CENTRAL HUDSON GAS & ELECTRIC CORP, 10-Q, 1998-08-05

CENTRAL HUDSON GAS & ELECTRIC CORP
10-Q, 1998-08-05
ELECTRIC & OTHER SERVICES COMBINED

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<PAGE> FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended.................June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from............to...................
Commission file number...................................1-3268

CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)

NEW YORK 14-0555980
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

284 SOUTH AVENUE, POUGHKEEPSIE NEW YORK 12601-4879
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including
area code (914) 452-2000

Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No

Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date. Common stock, par value $5.00 per share; 16,999,387 shares
outstanding as of June 30, 1998.

CENTRAL HUDSON GAS & ELECTRIC CORPORATION

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998

INDEX

PART I - FINANCIAL INFORMATION PAGE

Item 1 - Consolidated Financial Statements

Consolidated Statement of Income -
Three Months Ended June 30, 1998 and 1997 1

Consolidated Statement of Income -
Six Months Ended June 30, 1998 and 1997 3

Consolidated Balance Sheet - June 30, 1998
and December 31, 1997 5

Consolidated Statement of Cash Flows -
Six Months Ended June 30, 1998 and 1997 8

Notes to Consolidated Financial Statements 11

Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings 24

Item 5 - Other Information 25

Item 6 - Exhibits and Reports on Form 8-K 26

Signatures 28

PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 3 Months Ended
June 30,
1998 1997
(Thousands of Dollars)
Operating Revenues
Electric.............................. $ 90,319 $ 90,853
Gas................................... 16,681 24,216
Total - own territory................ 107,000 115,069
Electric sales to other utilities..... 4,717 3,503
Gas sales to other utilities.......... 389 32
112,106 118,604
Operating Expenses
Operation:
Fuel used in electric generation..... 16,642 13,274
Purchased electricity................ 11,286 12,509
Purchased natural gas................ 6,896 13,028
Other expenses of operation.......... 23,836 25,378
Maintenance........................... 6,792 7,080
Depreciation and amortization......... 11,413 10,904
Taxes, other than income tax.......... 15,329 15,740
Federal income tax.................... 5,508 5,849
97,702 103,762

Operating Income....................... 14,404 14,842

Other Income and Deductions
Allowance for equity funds
used during construction............. 83 82
Federal income tax.................... 293 169
Other - net........................... 2,094 2,014
2,470 2,265

Income Before Interest Charges......... 16,874 17,107

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 3 Months Ended
June 30,
1998 1997
(Thousands, Except for
Per Share Amounts)

Interest Charges
Interest on mortgage bonds............ 3,559 3,559
Interest on other long-term debt...... 2,268 2,299
Other interest........................ 881 610
Allowance for borrowed funds
used during construction............. (101) (51)
Amortization of expense on debt....... 226 226

6,833 6,643

Net Income............................. 10,041 10,464

Dividends Declared on Cumulative
Preferred Stock....................... 807 807
Income Available for Common Stock...... 9,234 9,657
Dividends Declared on
Common Stock.......................... 9,172 9,332

Balance Retained in the Business....... $ 62 $ 325

Common Stock:
Average Shares Outstanding (000s)..... 17,060 17,475

Earnings Per Share on Average Shares
Outstanding........................... $.54 $.55

Dividends Declared.................... $.54 $.535

See Notes to Consolidated Financial Statements.

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

For the 6 Months Ended
June 30,
1998 1997
(Thousands of Dollars)
Operating Revenues
Electric.............................. $ 191,631 $ 195,772
Gas................................... 52,171 66,745
Total - own territory................ 243,802 262,517
Electric sales to other utilities..... 11,571 7,864
Gas sales to other utilities.......... 614 98
255,987 270,479
Operating Expenses
Operation:
Fuel used in electric generation..... 36,875 28,206
Purchased electricity................ 22,649 27,467
Purchased natural gas................ 26,044 38,395
Other expenses of operation.......... 48,132 49,633
Maintenance........................... 12,335 12,876
Depreciation and amortization......... 22,662 21,808
Taxes, other than income tax.......... 32,537 33,439
Federal income tax.................... 16,346 18,012
217,580 229,836

Operating Income....................... 38,407 40,643

Other Income and Deductions
Allowance for equity funds
used during construction............. 190 183
Federal income tax.................... 573 360
Other - net........................... 3,500 3,880
4,263 4,423

Income Before Interest Charges......... 42,670 45,066

- 3 -
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

For the 6 Months Ended
June 30,
1998 1997
(Thousands, Except for
Per Share Amounts)

Interest Charges
Interest on mortgage bonds............ 7,118 7,118
Interest on other long-term debt...... 4,350 4,381
Other interest........................ 1,772 1,278
Allowance for borrowed funds
used during construction............. (231) (113)
Amortization of expense on debt....... 453 453

13,462 13,117

Net Income............................. 29,208 31,949

Dividends Declared on Cumulative
Preferred Stock....................... 1,614 1,614
Income Available for Common Stock...... 27,594 30,335
Dividends Declared on
Common Stock.......................... 18,334 18,607

Balance Retained in the Business....... $ 9,260 $ 11,728

Common Stock:
Average Shares Outstanding (000s)..... 17,146 17,504

Earnings Per Share on Average Shares
Outstanding......................... $1.61 $1.73

Dividends Declared.................... $1.075 $1.065

See Notes to Consolidated Financial Statements.

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1998 1997
(Unaudited) (Audited)
(Thousands of Dollars)
ASSETS
Utility Plant
Electric....................... $1,199,603 $1,193,735
Gas............................ 153,229 151,222
Common......................... 93,825 91,522
Nuclear fuel................... 42,301 37,262
1,488,958 1,473,741
Less: Accumulated depreciation. 580,744 560,304
Nuclear fuel amortization 33,892 33,059
874,322 880,378
Construction work in progress.. 58,331 52,413
Net Utility Plant............ 932,653 932,791
Investments and Other Assets
Prefunded Pension Costs........ 31,877 23,536
Other.......................... 16,596 14,958
Total Investments and
Other Assets................ 48,473 38,494
Current Assets
Cash and cash equivalents...... 3,295 9,054
Accounts receivable from
customers-net of allowance for
doubtful accounts............. 44,801 49,643
Accrued unbilled utility
revenues...................... 8,869 16,229
Other receivables.............. 4,544 2,073
Fuel, materials and supplies,
at average cost............... 21,099 24,100
Special deposits and
prepayments................... 12,550 14,210
Total Current Assets......... 95,158 115,309
Deferred Charges
Regulatory assets.............. 127,840 139,236
Unamortized debt expense....... 4,806 5,002
Other.......................... 17,238 21,258
Total Deferred Charges....... 149,884 165,496
Total Assets.................... $1,226,168 $1,252,090
See Notes to Consolidated Financial Statements.

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1998 1997
(Unaudited) (Audited)
(Thousands of Dollars)
LIABILITIES and CAPITALIZATION
Capitalization
Common Stock Equity
Common stock, 30,000,000 shares
authorized; shares issued
($5 par value):
1998 - 17,554,987
1997 - 17,554,987............ $ 87,775 $ 87,775
Paid-in capital............... 284,465 284,465
Retained earnings............. 129,800 120,540
Reacquired capital stock...... (21,239) (9,398)
Capital stock expense......... (6,241) (6,278)
Total Common Stock Equity... 474,560 477,104

Cumulative Preferred Stock
Not subject to mandatory
redemption.................. 21,030 21,030
Subject to mandatory
redemption.................. 35,000 35,000
Total Cumulative Preferred
Stock..................... 56,030 56,030

Long-term Debt................ 340,792 361,829

Total Capitalization....... 871,382 894,963

Current Liabilities
Current maturities
of long-term debt............ 21,549 1,317
Accounts payable.............. 15,933 24,368
Accrued taxes and interest.... 5,266 3,240
Dividends payable............. 9,983 10,052
Accrued vacation.............. 4,400 4,339
Customer deposits............. 4,082 4,001
Other......................... 5,033 6,545
Total Current Liabilities... 66,246 53,862

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, December 31,
1998 1997
(Unaudited) (Audited)
(Thousands of Dollars)
LIABILITIES and CAPITALIZATION

Deferred Credits and Other
Liabilities
Regulatory liabilities........ 70,646 81,271
Operating reserves............ 4,728 6,582
Other......................... 10,617 10,019
Total Deferred Credits and
Other Liabilities.......... 85,991 97,872

Accumulated Deferred Income Tax 202,549 205,393

Total Capitalization and
Liabilities................... $1,226,168 $1,252,090

See Notes to Consolidated Financial Statements.

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 6 Months Ended
June 30,
1998 1997
(Thousands of Dollars)
Operating Activities
Net Income.......................... $ 29,208 $ 31,949

Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:

Depreciation, amortization and
nuclear fuel amortization....... 24,067 24,133
Deferred income taxes, net........ (308) 1,404
Allowance for equity funds used
during construction............. (190) (183)
Nine Mile 2 Plant deferred
finance charges, net............ (2,428) (2,428)
Provision for uncollectibles...... 1,300 1,650
Accrued pension costs............. (5,850) (4,459)
Deferred gas costs................ 3,148 7,146
Deferred gas refunds.............. (1,410) 2,103
Other - net....................... (549) (3,539)

Changes in current assets and
liabilities, net:

Accounts receivable and unbilled
revenues................. 8,431 829
Fuel, materials and supplies...... 3,001 4,617
Special deposits and prepayments.. 1,660 1,058
Accounts payable.................. (8,435) (3,401)
Accrued taxes and interest........ 2,026 8,825
Other current liabilities......... (1,370) (1,763)

Net cash provided by operating
activities......................... 52,301 67,941

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CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 6 Months Ended
June 30,
1998 1997
(Thousands of Dollars)

Investing Activities
Additions to plant.................. (24,692) (17,684)
Allowance for equity funds used
during construction................ 190 183
Net additions to plant.............. (24,502) (17,501)
Nine Mile 2 Plant decommissioning
trust fund......................... (434) (434)
Other - net......................... (449) (332)
Net cash used in investing
activities......................... (25,385) (18,267)

Financing Activities
Proceeds from issuance of
long-term debt................... - 932
Repayments of short-term debt...... - (15,600)
Retirement and redemption of
long-term debt.................... (817) (859)
Dividends paid on cumulative
preferred and common stock........ (20,017) (20,193)
Reacquired capital stock........... (11,841) (3,535)
Net cash used in financing
activities........................ (32,675) (39,255)

- 9 -<PAGE>

CENTRAL HUDSON GAS & ELECTRIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 6 Months Ended
June 30,
1998 1997
(Thousands of Dollars)
Net Change in Cash and Cash
Equivalents.......................... (5,759) 10,419
Cash and Cash Equivalents -
Beginning of Year.................... 9,054 4,235
Cash and Cash Equivalents -
End of Period........................ $ 3,295 $ 14,654

Supplemental Disclosure of
Cash Flow Information
Interest paid (net of amounts
capitalized)...................... $ 11,872 $ 12,029
Federal income tax paid............ 14,700 11,111

See Notes to Consolidated Financial Statements.
- 10 -<PAGE>

CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Notes to Consolidated Financial Statements

NOTE 1 - GENERAL

The accompanying consolidated financial statements of Central Hudson Gas &
Electric Corporation (herein "the Company") are unaudited but, in the
opinion of management, reflect adjustments (which include normal recurring
adjustments) necessary for a fair statement of the results for the interim
periods presented. These condensed unaudited quarterly consolidated
financial statements do not contain the detail or footnote disclosures
concerning accounting policies and other matters which would be
included in annual consolidated financial statements and,
accordingly, should be read in conjunction with the audited Consolidated
Financial Statements (including the notes thereto)
included in the Company's Annual Report, on Form 10-K, for the
year ended December 31, 1997 (Company's 10-K Report).

Due to the seasonal nature of the Company's operations, financial
results for interim periods are not necessarily indicative of
trends for a twelve-month period.

NOTE 2 - REGULATORY MATTERS

Amended Settlement Agreement Order

Reference is made to the Amended and Restated Settlement
Agreement, as described in Item 7 under the caption
"Competition/Deregulation" and Note 1 - "Regulatory Matters" to
the Consolidated Financial Statements of the Company's 10-K
Report, regarding the Company's plan for transition to a
competitive generation and energy services market (Amended
Settlement Agreement). The Company received the final Order
dated June 30, 1998, confirming the February 19, 1998 (Order)
adopting terms of the Settlement subject to modifications and
conditions therein, from the Public Service Commission of the
State of New York (PSC) approving the Amended Settlement
Agreement reflecting action taken by the PSC on February 4,
1998. In the Order, the PSC adopted the terms of the Amended
Settlement Agreement, subject to certain modifications and
conditions. These modifications and conditions include the
following: a) the PSC reserves its authority to require an

-11- <PAGE>
auction and transfer of the Company's fossil-fueled electric
generating assets prior to June 30, 2001, if such accelerated
auction and transfer is found by the PSC to be in the public
interest (at June 30, 1998, the net book value of the Company's
fossil generating assets represented approximately 19% of net
utility plant); b) the PSC directed the PSC Staff to provide
assurance that the Company does not incur imprudent generation
costs which could be avoided by divestiture of fossil-fueled
electric generating assets prior to June 30, 2001; c) "Strandable
costs" of the Company, as defined in the Amended Settlement
Agreement, have been clarified to be those "production
expenditures of the Company made in fulfilling its obligation to
serve and provide safe, reliable electric service to customers
within its franchise territory which are not expected to be
recoverable in a competitive electricity market"; d) the PSC
added a provision dealing with mergers and acquisitions; namely,
pursuant to a petition filed jointly or individually by the
Company, the Company will have the flexibility to retain, on a
cumulative basis, all savings associated with an acquisition or
merger with another utility for a period of five years from the
date of closing of any merger or acquisition up to the amount of
the acquisition premium paid over the lesser of book value or
fair market value of assets merged or acquired, and savings in
excess of the recovery will be disposed of by order of the PSC.

Impact of Amended Settlement Agreement on Accounting Policies

The Amended Settlement Agreement creates certain changes to the
Company's accounting policies. The Company's accounting
policies conform to generally accepted accounting principles,
which, for regulated public utilities, include Statement of
Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71). Under SFAS
71, regulated companies defer costs and credits on the balance
sheet as regulatory assets and liabilities when it is probable
that those costs and credits will be allowed in the rate-making
process in a period different from when they otherwise would
have been reflected in income. These deferred regulatory assets
and liabilities are then reflected in the income statement in
the period in which the same amounts are reflected in rates. If
some portion of an enterprise's operations are regulated and
meet the appropriate criteria, SFAS 71 is applied only to the
regulated portion of the enterprise's operations.

-12-

Upon approval of the Amended Settlement Agreement by the PSC,
the Company applied the provisions of Statement of Financial
Accounting Standards No. 101, "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB
Statement No. 71" (SFAS 101) to the fossil-fueled generating
portion of its business. Therefore, on February 4, 1998 the
Company discontinued application of SFAS 71 to its fossil-fueled
generating portion of its business. Because the Amended
Settlement Agreement includes a provision for future recovery of
costs, the application of SFAS 101 to the fossil-fueled
generating portion of the Company's business did not have a
significant effect on the Company's financial position or
results of operations as of such discontinuance.

Certain regulatory assets and liabilities have been created as a
result of transactions relating to the Company's fossil-fueled
generating assets. At June 30, 1998, net regulatory assets
associated with the fossil-fueled generating assets totaled $7.0
million. The Company did not charge against income any of these
net regulatory assets because recovery of such assets is
considered probable under the Amended Settlement Agreement.

Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121), requires that long-lived
assets be reviewed for impairment if the carrying value of the
asset may not be recoverable. SFAS 121 also requires that long-lived assets
to be disposed of be carried at the lower of net
book value or fair value, and amends SFAS 71 to require that
regulatory assets be charged against earnings if recovery of
such assets is no longer probable. The Company will not
recognize an impairment of its fossil-fueled generating assets
because the estimated cash flows from operations, the sale of
such generating assets, and stranded cost recovery provisions of
the Amended Settlement Agreement are not expected to be less
than the net carrying amount of such generating assets.

Formation of Holding Company

Reference is made to the caption "Amended Settlement Agreement"
of Note 1, "Regulatory Matters," to the Consolidated Financial
Statements of the Company's 10-K Report and to the Company's
Current Report, on Form 8-K, dated January 7, 1998, in which a

-13-<PAGE>
proposed new holding company structure for the Company was
disclosed in the context of the PSC's Competitive Opportunities
Proceeding. Pursuant to the Amended Settlement Agreement, the
Company has begun efforts to form a holding company. Effective
April 24, 1998, the Company formed a wholly-owned subsidiary
named CH Energy Group, Inc., which, upon shareholder and certain
regulatory approvals, will become the holding company owner of
Central Hudson Gas & Electric Corporation. The Company has
received regulatory approval from the Federal Energy Regulatory
Commission, the Securities and Exchange Commission and the
Nuclear Regulatory Commission. Initially, the holding company
will be comprised of Central Hudson Gas & Electric Corporation
and its existing subsidiaries as described under the caption
"Other Matters" of Item 1 of the Company's 10-K Report, with the
exception of Phoenix Development Company, Inc. which will remain
a wholly owned subsidiary of Central Hudson Gas & Electric
Corporation. The holding company may also establish other
subsidiaries over time.

NOTE 3 - NEW ACCOUNTING STANDARDS - SEGMENT DISCLOSURES

In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" (SFAS 131). This Statement establishes
standards for reporting information about operating segments in
annual and interim financial statements. It also establishes
standards for related disclosures about products and services,
geographic areas and major customers. In compliance with the
requirements of this Statement, the Company will adopt SFAS 131
in its financial statements for the year ended December 31,
1998. The Company does not expect that the adoption of SFAS 131
will have a significant impact on the reporting requirements of
the Company.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

The Company faces a number of contingencies which arise during
the normal course of business and which have been discussed in
Note 9,"Commitments and Contingencies", to the Consolidated
Financial Statements of the Company's 10-K Report. Except for
that which is disclosed in Part II of this Quarterly Report, on
Form 10-Q, for the quarterly period ended June 30, 1998, and all
documents previously filed with the Securities and Exchange

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Commission in 1998, there have been no material changes in the
subject matters discussed in said Note 9.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

CAPITAL RESOURCES AND LIQUIDITY

The growth of retained earnings in the first six months of 1998
contributed to the increase in the book value of common stock
from $27.61 at December 31, 1997 to $27.92 at June 30, 1998;
however, the common equity ratio decreased from 53.2% at
December 31, 1997 to 53.1% at June 30, 1998 due to the
repurchase of common stock which exceeded the increase in
retained earnings.

For the six months ended June 30, 1998, the Company repurchased
280,400 shares of its common stock for $11.8 million under its
stock repurchase program (See Note 6, "Capitalization-Capital
Stock", to the Consolidated Financial Statements of the
Company's 10-K Report).

For the six months ended June 30, 1998, cash expenditures
related to the construction program of the Company amounted to
$24.3 million. The amount shown on the Consolidated Statement
of Cash Flows for "Net additions to Plant" of $24.5 million
includes the debt portion of $231,000 of the Allowance for Funds
Used During Construction ("AFDC", as such term is described in
Note 1, "Regulatory Matters", to the Consolidated Financial
Statements of the Company's 10-K Report). The cash requirements
for such expenditures were funded from internal sources.

The Company has $52 million of committed short-term credit
facilities available. In order to diversify its sources of
short-term financing, the Company has also entered into short-term credit
facilities with several commercial banks. At
June 30, 1998, the Company had no short-term debt outstanding
and had investments in short-term securities in the amount of
$3.2 million at the end of June 1998. Authorization from the
PSC limits the short-term borrowing amount the Company may have
outstanding, at any time, to $52 million in the aggregate.

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Pursuant to Article XXI of the Company's First Mortgage Bond
Indenture, the Company deposited $722,226 on March 24, 1998 with
the Indenture Trustee. Such Article requires the deposit of the
amount by which depreciation exceeds property additions in each
calendar year, less property additions made in the subsequent
calendar year, up to the date of deposit which must be made no
later than March 31 of each year. Such deposit may be withdrawn
at a subsequent date to fund redemptions of outstanding mortgage
bonds.

As described in Note 7,"Capitalization-Long-Term Debt", to the
Consolidated Financial Statements of the Company's 10-K Report,
the Company's interest rate cap agreement expired in April 1998.
On April 1, 1998 the Company entered into an interest rate cap
agreement with a bank, which agreement expires March 31, 2000.
Under this agreement, in the event a nationally recognized tax-exempt
bond interest rate index exceeds 5%, the Company will
receive a payment from such bank equal to the amount by which
the actual interest costs on its variable rate 1985 and 1987 New
York State Energy Research and Development Authority Bonds
exceeds 5% per annum. This agreement has the effect of limiting
the interest the Company must pay on such bonds (on a $115.9
million notional amount) to the lesser of their actual rate or
5% per annum.

On May 5, 1998, Moody's Investor Service, Inc. upgraded the
Company's senior secured debt rating from "A3" to "A2". The
Company's other service debt ratings are "A" from Standard and
Poor's Corporation, Duff & Phelps Credit Rating Co. and
Fitch/IBCA.

EARNINGS PER SHARE

Earnings per share of common stock were $.54 for the second quarter of
1998, as compared to $.55 for the second quarter of
1997, a decrease of 2%. Earnings per share of common stock were
$1.61 for the six months ended June 30, 1998, as compared to
$1.73 for the six months ended June 30, 1997, a decrease of 7%.

The decrease in earnings per share for the quarter ended
June 30, 1998, as compared to the same period in 1997,
resulted from the combined effect of decreased electric and gas
net operating revenues. Electric net operating revenues

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decreased primarily from a reduction in revenues related to fixed
term rentals of certain electric facilities which were concluded
in 1997. Gas net operating revenues decreased from the same
period last year largely due to a decrease in usage by
residential, commercial and industrial customers. A 14% decrease
in billing degree days contributed to the reduction in gas net
operating revenues. This decrease was largely offset by the
favorable impact on earnings of a decrease in the Company's
operation and maintenance costs in 1998 resulting primarily from
a decrease in maintenance costs of the Company's electric
generating plants. Also, partially offsetting this decrease was
the net effect of various other items, including the positive
earnings effect of a decrease in the number of outstanding shares
of common stock, decreased federal income tax and increased
depreciation expense on the Company's plant and equipment.

The decrease in per share earnings for the six months ended
June 30, 1998, as compared to the same period in 1997, resulted
largely from a decrease in electric net operating revenues due
primarily to a decrease in sales resulting primarily from milder
winter weather conditions experienced in the first quarter of
1998 compared to the same period in 1997. Also impacting this
decrease was the net effect of various other items, including
increased depreciation expense on the Company's plant and
equipment and decreased operation and maintenance costs in 1998
resulting primarily from a decrease in maintenance costs of the
Company's electric generating plants and its electric
transmission and distribution systems.

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RESULTS OF OPERATIONS

The following table reports the variation in the results of
operations for the three months and the six months ended
June 30, 1998 compared to the same periods for 1997:

3 MONTHS ENDED JUNE 30,
INCREASE
1998 1997 (DECREASE)
(Thousands of Dollars)
Operating Revenues............... $112,106 $118,604 $ (6,498)
Operating Expenses............... 97,702 103,762 (6,060)
Operating Income................. 14,404 14,842 (438)
Other Income..................... 2,470 2,265 205
Income before Interest Charges... 16,874 17,107 (233)
Interest Charges................. 6,833 6,643 190
Net Income....................... 10,041 10,464 (423)
Dividends Declared on Cumulative
Preferred Stock................. 807 807 -
Income Available for Common Stock $ 9,234 $ 9,657 $ (423)

6 MONTHS ENDED JUNE 30,
INCREASE
1998 1997 (DECREASE)
(Thousands of Dollars)

Operating Revenues............... $255,987 $270,479 $(14,492)
Operating Expenses............... 217,580 229,836 (12,256)
Operating Income................. 38,407 40,643 (2,236)
Other Income..................... 4,263 4,423 (160)
Income before Interest Charges... 42,670 45,066 (2,396)
Interest Charges................. 13,462 13,117 345
Net Income....................... 29,208 31,949 (2,741)
Dividends Declared on Cumulative
Preferred Stock................. 1,614 1,614 -
Income Available for Common Stock $ 27,594 $ 30,335 $ (2,741)

OPERATING REVENUES

Operating revenues decreased $6.5 million (6%) for the second
quarter of 1998 as compared to the second quarter of 1997 and
decreased $14.5 million (5%) for the six months ended June 30,

-18-<PAGE>
1998. Details of these revenue changes by electric and gas
departments are as follows:

INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Electric Gas Electric Gas
(Thousands of Dollars)

Customer Sales....... $ 1,009 $ (5,866)* $(1,643) $ (7,566)*
Sales to Other
Utilities........... 1,215 356 3,707 516
Fuel and Gas Cost
Adjustment.......... 971 (2,407) 1,109 (8,352)
Deferred Revenues.... (1,978) 746 (2,725) 1,391
Miscellaneous**...... (537) (7) (882) (47)
$ 680 $ (7,178) $ (434) $(14,058)

*Both firm and interruptible revenues.
**Includes revenues from delivery service of electric for retail
access customers and transportation of customer-owned gas.

SALES

The Company's sales vary seasonally in response to weather.
Generally electric revenues peak in the summer and gas revenues
peak in the winter.

Total kilowatt-hour sales of electricity within the Company's service
territory increased 2%, while firm sales of natural gas
decreased 18%, for the second quarter of 1998 as compared to the
second quarter of 1997. For the six months ended June 30, 1998,
electric sales decreased 1% and firm gas sales decreased 11%
compared to the same period last year. Changes in sales from
last year by major customer classifications, including
interruptible gas sales, are set forth below. Also indicated
are changes related to transportation of customer-owned gas:

-19-

INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Electric Gas Electric Gas
Residential........ - (14)% (2)% (10)%
Commercial......... 5 (14) 2 (9)
Industrial......... 2 (32) (2) (21)
Interruptible...... N/A (73) N/A (42)
Transportation of
Customer-owned
Gas............... N/A 17 N/A 7

Delivery service of electric retail access customers first began in the
quarter ended March 31, 1998. The related volume was
.2% of total own territory sales for both the quarter ended
June 30, 1998, and the six months ended June 30, 1998.

Billing heating degree days were 14% lower for the quarter ended
June 30, 1998 and 8% lower for the six months ended June 30,
1998 when compared to the same periods in 1997.

Sales of electricity to residential customers in the second quarter of
1998 remained flat from the comparable prior year
period due to the net effect of a 1% decrease in usage per
customer and a 1% increase in the number of customers.
Commercial sales in the second quarter of 1998 increased 5% as
compared to last year due to the combined effect of a 3%
increase in usage per customer and a 2% increase in the number
of customers. Electric sales to industrial customers increased
2% in the second quarter of 1998.

For the six months ended June 30, 1998, sales of electricity to residential
customers decreased 2% due to the net effect of a
3% decrease in usage per customer and a 1% increase in the
number of customers. Sales to commercial customers increased
2% due to the net effect of a 3% increase in the number of
customers and a 1% decrease in the usage per customer.
Electric sales to industrial customers decreased 2% for such
six-month period.

Sales of gas to residential customers for the second quarter of
1998 decreased 14% due to the net effect of a 15% decrease in
usage per customer and a 1% increase in the number of
customers. Sales of gas to commercial customers for the second

-20-<PAGE>
quarter of 1998 decreased 14% due to the net effect of a 17%
decrease in usage per customer and a 3% increase in the number of
customers. Firm gas sales to industrial customers decreased 32%
for the second quarter of 1998 when compared to the same period
in 1997, due primarily to decreased usage by a large industrial
customer and the conversion of another large customer to gas
transportation service.

For the six months ended June 30, 1998, residential gas sales decreased
10% due to a decrease in usage per customer.
Commercial gas sales decreased 9% due to the net effect of a
12% decrease in usage per customer and a 3% increase in the
number of customers. Firm gas sales to industrial customers
for the six months ended June 30, 1998 decreased 21% due
largely to a decrease in usage by a large industrial customer
and the conversion of another large customer to gas
transportation service.

Interruptible gas sales decreased 73% in the second quarter of 1998
and 42% for the six months ended June 30, 1998, due
largely to a decrease in boiler gas usage for electric
generation.

Transportation gas volumes increased 17% for the second quarter and
increased 7% for the six months ended June 30, 1998, due
primarily to the conversion of a large industrial customer to
gas transportation service.

OPERATING EXPENSES

The following table reports the variation in the operating expenses
for the three months and six months ended June 30,
1998 compared to the same periods for the prior year:

-21-<PAGE>

INCREASE (DECREASE) FROM PRIOR PERIOD
SECOND QUARTER SIX MONTHS
Amount Percent Amount Percent
(Dollars in Thousands)
Operating Expenses
Fuel and Purchased
Electricity............. $ 2,145 8 % $ 3,851 7 %
Purchased Natural Gas.... (6,132) (47) (12,351) (32)
Other Expenses of
Operation............... (1,542) (6) (1,501) (3)
Maintenance.............. (288) (4) (541) (4)
Depreciation and
Amortization............ 509 5 854 4
Taxes, Other than
Federal Income Tax...... (411) (3) (902) (3)
Federal Income Tax....... (341) (6) (1,666) (9)
Total............... $(6,060) (6)% $(12,256) (5)%

Fuel and purchased electricity costs increased $2.1 million (8%) for
the second quarter of 1998 and $3.9 million (7%) for the
six months ended June 30, 1998, resulting primarily from
increased sales of electricity to other utilities for both
periods. Purchased natural gas costs decreased $6.1 million
(47%) for the second quarter of 1998 resulting primarily from
lower interruptible gas sales for usage as boiler fuel.
Purchased natural gas costs decreased $12.4 million (32%) for
the six months ended June 30, 1998 resulting primarily from the
combined effect of a decrease in the restoration of deferred
gas costs related to the Company's gas cost adjustment and a
reduction in the base cost of gas resulting from decreased own
territory firm sales.

Other expenses of operation decreased $1.5 million (6%) for the second
quarter of 1998 from the combined effect of decreased
pension costs, decreased provisions for uncollectible customer
accounts and decreased costs associated with injuries and
damages.

Federal income taxes decreased $1.7 million (9%) for the six
months ended June 30, 1998, resulting primarily from decreased
pre-tax operating income when compared to the same period of
1997.

-22-<PAGE>
COMMON STOCK DIVIDENDS

Reference is made to the caption "Common Stock Dividends and Price
Ranges" on Page 37 of Item 7 to the Company's 10-K
Report, and which is incorporated by reference in Part II, Item
5 of said Report, for a discussion of the Company's dividend
policies. On June 26, 1998, the Board of Directors of the
Company declared a quarterly dividend of $.54 per share,
payable August 1, 1998 to shareholders of record as of July 10,
1998, representing an increase of $.005, or 1%, over the $.535
per share level established one year ago.

-23-

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Asbestos Litigation. For a discussion of lawsuits against
the Company involving asbestos, see Note 9 "Commitments and
Contingencies", to the Consolidated Financial Statements of the
Company's 10-K Report under the caption "Asbestos Litigation".

Since 1987, the Company has been involved as a defendant in
the "mass tort" asbestos litigation in the United States District
Courts for the Southern and Eastern Districts of New York and the
New York State Supreme Court, County of New York. This
litigation involves thousands of plaintiffs who seek large
amounts of compensatory and punitive damages from numerous
defendants for deaths and injuries allegedly caused by exposure
to asbestos. As of July 31, 1998, the Company has been a
defendant in approximately 1,400 such individual lawsuits. Many
of these lawsuits have been disposed of without any payment by
the Company, or for immaterial amounts. While the amounts
demanded in all the remaining lawsuits total several billions of
dollars, it is the Company's opinion, based on its experience in
such litigation and on information and relevant circumstances
known to it at this time, that these lawsuits will not have a
material adverse effect on the Company's financial position.
However, if the Company were ultimately held liable under these
lawsuits and insurance coverage were not available, the cost
thereof could have a material adverse effect (a reasonable
estimate of which cannot be made at this time) on the financial
condition of the Company if the Company could not recover all or
a substantial portion thereof in rates. The Company's insurance
does not extend to punitive damages.

Former Manufactured Gas Plant Facilities. Reference is made
to Note 9,"Commitments and Contingencies", to the Consolidated
Financial Statements of the Company's 10-K Report, under the
caption "Former Manufactured Gas Plant Facilities", for a
description of a lawsuit filed by the City of Newburgh, New York
(City) against the Company involving one of the Company's former
manufactured gas plant facilities.
The Company has entered into an agreement ("Agreement") with
the City that will allow the City to re-commence construction at
its sewage treatment plant, which construction was halted in 1994

-24-<PAGE>
when the City found contaminants more than 15 feet beneath the
ground surface. The Agreement provides for the City to construct
a clarifier at the sewage treatment plant and to deal
appropriately with any contaminants that may be encountered
during the construction activities. The Company will fund these
construction and related activities. The Agreement also requires
the City to withdraw its damage claims in the litigation that
relate to past and future costs of constructing the clarifier.
The Company's preliminary estimate of the construction cost,
including all of the related activities required by the
Agreement, is approximately $2,000,000. A trial date for the
issues remaining in the litigation has been set by the Court for
November 2, 1998.
The Company is conducting additional studies as part of the
remedial investigation required by its Order on Consent with the
New York State Department of Environmental Conservation (NYSDEC).
The results of these studies are currently expected to be
provided to the NYSDEC in the Fall of 1998.
The Company is unable to predict the outcome of the
litigation, nor can it make reasonable estimates of the costs of
remedial actions that may be required by NYSDEC.

Item 5. Other Information
Nine Mile 2 Nuclear Generating Station (Nine Mile 2 Plant).
Reference is made to the caption "Results of Operations Nuclear
Operations" in Item 7, Part I of the Company's 10-K Report for a
discussion of the proposed plans of Niagara Mohawk Power
Corporation (Niagara Mohawk) and Rochester Gas and Electric
Corporation (both of which are tenants-in-common owners, together
with the Company and others, of the Nine Mile 2 Plant) to
establish a joint nuclear operation company to be known as New
York Nuclear Operating Company (NYNOC). NYNOC is envisioned to
assume full responsibility for operation of all nuclear plants in
New York State, including the Nine Mile 2 Plant. On or about
June 15, 1998, New York State Electric & Gas Corporation
(NYSE&G), one of the other owners of the Nine Mile 2 Plant,
commenced an action against Niagara Mohawk (which is the operator
of the Nine Mile 2 Plant) in Supreme Court of the State of New
York, Tompkins County, demanding, among others, judgment to (i)
enjoin Niagara Mohawk from transferring operating responsibility
of the Nine Mile 2 Plant to NYNOC; and (ii) declare that Niagara
Mohawk may not transfer its operational responsibility for the
Nine Mile 2 Plant to NYNOC without NYSE&G's consent. The Company

-25-<PAGE>
can make no prediction as to the outcome of this litigation and
the effect thereof of the NYNOC proposal on the Company.
Labor Relations. Reference is made to the Company's 10-K
Report, and to the discussion in Part I, Item 1 thereof under the
subcaption "Labor Relations", of the Company's agreements with
the International Brotherhood of Electrical Workers for its
unionized employees, representing production and maintenance
employees, customer relations representatives, service workers
and clerical employees, excluding persons in managerial,
professional or supervisory positions. Such Agreements were
renegotiated effective July 1, 1998 and extend five years. These
Agreements included a separate Labor Agreement for Fossil
Production employees, general wage increases of 3.0 percent in
each of the five years of the Agreements, improvements in the
Company's pension and saving incentive plans; and increased
flexibility for the Company to redeploy employees to other work
activities as necessary.

Item 6. Exhibits and Reports on Form 8-K

(a)The following exhibits are furnished in accordance with
the provisions of Item 601 of Regulation S-K:

Exhibit No.
Regulation S-K
Item 601
Designation Exhibit Description

(12) Statement Showing Computation of
the Ratio of Earnings to Fixed
Charges and the Ratio of Earnings
to Combined Fixed Charges and
Preferred Stock Dividends.

(27) Financial Data Schedule, pursuant
to Item 601(c) of Regulation S-K.

(b)Reports on Form 8-K. During the period covered by
this Report on Form 10-Q, the Company filed the following Current
Reports on Form 8-K:

(i) A Report, dated July 24, 1998, describing (i) the Order
of the PSC issued and effective June 30, 1998,

-26-<PAGE>
explaining in greater detail the Abbreviated Order of
the PSC, issued and effective February 19, 1998, which
February 19, 1998 Order modified and, as modified,
approved the Amended and Restated Settlement Agreement,
dated January 2, 1998, entered into among the Company,
the PSC Staff and others as part of the PSC's
"Competitive Opportunities" proceeding (ii) the Order,
dated June 24, 1998, of the Federal Energy Regulatory
Commission conditionally authorizing the establishment
of an Independent System Operator by the member systems
of the New York Power Pool and (iii) effective
August 1, 1998, Mr. Paul J. Ganci's appointment by the
Company's Board of Directors as President and Chief
Executive Officer. Mr. John E. Mack, III, formerly
Chairman of the Board and Chief Executive Officer,
continues as Chairman of the Board.

-27-<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned hereunder duly authorized.

CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Registrant)

By: (SGD.) DONNA S. DOYLE
Donna S. Doyle
Controller
Authorized Officer and Chief
Accounting Officer

Dated: August 5, 1998

-28-

</PAGE>

<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $932,653
<OTHER-PROPERTY-AND-INVEST> $48,473
<TOTAL-CURRENT-ASSETS> $95,158
<TOTAL-DEFERRED-CHARGES> $149,884
<OTHER-ASSETS> $0
<TOTAL-ASSETS> $1,226,168
<COMMON> $87,775
<CAPITAL-SURPLUS-PAID-IN> $256,985
<RETAINED-EARNINGS> $129,800
<TOTAL-COMMON-STOCKHOLDERS-EQ> $474,560
$35,000
$21,030
<LONG-TERM-DEBT-NET> $340,792
<SHORT-TERM-NOTES> $0
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $21,549
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $333,237
<TOT-CAPITALIZATION-AND-LIAB> $1,226,168
<GROSS-OPERATING-REVENUE> $255,987
<INCOME-TAX-EXPENSE> $16,346
<OTHER-OPERATING-EXPENSES> $201,234
<TOTAL-OPERATING-EXPENSES> $217,580
<OPERATING-INCOME-LOSS> $38,407
<OTHER-INCOME-NET> $4,263
<INCOME-BEFORE-INTEREST-EXPEN> $42,670
<TOTAL-INTEREST-EXPENSE> $13,462
<NET-INCOME> $29,208
$1,614
<EARNINGS-AVAILABLE-FOR-COMM> $27,594
<COMMON-STOCK-DIVIDENDS> $18,334
<TOTAL-INTEREST-ON-BONDS> $0
<CASH-FLOW-OPERATIONS> $52,301
<EPS-PRIMARY> $1.61
<EPS-DILUTED> $0

</TABLE>

<PAGE>
<TABLE> EXHIBIT 12
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
FIXED CHARGES AND PREFERRED DIVIDENDS
<CAPTION> 1998 Year Ended December 31,
3 Mos 6 Mos 12 Mos 1997 1996 1995 1994
Ended Ended Ended
June 30 June 30 June 30
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
A. Net Income $10,041 $29,208 $ 52,347 $ 55,086 $ 56,082 $ 52,722 $ 50,929
B. Federal Income Tax 5,215 15,773 24,357 26,237 31,068 28,687 26,806
C. Earnings before Income Taxes 15,256 44,981 76,704 81,323 87,150 81,409 77,735
D. Total Fixed Charges <FN1> 6,989 13,737 27,368 27,148 27,231 30,433 32,679
E. Total Earnings $22,245 $58,718 $104,072 $108,471 $114,381 $111,842 $110,414
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 807 $ 1,614 $ 3,230 $ 3,230 $ 3,230 $ 4,903 $ 5,127
G. Less Allowable Dividend Deduction 32 64 127 127 127 528 528
H. Net Subject to Gross-up 775 1,550 3,103 3,103 3,103 4,375 4,599
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.519 1.540 1.465 1.476 1.554 1.544 1.526
J. Pref. Dividend (Pre-tax) (HxI) 1,177 2,387 4,546 4,580 4,822 6,755 7,018
K. Plus Allowable Dividend Deduction 32 64 127 127 127 528 528
L. Preferred Dividend Factor 1,209 2,451 4,673 4,707 4,949 7,283 7,546
M. Fixed Charges (D) 6,989 13,737 27,368 27,148 27,231 30,433 32,679
N. Total Fixed Charges
and Preferred Dividends $ 8,198 $16,188 $ 32,041 $ 31,855 $ 32,180 $ 37,716 $ 40,225
O. Ratio of Earnings to Fixed
Charges (E/D) 3.18 4.27 3.80 4.00 4.20 3.68 3.38
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 2.71 3.63 3.25 3.41 3.55 2.97 2.74
<FN1> Includes a portion of rent expense deemed to be representive of the interest factor.
</TABLE>
</PAGE>

<PAGE>
B Y - L A W S

CENTRAL HUDSON GAS & ELECTRIC CORPORATION

___________________

ARTICLE I.

MEETINGS OF SHAREHOLDERS

SECTION 1. Place of Meeting. All meetings of the
shareholders shall be held at the principal office of the
Corporation in the City of Poughkeepsie, County of Dutchess,
State of New York, or at such other place or places in the State
of New York as may from time to time be fixed by the Board of
Directors.

SECTION 2. Annual Meeting. The Annual Meeting of the
shareholders, for the election of directors and the transaction
of such other business as may be brought before the meeting,
shall be held each year on the first Tuesday in April (or if said
day be a legal holiday, then on the next succeeding business
day), at such time of day as the directors may determine.

SECTION 3. Special Meetings. Special meetings of the
shareholders may be called by the Board of Directors or by the
Chairman of the Board of Directors or by the President, or by
shareholders together holding at least one third of the capital
stock of the Corporation entitled to vote or act with respect
thereto upon the business to be brought before such meeting.

SECTION 4. Notice of Meetings. Notice of any annual or
special meeting of the shareholders shall be in writing and shall
be signed by the Chairman of the Board of Directors or the
President or the Secretary or an Assistant Secretary. Such
notice shall state the purpose or purposes for which the meeting
is called and shall state the place, date and hour of the meeting
and, unless it is the annual meeting, indicate that it is being
issued by or at the direction of the person or persons calling
the meeting. A copy of the notice of any meeting shall be given,
- 1 -<PAGE>
personally or by first-class mail, not fewer than ten nor more
than sixty days before the date of the meeting, provided,
however, that a copy of such notice may be given by third-class
mail not fewer than twenty-four nor more than sixty days before
the date of the meeting, to each shareholder entitled to vote at
such meeting. If mailed, such notice is given when deposited in
the United States mail, with postage thereon prepaid, directed to
the shareholder at his address as it appears on the record of
shareholders, or, if he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed
to some other address, then directed to him at such other
address. An affidavit of the Secretary of the Corporation or
other person giving the notice or of a transfer agent of the
Corporation that the notice required by this section has been
given shall be supplied at the meeting to which it relates.

SECTION 5. Quorum. Except as otherwise provided by
statute, the holders of a majority of the shares entitled to vote
thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a
specified item of business is required to be voted on by a class
or series, voting as a class, the holders of a majority of the
shares of such class or series shall constitute a quorum for the
transaction of such specified item of business.

SECTION 6. Inspectors. The person presiding at a
shareholders' meeting may, and on the request of any shareholder
entitled to vote thereat shall, appoint one or more inspectors.
Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according
to the best of his ability. The inspectors shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine questions arising in connection
with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all shareholders.
The inspectors shall make a report in writing of any matter
determined by them and execute a certificate of any fact found by
them.

- 2 -<PAGE>

SECTION 7. Adjournment of Meetings. Any meeting of
shareholders may be adjourned by a majority vote of the
shareholders present or represented by proxy despite the absence
of a quorum. When a meeting of shareholders is adjourned to
another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which
the meeting is adjourned are announced at the meeting at which
the adjournment is taken, and at the adjourned meeting at which a
quorum shall be present, any business may be transacted, and any
corporate action may be taken, which might have been transacted
or taken if the meeting had been held as originally called.

SECTION 8. Voting. Every shareholder of record shall be
entitled at every meeting of the shareholders to one vote for
every share of stock standing in his name on the record of
shareholders of the Corporation unless otherwise provided in the
Certificate of Incorporation and amendments thereto and except as
provided in Section 9 of this Article I. Every shareholder
entitled to vote at a meeting of shareholders may authorize
another person or persons to act for him by proxy. No proxy
shall be valid after the expiration of eleven months from the
date thereof unless otherwise provided in the proxy. A list of
shareholders as of the record date certified by the officer
responsible for its preparation or by a transfer agent shall be
available at every meeting of shareholders and shall be produced
upon the request of any shareholder, and all persons who appear
from such list to be shareholders entitled to vote thereat may
vote at such meeting.

SECTION 9. Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to
or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment
of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in
advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than sixty nor less
than ten days before the day of such meeting, nor more than sixty
days prior to any other action.

- 3 -<PAGE>

ARTICLE II.

BOARD OF DIRECTORS

SECTION 1. Number and Qualifications. The number of
directors constituting the entire Board shall be nine. The
number of directors may be increased, or decreased to not less
than three nor more than 25, by amendment of the by-laws adopted
by vote of a majority of the entire Board of Directors.

Each director shall be at least 18 years of age. No person
who has reached age 70 shall stand for election as a director.

SECTION 2. Election of Directors. Except as otherwise
required by law or by the Certificate of Incorporation as
amended, and except as hereinafter otherwise provided by Sections
5 and 6 of this Article II, directors shall be elected by a
plurality of the votes cast at the annual meeting of shareholders
by the holders of shares entitled to vote at the election and
shall hold office until the next annual meeting of shareholders.

SECTION 3. Term of Office. Each director shall, except as
hereinafter provided in Section 4 and in Section 6 of this
Article II, hold office until the expiration of the term for
which he is elected and until his successor has been elected and
qualified.

SECTION 4. Resignation and Removal. Any director may
resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Chairman of
the Board of Directors or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective unless so
specified therein. Any director may at any time, with or without
cause, be removed by vote of the shareholders at a special
meeting called for that purpose. When, however, pursuant to the
provisions of the Certificate of Incorporation as amended, the
holders of the shares of any class or series, voting as a class,
have the right to elect one or more directors, such director or
directors so elected may be removed only by the applicable vote
of the holders of the shares of that class or series, voting as a
class.

- 4 -<PAGE>

SECTION 5. Newly Created Directorships and Vacancies.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board for any
reason, except the removal of directors without cause, and except
as provided for in Section 6 of this Article II, may be filled by
vote of a majority of the directors then in office, although less
than a quorum exists. A vacancy occurring in the Board by reason
of the removal of a director without cause, may be filled only by
vote of the shareholders, subject to the provisions of said
Section 6. A director elected to fill a vacancy shall be elected
to hold office for the unexpired term of his predecessor, and
until his successor is elected and qualified.

SECTION 6. Election of Directors by Holders of Preferred
Stock. Anything in the by-laws to the contrary notwithstanding:
In case dividends on any series of the serial preferred stock of
the Corporation at the rate or rates prescribed for such series
shall not have been paid in full for periods aggregating one year
or more, than, and until full cumulative dividends thereon shall
have been paid, the holders of each such series shall have the
right, together with holders of all other serial preferred stock
in respect to which the same right shall be conferred, to elect a
majority of the members of the Board of Directors of the
corporation. Whenever the holders of any series of serial
preferred stock shall become so entitled, either separately or
together with the holders of other serial preferred stock as
aforesaid, to elect a majority of the members of the Board of
Directors, and upon the written request of the holders of record
of at least five percent of the total number of shares of serial
preferred stock then outstanding and entitled to such right of
election, addressed to the Secretary of the Corporation, a
special meeting of the holders of serial preferred stock entitled
to such right of election and the holders of Common Stock shall
be called for the purpose of electing directors. At such meeting
the holders of serial preferred stock and the holders of Common
Stock shall vote separately, and the holders of serial preferred
stock present in person or by proxy at such meeting shall be
entitled to elect, by a plurality of votes cast by them, a
majority of the members of a new Board of Directors of the
corporation, and the holders of Common Stock present in person or
by proxy shall be entitled to elect, by a plurality of votes cast
by them, the remainder of the new Board of Directors. The
persons so elected as directors shall thereupon constitute the

- 5 -<PAGE>
Board of Directors of the Corporation, and the terms of office of
the previous directors of the Corporation shall thereupon
terminate. The term "a majority of the members of Board of
Directors" as herein used shall mean one more than one half of
the total number of directors provided for by the by-laws,
regardless of the number then in office, and in case one half of
such number shall not be a whole number, such one half shall be
the next smaller whole number. In the event of any vacancy in
the Board of Directors among the directors elected by the holders
of serial preferred stock, such vacancy may be filled by the
other directors elected by them, and if not so filled may be
filled by the holders of serial preferred stock entitled to the
right of election as aforesaid at a special meeting of the
holders of said stock called for that purpose, and such a meeting
shall be called upon the written request of at least five percent
of the total number of shares of serial preferred stock then
outstanding and entitled to such right of election. If and when,
however, full cumulative dividends upon any series of the serial
preferred stock shall at any subsequent time be paid, then and
thereupon such power of the holders of such series of serial
preferred stock to vote in the election of a majority of the
members of the Board of Directors shall cease; subject, however,
to being again revived at any subsequent time if there shall
again be default in payment of dividends upon such series of
serial preferred stock for periods aggregating one year or more
as aforesaid. Whenever such power of the holders of all series
of serial preferred stock to vote shall cease, the proper officer
of the Corporation may and upon the written request of the
holders of record of five percent of the total number of shares
of Common Stock then outstanding shall call a special meeting of
the holders of Common Stock for the purpose of electing
directors. At any meeting so called, the holders of a majority
of the Common Stock then outstanding, present in person or by
proxy, shall be entitled to elect, by a plurality of votes, a new
Board of Directors of the Corporation. The persons so elected as
directors shall thereupon constitute the Board of Directors of
the Corporation, and the terms of office of the previous
directors of the Corporation shall thereupon terminate.

SECTION 7. Regular Meetings. The directors shall hold a
regular annual meeting for the election of officers as soon as
practicable after the adjournment of the Annual Meeting of the
shareholders, and, in addition, regular meetings of the directors

- 6 -<PAGE>
shall be held at such times as the Board of Directors may by
resolution determine. No notice of the Annual Meeting shall be
required if held immediately after the Annual Meeting of the
shareholders and if a quorum is present.

SECTION 8. Special Meetings. Special meetings of the
directors may be called by the Chairman of the Board of Directors
or by the President or by any two directors at any time and must
be called by the Secretary on the written request of any two
directors.

SECTION 9. Notice and Place of Meetings. Regular meetings
shall be held at such place or places either within or without
the State of New York as the Board of Directors may from time to
time determine. Special meetings shall be held at such place or
places either within or without the State of New York as may be
specified in the respective notices of the meetings. Except as
provided in Section 7 of this Article II, notice of any regular
or special meeting of the directors shall be mailed to each
director addressed to him at his residence or usual place of
business at least two days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegraph,
or be delivered personally or by telephone, not later than the
day before the day on which the meeting is to be held.

SECTION 10. Business Transacted at Meetings. Any business
may be transacted and any corporate action taken at any regular
or special meeting of the directors whether stated in the notice
of the meeting or not.

SECTION 11. Quorum and Manner of Acting. Any five of the
directors in office at the time of any meeting of the Board shall
constitute a quorum and, except as by law otherwise provided, the
act of a majority of the directors present at any such meeting,
at which a quorum is present, shall be the act of the Board of
Directors. In the event it is necessary to obtain a quorum, and
only in such event, at the discretion of the presiding Board
member, any one or more members of the Board may be present and
participate in a meeting of the Board by means of a conference
telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the
same time. Participation by such means shall constitute presence
in person at such meeting. In the absence of a quorum, the

- 7 -<PAGE>
directors present may adjourn the meeting from time to time until
a quorum be had. Notice of any adjourned meeting need not be
given other than by announcement at the meeting. The directors
shall act only as a Board and the individual directors shall have
no power as such.

SECTION 12. Compensation. The compensation of the
directors, other than employees of the Corporation, for services
as directors and as members of committees of the Board shall be
as fixed by the Board from time to time. Such directors shall
also be reimbursed for expenses incurred in attending meetings of
the Board and/or committees thereof.

SECTION 13. Indemnification of Officers and Directors. Any
person made, or threatened to be made a party to any action or
proceedings, whether civil or criminal, by reason of the fact
that he, his testator or intestate, is or was a director or
officer of the Board of Directors, or officer or employee of the
Corporation or serves or served any other corporation in any
capacity at the request of the Corporation, shall be indemnified
by the Corporation, and the Corporation may advance his related
expenses, to the full extent authorized or permitted by law. The
Corporation may enter into indemnification agreements with such
directors and officers, as the Chairman of the Board and/or
President shall authorize, to the full extent authorized or
permitted by law.

SECTION 14. Committees of the Board. The Board, by
resolution adopted by a majority of the entire Board, may
designate from among its members, in addition to the Executive
Committee provided for in Article III of these By-Laws,
committees of the Board, each consisting of three or more
directors, and each of which shall have the powers and duties
prescribed in the resolution designating such committees.
Anything in these By-Laws or in the resolution designating such
committees to the contrary notwithstanding, in the event it is
necessary to obtain a quorum, and only in such event, at the
discretion of the presiding committee member, any one or more
members of any committee of the Board of Directors may
participate in any meeting of such committee by means of a
conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at
the same time. Participation by such means shall constitute
presence in person at such meeting.
- 8 -<PAGE>

ARTICLE III.

EXECUTIVE COMMITTEE

SECTION 1. How Constituted and Powers. The Board of
Directors, by resolution adopted by a majority of the entire
Board, may designate two or more of the directors, together with
the Chairman of the Board of Directors, and the President, to
constitute an Executive Committee, to serve at the pleasure of
the Board, which Committee shall during the intervals between
meetings of the Board of Directors, unless limited by the
resolution appointing such Committee, have authority to exercise
all or any of the powers of the Board of Directors in the
management of the affairs of the Corporation, insofar as such
powers may lawfully be delegated. The Board may designate one or
more directors as alternate members of such Committee, who may
replace any absent member or members at any meeting of such
Committee.

SECTION 2. Removal and Resignation. Any member of the
Executive Committee, except a member ex officio, may be removed
at any time with or without cause, by resolution adopted by a
majority of the entire Board. Any member of the Executive
Committee may resign at any time. Such resignation shall be in
writing and shall take effect at the time specified therein, or,
if no time be specified, at the time of its receipt by the
Chairman of the Board of Directors or the President or Secretary.
The acceptance of a resignation shall not be necessary to make it
effective unless so specified therein. Any person ceasing to be
a director shall ipso facto cease to be a member of the Executive
Committee.

SECTION 3. Filling of Vacancies. Any vacancy among the
members of the Executive Committee occurring from any cause
whatsoever may be filled from among the directors by a majority
of the entire Board of Directors.

SECTION 4. Quorum. A majority of the members of the
Executive Committee shall constitute a quorum. The act of a
majority of the members of the Executive Committee present at any
meeting at which a quorum is present shall be the act of the
Executive Committee. The members of the Executive Committee

- 9 -<PAGE>
shall act only as a committee and the individual members thereof
shall have no powers as such.

SECTION 5. Record of Proceedings, etc. The Executive
Committee shall keep a record of its acts and proceedings and
shall report the same to the Board of Directors when and as
required.

SECTION 6. Organization, Meetings, etc. The Executive
Committee shall make such rules as it may deem expedient for the
regulation and carrying on of its meetings and proceedings.

SECTION 7. Compensation of Members. The members of the
Executive Committee shall be entitled to such compensation as may
be allowed them by resolution of the Board of Directors.

ARTICLE IV.

OFFICERS

SECTION 1. Election. The Board of Directors, at its
regular annual meeting, shall elect or appoint from their number
a Chairman of the Board of Directors and the Chairmen of
Committees of the Board and may elect or appoint a vice chairman
of the Board of Directors and vice chairmen of Committees of the
Board, which officers shall be officers of the Board; and it
shall elect or appoint a President, one or more Vice Presidents,
a Secretary, a Treasurer, and a Controller which officers shall
be officers of the Corporation. Each of said officers, subject
to the provisions of Sections 2 and 3 of this Article, shall hold
office, if elected, until the meeting of the Board following the
next Annual Meeting of shareholders and until his successor has
been elected and qualified, or, if appointed, for the term
specified in the resolution appointing him and until his
successor has been elected or appointed. Any two or more offices
may be held by the same person, except the offices of President
and Secretary. Should any of the officers of the Board or the
President cease to be a director, he shall ipso facto cease to be
such officer.

- 10 -<PAGE>

SECTION 2. Removal. Any officer may be removed summarily
with or without cause at any time by resolution of the Board of
Directors, or, except in the case of any officer elected by the
Board of Directors, by any committee or officer upon whom such
power of removal may be conferred by the Board of Directors,
without prejudice, however, to any rights which any such person
may have by contract.

SECTION 3. Resignation of Officers. Any officer may resign
at any time by giving written notice of such resignation to the
Board of Directors, its Chairman, the President or Secretary of
the Corporation. Such resignation shall take effect at the time
specified therein, or, if no time be specified, at the time of
its receipt by the Board of Directors or one of the above-named
officers

of the Corporation. The acceptance of a resignation shall not be
necessary to make it effective unless so specified therein.

SECTION 4. Filling of Vacancies. A vacancy in any office,
from whatever cause arising, shall be filled for the unexpired
portion of the term in the manner provided in these by-laws for
the regular election or appointment of such officer.

SECTION 5. Compensation. The compensation of the officers
shall be fixed by the Board of Directors or by any committee or
superior officer upon whom power in that regard may be conferred
by the Board of Directors.

SECTION 6. Chairman of the Board of Directors. The
Chairman of the Board of Directors shall, when presented, preside
at all meetings of the shareholders and the Board of Directors.
He shall be Chairman of the Executive Committee. He shall be
responsible for direction of the policy of the Board of Directors
and shall have the power and perform the duties necessary to
implement such responsibility.

SECTION 7. Vice Chairman of the Board of Directors. In the
absence of the Chairman of the Board of Directors, the Vice
Chairman shall, when present, preside at all meetings of the
shareholders and the Board of Directors. He shall have such
powers and perform such duties as the Chairman of the Board of
Directors shall delegate to him.

- 11 -<PAGE>

SECTION 8. President and Chief Executive Officer. The
President and Chief Executive Officer shall, subject to the
authority of the Chairman of the Board of Directors, have the
power and perform the duties usually appertaining to the
president and chief executive officer of a corporation, and such
power and duties as the Chairman of the Board of Directors shall
assign to him. He shall be a member of the Board of Directors
and of the Executive Committee.

SECTION 9. The Vice Presidents. The Vice Presidents shall
have such duties as may from time to time be assigned to them by
the Board of Directors or the President, or by the Chairman of
the Board in the President's absence. When performing the duties
of the President, they shall have all the powers of, and be
subject to all the restrictions upon, the President.

SECTION 10. The Treasurer. The Treasurer shall:

(a) Except as otherwise ordered by the Board, have charge
and custody of, and be responsible for all funds, securities,
receipts and disbursements of the Corporation and shall deposit,
or cause to be deposited, all money and other valuable effects in
its name in such banks, trust companies or other depositaries as
shall be selected in accordance with these by-laws;

(b) Receive and give receipts for payments made to the
Corporation and take and preserve proper receipts for all monies
disbursed by it;

(c) In general, perform such duties as are incident to the
office of Treasurer, or as may be from time to time assigned to
him by the Board of Directors, the Chairman of the Board or the
President, or as may be prescribed by law or by these by-laws.

The Treasurer shall give to the Corporation a bond if, and
in such sum as, required by the Board of Directors, conditioned
for the faithful performance of the duties of his office and the
restoration to the Corporation at the expiration of his term of
office, or in case of his death, resignation or removal from
office, of all books, papers, vouchers, money or other property
of whatever kind, in his possession belonging to the Corporation.

- 12 -
<PAGE>
SECTION 11. Controller. The Controller shall:

(a) Keep at the office of the Corporation correct books of
account of all its business and transactions, subject to the
supervision and control of the President and Treasurer;

(b) Exhibit at all reasonable times his books of accounts
and records to any of the directors upon application during
business hours at the office of the Corporation where such books
and records are kept;

(c) Render a full statement of the financial condition of
the Corporation whenever requested so to do by the Board of
Directors, the Chairman of the Board or the President; and

(d) In general, perform such duties as may be from time to
time assigned to him by the Board of Directors, the Chairman of
the Board or the President.

SECTION 12. The Secretary. The Secretary shall:

(a) Keep the minutes of the meetings of the shareholders,
Board of Directors and Executive Committee in books provided for
the purpose;

(b) See that all notices are duly given in accordance with
the provisions of these by-laws or as required by law;

(c) Be custodian of the seal of the Corporation and see that
it or a facsimile thereof is affixed to all stock certificates
prior to their issue, and that it is affixed to all documents the
execution of which under the seal of the Corporation is duly
authorized or which require that the seal be affixed thereto;

(d) Have charge of the stock certificate books of the
Corporation and keep, or cause to be kept, at the office of the
Corporation or at the office of its transfer agent or registrar,
a record of shareholders of the Corporation, containing the names
and addresses of all shareholders, the number and class of shares
held by each and the dates when they respectively became the
owners of record thereof; and

- 13 -<PAGE>
(e) In general, perform such duties as are incident to the
office of Secretary, or as may be from time to time assigned to
him by the Board of Directors, the Chairman of the Board or the
President, or as are prescribed by law or by these by-laws.

SECTION 13. Other Officers. Other officers, including one
or more additional Vice Presidents, may from time to time be
appointed by the Board of Directors or by any officer or
committee upon whom a power of appointment may be conferred by
the Board of Directors, which other officers shall have such
powers and perform such duties as may be assigned to them by the
Board of Directors, the Chairman of the Board or the President
and shall hold office for such terms as may be designated by the
Board of Directors or the officer or committee appointing them.

ARTICLE V.

CONTRACTS, LOANS, BANK ACCOUNTS, ETC.

SECTION 1. Contracts, etc., How Executed. The Board of
Directors, except as in these by-laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of
and on behalf of the Corporation, and such authority may be
general or confined to specific instances, and, unless so
authorized by the Board of Directors, no officer or agent or
employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its
credits or to render it liable pecuniarily for any purpose or to
any amount.

SECTION 2. Loans. No loans shall be contracted on behalf
of the Corporation and no negotiable paper shall be issued in its
name, unless authorized by the vote of the Board of Directors.
When so authorized, any officer or agent of the Corporation may
effect loans and advances for the Corporation from any bank,
trust company or other institution, or from any firm, corporation
or individual and for such loans and advances may make, execute
and deliver promissory notes, bonds or other evidences of
indebtedness of the corporation. When so authorized any officer
or agent of the Corporation, as security for the payment of any
and all loans, advances, indebtedness and liabilities of the

- 14 -<PAGE>
Corporation, may pledge, hypothecate or transfer any and all
stocks, securities and other personal property at any time held
by the Corporation, and to that end endorse, assign and deliver
the same. Such authority may be general or confined to specific
instances. The Board of Directors may authorize any mortgage or
pledge of, or the creation of a security interest in, all or any
part of the corporate property, or any interest therein, wherever
situated.

SECTION 3. Checks, Drafts, etc. All checks, drafts or
other orders for the payment of money, notes or other evidence of
indebtedness issued in the name of the Corporation shall be
signed by the Treasurer or such other officer
or officers, agent or agents of the Corporation and in such
manner as shall from time to time be determined by resolution of
the Board of Directors.

SECTION 4. Deposits. All funds of the Corporation shall be
deposited from time to time to its credit in such banks, trust
companies or other depositaries as the Board of Directors may
select, or as may be selected by an officer or officers, agent or
agents of the Corporation to whom such power, from time to time,
may be delegated by the Board of Directors and, for the purpose
of such deposit, checks, drafts and other orders for the payment
of money which are payable to the order of the Corporation may be
endorsed, assigned and delivered by the President or a Vice
President, or the Treasurer or the Secretary, or by any officer,
agent or employee of the Corporation to whom any of said
officers, or the Board of Directors, by resolution, shall have
delegated such power.

SECTION 5. General and Special Bank Accounts. The Board of
Directors may from time to time authorize the opening and keeping
of general and special bank accounts with such banks, trust
companies or other depositaries as the Board may select and may
make such special rules and regulations with respect thereto, as
it may deem expedient.

- 15 -<PAGE>

ARTICLE VI.

CAPITAL STOCK

SECTION 1. Issue of Certificates of Stock. Certificates
for shares of the capital stock of the Corporation shall be in
such form as shall be approved by the Board of Directors. They
shall be numbered, as nearly as may be, in the order of their
issue and shall be signed by the Chairman of the Board of
Directors or by the President or a Vice President, and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles if the certificate is countersigned
by a transfer agent or registered by a registrar other than the
Corporation itself or its employee.

SECTION 2. Transfer of Stock. Shares of the capital stock
of the Corporation shall be transferable by the holder thereof in
person or by duly authorized attorney upon surrender of the
certificate or certificates for such shares properly endorsed.
Every certificate of stock exchanged or returned to the
Corporation shall be appropriately cancelled. A person in whose
name shares of stock stand on the books of the Corporation shall
be deemed the owner thereof as regards the Corporation. The
Board of Directors may make such other and further rules and
regulations as they may deem necessary or proper concerning the
issue, transfer and registration of stock certificates.

SECTION 3. Lost, Destroyed and Mutilated Certificates. The
holder of any stock of the Corporation shall immediately notify
the corporation of any loss, destruction or mutilation of the
certificates therefor. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore
issued by it alleged to have been lost or destroyed, and the
Board of Directors may, in its discretion, require the owner of
the lost or destroyed certificate or his legal representatives to
give the Corporation a bond in such sum and with such surety or
sureties, as they may require to indemnify the Corporation, and
any registrar or transfer agent of its stock, against any claim
that may be made against it by reason of the issue of such new
certificate and against all other liability in the premises.
- 16 -<PAGE>
ARTICLE VII.

DIVIDENDS, SURPLUS, ETC.

SECTION 1. General Discretion of Directors. The Board of
Directors shall have the power from time to time to fix and
determine and to vary the amount of working capital of the
Corporation, to determine whether any and, if any, what dividends
shall be declared and paid to the shareholders, to fix the date
or dates for the payment of dividends, and to fix a time, not
exceeding 50 days preceding the date fixed for the payment of any
dividend, as a date for the determination of shareholders
entitled to receive payment of such dividend. When any dividend
is paid or any other distribution is made, in whole or in part,
from sources other than earned surplus, it shall be accompanied
by a written notice (1) disclosing the amounts by which such
dividend or distribution affects stated capital, surplus and
earned surplus, or (2) if such amounts are not determinable at
the time of such notice, disclosing the approximate effect of
such dividend or distribution as aforesaid and stating that such
amounts are not yet determinable.

ARTICLE VIII.

MISCELLANEOUS PROVISIONS

SECTION 1. Fiscal Year. The fiscal year of the Corporation
shall be the calendar year.

SECTION 2. Waiver of Notice. Notice of meeting need not be
given to any shareholder who submits a signed waiver of notice,
in person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by
proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of
notice by him. Notice of a meeting need not be given to any
director who submits a signed waiver of notice whether before or
after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to him.
Whenever the Corporation or the Board of Directors or any
committee thereof is authorized to take any action after notice

- 17 -<PAGE>
to any person or persons or after the lapse of a prescribed
period of time, such action may be taken without notice and
without the lapse of such period of time, if at any time before
or after such action is completed the person or persons entitled
to such notice or entitled to participate in the action to be
taken or, in the case of a shareholder, by his attorney-in-fact,
submit a signed waiver of notice of such requirements.

SECTION 3. Notices. Whenever by the by-laws any written
notice is required to be given to any shareholder, director or
officer, the same may be given, unless otherwise required by law
and except as hereinbefore otherwise expressly provided, by
delivering it personally to him or by mailing or telegraphing it
to him at his last known post office address. Where a notice is
mailed or telegraphed, it shall be deemed to have been given at
the time it is mailed or telegraphed.

SECTION 4. Examination of Books. The Board of Directors
shall, subject to the laws of the State of New York have power to
determine from time to time, whether, to what extent, and under
what conditions and regulations the accounts and books of the
Corporation or any of them shall be open to the inspection of the
shareholders, and no shareholder shall have any right to inspect
any account book or document of the Corporation except as
conferred by the laws of the State of New York unless and until
authorized so to do by resolution of the Board of Directors or
shareholders of the Corporation.

SECTION 5. Gender. Words used in these by-laws importing
the male gender shall be construed to include the female gender,
wherever appropriate.

ARTICLE IX.

AMENDMENTS

SECTION 1. Amendment by Directors. The Board of Directors
shall have the power without the assent or vote of the
shareholders to adopt by-laws, and except as hereinafter provided
in Section 2 of this Article, and subject to such limitations as

- 18 -<PAGE>
may be imposed by law, to rescind, alter, amend or repeal by a
vote of a majority of the whole Board any of the by-laws, whether
adopted by the Board or by the shareholders.

SECTION 2. Amendment by Shareholders. The shareholders
shall have power to rescind, alter, amend or repeal any by-laws
and to adopt by-laws which, if so expressed, may not be
rescinded, altered, amended or repealed by the Board of
Directors.

- 19 -<PAGE>
I, __________________, Secretary of Central Hudson Gas &
Electric Corporation, do hereby certify that the foregoing is a
full, true and correct copy of the by-laws of said Corporation as
in effect at the date hereof.

IN WITNESS WHEREOF, I have hereunto set my hand as Secretary
of said Corporation and hereunto affixed its corporate seal this
day of _______, 199_.

(SGD.) ELLEN AHEARN
Secretary

4/2/96

I, Ellen Ahearn, Secretary of Central Hudson Gas & Electric
Corporation, do hereby certify that the foregoing is a full, true
and correct copy of the by-laws of said Corporation as in effect
at the date hereof.

IN WITNESS WHEREOF, I have hereunto set my hand as Secretary
of said Corporation and hereunto affixed its corporate seal this
24th day of March, 1998.

(SGD.) ELLEN AHEARN
Secretary

4/2/96

<PAGE>

B Y - L A W S

CENTRAL HUDSON GAS & ELECTRIC CORPORATION

<PAGE>
TABLE OF CONTENTS

BY-LAWS OF
CENTRAL HUDSON GAS & ELECTRIC CORPORATION

Page

ARTICLE I. MEETING OF SHAREHOLDERS 1
Section 1. Place of Meeting 1
Section 2. Annual Meeting 1
Section 3. Special Meeting 1
Section 4. Notice of Meetings 1
Section 5. Quorum 2
Section 6. Inspectors 2
Section 7. Adjournment of Meetings 2
Section 8. Voting 2
Section 9. Record Date 3

ARTICLE II. BOARD OF DIRECTORS 3

Section 1. Number and Qualifications 3
Section 2. Election of Directors 3
Section 3. Term of Office 3
Section 4. Resignation and Removal 3
Section 5. Newly Created Directorships
and Vacancies 4
Section 6. Election of Directors by Holders
of Preferred Stock 4
Section 7. Regular Meetings 5
Section 8. Special Meetings 5
Section 9. Notice and Place of Meetings 5
Section 10. Business Transacted at Meetings 6
Section 11. Quorum and Manner of Acting 6
Section 12. Compensation 6
Section 13. Indemnification of Officers
and Directors 6
Section 14. Committees of the Board 6

ARTICLE III. EXECUTIVE COMMITTEE 7

Section 1. How Constituted and Powers 7
Section 2. Removal and Resignation 7
Section 3. Filling of Vacancies 7

PAGE

Section 4. Quorum 7
Section 5. Record of Proceedings, etc. 8
Section 6. Organization, Meetings, etc. 8
Section 7. Compensation of Members 8

ARTICLE IV. OFFICERS 8

Section 1. Election 8
Section 2. Removal 8
Section 3. Resignation of Officers 8
Section 4. Filling of Vacancies 9
Section 5. Compensation 9
Section 6. Chairman of the Board of Directors
and Chief Executive Officer 9
Section 7. Vice Chairman of the Board of Directors 9
Section 8. President and Chief Operating Officer 9
Section 9. The Vice Presidents 9
Section 10. The Treasurer 9
Section 11. Controller 10
Section 12. The Secretary 10
Section 13. Other Officers 11

ARTICLE V. CONTRACTS, LOANS, BANK ACCOUNTS, ETC. 11

Section 1. Contracts, etc., How Executed 11
Section 2. Loans 11
Section 3. Checks, Drafts, etc. 12
Section 4. Deposits 12
Section 5. General and Special Bank Accounts 12

ARTICLE VI. CAPITAL STOCK 12

Section 1. Issue of Certificates of Stock 12
Section 2. Transfer of Stock 12
Section 3. Lost, Destroyed and Mutilated
Certificates 13

ARTICLE VII. DIVIDENDS, SURPLUS, ETC. 13

Section 1. General Discretion of Directors 13

ARTICLE VIII. MISCELLANEOUS PROVISIONS 13

PAGE

Section 1. Fiscal Year 13
Section 2. Waiver of Notice 14
Section 3. Notices 14
Section 4. Examination of Books 14
Section 5. Gender 14

ARTICLE IX. AMENDMENTS 14

Section 1. Amendment by Directors 14
Section 2. Amendment by Shareholders 15

</PAGE>