SCHEDULE 14A

                                 (Rule 14a-101)

                    INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|

Check the appropriate box:

|_|  Preliminary Proxy Statement             |_|  Soliciting Material under Rule
|_|  Confidential, for Use of the                 14a-12
     Commission Only (as permitted
     by Rule 14a-6(e)(2))
|X|  Definitive Proxy Statement
|_|  Definitive Additional Materials

                              CH ENERGY GROUP, INC
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

|X|   No fee required.
|_|   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)   Title of each class of securities to which transaction applies:

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(2)   Aggregate number of securities to which transaction applies:

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(3)   Per unit price or other underlying value of transaction  computed pursuant
      to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
      calculated and state how it was determined):

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(4)   Proposed maximum aggregate value of transaction:

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(5)   Total fee paid:

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|_|   Fee paid previously with preliminary materials.

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|_|   Check box if any part of the fee is offset as  provided  by  Exchange  Act
      Rule  0-11(a)(2)  and identify the filing for which the offsetting fee was
      paid  previously.  Identify the previous filing by registration  statement
      number, or the Form or Schedule and the date of its filing.

      (1)   Amount Previously Paid:

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      (2)   Form, Schedule or Registration Statement No.:

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      (3)   Filing Party:

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      (4)   Date Filed:

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                              CH ENERGY GROUP, INC.

                                284 SOUTH AVENUE

                        POUGHKEEPSIE, NEW YORK 12601-4879

                                                                   March 1, 2007

To the Holders of Shares of Common Stock:

      I am pleased to invite you to the 2007 Annual Meeting of  Shareholders  of
CH Energy Group, Inc. (the "Corporation").

      The  Annual  Meeting  of  Shareholders  will be held at the  Corporation's
office in  Poughkeepsie,  New York on Tuesday,  April 24,  2007,  at 10:30 AM. A
Notice  of the  Annual  Meeting  of  Shareholders  and the Proxy  Statement  are
attached.

      We  request  that you  mark,  sign,  date,  and mail  the  enclosed  proxy
promptly.  Prompt  return of your voted  proxy  will  reduce the cost of further
mailings.  As an  alternative to returning your proxy by mail, you can also vote
your shares by proxy by calling the  toll-free  number on your proxy or by using
the  Internet at  WWW.COMPUTERSHARE.COM/EXPRESSVOTE.  Both methods of voting are
available  twenty-four  hours a day,  seven days a week,  and will be accessible
until  12:01 AM on April 16,  2007.  You may revoke your voted proxy at any time
prior to the meeting or vote in person if you attend the meeting.

      The response from our  shareholders in the past to annual proxy statements
has  been  outstanding,  and this  year we are once  again  looking  forward  to
receiving your proxy.

      You are cordially  invited to attend the Annual Meeting of Shareholders in
person.  It is always a  pleasure  for me and the other  members of the Board of
Directors to meet with our shareholders.  We look forward to greeting as many of
you as possible at the meeting.

                                                Steven V. Lant
                                                CHAIRMAN OF THE BOARD, PRESIDENT
                                                AND CHIEF EXECUTIVE OFFICER



                              CH ENERGY GROUP, INC.
                                284 SOUTH AVENUE
                        POUGHKEEPSIE, NEW YORK 12601-4879

                    ----------------------------------------
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                    ----------------------------------------

To the Holders of Shares of Common Stock:

      NOTICE IS HEREBY  GIVEN that the  Annual  Meeting  of  Shareholders  of CH
Energy Group, Inc. (the "Corporation") will be held:

TIME .......................   10:30 AM on Tuesday, April 24, 2007

PLACE ......................   Office of the Corporation
                               284 South Avenue
                               Poughkeepsie, New York 12601-4879

ITEMS OF BUSINESS ..........   (1) To elect two Directors, each to serve for a
                               three-year term expiring in 2010;

                               and

                               (2) To act upon any other matters that may
                               properly come before the meeting.

RECORD DATE ................   HOLDERS OF RECORD OF SHARES OF COMMON STOCK ON
                               THE CLOSE OF BUSINESS ON MARCH 1, 2007, ARE
                               ENTITLED TO VOTE AT THE MEETING.

ANNUAL REPORT ..............   The Annual Report to Shareholders, as combined
                               with the Corporation's Annual Report on Form 10-K
                               filed with the Securities and Exchange
                               Commission, is enclosed.

PROXY VOTING ...............   It is important that your shares be represented
                               and voted at the Annual Meeting of Shareholders.
                               Please MARK, SIGN, DATE, AND RETURN PROMPTLY the
                               enclosed proxy in the postage-paid envelope
                               furnished for that purpose. As an alternative to
                               returning your proxy by mail, you can also vote
                               your shares by proxy by calling the toll-free
                               number on your proxy or by using the Internet at
                               WWW.COMPUTERSHARE.COM/EXPRESSVOTE. Both Internet
                               and telephone voting are available twenty-four
                               hours a day, seven days a week, and will be
                               accessible until 12:01 AM on April 16, 2007. You
                               may revoke your voted proxy at any time prior to
                               the meeting or vote in person if you attend the
                               meeting. Any proxy may be revoked in the manner
                               described in the accompanying proxy statement at
                               any time prior to its exercise at the meeting.

                                             By Order of the Board of Directors,

                                                             Lincoln E. Bleveans
                                                             CORPORATE SECRETARY

March 1, 2007



                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

PROXY STATEMENT ..........................................................     1

CURRENT DIRECTORS, CLASSES, AND TERMS OF OFFICE ..........................     4

ELECTION OF DIRECTORS ....................................................     4

GOVERNANCE OF THE CORPORATION ............................................     8

REPORT OF THE AUDIT COMMITTEE ............................................    14

SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS .............................    16

STOCK EQUIVALENTS OWNERSHIP OF DIRECTORS .................................    17

INSURANCE ................................................................    18

EXECUTIVE COMPENSATION ...................................................    18

COMPENSATION COMMITTEE REPORT ............................................    26

OTHER MATTERS ............................................................    49



                                 PROXY STATEMENT

      The  enclosed  proxy is being  solicited  by the Board of  Directors of CH
Energy  Group,  Inc.  (the   "Corporation")  for  use  in  connection  with  the
Corporation's  Annual Meeting of  Shareholders to be held on April 24, 2007 (the
"Annual  Meeting"),  at  the  offices  of the  Corporation,  284  South  Avenue,
Poughkeepsie, New York 12601-4879.

      This  proxy   statement   and  enclosed   proxy  are  being  sent  to  the
Corporation's shareholders on or about March 1, 2007. The mailing address of the
principal executive office of the Corporation is 284 South Avenue, Poughkeepsie,
New York 12601-4879.

      The  Corporation  is the holding  company  parent of Central  Hudson Gas &
Electric   Corporation   ("Central   Hudson")  and  Central  Hudson  Enterprises
Corporation ("CHEC"), and their respective subsidiaries.

SHAREHOLDERS ENTITLED TO VOTE

      The  record of  shareholders  entitled  to notice  of, and to vote at, the
Annual  Meeting  was taken at the close of  business  on March 1, 2007.  At that
date,  there were  15,762,000  shares of common  stock  ($0.10 par value) of the
Corporation ("Common Stock") outstanding. Each share of Common Stock is entitled
to one vote.  No other  class of  securities  is  entitled to vote at the Annual
Meeting.

PROXIES

HOW YOU CAN VOTE

      Shareholders  of record can give a proxy to be voted at the Annual Meeting
(i)   by   telephone,    (ii)   electronically,    using   the   Internet,    at
WWW.COMPUTERSHARE.COM/EXPRESSVOTE, or (iii) by mail. Shareholders who hold their
shares in "street name" must vote their shares in the manner prescribed by their
brokers.

      The  telephone  and  Internet  voting  procedures  have  been  set  up for
shareholder  convenience  and have been  designed  to  authenticate  shareholder
identity, to allow shareholders to give voting instructions, and to confirm that
those instructions have been recorded  properly.  If shareholders of record wish
to vote by proxy,  by telephone,  or by using the Internet,  please refer to the
specific  instructions set forth on the enclosed proxy. If shareholders  wish to
vote using a paper  format  and  return  their  signed  proxy  before the Annual
Meeting, their shares will be voted as directed.

      Whether shareholders choose to vote by telephone, electronically using the
Internet,  or by  mail,  each  proxy  will  be  voted  in  accordance  with  the
shareholder's instructions with respect to the election of Directors.

      IF  SHAREHOLDERS DO NOT SPECIFY ON THEIR PROXY (OR WHEN GIVING THEIR PROXY
BY TELEPHONE OR BY USING THE INTERNET) HOW THEY WANT TO VOTE THEIR SHARES, IT IS
THE  INTENTION  OF THE PERSONS  NAMED ON THE PROXY TO VOTE "FOR" THE ELECTION OF
THE NOMINEES FOR DIRECTOR AS SET FORTH UNDER "ELECTION OF DIRECTORS."

      ABSTENTIONS AND BROKER NON-VOTES ARE VOTED NEITHER "FOR" NOR "AGAINST" AND
HAVE NO EFFECT ON THE VOTE BUT ARE COUNTED IN THE DETERMINATION OF A QUORUM.

REVOCATION OF PROXIES

      A  shareholder  may  revoke  his or her  proxy,  at any time  before it is
exercised, in any of three ways:

      (a)   by  submitting   written  notice  of  revocation  to  the  Corporate
            Secretary;

      (b)   by submitting another proxy by telephone,  electronically, using the
            Internet  at  WWW.COMPUTERSHARE.COM/EXPRESSVOTE,  or by mail that is
            later dated and (if by mail) that is properly signed; or

      (c)   by voting in person at the Annual Meeting.


                                       1


COST OF PROXY SOLICITATION

      The cost of preparing,  printing, and mailing the notice of meeting, proxy
statement,  proxy,  and annual  report will be borne by the  Corporation.  Proxy
solicitation  other than by use of the mail may be made by regular  employees of
the Corporation by telephone and personal solicitation. Banks, brokerage houses,
custodians,  nominees,  and  fiduciaries  are  requested  to forward  soliciting
material to their principal(s) and to obtain  authorization for the execution of
proxies, and may be reimbursed for their out-of-pocket expenses incurred in that
connection.  In addition, the Corporation has retained D. F. King & Co., Inc. of
New  York,  New  York,  a proxy  solicitation  organization,  to  assist  in the
solicitation of proxies. The fee of such organization in connection therewith is
estimated to be $7,500, plus reasonable out-of-pocket expenses.

SHAREHOLDER AND INTERESTED PARTY COMMUNICATIONS

      Highlights of the 2007 Annual Meeting of Shareholders will be published on
the   Corporation's   Internet   site  at   WWW.CHENERGYGROUP.COM   and  in  the
Corporation's  May 2007 Report to  Shareholders.  The text of the remarks of the
Chairman  of the  Board,  President  and Chief  Executive  Officer at the Annual
Meeting will also be published on the same Internet site.

      Shareholders may obtain information  relating to financial and statistical
reports of the Corporation and information relating to their own share ownership
by  contacting  the   Corporation's   Director  of   Shareholder   Relations  at
845-486-5383 or by writing to the Director of Shareholder Relations at 284 South
Avenue, Poughkeepsie, New York 12601-4879.

      Shareholder  communications  related  to any  aspect of the  Corporation's
business are also welcome.  Space for comments is provided on the proxy given to
shareholders of record.

      Shareholders may also submit written  communications to the Corporation in
care of the  Corporate  Secretary at 284 South  Avenue,  Poughkeepsie,  New York
12601-4879.  Although all  communications  may not be answered on an  individual
basis,  they do assist the Directors and  management in addressing  the needs of
shareholders.

      Each  such  communication  received  by  the  Corporate  Secretary  from a
shareholder  is reviewed by him to determine  how it should be handled.  Not all
communications  from  shareholders  are  communicated  directly  to the Board of
Directors.

      If the subject matter of a  communication  from a shareholder is a concern
or  complaint   regarding  the  accuracy  or  integrity  of  the   Corporation's
accounting,  auditing,  or financial reporting,  the Corporate Secretary follows
the procedures established by the Board of Directors for "Receiving and Handling
Concerns or Complaints Regarding  Accounting,  Auditing or Financial Reporting."
These procedures,  set forth in Section IV of the Corporation's Code of Business
Conduct and Ethics,  which is available on the  Corporation's  Internet  site at
WWW.CHENERGYGROUP.COM, are as follows:

                  The Audit  Committee  of the Board of  Directors  of CH Energy
            Group, Inc. has established the following  procedures for persons to
            follow in order to communicate concerns or complaints to the Company
            about  the  accuracy  and  integrity  of the  Company's  accounting,
            auditing and  financial  reporting.  All persons are  encouraged  to
            submit  good  faith   concerns  and   complaints   without  fear  of
            retaliation  of any kind.  The Company will not  discharge,  demote,
            suspend,  threaten,  harass  or in  any  other  manner  discriminate
            against  any  employee  in the  terms  and  condition  of his or her
            employment  because the employee  has raised good faith  concerns or
            complaints  in  accordance  with these  procedures.  If an  employee
            wishes to do so, he or she may communicate  concerns  anonymously in
            accordance with paragraph (ii) below.

            (I) SUBMISSION OF CONCERNS AND COMPLAINTS

                  Any person may submit a concern or complaint about accounting,
            internal  accounting  controls or auditing  matters by bringing  the
            matter directly to the attention of:


                                       2


                   Joseph B. Koczko, Esq.; Thompson Hine LLP;
          335 Madison Avenue; 12th Floor; New York, New York 10017-4611
                     Phone: 212-344-5680; Fax: 212-344-6101
                      Email: Joseph.Koczko@ThompsonHine.com

            (II) ANONYMOUS SUBMISSIONS BY EMPLOYEES

                  If an  employee  wishes to submit a  concern  on an  anonymous
            basis regarding  questionable  accounting or auditing matters, he or
            she may do so by  communicating  in writing  with Mr.  Koczko at the
            above address.  This writing should include  sufficient  information
            and specificity to allow the Company to review the subject matter.

            (III) TREATMENT OF CONCERNS AND COMPLAINTS

                  Upon  receipt  of a concern  or  complaint,  Mr.  Koczko  will
            communicate  the concern or  complaint to General  Counsel,  John E.
            Gould,  Esq., and he and Mr. Gould will consult with the Chairman of
            the Audit Committee  regarding the concern or complaint.  Subject to
            the  authority  of the Audit  Committee,  the  Chairman of the Audit
            Committee,  in  consultation  with Mr.  Koczko and Mr.  Gould,  will
            determine how the concern or complaint  should be evaluated  and, if
            necessary,  investigated  by Mr.  Koczko,  by Mr. Gould,  or by such
            other persons as may be  appropriate.  Prompt and corrective  action
            will be taken when and as  warranted  in the  judgment  of the Audit
            Committee.  The Company will make every  effort to maintain,  within
            the limits allowed by law and consistent with the need to conduct an
            adequate review, the  confidentiality of anyone submitting a concern
            or complaint.

            (IV) RETENTION OF INFORMATION

                  Mr.  Koczko  shall  maintain  a  file  at  Thompson  Hine  LLP
            regarding each submission of a concern or complaint.  The file shall
            contain the original  document(s)  with respect to the submission of
            the concern or complaint,  together with other documents and records
            regarding  the  evaluation,  investigation  and  resolution  of  the
            matter.

            (V) QUARTERLY REPORTING TO THE AUDIT COMMITTEE

                  The Chairman of the Audit Committee shall report  quarterly to
            the Audit  Committee  with  respect  to the  status  of all  pending
            submissions of concerns or complaints  concerning matters covered by
            these  procedures.  Copies  of  each  file  will  be  maintained  in
            accordance  with  the  Company's   document   retention  policy.  In
            addition,  Mr.  Koczko  shall  prepare  and  maintain a written  log
            listing each  submission  by date and setting  forth a brief written
            description  regarding the  substance of the matter.  A copy of this
            log shall be provided to the Chairman of the Audit Committee and the
            General Counsel on a quarterly basis.

      A shareholder may send a written  communication  to the Board of Directors
or to specific individual Directors by addressing the communication to the Board
of Directors or to an individual  Director and submitting the  communication  to
the  Corporation  in  care  of the  Corporate  Secretary  at 284  South  Avenue,
Poughkeepsie, New York 12601-4879.

      The Lead Independent Director of the Board of Directors,  E. Michel Kruse,
is an  independent  Director and has been  designated by the Board to preside at
the executive sessions of the independent Directors.  If interested parties wish
to make a  concern  known  to the  independent  Directors,  they  may do so in a
writing  addressed to the Lead Independent  Director and submitted in accordance
with the  procedures  established  by the Board of Directors for  "Receiving and
Handling  Concerns or  Complaints  Regarding  Accounting,  Auditing or Financial
Reporting."  These  procedures are set forth in Section IV of the  Corporation's
Code of Business  Conduct and Ethics,  which is available  on the  Corporation's
Internet site at WWW.CHENERGYGROUP.COM,  and are also set forth above. Each such
writing  submitted in  accordance  with these  procedures  will be  communicated
directly to Mr. Kruse.


                                       3


SHAREHOLDER PROPOSALS

      A  shareholder  who  would  like  to  have  a  proposal  included  in  the
Corporation's  2008  Proxy  Statement  must  submit  the  proposal  so that  the
Corporate  Secretary  receives it no later than November 10, 2007.  The rules of
the Securities and Exchange  Commission  ("SEC")  contain  procedures  governing
shareholder  proposals that may be included in a proxy  statement.  In addition,
the Corporation's By-laws must be followed.

      The  By-laws  require any  shareholder  wishing to make a  nomination  for
Director or to introduce a proposal or other business at the Corporation's  2008
Annual Meeting of Shareholders  to give the  Corporation  advance written notice
thereof no earlier than January 26, 2008, and no later than February 25, 2008.

      A copy of the  Corporation's  By-laws  may be  obtained  by writing to the
Corporate Secretary, CH Energy Group, Inc., 284 South Avenue, Poughkeepsie,  New
York 12601-4879.

                 CURRENT DIRECTORS, CLASSES, AND TERMS OF OFFICE

      The  Corporation's  Restated  Certificate  of  Incorporation  and  By-laws
require  that the Board of  Directors  be divided  into three  classes as nearly
equal in number as possible with staggered terms so that, at each Annual Meeting
of Shareholders,  one class of Directors will stand for election to a three-year
term. The Directors  currently in classes are listed below and their  respective
terms of office  expire as of the Annual  Meeting of  Shareholders  in the years
listed below:

                                 CLASS I - 2007
                                 --------------
                             Edward F. X. Gallagher
                                 Steven V. Lant
                                Jeffrey D. Tranen

                                 CLASS II - 2008
                                 ---------------
                               Margarita K. Dilley
                                Steven M. Fetter
                                Stanley J. Grubel

                                CLASS III - 2009
                                ----------------
                                Manuel J. Iraola
                                 E. Michel Kruse
                               Ernest R. Verebelyi

      Edward F. X.  Gallagher,  a Class I  Director,  will not be  standing  for
reelection  at the  Annual  Meeting  as he has  reached  the  age at  which  the
Corporation's  By-laws provide that he may not stand for  reelection.  The Board
has decided not to replace Mr.  Gallagher  at this time.  Thus,  the size of the
Board will be decreased by one Director to a total of eight Directors.

      The  nominees  for  these  Directorship  positions  are set  forth  below.
Although the Board of Directors does not  contemplate  that the nominees will be
unable to serve, should such a situation arise prior to the Annual Meeting,  the
proxies will be voted in accordance with the best judgment of the persons acting
thereunder.

                              ELECTION OF DIRECTORS

      The Board of Directors  proposes the  following  nominees to be elected to
the Board of  Directors  at the  Annual  Meeting,  their  terms to expire at the
Annual Meeting of  Shareholders  in the year noted below or until a successor is
elected and qualified. The Board of Directors recommends a vote in favor of each
such nominee:

                                 CLASS I - 2010
                                 --------------
                                 Steven V. Lant
                                Jeffrey D. Tranen


                                       4


VOTE REQUIRED FOR ELECTION OF DIRECTORS

      The nominees  for Director  receiving a plurality of the votes cast at the
Annual  Meeting in person or by proxy shall be elected.  Abstentions  and broker
non-votes  are voted  neither "FOR" nor "AGAINST" and have no effect on the vote
but are counted in the determination of a quorum.

             THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
                        VOTE "FOR" EACH OF THE NOMINEES.

NOMINEES AND OTHER DIRECTORS

      The following table sets forth (i) the name and age of each nominee and of
each Director of the Corporation whose term of office continues after the Annual
Meeting,  (ii) the principal occupation and employment of each person during the
past five years,  (iii) positions and offices with the Corporation  held by each
person,  and (iv) the period  during  which each has served as a Director of the
Corporation. Each nominee is currently serving as a Director of the Corporation.



                                      PRINCIPAL OCCUPATION AND BUSINESS                                             PERIOD OF
                                         EXPERIENCE DURING THE PAST              POSITIONS OR OFFICES WITH         SERVICE AS
NAME AND AGE                                   FIVE YEARS (1)                         THE CORPORATION            DIRECTOR BEGAN
------------                          ---------------------------------          -------------------------       --------------
                                                                                                             
                                    NOMINEES FOR ELECTION AS CLASS I DIRECTORS SERVING FOR A TERM EXPIRING IN 2007

Steven V. Lant ..............       Present positions since 2004;                Chairman, President and              2002
   49                                 President and Chief Executive                Chief Executive Officer of
                                      Officer of the Corporation,                  the Corporation; Chairman
[PHOTO OMITTED]                       2003-2004; Chief Operating                   and Chief Executive
                                      Officer and Chief Financial                  Officer of Central Hudson;
                                      Officer of the Corporation,                  Chairman, President and
                                      2002-2003; Chief Financial                   Chief Executive Officer
                                      Officer of the Corporation, of               of CHEC; Director of
                                      Central Hudson, and of Central               the Corporation, of
                                      Hudson Energy Services, Inc.,                Central Hudson, and
                                      2001-2002                                    of CHEC
                                             Poughkeepsie, NY

Jeffrey D. Tranen ...........       Senior Managing Director, Lexecon            Director                             2004
   60                                 (an FTI Company), a consulting
                                      firm, 2000-present; Director,
[PHOTO OMITTED]                       Doble Engineering Company;
                                      Director, Oglethorpe Power
                                      Corporation, 2000-2004;
                                      Director, Earthfirst Technologies
                                      Incorporated, 2001-2002;
                                      President and Chief Operating
                                      Officer, Sithe Northeast Inc.,
                                      1999-2000; President and Chief
                                      Executive Officer, California
                                      Independent System Operator,
                                      1997-1999; President, New
                                      England Power Company,
                                      1993-1997
                                                New York, NY



                                       5




                                      PRINCIPAL OCCUPATION AND BUSINESS                                             PERIOD OF
                                         EXPERIENCE DURING THE PAST              POSITIONS OR OFFICES WITH         SERVICE AS
NAME AND AGE                                   FIVE YEARS (1)                         THE CORPORATION            DIRECTOR BEGAN
------------                          ---------------------------------          -------------------------       --------------
                                                                                                             
                                    INCUMBENT CLASS II DIRECTORS SERVING FOR A TERM EXPIRING IN 2008

Margarita K. Dilley .........       Consultant; Vice President, Chief            Director; Chair of the               2004
   49                                 Financial Officer, and Director              Audit Committee of the
                                      of Astrolink International LLC,              Board of Directors
[PHOTO OMITTED]                       1998-2004; Director of Strategy
                                      & Corporate Development and
                                      Treasurer of INTELSAT, 1992-
                                      1998; Treasurer, Comsat
                                      Corporation, 1987-1992
                                               Washington, DC

Steven M. Fetter ............       President, Regulation UnFettered,            Director; Chair of the               2002
   54                                 a consulting firm, 2002-present;             Governance and
                                      Board member and former                      Nominating Committee
[PHOTO OMITTED]                       Chairman of the National                     of the Board of Directors
                                      Regulatory Research Institute
                                      (at Ohio State University);
                                      Group Head and Managing
                                      Director, Global Power Group,
                                      FitchRatings, 1998-2002;
                                      Chairman and Commissioner
                                      of the Michigan Public Service
                                      Commission, 1987-1993;
                                      Acting Associate Deputy Under
                                      Secretary of Labor, U.S.
                                      Department of Labor, 1987
                                                Henderson, NV

Stanley J. Grubel ...........       Consultant; Director, Asyst                  Director; Chair of                   1999
   64                                 Technologies, Inc.; Vice                     the Compensation
                                      President and General Manager,               Committee of the
[PHOTO OMITTED]                       Philips Semiconductor                        Board of Directors
                                      Manufacturing, Inc., 2000-2001;
                                      Chief Executive Officer, MiCRUS,
                                      1995-2000
                                                Irvington, NY



                                       6




                                      PRINCIPAL OCCUPATION AND BUSINESS                                             PERIOD OF
                                         EXPERIENCE DURING THE PAST              POSITIONS OR OFFICES WITH         SERVICE AS
NAME AND AGE                                   FIVE YEARS (1)                         THE CORPORATION            DIRECTOR BEGAN
------------                          ---------------------------------          -------------------------       --------------
                                                                                                             
                                    INCUMBENT CLASS III DIRECTORS SERVING FOR A TERM EXPIRING IN 2009

Manuel J. Iraola ............       Chairman, President and Chief                Director                             2006
   58                                 Executive Officer, The Aloaris
                                      Group, a consulting and
[PHOTO OMITTED]                       investment firm, 2002-present;
                                      Chairman and Chief Executive
                                      Officer, Homexperts, Inc. (d/b/a
                                      Homekeys), a real estate services
                                      company, 2005-present; Director,
                                      Schweitzer-Mauduit International,
                                      Inc., 2005-present; President,
                                      Phelps Dodge Industries,
                                      1995-2002
                                              Coral Gables, FL

E. Michel Kruse .............       Retired; Chairman and Senior                 Director; Lead Independent           2002
   62                                 Advisor - Financial Institutions             Director; Chair of the
                                      Group of UBS Warburg, 2000-2002;             Strategy and Finance
[PHOTO OMITTED]                       Chief Executive of BHF- Bank AG,             Committee of the
                                      1997-1999; Chief Financial Officer           Board of Directors
                                      and Vice Chairman of the Board of
                                      The Chase Manhattan Corporation,
                                      1992-1996
                                                Greenwich, CT

Ernest R. Verebelyi .........       Retired; Non-executive Chairman,             Director                             2006
   59                                 2005-present, and Director, 2003-
                                      present, Columbus McKinnon
[PHOTO OMITTED]                       Corporation, an industrial
                                      manufacturing company; President-
                                      Americas, Terex Corporation, 2001-
                                      2002; President-Americas and
                                      Mining, Terex Corporation, 2001
                                            Ponte Vedra Beach, FL


----------
(1)   Based on information furnished to the Corporation as of December 31, 2006.


                                       7


                          GOVERNANCE OF THE CORPORATION

      The Board of Directors has nine  members.  As of the Annual  Meeting,  the
Board will have  eight  members  as a result of the  retirement  of Edward F. X.
Gallagher.

      During 2006,  the Board of Directors held nine meetings and the Committees
held a total of 24 meetings.  No Director  attended fewer than 75% of all of the
Board  meetings held in the last year.  With the exception of Director  Heinz K.
Fridrich (who retired from the Board as of the 2006 Annual Meeting), no Director
attended  fewer than 75% of the total number of meetings held by all  Committees
of the Board on which any  Director  served.  Mr.  Fridrich  served on the Audit
Committee and the Governance and Nominating  Committee until his retirement from
the Board,  and attended one of the two Audit Committee  meetings and all of the
Governance and Nominating Committee meetings held during that period. Other than
Mr. Fridrich, all Directors serving on each of the Compensation  Committee,  the
Governance  and  Nominating  Committee,  and the Strategy and Finance  Committee
attended all of their respective  Committee  meetings.  The Directors serving on
the  Audit  Committee  attended  more  than  75% of their  respective  Committee
meetings.

      The Board of Directors has adopted statements of governance principles set
forth in a document entitled "Corporate  Governance." Section I of this document
sets forth the Corporation's  statement of "Our Principles and Culture." Section
II of this document sets forth the  Corporation's  statement of "Our  Governance
Guidelines." The entire document is available on the Corporation's Internet site
at WWW.CHENERGYGROUP.COM.  A copy of the Corporation's governance principles may
also be obtained by writing to the Corporate  Secretary,  CH Energy Group, Inc.,
284 South Avenue, Poughkeepsie, New York 12601-4879.

DIRECTOR INDEPENDENCE

      The Board of Directors makes  determinations  regarding whether individual
Directors  are  "independent"  for purposes of applicable  corporate  governance
rules promulgated by the SEC and New York Stock Exchange listing standards based
on all relevant  facts and  circumstances.  To be considered  "independent"  for
purposes of the Director qualification  standards,  the Board must affirmatively
determine that the Director has no material  relationship  with the Corporation,
directly or as an officer, shareholder, or partner of an organization that has a
relationship  with the  Corporation.  The Board  broadly  considers all relevant
facts and  circumstances.  In this  connection,  the Board applies the following
standards:

      o     In no event will a Director be considered "independent" if:

            (A)   within the preceding three years:

                  (i)   the Director was employed by the Corporation;

                  (ii)  any  member  of  the  Director's  immediate  family  was
                        employed by the Corporation as an executive officer;

                  (iii) the  Director  or any  member  of  his or her  immediate
                        family received more than $100,000 during a twelve-month
                        period  in  direct  compensation  from  the  Corporation
                        (other than  Director's  fees and pension or other forms
                        of  deferred  compensation  for prior  service  with the
                        Corporation); or

                  (iv)  an  executive  officer  of  the  Corporation  was on the
                        Compensation  Committee  of the Board of Directors of an
                        entity that  employed  either the Director or any member
                        of his or her immediate family as an executive  officer;
                        or

            (B)   (i)   the  Director  or any  member  of  his or her  immediate
                        family  is a  current  partner  of a  firm  that  is the
                        Corporation's internal or external auditor;

                  (ii)  the Director is a current employee of such a firm;


                                       8


                  (iii) any member of the immediate  family of the Director is a
                        current  employee of such a firm and participates in the
                        firm's audit,  assurance, or tax compliance (but not tax
                        planning) practice; or

                  (iv)  the  Director  or any  member  of  his or her  immediate
                        family  was  within  the  last  three  years  (but is no
                        longer)  a  partner  or  employee  of  such a  firm  and
                        personally worked on the Corporation's audit within that
                        time; or

            (C)   the Director is a current  employee,  or an  immediate  family
                  member of the Director is a current executive  officer,  of an
                  entity that has made payments to, or received  payments  from,
                  the  Corporation  for property or services in an amount which,
                  in any of the last three fiscal years,  exceeds the greater of
                  $1  million or 2% of such other  entity's  consolidated  gross
                  revenues.

      In addition,  the following standards identify categories of relationships
that will NOT be  considered  as  material  relationships  that  would  impair a
Director's independence:

      o     Transactions between the Corporation and another entity with which a
            Director or a member of a Director's  immediate family is affiliated
            --

                  (i)   if the transactions occurred more than three years prior
                        to the determination of independence, or

                  (ii)  if the  transactions  occur in the  ordinary  course  of
                        business  and are  consistent  with other  arm's  length
                        transactions  in which the  Corporation has engaged with
                        third parties, unless

                        (a)   the  Director  is a  current  employee,  executive
                              officer,  director,  or owner of 5% or more of the
                              voting stock of the other  entity,  or a member of
                              the  Director's  immediate  family  is  a  current
                              employee, executive officer, director, or owner of
                              5% or more of the voting stock of the other entity
                              AND

                        (b)   such  transactions  represent,  in any of the last
                              three  fiscal  years,  more than the greater of $1
                              million or 2% of the other  entity's  consolidated
                              gross revenues; and

      o     Discretionary   charitable   contributions  by  the  Corporation  to
            non-profit  entities  with  which  a  Director  or a  member  of the
            Director's immediate family is affiliated, if such contributions

                  (i)   occurred   more   than   three   years   prior   to  the
                        determination of independence, or

                  (ii)  are  consistent  with  the  Corporation's  philanthropic
                        practices, unless

                        (a)   the  Director  or  family   member  is  a  current
                              executive  officer,  director,  or  trustee of the
                              entity and

                        (b)   the Corporation's  contributions represent, in any
                              of the last  three  fiscal  years,  more  than the
                              greater  of $1  million  or 2%  of  such  entity's
                              consolidated gross revenues.

      Annually,  the Board will review all relationships between the Corporation
and its  Directors,  including  but not  limited to  commercial  and  charitable
relationships,   to  determine  whether  Directors  are  independent  under  the
standards  described above. For relationships not qualifying as immaterial under
the  categorical  standards  listed  above,  the  determination  of whether  the
relationship  is material,  and therefore  whether the Director is  independent,
shall be made by the  Directors who satisfy the above  independence  guidelines.
The Corporation will explain in its next proxy statement the basis for any Board
determination  that a relationship was not material despite the fact that it did
not meet the  categorical  standards  of  immateriality  set  forth in the above
guidelines.

      An Audit Committee  member may not, other than in his or her capacity as a
member  of the  Audit  Committee,  the Board of  Directors,  or any other  Board
Committee, (i) accept directly or indirectly any consulting,  advisory, or other
compensatory fee from the Corporation or any subsidiary thereof,  provided that,
compensatory  fees do not include the receipt of fixed  amounts of  compensation
under a retirement plan (including deferred compensation)


                                       9


for prior service with the listed issuer (provided that such compensation is not
contingent in any way on continued service);  or (ii) be an affiliated person of
the Corporation or any subsidiary thereof.

      As a result of its annual review, the Board has determined that all of the
Directors are independent, with the exception of Steven V. Lant. Mr. Lant is not
independent because he is an executive officer of the Corporation.

      Only  independent  Directors serve on the  Corporation's  Audit Committee,
Governance and Nominating Committee, and Compensation Committee.

COMMITTEES OF THE BOARD OF DIRECTORS

      The  Corporation's  standing  Committees  are  the  Audit  Committee,  the
Compensation  Committee,  the  Governance  and  Nominating  Committee,  and  the
Strategy and Finance Committee.  These Committees are described below.  Although
permitted by the By-laws,  the Board of Directors has not appointed an Executive
Committee.

AUDIT COMMITTEE

      The members of the Audit  Committee  are  Margarita K.  Dilley,  Steven M.
Fetter, Edward F. X. Gallagher,  Manuel J. Iraola, and Ernest R. Verebelyi.  Ms.
Dilley is the Chair of the Audit Committee. The Audit Committee met ten times in
2006.

      The Board of Directors has determined  that these  Committee  members meet
the New York Stock Exchange listing standards and the Corporation's  categorical
standards for independence.

      The Board of Directors has  determined  that Margarita K. Dilley meets the
SEC criteria for an "audit  committee  financial  expert" and the New York Stock
Exchange  standard  of  having   accounting  or  related  financial   management
expertise.  Ms. Dilley's extensive background and experience includes serving as
the Chief Financial Officer of Astrolink International LLC.

      The functions of the Audit  Committee are to assist the Board of Directors
in its oversight of (a) the accounting and financial  reporting processes of the
Corporation and (b) the auditing of the financial statements of the Corporation,
and those functions are further  discussed in the Report of the Audit Committee,
which is set forth beginning on page 14 of this proxy statement.

      The Audit  Committee  operates under a written  Charter which sets out the
functions, responsibilities, and scope of authority of this Committee. A copy of
the   Charter   is   available   on   the   Corporation's   Internet   site   at
WWW.CHENERGYGROUP.COM  and may also be  obtained  by  writing  to the  Corporate
Secretary,  CH Energy  Group,  Inc.,  284 South Avenue,  Poughkeepsie,  New York
12601-4879.

COMPENSATION COMMITTEE

      The members of the Compensation Committee are Stanley J. Grubel, Margarita
K. Dilley, Manuel J. Iraola, and Ernest R. Verebelyi. Mr. Grubel is the Chair of
the Compensation Committee. The Compensation Committee met five times in 2006.

      The Board of Directors has determined  that these  Committee  members meet
the New York Stock Exchange listing standards and the Corporation's  categorical
standards for independence.

      The functions of the Compensation Committee are to (a) assist the Board of
Directors  in its  oversight  of (i) the  executive  compensation  and  benefits
program of the Corporation,  (ii) the compensation  program for Directors of the
Corporation,  and  (iii)  succession  planning  for  officer  positions  of  the
Corporation and (b) provide,  in accordance with the rules of the SEC, an annual
"Compensation  Committee  Report" for  inclusion in the  Company's  annual proxy
statement.

      For  additional   information   about  the  role  and  activities  of  the
Compensation  Committee,  please refer to the Executive  Compensation section of
this proxy statement at page 18.


                                       10


      The Compensation Committee operates under a written Charter which sets out
the functions,  responsibilities,  and scope of authority of this Committee. The
Charter  provides that the Committee may not delegate its  authority.  A copy of
the   Charter   is   available   on   the   Corporation's   Internet   site   at
WWW.CHENERGYGROUP.COM  and may also be  obtained  by  writing  to the  Corporate
Secretary,  CH Energy  Group,  Inc.,  284 South Avenue,  Poughkeepsie,  New York
12601-4879.

GOVERNANCE AND NOMINATING COMMITTEE

      The  members of the  Governance  and  Nominating  Committee  are Steven M.
Fetter,  Jeffrey D. Tranen,  and E. Michel Kruse. Mr. Fetter is the Chair of the
Governance and Nominating Committee. The Governance and Nominating Committee met
four times in 2006.

      The Board of Directors has determined  that these  Committee  members meet
the New York Stock Exchange listing standards and the Corporation's  categorical
standards for independence.

      The functions of the Governance and Nominating Committee are to assist the
Board of  Directors  in (a)  organizing  itself  to  effectively  carry  out its
responsibilities  and (b)  nominating for election to the Board persons who have
experience,  backgrounds,  and skills  appropriate  for the current needs of the
Corporation.

      The Governance and Nominating  Committee  operates under a written Charter
which sets out the functions,  responsibilities,  and scope of authority of this
Committee. A copy of the Charter is available on the Corporation's Internet site
at  WWW.CHENERGYGROUP.COM  and may also be obtained by writing to the  Corporate
Secretary,  CH Energy  Group,  Inc.,  284 South Avenue,  Poughkeepsie,  New York
12601-4879.

STRATEGY AND FINANCE COMMITTEE

      The  members  of the  Strategy  and  Finance  Committee  are  Edward F. X.
Gallagher,  Stanley J. Grubel,  E. Michel Kruse,  Steven V. Lant, and Jeffrey D.
Tranen.  Mr.  Kruse is the Chair of the  Strategy  and  Finance  Committee.  The
Strategy and Finance Committee met five times in 2006.

      The  functions  of the Strategy  and Finance  Committee  are to assist the
Board of Directors in its oversight of the  Corporation's  strategic  direction,
business  and   financial   planning,   financing   policies,   and   consistent
implementation of business plans.

      The Strategy and Finance Committee  operates under a written Charter which
sets  out the  functions,  responsibilities,  and  scope  of  authority  of this
Committee. A copy of the Charter is available on the Corporation's Internet site
at  WWW.CHENERGYGROUP.COM  and may also be obtained by writing to the  Corporate
Secretary,  CH Energy  Group,  Inc.,  284 South Avenue,  Poughkeepsie,  New York
12601-4879.

DIRECTOR NOMINATION PROCESS

      The  Governance  and  Nominating  Committee  of the Board of  Directors is
responsible for identifying,  evaluating, and recommending to the Board nominees
for election as Directors of the Corporation.

      The  Governance  and Nominating  Committee  seeks to nominate  persons for
election to the Board of Directors who have experience,  backgrounds, and skills
appropriate  for the  current  needs of the  Corporation.  In  carrying  out the
nomination  process,  the Governance and Nominating  Committee works to identify
potential  candidates  and welcomes  recommendations  from other  members of the
Board, members of management,  shareholders,  and other interested persons. From
time to  time,  the  Governance  and  Nominating  Committee  also  may  retain a
professional search firm to assist in identifying and evaluating candidates.

      On an annual basis,  the Governance and Nominating  Committee  reviews the
current size, composition,  and organization of the Board and of its Committees,
determines future needs, and makes  recommendations to the Board as appropriate.
The Governance and Nominating Committee evaluates Director candidates, including
incumbent  Directors,  and seeks to recommend  nominees who would strengthen the
Board and fill needs for particular skills or


                                       11


attributes  among the Directors.  This evaluation is performed in the context of
Board-approved  "Criteria for Selecting New  Directors" and of Sections 2, 3, 4,
and  5 of  the  Corporation's  Governance  Guidelines.  These  Sections  of  the
Governance Guidelines relate to the functions of the Board, the responsibilities
and duties of  Directors,  the  desired  qualifications  of  Directors,  and the
requirement  that a majority of Directors be independent in accordance  with the
Listed  Company  Manual  of the  New  York  Stock  Exchange.  The  Corporation's
"Criteria  for  Selecting  New  Directors"  and its  Governance  Guidelines  are
available on the Corporation's  Internet site at  WWW.CHENERGYGROUP.COM  and may
also be obtained by writing to the Corporate  Secretary,  CH Energy Group, Inc.,
284 South Avenue,  Poughkeepsie,  New York 12601-4879. All potential candidates,
including  persons  recommended by security  holders,  are evaluated in the same
manner and according to the same standards.

      When the Governance and Nominating  Committee  identifies a candidate that
merits in-depth consideration,  the Committee invites the Chairman of the Board,
President and Chief Executive Officer to assess the person's  qualifications and
to discuss his views about the person with the  Committee;  this  assessment may
involve the Chairman of the Board, President and Chief Executive Officer meeting
with the person.

      When a candidate is identified by the Governance and Nominating  Committee
as a potential  nominee for  election as a new Director of the  Corporation,  at
least two  members of the  Governance  and  Nominating  Committee  meet with the
person in face-to-face interviews.  Subsequently,  the Governance and Nominating
Committee  meets to discuss and  consider  candidates'  qualifications  and then
chooses,  by majority  vote of the Committee  members,  the persons it wishes to
recommend to the Board as nominees for election as Directors of the Corporation.

      A  shareholder  wishing  to  recommend  a person  for  consideration  as a
potential  candidate for election to the Board of Directors may do so by sending
a written  communication  to the Governance and Nominating  Committee in care of
the Corporate Secretary at 284 South Avenue, Poughkeepsie,  New York 12601-4879.
The submission to the  Governance  and  Nominating  Committee must include (a) a
written  statement signed by the potential  candidate  confirming that he or she
wishes to be considered as a candidate and would be willing and able to serve as
a Director if elected and (b) a writing signed by the shareholder  that includes
sufficient  information  and  specificity  to  (i)  enable  the  Governance  and
Nominating  Committee to confirm the  writer's  status as a  shareholder  of the
Corporation  and (ii) allow the Governance and Nominating  Committee to evaluate
the  potential  candidate  in the  context of the  Corporation's  "Criteria  for
Selecting New Directors" and its Governance Guidelines.

BOARD MEMBER ATTENDANCE AT ANNUAL MEETING OF SHAREHOLDERS

      Directors are expected to attend the Annual Meeting of  Shareholders,  and
it is the practice of the  Corporation  to introduce each Director at the Annual
Meeting of Shareholders.

      Each of the  current  members  of the  Corporation's  Board  of  Directors
attended the 2006 Annual Meeting of Shareholders.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      Only independent  Directors served on the Compensation  Committee in 2006.
Mr.  Grubel  served  as the Chair of the  Compensation  Committee  in 2006,  and
continues to serve as its Chair through the date of this proxy. Mr. Grubel,  Ms.
Dilley,  and Mr. Tranen  served on the  Compensation  Committee  from January 1,
2006,  until the Annual Meeting of the Corporation  held on April 25, 2006. From
April 26, 2006,  through December 31, 2006, Mr. Grubel,  Ms. Dilley, Mr. Iraola,
and Mr.  Verebelyi  served as members of the  Compensation  Committee,  and they
continue to serve as members of the Compensation  Committee  through the date of
this proxy. No Compensation  Committee interlock  relationships  existed in 2006
for the Corporation or its subsidiary companies.

CODE OF BUSINESS CONDUCT AND ETHICS

      The Corporation has a Code of Business  Conduct and Ethics that sets forth
the commitment of the Corporation to conduct its business in accordance with the
highest ethical standards and all applicable laws, rules, and regula-


                                       12


tions.  The  Code of  Business  Conduct  and  Ethics,  adopted  by the  Board of
Directors,  states the guiding principles by which the Corporation  operates and
conducts  its  daily  business  with  its  shareholders,  customers,  suppliers,
government authorities,  and employees. These principles apply to all Directors,
officers, and employees.

      Employees  are  encouraged to report any conduct that they believe in good
faith to be an actual or apparent  violation of the Code of Business Conduct and
Ethics.

      Section II of the Code of Business Conduct and Ethics,  in accordance with
Section 406 of the  Sarbanes-Oxley  Act of 2002,  constitutes the  Corporation's
Code of Ethics for Senior Financial Officers.  This section, in conjunction with
the remainder of the Code of Business Conduct and Ethics, is intended to promote
honest and ethical  conduct,  full and accurate  reporting,  and compliance with
laws as well as other matters. A copy of the Code of Business Conduct and Ethics
is available on the Corporation's  Internet site at  WWW.CHENERGYGROUP.COM.  The
Corporation  has also filed a copy of the Code of  Business  Conduct  and Ethics
with the SEC as an exhibit to the  Corporation's  Annual Report on Form 10-K for
the year ended December 31, 2003. A copy of the  Corporation's  Code of Business
Conduct  and  Ethics  may also be  obtained  free of  charge by  writing  to the
Corporate Secretary, CH Energy Group, Inc., 284 South Avenue, Poughkeepsie,  New
York 12601-4879.

      If the  Corporation's  Board of Directors amends Section II of the Code of
Business  Conduct  and  Ethics or grants any waiver to Section II of the Code of
Business Conduct and Ethics, which waiver relates to issues concerning actual or
apparent conflicts of interest,  disclosures in the Corporation's SEC filings or
public communications,  compliance with laws, rules, or regulations, or internal
compliance with the Code of Business  Conduct and Ethics within the Corporation,
the   Corporation   will  post  such   information   on  its  Internet  site  at
WWW.CHENERGYGROUP.COM.

REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS

      The Board of Directors has adopted a written policy and written procedures
for  the  review,  approval,  or  ratification  of  transactions  involving  the
Corporation and "related  persons" (I.E.,  Directors and their immediate  family
members, executive officers and their immediate family members, and shareholders
owning five percent or more of the Corporation's  outstanding stock). The policy
and  procedures  cover any related person  transaction  that exceeds the minimum
threshold for disclosure in our annual proxy  statement under the relevant rules
of the SEC (generally,  a transaction involving an amount in excess of $120,000,
or a series of transactions  involving an aggregate amount in excess of $120,000
in any  calendar  year,  in which a  related  person  has a direct  or  indirect
material interest,  and which does not fall under an explicitly stated exception
set forth in the applicable disclosure rules of the SEC). Such a covered related
person transaction is hereinafter referred to as a "Related Person Transaction."

POLICY

      o     The Governance and Nominating  Committee,  which consists  solely of
            independent Directors,  must review all Related Person Transactions.
            The Governance  and Nominating  Committee will approve a Transaction
            only if it determines  that the  Transaction is consistent  with the
            business   interests  of  the   Corporation.   In  considering   the
            Transaction,  the  Committee  will  consider all  relevant  factors,
            including as applicable (i) the Corporation's business rationale for
            entering into the  Transaction;  (ii) whether the  Transaction is on
            terms comparable to those available to third parties, or in the case
            of  employment  relationships,  to  employees  generally;  (iii) the
            potential  for the  Transaction  to lead to an  actual  or  apparent
            conflict  of interest  and any  safeguards  imposed to prevent  such
            actual or apparent  conflicts;  and (iv) the overall fairness of the
            Transaction to the Corporation.

PROCEDURE

      o     Directors  and  executive  officers are  responsible  for bringing a
            potential  Related  Person  Transaction  to  the  attention  of  the
            Chairman,  President and Chief Executive Officer or to the attention
            of the Chair of the Governance and Nominating Committee.


                                       13


      o     The Chairman, President and Chief Executive Officer and the Chair of
            the Governance and Nominating  Committee shall jointly determine (or
            if either is involved in the Transaction,  the other shall determine
            in  consultation  with the Lead  Independent  Director)  whether the
            matter is a Related Person  Transaction that should be considered by
            the Governance and Nominating Committee.

      o     If a Director is involved in the Related Person  Transaction,  he or
            she shall be recused from all  discussions  and decisions  about the
            Transaction.

      o     The Transaction should be approved in advance whenever  practicable,
            and if not practicable, must be ratified as promptly as practicable.

                          REPORT OF THE AUDIT COMMITTEE

      The Audit  Committee  of the Board of  Directors is comprised of Directors
who have no material  relationship with the Corporation (either directly or as a
partner, shareholder, or officer of an organization that has a relationship with
the Corporation) and meet the New York Stock Exchange listing  standards and the
Corporation's  categorical  standards  for  independence.  The  Audit  Committee
operates  under a written  Charter  adopted by the Board of Directors,  which is
available at the Corporation's  Internet site at  WWW.CHENERGYGROUP.COM  and may
also be obtained by writing to the Corporate  Secretary,  CH Energy Group, Inc.,
284 South Avenue, Poughkeepsie, New York 12601-4879.

      In performing its duties, the Audit Committee (i) reviews the scope of the
audit by the Corporation's independent accountants,  PricewaterhouseCoopers LLP,
and related matters  pertaining to the examination of the financial  statements;
(ii)  reviews  and  evaluates,   at  least  once  a  year,  the  qualifications,
independence,  and performance of the independent accountants (which includes an
evaluation of the lead partner of the independent  accountants);  (iii) examines
the adequacy of the Corporation's  internal control over financial reporting and
the Corporation's and its subsidiary companies' internal audit activities;  (iv)
reviews the nature and extent of audit and non-audit  services and  pre-approves
such  services  provided  by  the  Corporation's  independent  accountants;  (v)
consults at least three times a year with the independent  accountants regarding
financial issues;  (vi) makes  recommendations  to the Board of Directors on the
foregoing matters as well as on the appointment of the Corporation's independent
accountants;  (vii) meets  regularly with the  Corporation's  Internal  Auditing
Manager  and  Controller;  and (viii)  reviews  quarterly  and annual  financial
statements and earnings releases filed with the SEC.

      In 2006, the Audit Committee met with management  periodically  during the
year to  consider  the  adequacy  of the  Corporation's  internal  control  over
financial  reporting and the objectivity of its financial  reporting.  The Audit
Committee discussed these matters with the Corporation's independent accountants
and with appropriate  Corporation financial personnel and internal auditors. The
Audit  Committee  also discussed with the  Corporation's  senior  management and
independent accountants the process used for certifications by the Corporation's
Chief Executive Officer and the Chief Financial  Officer,  which  certifications
are required for certain of the Corporation's filings with the SEC.

      The Audit  Committee also met privately at its regular  meetings with both
the independent  accountants and the Internal Auditing Manager,  as well as with
the Controller.

      For 2006, the Audit Committee has:

      1.  reviewed  and  discussed  the  audited   financial   statements   with
management;

      2. discussed with the independent  accountants the matters  required to be
discussed by Statement on Auditing  Standards No. 61 (Codification of Statements
on Auditing Standards), as may be modified or supplemented;

      3. received the written  disclosures  and the letter from the  independent
accountants   required  by   Independence   Standards   Board   Standard  No.  1
(Independence  Discussions  with  Audit  Committees),  as  may  be  modified  or
supplemented,   and  has  discussed  with  and  affirmed  the   independence  of
PricewaterhouseCoopers  LLP  from  the  management  of the  Corporation  and its
subsidiary companies; and

      4.  received  the  reports of the Chief  Executive  Officer  and the Chief
Financial  Officer  relating to their evaluation of the  Corporation's  internal
control over financial reporting.


                                       14


      Based on the  review  and  discussions  referred  to above and  additional
matters  deemed  relevant  and  appropriate  by the Audit  Committee,  the Audit
Committee  recommended to the Corporation's  Board of Directors that the audited
financial statements be included in the Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, for filing with the SEC.

                                                    Margarita K. Dilley, Chair
                                                    Steven M. Fetter
                                                    Edward F. X. Gallagher
                                                    Manuel J. Iraola
                                                    Ernest R. Verebelyi

      The  Audit   Committee  has  appointed   PricewaterhouseCoopers   LLP,  an
independent registered public accounting firm, as the Corporation's  independent
public accountants for 2007.

      Representatives  of  PricewaterhouseCoopers  LLP  will be  present  at the
Annual Meeting.  The  PricewaterhouseCoopers  representatives  will be given the
opportunity  to make a statement  if desired and will be available to respond to
appropriate questions from shareholders.

      Information   on  fees  billed  by   PricewaterhouseCoopers   LLP  to  the
Corporation during 2006 and 2005 is provided below:

PRINCIPAL ACCOUNTANT FEES AND SERVICES



---------------------------------------------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP                                                                2006                 2005
---------------------------------------------------------------------------------------------------------------------
                                                                                                       
Audit Fees                                                                              $769,000             $712,000
Audit-Related Fees
  Includes financing costs (2006) and accounting research (2005)                         $38,300              $26,000
---------------------------------------------------------------------------------------------------------------------
Tax Fees
  Includes review of consolidated federal and state income tax returns
    (2006 and 2005) and tax research (2005)                                              $15,600              $25,000
---------------------------------------------------------------------------------------------------------------------
All Other Fees
  Includes software licensing fee for accounting research tool                            $1,500               $1,500
---------------------------------------------------------------------------------------------------------------------
TOTAL                                                                                   $824,400             $764,500
---------------------------------------------------------------------------------------------------------------------


      The Audit  Committee  also  concluded  that the  provision of services for
which fees were paid under the  captions  "Audit-Related  Fees," "Tax Fees," and
"All Other Fees" were compatible with the maintenance of  PricewaterhouseCoopers
LLP's independence.

      The Audit Committee has adopted guidelines  regarding  pre-approval of the
services to be  provided by the  Corporation's  independent  accountants.  These
guidelines  require that the Audit  Committee  review and approve,  prior to the
start of the fiscal year,  (i) an engagement  letter for audit services from the
independent  accountants,  outlining  the  scope  of the  audit  services  to be
provided  during the next fiscal  year and  including  a fee  proposal  for such
services,  and  (ii) a list  of,  and a  budget  for,  non-audit  services  that
management recommends be provided by the independent accountants during the next
fiscal year.

      Management and the independent  accountants confirmed that the recommended
non-audit  services were  permissible  under all  applicable  requirements.  The
Corporation has adopted a list of specific audit and non-audit services that may
be provided by the independent accountants.

      If the scope or cost of the audit or non-audit  services  requires changes
during the fiscal year, the Audit Committee's procedures enable the Chair of the
Audit  Committee to approve such changes,  up to certain dollar  limits,  and to
report  on  any  such  changes  at  the  next  Audit  Committee   meeting.   The
Corporation's  Vice President of Accounting  and  Controller is responsible  for
tracking  all  independent  accountant  fees  against  the budgets for audit and
non-audit  services and reporting on such budget issues at least annually to the
Audit Committee.

      In 2006,  the Audit  Committee  approved  all of the fees set forth in the
table above under the captions  "Audit-Related Fees," "Tax Fees," and "All Other
Fees."


                                       15


                  SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS

      The following table lists the number of shares of equity securities of the
Corporation  beneficially  owned  by each of the  Directors,  by each  executive
officer  named in the  Summary  Compensation  Table  included  under the caption
"Executive   Compensation,"  by  beneficial  owners  of  more  than  5%  of  the
Corporation's  Common Stock, and by all Directors and executive  officers of the
Corporation as a group:



                                                                        AMOUNT AND NATURE OF            % OF THE
                                                                       BENEFICIAL OWNERSHIP OF        CORPORATION'S
                                                                          THE CORPORATION'S              COMMON
      NAME OF BENEFICIAL OWNER                                           COMMON STOCK (1)(2)            STOCK (3)
      ------------------------                                           -------------------            ---------
                                                                                                
      Margarita K. Dilley .........................................                  0                Less than 1%
      Steven M. Fetter ............................................              1,301                Less than 1%
      Edward F. X. Gallagher ......................................              8,157                Less than 1%
      Stanley J. Grubel ...........................................              5,828                Less than 1%
      Manuel J. Iraola ............................................                  0                Less than 1%
      E. Michel Kruse .............................................              1,100                Less than 1%
      Steven V. Lant (7) ..........................................             12,944                Less than 1%
      Jeffrey D. Tranen ...........................................                  0                Less than 1%
      Ernest R. Verebelyi .........................................                  0                Less than 1%
      Christopher M. Capone (7) ...................................                 58                Less than 1%
      Joseph J. DeVirgilio, Jr. (7) ...............................              3,101                Less than 1%
      Carl E. Meyer (7) ...........................................              6,508                Less than 1%
      Arthur R. Upright ...........................................              3,441                Less than 1%
      Barclays Global Investors, NA (4) ...........................          1,046,566                6.64%
      Gabelli Asset Management Inc. (5) ...........................          1,495,150                9.49%
      Manulife Financial Corporation (6) ..........................          1,063,850                6.75%
      All Directors and Executive Officers as a Group
        (16 Persons) ..............................................             46,095                Less than 1%


----------
(1)   In the case of Directors  and  executive  officers,  based on  information
      furnished  to the  Corporation  by them as of December  31,  2006.  Unless
      otherwise  noted,  each  individual  or entity named in the table has sole
      voting and dispositive power.

(2)   Includes shares of Common Stock that may be acquired  through the exercise
      of options  that are  exercisable  currently.  The  persons  who have such
      options and the number of shares which may be acquired is as follows:  Mr.
      Fetter (1,000);  Mr.  Gallagher  (4,000);  Mr. Grubel  (4,000);  Mr. Kruse
      (1,000);  Mr.  Lant  (7,120);  all  other  executive  officers  as a group
      (3,160).

(3)   The percentage  ownership  calculation for each beneficial  owner has been
      made on the basis of the amount of  outstanding  shares of Common Stock as
      of the record date.

(4)   Based upon a  Schedule  13G filed with the SEC on  January  23,  2007,  by
      Barclays Global Investors, NA on behalf of Barclays Global Investors,  NA,
      Barclays Global Fund Advisors,  Barclays Global  Investors,  Ltd, Barclays
      Global  Investors  Japan Trust and Banking Company  Limited,  and Barclays
      Global  Investors  Japan  Limited.  As reported in the Schedule 13G, as of
      December  31,  2006,  Common  Stock  was  beneficially  owned as  follows:
      Barclays Global Investors,  NA--582,885 shares (3.70%),  of which Barclays
      Global Investors, NA has voting power with respect to only 468,758 shares;
      Barclays Global Fund Advisors, 455,049 shares (2.89%), and Barclays Global
      Investors,  Ltd.,  8,632  shares (less than 1%).  The  principal  business
      address for each of the  foregoing is 45 Fremont  Street,  San  Francisco,
      California 94105. In addition,  Barclays PLC filed a Schedule 13G with the
      SEC on  February  9,  2006,  on  behalf  of  Barclays  Bank PLC and  other
      entities, reporting as of December 31, 2005, 23,154 shares of Common Stock
      (less than 1%)  beneficially  owned by  Barclays  Bank PLC,  which are not
      included  in the table  above  for  Barclays  Global  Investors,  NA.  The
      principal  business  address for Barclays  Bank PLC is 54 Lombard  Street,
      London, England EC3P 3AH.

(5)   Based upon a Schedule 13 D/A filed with the SEC on  December  5, 2002,  by
      Gabelli  Asset  Management  Inc. on behalf of Gabelli  Funds,  LLC,  GAMCO
      Investors,  Inc., MJG Associates,  Inc., Gabelli & Co. Inc. Profit Sharing
      Plan, Gabelli Foundation,  Inc., and Gabelli Group Capital Partners,  Inc.
      As  reported  in the  Schedule  13 D/A,  as of  September  30,  2002,  the
      Corporation's  Common  Stock was  beneficially  owned as follows:  Gabelli
      Funds--369,400  (2.28%),  GAMCO--1,116,250  (6.90%),  Gabelli  Foundation,
      Inc.--6,000 (0.04%), Gabelli


                                       16


      & Co. Inc.  Profit  Sharing  Plan--2,000  (0.01%),  MJG  Associates--1,500
      (0.01%).  GAMCO does not have the authority to vote 51,800 of the reporteD
      shares.  The principal  business address for each of the foregoing,  other
      than MJG Associates and Gabelli  Foundation is One Corporate Center,  Rye,
      New York 10580.  The principal  business  address for MJG  Associates is 8
      Sound Shore Drive,  Greenwich,  Connecticut  06830. The principal business
      address for Gabelli  Foundation is 165 West Liberty Street,  Reno,  Nevada
      89501.

(6)   Based upon a Schedule 13G/A filed by Manulife  Financial  Corporation with
      the SEC on February 8, 2007.  As reported on said  Schedule  13G/A,  as of
      December  31,  2006,  Common  Stock  was  beneficially  owned by  indirect
      wholly-owned  subsidiaries of Manulife  Financial  Corporation as follows:
      John Hancock Advisers,  LLC and MFC Global Investment  Management  (U.S.),
      LLC--1,056,200   shares  (6.7%),   as  to  which  they  share  voting  and
      dispositive   power,  and  MFC  Global  Investment   Management   (U.S.A.)
      Limited--7,650  shares (less than 1%). The principal  business address for
      Manulife  Financial  Corporation  and  MFC  Global  Investment  Management
      (U.S.A.) Limited is 200 Bloor Street, East, Toronto,  Ontario,  Canada M4W
      1E5. The principal business address for John Hancock Advisers,  LLC is 601
      Congress  Street,  Boston,  Massachusetts  02210.  The principal  business
      address for MFC Global Investment Management (U.S.), LLC is 101 Huntington
      Street, Boston, Massachusetts 02199.

(7)   Certain of the named executives have deferred  compensation accounts under
      the Directors and Executives Deferred  Compensation Plan that are credited
      with phantom shares of Common Stock: Mr. Capone (485 phantom shares),  Mr.
      DeVirgilio (678 phantom shares), and Mr. Meyer (1,104 phantom shares). Mr.
      Upright does not have phantom shares credited to his account.  The phantom
      shares  credited  to Mr.  Lant's  account  under the plan are shown in the
      table "Stock Equivalents Ownership of Directors,"  immediately below. Such
      shares are not  reflected on the  "Security  Ownership  of  Directors  and
      Officers" table.

                    STOCK EQUIVALENTS OWNERSHIP OF DIRECTORS

      The  following  table sets  forth the  number of phantom  shares of Common
Stock,  as of December 31, 2006,  credited to the accounts of the  Corporation's
participating Directors under the Directors and Executives Deferred Compensation
Plan, including reinvested dividends (rounded to the nearest whole number).

      The phantom shares shown in the following table are the sum of (i) phantom
shares granted to the Corporation's  independent  Directors (I.E., each Director
other than Mr. Lant) as a part of their  compensation  for service as a Director
of the Corporation and (ii) phantom shares resulting from the deferral,  if any,
into phantom shares of an independent Director's fees which would have otherwise
been paid to the Director in cash.  The phantom  shares  shown in the  following
table for Mr. Lant are the sum of the phantom  shares  resulting from Mr. Lant's
deferral into phantom shares of compensation earned by Mr. Lant for his services
as an executive of the Corporation.

      Under the Directors and Executives  Deferred  Compensation Plan,  payments
are made in cash and are generally  made  following  termination of service as a
Director  based  on the  market  value  of the  Common  Stock  at  the  time  of
termination.   For  additional   information,   see  the  subcaption   "Director
Compensation" at page 46 of this proxy statement.

             NAME                                   NUMBER OF PHANTOM SHARES (A)
             ----                                   ----------------------------
             Steven V. Lant ........................             2,784
             Margarita K. Dilley ...................             2,291
             Steven M. Fetter ......................             4,113
             Edward F. X. Gallagher ................             5,068
             Stanley J. Grubel .....................             4,639
             Manuel J. Iraola ......................             1,065
             E. Michel Kruse .......................             3,973
             Jeffrey D. Tranen .....................             3,410
             Ernest R. Verebelyi ...................               784
             Total (b) .............................            25,343

----------
(a)   The information in this table is as of December 31, 2006.

(b)   The total for each individual is less than 1% of the outstanding shares of
      Common Stock, and the total for the group of all participating independent
      Directors (8 persons) is less than 1% of the outstanding  shares of Common
      Stock, both percentages calculated as of the record date.


                                       17


                                    INSURANCE

      The  Corporation  provides  liability  insurance  for  its  Directors  and
officers.  Federal  Insurance  Company  (CHUBB),  Associated  Electric  and  Gas
Insurance  Services,  Ltd., Energy Insurance Mutual, and American  International
Group Companies are the principal  underwriters of the current  coverage,  which
extends until June 1, 2007.  The annual cost of this  coverage is  approximately
$980,000.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  the
Corporation's  officers and Directors and any person who owns more than 10% of a
registered class of the Corporation's equity securities (collectively "Reporting
Persons")  to file  initial  reports  of  ownership  and  reports  of changes in
ownership with the SEC. These Reporting  Persons are required by SEC regulations
to furnish the  Corporation  with  copies of all Section  16(a) forms they file.
Based  solely  on a  review  of the  copies  of  these  forms  furnished  to the
Corporation  and written  representations  from the  Corporation's  officers and
Directors:  (i) Mr. Tranen filed one late Form 4 (reporting grants of a total of
312 deferred fee phantom stock units). This filing was not made timely due to an
internal  error at the plan  administrator;  (ii) Each of Ms. Dilley and Messrs.
Fetter,  Gallagher,  Grubel, Iraola, Kruse, Tranen, and Verebelyi filed one late
Form 4 (each  reporting a grant of a total of 269  deferred  fee  phantom  stock
units). Each of these filings was untimely by one day; and (iii) Donna S. Doyle,
an officer of the Corporation,  filed one late Form 4 (reporting the exercise of
stock  options  (right-to-buy)  resulting  in 18 shares of Common  Stock).  This
filing was untimely by one day. As noted, each of the Form 4 filings referred to
in this paragraph has since been made.

                             EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

      This  Compensation  Discussion  and  Analysis  explains  our  compensation
program  for the Chief  Executive  Officer  (the  "CEO"),  the  Chief  Financial
Officer, and the other three most highly compensated  executive officers.  These
individuals  are referred to  collectively  in this proxy statement as our Named
Executive Officers.

OBJECTIVES AND PRINCIPLES OF OUR EXECUTIVE COMPENSATION PROGRAM

      The Compensation Committee is responsible for developing and administering
our  executive  compensation  program  for our  Named  Executive  Officers.  Our
executive compensation program is designed to achieve the following objectives:

      o     Attract and retain experienced and talented executives;

      o     Align the interests of our executive  officers and  shareholders  by
            motivating  executive officers to increase  shareholder value and by
            rewarding executive officers when shareholder value increases; and

      o     Provide a compensation  package that is weighted heavily towards pay
            for  performance,  and in which an  executive's  total  compensation
            opportunity  is dependent on corporate  business  results,  personal
            performance, and the creation of shareholder value.

      We use the  following  two  general  principles  to  guide  our  decisions
regarding executive compensation.

      PAY COMPETITIVELY WITHIN THE RELEVANT MARKET FOR EXECUTIVE TALENT

      The Corporation  believes that it must provide a competitive  compensation
package to successfully attract and retain talented executives.  As a result, we
believe  that  our  executive   compensation  program  should  provide  a  total
compensation  package for our executive  team that is, in the  aggregate,  at or
near the market median level of total compensation provided by our industry peer
groups.  In this  connection,  the  Compensation  Committee has retained the Hay
Group  ("Hay"  or the "Hay  Group")  to advise  the  Committee  on  compensation
matters.  For more  information  about the Hay  Group,  please  see the  section
entitled "Benchmarking Our Compensation Program" below.


                                       18


      MOTIVATE EXECUTIVES TO MEET OR EXCEED PERFORMANCE GOALS

      Our  executive   compensation  program  emphasizes  pay  for  performance.
Performance is measured  based on  performance  goals and metrics that align the
interests  of  executives   with  the  interests  of  the  Corporation  and  its
shareholders. The performance goals are established so that target attainment is
not assured.  Instead,  our executives  are required to demonstrate  significant
effort,  dedication, and achievement to attain payment for performance at target
or above.  Consistent  with the  practices of the companies in our industry peer
groups and the practices of public companies in the United States generally, the
Corporation's  compensation  program  is being  tilted  on an  increasing  basis
towards a combination  of short-term and long-term  performance-based  incentive
compensation,  with the percentage of performance-based  compensation increasing
as the levels of executive responsibility increase.

BENCHMARKING OUR COMPENSATION PROGRAM

      As  described  above,  the  Corporation  believes  that it must  provide a
competitive  compensation  package to  successfully  recruit and retain talented
executives.  To do that, it needs  information about  compensation  practices of
companies in the  relevant  competitive  market for  executive  talent.  In this
connection,  the Compensation Committee has retained the Hay Group to advise the
Committee on compensation  matters. Hay is an independent  consulting firm that,
among other things,  specializes in gathering and analyzing data with respect to
the compensation  practices and  compensation  levels of companies in the United
States,  and in  advising  corporations  on  structuring  compensation  programs
appropriate to their particular markets and business goals. Hay reports directly
to the Compensation Committee of the Corporation and serves at the sole pleasure
of the Compensation Committee.

      Each year, in consultation  with Hay, the Compensation  Committee  reviews
information about the compensation  being paid to executives (i) who are working
at companies engaged in businesses  comparable to the  Corporation's  businesses
and (ii) who have roles and  responsibilities  that are similar to the roles and
responsibilities  of the Corporation's  executives.  The Committee conducts this
review to assess the Corporation's  relative competitive position with regard to
compensation being paid within the market in which the Corporation  competes for
executive  talent.  Specifically,   the  Committee  compares  the  Corporation's
compensation  structure  and pay  levels  with  those  of  companies  in  groups
identified by Hay and the Committee as "comparator groups."

      The first  comparator  group  used for 2006 was a custom  peer group of 15
utility and energy  companies  operating in the United States.  The criteria for
inclusion  of  companies  in  this  custom  peer  group  were  developed  by the
Compensation Committee in consultation with Hay. Specifically, the criteria were
that the company have between 50% and 200% of the Corporation's  annual revenues
and have at least 5% of its assets  invested in  non-regulated  businesses.  The
compensation  information  used by the Hay Group with respect to this comparator
group was gathered from the proxy  statements filed by each company in the group
with the SEC.

      This group of 15 companies served as a primary comparator group for use in
determining the  compensation  levels for Mr. Lant, Mr. Meyer, and Mr. Capone in
2006.  It was  used  for  these  three  senior  officers  because  Hay  and  the
Compensation  Committee  believe (i) the scope and  complexity of the respective
positions  of Mr.  Lant,  Mr.  Meyer,  and Mr.  Capone  match-up  well  with the
responsibilities of persons occupying similar positions at the companies in this
comparator group and (ii) this custom peer group of companies,  based on size of
revenues and diversification of business  activities,  provides information that
reasonably  corresponds  to the market for executive  talent that is relevant to
the  compensation  of Mr. Lant, Mr. Meyer,  and Mr. Capone.  The 15 companies in
this comparator group were:

                Vectren Corp                         UIL Holdings
                Southwest Gas Corp                   DQE Inc
                DPL Inc.                             Cleco Corp
                Avista Corp                          Energen Corp
                Laclede Group                        Idacorp
                Equitable Resources                  South Jersey Industries
                Unisource Energy                     El Paso Electric
                                                     Semco Energy


                                       19


      This 15  company  peer  group was not used as a  comparator  group for Mr.
DeVirgilio  and Mr.  Upright  because  the Hay Group  concluded  that  their job
positions  involve  numerous  functions  that are not  necessarily  performed by
persons with similar  titles at different  companies.  Rather,  in reviewing Mr.
DeVirgilio's and Mr. Upright's  compensation levels, the Hay Group made use of a
comparator  group known as "The Hay Group's  National  Utility  Database."  This
comparator group was also used as a secondary resource by Hay in connection with
its analyses of the competitiveness of Mr. Lant's, Mr. Capone's, and Mr. Meyer's
compensation.

      For 2006,  the Hay  Group's  National  Utility  Database  consisted  of 45
utilities in the United States, including the Corporation,  that participated in
a national  survey  conducted by Hay regarding  compensation  structures and pay
levels. Based on information supplied by the 45 participating utility companies,
Hay compiled a proprietary database with respect to the roles, responsibilities,
and  compensation  levels  of the  officer  positions  at  the 45  participating
companies.  This  information  was gathered and analyzed in  recognition  of the
practical reality that job  responsibilities  of persons with similar titles may
vary  significantly  from company to company,  and that a person's  title is not
necessarily  descriptive  of  a  person's  duties.  Using  its  own  proprietary
evaluation  methodology,  Hay  considered  the  scope  and  complexity  of  each
officer's position within the 44 other participating companies, compared it with
the scope and  complexity  of the  officer  positions  at the  Corporation,  and
provided the Compensation  Committee with an assessment of the relative position
of the  compensation  being paid to the  Corporation's  officers in light of the
compensation  being  paid to  persons  carrying  duties  of  similar  scope  and
complexity at the companies participating in the survey.

      Hay's proprietary  evaluation methodology focuses on identifying positions
within the comparator group that have a scope and complexity of responsibilities
that are  comparable to those duties  exercised by particular  executives of the
Corporation. While information about positions in each of the 44 other companies
was considered,  particular  companies in the comparator  group may not have had
any positions that were considered comparable to the complexity and scope of the
particular  positions at the  Corporation,  while other companies may have had a
number of positions that were considered comparable.

      The 45 companies included in this comparator group for 2006 were:


                                                                         
      A&N Electric Cooperative                                              Montana Dakota Utility
      AGL Resources                                                         Nashville Electric Service
      Alabama Electric Cooperative                                          National Fuel Gas
      Allegheny Energy                                                      New York Independent System Operator
      Allete                                                                New York Power Authority
      Atmos Energy - TXU Gas                                                Nuclear Management
      California Independent System Operator                                Philadelphia Gas Works
      CenterPoint Energy                                                    Piedmont Natural Gas
      CH Energy Group, Inc.                                                 Progress Energy
      Des Moines Water Works                                                Public Works Commission of the City of
      Dominion Resources                                                    Fayetteville, NC
      East Kentucky Power Cooperative                                       Sacramento Municipal Utilities District
      Edison International - Edison Mission Energy                          Sierra Southwest Cooperative Services
      ElectriCities of North Carolina                                       South Jersey Industries
      FPL Group - Florida Power & Light                                     South Mississippi Electric Power
      Iroquois Pipeline                                                     Southern Company
      Kinder Morgan                                                         Southern Minnesota Municipal Power Agency
      MidAmerican Energy                                                    Southwest Gas
      Mid-Carolina Electric Cooperative                                     SUEZ Energy
      Midland Cogeneration Venture                                          Texas Gas Transmission
      Midwest Independent Transmission System Operator                      UGI
      Minnkota Power Cooperative                                            Unitil
      Mirant                                                                Wisconsin Public Service



                                       20


DESCRIPTION OF OUR EXECUTIVE COMPENSATION PROGRAM

      According  to  information   provided  annually  by  the  Hay  Group,  the
compensation   programs  of  virtually  all  companies  in  the  above-described
comparator  groups  make use of four  primary  compensation  elements:  (i) base
salary; (ii) annual short-term incentives;  (iii) long-term incentives; and (iv)
retirement benefits.  Because of this common practice in the relevant market for
executive talent,  and because the Corporation  believes there are sound reasons
for each element, the Corporation's compensation program for the Named Executive
Officers has four primary elements:

      o     base salary;

      o     annual short-term incentives;

      o     long-term incentives; and

      o     retirement benefits.

      The Corporation also provides our Named Executive  Officers with severance
benefits, health and welfare benefits, and certain limited perquisites.

PROCESS FOR MAKING COMPENSATION DECISIONS

      Each year the Compensation  Committee reviews the base salary,  short-term
incentive,  and long-term incentive  compensation level for each Named Executive
Officer. This adjustment process usually occurs in November and December.

      With respect to the  compensation of individual  executive  officers,  the
Compensation   Committee   considers  the  person's   level  and  complexity  of
responsibility,  experience and skills,  and  performance in his or her position
over  time.  In this  connection,  Steven V.  Lant,  as  Chairman  of the Board,
President and Chief Executive Officer,  provides the Compensation Committee with
an annual evaluation of the performance of each executive  officer.  Mr. Lant is
solely  responsible  for preparing the  evaluations of the three Named Executive
Officers who report directly to him: Carl E. Meyer,  Christopher M. Capone,  and
Joseph J. DeVirgilio,  Jr. In turn, these three executives provide Mr. Lant with
their  evaluations  of the officers who report  directly to each of them.  After
reviewing  these  evaluations  in the context of his own assessment of each such
officer's  performance,  Mr. Lant  develops his annual  evaluation  of each such
officer for presentation to the Committee.  Mr. Lant meets with the Compensation
Committee  and  reviews  the  evaluations  of  each  executive  officer.   After
discussing these  evaluations with Mr. Lant, and after making its own assessment
of the performance of each such executive  officer,  the Compensation  Committee
recommends  to the  independent  Directors  of the Board,  for their  review and
approval, the compensation level for each such executive officer with respect to
each of three elements of the  Corporation's  compensation  program;  I.E., base
salary, annual short-term incentives, and long-term incentives.

      The  Compensation  Committee  evaluated the performance of Mr. Lant during
2005  and  made  recommendations  to the  independent  Directors  of  the  Board
regarding Mr. Lant's  compensation  level for 2006. These  recommendations  were
approved  by  the   independent   Directors  of  the  Board   without   material
modifications. The Compensation Committee's analysis took into consideration the
salary, annual short-term  incentives,  and long-term incentives provided to the
chief executive  officers of companies in the two comparator groups used for Mr.
Lant. In addition,  Mr. Lant's compensation also reflects the greater policy and
decision making  responsibility  of the Chief Executive Officer position and the
higher  level of  responsibility  that he bears with  respect  to the  strategic
direction and the financial and operating results of the Corporation. In setting
Mr. Lant's  compensation  for 2006,  the  Compensation  Committee also took into
consideration the fact that Mr. Lant had served as Chief Executive Officer for a
relatively short period of time, I.E., since May 1, 2004.

ELEMENTS OF COMPENSATION

      A  summary  of each  element  of the  compensation  program  for our Named
Executive Officers is set forth below. The Compensation  Committee believes that
each element complements the others and that together they serve to


                                       21


achieve  the  Corporation's  compensation  objectives.  In  accordance  with our
overall objectives,  the executive compensation program for 2006 was competitive
with  our  industry  peer  group;  however,  the  actual  amount  earned  by our
executives  was below the median  level of the  comparator  groups  because  the
Corporation did not achieve the performance  goals applicable to the performance
shares for the 2004-2006 performance cycle (see "Long-Term Incentives",  below).
Consistent  with our pay for performance  philosophy,  assuming payout at target
levels,  our  2006  annual  incentive   opportunities  and  long-term  incentive
opportunities  represented,  in the  aggregate,  from  55% to  115%  of a  Named
Executive Officer's base salary, depending on the executive's role.

BASE SALARY

      We provide  competitive  base salaries to attract and retain key executive
talent.  The Committee  believes that a competitive  base salary is an important
component of compensation as it provides a degree of financial stability for our
executives. Base salaries also form the basis for calculating other compensation
opportunities for our Named Executive Officers.  For example,  base salaries are
used to determine each executive  officer's  annual  incentive  opportunity (see
"Annual  Short-Term  Incentives,"  below) and  long-term  incentive  awards (see
"Long-Term  Incentives,"  below).  Moreover,  base  salaries  are included in an
executive's  "final  average pay" for  purposes of  determining  his  retirement
benefits (see "Retirement  Benefits," below) and are included in the formula for
calculating  severance  benefits  in the  event  of a  change  in  control  (see
"Severance Arrangements," below).

      Base  salaries are designed to be  competitive  with base salaries paid by
the   companies   in  the   comparator   groups  to   executives   with  similar
responsibilities  to the  responsibilities  being  exercised  by the  particular
executive  officers of the Corporation.  The salaries are normally set at target
levels within the second or third quartile of the salary  distribution levels in
the  comparator   groups,   adjusted  to  reflect  the  individual's   scope  of
responsibilities,  level of experience and skill,  and the quality of his or her
performance  over  time.  Attention  is also  given to  maintaining  appropriate
internal salary relationships among the Corporation's executive officers, and to
recognizing succession planning goals.

      For  2006,  the  base  salaries  for our  Named  Executive  Officers  were
increased over their base salaries for 2005 as follows:  (i) Mr. Lant received a
6.5%  increase,  (ii) Mr.  Capone  received a 14.3%  increase,  (iii) Mr.  Meyer
received a 3.2% increase,  (iv) Mr. DeVirgilio received a 3.3% increase, and (v)
Mr. Upright  received a 5% increase.  For more  information  about the 2006 base
salaries for each of our Named Executive Officers,  please refer to the "Salary"
column of the Summary Compensation Table at page 26.

ANNUAL SHORT-TERM INCENTIVES

      Consistent with our emphasis on pay for performance incentive compensation
programs,  we have  established the Executive  Annual Incentive Plan under which
our executive officers,  including our Named Executive Officers, are eligible to
receive  annual  incentive  cash payments  based on  performance  against annual
established  performance  targets.  The annual  incentive  is designed to reward
achievement of each year's business plan objectives in a manner  consistent with
achievement of the  Corporation's  strategy of achieving  long-term  shareholder
value.

      In order to ensure  that our  compensation  package  is  weighted  heavily
towards pay for performance,  the annual incentive for 2006 represented from 30%
to 50% of a Named Executive Officer's base salary (assuming payout at the target
level), depending on the executive's level of responsibility.  Moreover,  annual
incentives  are included in an  executive's  "final average pay" for purposes of
determining his retirement  benefits (see "Retirement  Benefits," below) and are
included  in the formula for  calculating  severance  benefits in the event of a
change in control (see "Severance Arrangements," below).

      Under the Executive  Annual  Incentive Plan, our Named Executive  Officers
have  the  opportunity  to  earn  targeted  incentive  cash  payments  that  are
calculated  as  a  percentage  of  each  person's  annual  base  salary.   These
percentages  are developed by the  Compensation  Committee,  and approved by the
independent  Directors  on our Board,  according to each  person's  position and
level of  responsibility.  Annual  incentive award  opportunities  for our Named
Executive  Officers,  in the aggregate,  are targeted to result in cash payments
that are approximately equal


                                       22


to the market  median of our  comparator  groups  assuming  our target  business
objectives are achieved. For 2006, the targeted percentage for each of our Named
Executive Officers was as follows: (i) 50% of base salary for Mr. Lant, (ii) 35%
of base salary for each of Messrs. Meyer, DeVirgilio,  and Capone, and (iii) 30%
of base salary for Mr. Upright.

      These  percentages of base salary can be earned as incentive cash payments
if incentive  performance  targets for the year are achieved.  The  Compensation
Committee  establishes the incentive  performance  targets each year,  which are
primarily quantitative and financial in nature. For 2006, the targets related to
earnings  per  share  and,  at  the  subsidiary  level,  to the  achievement  of
additional  specified  customer  satisfaction  levels.  Performance  is measured
according to levels  established each year for threshold  performance,  targeted
performance, and superior performance. The performance levels are established so
that target attainment is not assured.  Instead,  our executives are required to
demonstrate  significant effort,  dedication,  and achievement to attain payment
for performance at target or above. In fact, actual achievement levels have been
below target for three of the last six performance  periods prior to 2006 (I.E.,
2000 through 2005).

      After the end of each calendar year,  management  assesses the performance
of the  Corporation  for each  performance  target  and  calculates  the  annual
incentive  amounts for the prior year.  These  assessments and  calculations are
verified for accuracy  each year by the Hay Group.  The  Compensation  Committee
then  reviews  the  verified  assessments  and  calculations  and  approves  the
resulting annual incentive amounts. The incentive compensation  opportunity will
vary,  from 0% to 150% of the targeted  percentage of base salary,  according to
the level of overall corporate performance achieved for the year relative to the
established performance targets. For 2006, actual performance ranged from 107.6%
to 116% of target performance level.  Please refer to the "Non-Equity  Incentive
Plan  Compensation"  column of the  Summary  Compensation  Table for the  annual
incentive  amounts for each Named Executive  Officer under the Executive  Annual
Incentive Plan for the 2006 performance period.

      The annual  incentive  amounts  for each Named  Executive  Officer  may be
adjusted upwards or downwards by up to 50% based upon the Committee's assessment
of the  individual's  performance.  Such  adjustments,  if made, are based on an
evaluation of each officer's  contribution to achieving corporate  opportunities
and meeting corporate challenges, as well as an evaluation of the quality of the
individual's performance in exercising  responsibility described in his position
description.  In this regard, adjustments were made to the 2006 annual incentive
amounts for the  following  Named  Executive  Officers:  Mr.  Lant, a 20% upward
adjustment;  Mr. Capone,  a 15% upward  adjustment;  and Mr. Meyer, a 15% upward
adjustment.  The  amounts of the  discretionary  adjustments  for 2006 for these
Named  Executive  Officers  are  included in the  "Bonus"  column of the Summary
Compensation Table.

      For more  information  on the 2006 annual  incentive  opportunity  for our
Named Executive Officers,  including a description of the applicable performance
goals,  please refer to the "Grants of Plan-Based  Awards" section of this proxy
statement at page 28. The "Estimated  Future Payouts Under Non-Equity  Incentive
Plan Awards"  column of the "Grants of  Plan-Based  Awards"  table  provides the
estimated  payouts for our Named Executive  Officers at Threshold,  Target,  and
Maximum performance levels.

LONG-TERM INCENTIVES

      We award long-term incentive grants to executive  officers,  including the
Named  Executive  Officers,  as part of our total  compensation  package.  These
awards are consistent with our pay for performance  principles  because they are
designed to focus the attention of executives on strategic  goals  spanning more
than the  current  year,  and to  align  the  interest  of  executives  with the
Corporation's goal of creating  long-term  shareholder value. In order to ensure
that our  compensation  package is weighted heavily towards pay for performance,
the long-term  incentive  opportunity for 2006  represented from 25% to 65% of a
Named  Executive  Officer's base salary  (assuming  payout at the target level),
depending on the executive's role.

      Long-term  incentives  have included two  components in recent years:  (i)
options to purchase the Corporation's  Common Stock, and (ii) performance shares
that  vest  depending  upon  the  Corporation's  performance  over a  three-year
performance  period.  The long-term  incentives  in 2003  consisted of 25% stock
options and 75% performance  shares.  The long-term  incentives in 2004 and 2005
consisted of 100% performance shares. This shift away from options


                                       23


occurred because the Compensation Committee, in consultation with the Hay Group,
concluded that  performance  shares were preferable for the Corporation  because
the shares are earned through  corporate  performance over a defined time period
(I.E., a performance  cycle),  the number of shares actually received at the end
of a  performance  cycle  increases  or  decreases  according  to the  level  of
performance  achieved during the performance  cycle, and the value of the shares
granted can be expected to increase as corporate performance increases.

      For  2006,  the  Compensation  Committee  recommended  to the  independent
Directors on the Board, and the independent Directors agreed, that the long-term
incentives  would again consist solely of  performance  shares and that no stock
options would be issued.  The performance shares are granted under our Long-Term
Equity  Incentive  Plan and are  intended to comply  with the  performance-based
compensation exception to Section 162(m) of the Internal Revenue Code.

      The target number of performance  shares  granted to each Named  Executive
Officer is generally  determined  in November or December of the year  preceding
the year in which  the  grant  will be made.  The  target  number  is based on a
percentage  of the  individual's  base  salary  that  will be in  effect  at the
beginning of the next calendar year.  These  percentages are determined for each
officer  by the  Committee  according  to the  person's  position  and  level of
responsibility,  and are targeted,  in the aggregate for the executive  team, at
the median  amount of  long-term  incentive  compensation  that is  available to
persons with similar  responsibilities  within the comparator  groups. For 2006,
the targeted  percentage of base salary for each of our Named Executive Officers
was as follows: (i) 65% of base salary for Mr. Lant, (ii) 35% of base salary for
each of Messrs. Meyer, DeVirgilio,  and Capone, and (iii) 25% of base salary for
Mr.  Upright.  The actual  number of  performance  shares  granted to each Named
Executive  Officer is determined by dividing  each person's  performance  target
(I.E.,  an amount  equal to a  percentage  of his or her salary in effect at the
beginning of the next calendar  year) by the closing price of the  Corporation's
Common Stock on the first Monday  following  the first Tuesday in January of the
following calendar year.

      Payment  of the  performance  shares  granted in 2006 will be based on the
extent to which the Corporation performs with respect to established performance
metrics  during a three-year  performance  cycle  starting  January 1, 2006, and
ending December 31, 2008. In the past, these  performance  metrics were based on
the  Corporation's  total  shareholder  return compared to the total shareholder
return of the companies in the Edison  Electric  Institute  Index of combination
natural gas and electric investor-owned utilities (the "EEI Index"). Starting in
2005, upon the  recommendation of the Hay Group, the Committee shifted away from
stock-based  performance metrics to operational performance metrics. This change
was  designed  to  (i)  align  the  long-term  incentive  opportunities  of  our
executives with performance  metrics within their control,  and (ii) ensure that
the cost of the  long-term  incentive  opportunities  for  financial  accounting
purposes  better reflects the actual benefit  received by the  executives.  As a
result,  the performance  metrics for the 2006 performance shares consist of two
measurements  of equal weight,  I.E., each  measurement  accounts for 50% of the
total performance share metric:

      1. the percentage growth in the Corporation's  earnings per share over the
three-year  performance  cycle as compared to the percentage  growth in earnings
per share of the companies in the EEI Index over the same time period; and

      2. the average of the  Corporation's  annual  dividend yield on book value
over the three-year  performance  cycle as compared to the average of the annual
dividend  yield on book  value of the  companies  in the EEI Index over the same
time period.

      The number of shares of the  Corporation's  Common  Stock  earned and paid
will range,  according to the level of performance achieved,  from 0% to 150% of
the performance  shares granted.  The performance levels are established so that
target attainment is not assured and is dependent on the Corporation's  relative
performance compared against the companies in the EEI Index.

      Performance shares may be granted on a year-to-year basis, with the result
that there are normally over-lapping  three-year performance cycles in effect on
a  concurrent  basis.  Indeed,  during  2006 there  were three open  performance
cycles:  2004-2006,  2005-2007,  and 2006-2008.  Following the completion of the
2004-2006 performance


                                       24


cycle, the Compensation Committee determined that the Corporation did not attain
the  applicable  performance  objectives  for that  cycle.  Therefore  our Named
Executive Officers did not receive any payout of performance shares with respect
to that cycle.

      For more  information  on the  performance  shares  granted  to our  Named
Executive  Officers in 2006,  please refer to the "Grants of Plan-Based  Awards"
section of this proxy statement at page 28. The "Estimated  Future Payouts Under
Equity Incentive Plan Awards" column of the "Grants of Plan-Based  Awards" table
provides the estimated  payouts for our Named  Executive  Officers at Threshold,
Target, and Maximum performance levels. The accompanying narrative to that table
summarizes  the  applicable  performance  goals for each of our Named  Executive
Officers,  including the applicable  Threshold,  Target and Maximum  performance
levels.  For information about the total number of equity awards  outstanding as
of the end of 2006 with respect to each Named Executive Officer, please refer to
the  "Outstanding  Equity  Awards  at Fiscal  Year-End"  section  of this  proxy
statement at page 31.

RETIREMENT BENEFITS

      In order to attract and retain key executive talent at the Corporation and
its utility subsidiary, Central Hudson, the Compensation Committee believes that
it is important to provide the executive officers, including the Named Executive
Officers, with retirement benefits that are in addition to those provided to its
employees generally.  These retirement benefits are provided primarily under the
Supplemental  Executive  Retirement Plan,  which provides  benefits in excess of
those  provided under the Retirement  Income Plan.  The  Supplemental  Executive
Retirement  Plan is designed to work in conjunction  with the Retirement  Income
Plan to provide each Named Executive Officer with a retirement  benefit equal to
57% of his or her  applicable  final  average  pay at age 61  with 30  years  of
service.  A  participant's   Supplemental   Executive  Retirement  Plan  benefit
generally   becomes  vested  if,  while  employed  by  the  Corporation  or  its
affiliates, he or she attains the normal retirement age of 61, or attains his or
her early retirement date of age 55 with ten years or more of vesting service.

      The retirement  program was designed in  consultation  with the Hay Group.
The Compensation  Committee  believes that the retirement  program is consistent
with the programs offered by companies in the comparator groups.  Moreover,  the
Compensation  Committee  believes that the vesting  schedule of the Supplemental
Executive Retirement Plan enhances our retention program for our Named Executive
Officers and rewards their long-term commitment to the Corporation.

      For more  information  on these  retirement  benefits  and our  retirement
program,  please refer to the "Pension Benefits" section of this proxy statement
at page 34.

HEALTH, WELFARE AND OTHER PERSONAL BENEFITS

      In addition to the principal compensation  components described above, our
Named  Executive  Officers are entitled to participate  in all health,  welfare,
fringe benefit,  and other  arrangements  generally  available to other salaried
employees.  We also may, as considered  reasonable and  appropriate on a case by
case basis, provide our officers,  including our Named Executive Officers,  with
limited  additional  perquisites and other personal  benefits.  For example,  on
March 1, 2004, the Corporation  established a financial planning program for its
executives, including its Named Executive Officers. After an executive completes
his initial financial planning program,  the executive is eligible for up to one
thousand  dollars of  financial  planning  services on an annual  basis.  A full
financial  plan update is available to each  executive in the sixth year (or the
fourth year for those  executives  age 55 and over)  following the completion of
his initial financial planning program.

      The Compensation Committee believes that these health,  welfare, and other
personal  benefits are reasonable  and  consistent  with the practices of public
companies in the United States.  The  Compensation  Committee also believes that
these  benefits   assist  the   Corporation  in  attracting  and  retaining  key
executives.


                                       25


SEVERANCE ARRANGEMENTS

      The  Corporation  does not have  employment  agreements with its executive
officers.  The  Compensation  Committee  believes that the absence of employment
agreements  provides the  Corporation  with more  flexibility  in adjusting  the
compensation levels of its executive officers.

      However,  the  Corporation  has entered into change in control  agreements
with its  executive  officers,  including  its  Named  Executive  Officers.  The
agreements  are  designed  to  encourage  the  executive's  full  attention  and
dedication to the  Corporation  currently and in the event of any  threatened or
pending change in control. Under these agreements,  each Named Executive Officer
would be entitled to certain  payments  and benefits if a change in control were
to occur  and the  Corporation  or its  affiliates  terminated  the  executive's
employment  without "cause" or the executive  terminated his employment with the
Corporation or its  affiliates  for "good reason" within a three-year  period (a
two-year  period  for  Mr.  Upright)  following  such  change  in  control.  The
Compensation  Committee believes that the protections  afforded by the change in
control  agreements  are a valuable  incentive for  attracting and retaining key
executives and are competitive with those of other corporations.

      For more information on the change in control agreements,  please refer to
the "Potential  Payments Upon  Termination or Change in Control" section of this
proxy statement at page 39.

                          COMPENSATION COMMITTEE REPORT

      The  Compensation  Committee has reviewed and  discussed the  Compensation
Discussion and Analysis contained in this proxy statement with the management of
the  Corporation  and,  based on such review and  discussion,  the  Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and  Analysis  be  included  in this proxy  statement  and  incorporated  in the
Corporation's  Annual Report on Form 10-K for the fiscal year ended December 31,
2006.

                                                     The Compensation Committee:

                                                     Stanley J. Grubel, Chair
                                                     Margarita K. Dilley
                                                     Manuel J. Iraola
                                                     Ernest R. Verebelyi

SUMMARY COMPENSATION TABLE

      The following table sets forth information  regarding the compensation for
the year ended December 31, 2006, of the Named Executive Officers.



---------------------------------------------------------------------------------------------------------------------------------
                                                                                              CHANGE IN
                                                                                               PENSION
                                                                               NON-EQUITY     VALUE AND
                                                                                INCENTIVE   NONQUALIFIED       ALL
      NAME AND                                            STOCK      OPTION       PLAN        DEFERRED        OTHER
      PRINCIPAL                    SALARY      BONUS     AWARDS      AWARDS      COMPEN-    COMPENSATION     COMPEN-
      POSITION            YEAR       ($)        ($)        ($)         ($)      SATION($)    EARNINGS($)    SATION($)   TOTAL($)
       (A)(1)              (B)     (C)(2)     (D)(3)     (E)(4)      (F)(5)      (G)(6)        (H)(7)        (I)(8)        (J)
---------------------------------------------------------------------------------------------------------------------------------
                                                                                             
Steven V. Lant            2006     490,000     56,840     220,996    15,658      284,200       481,300        7,500     1,556,494
---------------------------------------------------------------------------------------------------------------------------------
Christopher M.
  Capone                  2006     240,000     14,616      66,077         0       97,440        54,900        7,500       480,533
---------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer             2006     291,000     16,456      72,076    14,730      109,707         6,900        7,500       518,369
---------------------------------------------------------------------------------------------------------------------------------
Joseph J.
  DeVirgilio, Jr.         2006     250,000          0      67,307     8,592      101,500       145,200        7,500       580,099
---------------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright         2006     230,000          0      42,076     7,572       80,040       148,100       28,733       536,521
---------------------------------------------------------------------------------------------------------------------------------


----------
(1)   The  principal  positions  each of the  Named  Executive  Officers  are as
      follows:


                                       26


            Mr. Lant - Chairman,  President and Chief  Executive  Officer of the
            Corporation; Chairman and Chief Executive Officer of Central Hudson;
            Chairman, President and Chief Executive Officer of CHEC.

            Mr.  Capone  -  Chief   Financial   Officer  and  Treasurer  of  the
            Corporation, Central Hudson, and CHEC.

            Mr. Meyer - Executive Vice President of the  Corporation;  President
            and Chief Operating Officer of Central Hudson.

            Mr.  DeVirgilio - Executive Vice  President - Corporate  Services of
            the Corporation  and of Central Hudson;  Executive Vice President of
            CHEC.

            Mr. Upright - Senior Vice President of the Corporation;  Senior Vice
            President - Regulatory Affairs of Central Hudson.

(2)   SALARY.  The "Salary" column of the Summary  Compensation  Table shows the
      salaries paid in 2006 to each of the Named Executive Officers.

(3)   BONUS.  The  "Bonus"  column of the Summary  Compensation  Table shows the
      discretionary  increases,  if any, in the annual incentive amounts for our
      Named Executive Officers under the Executive Annual Incentive Plan for the
      2006 performance period. For additional  information about the 2006 annual
      incentive opportunities, please refer to the "Grants of Plan-Based Awards"
      section  of this  proxy  statement  at page 28.  Please  also refer to the
      "Compensation  Discussion and Analysis" section of this proxy statement at
      page 22, under the sub-heading "Annual Short-Term Incentives."

(4)   STOCK AWARDS. The "Stock Awards" column of the Summary  Compensation Table
      shows the aggregate  dollar  amount  recognized  for  financial  statement
      reporting  purposes for the fiscal year ending  December  31,  2006,  with
      respect to  performance  share  awards  granted  to each  Named  Executive
      Officer for the 2004-2006  performance  period, the 2005-2007  performance
      period, and the 2006-2008  performance period. The aggregate dollar amount
      was determined in accordance  with Financial  Accounting  Standards  Board
      Statement of Financial  Accounting Standards No. 123 (revised 2004), SHARE
      BASED  PAYMENT  ("FAS  123R");  however,  the  calculations  disregard the
      estimate of forfeitures related to service-based  vesting conditions.  See
      Note  10  of  the  Consolidated  Financial  Statements  contained  in  the
      Corporation's  Annual Report on Form 10-K for the year ended  December 31,
      2006, for an explanation of the assumptions made by the Corporation in the
      valuation of these awards.  The  Corporation did not attain the applicable
      performance  objectives governing the performance shares for the 2004-2006
      performance  period.  Therefore,  the Named Executive  Officers  forfeited
      those  performance  shares in their  entirety  as of the end of 2006.  For
      information about the performance  shares granted in 2006, please refer to
      the "Grants of Plan-Based  Awards" section of this proxy statement at page
      28.  Please  also  refer to the  "Compensation  Discussion  and  Analysis"
      section  of  this  proxy  statement  at page  23,  under  the  sub-heading
      "Long-Term   Incentives."  For  information  on  all  of  the  outstanding
      performance   shares  as  of  December  31,  2006,  please  refer  to  the
      "Outstanding  Equity  Awards at Fiscal  Year-End"  section  of this  proxy
      statement at page 31.

(5)   OPTION  AWARDS.  The "Option  Awards"  column of the Summary  Compensation
      Table shows the aggregate dollar amount recognized for financial statement
      reporting  purposes for the fiscal year ending  December  31,  2006,  with
      respect  to  outstanding  stock  options  granted  to our Named  Executive
      Officers in 2003.  The aggregate  dollar amount  recognized  for financial
      statement   reporting   purposes   includes  the  incremental  fair  value
      attributable to the  modification of the vesting schedule of Mr. Upright's
      stock options in  connection  with his planned  retirement.  The aggregate
      dollar amount was  determined in accordance  with FAS 123R;  however,  the
      calculations   disregard   the   estimate   of   forfeitures   related  to
      service-based  vesting  conditions.   See  Note  10  of  the  Consolidated
      Financial  Statements contained in the Corporation's Annual Report on Form
      10-K for the year ended  December  31,  2006,  for an  explanation  of the
      assumptions made by the Corporation in the valuation of these awards.  For
      information on the stock options  outstanding as of December 31, 2006, for
      each Named  Executive  Officer,  please refer to the  "Outstanding  Equity
      Awards at Fiscal Year-End" section of this proxy statement at page 31. For
      information about the modification of Mr. Upright's stock options,  please
      refer to the "Grants of Plan-Based Awards" section of this proxy statement
      at page 28.


                                       27


(6)   NON-EQUITY  INCENTIVE PLAN  COMPENSATION.  The "Non-Equity  Incentive Plan
      Compensation"  column of the Summary  Compensation  Table shows the annual
      incentive award earned by our Named Executive Officers under the Executive
      Annual Incentive Plan for the 2006 performance period. Please refer to the
      "Bonus"  column of the  Summary  Compensation  Table for the amount of the
      discretionary  increases,  if any, in the annual incentive award earned by
      our Named Executive Officers under the Executive Annual Incentive Plan for
      the 2006 performance  period.  For additional  information  about the 2006
      annual incentive  opportunities under the Executive Annual Incentive Plan,
      please refer to the "Grants of  Plan-Based  Awards"  section of this proxy
      statement at page 28.  Please also refer to the  "Compensation  Discussion
      and  Analysis"  section  of this  proxy  statement  at page 22,  under the
      sub-heading "Annual Short-Term Incentives."

(7)   CHANGE IN PENSION VALUE AND NONQUALIFIED DEFERRED  COMPENSATION  EARNINGS.
      The  "Change  in  Pension  Value and  Nonqualified  Deferred  Compensation
      Earnings" column of the Summary  Compensation  Table shows the increase in
      the present value of the accumulated  benefits under the Retirement Income
      Plan,   Supplemental   Executive   Retirement  Plan,   Retirement  Benefit
      Restoration Plan, and  Supplementary  Retirement Plan. The increase in the
      present value of the accumulated  benefits was measured from (i) September
      30, 2005, to September 30, 2006 (the  measurement  date used for reporting
      purposes  in the  Corporation's  Annual  Report  on Form 10-K for the year
      ended  December  31,  2006),  for the  Retirement  Income  Plan;  and (ii)
      December 31, 2005, to December 31, 2006,  for the  Supplemental  Executive
      Retirement Plan,  Retirement  Benefit  Restoration Plan, and Supplementary
      Retirement Plan. For information on these plans and benefits, please refer
      to the "Pension  Benefits" section of this proxy statement at page 34. Our
      Named Executive  Officers did not accrue any  above-market  earnings under
      the Directors and Executives  Deferred  Compensation Plan during 2006, and
      therefore we have not reported  any earnings  credited  under that plan in
      this column.  For  information  on the Directors and  Executives  Deferred
      Compensation   Plan,   please   refer   to  the   "Nonqualified   Deferred
      Compensation" section of this proxy statement at page 38.

(8)   ALL OTHER COMPENSATION. The "All Other Compensation" column of the Summary
      Compensation Table shows the $7,500  contribution that Central Hudson made
      on behalf of each Named  Executive  Officer in 2006 under the 401(k) Plan.
      The column also  includes  accrued  vacation  pay in the amount of $21,233
      that was paid to Mr.  Upright  at the end of 2006 in  connection  with his
      planned retirement.

GRANTS OF PLAN-BASED AWARDS

      The  following  table sets  forth  information  for each  Named  Executive
Officer   regarding   estimated   payouts  of  the  (i)  annual  cash  incentive
opportunities granted under the Executive Annual Incentive Plan during 2006, and
(ii) performance shares granted under the Long-Term Equity Incentive Plan during
2006.



                                                                                                                         GRANT DATE
                                              ESTIMATED FUTURE PAYOUTS UNDER          ESTIMATED FUTURE PAYOUTS UNDER     FAIR VALUE
                                 DATE OF    NON-EQUITY INCENTIVE PLAN AWARDS(1)       EQUITY INCENTIVE PLAN AWARDS(2)     OF STOCK
                       GRANT      BOARD    -------------------------------------    ----------------------------------   AND OPTION
         NAME          DATE      ACTION    THRESHOLD      TARGET         MAXIMUM    THRESHOLD     TARGET       MAXIMUM     AWARDS
          (A)           (B)     (B-1)(3)    ($)(C)        ($)(D)         ($)(E)      (#)(F)       (#)(G)       (#)(H)      (L)(4)
         ----          ----     -------    ---------      ------         -------    ---------     ------       -------   ----------
                                                                                               
Steven V. Lant        4/25/06    2/10/06    122,500       245,000        367,500        229        6,940        10,410    208,389
Christopher M.
  Capone              4/25/06    2/10/06     42,000        84,000        126,000         60        1,820         2,730     54,650
Carl E. Meyer         4/25/06    2/10/06     50,925       101,850        152,775         73        2,210         3,315     66,360
Joseph J.
  DeVirgilio, Jr.     4/25/06    2/10/06     43,750        87,500        131,250         63        1,900         2,850     57,052
Arthur R. Upright     4/25/06    2/10/06     34,500        69,000        103,500         41        1,250         1,875     40,138


----------
(1)   ESTIMATED  FUTURE PAYOUTS UNDER  NON-EQUITY  INCENTIVE  PLAN AWARDS.  This
      column  provides  information  about the  annual  incentive  opportunities
      granted under the Executive Annual Incentive Plan during 2006 to our Named
      Executive Officers. The information included in the "Threshold," "Target,"
      and "Maximum"  columns  reflects the range of potential  payouts under the
      Executive   Annual   Incentive  Plan  when  the  performance   goals  were
      established  by the  Compensation  Committee and the Board of Directors in
      December  2005.  The actual 2006 annual  incentive  awards  earned by each
      Named Executive Officer under the Executive Annual Incentive


                                       28


      Plan were determined on February 13, 2007. Please refer to the "Non-Equity
      Incentive Plan Compensation"  column of the Summary Compensation Table for
      the amount of the annual  incentive  award  earned by our Named  Executive
      Officers  under  the  Executive   Annual   Incentive  Plan  for  the  2006
      performance  period.  Please  refer to the  "Bonus"  column of the Summary
      Compensation Table for the amount of the discretionary  increases, if any,
      in the annual incentive award earned by our Named Executive Officers under
      the Executive Annual Incentive Plan for the 2006 performance period. For a
      brief  description of the Executive Annual Incentive Plan, please refer to
      the  narrative  summary that  follows this table and to the  "Compensation
      Discussion and Analysis" section of this proxy statement at page 18.

(2)   ESTIMATED FUTURE PAYOUTS UNDER EQUITY  INCENTIVE PLAN AWARDS.  This column
      provides  information  about  the  performance  shares  granted  under the
      Long-Term  Equity  Incentive  Plan  during  2006  to our  Named  Executive
      Officers.  The  information  included in the  "Threshold,"  "Target,"  and
      "Maximum"  columns  reflects  the  range of  potential  payouts  under the
      performance  shares when the  performance  goals were  established  by the
      Compensation  Committee in January 2006.  The actual payout will depend on
      the extent to which the  Corporation  achieves the applicable  performance
      goals. For a brief description of the performance shares,  please refer to
      the  narrative  summary  that  follows this table and to the "Compensation
      Discussion and Analysis" section of this proxy statement at page 18.

(3)   DATE OF BOARD ACTION. The Compensation  Committee  authorized the grant of
      the  performance  shares on  February  10,  2006,  subject to  shareholder
      approval of the Long-Term Equity Incentive Plan. Our shareholders approved
      the Long-Term Equity Incentive Plan on April 25, 2006, which is treated as
      the actual grant date for the performance  shares.  The difference between
      the two dates  does not have an  impact  on the  value of the  performance
      shares.

(4)   GRANT  DATE FAIR  VALUE OF STOCK AND  OPTION  AWARDS.  The  amount in this
      column  consists of the grant date fair value, as determined in accordance
      with FAS 123R, of  outstanding  performance  share awards  granted to each
      Named  Executive  Officer in 2006.  With respect to Mr.  Upright only, the
      column  also  includes  the  incremental  fair value  attributable  to the
      modification of the vesting  schedule of his stock options,  as determined
      in accordance  with FAS 123R.  See Note 10 of the  Consolidated  Financial
      Statements  contained in the Corporation's  Annual Report on Form 10-K for
      the year ended December 31, 2006,  for an  explanation of the  assumptions
      made  by  the  Corporation  in  the  valuation  of  these  awards.  For  a
      description of the  modification to Mr.  Upright's  stock options,  please
      refer to the narrative summary that follows this table.


                                       29


      EXECUTIVE  ANNUAL  INCENTIVE PLAN.  Under the Executive  Annual  Incentive
Plan, our Named  Executive  Officers have the opportunity to earn incentive cash
payments  that are  calculated  as a  percentage  of each  person's  annual base
salary. For 2006, the annual incentive award opportunities were as follows:  (i)
50% of annual  base  salary for Mr.  Lant;  (ii) 35% of annual  base  salary for
Messrs.  Capone, Meyer, and DeVirgilio;  and (iii) 30% of annual base salary for
Mr. Upright. The incentive  compensation  opportunity will vary, from 0% to 150%
of the targeted  percentage  of base  salary,  according to the level of overall
performance  achieved  for the year  relative  to each  established  performance
target, as set forth below:



---------------------------------------------------------------------------------------------------------------------------
                                                                                                                  MAXIMUM
                                            BELOW                THRESHOLD                TARGET                PERFORMANCE
                                          THRESHOLD             PERFORMANCE             PERFORMANCE              OR ABOVE
---------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Payout Percentage                            0%                     50%                    100%                    150%
---------------------------------------------------------------------------------------------------------------------------


      For  2006,  the  performance  goals  and  weighting  of each  goal were as
follows:



------------------------------------------------------------------------------------------------------------
                                                                        NAMED
                                                                        EXECUTIVE
  PERFORMANCE GOAL                                                      OFFICER                       WEIGHT
------------------------------------------------------------------------------------------------------------
                                                                                                 
The Corporation's earnings per share, adjusted                          Lant, Capone,                  100%
for unusual weather and excluding interest and                          DeVirgilio and
earnings from investment program                                        Upright
------------------------------------------------------------------------------------------------------------
Central Hudson's earnings per share, adjusted                           Meyer                           60%
for unusual weather
------------------------------------------------------------------------------------------------------------
Customer Satisfaction

1) J.D. Powers Customer Satisfaction Survey
Results for the Eastern Division -2006                                                                  20%
------------------------------------------------------------------------------------------------------------
2) "How Did We Do?" survey administered by
Central Hudson during 2006
------------------------------------------------------------------------------------------------------------
    a. Highly Satisfied                                                                                 10%
    b. Satisfied and Highly Satisfied                                                                   10%
------------------------------------------------------------------------------------------------------------


      Each Named Executive  Officer's  annual incentive  compensation  amount is
based on overall achievement of the annual incentive performance targets, but it
may be adjusted  upwards or downwards by up to 50% based upon an  assessment  of
the individual's  performance.  The annual incentive will be paid in the form of
cash no later than March 15, 2007.  An  executive's  right to receive the annual
incentive  will  be  forfeited  if he or  she  terminates  employment  with  the
Corporation  and its  affiliates  for any reason  (other  than his or her death,
disability,  or retirement)  during the year.  Upon an  executive's  retirement,
death,  or disability  prior to the end of the year, the CEO and/or the Board of
Directors (or appropriate committee thereof) would determine the extent to which
the  applicable  performance  goals  have been  achieved  at  year-end,  and the
resulting  award will be pro-rated based on the number of days the executive had
been employed during the year.

      PERFORMANCE  SHARES.  Payment  of the  performance  shares is based on the
extent to which the Corporation  achieves two equally weighted performance goals
during a three-year  performance  period  starting  January 1, 2006,  and ending
December  31, 2008.  The first  performance  goal is based on the  Corporation's
percentage  growth  in  earnings  per share  during  the  performance  period as
compared to the percentage  growth in earnings per share of the companies in the
EEI Index during the same period.  The second  performance  goal is based on the
average of the  Corporation's  annual  dividend  yield on book value  during the
performance  period as compared to the average of the annual  dividend  yield on
book value of the companies in the EEI Index during the same period.  The number
of shares earned and paid will range,  according to the percentile  rank of each
performance goal relative to the companies in the EEI Index,  from 0% to 150% of
the performance shares granted, as set forth below:


                                       30




---------------------------------------------------------------------------------------------------------------------------
                                             BELOW
                                           THRESHOLD -                                                           MAXIMUM -
                                           PERCENTILE           THRESHOLD -               TARGET -              PERCENTILE
                                           RANK OF 20%          PERCENTILE              PERCENTILE              RANK OF 80%
                                             OR LESS            RANK OF 21%             RANK OF 50%               OR MORE
---------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Payout Percentage                              0%                  3.3%                    100%                    150%
---------------------------------------------------------------------------------------------------------------------------


      Payment of any  performance  shares that become earned will be made in the
form of shares of the  Corporation's  Common Stock no later than March 15, 2009.
An executive's  right to receive the performance  shares will be forfeited if he
or she terminates  employment  with the  Corporation  and its affiliates for any
reason  (other  than his or her death or  retirement)  prior to  payment  of the
performance  shares.  If,  however,  an  executive  retires  or dies  during the
performance  period,  the Board of Directors (or appropriate  committee thereof)
would  determine the extent to which the applicable  performance  goals had been
achieved  during the full  fiscal  quarters  completed  during  the  performance
period,  and the resulting  award would be pro-rated based on the number of days
the executive had been employed during the performance period. Upon a "change in
control" of the  Corporation,  the Board of Directors (or appropriate  committee
thereof) would  determine the extent to which the applicable  performance  goals
have been achieved through the full fiscal quarters completed prior to that date
and the resulting  award would be paid without  pro-ration.  The Named Executive
Officers have no right to dividends and no right to vote the performance  shares
until they are paid.

      MODIFICATION TO MR. UPRIGHT'S STOCK OPTIONS

      Mr. Upright  retired on January 1, 2007. In connection with his retirement
and in recognition of his significant  contributions  to the Corporation and its
subsidiaries  over the past 40 years, the Compensation  Committee  exercised its
discretion to  accelerate  the vesting of stock options held by him covering 800
shares of the Corporation's Common Stock.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

      The  following  table sets  forth  information  for each  Named  Executive
Officer  with respect to (i) each option to purchase  the  Corporation's  Common
Stock that had not been  exercised and remained  outstanding  as of December 31,
2006, and (ii) each award of performance shares that had not vested and remained
outstanding as of December 31, 2006.





---------------------------------------------------------------------------------------------------------------------------------
                                                 OPTION AWARDS                                      STOCK AWARDS
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         EQUITY
                                                                                                              EQUITY    INCENTIVE
                                                                                                             INCENTIVE    PLAN
                                                                                                               PLAN      AWARDS:
                                                                                                    MARKET    AWARDS:    MARKET
                                                                                                     VALUE    NUMBER    OR PAYOUT
                                                    EQUITY                                            OF        OF       VALUE OF
                                                   INCENTIVE                                        SHARES   UNEARNED    UNEARNED
                                                     PLAN                                NUMBER       OR      SHARES,    SHARES,
                                                    AWARDS:                             OF SHARES    UNITS   UNITS OR    UNITS OR
                       NUMBER OF     NUMBER OF     NUMBER OF                            OR UNITS      OF       OTHER     OTHER
                      SECURITIES    SECURITIES    SECURITIES                            OF STOCK     STOCK    RIGHTS     RIGHTS
                      UNDERLYING    UNDERLYING    UNDERLYING                              THAT       THAT      THAT       THAT
                      UNEXERCISED   UNEXERCISED   UNEXERCISED   OPTION       OPTION     HAVE NOT   HAVE NOT  HAVE NOT    HAVE NOT
                      OPTIONS (#)   OPTIONS(#)     UNEARNED    EXERCISE    EXPIRATION    VESTED     VESTED    VESTED     VESTED
  NAME         GRANT  EXERCISABLE  UNEXERCISABLE  OPTIONS(#)   PRICE($)       DATE         (#)        ($)       (#)        ($)
   (A)          YR      (B)(1)        (C)(2)          (D)       (E)(3)         (F)         (G)        (H)     (I)(4)     (J)(5)
---------------------------------------------------------------------------------------------------------------------------------
                                                                                            
Steven V.       2001     3,600             0             0      $44.06      January 1,      0          0
  Lant                                                                      2011
                2003     2,640         1,760             0      $48.62      January 1,      0          0
                                                                            2013
                             0             0             0                                  0          0      499.72      26,385
---------------------------------------------------------------------------------------------------------------------------------
Christopher
  M. Capone                  0             0             0                                  0          0      150.28       7,935

---------------------------------------------------------------------------------------------------------------------------------
Carl E.         2003         0         1,440             0      $48.62      January 1,      0          0
  Meyer                                                                     2013
                             0             0             0                                  0          0      163.15       8,614
---------------------------------------------------------------------------------------------------------------------------------
Joseph J.       2003         0           800             0      $48.62      January 1,      0          0
  DeVirgilio,                                                               2013
  Jr.                        0             0             0                                  0          0      152.92       8,074
---------------------------------------------------------------------------------------------------------------------------------
Arthur R.       2003       800             0             0      $48.62      January 1,                 0
  Upright                                                                   2012 (6)
                             0             0             0                                  0          0       95.40       5,037
---------------------------------------------------------------------------------------------------------------------------------




                                       31


----------
(1)   NUMBER OF SECURITIES  UNDERLYING  UNEXERCISED  OPTIONS  EXERCISABLE.  This
      column shows the number of shares  underlying  outstanding  stock  options
      that have vested as of December 31, 2006.

(2)   NUMBER OF SECURITIES UNDERLYING  UNEXERCISED OPTIONS  UNEXERCISABLE.  This
      column shows the number of shares  underlying  outstanding  stock  options
      that have not vested as of December 31, 2006. Of this number,  one-half of
      the shares vested on January 1, 2007, and the remaining one-half will vest
      on  January  1,  2008.  The  stock  options  vest in full upon a change in
      control  of  the  Corporation  or  upon  the  Named  Executive   Officer's
      termination of employment due to death.

(3)   OPTION EXERCISE PRICE. This column shows the exercise price for each stock
      option reported in the table, which equals the fair market value per share
      of the underlying option shares on the date of grant.

(4)   EQUITY INCENTIVE PLAN AWARDS:  NUMBER OF UNEARNED  SHARES,  UNITS OR OTHER
      RIGHTS THAT HAVE NOT VESTED.  This column  shows the  aggregate  number of
      performance  shares for each Named  Executive  Officer  outstanding  as of
      December 31, 2006, for the 2005-2007  performance period and the 2006-2008
      performance period, assuming "threshold" performance of 3.3% of target. In
      order to provide a more  complete  picture  of the  number of  performance
      shares actually outstanding as of the end of 2006, a summary of the number
      of outstanding  performance shares granted to each Named Executive Officer
      for each performance period,  assuming "target" performance,  is set forth
      below:



                                 # OF TARGET PERFORMANCE SHARES           # OF TARGET PERFORMANCE SHARES
      NAME                        2006-2008 PERFORMANCE PERIOD             2005-2007 PERFORMANCE PERIOD*
      ----                        ---------------------------             -----------------------------
                                                                                 
      Lant .....................              6,940                                    8,203
      Capone ...................              1,820                                    2,734
      Meyer ....................              2,210                                    2,734
      DeVirgilio ...............              1,900                                    2,734
      Upright ..................              1,250                                    1,641


----------
*     Cash  dividends  paid  on  the   performance   shares  for  the  2005-2007
      performance  period  are  reinvested  in  additional  performance  shares,
      subject to the  Corporation's  attainment  of the  applicable  performance
      goals.  The number of "target"  performance  shares  listed  above for the
      2005-2007  has been  increased  by a  factor  of  9.379%  to  reflect  the
      reinvestment  of  dividends  paid  during  2005 and 2006  into  additional
      performance shares.

      The  performance  shares vest based on the extent to which the Corporation
achieves  the  applicable  performance  goals  as of the  end of the  applicable
performance  period (I.E.,  December 31, 2007, or December 31, 2008, as the case
may be). In general,  the executive must be employed on the date that the earned
performance shares, if any, are paid, which generally occurs within 2 1/2 months
following  the end of the  applicable  performance  period.  Upon a  "change  in
control" the Board of Directors (or appropriate  committee  thereof) is required
to  determine  the extent to which the  applicable  performance  goals have been
achieved  through  such date (or,  with  respect  to the  2006-2008  performance
period,  through the full fiscal quarters completed prior to that date), and the
resulting  award is required to be paid to the  executives  without  pro-ration.
Upon a Named Executive  Officer's  death or "retirement"  during the performance
period, the Board of Directors (or appropriate committee thereof) is required to
determine the extent to which the applicable performance goals had been achieved
as of  such  time,  and  the  resulting  award  is  required  to be  paid to the
executive,  prorated based on the  executive's  service  during the  performance
period.  For  additional  information  about  the  performance  shares  for  the
2006-2008  performance period, please refer to the "Grants of Plan-Based Awards"
section of this proxy statement at page 28.

(5)   EQUITY  INCENTIVE PLAN AWARDS:  MARKET OR PAYOUT VALUE OF UNEARNED SHARES,
      UNITS OR OTHER  RIGHTS  THAT  HAVE  NOT  VESTED.  This  column  shows  the
      aggregate  dollar value of the  performance  shares  disclosed,  using the
      closing stock price on December 29, 2006, of $52.80 per share and assuming
      "threshold" performance of 3.3% of target.

(6)   OPTION EXPIRATION DATE FOR MR. UPRIGHT.  Mr. Upright retired on January 1,
      2007.  Pursuant to the terms of his stock  option  agreement,  his options
      remain exercisable for five years following his retirement. Therefore, the
      option expiration date for his outstanding stock options became January 1,
      2012, effective on his retirement.


                                       32


OPTION EXERCISES AND STOCK VESTED AT FISCAL YEAR-END

      The  following  table sets  forth  information  for each  Named  Executive
Officer with  respect to (i) the  exercise of options to purchase  shares of the
Corporation's  Common  Stock  during  2006,  and (ii) the payout (if any) of the
performance share awards for the 2004-2006 performance period.



---------------------------------------------------------------------------------------------------------------------------
                                                                 OPTION AWARDS                        STOCK AWARDS
---------------------------------------------------------------------------------------------------------------------------
                                                           NUMBER OF                         NUMBER OF
                                                            SHARES                            SHARES
                                                          ACQUIRED ON    VALUE REALIZED     ACQUIRED ON      VALUE REALIZED
                NAME                     DATE OF          EXERCISE(#)    ON EXERCISE($)      VESTING(#)       ON VESTING($)
                 (A)                    EXERCISE              (B)            (C)(1)            (D)(2)              (E)
---------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Steven V. Lant                           5/19/06              720             9,929              $0                $0
---------------------------------------------------------------------------------------------------------------------------
Christopher M. Capone                                                                            $0                $0
---------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer                           3/3/2006              720             3,002              $0                $0
                                        11/13/06            2,160             7,085              $0                $0
---------------------------------------------------------------------------------------------------------------------------
Joseph J. DeVirgilio, Jr.                 3/2/06              440             2,130              $0                $0
                                        11/13/06            1,200             3,936              $0                $0
---------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright                         3/2/06              440             2,130              $0                $0
                                          3/2/06            1,200               336              $0                $0
---------------------------------------------------------------------------------------------------------------------------


----------
(1)   VALUE  REALIZED ON EXERCISE.  This column  reflects the product of (i) the
      number  of  shares  acquired  upon  the  exercise  of  the  stock  option,
      multiplied by (ii) the excess of (x) the average of the high and low price
      per share of the Corporation's Common Stock on the date of exercise,  over
      (y) the per share exercise price of the stock option.

(2)   NUMBER OF SHARES  ACQUIRED ON VESTING.  The Corporation did not attain the
      applicable performance objectives governing the performance shares for the
      2004-2006  performance  period.  Therefore,  the Named Executive  Officers
      forfeited  those  performance  shares in their  entirety  as of the end of
      2006.


                                       33


PENSION BENEFITS

      The following table sets forth information  regarding the pension benefits
of our Named Executive Officers.



--------------------------------------------------------------------------------------------------------------------------------
                                                                                                      PRESENT         PAYMENTS
                                                                                NUMBER OF            VALUE OF          DURING
                                                                             YEARS CREDITED         ACCUMULATED      LAST FISCAL
                                                                                 SERVICE              BENEFIT           YEAR
       NAME                              PLAN NAME (1)                             (#)                ($)(2)             ($)
        (A)                                   (B)                                  (C)                  (D)              (E)
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                              
Steven V. Lant         Retirement Income Plan                               25 yrs. 11 mos.             921,900           0
                       Supplemental Executive Retirement Plan               26 yrs. 1 mo.             1,486,900           0
                       Retirement Benefit Restoration Plan                  26 yrs. 1 mo.               333,600           0
                       Supplementary Retirement Plan                        N/A                               0           0
--------------------------------------------------------------------------------------------------------------------------------
Christopher M.         Retirement Income Plan                               5 yrs. 5 mos.               117,200           0
Capone                 Supplemental Executive Retirement Plan               5 yrs. 8 mos.                50,300           0
                       Retirement Benefit Restoration Plan                  5 yrs. 8 mos.                 1,600           0
                       Supplementary Retirement Plan                        N/A                               0           0
--------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer          Retirement Income Plan                               36 yrs. 2 mos.            1,626,500           0
                       Supplemental Executive Retirement Plan               36 yrs. 5 mos.              484,000           0
                       Retirement Benefit Restoration Plan                  36 yrs. 5 mos.              517,100           0
                       Supplementary Retirement Plan                        N/A                               0           0
--------------------------------------------------------------------------------------------------------------------------------
Joseph J.              Retirement Income Plan                               33 yrs. 3 mos.            1,568,000           0
DeVirgilio, Jr.        Supplemental Executive Retirement Plan               33 yrs. 6 mos.              557,300           0
                       Retirement Benefit Restoration Plan                  33 yrs. 6 mos.               26,600           0
                       Supplementary Retirement Plan                        N/A                               0           0
--------------------------------------------------------------------------------------------------------------------------------
Arthur R.              Retirement Income Plan                               41 yrs. 2 mos.            1,610,500           0
 Upright               Supplemental Executive Retirement Plan               41 yrs. 5 mos.               46,800           0
                       Retirement Benefit Restoration Plan                  41 yrs. 5 mos.               10,400           0
                       Supplementary Retirement Plan                        N/A                         264,300           0
--------------------------------------------------------------------------------------------------------------------------------


----------
(1)   The formal name of each plan is included in the narrative  description  of
      the plans following this table.

(2)   The number of years of  credited  service  in column  (c) and the  present
      value of  accumulated  benefit  in  column  (d) are  calculated  (i) as of
      September  30,  2006,  for  the  Retirement  Income  Plan,  which  is  the
      measurement date used for reporting purposes in the Consolidated Financial
      Statements  contained in the Corporation's  Annual Report on Form 10-K for
      the year ended  December 31, 2006;  and (ii) as of December 31, 2006,  for
      the Supplemental Executive Retirement Plan, Retirement Benefit Restoration
      Plan, and Supplementary  Retirement Plan. The present value of accumulated
      benefits  was  prepared  based  on  the  same   assumptions  used  in  the
      Consolidated  Financial  Statements  contained in the Corporation's Annual
      Report on Form 10-K for the year ended  December  31,  2006,  including  a
      5.80% discount rate and the Retirement  Plan 2000 Combined Table Projected
      to 2006,  no  collar  adjustment,  and a  retirement  age of 61 under  the
      Supplemental  Executive  Retirement  Plan and a retirement age of 55 under
      the Retirement Income Plan and the Retirement Benefit Restoration Plan.

DESCRIPTION OF DEFINED BENEFIT RETIREMENT PLANS

      In 2005, the  Corporation  restructured  its retirement  program to reduce
complexity and align the program more closely to comparable market practice. The
new  program  is  designed  to  provide  each  Named  Executive  Officer  with a
retirement  benefit equal to 57% of his or her applicable  final average pay (as
defined  below) at age 61 with 30 years of  service.  The new  program  consists
primarily  of  the  Retirement  Income  Plan  and  the  Supplemental   Executive
Retirement  Plan.  Benefit  accruals under prior  non-qualified  plans have been
frozen.  A more detailed  description of each of the defined  benefit plans that
comprise the Corporation's retirement program follows.


                                       34


      RETIREMENT INCOME PLAN. The Retirement Income Plan of Central Hudson Gas &
Electric  Corporation  ("Retirement  Income  Plan" or "RIP") is a  tax-qualified
defined  benefit plan and generally  covers all employees of Central  Hudson.  A
participant's  benefit under the  Retirement  Income Plan may be based on one or
both of the following  benefit  formulas:  (i) the "service  benefit" formula or
(ii) the "account  benefit"  formula.  Each of these two formulas are  described
below.

      o     SERVICE BENEFIT  FORMULA.  All of our Named  Executive  Officers are
            eligible for the Retirement  Income Plan's regular  service  benefit
            and  supplementary  past  service  benefit,   with  Messrs.   Meyer,
            DeVirgilio,  and Upright having currently  satisfied the eligibility
            requirements for early retirement.

            o     The  regular   service  benefit  is  generally  based  on  the
                  accumulation over the participant's  career of a percentage of
                  the participant's annual compensation (base salary for periods
                  before 2005 and base salary and annual  incentive  for periods
                  on and  after  January  1,  2005)  for each  year of  eligible
                  employment.  For  periods on and after  October  1, 1989,  the
                  percentage  is 2% of  eligible  compensation,  except that for
                  years after the October 1st  coincident  with or following the
                  participant's  50th  birthday,  the percentage is increased to
                  2.5%.

            o     The supplementary  past service benefit  generally  provides a
                  benefit  for  service  prior to October  1,  2003,  based on a
                  percentage of a participant's  average  earnings at October 1,
                  2003  (being  50% of each of the base  salaries  at October 1,
                  2000,  and  2003,  and  100% of each of the base  salaries  at
                  October 1, 2001, and 2002),  and the number of years of servic
                  e while a participant of the  Retirement  Income Plan prior to
                  October 1, 2003. The percentage is 1.45% for average  earnings
                  up to  $37,500  and 1.75% for  average  earnings  in excess of
                  $37,500.

            Both the  regular  service  benefit  and past  service  benefit  are
            subject  to certain  limitations.  Beginning  October  1, 2006,  the
            monthly  benefit  with  respect to the regular  service  benefit and
            supplementary  past service benefit of each Named Executive  Officer
            may not collectively exceed 1/12th of 57% of the participant's final
            average  pay (base  salary and  annual  incentive)  multiplied  by a
            fraction, the numerator of which is years of benefit service (not to
            exceed 30) and the  denominator of which is 30, and which  resulting
            amount is  reduced by 0.333% for each full month by which his or her
            benefit  commencement date precedes the date the participant attains
            age 61.

            The   Retirement   Income  Plan's   regular   service   benefit  and
            supplementary  past  service  benefit  are  payable in the form of a
            monthly  life annuity  following  normal  retirement  at age 65. The
            regular service benefit and  supplementary  past service benefit are
            also payable  following early  retirement at or after age 55 with at
            least ten years of service,  with no  reduction  in the monthly life
            annuity for  commencement  before normal  retirement age. Payment at
            normal  or  early  retirement  is  also  available  in the  form  of
            actuarial  equivalent joint and survivor annuities,  which provide a
            reduced monthly amount for the participant's life with the surviving
            joint  annuitant  receiving 30%, 40%, 50%, 75%, or 100%, as elected,
            of the reduced monthly amount.  An active  employee,  upon attaining
            normal  retirement  age,  may  elect  one of the  optional  forms of
            payment as a pre-retirement death benefit.  Otherwise,  if an active
            vested   participant   dies   before   benefit    commencement,    a
            pre-retirement  surviving spouse annuity generally is payable to the
            participant's  surviving  spouse  beginning on the later of when the
            participant  died or would have attained age 55 in the amount of the
            participant's  accrued benefit.  For a former employee who dies, the
            pre-retirement  surviving spouse annuity is reduced for commencement
            prior to normal retirement age.

      o     ACCOUNT BENEFIT FORMULA.  All of our Named Executive Officers except
            for Mr.  Capone are also eligible for the  Retirement  Income Plan's
            account benefit, with Messrs. Meyer, DeVirgilio,  and Upright having
            currently  satisfied  the  eligibility  requirements  to receive the
            account benefit upon termination of employment.  The account benefit
            is comprised of amounts credited to a hypothetical account on behalf
            of participants under the following formula:  For those participants
            in the Retirement  Income Plan on January 1, 1987, 10% of their base
            salary  as of  that  date,  plus,  for  those  participants  in  the
            Retirement  Income  Plan on  September  30,  1991,  5% of their base
            salary as of that date, plus, for those


                                       35


            participants in the Retirement Income Plan on September 30, 1997, 5%
            of their base salary as of that date,  plus, for those  participants
            in the  Retirement  Income Plan on September  30, 1999,  5% of their
            base salary as of that date,  plus,  annual  interest on the account
            balance generally based on the yield for 30-year Treasury Bonds.

            The  account  benefit  is  payable  in the form of a lump sum in the
            amount credited to the  hypothetical  account at the time of benefit
            commencement (I.E., following termination of employment). Payment is
            also  available  in  the  form  of a  single  life  annuity  (for  a
            participant who is not married) or a joint and 50% or 100% surviving
            spouse  annuity  (for a  participant  who is  married)  based on the
            actuarial  equivalent of the account balance. If the account benefit
            is  commenced  at the same time as the regular  service  benefit and
            supplementary past service benefit,  the actuarial equivalent of the
            account  balance  may  be  paid  in the  same  form  as the  service
            benefits.  Upon a  participant's  death,  the amount credited to the
            account is payable in a lump sum to the  participant's  beneficiary,
            and, if the beneficiary is the participant's spouse,  payable either
            in a lump  sum  or in a  spousal  annuity  based  on  the  actuarial
            equivalent of the account balance.

      SUPPLEMENTAL   EXECUTIVE  RETIREMENT  PLAN.  The  CH  Energy  Group,  Inc.
Supplemental  Executive  Retirement Plan (the "SERP") is an unfunded,  unsecured
pension  benefit  plan for a select  group of highly  compensated  employees.  A
participant's  SERP benefit becomes vested if, while employed by the Corporation
or its  affiliates,  he or she attains the normal  retirement age of 61, attains
his or her early  retirement  date of age 55 with ten  years or more of  vesting
service,  or a change in control occurs.  A participant  will forfeit his or her
SERP benefit  (whether or not vested at the time) if his or her employment  with
the Corporation is terminated for "cause."

      The SERP retirement benefit of a participant equals the excess, if any, of
the (i)  participant's  normal  retirement  benefit or early retirement  benefit
described  below,  over  (ii)  the  actuarial  equivalent  of the  participant's
cumulative  benefits  under the  Retirement  Income Plan  (excluding the account
benefit   component),   Central  Hudson  Retirement  Benefit   Restoration  Plan
(described  below) and the CH Energy Group, Inc.  Supplementary  Retirement Plan
(described  below),  each calculated as though paid in the form of a single life
annuity on the date the normal  retirement  benefit  becomes  payable  under the
SERP.

      o     NORMAL RETIREMENT BENEFIT. If a participant terminates employment on
            or  after  the  date he or she  attains  age 61,  he or she  will be
            entitled  to a normal  retirement  benefit.  The  normal  retirement
            benefit  is equal  to the  product  of (i) 57% of the  participant's
            highest  consecutive  3-year  average  of  base  salary  and  annual
            incentive during the ten-year period that precedes the participant's
            termination  of  employment,  and (ii) a fraction,  the numerator of
            which  is the  participant's  years of  benefit  service  under  the
            Retirement  Income  Plan (not to exceed 30) and the  denominator  of
            which is 30.

      o     EARLY RETIREMENT BENEFIT.  Upon the participant's vested termination
            of  employment  before  the  date  he or she  attains  age  61,  the
            participant will be entitled to an early retirement benefit equal to
            the normal  retirement  benefit  (described above) reduced by 0.333%
            for each full month by which his or her  benefit  commencement  date
            precedes the date the  participant  attains age 61.  Messrs.  Meyer,
            DeVirgilio,  and  Upright  are  entitled  to  the  early  retirement
            benefit.

      The SERP  retirement  benefit  commences  on the first day of the  seventh
month following the participant's  vested  termination of employment in the form
of a life annuity selected by the participant and is paid monthly, except that a
participant  who is  vested  solely as a result  of a change  in  control  shall
commence to receive  payment on the later of the first day of the seventh  month
following  his or her  termination  of  employment or age 55. The normal form of
benefit  under the SERP is a single life annuity for single  participants  and a
joint and 100% survivor annuity for married participants.  However, participants
may select a single  life  annuity or a 30%,  40%,  50%,  75%, or 100% joint and
survivor annuity (or other annuity permitted by the Corporation).


                                       36


      A SERP  benefit is also payable if a  participant  is vested in his or her
benefit  at the  time  of  his  or her  death  or  disability.  A  participant's
compensation and years of additional  benefit service provided under a change in
control  agreement  between the Corporation and the participant  will be used in
calculating  the  participant's   SERP  benefit  if  the  participant's   vested
termination occurs in connection with a change in control.

      For more  information  on the  death,  disability  and  change in  control
benefits under the SERP,  please refer to the applicable  description  under the
heading "Potential Payments Upon Termination or Change in Control" on page 39 of
this proxy statement.

      CENTRAL HUDSON  RETIREMENT  BENEFIT  RESTORATION  PLAN. The Central Hudson
Retirement Benefit  Restoration Plan ("RBRP") is an unfunded,  unsecured pension
benefit plan for a select group of highly compensated employees.  As of December
31, 2005, the RBRP was terminated  with respect to any  participant  who was not
vested,  closed to new  participants,  and frozen  with  respect  to  additional
benefit accruals of vested  participants.  The RBRP provides a benefit in excess
of the Internal Revenue Service ("IRS")  compensation and benefit limits imposed
by Sections 401(a)(17) and 415 of the Internal Revenue Code, respectively,  with
respect to the service benefit  component of the Retirement  Income Plan and the
account  benefit  component of the Retirement  Income Plan. The pension  benefit
under the RBRP is  calculated  as the excess,  if any, of (x) the  participant's
Retirement  Income Plan benefit as of December 31, 2005,  without  regard to the
Section 401(a)(17)  compensation limit ($210,000 for 2005) and without regard to
the  Section  415  benefit   limitation   ($170,000   for  2005)  over  (y)  the
participant's  actual  Retirement  Income Plan  benefit as of December 31, 2005.
Compensation and years of service under the RBRP have the same meanings provided
under the Retirement  Income Plan.  Benefits  generally become payable under the
RBRP at the time payments become payable from the Retirement Income Plan and are
paid  over the life of the  participant  and over the life of the  participant's
spouse upon the  participant's  death,  in the form selected by the  participant
under the Retirement Income Plan.

      SUPPLEMENTARY  RETIREMENT  PLAN. The CH Energy Group,  Inc.  Supplementary
Retirement Plan (the "SRP") is an unfunded, unsecured pension benefit plan for a
select group of highly compensated  employees.  As of December 31, 2005, the SRP
was terminated with respect to any participant who was not vested as of December
31,  2005.  The annual SRP  benefit is payable in monthly  installments  for ten
years,  commencing on retirement,  to eligible participants (generally those who
retire at age 60 or older and with ten or more  years of  service,  or at age 65
without  regard to years of service) of the following  percentage of base pay at
retirement:  age 60 to 63 - 10%; age 63 to 65 - 15%; age 65 or over - 20%.  Upon
the participant's  death, on or after the date he or she has become vested,  the
participant's  monthly  benefit will be paid to the  participant's  beneficiary.
Only Mr.  Upright is entitled to a benefit under the SRP. Mr.  Upright's  annual
SRP benefit equals 15% of his base pay at his retirement, since he was age 63 at
the end of 2006.

      IMPACT OF SECTION  409A.  Section 409A was added to the  Internal  Revenue
Code in the fall of 2004.  Section  409A imposes new  restrictions  on the SERP,
RBRP,  and SRP described  above with respect to amounts  deferred after December
31, 2004, and earnings  thereon (and with respect to plans that are  "materially
modified" after October 3, 2004).  These new  restrictions  generally define the
earliest date that  payments may commence  under the plans and limit the ability
of participants to receive accelerated  payments or to change their deferral and
payment elections.  As permitted under existing  guidance,  the Corporation will
amend the plans  described  above on or before  December 31, 2007, to conform to
Section  409A.  In the  meantime,  the  Corporation  has  adopted  a  resolution
providing  that the plans are deemed  amended to the extent  necessary to comply
with  Section  409A  and that  the  plans  will be  administered  in good  faith
compliance with the new rules, as permitted by current IRS guidance.


                                       37


NONQUALIFIED DEFERRED COMPENSATION

      The following  table sets forth  information  regarding  the  nonqualified
deferred compensation of our Named Executive Officers as of December 31, 2006.



------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     AGGREGATE
                                                 EXECUTIVE        REGISTRANT        AGGREGATE        AGGREGATE        BALANCE
                                               CONTRIBUTIONS     CONTRIBUTIONS     EARNINGS IN     WITHDRAWALS/       AT LAST
                                                IN LAST FY        IN LAST FY         LAST FY       DISTRIBUTIONS        FYE
------------------------------------------------------------------------------------------------------------------------------
                NAME                              ($)(1)              ($)              ($)              ($)           ($)(2)
                 (A)                                (B)               (C)              (D)              (E)             (F)
                                                                                                     
Steven V. Lant                                         0              0               40,236             0          $  260,590
------------------------------------------------------------------------------------------------------------------------------
Christopher M. Capone                                  0              0               20,641             0             125,113
------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer                                     96,030              0              146,872             0           1,102,899
------------------------------------------------------------------------------------------------------------------------------
Joseph J. DeVirgilio, Jr.                              0              0               14,449             0             377,472
------------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright                                      0              0                7,393             0             128,016
------------------------------------------------------------------------------------------------------------------------------


----------
(1)   EXECUTIVE  CONTRIBUTIONS  IN LAST FY.  Each  Named  Executive  Officer  is
      eligible to defer base salary,  annual incentive  awards,  and performance
      shares  under  the  terms  of  the  Directors  and   Executives   Deferred
      Compensation Plan,  described below. The "Executive  Contributions in Last
      FY" column shows the aggregate  deferrals for each Named Executive Officer
      during 2006. The base salary deferrals are included in the "Salary" column
      of the "Summary Compensation" table.

(2)   AGGREGATE  BALANCE AT LAST FYE. The  aggregate  balance as of December 31,
      2006,  reported in column (f) for each Named  Executive  Officer  includes
      prior deferrals of base salary, annual incentives,  and performance shares
      that were previously reported as compensation on the Summary  Compensation
      Table for prior years.  For example,  from 2000-2005,  our Named Executive
      Officers deferred the following amounts under the Directors and Executives
      Deferred  Compensation Plan that were previously  reported as compensation
      in the Summary  Compensation  Table:  (i) Mr.  Lant -  $290,287;  (ii) Mr.
      Capone -  $90,060;  (iii) Mr.  Meyer -  $678,713;  (iv) Mr.  DeVirgilio  -
      $291,885;  and (v) Mr.  Upright - $129,743.  These amounts have since been
      adjusted,  pursuant to the terms of the Directors and Executives  Deferred
      Compensation Plan, for investment performance (E.G., earnings and losses),
      deferrals credited during 2006, and in-service distributions.

DESCRIPTION OF DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN

      The  amounts  reflected  in the above  table are  maintained  under the CH
Energy Group, Inc. Directors and Executives Deferred Compensation Plan, which is
an unfunded,  unsecured deferred  compensation plan for a select group of highly
compensated employees.  Under the Directors and Executives Deferred Compensation
Plan,  our Named  Executive  Officers may elect to defer up to 50% of their base
salary and up to 100% of their  annual  incentive  and  performance  shares on a
pre-tax  basis.  Payments are made under the Directors and  Executives  Deferred
Compensation  Plan in cash at certain future dates  specified by participants or
upon his or her earlier  termination of employment,  death, or disability.  If a
participant  terminates employment on or after age 55, as a result of his or her
long-term  disability,  or in certain circumstances in connection with a "change
in  control" of the  Corporation,  then  amounts  credited to his or her account
generally will be paid in a lump sum or in equal quarterly  installments  over a
period of five, ten, or fifteen years as elected by the participant.  Otherwise,
amounts are payable in a single lump sum. The Corporation may accelerate payment
in the event of a participant's  "financial  hardship."  Moreover, a participant
may elect to  receive  an  immediate  distribution  of all or a  portion  of any
amounts  deferred  prior to January 1, 2005 (and  related  earnings),  provided,
however,  that he or she will forfeit 10% of the amount of his or her account(s)
that he or she has elected to receive.  The  deferred  compensation  is credited
with earnings,  gains, and losses in accordance with deemed investment elections
made by participants  from among various  crediting  options  established by the
Corporation from time to time. Participants are permitted to change their deemed
investment  elections daily. For 2006, the investment options tracked returns on
the  Corporation's  Common  Stock  and  returns  under  publicly  available  and
externally managed investment funds such as mutual funds.


                                       38


      Section 409A was added to the  Internal  Revenue Code in the fall of 2004.
Section 409A imposes new  restrictions on the Directors and Executives  Deferred
Compensation  Plan  described  above  with  respect to  amounts  deferred  after
December  31,  2004,  and  earnings  thereon (and with respect to plans that are
"materially  modified" after October 3, 2004). These new restrictions  generally
define the earliest date that payments may commence under the plan and limit the
ability of  participants  to receive  accelerated  payments  or to change  their
deferral  and payment  elections.  As permitted  under  existing  guidance,  the
Corporation will amend the Directors and Executives  Deferred  Compensation Plan
on or before December 31, 2007, to conform to Section 409A. In the meantime, the
Corporation has adopted a resolution providing that the Directors and Executives
Deferred  Compensation  Plan is deemed amended to the extent necessary to comply
with  Section  409A  and  that  the  plan  will be  administered  in good  faith
compliance with the new rules, as permitted by current IRS guidance.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

      The Corporation has entered into certain  agreements and maintains certain
plans and arrangements  that require the Corporation or its successors to pay or
provide certain compensation and benefits to its Named Executive Officers in the
event of  certain  terminations  of  employment  or a change in  control  of the
Corporation.  The  estimated  amount of  compensation  and  benefits  payable or
provided to each Named Executive  Officer in each situation is summarized below.
These estimates are based on the assumption that the various  triggering  events
occur on the last  business day of the 2006  calendar  year (I.E.,  December 29,
2006).  We have noted below other material  assumptions  used in calculating the
estimated  compensation  and benefits under each  triggering  event.  The actual
amounts  that  would  be  paid  to  a  Named  Executive   Officer  upon  certain
terminations of employment or upon a change in control can only be determined at
the time the actual triggering event occurs.

      The estimated amount of compensation and benefits described below does not
take into account  compensation and benefits that a Named Executive  Officer has
earned  prior to the  applicable  triggering  event,  such as earned  but unpaid
salary,  or accrued  vacation pay. The  estimates  also do not take into account
benefits to which our Named Executive Officers would be entitled to receive upon
termination  of employment  generally  under the  retirement  plans and programs
described in the Pension Benefits section of this proxy statement at page 34 and
the Nonqualified  Deferred  Compensation section of this proxy statement at page
38.  Nonetheless,  this section  identifies  and  quantifies the extent to which
those retirement benefits are enhanced or accelerated upon the triggering events
described below.

VOLUNTARY TERMINATION OR INVOLUNTARY TERMINATION FOR "CAUSE"

      The  Corporation  does not maintain any plans or  arrangements  that would
provide  benefits  to our  Named  Executive  Officers  solely  as a result  of a
voluntary  termination  (other than upon  "retirement" as described below) or an
involuntary  termination  for "cause" (as defined under the heading  "Qualifying
Termination Following Change in Control" below).

INVOLUNTARY TERMINATION WITHOUT "CAUSE"

      Pursuant to its corporate policy, the Corporation would have provided each
Named   Executive   Officer  with   outplacement   services  from  a  recognized
outplacement  provider,  with a value not to exceed $30,000, in the event of the
executive's  involuntary  termination  without  "cause"  (as  defined  under the
heading "Qualifying  Termination Following Change in Control" below) on December
29, 2006.

RETIREMENT OR DEATH

      As described below, a Named Executive Officer's  termination of employment
with the Corporation due to "retirement"  (as defined below) or death can result
in enhanced  benefits  under the  outstanding  performance  shares and Executive
Annual Incentive Plan.


                                       39


      PERFORMANCE SHARES.  Except as otherwise provided below, a Named Executive
Officer would  forfeit his right to all  outstanding  performance  shares if his
employment  terminated during the applicable  performance period. If, however, a
Named Executive  Officer had retired or died during a performance  period,  then
the Board of Directors (or appropriate  committee thereof) would have determined
the extent to which the  applicable  performance  goals had been  achieved as of
such  time,  and the  resulting  award  would  have been  prorated  based on the
executive's  service during the  performance  period.  For purposes of the table
below,  the Corporation  has determined,  based on its assessment of performance
through December 31, 2006, that if a Named Executive  Officer retired or died on
December  29,  2006,  he would  have been  entitled  to (i) no payout  under the
2004-2006  performance  period,  (ii) a payout under the  2005-2007  performance
period at 80% of target (including reinvested dividends), pro-rated based on the
performance of services during 2/3 of the performance period, and (iii) a payout
under the  2006-2008  performance  period at 80% of target  (with no  reinvested
dividends),  prorated  based on the  performance  of services  during 1/3 of the
performance  period.  Such amounts  would have been paid in a single lump sum in
the form of shares of the Corporation's Common Stock. For additional information
about the performance shares,  please refer to the "Grants of Plan-Based Awards"
section of this proxy statement at page 28 and the "Outstanding Equity Awards at
Fiscal Year-End" section of this proxy statement at page 31.

      EXECUTIVE  ANNUAL  INCENTIVE PLAN.  Except as otherwise  provided below, a
Named Executive  Officer would forfeit his right to his 2006 annual incentive if
his  employment  terminated  during the year.  If,  however,  a Named  Executive
Officer had  retired or died  during the year,  then the CEO and/or the Board of
Directors (or appropriate committee thereof) would have determined the extent to
which the applicable goals established under the Executive Annual Incentive Plan
had been achieved at year-end, and the resulting award would have been pro-rated
based on the  executive's  service  during the year and paid in a lump sum.  For
additional  information  about the Executive Annual Incentive Plan, please refer
to the "Grants of Plan-Based Awards" section of this proxy statement at page 28.

      STOCK  OPTIONS.  Except as otherwise  provided  below,  a Named  Executive
Officer would forfeit his unvested stock options upon termination of employment.
If, however,  a Named Executive Officer had died on or before December 29, 2006,
then all unvested  stock  options held by him would have become fully vested and
remained  exercisable  for 3 years (or if  shorter,  the  remaining  term).  For
additional  information about the stock options,  including their vesting dates,
please refer to the "Outstanding  Equity Awards at Fiscal  Year-End"  section of
this proxy statement at page 31.

      DEFINITIONS.  For  purposes  of the  above,  the term  "retirement"  means
termination of employment with the Corporation or an affiliate  either (i) on or
after  age 65 or (ii) on or  after  age 55 with  ten  years  or more of  service
pursuant to the early retirement  provisions of the Retirement Income Plan. Only
Messrs. Meyer,  DeVirgilio,  and Upright would have satisfied this definition of
"retirement" on December 29, 2006.

      Based on the  above,  the  Corporation  would  have  provided  each  Named
Executive Officer (or his beneficiary) with the following estimated payments, in
a lump sum, if he had "retired" (as defined above) from the  Corporation and its
affiliates  on December  29,  2006,  or if he had died while  employed  with the
Corporation or its affiliates on December 29, 2006.



-------------------------------------------------------------------------------------------------------------------------------
                                          PERFORMANCE     PERFORMANCE    PERFORMANCE
                                            SHARES:         SHARES:        SHARES:       EXECUTIVE    ACCELERATED
                                           2004-2006       2005-2007      2006-2008       ANNUAL      VESTING OF      TOTAL ON
                                          PERFORMANCE     PERFORMANCE    PERFORMANCE     INCENTIVE       STOCK       RETIREMENT
NAME                                       PERIOD(1)       PERIOD(2)      PERIOD(3)       PLAN(4)     OPTIONS(5)      OR DEATH
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Steven V. Lant                                 $0           $230,996        $97,715       $284,200       $7,357        $620,268
-------------------------------------------------------------------------------------------------------------------------------
Christopher M. Capone                          $0            $76,989        $25,626        $97,440           $0        $200,055
-------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer                                  $0            $76,989        $31,117       $109,707       $6,019        $223,832
-------------------------------------------------------------------------------------------------------------------------------
Joseph J. DeVirgilio, Jr.                      $0            $76,989        $26,752       $101,500       $3,344        $208,585
-------------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright                              $0            $46,211        $17,600        $80,040       $3,344        $147,195
-------------------------------------------------------------------------------------------------------------------------------


----------
(1)   Following  the  completion  of  the  2004-2006   performance  period,  the
      Compensation  Committee determined that the Corporation did not attain the
      applicable  performance objectives for that period.  Therefore,  our Named
      Executive  Officers did not receive any payout of performance  shares with
      respect to that performance period.


                                       40


(2)   The value of the performance  shares for the 2005-2007  performance period
      is  calculated  as follows:  (i) the number of  performance  shares earned
      assuming  a payout  of 80% of  target  (including  reinvested  dividends),
      pro-rated  based  on  the  performance  of  services  during  2/3  of  the
      performance   period,   multiplied  by  (ii)  the  closing  price  of  the
      Corporation's Common Stock on December 29, 2006, of $52.80 per share.

(3)   The value of the performance  shares for the 2006-2008  performance period
      is  calculated  as follows:  (i) the number of  performance  shares earned
      assuming  a  payout  of 80% of  target  (with  no  reinvested  dividends),
      prorated  based  on  the   performance  of  services  during  1/3  of  the
      performance   period,   multiplied  by  (ii)  the  closing  price  of  the
      Corporation's Common Stock on December 29, 2006, of $52.80 per share.

(4)   The annual  incentive  is based on actual  performance  for 2006,  without
      pro-ration, and without any discretionary adjustments.

(5)   The value of the  accelerated  vesting of stock options equals the excess,
      if any,  of the (i)  market  value  of the  underlying  option  shares  on
      vesting,  based on the closing price of the Corporation's  Common Stock on
      December 29, 2006,  of $52.80 per share,  over (ii) the exercise  price of
      the stock options.  The accelerated vesting only applies in the event of a
      Named Executive  Officer's death.  The stock options do not  automatically
      accelerate upon "retirement."

DISABILITY

      As described below, a Named Executive Officer's  termination of employment
with the  Corporation  due to  "disability"  (as  defined  below)  can result in
enhanced  benefits  under the  Supplemental  Executive  Retirement  Plan and the
Executive Annual Incentive Plan.

      ADDITIONAL  SERVICE  CREDIT UNDER THE  SUPPLEMENTAL  EXECUTIVE  RETIREMENT
PLAN.  If a Named  Executive  Officer  who was vested  under the SERP had become
disabled (within the meaning of the Corporation's  long-term disability plan) on
December  29, 2006,  then his benefit  would have been  calculated  as if he had
received  additional years of benefit service (up to five),  consistent with the
disability  crediting  rules under the  Retirement  Income Plan.  For additional
information  about the SERP,  please refer to the "Pension  Benefits" section of
this proxy statement at page 34.

      EXECUTIVE  ANNUAL  INCENTIVE PLAN.  Except as otherwise  provided below, a
Named Executive  Officer would forfeit his right to his 2006 annual incentive if
his  employment  terminated  during the year.  If,  however,  a Named  Executive
Officer had become disabled (as determined by the Board of Directors) during the
year,  then the CEO  and/or the Board of  Directors  (or  appropriate  committee
thereof)  would  have  determined  the  extent  to which  the  applicable  goals
established  under the  Executive  Annual  Incentive  Plan had been  achieved at
year-end,  and the  resulting  award  would  have  been  pro-rated  based on the
executive's  service  during  the year and paid in a lump  sum.  For  additional
information  about the  Executive  Annual  Incentive  Plan,  please refer to the
"Grants of Plan-Based Awards" section of this proxy statement at page 28.

      Based on the  above,  the  Corporation  would  have  provided  each  Named
Executive Officer with the following  estimated  payments or benefits if he hade
become "disabled" (as defined above) while employed with the Corporation and its
affiliates on December 29, 2006.



------------------------------------------------------------------------------------------------------------------------------
                                                    ADDITIONAL SERVICE               EXECUTIVE
                                                     CREDIT UNDER THE                 ANNUAL
NAME                                                      SERP(1)                INCENTIVE PLAN(2)         TOTAL ON DISABILITY
------------------------------------------------------------------------------------------------------------------------------
                                                                                                        
Steven V. Lant                                            $      0                    $284,200                   $284,200
------------------------------------------------------------------------------------------------------------------------------
Christopher M. Capone                                     $      0                    $ 97,440                   $ 97,440
------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer                                             $385,100                    $109,707                   $494,807
------------------------------------------------------------------------------------------------------------------------------
Joseph J. DeVirgilio, Jr.                                 $520,200                    $101,500                   $621,700
------------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright                                         $ 46,800                    $ 80,040                   $126,840
------------------------------------------------------------------------------------------------------------------------------


----------
(1)   The value of the  additional  service  credit  under the SERP  equals  the
      excess,  if any, of (i) the present value of the individual's  VESTED SERP
      benefit as of December 29, 2006, calculated as if he remained employed for
      an  additional 5 years,  over (ii) the present  value of the  individual's
      VESTED SERP benefit as of December 29, 2006.


                                       41


      The present value was  determined  based on a 5.80%  discount rate and the
      Retirement   Plan  2000  Combined  Table  Projected  to  2006,  no  collar
      adjustment,  and assuming that no additional  service is credited past age
      60.  For  additional  information  about  the  SERP,  please  refer to the
      "Pension Benefits" section of this proxy statement at page 34.

(2)   The annual  incentive  is based on actual  performance  for 2006,  without
      pro-ration, and without any discretionary adjustments.

CHANGE IN CONTROL

      As described  below,  each Named  Executive  Officer  would be entitled to
accelerated vesting of outstanding  performance shares and stock options,  along
with accelerated vesting of his Supplemental  Executive  Retirement Plan benefit
in the event of a "change in control" (as defined below).

      PERFORMANCE SHARES. Upon a change in control (as defined below), the Board
of Directors  (or  appropriate  committee  thereof) is required to determine the
extent to which the applicable performance goals have been achieved through such
date (or, with respect to the  2006-2008  performance  period,  through the full
fiscal  quarters  completed  prior to that  date),  and the  resulting  award is
required to be paid to the executives  without  pro-ration.  For purposes of the
table  below,  the  Corporation  has  determined,  based  on its  assessment  of
performance  through  December 31, 2006, that if a change in control occurred on
December 29, 2006,  our Named  Executive  Officers  would have been  entitled to
receive:  (i) no payout under the 2004-2006  performance  period,  (ii) a payout
under the 2005-2007  performance  period at 80% of target (including  reinvested
dividends),  and (iii) a payout under the 2006-2008 performance period at 80% of
target (not including reinvested  dividends).  Such amounts would have been paid
in a single  lump sum in the  form of  either  shares  or cash.  For  additional
information  about  the  performance  shares,  please  refer to the  "Grants  of
Plan-Based  Awards"  section  of  this  proxy  statement  at  page  28  and  the
"Outstanding  Equity Awards at Fiscal Year-End"  section of this proxy statement
at page 31.

      STOCK  OPTIONS.  If a change in control  (as  defined  below)  occurred on
December  29,  2006,  all unvested  stock  options  held by the Named  Executive
Officers  would  have  become  fully  vested  and  exercisable.  For  additional
information about the stock options, including their vesting dates, please refer
to the  "Outstanding  Equity  Awards at Fiscal  Year-End"  section of this proxy
statement at page 31.

      ENHANCED SERP BENEFIT. If a change in control (as defined below), occurred
on December 29, 2006,  each Named  Executive  Officer would have fully vested in
his or her benefit  under the SERP.  The SERP benefit  will  commence to be paid
upon the later of his or her  termination of employment or attainment of age 55.
For  additional  information  about  the  SERP,  please  refer  to the  "Pension
Benefits" section of this proxy statement at page 34.

      DEFINITIONS.  For purposes of the above, a change in control is defined as
follows:

      o     With respect to the accelerated  vesting of the  performance  shares
            for the  2004-2006  performance  period and  accelerated  vesting of
            stock options, the term "change in control" means (i) an acquisition
            of 50% or more of the Corporation's stock; (ii) shareholder approval
            of a complete  liquidation of the Corporation;  or (iii) the sale of
            all or substantially all of the  Corporation's  assets or the merger
            or   consolidation   of  the   Corporation   with  or  into  another
            corporation.

      o     With respect to the accelerated  vesting of the  performance  shares
            for the 2005-2007 and 2006-2008 performance period, the term "change
            in control" is defined  under the  heading  "Qualifying  Termination
            Following Change in Control" immediately below.

      Based on the above,  each Named Executive Officer would have been entitled
to the following  estimated  payments and benefits from the  Corporation  or its
successor in the event that a change in control (as defined  above)  occurred on
December 29, 2006.


                                       42




----------------------------------------------------------------------------------------------------------------------------------
                                     PERFORMANCE     PERFORMANCE      PERFORMANCE
                                       SHARES:         SHARES:          SHARES:        ACCELERATED      ACCELERATED
                                      2004-2006       2005-2007        2006-2008       VESTING OF       VESTING OF      TOTAL ON
                                     PERFORMANCE     PERFORMANCE      PERFORMANCE         STOCK            SERP         CHANGE IN
NAME                                  PERIOD(1)       PERIOD(2)        PERIOD(3)       OPTIONS(4)       BENEFIT(5)       CONTROL
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Steven V. Lant                           $0            $346,495         $293,146          $7,357        $1,488,800      $2,135,798
----------------------------------------------------------------------------------------------------------------------------------
Christopher M. Capone                    $0            $115,484         $ 76,877          $    0        $   31,700      $  224,061
----------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer                            $0            $115,484         $ 93,350          $6,019        $        0      $  214,853
----------------------------------------------------------------------------------------------------------------------------------
Joseph J. DeVirgilio, Jr.                $0            $115,484         $ 80,256          $3,344        $        0      $  199,084
----------------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright                        $0            $ 69,316         $ 52,800          $3,344        $        0      $  125,460
----------------------------------------------------------------------------------------------------------------------------------


----------
(1)   Following  the  completion  of  the  2004-2006   performance  period,  the
      Compensation  Committee determined that the Corporation did not attain the
      applicable  performance objectives for that period.  Therefore,  our Named
      Executive  Officers did not receive any payout of performance  shares with
      respect to that performance period.

(2)   The value of the performance  shares for the 2005-2007  performance period
      is  calculated  as follows:  (i) the number of  performance  shares earned
      assuming  a payout  of 80% of  target  (including  reinvested  dividends),
      without   pro-ration,   multiplied  by  (ii)  the  closing  price  of  the
      Corporation's Common Stock on December 29, 2006, of $52.80 per share.

(3)   The value of the performance  shares for the 2006-2008  performance period
      is  calculated  as follows:  (i) the number of  performance  shares earned
      assuming a payout of 80% of target (with no reinvested dividends), without
      pro-ration,  multiplied  by (ii) the  closing  price of the  Corporation's
      Common Stock on December 29, 2006, of $52.80 per share.

(4)   The value of the  accelerated  vesting of stock options equals the excess,
      if any,  of the (i)  market  value  of the  underlying  option  shares  on
      vesting,  based on the closing price of the Corporation's  Common Stock on
      December 29, 2006,  of $52.80 per share,  over (ii) the exercise  price of
      the stock options.

(5)   The  value of the  accelerated  vesting  of the SERP  benefit  equals  the
      excess,  if any, of (i) the present value of the individual's SERP benefit
      as of December  29, 2006  (whether or not  vested),  over (ii) the present
      value of the individual's VESTED SERP benefit as of December 29, 2006. The
      present  value  was  determined  based  on a 5.80%  discount  rate and the
      Retirement  Plan 2000  Combined  Table  Projected to 2006,  with no collar
      adjustment.  Each of Messrs.  Meyer,  DeVirgilio,  and  Upright  was fully
      vested in his SERP benefit as of December  29, 2006,  so he would not have
      received any additional  benefit had a change in control  occurred on that
      date.  For  additional  information  about the SERP,  please  refer to the
      "Pension Benefits" section of this proxy statement at page 34.

QUALIFYING TERMINATION FOLLOWING CHANGE IN CONTROL

      As described  below,  each Named  Executive  Officer  would be entitled to
certain payments and benefits if a "change in control" (as defined below) occurs
and the  Corporation or its affiliates  terminates  the  executive's  employment
without  "cause" (as defined  below) or the executive  terminates his employment
with the  Corporation  or its  affiliates  for "good reason" (as defined  below)
within certain time periods following such change in control.

      CHANGE IN  CONTROL  AGREEMENTS.  The  Corporation  has a change in control
agreement  ("Change  in  Control  Agreement")  with  certain  of  its  executive
officers,  including  its  Named  Executive  Officers.  The  Change  in  Control
Agreements  generally  become  effective  only upon a change in  control  of the
Corporation (as defined below) and provide  certain  benefits and protections to
the covered executives during the three-year period (the two-year period for Mr.
Upright)  following  a change in  control.  For  example,  the Change in Control
Agreements  generally  provide  that an  executive's  terms  and  conditions  of
employment (including position,  location,  base salary,  annual incentive,  and
benefits)  would not be  adversely  changed  during the  applicable  two-year or
three-year period following a change in control. Moreover, the Change in Control
Agreements  provide that the  executive  would be entitled to certain  severance
benefits if, during the applicable two or three-year  period  following a change
in  control,  the  Corporation  or  its  affiliates  terminate  the  executive's
employment without "cause" (as defined below) or the


                                       43


executive  terminates his employment  with the Corporation or its affiliates for
"good reason" (as defined below). In general, the executive would be entitled to
receive:

      o     A pro-rated annual incentive based on the average of the executive's
            last three pre-change in control annual incentives  ("Average Annual
            Incentive"), paid in a lump sum;

      o     An amount  equal to three times (or two times for Mr.  Upright)  the
            sum of the  executive's  base salary and Average  Annual  Incentive,
            payable in 12 equal monthly installments;

      o     Outplacement services from a recognized  outplacement provider, with
            a value not to exceed $30,000;

      o     Continued  welfare benefits  (including  health care benefits) for a
            period  of  three  years  (two  years  for  Mr.  Upright)  following
            termination  (subject to mitigation upon receiving  similar benefits
            from another employer); and

      o     Reimbursement for all legal fees and expenses reasonably incurred in
            asserting his rights under the Agreements, regardless of the outcome
            of the dispute  (unless a tribunal  determines  that the executive's
            position was frivolous or maintained in bad faith).  For purposes of
            the above calculations,  we have assumed that the executive will not
            incur legal fees to enforce  his rights  under the Change in Control
            Agreement.

      DEFINITIONS.  For  purposes  of  the  Change  in  Control  Agreement,  the
following words have the meanings set forth below:

      o     CHANGE IN CONTROL.  A change in control means any of the  following:
            (i) an acquisition of 20% or more of the Corporation's stock; (ii) a
            change in the  membership of the  Corporation's  Board of Directors,
            such that the current  incumbents and their  approved  successors no
            longer constitute a majority;  (iii) a business combination in which
            any one of the following is true: the Corporation's old shareholders
            do not  hold at least  60% of the  combined  enterprise;  there is a
            20%-or-more  shareholder of the combined enterprise (other than as a
            result of conversion of the shareholder's  pre-combination  interest
            in the Corporation);  or the members of the  Corporation's  Board of
            Directors  (immediately  before  the  combination)  do not make up a
            majority  of  the  board  of  the  combined   enterprise;   or  (iv)
            shareholder approval of a complete liquidation of the Corporation.

      o     CAUSE.  A termination is for cause if it is for any of the following
            reasons:  (i) the willful and continued  failure of the executive to
            perform  substantially his duties with the Corporation or any of its
            affiliated  companies  (other than any such failure  resulting  from
            incapacity  due to  physical  or  mental  illness),  after a written
            demand for  substantial  performance  is delivered to the executive;
            (ii) the willful  engaging by the  executive  in illegal  conduct or
            gross misconduct  which is materially and demonstrably  injurious to
            the  Corporation  or any  of its  affiliated  companies;  (iii)  the
            repeated use of alcohol by the executive that materially  interferes
            with  his  duties,  use of  illegal  drugs  by the  executive,  or a
            violation of the drug and/or alcohol  policies of the Corporation or
            any of its affiliated companies; (iv) a conviction,  guilty plea, or
            plea of NOLO  CONTENDERE of the  executive  for any crime  involving
            moral turpitude or for any felony;  (v) a breach by the executive of
            his fiduciary duties of loyalty or care to the Corporation or any of
            its  affiliated  companies  or a material  violation  of the Code of
            Business Conduct and Ethics, or similar policies, of the Corporation
            or any of its  affiliated  companies;  or  (vi)  the  breach  by the
            executive of the confidentiality  provision of the Change in Control
            Agreement.

      o     GOOD REASON. A termination by the executive is for good reason if it
            is for any of the following  reasons:  (i) any material reduction in
            the executive's authority,  duties, or responsibilities  without the
            executive's  written  consent  that is not remedied  promptly  after
            receipt of notice thereof given by the  executive;  (ii) any failure
            by the Corporation to maintain the executive's  base salary,  annual
            incentive,  and benefits levels as provided in the Change in Control
            Agreement  that is not  remedied  promptly  after  receipt of notice
            thereof given by the executive; (iii) any required relocation of the
            executive's   office  of  50  miles  or  more;  (iv)  any  purported
            termination by the Corporation or any of its affiliated companies of
            the executive's employment otherwise


                                       44


            than as expressly  permitted by the Change in Control Agreement;  or
            (v)  any  failure  by the  Corporation  or  any  of  its  affiliated
            companies  to  require a  successor  to assume the Change in Control
            Agreement.

      ENHANCED  SERP  BENEFIT.  If a Named  Executive  Officer  is  entitled  to
benefits  under his or her Change in  Control  Agreement  following  a change in
control,  then his or her SERP  benefit will be  calculated  as if he or she had
remained  employed with the Corporation and its affiliates for a two-year period
(the  three-year  period  for  Messrs.  Lant,  Meyer,  DeVirgilio,  and  Capone)
following the change in control.  Such benefit will commence to be paid upon the
later of the executive's  termination of employment or attainment of age 55. For
additional  information about the SERP,  please refer to the "Pension  Benefits"
section of this proxy statement at page 34.

      280G TAX  GROSS-UP.  On or  after a change  in  control,  Mr.  Lant may be
subject to certain excise taxes pursuant to Section 280G of the Internal Revenue
Code ("280G"). The Corporation or its successor is obligated under the Change in
Control  Agreement  to  reimburse  Mr. Lant for all 280G  excise  taxes that are
imposed on him,  whether as a result of  payments  received  under his Change in
Control Agreement or otherwise, and any income and excise taxes that are payable
by the executive as a result of such reimbursements.  If, however, the aggregate
parachute  payments do not exceed 110% of the maximum total  payments that could
be made without triggering the excise tax under Section 280G, then the parachute
payments would be  automatically  reduced to such maximum amount and no gross-up
payment would be made. In general,  the reimbursements would be made to Mr. Lant
by the  Corporation  or its  successors  at the same time that the  payments  or
benefits subject to the excise tax are paid or provided. In contrast,  the other
Named Executive  Officers would be responsible for paying the applicable  excise
taxes under 280G imposed on any payments  under the Change in Control  Agreement
or  otherwise,  but any  payments  subject to the excise tax would be reduced if
such  reduction  provides  a larger  after-tax  benefit  than if the  excise tax
applied.

      NON-SOLICITATION  AND NON-COMPETITION  PROVISIONS.  As a condition to each
executive's  entitlement  to  receive  severance  benefits  under the  Change in
Control  Agreement,  each Named Executive  Officer must not solicit employees of
the Corporation and its successor for a one-year period following termination of
employment and must comply with a confidentiality  restriction. The acquiring or
successor  entity  generally  retains the right to suspend certain  payments and
pursue  judicial  remedies in the event that an  executive  breaches  any of his
confidentiality,   non-solicitation,   or  similar   obligations.   Moreover,  a
terminated  executive  is required  to sign a release of all claims  against the
Corporation,  the  acquiring or  successor  entity,  and any of their  officers,
directors,  employees,  or shareholders,  prior to receiving  severance benefits
under the Change in Control Agreements.

      Based on the above,  each Named Executive Officer would have been entitled
to the following  estimated  payments and benefits from the  Corporation  or its
successor if a "change in control" (as defined  above)  occurred on December 29,
2006,  and  the  Corporation  or  its  affiliates   terminated  the  executive's
employment  without  "cause" (as defined above) or the executive  terminated his
employment  with the Corporation or its affiliates for "good reason" (as defined
above) immediately following such change in control.



-------------------------------------------------------------------------------------------------------------------------------
                                                                         CONTINUED                                  TOTAL ON A
                                                                          WELFARE                                   QUALIFYING
                                                                          BENEFITS      ENHANCED        SECTION     TERMINATION
                                             OUTPLACE-    CONTINUED     (OTHER THAN       SERP           280G       FOLLOWING A
                                CASH           MENT       HEALTHCARE     HEALTHCARE)    BENEFIT        GROSS-UP      CHANGE IN
NAME                          SEVERANCE      SERVICES     BENEFITS(1)        (2)           (3)            (4)         CONTROL
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Steven V. Lant                $2,487,538      $30,000       $49,000        $6,348       $950,500      $2,542,939     $6,066,325
-------------------------------------------------------------------------------------------------------------------------------
Christopher M.
  Capone                      $  975,824      $30,000       $36,800        $3,111       $141,100      $        0     $1,186,835
-------------------------------------------------------------------------------------------------------------------------------
Carl E. Meyer                 $1,246,221      $30,000       $59,600        $3,771       $155,500      $        0     $1,495,092
-------------------------------------------------------------------------------------------------------------------------------
Joseph J.
  DeVirgilio, Jr.             $1,051,986      $30,000       $54,400        $3,240       $220,900      $        0     $1,360,526
-------------------------------------------------------------------------------------------------------------------------------
Arthur R. Upright             $  686,585      $30,000       $41,200        $1,988       $265,100      $        0     $1,024,873
-------------------------------------------------------------------------------------------------------------------------------


----------
(1)   The present  value of the continued  healthcare  benefits is calculated in
      accordance  with  Financial   Accounting   Standards  Board  Statement  of
      Financial  Accounting   Standards  No.  106,  EMPLOYER'S   ACCOUNTING  FOR
      POSTRETIREMENT  BENEFITS OTHER THAN PENSIONS.  The values assume continued
      healthcare coverage for the individual and his spouse


                                       45


      for the applicable  continuation  period.  See Note 9 of the  Consolidated
      Financial  Statements contained in the Corporation's Annual Report on Form
      10-K for the year ended  December  31,  2006,  for an  explanation  of the
      assumptions  made by the  Corporation  in the  valuation of the  continued
      health care benefits.

(2)   Represents the value of premiums for continued group life insurance during
      the applicable two or three-year continuation period.

(3)   The value of the  enhanced  SERP benefit  equals the present  value of the
      increase  in the  individual's  SERP  benefit  as of  December  29,  2006,
      calculated  as if he had remained  employed with the  Corporation  and its
      affiliates for an additional  three-year period (a two-year period for Mr.
      Upright) following termination.  The present value was determined based on
      a 5.80%  discount  rate  and  the  Retirement  Plan  2000  Combined  Table
      Projected to 2006, with no collar adjustment.  For additional  information
      about the SERP,  please  refer to the "Pension  Benefits"  section of this
      proxy statement at page 34.

(4)   The amount in this  column is merely an  estimate.  The 280G tax  gross-up
      amount is based on the following  assumptions:  (i) a 280G excise tax rate
      of 20% and a combined federal,  state, and local income and employment tax
      rate of 43.45%,  (ii) the closing price of the Corporation's  Common Stock
      on December 29, 2006,  was $52.80 per share,  (iii) 120% of the semiannual
      applicable  federal rate for December 2006 was 5.89%, (iv) no amounts were
      discounted as  attributable  to reasonable  compensation  and no value was
      attributed to the non-solicitation or non-competition  covenants contained
      in the Change in Control  Agreement,  and (v) unvested  stock options were
      assumed by the acquirer instead of cashed-out.

DIRECTOR COMPENSATION

      The following table sets forth information regarding  compensation for the
year ended December 31, 2006, for the Directors other than Mr. Lant.



-------------------------------------------------------------------------------------------------------------------------------
                                                                                       CHANGE IN
                                                                                     PENSION VALUE
                                FEES                                                      AND
                              EARNED OR                  OPTION      NON-EQUITY      NONQUALIFIED
                               PAID IN       STOCK       AWARDS    INCENTIVE PLAN      DEFERRED         ALL OTHER
                               CASH($)     AWARDS($)       ($)      COMPENSATION     COMPENSATION     COMPENSATION
     NAME                        (B)          (C)          (D)           ($)           EARNINGS            ($)         TOTAL($)
      (A)                        (1)          (2)          (3)           (E)              (F)              (G)            (H)
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Margarita K. Dilley            59,167       54,659         0              0                0                0           113,826
-------------------------------------------------------------------------------------------------------------------------------
Steven M. Fetter               60,833       54,659         0              0                0                0           115,492
-------------------------------------------------------------------------------------------------------------------------------
Heinz K. Fridrich              21,667       16,794         0              0                0                0            38,461
-------------------------------------------------------------------------------------------------------------------------------
Edward F. X. Gallagher         52,500       54,659         0              0                0                0           107,159
-------------------------------------------------------------------------------------------------------------------------------
Stanley J. Grubel              60,000       54,659         0              0                0                0           114,659
-------------------------------------------------------------------------------------------------------------------------------
Manuel J. Iraola               48,333       50,224         0              0                0                0            98,557
-------------------------------------------------------------------------------------------------------------------------------
E. Michel Kruse                65,000       54,659         0              0                0                0           119,659
-------------------------------------------------------------------------------------------------------------------------------
Jeffrey D. Tranen              52,500       54,659         0              0                0                0           107,159
-------------------------------------------------------------------------------------------------------------------------------
Ernest R. Verebelyi            35,833       37,895         0              0                0                0            73,728
-------------------------------------------------------------------------------------------------------------------------------


----------
(1)   FEES EARNED OR PAID IN CASH.  Amounts  shown in this column  include  fees
      paid to the independent Directors for service on the Board under an annual
      retainer fee arrangement  along with fees paid on an annual retainer basis
      for service in a leadership  capacity  related to the Board's  activities.
      Independent  Directors  receive no other current period cash  compensation
      for service on the Board.

(2)   STOCK AWARDS.  The "Stock Awards" column shows the aggregate dollar amount
      recognized for financial  statement reporting purposes for the fiscal year
      ending  December 31, 2006,  with respect to phantom stock  credited to the
      account of each  Director  under the  Directors  and  Executives  Deferred
      Compensation   Plan.   The  phantom  stock  was  credited  in  four  equal
      installments  to the  account of each  person  serving  as an  independent
      Director  at the  time  when  the  particular  quarterly  installment  was
      credited.  The  dollar  amount  reported  in the Stock  Awards  column was
      determined under FAS 123R using the fair market value of the Corporation's
      Common Stock on the date each credit was made. The amount reported in this
      column also equals the grant date fair


                                       46


      value of the phantom  stock  awards under FAS 123R.  For more  information
      about  these  phantom  stock  credits,   please  refer  to  the  narrative
      description of the Director  compensation program that follows this table.
      The total  number of  phantom  shares of the  Corporation's  Common  Stock
      credited  to  the  account  of  each  Director  under  the  Directors  and
      Executives  Deferred  Compensation Plan as of December 31, 2006, is listed
      below:

                                                  THE TOTAL NUMBER OF PHANTOM
                                                SHARES CREDITED TO THE ACCOUNT
           NAME                                OF EACH DIRECTOR AS OF 12/31/2006
           ----                                ---------------------------------

           Margarita K. Dilley ...............               2,291
           Steven M. Fetter ..................               4,113
           Heinz K. Fridrich .................                   0
           Edward F. X. Gallagher ............               5,068
           Stanley J. Grubel .................               4,639
           Manuel J. Iraola ..................               1,065
           E. Michel Kruse ...................               3,973
           Jeffrey D. Tranen .................               3,410
           Ernest R. Verebelyi ...............                 784

(3)   OPTION AWARDS.  The Corporation did not recognize any amount for financial
      statement reporting purposes for the fiscal year ending December 31, 2006,
      with respect to outstanding  Director stock options. The outstanding stock
      options held by our  Directors  are listed  below.  The stock options were
      granted  with an  exercise  price  equal to the fair  market  value of the
      underlying  shares on the date of  grant.  The stock  options  were  fully
      vested on the date of grant.



                                                                 # OF SHARES UNDERLYING STOCK      # OF SHARES UNDERLYING STOCK
      NAME                                                        OPTIONS GRANTED ON 1/1/2003       OPTIONS GRANTED ON 1/1/2001
      ----                                                        ---------------------------       ---------------------------
                                                                                                         
      Steven M. Fetter.....................................                   1,000                               N/A
      Edward F. X. Gallagher...............................                   1,000                             3,000
      Stanley J. Grubel....................................                   1,000                             3,000
      E. Michel Kruse......................................                   1,000                               N/A

      Exercise Price per Share:............................                  $48.62                            $44.06


DESCRIPTION OF DIRECTOR COMPENSATION PROGRAM

      The Corporation's Director compensation program is designed to enhance the
Corporation's  ability to attract and retain highly  qualified  Directors and to
align  their  interests  with  the  long-term  interests  of  the  Corporation's
shareholders.  The  program  consists  of  both a cash  component,  designed  to
compensate  independent  Directors  for  their  service  on the  Board  and  its
Committees,  and an  equity  component,  designed  to  align  the  interests  of
independent  Directors and  shareholders.  Mr. Lant receives no compensation for
his service on the Board.

      CASH  COMPENSATION.  During  2006,  the  basic  annual  retainer  paid  to
independent  Directors was $50,000 for the period January 1 through June 30, and
$55,000 for the period  July 1 through  December  31. The cash  retainer is paid
quarterly  in advance in four equal  installments  to each person  serving as an
independent Director at the time when the particular quarterly payment is made.

      Based on the above,  the total basic annual  retainer for 2006 amounted to
$52,500  for each  independent  Director  serving  for the full year,  including
Margarita  K.  Dilley,  Steven M.  Fetter,  Edward F. X.  Gallagher,  Stanley J.
Grubel, E. Michel Kruse, and Jeffrey D. Tranen. Those independent  Directors who
did not serve for the entire year were paid amounts  related to the basic annual
retainer  that was in effect  during their term of service  during the year on a
pro-rata  basis as measured from the  initiation or termination of their service
during  the year as the case may be.  Independent  Directors  who were paid less
than the total annual retainer on this basis and the amounts that they were paid
are included in column (b) above as follows: Heinz K. Fridrich ($16,667), Manuel
J. Iraola ($48,333), and Ernest R. Verebelyi ($35,833).


                                       47


      Independent  Directors  who  serve  as a  Committee  Chair  or as the Lead
Independent  Director of the Board receive an additional  annual  retainer.  The
capacities  carrying the payment of an additional retainer along with the annual
amount of such  additional  annual  retainer  during 2006 were as follows:  Lead
Independent Director ($7,500), Chair of the Audit Committee ($10,000),  Chair of
the Governance  and Nominating  Committee  ($7,500),  Chair of the  Compensation
Committee  ($7,500),  and Chair of the Strategy and Finance Committee  ($7,500).
Such  additional  retainers are generally paid  quarterly,  in advance,  and are
prorated  based on the  period of  service  of a  Director  during the year of a
Director in any of those  capacities.  Amounts  included in column (b) above for
each of the Directors serving in any such capacity or capacities during 2006 are
as follows:


                                             
      Margarita K. Dilley:............          Chair of the Audit Committee ($6,667)

      Steven M. Fetter................          Chair of the Audit Committee ($3,333)

                                                Chair of the Governance and Nominating Committee ($5,000)

      Heinz K. Fridrich...............          Lead Independent Director ($2,500)

                                                Chair of the Governance and Nominating Committee ($2,500)

      Stanley J. Grubel...............          Chair of the Compensation Committee ($7,500)

      E. Michel Kruse.................          Lead Independent Director ($5,000)

                                                Chair of the Strategy and Finance Committee ($7,500)


      EQUITY   COMPENSATION.   During  2006,  the  equity  component  of  annual
compensation  for each  independent  Director  was fixed at a number of  phantom
shares of the Corporation's Common Stock having an aggregate value approximately
equal to an annual rate of $50,000 for the period  January 1 through June 30 and
an annual  rate of $55,000  for the period  July 1 through  December  31.  These
shares are credited to each Director's account under the Directors and Executive
Deferred  Compensation Plan. The program requires this credit to remain invested
in phantom shares until the  termination of the Director's  service on the Board
and to be paid only in cash after  termination of Board  service.  The number of
phantom shares to be credited to each  Director's  account will be calculated on
the basis of the closing  price of the  Corporation's  Common Stock on the first
Tuesday  following  the first  Monday  of  January  in each year (the  number of
phantom shares  credited for the period July 1 through  December 31 was based on
the closing  price of the  Corporation's  Common  Stock on June 30,  2006).  The
phantom shares were credited in four equal  installments  to the account of each
person  serving  as an  independent  Director  at the time  when the  particular
quarterly installment was credited.

      CHANGES  TO  DIRECTOR   COMPENSATION  PROGRAM.  On  May  25,  2006,  after
conducting  its annual review of Director  compensation,  the Board of Directors
approved an increase in the compensation paid to its independent Directors.  The
Board increased the  compensation for independent  Directors,  effective July 1,
2006, from an annual cash retainer of $50,000 and $50,000 in phantom shares,  to
an annual cash retainer of $55,000 and $55,000 in phantom shares.  The increases
were  made  pro-rata  for the  remainder  of 2006.  The  increase  was  based on
recommendations  from  the  Compensation  Committee,   which  analyzed  external
benchmarking  data provided by the Hay Group. The increase offers a compensation
package  that the Board  believes  is  comparable  with  other  relevant  public
companies and serves to align Director and shareholder interests.

      DIRECTORS  AND  EXECUTIVES  DEFERRED  COMPENSATION  PLAN.  An  independent
Director also may elect to defer payment of all or part of the cash compensation
received as a Director under the Corporation's Directors and Executives Deferred
Compensation Plan. If the Director so elects, any deferred cash compensation may
be credited to a bookkeeping  account of phantom shares,  whose value is tied to
the value of the  Corporation's  Common Stock,  or to other  investment  options
provided under the Directors and Executives Deferred Compensation Plan from time
to time.  Compensation  deferred in accordance with the Directors and Executives
Deferred  Compensation Plan is paid to Directors (adjusted to reflect investment
earnings and losses) at the time the Director ceases being a member of the Board
of  Directors,  either in a lump sum or over a period of time  depending  on the
circumstances of cessation and/or distribution elections.


                                       48


                                  OTHER MATTERS

      The Board of Directors  does not know of any matters to be brought  before
the Annual  Meeting other than those  referred to in the notice  hereof.  If any
other matters  properly come before the Annual  Meeting,  it is the intention of
the  persons  named in the form of proxy to vote the  proxy in  accordance  with
their judgment on such matters.

                                             By Order of the Board of Directors,

                                             Lincoln E. Bleveans
                                             CORPORATE SECRETARY

March 1, 2007


                                       49


                         ROUTE TO CH ENERGY GROUP, INC.

                                 [MAP OMITTED]

                 FROM NEW YORK CITY AREA:
                 o   Taconic State parkway North to
                        Interstate 84 (I-84)
                 o   I-84 West to Exit 13 (Route 9)
                 o   Turn right off ramp onto Route 9 North
                 o   Route 9 approximately 12 miles to the
                        Academy Street / South Avenue Exit
                 o   Bear left at end of ramp and go
                        under overpass
                 o   Turn right into CH Energy Group, Inc.
                        entrance

                 FROM CONNECTICUT:
                 o   I-84 West to Exit 13 (Route 9)
                 o   Continue as above

                 FROM PENNSYLVANIA:
                 o   I-84 East to Exit 13 (Route 9)
                 o   Turn left off ramp onto Route 9 North
                 o   Continue as above

                 FROM NEW JERSEY AND UPSTATE NEW YORK:
                 o   New York State Thruway (I-87) to Exit 18 (New Paltz)
                 o   Turn right onto Route 299
                 o   Route 299 approximately 5 miles, turn
                        right onto Route 9W South
                 o   Route 9W approximately 2 miles, bear
                        right for FDR/Mid-Hudson Bridge
                 o   After crossing bridge take first right
                        (Route 9 South)
                 o   Bear right off exit ramp into CH Energy
                        Group, Inc. entrance





                                    |||||||||||||||||||||||||
   [Graphic Omitted
                                    ADMISSION TICKET
   CH ENERGY GROUP, INC.
                                    ||||||||||||||||||||||||||||||||| C123456789
--
-- MR A SAMPLE            000004    000000000.000000 ext  000000000.000000 ext
-- DESIGNATION (IF ANY)             000000000.000000 ext  000000000.000000 ext
-- ADD 1                            000000000.000000 ext  000000000.000000 ext
-- ADD 2
-- ADD 3                            ELECTRONIC VOTING INSTRUCTIONS
-- ADD 4
-- ADD 5                            YOU CAN VOTE BY INTERNET OR TELEPHONE!
-- ADD 6                            AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK!
--
--                                  Instead of mailing your proxy, you may
--   |||||||||||||||||||||||||      choose one of the two voting methods
--                                  outlined below to vote your proxy.

                                    VALIDATION DETAILS ARE LOCATED BELOW IN THE
                                    TITLE BAR.

                                    PROXIES SUBMITTED BY THE INTERNET OR
                                    TELEPHONE MUST BE RECEIVED BY 12:01 A.M.,
                                    CENTRAL TIME, ON APRIL 16, 2007

                                                 VOTE BY INTERNET

                              [graphic omitted]  o Log on to the Internet and go
                                                   to www.investorvote.com
                                                 o Follow the steps outlined on
                                                   the secured website.


                                                 VOTE BY TELEPHONE

                              [graphic omitted]  o Call toll free 1-800-652-VOTE
                                                   (8683) within the United
                                                   States, Canada & Puerto Rico
                                                   any time on a touch tone
                                                   telephone. There is NO CHARGE
                                                   to you for the call.

                                                 o Follow the instructions
                                                   provided by the recorded
                                                   message.
Using a black ink pen, mark your votes with an X
as shown in this example. Please do not write
outside the designated areas.   [X]

================================================================================
ANNUAL MEETING PROXY CARD             123456       C0123456789        12345
================================================================================

o IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. o
--------------------------------------------------------------------------------

[A] PROPOSALS - THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE NOMINEES
    LISTED AND FOR PROPOSALS 2 - 5.

1.  Election of Class I Directors 2010:   FOR   WITHHOLD        FOR   WITHHOLD

                                          [ ]     [ ]           [ ]      [ ]   +

    01 - Steven V. Lant                         02 - Jeffrey D. Tranen


[B] ISSUES

2.  In their discretion, upon such other business as may properly come before
    the annual meeting or any adjournment or postponement thereof.

MEETING ATTENDANCE

Mark the box to the right if you plan to   [ ]
attend the Annual Meeting.

ANNUAL REPORT
Mark the box to the right if you would
like to stop receiving an Annual Report.   [ ]


                                                            
CHANGE OF ADDRESS - Please print new address below.            COMMENTS - Please print your comments below.
-----------------------------------------------------------    -----------------------------------------------------------

-----------------------------------------------------------    -----------------------------------------------------------


[C] AUTHORIZED SIGNATURES - THIS SECTION MUST BE COMPLETED FOR YOUR VOTE TO BE
    COUNTED. - DATE AND SIGN BELOW

Please sign exactly as name(s) appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custodian, please give full title.

                                                            
Date (mm/dd/yyyy) - Please print date below.                   Signature 1 - Please keep  signature within the box.
----------------------------------------------------------     -----------------------------------------------------------
                   /             /
                  /             /
----------------------------------------------------------     -----------------------------------------------------------

Signature 2 - Please keep signature within the box.
----------------------------------------------------------


----------------------------------------------------------
                                                               MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE
[Graphic Omitted]                 C 1234567890J       JNT      140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
                                                               MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
                                  1 U P X    0 1 1 9 3 0 1     MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND   +







                                ADMISSION TICKET

                         ANNUAL MEETING OF SHAREHOLDERS
                           April 24, 2007, 10:30 a.m.
                              CH ENERGY GROUP, INC.
                       284 South Avenue, Poughkeepsie, NY


--------------------------------------------------------------------------------
                                     AGENDA

                             - Election of Directors
--------------------------------------------------------------------------------



         IT IS IMPORTANT THAT ALL SHARES BE REPRESENTED AT THIS MEETING,
                WHETHER OR NOT YOU ATTEND THE MEETING IN PERSON.
                    TO MAKE SURE ALL SHARES ARE REPRESENTED,
             WE URGE YOU TO COMPLETE AND MAIL THE PROXY CARD BELOW.


--------------------------------------------------------------------------------
                    If planning to attend the Annual Meeting,
              please mark the appropriate box on the reverse side.
               Present this Admission Ticket to the representative
                   at the entrance to the Annual Meeting room.
--------------------------------------------------------------------------------

o IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. o

[Graphic Omitted]

CH ENERGY GROUP, INC.

--------------------------------------------------------------------------------
PROXY - CH ENERGY GROUP, INC.
--------------------------------------------------------------------------------

PROXY OF COMMON SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints MARGARITA K. DILLEY, STEVEN M. FETTER, STANLEY
J. GRUBEL and E. MICHEL KRUSE, or any one or more of them, as proxy, with full
power of substitution, to vote, as designated on the reverse hereof, all shares
of Common Stock owned of record by the undersigned on March 1, 2007, at the
Annual Meeting of Shareholders of CH Energy Group, Inc. to be held at the office
of the Corporation, 284 South Avenue, in the City of Poughkeepsie, Dutchess
County, New York, on April 24, 2007, or any adjournment thereof, upon all such
matters as may properly come before the meeting, including the following
proposal described in the Proxy Statement, dated March 1, 2007, a copy of which
has been received by the undersigned.

THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED WITH REGARD TO
ELECTION OF DIRECTORS. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE LISTED NOMINEES FOR ELECTION AS DIRECTORS.

You may vote the shares held in this account by telephone or electronically
using the Internet. Voting by telephone or using the Internet will eliminate the
need to mail voted proxy card(s) representing shares held in the account;
therefore if voting using the Internet or by telephone, please do not mail your
card. Both voting systems preserve the confidentiality of every vote and will
confirm the voting instructions with you.You may also change selections on any
or all of the proposals to be voted. To vote by telephone or using the Internet,
please have this proxy card and your social security number available. Please
follow the steps below.

As an added convenience, you may sign up to receive next year's annual report
and proxy materials via the Internet. Next year when the materials are
available, we will send you an e-mail with instructions which will enable you to
review these materials on-line. To sign up for this optional service, visit
www.copmutershare.com/us/ecomms.
--------------------------------