CINCINNATI GAS & ELECTRIC CO, 10-K, 1994-03-17

CINCINNATI GAS & ELECTRIC CO
10-K, 1994-03-17
ELECTRIC & OTHER SERVICES COMBINED

Previous: CHRIS CRAFT INDUSTRIES INC, SC 13G/A, 1994-03-17

Next: CITIZENS UTILITIES CO, S-3/A, 1994-03-17

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the fiscal year ended December 31, 1993

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

Commission file number 1-1232

THE CINCINNATI GAS & ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

OHIO 31-0240030
(State of incorporation) (I.R.S. Employer Identification No.)

139 EAST FOURTH STREET, CINCINNATI, OHIO 45202
(Address of principal executive offices) (Zip Code)

513-381-2000
(Registrant's telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:

Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Cumulative Preferred Stock, par )
value $100 per share )
4 % series )
4-3/4% series ) Cincinnati Stock Exchange-
7.44 % series ) New York Stock Exchange
9.28 % series )
9.15 % series )
7-7/8% series )
7-3/8% series )

Common Stock, par value $8.50 per Cincinnati Stock Exchange-
share New York Stock Exchange-
Chicago Stock Exchange-
Pacific Stock Exchange

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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates was
approximately $2,165 million as of February 28, 1994.

88,458,656 shares of Common Stock ($8.50 Par Value) were outstanding as of
February 28, 1994.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for the Annual Meeting
of Shareholders to be held on May 18, 1994 are incorporated by reference in Part
III of this Report.

<PAGE>
TABLE OF CONTENTS

Page
Number
------
Part I

Item 1. Business............................................. 1
General............................................ 1
Merger Agreement................................... 1
General Problems of the Industry................... 4
Construction Program and Capital Requirements...... 4
Electric Operations and Fuel Supply................ 5
Gas Operations and Gas Supply...................... 7
Regulation......................................... 7
Rate Matters....................................... 8
Environmental Matters.............................. 11
Employee Relations................................. 16
Executive Officers of the Registrant............... 16
Operating Statistics............................... 18
Item 2. Properties........................................... 20
Item 3. Legal Proceedings.................................... 22
Item 4. Submission of Matters to a Vote of Security Holders.. 23

Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.................... 24
Item 6. Selected Financial Data.............................. 25
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 25
Item 8. Financial Statements and Supplementary Data.......... 36
Report of Independent Public Accountants............. 66
Item 9. ..................................................... 67

Part III
Items 10., 11., 12. and 13...................................... 67

Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K............................ 67
Signatures...................................................... 81

<PAGE>
PART I

Item 1. Business--Registrant (CG&E and Subsidiaries)
- ------- --------------------------------------------

General
- -------

CG&E and its subsidiary companies, The Union Light, Heat and Power
Company (Union Light), Miami Power Corporation, The West Harrison Gas and
Electric Company, and Lawrenceburg Gas Company, operate in contiguous
territories. Tri-State Improvement Company is a wholly-owned real estate
development company. CGE Corp, a wholly-owned non-regulated subsidiary of
CG&E formed in 1994, serves as the parent company of two non-utility
subsidiaries, Enertech Associates International Inc., which provides energy
related services, and CG&E Resource Marketing, Inc., which provides gas
marketing services. All of the companies are managed by substantially the
same officers.

CG&E and its subsidiaries are primarily engaged in providing electric and
gas service in the southwestern portion of Ohio and adjacent areas in Kentucky
and Indiana. The area served with electricity or gas, or both, covers
approximately 3,000 square miles with an estimated population of 1.8 million
and includes the cities of Cincinnati and Middletown in Ohio, Covington and
Newport in Kentucky, and Lawrenceburg in Indiana. The area is, for the most
part, heavily populated and highly industrialized. The industrial activities
are diversified and include the manufacturing or processing of iron and steel,
machinery and machine tools, non-ferrous metals, jet engines, transportation
equipment, fabricated metal products, industrial chemicals, soaps and
detergents, food and beverage products, paper and printing, electrical
machinery, rubber and plastic products, and petroleum refining and related
products.

Merger Agreement
- ----------------

In December 1992, CG&E, PSI Resources, Inc. (PSI) and PSI Energy, Inc.,
PSI's principal subsidiary, an Indiana electric utility (PSI Energy), entered
into an agreement which, as subsequently amended (the Merger Agreement)
provides for the merger of PSI into a newly formed corporation named CINergy
Corp. (CINergy) and the merger of a newly formed subsidiary of CINergy into
CG&E. For 1993, PSI had operating revenues of $1.1 billion and earnings on
common shares of $96.4 million. As a result of the merger, holders of CG&E
Common Stock and PSI Common Stock will become the holders of CINergy Common
Stock. CINergy will become a holding company required to be registered under
the Public Utility Holding Company Act of 1935 (PUHCA) with two operating
subsidiaries, CG&E and PSI Energy. Union Light will remain a subsidiary of
CG&E. Under the Merger Agreement, each share of CG&E Common Stock will be
converted into the right to receive one share of CINergy Common Stock. Each
share of PSI Common Stock will be converted into the right to receive that
number of shares of CINergy Common Stock obtained by dividing $30.69 by the
<PAGE>
average closing price of CG&E Common Stock for the 15 consecutive trading days
preceding the fifth trading day prior to the merger; provided that, if the
actual quotient obtained thereby is less than .909, the quotient shall be
.909, and if the actual quotient obtained thereby is more than 1.023, the
quotient shall be 1.023. At December 31, 1993, CG&E and PSI had 88.1 million
and 57.0 million common shares outstanding, respectively.

The merger will be accounted for as a "pooling of interests", and it is
anticipated that the transaction will be completed in the third quarter of
1994. The merger is subject to approval by the Securities and Exchange
Commission (SEC) and the Federal Energy Regulatory Commission (FERC).
Shareholders of both companies approved the merger in November 1993.

FERC issued conditional approval of the CINergy merger in August 1993,
but several intervenors, including The Public Utilities Commission of Ohio
(PUCO) and the Kentucky Public Service Commission (KPSC), filed for rehearing
of that order. On January 12, 1994, FERC withdrew its conditional approval of
the merger and ordered the setting of FERC-sponsored settlement procedures to
be held.

On March 4, 1994, CG&E reached a settlement agreement with the PUCO and
the Ohio Office of Consumers' Counsel (OCC) on merger issues identified by
FERC. On March 2, PSI Energy and Indiana's consumer representatives had
reached a similar agreement. Both settlement agreements have been filed with
FERC. These documents address, among other things, the coordination of state
and federal regulation and the commitment that neither CG&E nor PSI electric
base rates, nor CG&E's gas base rates, will rise because of the merger, except
to reflect any effects that may result from the divestiture of CG&E's gas
operations if ordered by the SEC in accordance with the requirements of PUHCA
discussed below.

CG&E also filed with FERC a unilateral offer of settlement addressing all
issues raised in the KPSC's application for rehearing with FERC. Although it
is the belief of CG&E and PSI that no state utility commissions have
jurisdiction over approval of the proposed merger, an application has been
filed with the KPSC to comply with the Staff of the KPSC's position that the
KPSC's authorization is required for the indirect acquisition of control of
CG&E's Kentucky subsidiary, The Union Light, Heat and Power Company, by
CINergy. As part of the settlement offer, Union Light will agree not to
increase gas base rates as a result of the merger except to reflect any
effects that may result from the divestiture of Union Light's gas operations
discussed below.

Also included in the filings with FERC were settlement agreements with
the city of Hamilton, Ohio, and the Wabash Valley Power Association in
Indiana. These agreements resolve issues related to the transmission of power
in Ohio and Indiana.

If the settlement agreements filed with FERC are not acceptable, FERC
could set issues for hearing. If a hearing is held by FERC, consummation of
the merger would likely be extended beyond the third quarter of 1994.
<PAGE>
CG&E and PSI also submitted to FERC the operating agreement among CINergy
Services, Inc., a subsidiary of CINergy, and CG&E and PSI Energy that provides
for the coordinated planning and operation of the electric generation and
transmission and other facilities of CG&E and PSI as an integrated utility
system. It also establishes a framework for the equitable sharing of the
benefits and costs of such coordinated operations between CG&E and PSI. The
parties to the Ohio and Indiana FERC settlements have agreed to support or not
oppose the operating agreement, and the settlements are conditioned upon FERC
approving the filed operating agreement without material changes.

CG&E's filing with FERC also references a separate agreement among CG&E,
the Staff of the PUCO, the OCC, and other parties settling issues raised by a
November 1993 ruling of the Supreme Court of Ohio on the phased-in electric
rate increase ordered by the PUCO in May 1992. The agreement includes a
moratorium on increases in base electric rates prior to January 1, 1999
(except under certain circumstances), authorization for CG&E to retain all
non-fuel merger savings until 1999, and a commitment by the PUCO that it will
support CG&E's efforts to retain CG&E's gas operations in its PUHCA filing
with the SEC (see below). Reference is made to "Rate Matters" for additional
information.

PUHCA imposes restrictions on the operations of registered holding
company systems. Among these are requirements that securities issuances,
sales and acquisitions of utility assets or of securities of utility companies
and acquisitions of interests in any other business be approved by the SEC.
PUHCA also limits the ability of registered holding companies to engage in
non-utility ventures and regulates holding company system service companies
and the rendering of services by holding company affiliates to the system s
utilities. The SEC has interpreted the PUHCA to preclude registered holding
companies, with some exceptions, from owning both electric and gas utility
systems. The SEC may require that CG&E divest its gas properties within a
reasonable time after the merger in order to approve the merger as it has done
in many cases involving the acquisition by a holding company of a combination
gas and electric company. In some cases, the SEC has allowed the retention of
the gas properties or deferred the question of divestiture for a substantial
period of time. In those cases in which divestiture has taken place, the SEC
usually has allowed companies sufficient time to accomplish the divestiture in
a manner that protects shareholder value. CG&E believes good arguments exist
to allow retention of the gas assets, and CG&E will request that it be allowed
to do so.

Discussions contained in the following pages of this Report, except where
noted, pertain to CG&E and its subsidiary companies, and projections or
estimates contained therein do not reflect the pending merger.

<PAGE>
General Problems of the Industry
- --------------------------------

CG&E is experiencing, or may experience in the future, certain problems
which are general to the utility industry, including increased costs of
complying with evolving environmental regulations, uncertainty regarding
adequate and timely rate treatment for operating expenses and costs incurred
in constructing facilities, uncertainty as to the deregulation of the utility
industry (primarily resulting from the Energy Policy Act of 1992 (Energy
Act)), uncertainties in the gas industry resulting from FERC Order 636,
difficulty in accurately forecasting demand for utility service, and the
effects of customer conservation practices on gas and electric usage.
Reference is made to "Electric Operations and Fuel Supply" and "Gas Operations
and Gas Supply" herein regarding the Energy Act and FERC Order 636,
respectively.

Construction Program and Capital Requirements
- ---------------------------------------------

A comparison of actual and estimated construction programs, including
allowance for funds used during construction, for CG&E and its subsidiaries
for the years 1993-1998 is set forth below. These estimates are under
continuing review and subject to adjustment.
<TABLE>
<CAPTION>
Actual Estimated
------ ---------------------------
1993 1994 1995 1994-1998
------ ---- ---- ---------
(Millions of Dollars)
<S> <C> <C> <C> <C>
Peaking units......................... $ 3 $ 6 $ 7 $ 183
Other electric generation and
transmission projects commonly owned
with neighboring utilities.......... 24 28 35 190
Other electric generation and
transmission facilities............. 34 34 30 284
Electric distribution facilities...... 80 70 70 379
Demand side management
and other electric facilities....... 3 8 10 55
Gas facilities........................ 37 41 39 230
Common and other facilities........... 21 5 4 22
---- ---- ---- ------
Total......................... $202 $192 $195 $1,343
==== ==== ==== ======
</TABLE>

During 1994-1998, long-term debt of CG&E and its subsidiaries will mature
or be subject to mandatory redemption as follows: $.3 million in 1994 and
$130 million in 1997. For information relating to the redemption of preferred
stock, see Note 4 to the Consolidated Financial Statements.

<PAGE>
CG&E, The Dayton Power and Light Company (DP&L), and Columbus Southern
Power Company (Columbus) have constructed electric generating units and
related transmission facilities on varying common ownership bases as set forth
in Note 10 to the Consolidated Financial Statements. Agreements among CG&E,
DP&L, and Columbus obligate each company, severally and not jointly, to pay
the cost of constructing and operating only its ownership share of commonly
owned electric facilities. Each of the three companies is paying its share of
the cost of operating commonly owned facilities.

Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Environmental Matters" herein for
information as to estimated capital expenditures relating to compliance with
the Clean Air Act Amendments of 1990.

Electric Operations and Fuel Supply
- -----------------------------------

During 1993, almost all of the electricity generated by units owned by
CG&E or in which it has an ownership interest was produced by coal-fired
generating units. Those units generate most of the electric requirements of
CG&E and its subsidiaries. A new all-time electric system peak load of
4,493,000 Kw was set on July 28, 1993. This was 8.0% greater than the
previous record of 4,161,000 Kw set in 1991. For the next five years
(1994-1998) peak demands are expected to increase at an average annual rate of
1.8%. CG&E's presently installed summer net generating capability is
5,120,750 Kw, consisting of 1,884,400 Kw of capacity which it solely owns, and
3,236,350 Kw of capacity which is its interest in units commonly owned with
Columbus and/or DP&L. In addition, CG&E, DP&L, and Columbus have a commonly
owned transmission network, and CG&E has interconnections with other utilities
for the purchase, sale, and interchange of electricity.

CG&E and East Kentucky Power Cooperative, Inc. have an agreement for the
interchange of electric power, subject to availability, during certain times
of the year through March 2000. Under the agreement, CG&E, a summer peaking
company, has the right to obtain up to 150 megawatts of electricity through
March 31, 1997 and up to 50 megawatts from April 1, 1997 through March 31,
2000 from East Kentucky Power during the months of June, July and August.
East Kentucky Power, a winter peaking company, has the right to receive up to
150 megawatts through March 31, 1997 and up to 50 megawatts from April 1, 1997
through March 31, 2000 from CG&E in December, January and February.

CG&E currently attempts to maintain its coal inventory at a supply of
approximately 50 days. On December 31, 1993, based on an estimated daily
burn, the coal reserve for the four coal-burning stations (W. C. Beckjord,
East Bend, Miami Fort and Zimmer Stations) operated by CG&E represented a
49-day supply. Based upon information received from DP&L and Columbus, the
reserve at Stuart and Killen Stations (operated by DP&L) represented a 52-day
supply, and the reserve at Conesville Station (operated by Columbus)
represented a 107-day supply.

<PAGE>
The coal requirements for generating units operated by CG&E (including
commonly owned units) were approximately 9.1 million tons in 1993, and are
estimated to be 9.8 million tons in 1994. The coal required for units
commonly owned with and operated by DP&L or Columbus is obtained by them.

A major portion of the coal required by CG&E is obtained through contract
purchases, with the remaining requirements purchased on the spot market. The
prices to be paid by CG&E under its contracts are subject to adjustment to
reflect suppliers' costs and certain other factors, and the contracts may be
terminated by virtue of certain provisions pertaining to coal quality. The
coal delivered under these contracts is primarily from mines located in Ohio,
Kentucky, West Virginia and Pennsylvania. CG&E intends to continue purchasing
a portion of its coal requirements on the spot market.

CG&E believes that it will be able to obtain sufficient coal to meet its
generating requirements. The average sulfur content of coal to be supplied to
CG&E under its present contracts will permit compliance with the current
Federal sulfur dioxide plan for Ohio (see "Environmental Matters--Air
Quality"). CG&E is unable to predict the extent to which coal availability
and price may ultimately be affected by future environmental requirements,
although CG&E expects the cost of coal to rise in the long run as the supply
of more accessible and higher-grade coal diminishes and as mining,
transportation, and other related costs continue an upward trend.

The Energy Policy Act of 1992 addresses several matters affecting
electric utilities including mandated open access to the electric transmission
system and greater encouragement of independent power production and
cogeneration. Although CG&E cannot predict the long-term consequences the
Energy Act will have, CG&E intends to aggressively pursue the opportunities
presented by the Act.

Administrative rules of the PUCO on integrated resource planning (IRP)
require electric utilities to show that least-cost options are pursued when
planning for future load growth. The primary emphasis of IRP is on procedures
for the evaluation of long-term electric forecasts and the integration of
demand and supply alternatives for meeting future electric needs. In
February 1994, the PUCO approved CG&E's 1992 Electric Long-Term Forecast
Report, which included its IRP.

In December 1992, the PUCO issued proposed rules to establish competitive
bidding for new power capacity additions and transmission access. The
proposed rules purport to require open access to the intrastate transmission
grid for winning bidders for that amount of capacity offered by the winning
bidders. While bidding is not mandatory, if a utility decides not to conduct
a competitive bidding to meet additional capacity needs, the utility must
demonstrate that, in developing its IRP, it considered all reasonable and
practical resource options. CG&E is awaiting the issuance of final rules to
determine the effect, if any, on its electric operations.

<PAGE>

Gas Operations and Gas Supply
- -----------------------------

In 1992, FERC issued Order 636 which restructures the relationships
between interstate gas pipeline companies and their customers for gas sales
and transportation services. Order 636 has changed the way CG&E and Union
Light purchase gas supplies and contract for transportation and storage
services. CG&E and Union Light have contracts that provide adequate supply
and storage capacity, including transportation services, to meet normal
demand, as well as unanticipated load swings. CG&E and Union Light expect to
purchase approximately 5% of their annual firm gas requirements on the spot
market.

Order 636 also allows pipelines to recover transition costs they incur in
complying with the Order from customers, including CG&E and Union Light. An
agreement between CG&E and residential and industrial customer groups
regarding recovery of these transition costs has been submitted to the PUCO
for approval. The KPSC has issued an order which allows Union Light to
recover these transition costs through its purchased gas adjustment clause.
Order 636 transition costs are not expected to significantly impact the
Company.

CG&E and Union Light each have an approved rate structure for the
transportation of gas which contributes in making gas prices competitive with
alternate fuels. CG&E and Union Light are transporting gas for more than 90
large-volume customers. Without these programs, CG&E and Union Light would
have lost many of these customers to alternate fuels. CG&E and Union Light
can either transport gas purchased by its customers for a transportation
charge, or buy spot market gas which is then sold to customers at a rate
competitive with alternate fuels.

Due to extremely cold weather, an all-time record for 24-hour gas sendout
was set on January 18, 1994. Gas customers consumed 1 million dekatherms, 8%
higher than the previous record which was set in 1972.

Regulation
- ----------

CG&E is a public utility under the laws of Ohio and is subject to
regulation as to intrastate electric and gas rates and other matters by the
PUCO. Rates within municipalities are subject to original regulation by the
municipalities. As to intrastate rates and other matters, Union Light is
regulated by the KPSC, and The West Harrison Gas and Electric Company and
Lawrenceburg Gas Company by the Indiana Utility Regulatory Commission. The
Ohio Power Siting Board, a division of the PUCO, has jurisdiction over the
location, construction, and initial operation of new electric generating
facilities, and certain electric and gas transmission lines, of the capacities
presently utilized by CG&E.

<PAGE>
CG&E, Union Light, and Miami Power Corporation are subject to rate
regulation under Part II of the Federal Power Act, principally as to CG&E's
wholesale of electricity to Union Light. Transportation of gas between CG&E
and Union Light is subject to regulation under the Natural Gas Act.

CG&E and its utility subsidiaries follow the Uniform Systems of Accounts
prescribed by FERC.

CG&E is exempt from the Public Utility Holding Company Act of 1935
(PUHCA) (except Section 9(a)(2)) by virtue of having filed an exemption
statement with the SEC. CINergy plans to file for registered holding company
status under PUHCA (see "Merger Agreement").

See also "Environmental Matters".

Rate Matters
- ------------

In April 1991, CG&E filed a request with The Public Utilities Commission
of Ohio (PUCO) to increase electric rates by approximately $200 million
annually. The primary reason for the request was recovery of costs associated
with Zimmer Station.

In a 1992 rate decision, the PUCO authorized CG&E to increase electric
revenues by $116.4 million to be phased in over a three-year period through
annual increases of $37.8 million, $38.8 million and $39.8 million in the
first, second and third years, respectively. The PUCO also disallowed from
rate base approximately $230 million, representing costs related to Zimmer
Station for nuclear fuel, nuclear wind-down activities during the conversion
to a coal-fired facility and a portion of the allowance for funds used during
construction (AFC) accrued by CG&E on Zimmer.

In August 1992, CG&E filed an appeal with the Supreme Court of Ohio to
overturn the rate order issued by the PUCO including the rate base
disallowances. In the appeal, CG&E stated that the PUCO did not have
authority to order a phased-in rate increase and erroneously determined the
amount of CG&E's required cash working capital.

On November 3, 1993, the Supreme Court of Ohio issued its decision on
CG&E's appeal. The Court ruled that the PUCO does not have the authority to
order a phase-in of amounts granted in a rate proceeding and remanded the case
to the PUCO to set rates that provide the gross annual revenues determined in
accordance with Ohio statutes. The Court also said the PUCO must provide a
mechanism by which CG&E may recover costs already deferred under the phase-in
plan through the date of the order on remand. At December 31, 1993, CG&E had
deferred $70 million of costs, net of taxes, related to the phase-in plan. On
the other issues, the Court ruled in favor of the PUCO, stating the PUCO
properly determined CG&E's cash working capital allowance and properly
excluded costs related to nuclear fuel, nuclear wind-down activities, and AFC
from rate base. As a result of the Supreme Court decision, CG&E wrote off
Zimmer Station costs of approximately $223 million, net of tax, in November
1993.

<PAGE>
In March 1994, CG&E negotiated a settlement agreement with the PUCO
Staff, the Ohio Office of Consumers' Counsel and other intervenors to address
the November 1993 ruling by the Supreme Court of Ohio. As part of the
agreement, CG&E has agreed not to seek early implementation of the third phase
of the 1992 rate increase, which means the $39.8 million increase will take
effect in May 1994 as originally scheduled. CG&E also agreed that it would
not seek accelerated recovery of deferrals related to the phase-in plan.
These deferrals will be recovered over the remaining seven year period
contemplated in the 1992 PUCO order. In addition, if the merger with PSI is
consummated, CG&E has agreed not to increase base electric rates prior to
January 1, 1999, except for increases in taxes, changes in federal or state
environmental laws, PUCO actions affecting electric utilities in general and
financial emergencies.

The settlement agreement also permits CG&E to retain all non-fuel savings
from the merger until 1999 and calls for merger-related transaction costs, or
any other accounting deferrals, to be amortized over a period ending by
January 1, 1999.

Other provisions of the agreement are: (i) if the merger is not
completed, CG&E can raise electric rates in May 1995 by $21 million to provide
accelerated recovery of phase-in deferrals; (ii) the PUCO and OCC will have
access to information about CINergy and affiliated companies; (iii) the PUCO
will support, before the Securities and Exchange Commission, CG&E's efforts to
retain its gas operations and other parties will not oppose efforts to retain
the gas properties; and (iv) contracts of CG&E with affiliated companies under
the merger that are to be filed with the Securities and Exchange Commission
must first be filed with the PUCO for its review and copies provided to the
OCC.

In September 1992, CG&E filed applications with the PUCO requesting
increases in annual electric and gas revenues of approximately $86 million and
$35 million, respectively. In August 1993, the PUCO approved a stipulation
providing for annual increases of approximately $41 million (5%) in electric
revenues and $19 million (6%) in gas revenues effective immediately. As part
of the stipulation, CG&E agreed, among other things, not to increase electric
or gas base rates prior to June 1, 1995. This would not include rate filings
made under certain circumstances, such as to address financial emergencies or
to reflect any savings associated with the prospective merger with PSI
Resources, Inc. (see Note 9 to the Consolidated Financial Statements).

In September 1992, Union Light filed a request with the KPSC to increase
annual gas revenues by approximately $9 million. Orders issued in mid-1993 by
the KPSC authorized Union Light to increase annual gas revenues by $4.2
million.

<PAGE>
Ohio's rate base law prescribes the net original cost method of
determining rate base. The law permits the PUCO, at its discretion, to allow
normalization of accounting for income taxes and to include in rate base
construction work in progress (CWIP) on projects at least 75% complete, in an
amount up to 10% of the rate base excluding CWIP. The amount of air pollution
control construction, together with any other allowance for CWIP, allowed in
rate base may not exceed 20% of the rate base excluding CWIP. Rate increases
requested under the law will be permitted to go into effect, subject to
refund, nine months after the date of filing. The law prohibits a utility
from filing an application for a rate increase if it has another pending.
Revenues collected after 18 months from the date of filing, without a final
order of the PUCO, will not be subject to refund. The law also provides for a
Consumers' Counsel to participate in rate cases before the PUCO on behalf of
residential consumers.

In accordance with rules established by the PUCO, CG&E is permitted to
make changes in the electric fuel adjustment charge every six months,
following hearings by the PUCO. The rules also require reconciliation of
over- or under-recovery of fuel costs and annual audits of the application of
the adjustment charge and fuel procurement practices. Rules pertaining to
purchased gas costs permit quarterly adjustments, reconciliation of over- or
under-recovery of gas costs, and require annual hearings and audits. In
conjunction with these rules, CG&E expenses the cost of fuel used to generate
electricity and purchased gas costs as recovered through revenue and defers
the portion of these costs recoverable or refundable in future periods.

Rules established by the KPSC pertaining to Union Light's electric fuel
adjustment clause provide for public hearings at six-month intervals to review
past calculations, reconciliation of over- or under-recovery of fuel costs,
and a public hearing every two years to review the application of the
adjustment charge and fuel procurement practices. In accordance with a
purchased gas adjustment clause approved by the KPSC, Union Light is permitted
to make quarterly adjustments in gas costs and reconciliation of over- or
under-recovery of gas costs. In conjunction with these rules, Union Light
expenses the costs of gas and electricity purchased as recovered through
revenue and defers the portion of these costs recoverable or refundable in
future periods.

<PAGE>
Environmental Matters
- ---------------------

GENERAL

CG&E and its subsidiaries are subject to regulation by various Federal,
state, and local authorities relative to air and water quality, solid and
hazardous waste disposal, and other environmental matters. During 1993,
CG&E's capital expenditures for pollution control facilities, including those
commonly owned with Columbus and/or DP&L, amounted to $26 million. During the
year 1994, CG&E expects to spend $21 million for pollution control facilities.
CG&E is expected to incur other substantial capital expenditures and operating
costs relating to efforts to comply with environmental statutes and
regulations as described below, but it is not able to estimate the
expenditures and costs which would be necessary to meet environmental
requirements imposed in the future by governmental authorities or to estimate
the effect of delays that may result from rigid application of existing
standards.

CG&E's inability to comply with potential environmental regulations and
more rigid enforcement policies with respect to existing standards and
regulations could cause substantial capital expenditures in addition to those
included in its construction program, and increase the cost per Kwh of
generation by reducing the amount of electricity available for delivery or by
necessitating increased fuel and/or operating and capital costs, and may cause
serious fuel supply problems for CG&E, or require it to cease operating a
portion of its generating facilities.

Pursuant to Federal law, the Director of the Ohio Environmental
Protection Agency (Ohio EPA) administers regulations prescribing air and water
quality standards, and regulations pertaining to solid waste, and is generally
empowered by Ohio environmental laws to issue construction and operating
permits and variances for facilities which may contribute to air pollution and
to issue similar permits for facilities which discharge pollutants into the
waters of the state as well as permits for the disposal of solid waste. The
Secretary of the Natural Resources and Environmental Protection Cabinet
(NREPC) exercises similar functions in Kentucky.

AIR QUALITY

Pursuant to the Federal Clean Air Act (Air Act), the U.S. Environmental
Protection Agency (U.S. EPA) promulgated national ambient air quality
standards for specified pollutants, including particulate matter, sulfur
dioxide, and nitrogen oxide. The Air Act places primary responsibility on the
states to develop implementation plans which include emission controls and
other methods to attain those standards. All implementation plans are subject
to approval by the U.S. EPA. The Ohio and Kentucky implementation plans are
fully enforceable by those states and, to the extent approved by the U.S. EPA,
are also enforceable by it.

<PAGE>
The U.S. EPA has promulgated various regulations under the Air Act.
Included are regulations dealing with significant deterioration of air
quality, imposition of more stringent control standards on new emission
sources, and construction of new sources in areas presently not meeting
ambient air quality standards. For facilities found to be in violation of an
applicable implementation plan, the Air Act provides for civil penalties of up
to $25,000 per day and criminal penalties. Noncompliance penalties are also
provided for and are generally based on the economic savings resulting from a
failure to comply with applicable emission limitations.

In 1990, the Air Act was amended by adding numerous requirements
including provisions pertaining to the nonattainment, hazardous air pollutant,
permitting, and enforcement programs. A new acid deposition ("acid rain")
program in the law governs emission of nitrogen oxides and establishes a cap
on sulfur dioxide emissions. The Air Act requires a 10 million ton per year
reduction nationwide in sulfur dioxide emissions by the year 2000, and
nationwide reductions in nitrogen oxide emissions of approximately two million
tons per year. The impact of these changes to the Air Act on CG&E will depend
upon regulations which remain to be promulgated by the U.S. EPA. However, as
a result of compliance, CG&E's operating and capital costs will increase.

AIR ACT COMPLIANCE. In June 1992, CG&E submitted its strategy for
complying with the acid rain provision of the Air Act to the PUCO, as part of
its Electric Long-Term Forecast Report (Electric LTFR). An Order approving
CG&E's Electric LTFR was issued by the PUCO in February 1994. In a separate
PUCO filing, CG&E requested approval of its plan for compliance with Phase I
of the Air Act. Approval of the compliance plan by the PUCO is needed so that
the costs of compliance can be recovered through rates. In February 1994, the
PUCO approved the compliance plan submitted in a stipulation and
recommendation. The PUCO emphasized that the approval did not limit their
authority to review CG&E's costs of compliance, and also indicated that it
intended to use the approved compliance plan as a baseline to measure the
effects of the proposed merger of CG&E and PSI.

CG&E's compliance strategy is a flexible program, which will allow
utilization of the emission allowance trading market as it develops and will
take full advantage of CG&E's existing sulfur dioxide removal equipment. To
comply with the new sulfur dioxide requirements, CG&E will increase the amount
of sulfur dioxide being removed by one of its existing scrubbers and will use
coal with a lower sulfur content at some of its generating stations. In
addition, CG&E will rely on demand side management and energy conservation
programs to reduce electric usage and demand. Reductions in nitrogen oxide
emissions will be achieved by installing low nitrogen oxide burners on certain
boilers. Emission monitors will be installed to continuously monitor sulfur
dioxide and nitrogen oxide emissions.

<PAGE>
CG&E presently estimates that capital expenditures needed to comply with
the Air Act will be between $125 million and $150 million through the year
2000. The construction program discussed in "Construction Program and Capital
Requirements" herein reflects expenditures of $73 million over the next five
years in order to comply with the Air Act. In addition, operating costs will
also increase. These estimates are under continuing review and subject to
adjustment based on such things as a change in regulatory requirements or a
change in compliance strategy.

SULFUR DIOXIDE STANDARDS. The U.S. EPA has approved portions of the Ohio
EPA sulfur dioxide plan applicable to CG&E. CG&E believes that the units
operated by it in Ohio are in compliance with applicable existing sulfur
dioxide regulations. CG&E also believes that East Bend Unit 2 is operating in
compliance with applicable existing Federal and Kentucky regulations.

In December 1988, the U.S. EPA notified the State of Ohio that the
portion of its state implementation plan (SIP) dealing with sulfur dioxide
emission limitations for Hamilton County (in southwestern Ohio) was deficient
and required the Ohio EPA to develop a new SIP with revised emission
limitations. The notice affects industrial and utility sources. The Ohio EPA
adopted a rule that required CG&E to construct a new smoke stack for two units
at CG&E's Miami Fort Generating Station, located in southwestern Hamilton
County.

In a separate action, the U.S. EPA, in January 1991, requested that
Hamilton and Butler Counties be redesignated nonattainment areas for sulfur
dioxide. The State of Ohio provided a response to the U.S. EPA stating that
Hamilton County should not be redesignated to nonattainment. The U.S. EPA has
not taken final action on the redesignation. This action by the U.S. EPA
could lead to the need for significant emission reductions at CG&E's Miami
Fort Generating Station and possibly at certain peaking facilities, in
addition to the new smoke stack mentioned above.

In August 1985, CG&E, as part of an industry group, filed a Petition for
Review in the U.S. Court of Appeals for the District of Columbia Circuit and,
in September 1985, filed a Petition for Reconsideration with the U.S. EPA,
regarding final regulations promulgated in June 1985 which relate to the
height of smokestacks at power plants. In January 1988, the Court of Appeals
issued its decision upholding certain provisions and remanding others to the
U.S. EPA for further rulemaking. CG&E believes that the Miami Fort Station
will not be affected by the regulations. CG&E has been informed by Columbus
that Conesville Unit 4 may be affected by the regulations. CG&E owns an
undivided 40% interest in Unit 4. CG&E has been informed by DP&L that the
Ohio EPA has determined that Killen Station will not be affected by the
regulations, but that the U.S. EPA has not made its determination. CG&E owns
an undivided 33% interest in Killen Station. CG&E, Columbus, and DP&L are not
able to state the ultimate impact of the regulations or of the Court of
Appeals' remand.

<PAGE>
STATE IMPLEMENTATION PLANS. Ohio has adopted its SIP applicable to the
units operated by CG&E in Ohio, portions of which have been approved by the
U.S. EPA. The Ohio implementation plan requires CG&E to obtain permits from
the Ohio EPA for operation of present generating facilities and for
construction and operation of new facilities.

Kentucky has adopted, and the U.S. EPA has approved, its SIP which
contains emission limitations and licensing requirements which are
substantially similar to U.S. EPA regulations.

As a result of the Air Act discussed above, prior to 1995, CG&E will need
to obtain an acid rain permit for those Phase I units operated by it which
will be affected by the acid rain provisions of the Air Act. This permit will
be issued by the U.S. EPA until Ohio and Kentucky are authorized by the U.S.
EPA to issue these permits. CG&E has complied with the application procedures
for the acid rain permits for the units. It has received some of the permits
and is awaiting action on the remaining applications.

CG&E has applied for or obtained all other state and federal
environmental permits for all generating units operated by it.

PARTICULATE MATTER STANDARDS. CG&E believes that existing generating
units operated by it in Ohio are in compliance with applicable Federal and
state standards for emission of particulate matter. East Bend Unit 2, located
in Kentucky, is in compliance with applicable Federal and state standards,
except for opacity standards, for which an application for a variance has been
filed and is still pending.

WATER QUALITY

Under the Water Act, effluent limitations requiring application of the
best available technology economically achievable are to be applied, and those
limitations require that no pollutants be discharged if the U.S. EPA finds
elimination of such discharges is technologically and economically achievable.
In 1987, the Water Act was amended to prohibit issuance of permits with less
stringent effluent limitations and to increase civil and criminal penalties
for violations. The Water Act provides for penalties of up to $25,000 per day
for each discharge violation. CG&E believes that it is in compliance with
applicable provisions of the Water Act.

<PAGE>
SOLID AND HAZARDOUS WASTE

The Resource Conservation and Recovery Act (RCRA) and the Hazardous and
Solid Waste Amendments of 1984 (Amendments), which substantially expand
Federal enforcement for violations of RCRA, provide for maximum corporate
fines of $1 million. The Amendments provide for a deferral of the
identification as a hazardous waste of high volume solid wastes of the type
generated at CG&E's electric generating stations, such as fly ash, bottom ash,
boiler slag, and flue gas emission control waste. In August 1993, the U.S.
EPA made the regulatory determination that these generating station products
should not be regulated under RCRA. Additional waste streams are under study
and a determination is expected by 1998. The Amendments also provide that the
states may adopt regulations governing the treatment, processing, and storage
of hazardous wastes which are more stringent than the Federal regulations.
RCRA Amendment provisions include a regulatory program for performance
standards for new underground storage tanks as well as standards covering leak
detection, leak prevention and corrective action for both new and existing
underground storage tanks.

The Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) expanded reporting and liability requirements covering the release of
hazardous substances into the environment. Some of these substances,
including polychlorinated biphenyls (PCBs), a substance regulated under the
Toxic Substances Control Act, are contained in certain equipment currently
used by CG&E and its subsidiaries. CG&E cannot predict the occurrence and
effect of a release of such substances.

CERCLA provides, among other things, for a trust fund, drawn from
industry and Federal appropriations, to finance clean up and containment
efforts of improperly managed hazardous waste sites. Under CERCLA, and other
laws, responsible parties may be strictly, and jointly and severally, liable
for money expended by the government to take necessary corrective action at
such sites.

In October 1986, the Superfund Amendments and Reauthorization Act of 1986
(SARA) was signed into law. SARA significantly amended CERCLA and established
programs dealing with emergency preparedness and community right-to-know,
leaking underground storage tanks, and other matters. SARA provides for a
significant increase in CERCLA funding, adopts strict cleanup standards and
schedules, places limitations on the timing and scope of court review of
government cleanup decisions, authorizes state and citizen participation in
cleanup plans, enforcement actions, and court proceedings, including provision
for citizens' suits against both private and public entities to enforce
CERCLA's requirements, expands liability provisions, and increases civil and
criminal penalties for violations of CERCLA.

In June 1991, CG&E was notified by the U.S. EPA that, in accordance with
CERCLA, the U.S. EPA alleges that CG&E is a Potentially Responsible Party
(PRP) liable for cleanup of the United Scrap Lead site in Troy, Ohio. CG&E
was one of approximately 200 companies so notified. CG&E believes it is not a
PRP and should not be responsible for cleanup of the site. Under CERCLA, CG&E
could be jointly and severally liable for costs incurred in cleaning the site,
estimated by the U.S. EPA to be $27 million.

<PAGE>
Employee Relations
- ------------------

CG&E and its subsidiaries presently have about 5,000 employees, of whom
about 3,300 belong to bargaining units. Approximately 1,600 employees are
represented by the International Brotherhood of Electrical Workers (IBEW), 500
by the United Steelworkers of America (USWA) and 1,200 by the Independent
Utilities Union (IUU).

The collective bargaining agreements with the IBEW and the USWA expire on
April 1, 1994 and May 15, 1994, respectively. The three year agreement with
the IUU, which expires in March 1995, has a wage reopener for the third year
of the contract. Negotiations with the IBEW and IUU are presently under way.

Executive Officers of the Registrant
- ------------------------------------
Term
Name Position Age Began
- ---- -------- --- -----

Jackson H. Randolph Chairman of the Board, 5/19/93
President and Chief Executive Officer 63 10/ 1/86
C. Robert Everman Senior Vice-President--Finance 57 2/ 1/87
Robert P. Wiwi Senior Vice-President--Customer and
Corporate Services 52 2/ 1/87
Donald R. Blum Secretary 62 4/26/78
Terry E. Bruck Vice-President--Electric Operations 48 4/21/88
Daniel R. Herche Controller 47 2/ 1/87
Donald I. Marshall Vice-President--Rates and
Economic Research 47 4/17/91
James J. Mayer Vice-President and 9/18/91
General Counsel 55 1/ 1/86
Stephen G. Salay Vice-President--Electric Production
and Fuel Supply 57 4/21/88
William L. Sheafer Treasurer 50 2/ 1/87
George H. Stinson Vice-President--Gas Operations 48 1/16/91
W. Denis Waymire Vice-President--Marketing and
Customer Relations 61 10/ 1/89

All of the executive officers of CG&E have been actively engaged in the
business of the Company for more than the past five years. Officers are
elected annually for a term of one year. The present terms end May 18, 1994.

<PAGE>
Under the Amended and Restated Agreement and Plan of Reorganization (the
Merger Agreement) by and among CG&E, PSI Resources, Inc., PSI Energy, Inc.,
CINergy Corp. and CINergy Sub, Inc., dated as of December 11, 1992, as amended
on July 2, 1993 and as of September 10, 1993, Jackson H. Randolph will be
entitled to serve as chief executive officer (CEO) of CINergy until
November 30, 1995 and Chairman of CINergy until November 30, 2000. James E.
Rogers, Jr., the current Chairman and CEO of PSI Resources, Inc. and Chairman,
CEO and President of PSI Energy, Inc., will be entitled to serve as Vice
Chairman of the Board, President and Chief Operating Officer of CINergy until
November 30, 1995, at which time he will be entitled to assume the additional
role of CEO. Reference is made to "Merger Agreement" herein for information
on the proposed merger.

<PAGE>
<TABLE>
<CAPTION>
OPERATING STATISTICS

The following tables are indicative of the general development of the business
conducted by CG&E and its subsidiaries during the periods indicated:

Year Ended December 31
-----------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
ELECTRIC DEPARTMENT

Sources of Electric Energy (million Kwh)
Generated (net send out)....................... 22,338 21,040 21,428
Purchased and interchanged -- net.............. 1,373 1,441 774
--------- --------- ---------
Available for deliveries............. 23,711 22,481 22,202
========= ========= =========

Fuel Cost per Kwh Generated (cents)............... 1.492 1.527 1.590
Fuel Cost per Million BTU (cents)................. 152.3 156.6 160.9
Fuel Cost per Ton Burned (dollars)................ 36.11 35.96 37.02

Sales (million Kwh)
Residential.................................... 7,149 6,583 7,110
Commercial..................................... 5,471 5,189 5,294
Industrial..................................... 6,067 5,926 5,539
Other retail................................... 1,672 1,551 1,587
Other electric utilities--non-affiliated....... 2,010 1,987 1,483
--------- --------- ---------
Total sales.......................... 22,369 21,236 21,013

Unaccounted For and Company Use.................. 1,342 1,245 1,189
--------- --------- ---------
Total distribution................... 23,711 22,481 22,202
========= ========= =========

Gross Revenues ($000 omitted)
Residential.................................... 502,399 436,416 456,378
Commercial..................................... 353,363 325,402 318,238
Industrial..................................... 277,021 263,212 245,177
Other retail................................... 92,498 84,577 82,597
Other electric utilities -- non-affiliated..... 46,208 40,076 35,128
--------- --------- ---------
Total................................ 1,271,489 1,149,683 1,137,518

Other departmental revenues.................... 10,956 9,773 9,877
--------- --------- ---------
Total revenues....................... 1,282,445 1,159,456 1,147,395
========= ========= =========
Customers at End of Period
Residential.................................... 621,111 621,685 612,875
Commercial..................................... 68,494 69,210 68,025
Industrial..................................... 3,108 3,194 3,185
Other retail................................... 4,388 4,472 4,361
Other electric utilities -- non-affiliated..... 13 13 15
--------- --------- ---------
Total customers...................... 697,114 698,574 688,461
========= ========= =========
Average Revenue per Kwh (cents)
Residential.................................... 7.03 6.63 6.42
Commercial..................................... 6.46 6.27 6.01
Industrial..................................... 4.57 4.44 4.43
<FN>

- ----------------
Note: See Note 12 to the Consolidated Financial Statements for additional financial
information by business segments.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
OPERATING STATISTICS-(Continued)

Year Ended December 31
-----------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
GAS DEPARTMENT

Sources of Gas (million cubic feet)
Natural gas purchased.......................... 79,393 75,851 74,618
Gas produced................................... 18 14 8
Transportation gas received.................... 29,115 25,611 20,916
------- ------- -------
Total available for deliveries....... 108,526 101,476 95,542
======= ======= =======
Average Cost per Mcf Purchased (cents)............ 353.7 300.9 284.1

Distribution of Gas (million cubic feet)
Gas sales
Residential.................................. 43,514 39,754 38,048
Commercial................................... 20,370 20,142 19,373
Industrial................................... 10,011 10,091 10,663
Other retail................................. 3,996 3,941 3,709
Other gas utilities.......................... 307 285 273
------- ------- -------
Total gas sales...................... 78,198 74,213 72,066

Gas transported ............................... 28,593 25,372 20,748
------- ------- -------
Total gas sales and gas
transported........................ 106,791 99,585 92,814

Unaccounted for and company use................ 1,735 1,891 2,728
------- ------- -------
Total distribution................... 108,526 101,476 95,542
======= ======= =======
Gross Revenues ($000 omitted)
Residential.................................... 269,684 220,140 205,790
Commercial..................................... 114,957 99,827 94,399
Industrial..................................... 47,403 42,091 41,445
Other retail................................... 20,219 17,024 15,588
Other gas utilities............................ 1,354 927 967
------- ------- -------
Total................................ 453,617 380,009 358,189

Other departmental revenues (including
gas transported)............................. 15,679 13,961 12,514
------- ------- -------
Total revenues....................... 469,296 393,970 370,703
======= ======= =======
Customers at End of Period
Residential.................................... 375,992 372,395 364,437
Commercial..................................... 40,471 40,303 39,829
Industrial..................................... 2,108 2,229 2,229
Other retail................................... 1,484 1,458 1,437
Other gas utilities............................ 1 1 1
------- ------- -------
Total customers...................... 420,056 416,386 407,933
======= ======= =======
Average Revenue per Mcf Sold (cents)
Residential.................................... 619.77 553.75 540.87
Commercial..................................... 564.34 495.63 487.29
Industrial..................................... 473.49 417.11 388.67
<FN>

- ----------------
Note: See Note 12 to the Consolidated Financial Statements for additional financial
information by business segments.
</TABLE>

<PAGE>
Item 2. Properties
- ------- ----------

CG&E wholly owns two of four steam electric generating units and six
combustion turbine units with a combined net capability of 395,800 Kw at Miami
Fort Station, located in Ohio. This station is on the Ohio River and is about
20 miles west of the center of Cincinnati. CG&E has an undivided interest in
the third and fourth units, commonly owned units, at this station with CG&E's
share of net capability being 320,000 Kw each.

CG&E wholly owns five of six steam electric generating units and four
combustion turbine units with a combined net capability of 890,400 Kw at the
Walter C. Beckjord Station, located in Ohio. This station is on the Ohio
River and is about 20 miles southeast of the center of Cincinnati. CG&E has an
undivided interest in the sixth unit, a commonly owned unit, at this station
with CG&E's share of net capability being 155,250 Kw.

CG&E wholly owns six combustion turbine electric generating units with a
combined net capability of 462,000 Kw at Woodsdale Generating Station, located
in Ohio. This station is in Butler County and is about 24 miles north of the
center of Cincinnati.

CG&E has undivided interests in four commonly owned steam electric
generating units at the J. M. Stuart Station, located in Ohio, with CG&E's
share of net capability being 912,600 Kw. This station is on the Ohio River
near Aberdeen, Ohio and is about 65 miles southeast of the center of
Cincinnati.

CG&E has an undivided interest in a commonly owned steam electric
generating unit at the Conesville Station, located in Ohio, with CG&E's share
of net capability being 312,000 Kw. This station is located on the Muskingum
River and is about 60 miles east of Columbus, Ohio.

CG&E has an undivided interest in a commonly owned steam electric
generating unit at the East Bend Station, located in Kentucky, with CG&E's
share of net capability being 414,000 Kw. This station is on the Ohio River
and is about 40 miles southwest of the center of Cincinnati.

CG&E has an undivided interest in a commonly owned steam electric
generating unit at the Killen Station, located in Ohio, with CG&E's share of
net capability being 198,000 Kw. This station is on the Ohio River and is
about 80 miles southeast of the center of Cincinnati.

CG&E has an undivided interest in a commonly owned steam electric
generating unit at the Wm. H. Zimmer Generating Station, located in Ohio, with
CG&E's share of net capability being 604,500 Kw. This station is located on
the Ohio River near Moscow, Ohio and is about 25 miles southeast of the center
of Cincinnati.

CG&E wholly owns a combustion turbine electric generating station, Dicks
Creek Station, with a net capability of 136,200 Kw. This station is located
in the City of Middletown, Ohio.

<PAGE>
CG&E's presently installed summer net generating capability is 5,120,750
Kw.

CG&E owns an overhead electric transmission system, an underground
electric transmission system and an electric distribution system in
Cincinnati, and other incorporated communities and adjacent rural territory
within all or parts of the Counties of Hamilton, Butler, Warren, Clermont,
Preble, Montgomery, Clinton, Highland, Adams, and Brown, in southwestern Ohio.
In addition, CG&E, Columbus, and DP&L have a commonly owned transmission
network. CG&E also owns electric transmission lines within the Counties of
Boone, Kenton, Pendleton, and Campbell, in northern Kentucky.

CG&E owns a 7,000,000 gallon capacity underground cavern located in the
Village of Monroe, Ohio, for the storage of liquid propane and a related
vaporization and mixing plant, located in Middletown, Ohio, and an 8,000,000
gallon capacity underground cavern for the storage of liquid propane and a
related vaporization and mixing plant located in the City of Cincinnati, which
are used primarily to augment CG&E's supply of natural gas during periods of
peak demand and emergencies. CG&E has gas distribution systems in Cincinnati,
Middletown, and other incorporated communities and in contiguous rural
territory within all or parts of the Counties of Hamilton, Butler, Warren,
Clermont, Clinton, Montgomery, Brown, and Adams, in southwestern Ohio.

Union Light, a subsidiary, owns an electric transmission system and an
electric distribution system in Covington, Newport, and other smaller
communities and in adjacent rural territory within all or parts of the
Counties of Kenton, Campbell, Boone, Grant, and Pendleton, in Kentucky. Union
Light owns a gas distribution system in Covington, Newport, and other smaller
communities and in adjacent rural territory within all or parts of the
Counties of Kenton, Campbell, Boone, Grant, Gallatin, and Pendleton, in
Kentucky. Union Light owns a 7,000,000 gallon capacity underground cavern for
the storage of liquid propane and a related vaporization and mixing plant and
feeder lines, located in Kenton County, Kentucky near the Kentucky-Ohio line
and adjacent to one of the gas lines that transports natural gas to CG&E. The
cavern and vaporization and mixing plant are used primarily to augment CG&E's
and Union Light's supply of natural gas during periods of peak demand and
emergencies.

Lawrenceburg Gas Company, a subsidiary, owns a gas distribution system in
and around Lawrenceburg, Greendale, Brookville, Rising Sun, Cedar Grove, and
West Harrison, Indiana, which are adjacent to the western part of CG&E's
service area. Lawrenceburg Gas is connected with and sells gas at wholesale
to the City of Aurora, Indiana, and also is connected within Indiana with the
lines of Texas Gas Transmission Corporation and Texas Eastern Transmission
Corporation.

The West Harrison Gas and Electric Company, a subsidiary, renders
electric service in a small community in Indiana adjacent to CG&E's service
area. Miami Power Corporation, a subsidiary, owns 40 miles of 138,000 volt
transmission line connecting the lines of Louisville Gas and Electric Company
with those of CG&E. Tri-State Improvement Company is a wholly-owned real
estate development company.

<PAGE>
Under the terms of the respective mortgage indentures securing first
mortgage bonds issued by CG&E and its subsidiaries, substantially all property
is subject to a direct first mortgage lien.

Item 3. Legal Proceedings
- ------- -----------------

In March 1993, two purported class action suits were filed with the
Superior Court for Hendricks County in the State of Indiana, in which PSI and
13 directors of PSI and PSI Energy were named as defendants. The complaints
alleged, among other things, that the directors breached their fiduciary
duties in connection with the Merger Agreement, the PSI Stock Option Agreement
and the PSI Rights Agreement and sought, among other things, to enjoin the
merger and to require that an auction for PSI be held. Four other purported
class action suits were filed in the U.S. District Court for the Southern
District of Indiana making substantially similar allegations, including
alleged violations of federal securities laws. Three of these suits named
CG&E and CINergy as defendants in addition to the defendants named in the
state actions above.

In April 1993, the U.S. District Court for the Southern District of
Indiana, with respect to discovery and injunctive relief, ordered five of the
pending suits to be consolidated. One of the purported class action suits
filed in Hendricks County was not included in the U.S. District Court's order
of consolidation. In May 1993, the Shareholder Plaintiffs filed a Unified
Complaint in the Consolidated Action alleging, among other things, that the
PSI directors breached their fiduciary duties in connection with the merger
and the PSI Rights Agreement, violated the federal securities laws and further
alleging that PSI failed to hold its annual meeting of shareholders and
sought, among other things, to enjoin the merger. The Consolidated Action
alleged that CG&E was a primary violator and aider and abettor of the
foregoing allegations.

In early 1994, the parties agreed to a Stipulation and Agreement of
Dismissal of the Consolidated action and the one remaining suit filed in the
Superior Court for Hendricks County. By the terms of the Stipulation and
Agreement of Dismissal the parties agreed that since 1) the Annual Meeting of
PSI stockholders was held in accordance with the orders of the U.S. District
Court for the Southern District of Indiana; 2) the supplemental disclosure was
made by PSI in accordance with the district court's order in August 1993; 3)
PSI's nominees were elected to the Board of Directors; and 4) both PSI
shareholders and CG&E shareholders have approved the merger, all class members
have received all the meaningful relief they could have received through the
litigation and that some or all of the claims are now moot and no longer
meritorious.

The parties also agreed to jointly move the court for an entry 1) of a
Final Order certifying the Consolidated Action as a class action on behalf of
the Class for the purpose of consideration of the Final Order; 2) dismissing
the Consolidated Action and remaining state action with prejudice; and 3)
settling all claims between the parties except that the U.S. District Court
for the Southern District of Indiana and the Superior Court for Hendricks
<PAGE>
County reserve jurisdiction to hold a hearing on the application by the
Shareholder Plaintiffs for attorney fees and expenses without waiving any
rights of the defendants to appeal. The Agreement of Dismissal also provides
that should the court find upon plaintiff's application that attorney fees and
expenses are recoverable by the Shareholder Plaintiffs, such fees and expenses
shall be paid by PSI. The parties are currently awaiting a ruling from the
District Court.

Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------

(a) A special meeting of shareholders of The Cincinnati Gas & Electric
Company was held on November 16, 1993.

(c) At the meeting, the shareholders adopted the Amended and Restated
Agreement and Plan of Reorganization dated as of December 11, 1992,
as amended and restated on July 2, 1993 and as of September 10,
1993 (as amended and restated, the "Merger Agreement"), as set
forth in its entirety in the Joint Proxy Statement/Prospectus dated
October 8, 1993. Of the 87,654,430 common shares outstanding and
entitled to vote at the meeting, 75,051,985 common shares were for
the adoption of the Merger Agreement, 1,123,450 against, 1,138,032
abstentions and 5,367,016 broker nonvotes.

<PAGE>
PART II

Item 5. Market for Registrant's Common Equity and Related
- ------- -------------------------------------------------
Stockholder Matters
-------------------

CG&E's common stock is listed on the New York, Cincinnati, Chicago, and
Pacific Stock Exchanges.

The table below sets forth the high and low sale prices as reported on
the New York Stock Exchange-Composite and dividend information for CG&E's
common stock.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Common Stock $:
1993 . . . . . -High 27 27 3/4 29 29 5/8
. . . . . -Low 23 7/8 24 1/4 27 1/8 26 1/8
1992 . . . . . -High 26 5/8 25 1/8 25 3/8 25 3/8
. . . . . -Low 23 5/8 22 1/4 22 7/8 23 1/4
Dividends Paid
per Common Share $:
1993 . . . . . .41 1/2 .41 1/2 .41 1/2 .43
1992 . . . . . .41 1/3 .41 1/3 .41 1/3 .41 1/3
</TABLE>

As of December 31, 1993, CG&E had approximately 58,000 common
shareholders of record.

<PAGE>
Item 6. Selected Financial Data
- ------- -----------------------
<TABLE>
<CAPTION>
1993(a) 1992 1991 1990 1989
------- ------ ------ ------ ------
(Thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues................... $1,751,741 $1,553,426 $1,518,098 $1,438,468 $1,437,511
Operating Income..................... $ 319,500 $ 259,701 $ 213,172 $ 226,629 $ 240,621
Allowance for Borrowed and
Other Funds Used During
Construction....................... $ 6,740 $ 17,583 $ 68,130 $ 135,682 $ 112,598
Post-in-Service Carrying Costs
and Phase-in Deferred
Return (b)......................... $ 47,434 $ 63,264 $ 50,079 $ -- $ --
Net Income (Loss).................... $ (8,724) $ 202,261 $ 206,996 $ 234,736 $ 239,693
Preferred Dividends.................. $ 25,160 $ 27,610 $ 24,529 $ 22,165 $ 20,259
Earnings (Loss) on Common Shares..... $ (33,884) $ 174,651 $ 182,467 $ 212,571 $ 219,434
Earnings (Loss) Per Common
Share.............................. $ (0.39) $ 2.04 $ 2.21 $ 2.74 $ 2.89
Cash Dividends Declared per
Common Share....................... $ 1.67 1/2 $ 1.65 1/3 $ 1.65 1/3 $ 1.60 $ 1.53 1/3
Total Assets......................... $5,143,523 $4,802,192 $4,583,786 $4,156,484 $3,777,579
Long-Term Debt and
Redeemable Preferred Stock......... $2,039,061 $2,019,863 $1,863,802 $1,740,249 $1,388,624
<FN>
Notes: (a) See "Rate Matters" herein for information concerning the write-off of a portion of Zimmer
Station.
(b) See Note 1 to the Consolidated Financial Statements for additional information.
</TABLE>

Item 7. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------

RESULTS OF OPERATIONS
- ---------------------

Earnings
- --------

The Company incurred a loss in 1993 of $.39 per common share. The
write-off of a portion of Zimmer Station, discussed below, reduced 1993
earnings per common share by $2.55. Without the write-off, earnings per share
would have been $2.16, compared to $2.04 in 1992. Earnings for 1993 were
positively affected by gas and electric rate increases received in 1992 and
1993, higher electric sales volumes, higher gas sales and transportation
volumes and continued cost control efforts.

Operating Revenues
- ------------------

Electric operating revenues increased $123 million in 1993 over 1992, as
a result of electric rate increases granted by regulatory bodies in 1992 and
1993, and an increase in total electric sales volumes of 5.3%. In 1992,
electric operating revenues increased $12 million due to rate increases
granted by regulatory bodies, partially offset by a 1.4% decrease in retail
<PAGE>
electric kwh sales due to mild weather. Electric operating revenues increased
$27 million in 1991 primarily as a result of a 7.8% increase in retail
electric sales volumes.

Gas operating revenues increased $75 million in 1993. The increase
resulted from gas rate increases granted by regulatory bodies in 1993, a 7.2%
increase in total volumes of gas sold and transported, and the operation of
adjustment clauses reflecting an increase in the average cost of gas
purchased. Gas operating revenues increased $23 million in 1992 due to a 7.3%
increase in total volumes sold and transported and to the operation of
adjustment clauses reflecting an increase in the average cost of gas
purchased. The $53 million increase in gas operating revenues for 1991 was
the result of an 8.9% increase in total volumes sold and transported and rate
increases granted by regulatory bodies.

Operating Expenses
- ------------------

Gas purchased expense for 1993 increased $53 million as a result of an
increase in the average cost per Mcf purchased of 17.5% and an increase in
volumes purchased of 4.7%. For 1992, gas purchased expense increased
$16 million as a result of an increase in volumes purchased of 1.7% and an
increase in the average cost per Mcf purchased of 5.9%. Gas purchased expense
increased $8 million in 1991 primarily as a result of a 3.3% increase in
volumes purchased.

Fuel used in electric production increased $12 million in 1993 due to a
6.2% increase in the amount of electricity generated. Fuel used in electric
production decreased $10 million in 1992 due to a 4.0% decrease in the cost of
fuel per kwh generated. In 1991, fuel used in electric production decreased
$6 million due to a 2.6% decrease in the amount of electricity generated.

The $15 million increase in other operation expense for 1993 was due to a
number of factors, including wage increases, the adoption of two accounting
standards involving postemployment and postretirement benefits, and increases
in gas production expenses. For information on new accounting standards, see
"Future Outlook" herein. The $22 million increase in other operation expense
for 1991 was due to a number of factors, including wage increases, increases
in gas and electric distribution expenses, and operating costs associated with
Zimmer Station which were not being recovered in rates charged to customers.

Maintenance expense decreased $16 million in 1992 primarily due to
decreased maintenance on electric generating units and gas and electric
distribution facilities.

Depreciation expense increased $11 million in 1993 primarily due to a
full year's effect of the first five units of Woodsdale Station being placed
in commercial operation in 1992, and from the sixth unit being placed in
commercial operation during 1993. Depreciation expense increased $10 million
in 1992 primarily due to a full year's effect of Zimmer Station being placed
in commercial operation in March 1991, and from the first five units at
Woodsdale being placed in commercial operation in 1992. In 1991, depreciation
<PAGE>
expense increased $37 million primarily due to an increase in depreciable
plant resulting from Zimmer Station being placed in commercial operation.

Post-in-service deferred operating expenses (net) of $6 million and $28
million in 1993 and 1992, respectively, reflect deferral of depreciation,
operation and maintenance expenses (exclusive of fuel costs), and property
taxes related to the first five units of Woodsdale Station between the time
the units began commercial operation and the effective date of new rates which
reflect these costs, in accordance with a stipulation approved by The Public
Utilities Commission of Ohio (PUCO) in August 1993. Post-in-service deferred
operating expenses in 1992 also reflect deferral of depreciation, operation
and maintenance expenses (exclusive of fuel costs), and property taxes related
to Zimmer Station from January 1992 through May 1992, the effective date of
new rates which reflected Zimmer Station costs. In accordance with a May 1992
rate order, CG&E began amortizing the deferred expenses associated with Zimmer
Station over a 10-year period. CG&E began amortizing the deferred Woodsdale
expenses over a 10-year period in accordance with the stipulation approved by
the PUCO in August 1993.

Phase-in deferred depreciation was $8 million for each of 1993 and 1992
as a result of a PUCO ordered phase-in plan, in which rates charged to
customers in the early years of the plan are less than that required to fully
recover the depreciation expenses related to Zimmer Station (see "Future
Outlook" herein).

Taxes other than income taxes increased $9 million in 1993, $24 million
in 1992 and $11 million in 1991 primarily due to increased property taxes
resulting from a greater investment in taxable property (including Zimmer and
Woodsdale Stations) and higher property tax rates in 1992 and 1991.

Other Income and Deductions
- ---------------------------

Allowance for funds used during construction (AFC) decreased $11 million
for 1993 primarily due to a decrease in construction work in progress
associated with the sixth unit of Woodsdale Station being placed in commercial
operation in 1993 and the first five units of Woodsdale being placed in
commercial operation during 1992. AFC decreased $51 million for 1992 and
$68 million in 1991 due to decreases in construction work in progress
associated with Zimmer Station being placed in commercial operation in March
1991 and the commercial operation of the first five units of Woodsdale Station
in 1992.

Post-in-service carrying costs decreased $25 million in 1993 and $13
million in 1992 as a result of discontinuing the accrual of carrying costs on
Zimmer Station when it was reflected in rates in May 1992. Post-in-service
carrying costs for 1993 and 1992 also reflect the accrual of carrying costs on
the first five units of Woodsdale Station between the time they began
commercial operation and the effective date of new rates approved by the PUCO
in August 1993 which reflect Woodsdale Station. Post-in-service carrying
costs were $50 million for 1991 as a result of accruing carrying costs on
Zimmer Station after it began commercial operation, in accordance with an
order of the PUCO. In accordance with the stipulation approved by the PUCO in
<PAGE>
August 1993, CG&E began amortizing the post-in-service carrying costs on
Zimmer and a portion of the carrying costs on Woodsdale over the useful life
of the applicable plant.

Phase-in deferred return was $35 million for 1993 and $27 million for
1992 as a result of the PUCO ordered phase-in plan, in which rates charged to
customers in the early years of the plan will be less than that required to
provide the authorized return on investment (see "Future Outlook" herein).

In November 1993, CG&E wrote off costs associated with Zimmer Station of
approximately $223 million, net of taxes. The write-off represents amounts
disallowed from rate base by the PUCO in its May 1992 rate order. CG&E had
appealed the rate order to the Supreme Court of Ohio; however, in November
1993, the Supreme Court upheld the PUCO on the issue of the disallowance,
ruling that the PUCO properly excluded costs related to nuclear fuel, nuclear
wind-down activities and AFC from CG&E's rate base.

Other (net) decreased $10 million in 1993 due to a number of factors,
including costs associated with IPALCO Enterprises, Inc.'s intervention in the
proposed merger between CG&E and PSI Resources.

Interest on long-term debt increased $8 million in 1992 and $18 million
in 1991 due to the issuance of additional first mortgage bonds.

Other interest decreased $12 million for 1992 primarily due to interest
accrued in 1991 on an Internal Revenue Service settlement regarding the timing
of the tax deduction on the 1985 abandonment of facilities not used in the
conversion of Zimmer Station.

FUTURE OUTLOOK
- --------------

Merger Agreement
- ----------------

CG&E has entered into a merger agreement with PSI Resources, Inc., whose
principal subsidiary is an Indiana electric utility with a service area
contiguous to that of CG&E. Under the merger agreement, CG&E and PSI will
become subsidiaries of a newly formed corporation named CINergy Corp., which
will be a registered holding company under the Public Utility Holding Company
Act of 1935 (PUHCA). In order to effect the merger, each share of CG&E common
stock will be converted into one share of CINergy common stock, and each share
of PSI common stock will be converted into that number of shares of CINergy
common stock obtained by dividing $30.69 by the average closing price of CG&E
common stock for the 15 trading days preceding the fifth day prior to
consummation of the merger, provided that the number of shares of CINergy
stock to be exchanged for each share of PSI will be no greater than 1.023 and
no less than .909. At December 31, 1993, CG&E and PSI had 88.1 million and
57.0 million common shares outstanding, respectively. The merger will be
accounted for as a "pooling-of-interests", and will be tax-free for
shareholders.

<PAGE>
The merger is subject to approval by the Securities and Exchange
Commission (SEC) and the Federal Energy Regulatory Commission (FERC).
Shareholders of each company have already approved the CINergy merger at
special meetings held in November 1993.

CG&E and PSI also submitted to FERC the operating agreement among CINergy
Services, Inc., a subsidiary of CINergy, and CG&E and PSI Energy that provides
for the coordinated planning and operation of the electric generation and
transmission and other facilities of CG&E and PSI as an integrated utility
system. It also establishes a framework for the equitable sharing of the
benefits and costs of such coordinated operations between CG&E and PSI. The
parties to the Ohio and Indiana FERC settlements have agreed to support or not
oppose the operating agreement, and the settlements are conditioned upon FERC
approving the filed operating agreement without material changes.
<PAGE>
CG&E's filing with FERC also references a separate agreement among CG&E,
the Staff of the PUCO, the OCC, and other parties settling issues raised by a
November 1993 ruling of the Supreme Court of Ohio on the phased-in electric
rate increase ordered by the PUCO in May 1992. The agreement includes a
moratorium on increases in base electric rates prior to January 1, 1999
(except under certain circumstances), authorization for CG&E to retain all
non-fuel merger savings until 1999, and a commitment by the PUCO that it will
support CG&E's efforts to retain CG&E's gas operations in its PUHCA filing
with the SEC (see below). Reference is made to "Rate Matters" for additional
information.

Originally, the merger agreement provided that CG&E and PSI would be
merged into CINergy as an Ohio corporation. Under this structure CG&E and PSI
would have become operating divisions of CINergy, ceasing to exist as separate
corporations, and CINergy would not have been subject to the restrictions
imposed by PUHCA. However, The Indiana Utility Regulatory Commission (IURC)
dismissed PSI's application for approval of the transfer of its license or
property to a non-Indiana corporation. The IURC's decision has been appealed
and the original merger structure could be reinstated if the appeal is
successful.

Unless otherwise noted, the following discussion pertains solely to CG&E
and its subsidiary companies, and any projections or estimates contained
therein do not reflect the pending merger.

Capital Requirements
- --------------------

For 1994, construction expenditures are estimated to be $192 million,
including $5 million of AFC, and over the next five years, (1994-1998),
construction expenditures are estimated to be $1,343 million, including
$54 million of AFC. These estimates are under continuing review and subject
to adjustment. Also during the next five years, a total of $142 million will
be required for the redemption of long-term debt and cumulative preferred
stock.

Included in CG&E's five-year construction program is $566 million for
electric production projects, $91 million for electric transmission
facilities, $379 million in electric distribution expenditures and $224
million in gas distribution expenditures. Of the projected expenditures,
<PAGE>
about $248 million is associated with construction of additional baseload and
peaking capacity, some of which will be deferred under the CINergy merger.

Capital Resources
- -----------------

Internally generated funds provided 85% of the amount needed for
construction during 1993. Over the past five years, internally generated
funds provided 47% of the amount needed for construction. For the next five
years (1994-1998), CG&E expects funds from operations to provide a greater
portion of the amount needed for construction expenditures than in the prior
five-year period, primarily as a result of decreased construction requirements
and the recovery through rates of CG&E's investment in Zimmer and Woodsdale
Stations.

CG&E contemplates future debt and equity financings in the capital
markets and the issuance of additional shares of common stock through its
employee stock purchase plans and Dividend Reinvestment and Stock Purchase
Plan. Short-term indebtedness will be used to supplement internal sources of
funds for the interim financing of the construction program. The Company may
continue to sell additional securities, from time to time, beyond what is
needed for capital requirements to allow the early refinancing of existing
securities. For information regarding the refinancing of long-term debt, see
Note 2 to the Consolidated Financial Statements.

Under the terms of CG&E's first mortgage indenture, at December 31, 1993,
CG&E would have been able to issue approximately $900 million of additional
first mortgage bonds at current interest rates.

As a result of the write-off of a portion of Zimmer Station in November
1993, CG&E will have inadequate coverage to meet the requirements of its
articles of incorporation for issuing additional shares of preferred stock
from March 1994 to late December 1994.

CG&E has a $200 million bank revolving credit agreement that will expire
in September 1996. The agreement provides a back-up source of funds for
CG&E's commercial paper program. CG&E has not made any borrowings under this
agreement.

CG&E and its subsidiaries had lines of credit at December 31, 1993, of
$123 million, of which $102 million remained unused. CG&E and its
subsidiaries are currently authorized to have a maximum of $235 million of
short-term notes outstanding.

<PAGE>
Current credit ratings for the Companies securities are provided in the
following table.

<TABLE>
<CAPTION>
Moody s
Investors Standard Duff &
Service & Poor's Phelps, Inc.
--------- -------- ------------
<S> <C> <C> <C>
The Cincinnati Gas & Electric Company
First Mortgage Bonds............... Baa1 BBB+ BBB+
Preferred Stock.................... baa2 BBB BBB
The Union Light, Heat and Power Company
First Mortgage Bonds............... Baa1 BBB+ Not Rated
</TABLE>

CG&E's securities have been placed on credit watch by Standard & Poor s
and Duff & Phelps for a possible upgrade upon consummation of the merger with
PSI.

Rate Matters
- ------------

Over the past two years, the Company has received a number of electric
and gas rate increases that will positively impact future earnings. The
primary reasons for the electric rate increases were recovery of CG&E's
investment in Zimmer Station, Woodsdale Station and other facilities used to
serve customers. The gas rate increases reflect investments in new and
replacement gas mains and facilities. As part of an August 1993 stipulation,
CG&E has agreed not to increase electric or gas base rates prior to June 1,
1995, excluding rate filings made under certain circumstances, such as to
address financial emergencies or to reflect savings associated with the merger
with PSI.

In August 1993, the PUCO approved a stipulation authorizing CG&E to
increase annual electric revenues by $41.1 million and increase annual gas
revenues by $19.1 million. In May 1992, the PUCO authorized CG&E to increase
electric revenues by $116.4 million to be phased in over a three-year period
through annual increases beginning each May of $37.8 million in 1992, $38.8
million in 1993 and $39.8 million in 1994.

In response to an appeal by CG&E of the PUCO's May 1992 rate order, the
Supreme Court of Ohio ruled, in November 1993, that the PUCO did not have
authority to order the phased-in rate increase, and remanded the case to the
PUCO to set rates that provide the gross annual revenues determined in
accordance with Ohio statutes. The Court also said the PUCO must provide a
mechanism which allows CG&E to recover costs being deferred under the phase-in
plan through the date of the order on remand. At December 31, 1993, CG&E had
deferred $70 million of costs, net of taxes, related to the phase-in plan.

In March 1994, CG&E negotiated a settlement agreement with the PUCO
Staff, the Ohio Office of Consumers' Counsel and other intervenors to address
the November 1993 ruling by the Supreme Court of Ohio. As part of the
agreement, CG&E has agreed not to seek early implementation of the third phase
of the May 1992 rate increase, which means the $39.8 million increase will
<PAGE>
take effect in May 1994 as originally scheduled. CG&E also agreed that it
would not seek accelerated recovery of deferrals related to the phase-in plan.
These deferrals will be recovered over the remaining seven year period
contemplated in the May 1992 PUCO order. In addition, if the merger with PSI
is consummated, CG&E has agreed not to increase base electric rates prior to
January 1, 1999, except for increases in taxes, changes in federal or state
environmental laws, PUCO actions affecting electric utilities in general and
financial emergencies.

Regulation and Legislation
- --------------------------

CG&E presently estimates that capital expenditures needed to comply with
the Clean Air Act Amendments of 1990 (Air Act) will be between $125 million
and $150 million through the year 2000. The construction program discussed
under "Capital Requirements" includes expenditures of $73 million over the
next five years in order to comply with the Air Act. Compliance with the Air
Act also will increase operating costs. CG&E expects that its cost of
compliance with the Air Act will be recoverable through rates.

In April 1992, FERC issued Order 636 which restructures the
relationships between interstate gas pipelines and their customers for gas
sales and transportation services. Order 636 will result in changes in the
way CG&E and Union Light purchase gas supplies and contract for transportation
and storage services, and will result in increased risks in managing the
ability to meet demand.

Order 636 also allows pipelines to recover transition costs they incur
in complying with the Order from customers, including CG&E and Union Light.
An agreement between CG&E and residential and industrial customer groups
regarding recovery of these transition costs has been submitted to the PUCO
for approval. Order 636 transition costs are not expected to significantly
impact the Company.

The Energy Policy Act of 1992 addresses several matters affecting
electric utilities including mandated open access to the electric transmission
system and greater encouragement of independent power production and
<PAGE>
cogeneration. Although CG&E cannot predict the long-term consequences the
Energy Act will have, the Company intends to aggressively pursue the
opportunities presented by the Act.

Environmental Issues
- --------------------

The United States Environmental Protection Agency (U.S. EPA) alleges
that CG&E is a Potentially Responsible Party (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) liable for
cleanup of the United Scrap Lead site in Troy, Ohio. CG&E was one of
approximately 200 companies so named. CG&E believes it is not a PRP and
should not be responsible for cleanup of the site. Under CERCLA, CG&E could be
jointly and severally liable for costs incurred in cleaning the site,
estimated by the U.S. EPA to be $27 million.

Accounting Standards
- --------------------

In recent years several new accounting standards have been issued by the
Financial Accounting Standards Board. While the impact on earnings and cash
flow associated with the new standards has been relatively minor, these
accounting changes do affect the recognition and presentation of amounts
reported in the Company's financial statements. For information in addition
to that provided below on recently adopted accounting standards, see Note 1 to
the Consolidated Financial Statements.

In 1993, CG&E and its subsidiaries adopted Statement of Financial
Accounting Standards No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions" (SFAS No. 106). SFAS No. 106 requires the
accrual of the expected cost of providing postretirement benefits other than
pensions to an employee and the employee's covered dependents during the
employee's active working career. SFAS No. 106 also requires the recognition
of the actuarially determined total postretirement benefit obligation earned
by existing retirees. In August 1993, the PUCO, under whose jurisdiction the
majority of these costs fall, authorized CG&E to begin recovering SFAS No. 106
costs. The adoption of SFAS No. 106 did not have a material effect on results
of operations.

Also in 1993, CG&E and its subsidiaries adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109).
SFAS No. 109 requires deferred tax recognition for all temporary differences
in accordance with the liability method, requires that deferred tax
liabilities and assets be adjusted for enacted changes in tax laws or rates
and prohibits net-of-tax accounting and reporting. The Company believes it is
probable that the net future increases in income taxes payable will be
recovered from customers through future rates and, accordingly, has recorded a
net regulatory asset at December 31, 1993. Adoption of SFAS No. 109 had no
impact on results of operations.

In 1993, CG&E and its subsidiaries adopted Statement of Financial
Accounting Standards No. 112, "Employers Accounting for Postemployment
Benefits" (SFAS No. 112). SFAS No. 112 requires the accrual of the cost of
<PAGE>
certain postemployment benefits provided to former or inactive employees. The
adoption of SFAS No. 112 did not have a material effect on results of
operations.

Inflation
- ---------
Over the past several years, the rate of inflation has been relatively
low. The Company believes that the recent inflation rates do not materially
affect its results of operations or financial condition. However, under
existing regulatory practice, only the historical cost of plant is recoverable
from customers. As a result, cash flows designed to provide recovery of
historical plant costs may not be adequate to replace plant in future years.

<PAGE>
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

CONSOLIDATED STATEMENT OF INCOME

for the years ended December 31,
1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C>
OPERATING REVENUES
Electric............................................. $1,282,445 $1,159,456 $1,147,395
Gas.................................................. 469,296 393,970 370,703
---------- ---------- ----------
Total operating revenues......................... 1,751,741 1,553,426 1,518,098
---------- ---------- ----------
OPERATING EXPENSES
Gas purchased........................................ 280,836 228,272 212,004
Fuel used in electric production..................... 333,279 321,074 331,012
Other operation...................................... 279,866 264,779 270,261
Maintenance.......................................... 108,857 104,780 120,796
Provision for depreciation........................... 152,061 140,996 130,592
Post-in-service deferred operating
expenses - net (Note 1)............................ (6,471) (27,799) --
Phase-in deferred depreciation (Note 1).............. (8,524) (8,468) --
Taxes other than income taxes (Schedule on page 43).. 183,367 174,072 150,480
Income taxes (Schedule on page 43)................... 108,970 96,019 89,781
---------- ---------- ----------
Total operating expenses......................... 1,432,241 1,293,725 1,304,926
---------- ---------- ----------
OPERATING INCOME 319,500 259,701 213,172
---------- ---------- ----------
OTHER INCOME AND DEDUCTIONS
Allowance for other funds used during construction... 3,154 9,966 44,596
Post-in-service carrying costs (Note 1).............. 12,100 36,655 50,079
Phase-in deferred return (Note 1).................... 35,334 26,609 --
Write-off of a portion of Zimmer Station (Note 5).... (234,844) -- --
Income taxes-credit (Schedule on page 43 and Note 1)
Related to write-off of a portion of Zimmer
Station......................................... 12,085 -- --
Other............................................ 9,405 27,386 40,686
Other - net.......................................... (9,551) 376 5,256
---------- ---------- ----------
Total other income and deductions................ (172,317) 100,992 140,617
---------- ---------- ----------
INCOME BEFORE INTEREST CHARGES............................. 147,183 360,693 353,789
---------- ---------- ----------
INTEREST CHARGES
Interest on long-term debt........................... 153,693 159,330 150,953
Other interest....................................... 2,449 2,801 14,960
Amortization of debt discount, premium and other..... 3,351 3,918 4,414
Allowance for borrowed funds used during
construction - credit.............................. (3,586) (7,617) (23,534)
---------- ---------- ----------
Net interest charges............................. 155,907 158,432 146,793
---------- ---------- ----------
NET INCOME (LOSS).......................................... (8,724) 202,261 206,996
Preferred dividends.................................. 25,160 27,610 24,529
---------- ---------- ----------
EARNINGS (LOSS) ON COMMON SHARES........................... $ (33,884) $ 174,651 $ 182,467
========== ========== ==========
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (000) (Note 3)........................... 87,335 85,593 82,311
EARNINGS (LOSS) PER COMMON SHARE (Note 3).................. $ (.39) $ 2.04 $ 2.21
DIVIDENDS DECLARED PER COMMON SHARE (Note 3)............... $ 1.67 1/2 $ 1.65 1/3 $ 1.65 1/3

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

CONSOLIDATED STATEMENT OF CASH FLOWS

for the years ended December 31,
1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income (Loss).......................................... $ (8,724) $ 202,261 $ 206,996
---------- ---------- ----------
Adjustments to reconcile net income to net cash:
Deferred gas and electric fuel costs - net............... 3,914 (1,394) 16,949
Depreciation............................................. 152,061 140,996 130,592
Post-in-service deferred operating expenses-net (Note 1). (6,471) (27,799) --
Phase-in deferred depreciation (Note 1).................. (8,524) (8,468) --
Allowance for other funds used during construction....... (3,154) (9,966) (44,596)
Post-in-service carrying costs (Note 1).................. (12,100) (36,655) (50,079)
Phase-in deferred return (Note 1)........................ (35,334) (26,609) --
Deferred income taxes and investment tax credits-net..... 35,720 46,451 15,203
Write-off of a portion of Zimmer Station (Note 5)........ 234,844 -- --
Deferred income taxes and investment tax credits related
to write-off of a portion of Zimmer Station........... (12,085) -- --
Other - net.............................................. 19,403 13,666 (3,002)
Change in current assets and liabilities:
Receivables and unbilled revenues..................... (38,040) (15,279) (32,011)
Materials, supplies and fuel.......................... 3,567 (12,206) (11,219)
Other current assets.................................. (4,543) (10,142) (20,779)
Accounts payable and other current liabilities........ 20,564 7,225 14,866
---------- ---------- ----------
Total adjustments................................... 349,822 59,820 15,924
---------- ---------- ----------
Net cash provided by operations..................... 341,098 262,081 222,920
---------- ---------- ----------

CASH FLOWS FROM INVESTING
Construction expenditures (less allowance for other funds
used during construction)................................ (198,709) (219,767) (365,648)
Zimmer Station escrow fund................................. -- -- 23,250
---------- ---------- ----------
Net cash used in investing activities............... (198,709) (219,767) (342,398)
---------- ---------- ----------

CASH FLOWS FROM FINANCING
Common stock proceeds...................................... 43,986 41,210 137,278
Preferred stock proceeds................................... -- 79,300 79,300
Long-term debt proceeds.................................... 297,000 361,835 109,398
Retirement of long-term debt and cumulative
preferred stock.......................................... (294,455) (440,561) (3,033)
Net short-term borrowings.................................. (15,500) 21,500 15,988
Dividends paid on common shares............................ (145,942) (141,132) (134,361)
Dividends paid on preferred shares......................... (25,160) (27,452) (24,567)
---------- ---------- ----------
Net cash provided by (used in) financing activities. (140,071) (105,300) 180,003
---------- ---------- ----------

Net increase (decrease) in cash and temporary
cash investments................................ 2,318 (62,986) 60,525
Cash and temporary cash investments - beginning of year...... 2,252 65,238 4,713
---------- ---------- ----------
Cash and temporary cash investments - end of year............ $ 4,570 $ 2,252 $ 65,238
========== ========== ==========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

CONSOLIDATED BALANCE SHEET

December 31,
1993 1992
(Thousands of Dollars)
<S> <C> <C>
ASSETS

PROPERTY, PLANT AND EQUIPMENT, at original cost (Notes 2, 9 and 10)
In service -
Electric............................................................... $4,393,798 $4,469,479
Gas.................................................................... 611,579 577,097
Common................................................................. 183,225 116,459
---------- ----------
5,188,602 5,163,035
Less - Accumulated provisions for depreciation......................... 1,472,313 1,362,468
---------- ----------
Net property, plant and equipment in service......................... 3,716,289 3,800,567
Construction work in progress............................................ 69,351 144,848
---------- ----------
3,785,640 3,945,415
---------- ----------

OTHER PROPERTY AND INVESTMENTS............................................. 18,559 19,783
---------- ----------

CURRENT ASSETS
Cash (Note 6)............................................................ 4,570 2,252
Accounts receivable less accumulated provision of $14,906,000 in 1993
and $12,114,000 in 1992 for doubtful accounts.......................... 206,210 197,809
Accrued unbilled revenues................................................ 105,955 76,316
Materials supplies and fuel at average cost
Fuel for use in electric production.................................... 54,358 65,783
Gas stored for current use............................................. 36,048 26,960
Other.................................................................. 62,111 63,341
Property taxes applicable to subsequent year............................. 107,410 102,316
Prepayments.............................................................. 29,053 29,495
Other.................................................................... 133 242
---------- ----------
605,848 564,514
---------- ----------
OTHER ASSETS
Post-in-service carrying costs and deferred operating expenses (Note 1).. 154,636 114,533
Phase-in deferred return and depreciation (Note 1)....................... 83,431 35,077
Amounts due from customers-income taxes (Note 1)......................... 387,748 --
Other.................................................................... 107,661 122,870
---------- ----------
733,476 272,480
---------- ----------
$5,143,523 $4,802,192
========== ==========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

CONSOLIDATED BALANCE SHEET

December 31,
1993 1992
(Thousands of Dollars)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CAPITALIZATION (Schedules on pages 41 and 42)
Common shareholders equity............................................... $1,519,257 $1,655,130
Cumulative preferred shares (Note 4) -
Not subject to mandatory redemption.................................... 120,000 120,000
Subject to mandatory redemption........................................ 210,000 210,000
Long-term debt (Note 2).................................................. 1,829,061 1,809,863
---------- ----------
3,678,318 3,794,993
---------- ----------

CURRENT LIABILITIES
Current portion of bonds................................................. -- 6,500
Notes payable (Note 6)
-bank................................................................ 31,000 33,500
-commercial paper.................................................... -- 13,000
-other............................................................... 13 13
Accounts payable......................................................... 122,620 117,268
Dividends payable on preferred shares ................................... 6,290 6,290
Accrued taxes............................................................ 222,219 207,197
Accrued interest on debt................................................. 29,123 28,434
Other current and accrued liabilities.................................... 29,496 29,995
---------- ----------
440,761 442,197
---------- ----------

DEFERRED CREDITS AND OTHER
Deferred income taxes (Note 1)........................................... 733,224 307,139
Investment tax credits................................................... 141,520 147,663
Accrued pension cost (Note 1)............................................ 41,826 37,295
Other liabilities and deferred credits................................... 107,874 72,905
---------- ----------
1,024,444 565,002
---------- ----------

$5,143,523 $4,802,192
========== ==========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY

for the years ended December 31,
1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C>
COMMON SHARES (Note 3)
Balance, beginning of year...................................... $ 734,307 $ 719,893 $ 664,040
$8.50 par value of 1,673,058, 1,695,770, and 6,570,879 shares
sold in 1993, 1992 and 1991, respectively................... 14,221 14,414 55,853
---------- ---------- ----------
Balance, end of year............................................ $ 748,528 $ 734,307 $ 719,893
========== ========== ==========

ADDITIONAL PAID-IN CAPITAL (Note 3)
Balance, beginning of year...................................... $ 284,486 $ 257,215 $ 176,557
Premium on sale of common shares.............................. 29,765 26,796 84,528
Retirement of cumulative preferred stock...................... -- 1,757 40
Common stock issuance expenses................................ (33) (407) (3,134)
Cumulative preferred stock issuance expenses.................. -- (875) (776)
---------- ---------- ----------
Balance, end of year............................................ $ 314,218 $ 284,486 $ 257,215
========== ========== ==========

RETAINED EARNINGS
Balance, beginning of year...................................... $ 636,337 $ 606,478 $ 558,412
Net income (loss)............................................. (8,724) 202,261 206,996
Cash dividends declared on capital shares -
Cumulative preferred (See page 41 for rates)................ (25,160) (27,610) (24,529)
Common (See page 36 for rates).............................. (145,942) (141,132) (134,361)
Retirement of cumulative preferred stock...................... -- (3,660) (40)
---------- ---------- ----------
Balance, end of year............................................ $ 456,511 $ 636,337 $ 606,478
========== ========== ==========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

SCHEDULE OF COMMON SHAREHOLDERS' EQUITY AND CUMULATIVE PREFERRED SHARES

December 31,
1993 1992
(Thousands of Dollars)
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common shares, par value $8.50 per share (Note 3) -
Authorized-120,000,000 shares
Outstanding-88,062,083 and 86,389,025 shares, respectively........ $ 748,528 $ 734,307
Additional paid-in capital.......................................... 314,218 284,486
Retained earnings................................................... 456,511 636,337
---------- ----------
Total common shareholders equity.............................. $1,519,257 $1,655,130
========== ==========

CUMULATIVE PREFERRED SHARES - not subject to mandatory redemption
Par value $100 per share (Note 4) -
Outstanding -
4% series-270,000 shares (redeemable, upon call, at $108)....... $ 27,000 $ 27,000
4 3/4% series-130,000 shares (redeemable, upon call, at $101)... 13,000 13,000
7.44% series-400,000 shares (redeemable, upon call, at $101).... 40,000 40,000
9.28% series-400,000 shares (redeemable, upon call, at $101).... 40,000 40,000
---------- ----------
$ 120,000 $ 120,000
========== ==========

CUMULATIVE PREFERRED SHARES - subject to mandatory redemption
Par value $100 per share (Note 4) -
Outstanding -
9.15% series-500,000 shares (redeemable, upon call, prior to
July 1, 1994 at $107.32; reduced amounts thereafter).......... $ 50,000 $ 50,000
7 7/8% series-800,000 shares (subject to mandatory redemption on
January 1, 2004 at $100; not redeemable prior to that date)... 80,000 80,000
7 3/8% series-800,000 shares (redeemable, upon call, after
August 1, 2002 at $100)....................................... 80,000 80,000
---------- ----------
$ 210,000 $ 210,000
========== ==========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

SCHEDULE OF LONG-TERM DEBT

December 31,
1993 1992
(Thousands of Dollars)
<S> <C> <C>
The Cincinnati Gas & Electric Company
First mortgage bonds -
8 3/4 % series due 1996........................................... -- 110,000
5 7/8 % series due 1997........................................... 30,000 30,000
6 1/4 % series due 1997........................................... 100,000 100,000
7 3/8 % series due 1999........................................... 50,000 50,000
8 5/8 % series due 2000........................................... 60,000 60,000
7 3/8 % series due 2001........................................... 60,000 60,000
7 1/4 % series due 2002........................................... 100,000 100,000
8 1/8 % series due 2003........................................... 60,000 60,000
9.15 % series due 2004........................................... -- 60,000
8.55 % series due 2006........................................... 75,000 75,000
9 1/8 % series due 2008........................................... 75,000 75,000
9 5/8 % series A and B due 2013................................... 31,700 31,700
10 1/8% series due 2015........................................... 84,000 84,000
9 1/4 % series due 2016........................................... -- 110,000
9.70 % series due 2019........................................... 100,000 100,000
10 1/8% series due 2020........................................... 100,000 100,000
10.20 % series due 2020........................................... 150,000 150,000
8.95 % series due 2021........................................... 100,000 100,000
8 1/2 % series due 2022........................................... 100,000 100,000
7.20 % series due 2023........................................... 300,000 --
---------- ---------
1,575,700 1,555,700
---------- ---------
Other long-term debt -
6.50% through 8 1/2% due 1993 through 2022........................ 75,733 75,746
Variable rate due 2013 and 2015................................... 100,000 100,000
---------- ---------
175,733 175,746
---------- ---------
1,751,433 1,731,446
---------- ---------
The Union Light Heat and Power Company
First mortgage bonds -
4 3/8 % series due 1993........................................... -- 6,500
6 1/2 % series due 1999........................................... 20,000 20,000
8 % series due 2003........................................... 10,000 10,000
9 1/2 % series due 2008........................................... 10,000 10,000
9.70 % series due 2019........................................... 20,000 20,000
10 1/4% series due 2020........................................... 30,000 30,000
---------- ---------
90,000 96,500
---------- ---------

Other Subsidiary Companies' Debt....................................... 1,475 1,475
Less current maturities................................................ 13 6,513
Unamortized premium (discount) - net................................... (13,834) (13,045)
---------- ---------
Total long-term debt......................................... $1,829,061 $1,809,863
========== =========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

SCHEDULE OF TAXES

for the years ended December 31,
1993 1992 1991
(Thousands of Dollars)
<S> <C> <C> <C>
TAXES OTHER THAN INCOME TAXES
Property....................................................... $ 104,979 $ 98,426 $ 77,444
Public Utility Gross Receipts.................................. 61,765 59,441 56,785
Payroll........................................................ 12,202 12,136 12,075
Other.......................................................... 4,421 4,069 4,176
--------- --------- ---------
$ 183,367 $ 174,072 $ 150,480
========= ========= =========
INCOME TAXES
Included in operating expenses -
Currently payable............................................ $ 69,009 $ 53,640 $ 74,366
Deferred - net
Liberalized depreciation................................... 42,787 41,902 27,985
Gas costs.................................................. 806 2,328 (6,053)
Post-in-service deferred operating expenses................ 2,406 7,520 --
Alternative minimum tax credit carryforward................ 6,598 (6,598) --
Property taxes............................................. (11,416) 6,463 1,547
Systems costs capitalized.................................. (46) (190) 6,441
Other...................................................... 3,856 (3,207) (9,387)
Investment tax credits - net................................. (5,030) (5,839) (5,118)
--------- --------- ---------
Total................................................. 108,970 96,019 89,781
--------- --------- ---------
Included in other income and deductions (Note 1) -
Currently payable............................................ (5,164) (31,457) (40,468)
Deferred - net
Alternative minimum tax credit carryforward................ (2,759) 2,759 --
Write-off of a portion of Zimmer Station................... (10,972) -- --
Other...................................................... (1,482) 1,312 (218)
Investment tax credits related to write-off of a portion
of Zimmer Station........................................ (1,113) -- --
--------- --------- ---------
Total................................................. (21,490) (27,386) (40,686)
--------- --------- ---------
Total provision....................................... $ 87,480 $ 68,633 $ 49,095
========= ========= =========
Analysis of provision -
Federal income taxes......................................... $ 84,885 $ 67,335 $ 47,341
State income taxes........................................... 2,595 1,298 1,754
--------- --------- ---------
$ 87,480 $ 68,633 $ 49,095
========= ========= =========
COMPUTATION OF FEDERAL INCOME TAX PROVISION
Pre-tax income................................................. $ 76,161 $ 269,596 $ 254,337
========= ========= =========
Tax at statutory Federal income tax rate applied
to pre-tax income............................................ $ 26,656 $ 91,663 $ 86,474
Changes in Federal income taxes resulting from -
Allowance for funds used during construction
which does not constitute taxable income................... (8,266) (24,898) (36,796)
Excess of book depreciation over tax depreciation............ 8,529 7,721 9,753
Cost of removal for property retired......................... (1,625) (2,235) (2,064)
Amortization of investment tax credits....................... (5,833) (5,473) (5,849)
Write-off of a portion of Zimmer Station..................... 69,365 -- --
Other-net.................................................... (3,941) 557 (4,177)
--------- --------- ---------
Federal income tax provision.......................... $ 84,885 $ 67,335 $ 47,341
========= ========= =========

<FN>
The accompanying notes are an integral part of the financial statements and schedules.
</TABLE>

<PAGE>
The Cincinnati Gas & Electric Company
And Subsidiary Companies

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: CG&E and its subsidiaries
follow the Uniform Systems of Accounts prescribed by the Federal Energy
Regulatory Commission (FERC), and are subject to the provisions of Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation". The more significant accounting policies are
summarized below:

PRINCIPLES OF CONSOLIDATION. All subsidiaries of CG&E are included in the
consolidated statements. Intercompany items and transactions have been
eliminated.

UTILITY PLANT. Property, plant and equipment is stated at the original cost
of construction, which includes payroll and related costs such as taxes,
pensions and other fringe benefits, general and administrative costs, and an
allowance for funds used during construction.

REVENUES AND FUEL. CG&E and its subsidiaries recognize revenues for gas and
electric service rendered during the month, which includes revenue for sales
unbilled at the end of each month. CG&E and The Union Light, Heat and Power
Company (Union Light) expense the costs of gas and electricity purchased and
the cost of fuel used in electric production as recovered through revenues and
defer the portion of these costs recoverable or refundable in future periods.

DEPRECIATION AND MAINTENANCE. The Companies determine their provision for
depreciation using the straight-line method and by the application of rates to
various classes of property, plant and equipment. The rates are based on
periodic studies of the estimated service lives and net cost of removal of the
properties. The percentages of the annual provisions for depreciation to the
weighted average of depreciable property during the three years ended
December 31, 1993, were equivalent to:

1993 1992 1991
------------------------

Electric . . . . 2.9 2.9 3.0
Gas . . . . . . 2.7 2.6 2.6
Common . . . . . 4.0 3.1 3.1

In a May 1992 rate order, The Public Utilities Commission of Ohio (PUCO)
authorized changes in depreciation accrual rates on CG&E's electric and common
plant. The changes resulted in an annual decrease in depreciation expense of
about $9 million.

Expenditures for maintenance and repairs of units of property, including
renewals of minor items, are charged to the appropriate maintenance expense
accounts. A betterment or replacement of a unit of property is accounted for
as an addition and retirement of property, plant and equipment. At the time of
such a retirement, the accumulated provision for depreciation is charged with
<PAGE>
the original cost of the property retired and also for the net cost of
removal.

INCOME TAXES. For income tax purposes, CG&E and its subsidiaries use
liberalized depreciation methods and deduct removal costs as incurred.
Consistent with regulatory treatment, CG&E and its subsidiaries currently
provide for deferred taxes arising from the use of liberalized depreciation
for operations regulated by state utility commissions, and for income tax
deferrals on all timing differences for operations regulated by FERC.
Although CG&E does not provide for deferred taxes resulting from the use of
liberalized depreciation for property additions subject to PUCO jurisdiction
made prior to October 1978, CG&E is allowed to collect through rates the
income taxes payable in the future as a result of using liberalized
depreciation for such property.

CG&E and its subsidiaries adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), in 1993.
SFAS No. 109 requires deferred tax recognition for all temporary differences
in accordance with the liability method, requires that deferred tax
liabilities and assets be adjusted for enacted changes in tax laws or rates
and prohibits net-of-tax accounting and reporting. The Company believes it is
probable that the net future increases in income taxes payable will be
recovered from customers through future rates and, accordingly, has recorded a
net regulatory asset at December 31, 1993. Adoption of SFAS No. 109 had no
impact on results of operations.

The following are the tax effects of temporary differences resulting in
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
------------ ----------
(Thousands)
<S> <C> <C>
Deferred tax liabilities
Depreciation and other plant related items--net... $ 631,602 $ 641,597
Income taxes due from customers--net.............. 106,111 113,383
Deferred expenses and carrying costs.............. 70,569 57,064
Other liabilities................................. 38,407 49,694
--------- ---------
846,689 861,738
--------- ---------

Deferred tax assets
Investment tax credits............................ 49,867 50,538
Other assets...................................... 63,598 55,705
--------- ---------
113,465 106,243
--------- ---------
Net deferred tax liability................. $ 733,224 $ 755,495
========= =========
</TABLE>

<PAGE>
The following table reconciles the change in the net deferred tax
liability to the deferred income tax expense included in the accompanying
Consolidated Statement of Income for the year ended December 31, 1993:
<TABLE>
<CAPTION>
(Thousands)
<S> <C>
Net change in deferred tax liability per above table............. $(22,271)
Change in amounts due from customers - income taxes.............. 52,049
--------
Deferred income tax expense for the year
ended December 31, 1993..................................... $ 29,778
========
</TABLE>

In August 1993, President Clinton signed into law the Omnibus Budget
Reconciliation Act of 1993. Among the Act's provisions is an increase in the
corporate Federal income tax rate from 34% to 35%, retroactive to January 1,
1993. Under SFAS No. 109, the increase in the tax rate has resulted in an
increase in the net deferred tax liability and in income tax related
regulatory assets. In the above table, this increase in regulatory assets has
been included in "Change in amounts due from customers - income taxes". The
increase in the Federal income tax rate has not had a material impact on the
Company's results of operations.

RETIREMENT INCOME PLANS. CG&E and its subsidiaries have trusteed
non-contributory retirement income plans covering substantially all regular
employees. The benefits are based on the employee's compensation, years of
service, and age at retirement. The Companies funding policy is to
contribute annually to the plans an amount which is not less than the minimum
amount required by the Employee Retirement Income Security Act of 1974 and not
more than the maximum amount deductible for income tax purposes.

The plans funded status and amounts recognized on the Consolidated
Balance Sheet for the years 1993 and 1992 are presented below:

<TABLE>
<CAPTION>
December 31,
1993 1992
-------- --------
(Thousands)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation....................................... $328,075 $294,114
Nonvested benefit obligation.................................... 32,286 26,891
-------- --------
Total accumulated benefit obligation................................ 360,361 321,005
Projected future compensation increases............................. 110,332 101,915
-------- --------
Projected benefit obligation for service rendered................... 470,693 422,920
Plans' assets at fair value, primarily stocks and bonds............. 423,052 417,551
-------- --------
Plans' assets in excess of (less than) projected benefit obligation. (47,641) (5,369)
Unrecognized net gain............................................... (15,970) (55,936)
Unrecognized prior service cost..................................... 29,149 31,995
Unrecognized net transition asset................................... (7,364) (7,985)
-------- --------
Accrued pension cost........................................ $(41,826) $(37,295)
======== ========
</TABLE>
<PAGE>
During 1992, the Company recorded $28.4 million of accrued pension cost
in accordance with Statement of Financial Accounting Standards No. 88,
"Employers Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits". This amount represented the
costs associated with additional benefits extended in connection with an early
retirement program and workforce reduction discussed below.

The following assumptions were used in accounting for pensions:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Discount rate used to determine actuarial present value of the
projected benefit obligation............................... 7.50% 8.25% 8.25%
Assumed rate of increase in future compensation levels used to
determine actuarial present value of the projected
benefit obligation......................................... 5.00% 5.75% 5.75%
Expected long-term rate of return on plans' assets................ 9.50% 9.50% 9.50%
</TABLE>

Net pension cost for the years 1993, 1992 and 1991 included the
following components:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(Thousands)
<S> <C> <C> <C>
Service cost -- benefits earned........................... $ 9,174 $ 8,767 $ 7,973
Interest cost on projected benefit obligation............. 34,475 30,424 27,903
Reduction in pension costs from actual return on assets... (31,371) (27,015) (76,705)
Net amortization and deferral............................. (4,666) (7,472) 43,857
-------- -------- --------
Net periodic pension cost.......................... $ 7,612 $ 4,704 $ 3,028
======== ======== ========
</TABLE>

EARLY RETIREMENT PROGRAM AND WORKFORCE REDUCTIONS. As a result of unfavorable
rate orders received in 1992, CG&E and its subsidiaries eliminated
approximately 900 regular, temporary and contract positions. The workforce
reduction was accomplished through a voluntary early retirement program and
involuntary separations. At December 31, 1992, the accrued liability
associated with the workforce reduction was $30.4 million (including
$28.4 million of additional pension benefits discussed above). In accordance
with a stipulation approved by the PUCO in August 1993, CG&E is recovering the
majority of these costs through rates over a period of three years. The
balance of unrecovered costs at December 31, 1993, totaled $27.2 million, and
is reflected in "Other Assets--Other" on the Consolidated Balance Sheet.

POSTRETIREMENT BENEFITS. Effective January 1, 1993, CG&E and its subsidiaries
adopted Statement of Financial Accounting Standards No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106).
SFAS No. 106 requires the accrual of the expected cost of providing
postretirement benefits other than pensions to an employee and the employee s
covered dependents during the employee's active working career. SFAS No. 106
also requires the recognition of the actuarially determined total
postretirement benefit obligation earned by existing retirees. CG&E offers
health care and life insurance benefits which are subject to SFAS No. 106.

<PAGE>
Life insurance benefits are fully paid by the Company for qualified
employees. Eligibility to receive postretirement coverage is limited to those
employees who had participated in the plans and earned the right to
postretirement benefits prior to January 1, 1991.

In 1988, CG&E and its subsidiaries recognized the actuarially determined
accumulated benefit obligation for postretirement life insurance benefits
earned by retirees. The accumulated benefit obligation for active employees
is being amortized over 15 years, the employees estimated remaining service
lives. The accounting for postretirement life insurance benefits is not
impacted by the adoption of SFAS No. 106.

Postretirement health care benefits are subject to deductibles,
copayment provisions and other limitations. Retirees can participate in
health care plans by paying 100% of the group coverage premium. Prior to the
adoption of SFAS No. 106, the cost of postretirement health care benefits was
expensed by the Companies as paid. Beginning in 1993, the Companies began
recognizing the accumulated postretirement benefit obligation over 20 years in
accordance with SFAS No. 106.

The PUCO, under whose jurisdiction the majority of SFAS No. 106 costs
fall, authorized CG&E to begin recovering these costs in September 1993. The
adoption of SFAS No. 106 did not have a material effect on results of
operations.

The net periodic postretirement cost for the Companies postretirement
benefit plans for 1993 are presented below:

<TABLE>
<CAPTION>
Health Life
Care Insurance Total
------ --------- -------
(Thousands)
<S> <C> <C> <C>
Service cost...................... $ 995 $ 116 $ 1,111
Interest cost..................... 4,269 1,924 6,193
Amortization of the unrecognized
transition obligation........... 2,584 415 2,999
------ ------ -------
Postretirement benefit cost.. $7,848 $2,455 $10,303
====== ====== =======
</TABLE>

<PAGE>
The Companies accumulated postretirement benefit obligation and accrued
postretirement benefit cost under the plans at December 31, 1993 are as
follows:

<TABLE>
<CAPTION>
Health Life
Care Insurance Total
------ --------- -------
(Thousands)
<S> <C> <C> <C>
Retirees................................. $22,753 $22,271 $45,024
Active employees eligible to retire...... 2,363 1,494 3,857
Other active employees who are
plan participants...................... 27,501 2,912 30,413
------- ------- -------
Accumulated postretirement benefit
obligation............................. 52,617 26,677 79,294
Unrecognized net gain (loss)............. 3,822 (249) 3,573
Unrecognized transition obligation....... (49,104) (3,733) (52,837)
------- ------- -------
Accrued postretirement benefit cost.. $ 7,335 $22,695 $30,030
======= ======= =======
</TABLE>
The following assumptions were used to determine the accumulated
postretirement benefit obligation:

<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
------------ ----------
<S> <C> <C>
Discount rate................................... 7.50% 8.25%

Health care cost trend rate, gradually declining 10.00% to 12.00% to
to 5% in 2002 and 2003, respectively.......... 13.00% 15.00%
</TABLE>

Increasing the assumed medical care cost trend rates by one percentage point
in each year would increase the estimated accumulated postretirement benefit
obligation as of December 31, 1993 by $10.5 million and the net periodic
postretirement cost by $1.2 million. No funding has been established by the
Companies for postretirement benefits.

POSTEMPLOYMENT BENEFITS. In 1993, CG&E and its subsidiaries adopted Statement
of Financial Accounting Standards No. 112, "Employers Accounting for
Postemployment Benefits" (SFAS No. 112). SFAS No. 112 requires the accrual of
the cost of certain postemployment benefits provided to former or inactive
employees. The adoption of SFAS No. 112 did not have a material effect on
results of operations.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. The applicable regulatory
uniform systems of accounts define "allowance for funds used during
construction" (AFC) as including "the net cost for the period of construction
of borrowed funds used for construction purposes and a reasonable rate on
other funds when so used." This amount of AFC constitutes an actual cost of
construction and, under established regulatory rate practices, a return on and
<PAGE>
recovery of such costs heretofore has been permitted in determining the rates
charged for utility services.

For 1993, 1992 and 1991, AFC was accrued at average pre-tax rates of
8.33%, 10.18% and 10.38%, respectively, compounded semi-annually. AFC was
accrued at an average net-of-tax rate of 10.25% compounded semi-annually for
1991 on construction projects that commenced before December 31, 1982
(primarily Zimmer Station). AFC represents non-cash earnings and, as a
result, does not affect current cash flow.

PHASE-IN DEFERRED DEPRECIATION AND DEFERRED RETURN. In a 1992 rate order, the
PUCO authorized CG&E an annual increase in electric revenues of approximately
$116.4 million, to be phased in over a three-year period under a plan that met
the requirements of Statement of Financial Accounting Standards No. 92,
"Regulated Enterprises - Accounting for Phase-in Plans". The phase-in plan
was designed so that the three rate increases will provide revenues sufficient
to recover all operating expenses and provide a fair rate of return on plant
investment. In the first three years of the phase-in plan ordered by the
PUCO, rates charged to customers do not fully recover depreciation expense and
return on shareholders investment. This deficiency is being capitalized on
the Consolidated Balance Sheet and will be recovered over a 10-year period.
Beginning in the fourth year, the revenue levels authorized pursuant to the
phase-in plan are designed to be sufficient to recover that period's operating
expenses, a fair return on the unrecovered investment, and amortization of
deferred depreciation and deferred return recorded during the first three
years of the plan. Under the rate order, the amount of deferred depreciation
and deferred return, including carrying costs on the deferrals, estimated to
be recorded in 1994 totaled approximately $15 million, net of tax, in addition
to the $70 million already deferred. For information on the recovery of
phase-in deferrals, the write-off of a portion of Zimmer Station and other
matters related to the phased-in rate increase, see Note 5.

POST-IN-SERVICE DEFERRED OPERATING EXPENSES AND CARRYING COSTS. In accordance
with an order of the PUCO, CG&E capitalized carrying costs for Zimmer Station
from the time it was placed in service in March 1991 until the effective date
of new rates authorized by the PUCO's 1992 rate order which reflected Zimmer
Station. CG&E began recovering these carrying costs over the useful life of
Zimmer Station in accordance with a stipulation approved by the PUCO in August
1993 (see Note 5 herein). At December 31, 1993, the unamortized amount of
post-in-service carrying costs associated with Zimmer Station was $102.7
million and is reflected in "Other Assets--Post-in-service carrying costs and
deferred operating expenses" on the Consolidated Balance Sheet.

Effective in January 1992, the PUCO, at CG&E's request, authorized the
Company to defer Zimmer Station depreciation, operation and maintenance
expenses (exclusive of fuel costs) and property taxes, which were not being
recovered in rates charged to customers. The PUCO also authorized CG&E to
accrue carrying costs on the deferred expenses. In its 1992 rate order, the
PUCO authorized CG&E to begin recovering these deferred expenses and
associated carrying costs over a 10-year period. At December 31, 1993, the
unamortized amount of post-in-service deferred operating expenses associated
with Zimmer Station was $18.7 million and is reflected in "Other Assets--
<PAGE>
Post-in-service carrying costs and deferred operating expenses" on the
Consolidated Balance Sheet.

In May 1992, the first three units at the Woodsdale Generating Station
began commercial operation and, in July 1992, two additional units were
declared operational. In accordance with an order issued by the PUCO, CG&E
capitalized carrying costs on the first five units at Woodsdale Station and
deferred depreciation, operation and maintenance expenses (exclusive of fuel
costs) and property taxes from the time these units were placed in service
until the effective date of new rates approved by the PUCO in August 1993
which reflected the Woodsdale units. CG&E began recovering a portion of
carrying costs over the useful life of Woodsdale Station and the deferred
expenses over a 10-year period in accordance with the stipulation approved by
the PUCO in August 1993 (see Note 5 herein). At December 31, 1993,
unamortized carrying costs and deferred expenses associated with Woodsdale
Station were $19.2 million and $14.0 million, respectively, and are reflected
in "Other Assets--Post-in-service carrying costs and deferred operating
expenses" on the Consolidated Balance Sheet.

STATEMENT OF CASH FLOWS. For purposes of the Statement of Cash Flows, CG&E
and its subsidiaries consider short-term investments having maturities of
three months or less at time of purchase to be cash equivalents.

The cash amounts of interest (net of allowance for borrowed funds used
during construction) and income taxes paid by CG&E and its subsidiaries in
1993, 1992 and 1991 are as follows:

1993 1992 1991
-------- -------- --------
Interest (000).............. $151,867 $151,821 $142,269
Income taxes (000).......... $53,786 $26,021 $46,573

(2) LONG-TERM DEBT: Under the terms of the respective mortgage indentures
securing first mortgage bonds issued by CG&E and its subsidiaries,
substantially all property is subject to a direct first mortgage lien.

Improvement and sinking fund provisions contained in the indentures
applicable to the First Mortgage Bonds of CG&E issued prior to 1980, and of
Union Light issued prior to 1981, require deposits with the Trustee, on or
before April 30 of each year, of amounts in cash and/or principal amount of
bonds equal to 1% ($4,300,000) of the principal amount of bonds of the
applicable series originally outstanding less certain designated retirements.

In lieu of such cash deposits or delivery of bonds and as permitted
under the terms of the indentures, historically the companies have followed
the practice of pledging unfunded property additions to the extent of 166 2/3%
of the annual sinking fund requirements.

Over the next five years, long-term debt of CG&E and its subsidiaries
will mature or be subject to mandatory redemption as follows: $.3 million in
1994 and $130.0 million in 1997.

<PAGE>
In November 1993, CG&E redeemed $280 million principal amount of First
Mortgage Bonds, consisting of the 8 3/4% Series due 1996, 9.15% Series due
2004 and 9 1/4% Series due 2016. Reacquisition expenses associated with the
extinguishment of these First Mortgage Bonds are reflected in "Other Assets -
Other" on the Consolidated Balance Sheet ($9.5 million as of December 31,
1993) and, consistent with past regulatory treatment, are being amortized over
a period of 12 years. The total balance of reacquisition expenses associated
with early retirements of long-term debt reflected in "Other Assets - Other"
on the Consolidated Balance Sheet at December 31, 1993, is $27.4 million.

In January 1994, the Company issued $94.7 million principal amount of
pollution control revenue refunding bonds at interest rates of 5.45% and
5 1/2%, the proceeds from which were used to refund six different series of
pollution control revenue bonds with interest rates ranging from 6.70% to
9 5/8%.

In February 1994, the Company issued $220 million principal amount of
first mortgage bonds with interest rates of 5.80% and 6.45%, the proceeds from
which will be used to refund $210 million principal amount of First Mortgage
Bonds, consisting of the 8 5/8% Series due 2000, 8.55% Series due 2006 and
9 1/8% Series due 2008.

(3) COMMON STOCK: On December 2, 1992, a three-for-two stock split in the
form of a stock dividend was paid to shareholders of record November 2, 1992,
at which time there were 57,338,284 shares of common stock outstanding. The
split was accomplished through a reduction in additional paid-in capital and
an increase in common shares. In connection with the split, fractional
interests totalling 4,438 shares were retired for cash. The accompanying
consolidated financial statements have been retroactively adjusted to reflect
the split.

CG&E issued authorized but previously unissued shares of Common Stock as
follows:

<TABLE>
<CAPTION>
Shares Issued Shares Reserved
-------------------------- for Issuance at
1993 1992 December 31, 1993
----------------------------------------------
<S> <C> <C> <C>
Dividend Reinvestment and Stock Purchase Plan... 829,706 797,516 724,641
Employee Stock Purchase Plans................... 843,352 902,692 2,476,419
--------- --------- ---------
1,673,058 1,700,208 3,201,060
========= ========= =========
</TABLE>

Pursuant to a Shareholders Rights Plan adopted by CG&E in 1992, one
right is presently attached to and trading with each share of outstanding CG&E
common stock. The rights will be exercisable, if not otherwise approved by
the Board of Directors, only if a person or group becomes the beneficial owner
of 20% or more of CG&E's common stock, commences a tender or exchange offer
for 25% or more of the common stock, or is declared an Adverse Person by the
Board of Directors.

<PAGE>
(4) CUMULATIVE PREFERRED STOCK: Under CG&E's Articles of Incorporation,
the Company presently is authorized to issue a maximum of 6,000,000 shares of
preferred stock at a par value of $100 per share.

The Cumulative Preferred Stock, 9.15% Series is subject to mandatory
redemption each July 1, beginning in 1996, in an amount sufficient to retire
25,000 shares, and the 7 3/8% Series is subject to mandatory redemption each
August 1, beginning in 1998, in an amount sufficient to retire 40,000 shares,
each at $100 per share, plus accrued dividends. For both series, CG&E has the
noncumulative option to redeem up to a like amount of additional shares in
each year. CG&E has the option to satisfy the mandatory redemption
requirements in whole or in part by crediting shares acquired by CG&E. To the
extent CG&E does not satisfy its mandatory sinking fund obligation in any
year, such obligation must be satisfied in the succeeding year or years. If
CG&E is in arrears in the redemption pursuant to the mandatory sinking fund
requirement, CG&E shall not purchase or otherwise acquire for value, or pay
dividends on, Common Stock.

The Cumulative Preferred Stock, 7 7/8% Series is subject to mandatory
redemption on January 1, 2004, at $100 per share plus accrued dividends to the
redemption date.

On February 25, 1994, CG&E gave notice to the holders of the Cumulative
Preferred Stock, 9.28% Series of its intention to redeem all outstanding
shares at $101 per share, on April 1, 1994.

(5) RATES: In April 1991, CG&E filed a request with the PUCO to increase
electric rates by approximately $200 million annually. The primary reason for
the request was recovery of costs associated with Zimmer Station.

On November 3, 1993, the Supreme Court of Ohio issued its decision on
CG&E's appeal. The Court ruled that the PUCO does not have the authority to
order a phase-in of amounts granted in a rate proceeding and remanded the case
to the PUCO to set rates that provide the gross annual revenues determined in
accordance with Ohio statutes. The Court also said the PUCO must provide a
mechanism by which CG&E may recover costs already deferred under the phase-in
plan through the date of the order on remand. At December 31, 1993, CG&E had
deferred $70 million of costs, net of taxes, related to the phase-in plan. On
the other issues, the Court ruled in favor of the PUCO, stating the PUCO
<PAGE>
properly determined CG&E's cash working capital allowance and properly
excluded costs related to nuclear fuel, nuclear wind-down activities, and AFC
from rate base. As a result of the Supreme Court decision, CG&E wrote off
Zimmer Station costs of approximately $223 million, net of taxes, in November
1993.

In March 1994, CG&E negotiated a settlement agreement with the PUCO
Staff, the Ohio Office of Consumers' Counsel and other intervenors to address
the November 1993 ruling by the Supreme Court of Ohio. As part of the
agreement, CG&E has agreed not to seek early implementation of the third phase
of the 1992 rate increase, which means the $39.8 million increase will take
effect in May 1994 as originally scheduled. CG&E also agreed that it would
not seek accelerated recovery of deferrals related to the phase-in plan.
These deferrals will be recovered over the remaining seven year period
contemplated in the 1992 PUCO order. In addition, if the merger with PSI is
consummated, CG&E has agreed not to increase base electric rates prior to
January 1, 1999, except for increases in taxes, changes in federal or state
environmental laws, PUCO actions affecting electric utilities in general and
financial emergencies.

In September 1992, Union Light filed a request with the Kentucky Public
Service Commission (KPSC) to increase annual gas revenues by approximately
$9 million. Orders issued in mid-1993 by the KPSC authorized Union Light to
increase annual gas revenues by $4.2 million.

<PAGE>
(6) BANK LINES OF CREDIT AND REVOLVING CREDIT AGREEMENT: At December 31,
1993, CG&E and its subsidiaries had lines of credit totaling $123.4 million,
which were maintained by compensating balances and/or fees. Unused lines of
credit at December 31, 1993, totaled $102.4 million (generally subject to
withdrawal by the banks). Substantially all of the cash balances of CG&E and
its subsidiaries are maintained to compensate the respective banks for banking
services and to obtain lines of credit; however, CG&E and its subsidiaries
have the right of withdrawal of such funds. The maximum amount of outstanding
short-term notes payable, including commercial paper, authorized by the PUCO
to be incurred by CG&E at any time through June 30, 1994 is $200 million and,
in addition, FERC authorized Union Light to issue a maximum of $35 million of
short-term notes payable through December 31, 1994.

CG&E has a bank revolving credit agreement providing for borrowings of
up to $200 million through September 1, 1996. At the option of CG&E, interest
rates on borrowings under the agreement may be based upon the prevailing prime
rate or certain other interest measurements. CG&E must pay a commitment fee
of 3/16% on the total amount of the credit agreement. CG&E has not made any
borrowings under this agreement.

(7) LEASES: CG&E and its subsidiaries have entered into operating leases
covering various facilities and properties, including office space, and
computer, communications and miscellaneous equipment. Rental payments for
operating leases are primarily charged to operating expenses. Total rental
payments for all operating leases were $21,756,000, $22,882,000 and
$20,984,000 for the years 1993, 1992 and 1991, respectively. Future minimum
lease payments required by CG&E and its subsidiaries under such operating
leases that have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 1993 were as follows:
<TABLE>
<CAPTION>
Year Ended December 31, (Thousands)
--------------------------------------------------
<S> <C>
1994............................. $ 16,344
1995............................. 14,731
1996............................. 9,214
1997............................. 6,506
1998............................. 3,323
Future Years..................... 14,470
---------
Total Minimum Lease Commitments.. $ 64,588
=========
</TABLE>

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS: The Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments" (SFAS No. 107), requires disclosure of the estimated fair value
of certain financial instruments of the Company. This information does not
purport to be a valuation of the Company as a whole.

<PAGE>
The following methods and assumptions were used to estimate the fair
value of each major class of financial instrument of CG&E and its subsidiaries
as required by SFAS No. 107:

Cash, Notes Payable, Accounts Receivable and Accounts Payable. The carrying
amount as reflected on the Consolidated Balance Sheet approximates the fair
value of these instruments due to the short period to maturity.

Long-Term Debt. The aggregate fair values for the first mortgage bonds and
other long-term debt of CG&E and its subsidiaries are based on the present
value of future cash flows. The discount rates used approximate the
incremental borrowing costs for similar instruments. Certain notes payable
have been excluded due to immateriality.

Cumulative Preferred Stock. The aggregate fair value for CG&E's preferred
stock is based on the latest closing prices quoted on the New York Stock
Exchange for each series.

The estimated fair values of long-term debt and preferred stock at
December 31, 1993 and 1992, are as follows:

<TABLE>
<CAPTION>
1993 1992
----------- -----------
(Thousands)
<S> <C> <C>
Long-Term Debt:
First mortgage bonds................ $ 1,847,150 $ 1,739,635
Other long-term debt................ $ 192,953 $ 185,929
Preferred Stock:
Not subject to mandatory redemption. $ 105,235 $ 101,935
Subject to mandatory redemption..... $ 230,363 $ 217,938
</TABLE>

(9) COMMITMENTS AND CONTINGENCIES: In December 1992, CG&E, PSI Resources,
Inc. (PSI) and PSI Energy, Inc., PSI's principal subsidiary, an Indiana
electric utility (PSI Energy), entered into an agreement which, as
subsequently amended (the Merger Agreement) provides for the merger of PSI
into a newly formed corporation named CINergy Corp. (CINergy) and the merger
of a newly formed subsidiary of CINergy into CG&E. For 1993, PSI had
operating revenues of $1.1 billion and earnings on common shares of
$96.4 million. As a result of the merger, holders of CG&E Common Stock and
PSI Common Stock will become the holders of CINergy Common Stock. CINergy
will become a holding company required to be registered under the Public
Utility Holding Company Act of 1935 (PUHCA) with two operating subsidiaries,
CG&E and PSI Energy. Union Light will remain a subsidiary of CG&E. Under the
Merger Agreement, each share of CG&E Common Stock will be converted into the
right to receive one share of CINergy Common Stock. Each share of PSI Common
Stock will be converted into the right to receive that number of shares of
CINergy Common Stock obtained by dividing $30.69 by the average closing price
of CG&E Common Stock for the 15 consecutive trading days preceding the fifth
trading day prior to the merger; provided that, if the actual quotient
obtained thereby is less than .909, the quotient shall be .909, and if the
actual quotient obtained thereby is more than 1.023, the quotient shall be
1.023.

<PAGE>
The merger will be accounted for as a "pooling of interests", and it is
anticipated that the transaction will be completed in the third quarter of
1994. The merger is subject to approval by the Securities and Exchange
Commission (SEC) and FERC. Shareholders of both companies approved the merger
in November 1993.

CG&E also filed with FERC a unilateral offer of settlement addressing
all issues raised in the KPSC's application for rehearing with FERC.
Although it is the belief of CG&E and PSI that no state utility commissions
have jurisdiction over approval of the proposed merger, an application has
been filed with the KPSC to comply with the Staff of the KPSC's position that
the KPSC's authorization is required for the indirect acquisition of control
of CG&E's Kentucky subsidiary, The Union Light, Heat and Power Company, by
CINergy. As part of the settlement offer, Union Light will agree not to
increase gas base rates as a result of the merger except to reflect any
effects that may result from the divestiture of Union Light's gas operations
discussed below.

<PAGE>
CG&E and PSI also submitted to FERC the operating agreement among
CINergy Services, Inc., a subsidiary of CINergy, and CG&E and PSI Energy that
provides for the coordinated planning and operation of the electric generation
and transmission and other facilities of CG&E and PSI as an integrated utility
system. It also establishes a framework for the equitable sharing of the
benefits and costs of such coordinated operations between CG&E and PSI. The
parties to the Ohio and Indiana FERC settlements have agreed to support or not
oppose the operating agreement, and the settlements are conditioned upon FERC
approving the filed operating agreement without material changes.

PUHCA imposes restrictions on the operations of registered holding
company systems. Among these are requirements that securities issuances, sales
and acquisitions of utility assets or of securities of utility companies and
acquisitions of interests in any other business be approved by the SEC. PUHCA
also limits the ability of registered holding companies to engage in
non-utility ventures and regulates holding company system service companies
and the rendering of services by holding company affiliates to the system s
utilities. The SEC has interpreted the PUHCA to preclude registered holding
companies, with some exceptions, from owning both electric and gas utility
systems. The SEC may require that CG&E divest its gas properties within a
reasonable time after the merger in order to approve the merger as it has done
in many cases involving the acquisition by a holding company of a combination
gas and electric company. In some cases, the SEC has allowed the retention of
the gas properties or deferred the question of divestiture for a substantial
period of time. In those cases in which divestiture has taken place, the SEC
usually has allowed companies sufficient time to accomplish the divestiture in
a manner that protects shareholder value. CG&E believes good arguments exist
to allow retention of the gas assets, and CG&E will request that it be allowed
to do so.

CG&E and its subsidiaries are subject to regulation by various Federal,
state and local authorities relative to air and water quality, solid and
hazardous waste disposal, and other environmental matters. Compliance
programs necessary to meet existing and future environmental laws and
regulations will increase the cost of utility service. Capital expenditures
related to environmental compliance are included in the Companies estimated
construction programs (see "Construction Program and Capital Requirements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" herein) and are expected to be recoverable through rates.

<PAGE>
In April 1992, FERC issued Order 636 which restructures the
relationships between interstate gas pipelines and their customers for gas
sales and transportation services. Order 636 will result in changes in the
way CG&E and Union Light purchase gas supplies and contract for transportation
and storage services, and will result in increased risks in managing the
ability to meet demand.

Order 636 also allows pipelines to recover transition costs they incur
in complying with the Order from customers, including CG&E and Union Light.
An agreement between CG&E and residential and industrial customer groups
regarding recovery of these transition costs has been submitted to the PUCO
for approval. Order 636 transition costs are not expected to significantly
impact the Company.

(10) COMMON OWNERSHIP OF ELECTRIC UTILITY PLANT: CG&E, Columbus Southern
Power Company, and The Dayton Power and Light Company have constructed
electric generating units and related transmission facilities on varying
common ownership bases as follows:

<TABLE>
<CAPTION>
CG&E's share at December 31, 1993
-----------------------------------------------
Percent Property, Plant Accumulated Construction
Owned by and Equipment Provisions for Work In
CG&E In Service (a) Depreciation Progress (b)
--------- -------------- --------------- ------------
(Thousands)
<S> <C> <C> <C> <C>
Production
Miami Fort Station (Units 7 and 8). 64 $ 197,865 $ 94,653 $ 825
W.C. Beckjord Station (Unit 6)..... 37.5 $ 37,741 $ 21,042 $ 251
J.M. Stuart Station................ 39 $ 251,542 $ 99,029 $ 10,377
Conesville Station (Unit 4)........ 40 $ 69,355 $ 29,218 $ 2,511
Wm. H. Zimmer Station.............. 46.5 $ 1,209,632 $ 97,763 $ 2,048
East Bend Station.................. 69 $ 324,165 $ 131,984 $ 1,568
Killen Station..................... 33 $ 186,055 $ 65,990 $ 271
Transmission......................... various $ 62,139 $ 26,346 $ 4

<FN>
(a) The Consolidated Statement of Income reflects CG&E's portion of all operating costs
associated with the commonly owned facilities.
(b) Each participant must provide funds for its share of the construction project.
</TABLE>

<PAGE>
(11) UNAUDITED QUARTERLY FINANCIAL DATA (THOUSANDS):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Total Operating Revenues......... $ 493,476 $ 367,470 $ 408,638 $ 482,157 $ 1,751,741
Operating Income................. $ 89,683 $ 63,652 $ 85,356 $ 80,809 $ 319,500
Net Income (Loss)................ $ 68,401 $ 39,928 $ 59,519 $(176,572)(a) $ (8,724)(a)
Earnings (Loss) on Common Shares. $ 62,111 $ 33,638 $ 53,228 $(182,861)(a) $ (33,884)(a)
Average Number of Common
Shares Outstanding............ 86,722 87,143 87,539 87,937
Earnings (Loss) per Common Share. $ .71 $ .38 $ .61 $ (2.08)(a) (b)
1992
Total Operating Revenues......... $ 446,529 $ 334,353 $ 352,139 $ 420,405 $ 1,553,426
Operating Income................. $ 72,333 $ 50,212 $ 68,460 $ 68,696 $ 259,701
Net Income....................... $ 67,086 $ 44,050 $ 46,063 $ 45,062 $ 202,261
Earnings on Common Shares........ $ 59,838 $ 37,350 $ 38,691 $ 38,772 $ 174,651
Average Number of Common Shares
Outstanding................... 84,946 85,376 85,797 86,251
Earnings per Common Share........ $ .70 $ .43 $ .45 $ .45 (b)

<FN>
(a) Reflects the write-off of a portion of Zimmer Station of approximately $223 million, net of
taxes.
(b) Total does not equal annual earnings per share due to change in shares outstanding.
</TABLE>

<PAGE>
(12) FINANCIAL INFORMATION BY BUSINESS SEGMENTS (THOUSANDS):

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Operating Operating Income Provision for Construction
Revenues Income Taxes Depreciation Expenditures(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Electric................ $1,282,445 $286,609 $102,034 $134,121 $ 157,194
Gas..................... 469,296 32,891 6,936 17,940 44,720
---------- -------- -------- -------- ---------
Total............... $1,751,741 $319,500 $108,970 $152,061 $ 201,914
========== ======== ======== ======== =========

YEAR ENDED DECEMBER 31, 1992
Electric................ $1,159,456 $236,152 $ 93,286 $125,298 $ 185,592
Gas..................... 393,970 23,549 2,733 15,698 41,447
---------- -------- -------- -------- ---------
Total............... $1,553,426 $259,701 $ 96,019 $140,996 $ 227,039
========== ======== ======== ======== =========

Year Ended December 31, 1991
Electric................ $1,147,395 $196,982 $ 90,709 $116,282 $ 343,631
Gas..................... 370,703 16,190 (928) 14,310 66,704
---------- -------- -------- -------- ---------
Total............... $1,518,098 $213,172 $ 89,781 $130,592 $ 410,335
========== ======== ======== ======== =========
<FN>
(a) Excludes construction expenditures for non-utility plant of $(51,000) in 1993, $2,694,000
in 1992, and $(90,000) in 1991.
</TABLE>

<TABLE>
<CAPTION>
December 31,
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Property, Plant and Equipment, net--
Electric....................... $3,281,620 $3,469,018 $3,410,782
Gas............................ 504,020 476,397 450,399
---------- ---------- ----------
3,785,640 3,945,415 3,861,181
Other Corporate Assets.............. 1,357,883 856,777 722,605
---------- ---------- ----------
Total Assets.............. $5,143,523 $4,802,192 $4,583,786
========== ========== ==========
</TABLE>

<PAGE>
(13) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION: The
following pro forma condensed consolidated financial information combines the
historical consolidated statements of income and consolidated balance sheets
of CG&E and PSI after giving effect to the merger. The unaudited Pro Forma
Condensed Consolidated Statements of Income for each of the three years ended
December 31, 1993, give effect to the merger as if it had occurred at January
1, 1991. The unaudited Pro Forma Condensed Consolidated Balance Sheet at
December 31, 1993, gives effect to the merger as if it had occurred at
December 31, 1993. These statements are prepared on the basis of accounting
for the merger as a pooling of interests and are based on the assumptions set
forth in the notes thereto. In addition, the following pro forma condensed
consolidated financial information should be read in conjunction with the
historical consolidated financial statements and related notes thereto of CG&E
and PSI. The following information is not necessarily indicative of the
operating results or financial position that would have occurred had the
merger been consummated at the beginning of the periods, or on the date, for
which the merger is being given effect, nor is it necessarily indicative of
future operating results or financial position.

Pro Forma Condensed Consolidated Statements of Income (in millions, except per
share amounts):

<TABLE>
<CAPTION>
1993
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 1,752 $ 1,088 $ 2,840
Operating expenses.............................. 1,432 938 2,370
--------- -------- ----------
Operating income................................ 320 150 470
Other income and deductions -- net.............. (173)* 24 (149)
Interest charges -- net......................... 156 65 221
Preferred dividend requirement.................. 25 13 38
--------- -------- ----------
Net income (loss)............................... $ (34) $ 96 $ 62
========= ======== ==========

Average common shares outstanding (1,2)......... 87 56 138/144
Earnings (Loss) per common share (1,2).......... $ (.39) $ 1.73 $ .45/.43

<FN>
*Reflects the write-off of a portion of Zimmer Station of approximately $223 million, net of taxes.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
1992
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 1,553 $ 1,081 $ 2,634
Operating expenses.............................. 1,293 916 2,209
--------- -------- ----------
Operating income................................ 260 165 425
Other income and deductions -- net.............. 100 5 105
Interest charges -- net......................... 158 67 225
Preferred dividend requirement.................. 27 7 34
--------- -------- ----------
Net income...................................... $ 175 $ 96 $ 271
========= ======== ==========

Average common shares outstanding (1,2)......... 86 55 136/142
Earnings per common share (1,2)................. $ 2.04 $ 1.75 $2.00/1.91
</TABLE>

<TABLE>
<CAPTION>
1991
-----------------------------------
Pro
Historical Forma
--------------------- ----------
CG&E PSI CINergy
--------- --------- ----------
<S> <C> <C> <C>
Operating revenues.............................. $ 1,518 $ 1,122 $ 2,640
Operating expenses.............................. 1,305 958 2,263
--------- -------- ----------
Operating income................................ 213 164 377
Other income and deductions -- net.............. 141 (79) 62
Interest charges -- net......................... 147 56 203
Preferred dividend requirement.................. 25 10 35
--------- -------- ----------
Net income...................................... $ 182 $ 19 $ 201
========= ======== ==========

Average common shares outstanding (1,2)......... 82 55 132/138
Earnings per common share (1,2)................. $ 2.21 $ .35 $1.53/1.46
</TABLE>

<PAGE>
Pro Forma Condensed Consolidated Balance Sheet (in millions):

<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------
Historical Pro Forma
------------------------ ---------
CG&E PSI CINergy
--------- --------- ---------
<S> <C> <C> <C>
Assets

Utility plant -- original cost
In service...................................... $ 5,188 $ 3,449 $ 8,637
Accumulated depreciation........................ 1,472 1,456 2,928
--------- --------- ---------
3,716 1,993 5,709
Construction work in progress................... 70 244 314
--------- --------- ---------
Total utility plant........................... 3,786 2,237 6,023
Current assets.................................... 606 197 803
Other assets...................................... 752 230 982
--------- --------- ---------
Total assets.................................. $ 5,144 $ 2,664 $ 7,808
========= ========= =========

Capitalization and Liabilities

Common stock (3).................................. $ 749 $ 1 $ 1
Paid-in capital (3)............................... 314 251 1,314
Retained earnings................................. 456 451 907
--------- --------- ---------
Total common stock equity..................... 1,519 703 2,222

Cumulative preferred stock........................ 330 188 518
Long-term debt.................................... 1,829 816 2,645
--------- --------- ---------
Total capitalization.......................... 3,678 1,707 5,385

Current liabilities............................... 441 567 1,008
Deferred income taxes............................. 734 286 1,020
Other liabilities................................. 291 104 395
--------- --------- ---------
Total capitalization and other liabilities.... $ 5,144 $ 2,664 $ 7,808
========= ========= =========
</TABLE>

<PAGE>
Notes to Pro Forma Condensed Consolidated Financial Information:

(1) Outstanding shares of CG&E common stock have been restated for a 3-for-2
stock split paid in the form of a dividend in December 1992.
(2) The Pro Forma Condensed Consolidated Statements of Income reflect the
conversion of each share of CG&E common stock outstanding into one share
of CINergy common stock and each share of PSI common stock outstanding
into (a) .909 share and (b) 1.023 shares of CINergy common stock. The
actual PSI conversion ratio may be lower than 1.023 or higher than .909
depending upon the closing sales price of CG&E common stock during a
period prior to the consummation of the merger.
(3) The pro forma "Common stock" and "Paid-in capital" amounts reflected in
the Pro Forma Condensed Consolidated Balance Sheet are based on the
conversion of each share of CG&E common stock outstanding into one share
of CINergy common stock ($.01 par value) and each share of PSI common
stock outstanding into 1.023 shares of CINergy common stock ($.01 par
value). Any PSI conversion ratio lower than 1.023 would result in a
reallocation of amounts between "Common stock" and "Paid-in capital".
However, any such reallocation would have no effect on "Total common
stock equity".
(4) Intercompany transactions (including purchased and exchanged power
transactions) between CG&E and PSI during the periods presented were not
material and accordingly no pro forma adjustments were made to eliminate
such transactions.
(5) Transaction costs, estimated to be approximately $47 million, are being
deferred by CG&E and PSI. In a settlement agreement filed with the
PUCO, CG&E has agreed to, among other things, amortize its portion of
merger-related transaction costs over a period ending by January 1,
1999. CG&E will also be permitted to retain all of its non-fuel savings
from the merger until 1999. For additional information on the
settlement agreement, see Note 5 to the Consolidated Financial
Statements. PSI's portion of the costs are being deferred for post-
merger recovery through customer rates.

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Cincinnati Gas & Electric Company:

We have audited the accompanying consolidated balance sheet and
schedules of common shareholders' equity and cumulative preferred shares and
long-term debt of THE CINCINNATI GAS & ELECTRIC COMPANY (an Ohio Corporation)
and its subsidiary companies as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in common shareholders' equity and
cash flows and schedule of taxes for each of the three years in the period
ended December 31, 1993. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Cincinnati Gas
& Electric Company and its subsidiary companies as of December 31, 1993 and
1992, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.

As explained in Note 1 to the consolidated financial statements, the
Company changed its methods of accounting for income taxes, postretirement
health care benefits and postemployment benefits effective January 1,1993.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules listed in
Item 14 are presented for purposes of complying with the Securities and
Exchange Commission's Rules and Regulations under the Securities Exchange Act
of 1934 and are not a required part of the basic financial statements. The
supplemental schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN & CO.

Cincinnati, Ohio,
January 24, 1994.

<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------

Not Applicable.

PART III

Items 10., 11., 12. and 13.
- ---------------------------

The information required by Items 11, 12, and 13 will be included in
CG&E's definitive proxy statement which will be filed with the Securities and
Exchange Commission in connection with the 1994 Annual meeting of Shareholders
and is incorporated herein by reference. The information regarding executive
officers of CG&E, called for by Item 10, is furnished in Part I of this Annual
Report.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------- ----------------------------------------------------------------

(a) Listed below are all financial statements, schedules, and exhibits
attached hereto, incorporated herein, and filed as a part of this
Annual Report.

(1) Consolidated Financial Statements:

Report of Independent Public Accountants

Consolidated Balance Sheet, December 31, 1993 and 1992

Consolidated Statement of Income for the three years ended
December 31, 1993

Consolidated Statement of Cash Flows for the three years ended
December 31, 1993

Consolidated Statement of Changes In Common Shareholders' Equity
for the three years ended December 31, 1993

Schedule of Common Shareholders' Equity and Cumulative Preferred
Shares, December 31, 1993 and 1992

Schedule of Long-Term Debt, December 31, 1993 and 1992

Schedule of Taxes for the three years ended December 31, 1993

Notes to Consolidated Financial Statements

<PAGE>
(2) Financial Statement Schedules:

#Schedule V -- Property, Plant and Equipment (1993, 1992 and
1991)

#Schedule VI -- Accumulated Provisions for Depreciation (1993,
1992 and 1991)

#Schedule VIII -- Other Accumulated Provisions (1993, 1992 and
1991)

#Schedule IX -- Short-Term Borrowings (1993, 1992 and 1991)

(3) Exhibits:

Exhibit
No.
-------
*2-A-1 -- Amended and Restated Agreement and Plan of
Reorganization by and among CG&E, PSI Resources,
Inc., PSI Energy, Inc., CINergy Corp. and CINergy Sub,
Inc., dated as of December 11, 1992, as amended on
July 2, 1993 and as of September 10, 1993 (filed as
Annex A to Amendment No. 3 to Registration Statement
No. 33-59964 on Form S-4)
*2-A-2 -- Form of CG&E Stock Option Agreement by and between
CG&E and PSI Resources, Inc. dated December 11, 1992
(filed as Exhibit 28 to Form 8-K dated December 11,
1992)
*2-A-3 -- Form of PSI Stock Option Agreement by and among CG&E,
PSI Resources, Inc. and PSI Energy, Inc. dated
December 11, 1992 (filed as Exhibit 28 to Form 8-K
dated December 11, 1992)
3-A-1 -- Copy of Amended Articles of Incorporation of CG&E
effective January 24, 1994
*3-B -- Copy of Regulations of CG&E as amended, adopted by
shareholders April 16, 1987 (filed as Exhibit 3-B to
Form 10-Q for the quarter ended March 31, 1987)
*4-A-1 -- Copy of Indenture between CG&E and The Bank of New
York dated as of August 1, 1936 (filed as Exhibit B-2
to Registration Statement No. 2-2374)
*4-A-2 -- Copy of Tenth Supplemental Indenture between CG&E and
The Bank of New York dated as of July 1, 1967 (filed
as Exhibit 2-B-11 to Registration Statement No.
2-26549)
*4-A-3 -- Copy of Eleventh Supplemental Indenture between CG&E
and The Bank of New York dated as of May 1, 1969
(filed as Exhibit 2-B-12 to Registration Statement No.
2-32063)
*4-A-4 -- Copy of Twelfth Supplemental Indenture between CG&E
and The Bank of New York dated as of December 1, 1970
(filed as Exhibit 2-B-13 to Registration Statement No.
2-38551)
<PAGE>
*4-A-5 -- Copy of Thirteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of November 1, 1971
(filed as Exhibit 2-B-14 to Registration Statement No.
2-41974)
*4-A-6 -- Copy of Fourteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of November 2, 1972
(filed as Exhibit 2-B-15 to Registration Statement No.
2-60961)
*4-A-7 -- Copy of Fifteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of August 1, 1973
(filed as Exhibit 2-B-16 to Registration Statement No.
2-60961)
*4-A-8 -- Copy of Eighteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of October 15, 1976
(filed as Exhibit 2-B-19 to Registration Statement No.
2-57243)
*4-A-9 -- Copy of Nineteenth Supplemental Indenture between CG&E
and The Bank of New York dated as of April 15, 1978
(filed as Exhibit 1 to Form 10-Q for the quarter ended
June 30, 1978)
*4-A-10 -- Copy of Twenty-fifth Supplemental Indenture between
CG&E and The Bank of New York dated as of December 1,
1985 (filed as Exhibit 4-A-20 to Form 10-K for the
year ended December 31, 1985)
*4-A-11 -- Copy of Twenty-ninth Supplemental Indenture between
CG&E and The Bank of New York dated as of June 15,
1989 (filed as Exhibit 4-A to Form 10-Q for the
quarter ended June 30, 1989)
*4-A-12 -- Copy of Thirtieth Supplemental Indenture between CG&E
and The Bank of New York dated as of May 1, 1990
(filed as Exhibit 4-A to Form 10-Q for the quarter
ended June 30, 1990)
*4-A-13 -- Copy of Thirty-first Supplemental Indenture between
CG&E and The Bank of New York dated as of December 1,
1990 (filed as Exhibit 4-A-21 to Form 10-K for the
year ended December 31, 1990)
*4-A-14 -- Copy of Thirty-second Supplemental Indenture between
CG&E and The Bank of New York dated as of December 15,
1991 (filed as Exhibit 4-A-29 to Registration
Statement No. 33-45115 of CG&E)
*4-A-15 -- Copy of Thirty-third Supplemental Indenture between
CG&E and The Bank of New York dated as of September 1,
1992 (filed as Exhibit 4-A-30 to Registration
Statement No. 33-53578 of CG&E)
*4-A-16 -- Copy of Thirty-fourth Supplemental Indenture between
CG&E and The Bank of New York dated as of October 1,
1993 (filed as Exhibit 4-A to Form 10-Q for the
quarter ended September 30, 1993)
*4-A-17 -- Copy of Thirty-fifth Supplemental Indenture between
CG&E and The Bank of New York dated as of January 1,
1994 (filed as Exhibit 4-A-32 to Registration
Statement No. 33-52335 of CG&E)
<PAGE>
*4-A-18 -- Copy of Thirty-sixth Supplemental Indenture between
CG&E and The Bank of New York dated as of February 15,
1994 (filed as Exhibit 4-A-33 to Registration
Statement No. 33-52335 of CG&E)
*4-A-19 -- Copy of Loan Agreement between CG&E and County of
Boone, Kentucky dated as of February 1, 1985 (filed as
Exhibit 4-A-26 to 1984 Form 10-K of CG&E)
*4-A-20 -- Copy of Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
December 1, 1985 (filed as Exhibit 4-A-28 to Form 10-K
for the year ended December 31, 1985)
*4-A-21 -- Copy of Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
December 1, 1985 (filed as Exhibit 4-A-29 to Form 10-K
for the year ended December 31, 1985)
*4-A-22 -- Copy of Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
December 1, 1985 (filed as Exhibit 4-A-30 to Form 10-K
for the year ended December 31, 1985)
*4-A-23 -- Copy of Repayment Agreement between CG&E and The
Dayton Power and Light Company dated as of
December 23, 1992 (filed as Exhibit 4-A-29 to Form
10-K for the year ended December 31, 1992)
4-A-24 -- Copy of Loan Agreement between CG&E and State of Ohio
Water Development Authority dated as of January 1,
1994
4-A-25 -- Copy of Loan Agreement between CG&E and State of Ohio
Air Quality Development Authority dated as of
January 1, 1994
4-A-26 -- Copy of Loan Agreement between CG&E and County of
Boone, Kentucky dated as of January 1, 1994
*4-B-1 -- Copy of First Mortgage between Union Light and The
Bank of New York dated as of February 1, 1949 (filed
as Exhibit 7 to Registration Statement No. 2-7793)
*4-B-2 -- Copy of Fifth Supplemental Indenture between Union
Light and The Bank of New York dated as of January 1,
1967 (filed as Exhibit 2-C-6 to Registration Statement
No. 2-60961 of CG&E)
*4-B-3 -- Copy of Seventh Supplemental Indenture between Union
Light and The Bank of New York dated as of October 1,
1973 (filed as Exhibit 2-C-7 to Registration Statement
No. 2-60961 of CG&E)
*4-B-4 -- Copy of Eighth Supplemental Indenture between Union
Light and The Bank of New York dated as of December 1,
1978 (filed as Exhibit 2-C-8 to Registration Statement
No. 2-63591 of CG&E)
*4-B-5 -- Copy of Tenth Supplemental Indenture between Union
Light and The Bank of New York dated as of July 1,
1989 (filed as Exhibit 4-B to Form 10-Q of CG&E for
the quarter ended June 30, 1989)
<PAGE>
*4-B-6 -- Copy of Eleventh Supplemental Indenture between Union
Light and The Bank of New York dated as of June 1,
1990 (filed as Exhibit 4-B to Form 10-Q of CG&E for
the quarter ended June 30, 1990)
*4-B-7 -- Copy of Twelfth Supplemental Indenture between Union
Light and The Bank of New York dated as of November
15, 1990 (filed as Exhibit 4-B-8 to Form 10-K for the
year ended December 31, 1990)
*4-B-8 -- Copy of Thirteenth Supplemental Indenture between
Union Light and The Bank of New York dated as of
August 1, 1992 (filed as Exhibit 4-B-9 to Form 10-K
for the year ended December 31, 1992)
*4-C -- Rights Agreement between The Cincinnati Gas & Electric
Company and The Fifth Third Bank, as Rights Agent,
dated as of July 15, 1992 (filed as Exhibit 4 to Form
8-K dated June 17, 1992)
*10-A-1 -- Copy of Deferred Compensation Agreement between
Jackson H. Randolph and CG&E dated January 1, 1992
(filed as Exhibit 10-B-1 to Form 10-K for the year
ended December 31, 1992)
*10-A-2 -- Copy of Supplemental Executive Retirement Income Plan
between CG&E and certain executive officers (filed as
Exhibit 10-B-4 to 1988 Form 10-K of CG&E)
*10-A-3 -- Copy of Amendment to Supplemental Executive
Retirement Income Plan between CG&E and certain
executive officers (filed as Exhibit 10-B-3 to Form
10-K for the year ended December 31, 1992)
*10-A-4 -- Copy of Key Employee Annual Incentive Plan offered by
CG&E to executive officers and other key employees
(filed as Exhibit 10-B-5 to 1988 Form 10-K of CG&E)
*10-A-5 -- Copy of Executive Severance Agreement between CG&E and
each of its executive officers (filed as Exhibit 10-B-
6 to 1989 Form 10-K of CG&E)
*10-A-6 -- Copy of Amendment to Executive Severance Agreement
between CG&E and each of its executive officers (filed
as Exhibit 10-B-6 to Form 10-K for the year ended
December 31, 1992)
*10-A-7 -- Copy of Employment Agreement by and among CG&E,
CINergy Corp., PSI Resources, Inc., PSI Energy, Inc.
and Jackson H. Randolph dated December 11, 1992
(filed as Exhibit 10-B-7 to Form 10-K for the year
ended December 31, 1992)
*10-A-8 -- Copy of Employment Agreement by and among PSI
Resources, Inc., PSI Energy, Inc., CG&E, CINergy Corp.
and James E. Rogers, Jr., dated December 11, 1992
(filed as Exhibit 10-B-8 to Form 10-K for the year
ended December 31, 1992)
21 -- Not applicable
23 -- Consent of Independent Public Accountants dated as of
March 15, 1994

<PAGE>
(b) Reports on Form 8-K filed during the quarter ended December 31,
1993:

Date of Report Item Reported
-------------- -------------

October 20, 1993 Item 7. Financial Statements
and Exhibits
October 26, 1993 Item 5. Other Events
Item 7. Financial Statements
and Exhibits
- -----------------
# All schedules, other than Schedules V, VI, VIII, and IX, are omitted as the
information is not required or is otherwise furnished, per Title 17, Section
210.5-04, CFR.

* The exhibits with an asterisk have been filed with the Securities and
Exchange Commission and are incorporated herein by reference.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES CONSOLIDATED
-------------------------------------
Property, Plant and Equipment
-----------------------------
For the Year Ended December 31, 1993
------------------------------------

(Thousands of Dollars)

Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other changes-- Balance at
December 31, Additions Retirements debit or December 31,
Classification 1992 at cost or sales (credit)(a) 1993
-------------- ------------ --------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Production $3,045,705 $ 47,717 (b) $ 3,899 $ (229,868)(c) $2,859,655
Transmission 357,056 9,549 1,161 (57) 365,387
Distribution 941,419 65,853 11,185 187 996,274
General 60,608 3,143 1,751 (1,116) 60,884
Plant held for future use 2,193 -- -- (130) 2,063
Completed construction--not classified (d) 62,498 47,037 -- -- 109,535
---------- -------- ------- ---------- ----------
Total electric 4,469,479 173,299 17,996 (230,984) 4,393,798
---------- -------- ------- ---------- ----------
GAS
Production 10,064 51 1 -- 10,114
Storage 22 -- -- -- 22
Distribution 537,244 40,353 2,800 -- 574,797
General 16,691 1,822 931 7 17,589
Plant held for future use 25 -- -- -- 25
Completed construction--not classified (d) 13,051 (4,019) -- -- 9,032
---------- -------- ------- ---------- ----------
Total gas 577,097 38,207 3,732 7 611,579
---------- -------- ------- ---------- ----------
COMMON 114,753 64,533 602 1,127 179,811
Completed construction--not classified (d) 1,706 1,708 -- -- 3,414
---------- -------- ------- ---------- ----------
Total common 116,459 66,241 602 1,127 183,225
---------- -------- ------- ---------- ----------
Property, plant and equipment in service $5,163,035 $277,747 $22,330 $ (229,850) $5,188,602
========== ======== ======= ========== ==========
CONSTRUCTION WORK IN PROGRESS (d)
Electric $ 91,311 $(29,764) $ -- $ 340 (e) $ 61,887
Gas 6,887 (925) -- -- 5,962
Common 46,650 (45,148) -- -- 1,502
---------- -------- ------- ---------- ----------
Total construction work in progress $ 144,848 $(75,837) $ -- $ 340 $ 69,351
========== ======== ======= ========== ==========
<FN>
Notes: (a) Amounts in Column E represent transfers between plant accounts.
(b) Includes Unit 1 at the Woodsdale Generating Station which began commercial operation in May 1993.
(c) Reflects the write-off of a portion of Zimmer Station. See Note 5 to the Consolidated Financial Statements for
additional information.
(d) Additions are net of transfers to plant in service.
(e) Represents a reclassification from non-utility property.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES CONSOLIDATED
-------------------------------------
Property, Plant and Equipment
-----------------------------
For the Year Ended December 31, 1992
------------------------------------

(Thousands of Dollars)

Column A Column B Column C Column D Column E Column F

-------- -------- -------- -------- -------- --------
Balance at Other changes-- Balance at
December 31, Additions Retirements debit or December 31,
Classification 1991 at cost or sales (credit)(a) 1992
-------------- ------------ --------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Production $2,808,314 $ 245,604 (b) $ 8,282 $ 69 $3,045,705
Transmission 336,893 21,389 1,225 (1) 357,056
Distribution 895,956 56,390 10,927 -- 941,419
General 56,897 7,594 3,857 (26) 60,608
Plant held for future use 2,261 -- -- (68) 2,193
Completed construction--not classified (c) 53,717 8,781 -- -- 62,498
---------- --------- ------- ---------- ----------
Total electric 4,154,038 339,758 24,291 (26) 4,469,479
---------- --------- ------- ---------- ----------
GAS
Production 9,873 200 9 -- 10,064
Storage 21 1 -- -- 22
Distribution 498,808 41,302 2,866 -- 537,244
General 15,399 2,705 1,441 28 16,691
Plant held for future use 58 -- 33 -- 25
Completed construction--not classified (c) 20,200 (7,149) -- -- 13,051
---------- --------- ------- ---------- ----------
Total gas 544,359 37,059 4,349 28 577,097

---------- --------- ------- ---------- ----------
COMMON 93,329 22,172 746 (2) 114,753
Completed construction--not classified (c) 18,375 (16,669) -- -- 1,706
---------- --------- ------- ---------- ----------
Total common 111,704 5,503 746 (2) 116,459
---------- --------- ------- ---------- ----------
Property, plant and equipment in service $4,810,101 $ 382,320 $29,386 $ -- $5,163,035
========== ========= ======= ========== ==========
CONSTRUCTION WORK IN PROGRESS (c)
Electric $ 253,417 $(162,114)(b) $ -- $ 8 (d) $ 91,311
Gas 5,670 1,217 -- -- 6,887
Common 41,039 5,611 -- -- 46,650
---------- --------- ------- ---------- ----------
Total construction work in progress $ 300,126 $(155,286) $ -- $ 8 $ 144,848
========== ========= ======= ========== ==========
<FN>
Notes: (a) Amounts in Column E represent transfers between plant accounts.
(b) Includes the Woodsdale Generating Station which began commercial operation in May 1992.
(c) Additions are net of transfers to plant in service.
(d) Represents a reclassification from non-utility property.
</TABLE>

(Thousands of Dollars)

Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Balance at Other changes-- Balance at
December 31, Additions Retirements debit or December 31,
Classification 1990 at cost or sales (credit)(a) 1991
-------------- ------------ --------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ELECTRIC
Production $1,362,584 $ 1,454,855 (b) $ 9,508 $ 383 $2,808,314
Transmission 307,561 30,699 734 (633) 336,893
Distribution 843,083 59,643 7,403 633 895,956
General 53,383 8,464 4,972 22 56,897
Plant held for future use 2,644 -- -- (383) 2,261
Completed construction--not classified (c) 44,562 9,155 -- -- 53,717
---------- ------------ ------- ---------- ----------
Total electric 2,613,817 1,562,816 22,617 22 4,154,038
---------- ------------ ------- ---------- ----------
GAS
Production 9,848 38 13 -- 9,873
Storage 21 -- -- -- 21
Distribution 447,383 54,168 2,743 -- 498,808
General 14,475 2,126 1,206 4 15,399
Plant held for future use 58 -- -- -- 58
Completed construction--not classified (c) 21,197 (997) -- -- 20,200
---------- ------------ ------- ---------- ----------
Total gas 492,982 55,335 3,962 4 544,359
---------- ------------ ------- ---------- ----------
COMMON 92,804 2,701 2,150 (26) 93,329
Completed construction--not classified (c) 4,902 13,473 -- -- 18,375
---------- ------------ ------- ---------- ----------
Total common 97,706 16,174 2,150 (26) 111,704
---------- ------------ ------- ---------- ----------
Property, plant and equipment in service $3,204,505 $ 1,634,325 $28,729 $ -- $4,810,101
========== ============ ======= ========== ==========
CONSTRUCTION WORK IN PROGRESS (c)
Electric $1,492,341 $ (1,239,182)(b) $ -- $ 258 (d) $ 253,417
Gas 7,736 (2,066) -- -- 5,670
Common 24,039 17,000 -- -- 41,039
---------- ------------ ------- ---------- ----------
Total construction work in progress $1,524,116 $ (1,224,248) $ -- $ 258 $ 300,126
========== ============ ======= ========== ==========

<FN>
Notes: (a) Amounts in Column E represent transfers between plant accounts.
(b) Includes the Wm. H. Zimmer Generating Station which began commercial
operation in March 1991.
(c) Additions are net of transfers to plant in service.
(d) Represents a reclassification from non-utility property.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VI
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES CONSOLIDATED
-------------------------------------
Accumulated Provisions for Depreciation
---------------------------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------

(Thousands of Dollars)

Column A Column B Column C Column D Column E Column F
- -------- -------- ------------------------- -------------------------- -------- ----------
Additions Deductions
------------------------- --------------------------

Balance at Salvage and Balance at
beginning of Charged to Charged to Retirements cost of end of
Description period expenses clearing or sales removal, net Other period
- ----------- ------------ ---------- ---------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
1993
Electric $1,196,987 $129,171 $2,789 $17,925 $2,470 $(17,369)(a) $1,291,183
Gas 159,334 15,798 1,067 3,731 (12) -- 172,480
Common 13,663 5,552 579 596 239 280 19,239
Retirement work in progress (7,516) -- -- -- 3,073 -- (10,589)
---------- -------- ------ ------- ------ -------- ----------
$1,362,468 $150,521 $4,435 $22,252 $5,770 $(17,089) $1,472,313
========== ======== ====== ======= ====== ======== ==========

For the Year Ended December 31,
1992
Electric $1,096,440 $122,840 $2,780 $24,120 $ 914 $ (39) $1,196,987
Gas 149,474 14,385 1,068 4,315 1,283 5 159,334
Common 10,812 3,304 599 745 341 34 13,663
Retirement work in progress (7,680) -- -- -- (164) -- (7,516)
---------- -------- ------ ------- ------ -------- -----------
$1,249,046 $140,529 $4,447 $29,180 $2,374 $ -- $1,362,468
========== ======== ====== ======= ====== ======== ===========

For the Year Ended December 31,
1991
Electric $1,006,455 $113,901 $2,704 $22,470 $4,159 $ 9 $1,096,440
Gas 140,483 13,159 996 3,961 1,203 -- 149,474
Common 10,025 2,994 600 2,150 648 (9) 10,812
Retirement work in progress (6,854) -- -- -- 826 -- (7,680)
---------- -------- ------ ------- ------ -------- -----------
$1,150,109 $130,054 $4,300 $28,581 $6,836 $ -- $1,249,046
========== ======== ====== ======= ====== ======== ===========

<FN>
Notes: (a) Reflects the accumulated provision for depreciation associated with the Zimmer Station write-off. See Note 5 to
the Consolidated Financial Statements for additional information.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES
------------------------
Other Accumulated Provisions
----------------------------
For the Year Ended December 31, 1993
------------------------------------
(Thousands of Dollars)

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------- Deductions for
Balance at Charged to purposes for which Balance at
December 31, Charged to other provisions December 31,
Description 1992 expenses accounts were made 1993
----------- ------------ ---------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Shown on asset side of balance sheet
- ------------------------------------

Doubtful accounts $ 12,114 $19,801 $ 1,032 $ 18,041 $ 14,906
======== ======= ======== ======== ========

Amounts due from customers
- income taxes (a) $ -- $ -- $387,748 $ -- $387,748
======== ======= ======== ======== ========

Deferred income taxes (a) (b) $ 35,569 $ -- $(35,569) $ -- $ --
======== ======= ======== ======== ========

Shown on liability side of balance sheet
- ----------------------------------------

Deferred income taxes (a) $307,139 $45,631 $396,307 $ 15,853 $733,224
======== ======= ======== ======== ========

Investment tax credits $147,663 $ 1,196 $ -- $ 7,339 $141,520
======== ======= ======== ======== ========

Accrued pension cost $ 37,295 $ 6,866 $ 746 $ 3,081 $ 41,826
======== ======= ======== ======== ========

Other liabilities and deferred credits-

Customers' advances for construction $ 9,850 $ -- $ (1,025) $ -- $ 8,825

Injuries and damages 1,078 5,035 -- 5,639 474

Other 61,977 20,580 197,081 181,063 98,575 (c)
-------- ------- -------- -------- --------
$ 72,905 $25,615 $196,056 $186,702 $107,874
======== ======= ======== ======== ========

<FN>
Notes: (a) Reflects the adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
See Note 1 to the Consolidated Financial Statements for further information.
(b) Included in Other Assets on the Consolidated Balance Sheet.
(c) Includes $30.0 million of accrued post-retirement benefits and $8.1 million of gas costs refundable to customers.
See Note 1 to the Consolidated Financial Statements for further information.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES
------------------------
Other Accumulated Provisions
----------------------------
For the Year Ended December 31, 1992
------------------------------------
(Thousands of Dollars)

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------- Deductions for
Balance at Charged to purposes for which Balance at
December 31, Charged to other provisions December 31,
Description 1991 expenses accounts were made 1992
----------- ------------ ---------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>

Shown on asset side of balance sheet
- ------------------------------------

Doubtful accounts $ 12,003 $18,143 $ 989 $ 19,021 $ 12,114
======== ======= ======== ======== ========

Deferred income taxes (a) $ 26,734 $21,218 $ 586 $ 12,969 $ 35,569
======== ======= ======== ======== ========

Shown on liability side of balance sheet
- ----------------------------------------

Deferred income taxes $246,056 $80,074 $ 586 $ 19,577 $307,139
======== ======= ======== ======== ========

Investment tax credits $153,502 $ (30) $ -- $ 5,809 $147,663
======== ======= ======== ======== ========

Other liabilities and deferred credits-

Customers' advances for construction $ 9,972 $ -- $ (122) $ -- $ 9,850

Injuries and damages 1,572 10,275 -- 10,769 1,078

Other 56,982 18,804 149,098 125,612 99,272 (b)
-------- ------- -------- -------- --------
$ 68,526 $29,079 $148,976 $136,381 $110,200
======== ======= ======== ======== ========

<FN>
Notes: (a) Included in Other Assets on the Consolidated Balance Sheet.
(b) Includes $28.4 million of additional pension benefits extended in connection with an early retirement program and
workforce reduction, and $20.2 million of accrued post-retirement life insurance benefits. See Note 1 to the
Consolidated Financial Statements for further information.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES
------------------------
Other Accumulated Provisions
----------------------------
For the Year Ended December 31, 1991
------------------------------------
(Thousands of Dollars)

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------- Deductions for
Balance at Charged to purposes for which Balance at
December 31, Charged to other provisions December 31,
Description 1990 expenses accounts were made 1991
----------- ------------ ---------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>

Shown on asset side of balance sheet
- ------------------------------------

Doubtful accounts $ 11,752 $17,757 $ 796 $ 18,302 $ 12,003
======== ======= ======== ======== ========

Deferred income taxes (a) $ 20,089 $24,359 $ (3,125) $ 14,589 $ 26,734
======== ======= ======== ======== ========

Shown on liability side of balance sheet
- ----------------------------------------

Deferred income taxes $219,105 $56,373 $ (3,125) $ 26,297 $246,056
======== ======= ======== ======== ========

Investment tax credits $158,614 $ 737 $ -- $ 5,849 $153,502
======== ======= ======== ======== ========

Other liabilities and deferred credits-

Customers' advances for construction $ 9,104 $ -- $ 868 $ -- $ 9,972

Injuries and damages 2,046 5,299 -- 5,773 1,572

Other 52,352 22,959 (1,985) 16,344 56,982 (b)
-------- ------- -------- -------- --------
$ 63,502 $28,258 $ (1,117) $ 22,117 $ 68,526
======== ======= ======== ======== ========

<FN>
Notes: (a) Included in Other Assets on the Consolidated Balance Sheet.
(b) Includes $19.2 million of accrued post-retirement life insurance benefits and $4.6 million of gas costs refundable
to customers.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IX
THE CINCINNATI GAS & ELECTRIC COMPANY
-------------------------------------
AND SUBSIDIARY COMPANIES CONSOLIDATED
-------------------------------------
Short-Term Borrowings
---------------------
For the Years Ended December 31, 1993, 1992 and 1991
----------------------------------------------------

(Thousands of Dollars)

Column A Column B Column C Column D Column E Column F
----------- ---------- ---------------- ------------------ -------------- -----------------
Category of Average amount Weighted
aggregate Balance Maximum amount outstanding average interest
short-term at end of Weighted average outstanding during during the rate during the
borrowings period interest rate the period (a) period (b) period (b)
----------- ---------- ---------------- ------------------ -------------- -----------------

<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1993
Notes payable--
Bank (c) $31,000 3.48% $ 56,080 $22,518 3.35%
Commercial paper (d) -- -- $ 28,000 $ 7,694 3.44%

For the Year Ended December 31, 1992
Notes payable--
Bank (c) $33,500 3.74% $ 72,500 $27,007 4.06%
Commercial paper (d) $13,000 4.22% $ 26,000 $ 3,098 3.82%

For the Year Ended December 31, 1991
Notes payable--
Bank (c) $25,000 4.81% $112,500 $39,656 5.90%
Commercial paper (d) -- -- $ 53,000 $24,852 6.09%

<FN>
Notes: (a) Reflects the maximum amount outstanding for each category of short-term borrowings but
not necessarily the maximum aggregate amount outstanding during the period.
(b) Computed by using the average daily borrowings outstanding during the period.
(c) Consists of bank notes issued for 90 days or less.
(d) Commercial paper is issued to a dealer at a discount with a term not to exceed nine months.
</TABLE>

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on this 15th day
of March, 1994.

THE CINCINNATI GAS & ELECTRIC COMPANY

By Jackson H. Randolph
-------------------------------------
(Jackson H. Randolph,
Chairman of the Board, President and
Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

(i) Principal Executive Officer:

Chairman of the Board,
President and Chief
Executive Officer
Jackson H. Randolph and Director March 15, 1994
- -------------------------------
(Jackson H. Randolph)

(ii) Principal Financial Officer:

Senior
Vice-President--
C. R. Everman Finance and Director March 15, 1994
- -------------------------------
(C. Robert Everman)

(iii) Principal Accounting Officer:

Daniel R. Herche Controller March 15, 1994
- -------------------------------
(Daniel R. Herche)

(iv) A Majority of the Board of Directors:

Neil A. Armstrong Director March 15, 1994
- -------------------------------
(Neil A. Armstrong)

<PAGE>
Oliver W. Birckhead Director March 15, 1994
- -------------------------------
(Oliver W. Birckhead)

Clement L. Buenger Director March 15, 1994
- -------------------------------
(Clement L. Buenger)

George C. Juilfs Director March 15, 1994
- -------------------------------
(George C. Juilfs)

Thomas E. Petry Director March 15, 1994
- -------------------------------
(Thomas E. Petry)

Director March 15, 1994
- -------------------------------
(Jane L. Rees)

John J. Schiff, Jr. Director March 15, 1994
- -------------------------------
(John J. Schiff, Jr.)

Dudley S. Taft Director March 15, 1994
- -------------------------------
(Dudley S. Taft)

Oliver W. Waddell Director March 15, 1994
- -------------------------------
(Oliver W. Waddell)

<PAGE>

EXHIBIT 3-A-1

Amended
Articles of Incorporation

THE CINCINNATI GAS & ELECTRIC COMPANY

Effective
January 24, 1994

<PAGE>

AMENDED ARTICLES OF INCORPORATION

THE CINCINNATI GAS & ELECTRIC COMPANY

The Cincinnati Gas & Electric Company, a corporation for
profit, heretofore organized in the year 1837 and now existing
under the laws of the State of Ohio, adopts, makes and files
these Amended Articles of Incorporation to supersede and take the
place of its heretofore existing Articles of Incorporation and
all previously adopted Amendments thereto:

ARTICLE FIRST

The name of the corporation shall be The Cincinnati Gas &
Electric Company (hereinafter referred to as the "Company").

ARTICLE SECOND

The place in the State of Ohio where the principal office of
the Company is located is the City of Cincinnati and the County
of Hamilton.

ARTICLE THIRD

The purpose for which the Company is formed is to engage in
any lawful act or activity for which corporations may be formed
under Sections 1701.01 to 1701.98 of the Ohio Revised Code.

ARTICLE FOURTH

The maximum number of shares which the Company is authorized
to have outstanding is 126,000,000 shares of which 6,000,000
shares of the par value of $100 each and of the aggregate par
value of $600,000,000 are to be Cumulative Preferred Stock, and
120,000,000 shares of the par value of $8.50 each and of the
aggregate par value of $1,020,000,000 are to be Common Stock.

The Common Stock and Cumulative Preferred Stock shall have
the following respective designations, preferences, dividend
rights, voting powers, redemption rights, conversion rights,
restrictions on issuance of shares and other relative,
participating, optional or other special rights and preferences,
and qualifications, limitations or restrictions thereon, and are
created on the following terms, respectively:

<PAGE>

COMMON STOCK

The shares of Common Stock may be issued at any time or
from time to time for such amount of consideration as may be
fixed by the Board of Directors. The holders of Common Stock
shall not be entitled to subscribe for or purchase or receive
any part of any new or additional issue of, or any warrant,
option or other right for the purchase of, stock of any class
or securities convertible into stock of any class whether now
or hereafter authorized and whether issued for cash,
property, by way of dividends or otherwise, except as
authorized by the Board of Directors.

CUMULATIVE PREFERRED STOCK

Clause l. Except as otherwise provided by this Article
Fourth or by the resolution or resolutions of the Board of
Directors providing for the issue of any series of Cumulative
Preferred Stock, the Cumulative Preferred Stock may be issued
at any time or from time to time in any amount, not exceeding
in the aggregate, including all shares of any and all series
thereof theretofore issued, the total number of shares of
Cumulative Preferred Stock hereinabove authorized, as
Cumulative Preferred Stock of one or more series, as
hereinafter provided, and for such lawful consideration as
shall be fixed from time to time by the Board of Directors.
All shares of any one series of Cumulative Preferred Stock
shall be alike in every particular, each series thereof shall
be distinctively designated by letter or descriptive words,
and all series of Cumulative Preferred Stock shall rank
equally and be identical in all respects except as permitted
by the provisions of Clause 2 of this Article Fourth.

Clause 2. Authority is hereby expressly granted to the
Board of Directors from time to time to adopt amendments to
these Articles providing for the issue in one or more series
of any unissued or treasury shares of the Cumulative
Preferred Stock, and to fix, by the amendment creating each
such series of the Cumulative Preferred Stock, the
designation and number of shares, dividend rate, dividend
payments dates (for any series issued subsequent to April 22,
1981), redemption rights and price, sinking fund
requirements, conversion rights and restrictions on issuance
of shares, of such series, to the full extent now or
hereafter permitted by the laws of the State of Ohio and
notwithstanding the provisions of any other Article of these
Amended Articles of the Company, in respect of the matters
set forth in the following subdivisions (a) to (g),
inclusive:

(a) The designation and number of shares of such
series;

(b) The dividend rate of such series;

(d) The price or prices at which shares of such
series may be redeemed, provided that such price shall
not be less than $100 a share and not more than $115 a
share, plus an amount equal to all accrued dividends
thereon to the date fixed for redemption;

<PAGE>

(e) The amount of the sinking fund, if any, to be
applied to the purchase or redemption of shares of such
series and the manner of its application;

(f) Whether or not the shares of such series shall
be made convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the
same class of stock of the Company, and if made so
convertible or exchangeable, the conversion price or
prices, or the rates of exchange, and the adjustments, if
any, at which such conversion or exchange may be made;
and

(g) Whether or not the issue of any additional
shares of such series or any future series in addition to
such series shall be subject to any restrictions and, if
so, the nature of such restrictions.

Clause 3. Before any dividends shall be declared or
paid upon or set apart for, or distribution made on, the
Common Stock and before any sum shall be paid or set apart
for the purchase or redemption of Cumulative Preferred Stock
of any series or for the purchase of the Common Stock, the
holders of Cumulative Preferred Stock of each series shall be
entitled to receive, if and when declared by the Board of
Directors, dividends at the annual rate fixed for such series
in accordance with the provisions of this Article Fourth, and
no more, from October 1, 1945, or if the first issue of any
shares of a series is made subsequent to December 31, 1945
but prior to April 23, 1981, from the dividend payment date
of, or next preceding the date of, issue thereof, payable on
January 1, April 1, July 1 and October 1 of each year;
provided, however, if the first issue of any shares of a
series is made subsequent to April 22, 1981, from the
dividend payment date of, or next preceding the date of,
issue thereof, payable on quarterly payment dates as fixed by
the Board of Directors. Dividends shall be cumulative so
that if for any dividend period or periods dividends on the
outstanding Cumulative Preferred Stock of any series, at the
rates fixed for such series, shall not have been paid, such
dividends shall be paid, or declared and set apart for
payment, before any dividends shall be declared or paid upon
or set apart for, or any distribution made on, the Common
Stock and before any sum shall be paid or set apart for the
purchase or redemption of Cumulative Preferred Stock of any
series or for the purchase of Common Stock. Deferred
dividends shall not bear interest. Dividends on all
Cumulative Preferred Stock of the same series shall be
cumulative from the same date and in the event of the issue
of additional Cumulative Preferred Stock of any series all
dividends paid on Cumulative Preferred Stock of such series
on the date of or on a date prior to the issue of such
additional Cumulative Preferred Stock and all dividends
declared and payable to holders of record of Cumulative
Preferred Stock of such series on a date prior to such
additional issue shall be deemed to have been paid on the
additional stock so issued. If at any time Cumulative
Preferred Stock of more than one series shall be outstanding,
any dividends declared upon the Cumulative Preferred Stock in
an amount less than the full amount payable on all Cumulative
Preferred Stock outstanding shall be declared pro rata so
that the amounts of dividends declared on each share of the
Cumulative Preferred Stock of different series shall in all
cases bear to each other the same proportions that the
respective dividend rates of such respective series bear to
each other.

<PAGE>

Clause 4. Upon at least thirty days previous notice
given by mail to record holders of Cumulative Preferred Stock
to be redeemed at their respective addresses as they appear
on the books of the Company and by publication in a newspaper
of general circulation in the City of Cincinnati, Ohio, and
in a newspaper of general circulation in the Borough of
Manhattan, City and State of New York, the Company, at its
election, by action of its Board of Directors may redeem the
whole of the Cumulative Preferred Stock or any series thereof
or any part of any series thereof by lot or pro rata, at any
time or from time to time and at the prices fixed for the
redemption of such shares in accordance with the provisions
of this Article Fourth (the price so fixed for any series
being herein called the redemption price of such series). If
the Company shall determine to redeem by lot less than all
the shares of any series of Cumulative Preferred Stock, the
selection by lot of the shares of such series so to be
redeemed shall be conducted by an independent bank or trust
company. From and after the date fixed in such notice as the
date of redemption, unless default shall be made by the
Company in providing moneys at the time and place specified
for the payment of the redemption price pursuant to such
notice, or, if the Company shall so elect, from and after a
date, which shall be prior to the date fixed as the date of
redemption, on which the Company shall provide moneys for the
payment of the redemption price by depositing the amount
thereof in trust for the account of the holders of the
Cumulative Preferred Stock called for redemption with a bank
or trust company doing business in the Borough of Manhattan,
in the City and State of New York, or in the City of
Cincinnati, Ohio, and having capital and surplus of at least
$5,000,000, pursuant to notice of such election included in
the notice of redemption specifying the date on which such
deposit will be made, all dividends on the Cumulative
Preferred Stock called for redemption shall cease to accrue
and all rights of the holders thereof as shareholders of the
Company, except the right to receive the redemption price
upon presentation and surrender of the respective
certificates for the Cumulative Preferred Stock called for
redemption, shall cease and determine. The Company may, from
time to time, purchase the whole of the Cumulative Preferred
Stock or any series thereof, or any part of any series
thereof, upon the best terms reasonably obtainable, but in no
event at a price greater than the redemption price in effect
at the date of such purchase of the shares so purchased. Such
redemption or purchase may, however, be effected only if full
cumulative dividends upon all shares of the Cumulative
Preferred Stock of all series then outstanding and not then
to be redeemed or purchased shall have been declared and
payment provided for. Cumulative Preferred Stock of any
series redeemed or purchased may in the discretion of the
Board of Directors be reissued, at any time or from time to
time, as stock of the same or of a different series, or may
be cancelled and not reissued.

Clause 5. After full cumulative dividends as aforesaid
upon the Cumulative Preferred Stock of all series then
outstanding shall have been paid for all past dividend
periods, and after or concurrently with making payment of or
provision for full dividends on the Cumulative Preferred
Stock of all series then outstanding for the current dividend
period, then and not otherwise dividends may be declared upon
the Common Stock at such rate as the Board of Directors may
determine and no holders of shares of any series of the
Cumulative Preferred Stock, as such, shall be entitled to
share therein.

<PAGE>

Clause 6-A. So long as any shares of the Cumulative
Preferred Stock of any series shall be outstanding, the
Company shall not, without the consent in writing of the
holders of record of at least a majority of the total number
of shares of the Cumulative Preferred Stock of all series
then outstanding or the consent (given by vote at a meeting
called for that purpose in the manner prescribed by the Code
of Regulations of the Company) of the holders of record of at
least a majority of the total number of shares of the
Cumulative Preferred Stock of all series then outstanding:

(a) Increase the authorized number of shares
of the Cumulative Preferred Stock; or

(b) Issue any unsecured notes, debentures or
other securities representing unsecured indebtedness,
or assume any such unsecured securities, for purposes
other than the refunding of outstanding unsecured
indebtedness theretofore incurred or assumed by the
Company or the redemption or other retirement of
outstanding shares of stock ranking prior to the
Cumulative Preferred Stock with respect to the
payment of dividends or upon the dissolution,
liquidation or winding up of the Company, whether
voluntary or involuntary, if, immediately after such
issue or assumption, the total principal amount of
all unsecured notes, debentures or other securities
representing unsecured indebtedness issued or assumed
by the Company and then outstanding (including
unsecured securities then to be issued or assumed)
would exceed 20% of the aggregate of (i) the total
principal amount of all bonds and other securities
representing secured indebtedness issued or assumed
by the Company and then to be outstanding, and (ii)
the capital and surplus of the Company as then to be
stated on the books of account of the Company; or

(c) Consolidate or merge with or into any
other corporation or corporations, unless such
consolidation or merger, or the issuance or
assumption of all securities to be issued or assumed
in connection with such consolidation or merger,
shall have been ordered, approved or permitted by the
Securities and Exchange Commission or by any
successor commission or other regulatory authority of
the United States of America having jurisdiction over
such consolidation or merger or the issuance or
assumption of securities in connection therewith;
provided that the provisions of this subdivision (c)
shall not apply to (i) a consolidation of the Company
with, or a merger into the Company of, any subsidiary
all the outstanding shares of stock of which at the
time shall be owned by the Company, or (ii) the
purchase or other acquisition by the Company of the
franchises or assets of another corporation, or (iii)
any transaction which does not involve a
consolidation or merger under the laws of the State
of Ohio.

Clause 6-B. So long as any shares of the Cumulative
Preferred Stock of any series shall be outstanding, the
Company shall not, without the consent in writing of the
holders of record of at least two-thirds of the total number
of shares of the Cumulative Preferred Stock of all series
then outstanding or the consent (given by vote at a meeting
called for that purpose in the manner prescribed by the Code
of Regulations of the Company) of the

<PAGE>

holders of record of at least two-thirds of the total number
of shares of the Cumulative Preferred Stock of all series then
outstanding:

(a) Create or authorize any kind of stock
ranking prior to the Cumulative Preferred Stock with
respect to the payment of dividends or upon the
dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary, or create
or authorize any obligation or security convertible
into shares of any such kind of stock; or

(b) Amend, alter, change or repeal any of the
express terms of the Cumulative Preferred Stock so as
to affect the holders thereof adversely; or

(d) Issue any additional shares of any series
of the Cumulative Preferred Stock, other than a
maximum of 270,000 shares of the first series, or any
shares ranking on a parity with it, unless the
consolidated income of the Company and its
subsidiaries (determined as hereinafter provided) for
any twelve consecutive calendar months within the
fifteen calendar months immediately preceding the
month within which the issuance of such additional
shares shall be authorized by the Board of Directors
of the Company shall have been in the aggregate not
less than one and one-half times the sum, on a
consolidated basis, of the interest requirements
(adjusted by provision for amortization of debt
discount and expense or of premium on debt, as the
case may be) for one year on all the indebtedness of
the Company and its subsidiaries outstanding at the
date of such proposed issue and the full dividend
requirements for one year on all shares of preferred
stock of the subsidiaries of the Company outstanding
at the date of such proposed issue and the full
dividend requirements for one year on all outstanding
shares (including those then proposed to be issued
but excluding any shares proposed to be retired in
connection with such issue) of the Cumulative
Preferred Stock and all other stock, if any, ranking
prior to or on a parity with the Cumulative Preferred
Stock with respect to the payment of dividends or the
distribution of assets upon the dissolution,
liquidation or winding up of the Company, whether
voluntary or involuntary.

"Consolidated income" for any period for the
purposes of this subdivision (d) of Clause 6-B shall
be computed by adding to the consolidated net income
of the Company and its subsidiaries for said period,
determined in accordance with generally accepted
accounting principles and practices, as adjusted by
action of the Board of Directors of the Company as
hereinafter provided, the amount deducted for
interest (adjusted as above provided) in determining
such net income. In determining such consolidated net
income for any period, there shall be deducted, in
addition to other items of expense, the amount
charged to income for said period on the books of the
Company and its subsidiaries for taxes and
depreciation expense. In the determination of
consolidated net income for the purposes of this
subdivision (d), the Board of Directors of the
Company

<PAGE>

may, in the exercise of due discretion, make
adjustments by way of increase or decrease in such
consolidated net income to give effect to changes
therein resulting from any acquisition of properties
or to any redemption, acquisition, purchase, sale or
exchange of securities by the Company or its
subsidiaries either prior to the issuance of any
shares of Cumulative Preferred Stock then to be
issued or in connection therewith.

The term "subsidiary" as used in this
subdivision (d) of Clause 6-B shall mean any
corporation more than 50% of the voting stock (stock
at the time entitling the holders thereof to elect a
majority of the Board of Directors of such
corporation) of which at the time is owned or
controlled, directly or indirectly, by the Company or
by one or more subsidiaries of the Company, or by the
Company and by one or more subsidiaries of the
Company.

The term "preferred stock" of a subsidiary as
used in this subdivision (d) of Clause 6-B shall mean
any stock of such subsidiary entitled to a preference
as to dividends or as to assets upon any liquidation
or dissolution of such subsidiary over any other
stock of such subsidiary.

Clause 6-C. So long as any shares of the Cumulative
Preferred Stock of any series shall be outstanding, the
Company shall not, without the consent in writing of the
holders of record of at least two-thirds of the total number
of shares of all series of the Cumulative Preferred Stock
which may be affected adversely or the consent (given by vote
at a meeting called for that purpose in the manner prescribed
by the Code of Regulations of the Company) of the holders of
record of at least two-thirds of the total number of shares
of all series of the Cumulative Preferred Stock which may be
affected adversely, amend, alter, change or repeal any of the
express terms of one or more series of the Cumulative
Preferred Stock so as to affect such series adversely.

Clause 7. Except as and to the extent otherwise
provided in this Article Fourth, the Cumulative Preferred
Stock shall not entitle any holder thereof to vote at any
meeting of shareholders or election of the Company, or
otherwise to participate in any action taken by the Company
or the shareholders thereof; provided, however, that whenever
dividends payable on the Cumulative Preferred Stock shall be
in default in an aggregate amount equivalent to four full
quarterly dividends on all shares of such Cumulative
Preferred Stock then outstanding, and until all such
dividends then in default shall have been paid or declared
and set apart for payment, the holders of the Cumulative
Preferred Stock of all series, voting separately as a class
and regardless of series, shall be entitled to elect a
majority of the Board of Directors, as then constituted, of
the Company, and the holders of any other class or classes of
stock of the Company entitled to vote for the election of
directors shall be entitled, voting separately as a class, to
elect the remainder of the Board of Directors, as then
constituted, of the Company. The right of the holders of the
Cumulative Preferred Stock voting separately as a class to
elect members of the Board of Directors of the Company as
aforesaid shall continue until such time as all dividends
accumulated on the Cumulative Preferred Stock shall have been
paid in full, or declared and set apart for payment (and such
dividends shall be paid, or declared and set apart for
payment, out of assets available therefor as soon as is
reasonably practicable), at which time

<PAGE>

the right of the holders of the Cumulative Preferred Stock
voting separately as a class to elect members of the Board of
Directors as aforesaid and the right of the holders or any
other class or classes of stock of the Company entitled to
vote for the election of directors voting separately as a
class to elect the remainder of the Board of Directors as
aforesaid shall terminate, subject to revesting in the event
of each and every subsequent default of the character above
mentioned.

The aforesaid rights of the holders of the Cumulative
Preferred Stock and of any other class or classes of stock of
the Company to vote separately for the election of members of
the Board of Directors may be exercised at any annual meeting
of shareholders of the Company or, within the limitations
hereinafter provided, at a special meeting of shareholders of
the Company held for the purpose of electing directors.

At such time when the right of the holders of the
Cumulative Preferred Stock to elect a majority of the Board
of Directors shall have become vested as aforesaid, a special
meeting of shareholders of the Company may be called and held
for the purpose of electing directors in the following manner
(unless under the provisions of the Code of Regulations of
the Company, as then in effect, an annual meeting of
shareholders of the Company is to be held within 60 days
after the vesting in the holders of the Cumulative Preferred
Stock of the right to elect members of the Board of Directors
or unless, subsequent to such vesting, a meeting of
shareholders of the Company has been held at which holders of
the Cumulative Preferred Stock were entitled to elect members
of the Board of Directors).

Upon the written request of any holder of record of the
Cumulative Preferred Stock then outstanding, regardless of
series, addressed to the Secretary of the Company, the
Secretary or an Assistant Secretary of the Company shall call
a special meeting of the shareholders entitled to vote for
the election of directors, for the purpose of electing a
majority of the Board of Directors by the vote of the holders
of the Cumulative Preferred Stock, and the remainder of the
Board of Directors by the vote of the holders of such other
class or classes of stock as may then be entitled to vote for
the election of directors, voting separately as hereinbefore
provided. Such meeting shall be held within 50 days after
personal service of such written request upon the Secretary
of the Company, or within 50 days after mailing the same
within the United States of America by registered mail
addressed to the Secretary of the Company at its principal
office. If such meeting shall not be called within 20 days of
such personal service or mailing, then any holder of record
of the Cumulative Preferred Stock then outstanding,
regardless of series, may designate in writing himself or any
other holder of record of the Cumulative Preferred Stock to
call such special meeting at the expense of the Company, and
such meeting may be called by such person so designated upon
the notice required for special meetings of shareholders and
shall be held at the place for the holding of annual meetings
of shareholders of the Company. Any holder of the Cumulative
Preferred Stock so designated shall have access to the stock
books of the Company for the purpose of causing said meeting
to be called as aforesaid.

At any annual or special meeting held for the purpose of
electing directors when the holders of the Cumulative
Preferred Stock shall be entitled to elect members of the
Board of Directors as aforesaid, the presence in person or by
proxy of the holders of a majority of the total number of
outstanding shares of the class or classes of stock of the
Company

<PAGE>

other than the Cumulative Preferred Stock entitled to
elect directors as aforesaid shall be required to constitute
a quorum of such class or classes for the election of
directors by such class or classes, and the presence in
person or by proxy of the holders of a majority of the total
number of outstanding shares of the Cumulative Preferred
Stock shall be required to constitute a quorum of such class
for the election of directors by such class; provided,
however, that a majority of those holders of the stock of
either such class or classes who are present in person or by
proxy shall have power to adjourn such meeting for the
election of directors by such class from time to time without
notice other than announcement at the meeting.

Upon the election of a majority of the Board of Directors
by the holders of the Cumulative Preferred Stock, the term of
office of all directors then in office shall terminate; and
no delay or failure by the holders of other classes of stock
in electing the remainder of the Board of Directors shall
invalidate the election of a majority thereof by the holders
of the Cumulative Preferred Stock.

Upon any termination of the right of the holders of the
Cumulative Preferred Stock to elect members of the Board of
Directors as aforesaid, the term of office of the directors
then in office shall terminate upon the election of a
majority of the Board of Directors, as then constituted, at a
meeting of the holders of the class or classes of stock of
the Company then entitled to vote for directors, which
meeting may be held at any time after such termination of
such right, and shall be called upon the request of holders
of record of such class or classes of stock then entitled to
vote for directors, in like manner and subject to similar
conditions as hereinbefore in this Clause 7 provided with
respect to the call of a special meeting of shareholders for
the election of directors by the holders of the Cumulative
Preferred Stock.

In case of any vacancy in the office of a director
occurring among the directors elected by the holders of the
Cumulative Preferred Stock as aforesaid, or of a successor to
any such director, the remaining directors so elected may
elect, by affirmative vote of a majority thereof, or the
remaining director so elected if there be but one, a
successor or successors to hold office for the unexpired term
of the director or directors whose place or places shall be
vacant, and such successor or successors shall be deemed to
have been elected by the holders of the Cumulative Preferred
Stock as aforesaid. Likewise, in case of any vacancy in the
office of a director occurring (at a time when the holders of
the Cumulative Preferred Stock shall be entitled to elect
members of the Board of Directors as aforesaid) among the
directors elected by the holders of the class or classes of
stock of the Company other than the Cumulative Preferred
Stock, or of a successor to any such director, the remaining
directors so elected may elect, by affirmative vote of a
majority thereof, or the remaining director so elected if
there be but one, a successor or successors to hold office
for the unexpired term of the director or directors whose
place or places shall be vacant, and such successor or
successors shall be deemed to have been elected by such
holders of the class or classes of stock of the Company other
than the Cumulative Preferred Stock.

<PAGE>

Except as herein otherwise expressly provided and except
when some mandatory provision of law shall be controlling,
whenever shares of two or more series of the Cumulative
Preferred Stock shall be outstanding, no particular series of
the Cumulative Preferred Stock shall be entitled to vote as a
separate series on any matter and all shares of the
Cumulative Preferred Stock of all series shall be deemed to
constitute but one class for any purpose for which a vote of
the shareholders of the Company by classes may now or
hereafter be required.

Clause 8. Upon any dissolution, liquidation, winding up
or reduction of the capital stock of the Company resulting in
a distribution of assets to its shareholders, holders of
Cumulative Preferred Stock of each series then outstanding,
before any distribution of assets shall be made to the
holders of Common Stock, shall be entitled to receive (a) in
the event of any involuntary dissolution, liquidation or
winding up of the Company, $100 a share together with an
amount equal to all accrued dividends thereon, and (b) in the
event of any voluntary dissolution, liquidation or winding up
of the Company or in the event of a reduction of the capital
stock of the Company resulting in a distribution of assets to
its shareholders, an amount equal to the redemption price
then in effect of the Cumulative Preferred Stock of such
series. If upon any such dissolution, liquidation or winding
up of the Company or reduction of its capital stock, the
assets so to be distributed among the holders of the
Cumulative Preferred Stock shall be insufficient to permit
the payment to such holders of the full preferential amounts
aforesaid, then the entire assets of the Company shall be
distributed ratably among the holders of the Cumulative
Preferred Stock in proportion to the full preferential
amounts to which they are respectively entitled as aforesaid.
After payment to the holders of the Cumulative Preferred
Stock of the full preferential amounts hereinbefore provided
for, the holders of the Cumulative Preferred Stock, as such,
shall have no right or claim to any of the remaining assets
of the Company and the remaining assets to be distributed, if
any, shall be distributed to the holders of the Common Stock.

Clause 9. The holders of the Cumulative Preferred Stock
shall have no right whatever to subscribe for or purchase or
receive any part of any new or additional issue of stock of
any class or securities convertible into stock of any class
whether now or hereafter authorized and whether issued for
cash, property or by way of dividends.

Clause 10. The term "accrued dividends", whenever used
herein with respect to the Cumulative Preferred Stock of any
series shall be deemed to mean that amount which would have
been paid as dividends on the Cumulative Preferred Stock of
such series to date had full dividends been paid thereon at
the rate fixed for such series in accordance with the
provisions of this Article Fourth, less in each case the
amount of all dividends paid upon the shares of such series
and the dividends deemed to have been paid as provided in
Clause 3 hereof.

Clause 11. So long as any shares of the first series of
Cumulative Preferred Stock shall be outstanding, the Company
shall not, at any time after December 31, 1949, declare any
dividend on any of its Common Stock, except dividends payable
in shares of Common Stock of the Company, or purchase any
shares of its Common Stock, or make any distribution of cash
or property among its Common Stockholders, by the reduction
of its

<PAGE>

capital stock or otherwise, unless, after giving
effect to such dividend, purchase or distribution, the
aggregate of all such dividends and all amounts applied to
such purchases or so distributed subsequent to December 31,
1949, shall not exceed 75% of the net income of the Company
subsequent to December 31, 1949, if, at the time of the
declaration of such dividend or the making of such purchase
or distribution, the aggregate of the par value of, or stated
capital represented by, the outstanding shares of Common
Stock of the Company and of the surplus of the Company shall
be less than an amount equal to 25% of the total
capitalization and surplus of the Company.

For the purposes of this Clause 11, the following terms
shall have the following meanings:

(a) The term "net income of the Company"
shall mean the gross earnings of the Company from all
sources less all proper deductions for operating
expenses, taxes (including income, excess profits and
other taxes based on or measured by income or
undistributed earnings or income), interest charges
and other appropriate items, including provision for
maintenance, retirements, depreciation and
obsolescence in an amount not less than 15% of the
amount of the operating revenues of the Company, and
less all dividends paid or accrued on the Cumulative
Preferred Stock of the Company which are applicable
to the period subsequent to December 31, 1949, and
otherwise determined in accordance with sound
accounting practice. The term "operating revenues of
the Company", as used in this paragraph, shall mean
and include all operating revenues derived by the
Company from the operation of its plants and
properties remaining after deducting therefrom an
amount equal to the aggregate cost to the Company of
electricity, gas (natural, artificial or mixed),
steam or water purchased and rentals paid for the use
of property owned by others and leased to or operated
by the Company and the maintenance of which and
depreciation on which are borne by the owners.

(b) The term "total capitalization" shall
mean the aggregate of the principal amount of all
indebtedness of the Company outstanding in the hands
of the public maturing more than twelve months after
the date of issue or assumption thereof, plus the par
value of, or stated capital represented by, the
outstanding shares of all classes of stock of the
Company.

(c) The term "surplus of the Company" shall
include capital surplus, earned surplus and any other
surplus of the Company.

VARIABLE TERMS OF EXISTING SERIES
OF CUMULATIVE PREFERRED STOCK

Clause 12. There has been previously created and issued
by resolution of the Board of Directors adopted October 25,
1945, an outstanding first series of the Cumulative Preferred
Stock authorized by this Article Fourth, consisting of
270,000 shares designated "Cumulative Preferred Stock, 4%
Series", the shares of such series having the express terms

<PAGE>

and provisions stated in such Article Fourth and as provided
in paragraphs (a) to (f), inclusive, of such resolution, to
wit:

(a) The designation of such series shall be
"Cumulative Preferred Stock, 4% Series", and such
series shall consist of 270,000 shares;

(b) The dividend rate of such series shall be
4% a share per year;

(c) The prices at which the shares of such
series may be redeemed shall be $111 a share if the
date fixed for redemption is prior to October 1,
1950; $109.50 a share if the date fixed for
redemption is October 1, 1950, or thereafter and
prior to October 1, 1955; and $108 a share if the
date fixed for redemption is on or after October 1,
1955; in each case plus an amount equal to all
dividends accrued thereon to the date fixed for
redemption;

(d) The shares of such series shall not be
entitled to the benefit of any sinking fund to be
applied to the purchase or redemption of shares of
such series;

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same or any other class or classes of stock of the
Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause 12 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

Clause 13. There has been previously created and issued
by resolution of the Board of Directors adopted March 10,
1958, an outstanding second series of the Cumulative
Preferred Stock authorized by this Article Fourth, consisting
of 130,000 shares designated "Cumulative Preferred Stock, 4
3/4% Series", the shares of such series having the express
terms and provisions stated in such Article Fourth and as
provided in paragraphs (a) to (f), inclusive, of such
resolution, to wit:

(a) The designation of such series shall be
"Cumulative Preferred Stock, 4 3/4% Series", and such
series shall consist of 130,000 shares;

(b) The dividend rate of such series shall be
4 3/4% a share per year;

(c) The prices at which the shares of such
series may be redeemed shall be $106 a share if the
date fixed for redemption is prior to April 1, 1963;
$104 a share if the date fixed for redemption is
April 1, 1963, or thereafter and prior to April 1,
1968; $102 a share if the date fixed for redemption
is April 1, 1968, or thereafter and prior to April 1,
1973; and $101 a share if the date fixed for
redemption is on or after April 1, 1973; in each case
plus an amount equal to all dividends accrued thereon
to the date fixed for redemption; provided,

<PAGE>

however, the Company shall not on or prior to April 1,
1963 exercise its option to redeem any shares of the
Cumulative Preferred Stock, 4 3/4% Series, as a part
of or in anticipation of any refunding operation by
the application, directly or indirectly, of borrowed
funds or the proceeds of issue of any stock ranking
prior to or on a parity with the Cumulative Preferred
Stock if such borrowed funds have an interest rate or
interest cost (calculated in accordance with accepted
financial practice), or such shares have a dividend
rate or cost, to the Company so calculated, less than
the dividend rate per annum of the Cumulative
Preferred Stock, 4 3/4% Series;

(d) The shares of such series shall not be
entitled to the benefit of any sinking fund to be
applied to the purchase or redemption of shares of
such series;

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same class of stock of the Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause l3 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

Clause 14. There has been previously created and issued
by resolution of the Board of Directors adopted April 10,
1972, an outstanding third series of the Cumulative Preferred
Stock authorized by this Article Fourth, consisting of
400,000 shares designated "Cumulative Preferred Stock, 7.44%
Series", the shares of such series having the express terms
and provisions stated in such Article Fourth and as provided
in paragraphs (a) to (f), inclusive, of such resolution, to
wit:

(a) The designation of such series shall be
"Cumulative Preferred Stock, 7.44% Series", and such
series shall consist of 400,000 shares;

(b) The dividend rate of such series shall be
7.44% a share per year;

(c) The prices at which the shares of such
series may be redeemed shall be $107.50 a share if
the date fixed for redemption is prior to April 1,
1977; $105.00 a share if the date fixed for
redemption is April 1, 1977, or thereafter and prior
to April 1, 1982; $102.50 a share if the date fixed
for redemption is April 1, 1982, or thereafter and
prior to April 1, 1987; and $101.00 a share if the
date fixed for redemption is on or after April 1,
1987; in each case plus an amount equal to all
dividends accrued thereon to the date fixed for
redemption; provided, however, the Company shall not,
prior to April 1, 1977, exercise its option to redeem
any shares of the Cumulative Preferred Stock, 7.44%
Series, as a part of or in anticipation of any
refunding operation by the application, directly or
indirectly, of borrowed funds or the proceeds of
issue of any Cumulative Preferred Stock or any stock
ranking prior to or on a parity with the

<PAGE>

Cumulative Preferred Stock if such borrowed funds have
an effective interest cost, or such shares have a
dividend cost, to the Company which is less than the
annual dividend rate of the Cumulative Preferred
Stock, 7.44% Series (in each case calculated to the
second place in accordance with generally accepted
financial practice);

(d) The shares of such series shall not be
entitled to the benefit of any sinking fund to be
applied to the purchase or redemption of shares of
such series;

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same class of stock of the Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause 14 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

Clause 15. There has been previously created and issued
by resolution of the Board of Directors adopted June 17,
1974, an outstanding fourth series of the Cumulative
Preferred Stock authorized by this Article Fourth, consisting
of 400,000 shares designated "Cumulative Preferred Stock,
9.28% Series", the shares of such series having the express
terms and provisions stated in such Article Fourth and as
provided in paragraphs (a) to (f), inclusive, of such
resolution, to wit:

(a) The designation of such series shall be
"Cumulative Preferred Stock, 9.28% Series", and such
series shall consist of 400,000 shares;

(b) The dividend rate of such series shall be
9.28% a share per year;

(c) The prices at which the shares of such
series may be redeemed shall be $109.50 a share if
the date fixed for redemption is prior to July 1,
1979; $106.00 a share if the date fixed for
redemption is July 1, 1979, or thereafter and prior
to July 1, 1984; $103.00 a share if the date fixed or
redemption is July 1, 1984, or thereafter and prior
to July 1, 1989; and $101.00 a share if the date
fixed for redemption is on or after July 1, 1989; in
each case plus an amount equal to all dividends
accrued thereon to the date fixed for redemption;
provided, however, that the Company shall not, prior
to July 1, 1979, exercise its option to redeem any
shares of the Cumulative Preferred Stock, 9.28%
Series, as a part of or in anticipation of any
refunding operation by the application, directly or
indirectly, of borrowed funds or the proceeds of
issue of any Cumulative Preferred Stock or any stock
ranking prior to or on a parity with the Cumulative
Preferred Stock if such borrowed funds have an
effective interest cost, or such shares have a
dividend cost, to the Company which is less than the
annual dividend rate of the Cumulative Preferred
Stock, 9.28% Series (in each

<PAGE>

case calculated to the second place in accordance with
generally accepted financial practice);

(d) The shares of such series shall not be
entitled to the benefit of any sinking fund to be
applied to the purchase or redemption of shares of
such series;

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same class of stock of the Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause 15 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

Clause 16. There has been previously created and issued
by resolution of the Finance Committee of the Board of
Directors of the Company, being theretofore duly authorized
by the Board of Directors, adopted July 12, 1990, an
outstanding fifth series of the Cumulative Preferred Stock
authorized by this Article Fourth, consisting of 500,000
shares designated "Cumulative Preferred Stock, 9.15% Series",
the shares of such series having the express terms and
provisions stated in such Article Fourth and as provided in
paragraphs (a) to (f), inclusive, of such resolution, to wit:

(a) The designation of such series shall be
"Cumulative Preferred Stock, 9.15% Series", and such
series shall consist of 500,000 shares;

(b) The dividend rate of such series shall be
9.15% a share per year;

Twelve Months Redemption Twelve Months Redemption
Beginning Price Per Beginning Price Per
July 1 Share July 1 Share
------------- ---------- ------------- ----------

1990 . . . . $109.15 1998 . . . $104.27
1991 . . . . 108.54 1999 . . . 103.66
1992 . . . . 107.93 2000 . . . 103.05
1993 . . . . 107.32 2001 . . . 102.44
1994 . . . . 106.71 2002 . . . 101.83
1995 . . . . 106.10 2003 . . . 101.22
1996 . . . . 105.49 2004 . . . 100.61
1997 . . . . 104.88

<PAGE>

and $100.00 a share if the date fixed for redemption
is on or after July 1, 2005, in each case plus an
amount equal to all dividends accrued thereon to the
date fixed for redemption; provided, however, that
the Company shall not, prior to July 1, 1995,
exercise its option to redeem any shares of the
Cumulative Preferred Stock, 9.15% Series, as a part
of or in anticipation of any refunding operation by
the application, directly or indirectly, of borrowed
funds or the proceeds of issue of any Cumulative
Preferred Stock or any stock ranking prior to or on a
parity with the Cumulative Preferred Stock if such
borrowed funds have an effective interest cost, or
such shares have a dividend cost, to the Company
which is less than the annual dividend rate of the
Cumulative Preferred Stock, 9.15% Series (in each
case calculated to the second place in accordance
with generally accepted financial practice);

(d) Beginning July 1, 1996 and on each July 1
thereafter, as long as any shares of the series shall
be outstanding, the Company shall acquire by
redemption, as a mandatory sinking fund requirement
and out of any funds legally available therefor,
25,000 shares of the series or, if less than 25,000
shares are then outstanding, such lesser number of
shares, at a redemption price of $100 a share, plus
an amount equal to all accrued dividends thereon to
the date fixed for redemption. The Company may
redeem, at its option, on July 1 of each such year,
not more than 25,000 additional shares at the same
price. Such optional right of redemption will not be
cumulative and will not reduce the mandatory sinking
fund requirement in any subsequent year. The sinking
fund requirement may be satisfied in whole or in part
by crediting shares of the series acquired by the
Company. To the extent the Company does not satisfy
the mandatory sinking fund obligation in any year
such obligation must be satisfied in the succeeding
year or years. If the Company is in arrears in the
redemption of the shares of the series pursuant to
the mandatory sinking fund requirement, the Company
shall not purchase or otherwise acquire for value, or
pay dividends on, Common Stock.

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same class of stock of the Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause 16 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

Clause 17. There has been previously created and issued
by resolution of the Finance Committee of the Board of
Directors of the Company, being theretofore duly authorized
by the Board of Directors, adopted December 11, 1991, an
outstanding sixth series of the Cumulative Preferred Stock
authorized by this Article Fourth, consisting of 800,000
shares designated "Cumulative Preferred Stock, 7 7/8%
Series", the shares of such series having the express terms
and provisions stated in such Article Fourth and as provided
in paragraphs (a) to (f), inclusive, of such resolution, to
wit:

<PAGE>

(a) The designation of such series shall be
"Cumulative Preferred Stock, 7 7/8% Series", and such
series shall consist of 800,000 shares;

(b) The dividend rate of such series shall be
7 7/8% a share per year;

(c) The Cumulative Preferred Stock, 7 7/8%
Series is not redeemable prior to January 1, 2004.
The entire series is subject to mandatory redemption
on January 1, 2004 at $100 per share, plus accrued
dividends to the redemption date;

(d) The shares of such series shall not be
entitled to the benefit of any sinking fund to be
applied to the purchase or redemption of shares of
such series;

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same class of stock of the Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause 17 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

Clause 18. There has been previously created and issued
by resolution of the Finance Committee of the Board of
Directors of the Company, being theretofore duly authorized
by the Board of Directors, adopted August 13, 1992, an
outstanding seventh series of the Cumulative Preferred Stock
authorized by this Article Fourth, consisting of 800,000
shares designated "Cumulative Preferred Stock, 7 3/8%
Series", the shares of such series having the express terms
and provisions stated in such Article Fourth and as provided
in paragraphs (a) to (f), inclusive, of such resolution, to
wit:

(a) The designation of such series shall be
"Cumulative Preferred Stock, 7 3/8% Series", and such
series shall consist of 800,000 shares;

(b) The dividend rate of such series shall be
7 3/8% a share per year;

(c) The Cumulative Preferred Stock, 7 3/8%
Series is not redeemable on or before August 1, 2002.
Thereafter, such series is redeemable, in whole or in
part, at a redemption price equal to $100 per share
plus an amount equal to all dividends accrued thereon
to the date fixed for redemption;

(d) Beginning August 1, 1998 and on each
August 1 thereafter, as long as any shares of the
series shall be outstanding, the Company shall
acquire by redemption, as a mandatory sinking fund
requirement and out of any funds legally available
therefor, 40,000 shares of the series or, if less
than 40,000 shares are then outstanding, such lesser
number of shares, at a redemption price of $100 a
share, plus an amount equal to all accrued dividends
thereon to the

<PAGE>

date fixed for redemption. The Company may redeem, at
its option, on August 1 of each such year, not more
than 40,000 additional shares at the same price. Such
optional right of redemption will not be cumulative
and will not reduce the mandatory sinking fund
requirement in any subsequent year. The sinking fund
requirement may be satisfied in whole or in part by
crediting shares of the series acquired by the
Company. To the extent the Company does not satisfy
the mandatory sinking fund obligation in any year such
obligation must be satisfied in the succeeding year or
years. If the Company is in arrears in the redemption
of the shares of the series pursuant to the mandatory
sinking fund requirement, the Company shall not
purchase or otherwise acquire for value, or pay
dividends on, Common Stock.

(e) The shares of such series shall not be
convertible into or exchangeable for shares of any
other class or classes or of any other series of the
same class of stock of the Company; and

(f) The issue of any additional shares of
such series or any future series shall not, by reason
of this Clause 18 of Article Fourth, be subject to
any restrictions in addition to the restrictions set
forth in the Articles of the Company.

ARTICLE FIFTH

These Amended Articles of Incorporation supersede and take the
place of the existing Articles of Incorporation, as amended.

EXHIBIT 4-A-24

_____________________________________________________________________________
_____________________________________________________________________________

LOAN AGREEMENT

between

OHIO WATER DEVELOPMENT AUTHORITY

and

THE CINCINNATI GAS & ELECTRIC COMPANY

_______________________________

$21,400,000
State of Ohio
Collateralized Water Development
Revenue Refunding Bonds, 1994 Series A
(The Cincinnati Gas & Electric Company Project)
_______________________________

Dated

as of

January 1, 1994

_____________________________________________________________________________
_____________________________________________________________________________

<PAGE>
INDEX

(This Index is not a part of the Agreement
but rather is for convenience of reference only.)

Page

Preambles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I
DEFINITIONS

Section 1.1 Use of Defined Terms. . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 6
Section 1.4 Captions and Headings . . . . . . . . . . . . . . . . . . . 7

ARTICLE II
REPRESENTATIONS

Section 2.1 Representations of the Authority. . . . . . . . . . . . . . 8
Section 2.2 No Warranty by Authority of Condition or
Suitability of the Project. . . . . . . . . . . . . . . . 8
Section 2.3 Representations and Covenants of the Company. . . . . . . . 8

ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS

Section 3.1 Acquisition, Construction and Installation. . . . . . . . .13
Section 3.2 Project Description . . . . . . . . . . . . . . . . . . . .13
Section 3.3 Issuance of the Bonds; Application of
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . .13
Section 3.4 Investment of Fund Moneys . . . . . . . . . . . . . . . . .14
Section 3.5 Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . .14

ARTICLE IV
LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

Section 4.1 Loan Repayment; Delivery of First Mortgage
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 4.2 Additional Payments . . . . . . . . . . . . . . . . . . . .16
Section 4.3 Place of Payments . . . . . . . . . . . . . . . . . . . . .17
Section 4.4 Obligations Unconditional . . . . . . . . . . . . . . . . .17
Section 4.5 Assignment of Revenues, Agreement and First
Mortgage Bonds. . . . . . . . . . . . . . . . . . . . . .17
Section 4.6 First Mortgage Bonds. . . . . . . . . . . . . . . . . . . .17

ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS

Section 5.1 Right of Access . . . . . . . . . . . . . . . . . . . . . .19
Section 5.2 Maintenance . . . . . . . . . . . . . . . . . . . . . . . .19
Section 5.3 Removal of Portions of the Project Facilities . . . . . . .19
Section 5.4 Operation of Project Facilities . . . . . . . . . . . . . .20
Section 5.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 5.6 Workers' Compensation Coverage. . . . . . . . . . . . . . .20
Section 5.7 Damage; Destruction and Eminent Domain. . . . . . . . . . .20
Section 5.8 Company to Maintain its Corporate Existence;
Conditions Under Which Exceptions Permitted . . . . . . .21
Section 5.9 Indemnification . . . . . . . . . . . . . . . . . . . . . .21
Section 5.10 Company Not to Adversely Affect Exclusion of
Interest on Bonds From Gross Income For Federal
Income Tax Purposes . . . . . . . . . . . . . . . . . . .22
Section 5.11 Operation and Maintenance . . . . . . . . . . . . . . . . .22
Section 5.12 Use of Project Facilities . . . . . . . . . . . . . . . . .23
Section 5.13 Assignment by Company . . . . . . . . . . . . . . . . . . .23
Section 5.14 Agreements with Bond Insurer. . . . . . . . . . . . . . . .24

ARTICLE VI
REDEMPTION

Section 6.1 Optional Redemption. . . . . . . . . . . . . . . . . . . . .25
Section 6.2 Extraordinary Optional Redemption. . . . . . . . . . . . . .25
Section 6.3 Mandatory Redemption . . . . . . . . . . . . . . . . . . . .27
Section 6.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . .27
Section 6.5 Actions by Authority . . . . . . . . . . . . . . . . . . . .27
Section 6.6 Concurrent Discharging of First Mortgage Bonds . . . . . . .27

ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES

Section 7.1 Events of Default. . . . . . . . . . . . . . . . . . . . . .28
Section 7.2 Remedies on Default. . . . . . . . . . . . . . . . . . . . .29
Section 7.3 No Remedy Exclusive. . . . . . . . . . . . . . . . . . . . .29
Section 7.4 Agreement to Pay Attorneys' Fees and Expenses. . . . . . . .30
Section 7.5 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 7.6 Notice of Default. . . . . . . . . . . . . . . . . . . . . .30

ARTICLE VIII
MISCELLANEOUS

Section 8.1 Term of Agreement. . . . . . . . . . . . . . . . . . . . . .31
Section 8.2 Amounts Remaining in Funds . . . . . . . . . . . . . . . . .31
Section 8.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .31
Section 8.4 Extent of Covenants of the Authority; No Personal
Liability . . . . . . . . . . . . . . . . . . . . . . . .31
Section 8.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.6 Amendments and Supplements . . . . . . . . . . . . . . . . .32
Section 8.7 Execution Counterparts . . . . . . . . . . . . . . . . . . .32
Section 8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . .32

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

EXHIBIT A - PROJECT FACILITIES COMPRISING KILLEN PROJECT UNIT

EXHIBIT B - PROJECT FACILITIES COMPRISING WALTER C. BECKJORD
PROJECT UNIT

EXHIBIT C - PROJECT FACILITIES COMPRISING MIAMI FORT PROJECT UNIT

<PAGE>
LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into as of January 1, 1994
between the OHIO WATER DEVELOPMENT AUTHORITY (the "Authority"), a body politic
and corporate organized and existing under the laws of the State of Ohio, and
THE CINCINNATI GAS & ELECTRIC COMPANY (the "Company"), a public utility and
corporation duly organized and validly existing under the laws of the State of
Ohio. Capitalized terms used in the following recitals are used as defined in
Article I of this Agreement.

Pursuant to Section 13 of Article VIII of the Ohio Constitution and the
Act, the Authority has determined to issue, sell and deliver the Bonds and to
lend the proceeds derived from the sale thereof to the Company to assist in the
refunding of the Refunded Bonds as defined below. The Refunded Bonds were
originally issued to provide funds to make loans to the Company to assist in the
financing of its portion of the costs of the Project as defined below.

The Company and the Authority each have full right and lawful authority
to enter into this Agreement and to perform and observe the provisions hereof on
their respective parts to be performed and observed.

NOW THEREFORE, in consideration of the premises and the mutual
representations and agreements hereinafter contained, the Authority and the
Company agree as follows (provided that any obligation of the Authority or the
State created by or arising out of this Agreement shall never constitute a
general debt of the Authority or the State or give rise to any pecuniary
liability of the Authority or the State but shall be payable solely out of
Revenues, including Loan Payments made pursuant to the First Mortgage Bonds):

<PAGE>
ARTICLE I

DEFINITIONS

Section 1.1. Use of Defined Terms. In addition to the words and terms
defined elsewhere in this Agreement or by reference to another document, the
words and terms set forth in Section 1.2 hereof shall have the meanings set
forth therein unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein.

Section 1.2. Definitions. As used herein:

"Act" means Chapter 6121 and 6123, Ohio Revised Code, as enacted and
amended from time to time pursuant to Section 13 of Article VIII of the Ohio
Constitution.

"Additional Payments" means the amounts required to be paid by the
Company pursuant to the provisions of Section 4.2 hereof.

"Administration Expenses" means the compensation (which compensation
shall not be greater than that typically charged in similar circumstances) and
reimbursement of reasonable expenses and advances payable to the Trustee, the
Registrar, any Paying Agent and any Authenticating Agent.

"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.

"Authenticating Agent" means the Authenticating Agent as defined in the
Indenture.

"Authority Fee" means an amount not to exceed $63,100.

"Bond Fund" means the Bond Fund created in the Indenture.

"Bond Insurance Policy" means the municipal bond insurance policy issued
by the Bond Insurer that guarantees payment when due of principal and interest
on the Bonds.

"Bond Insurer" means Municipal Bond Investors Assurance Corporation, a
stock insurance company incorporated under the laws of the State of New York, or
its successor.

"Bond Resolution" means the resolution of the Authority providing for
the issuance of the Bonds and approving this Agreement, the Indenture and
related matters, as amended or supplemented from time to time.

"Bond Service Charges" means, for any period or time, the principal of,
premium, if any, and interest due on the Bonds for that period or payable at
that time whether due at maturity or upon acceleration or redemption or
otherwise.

"Bonds" means the $21,400,000 Collateralized Water Development Revenue
Refunding Bonds, 1994 Series A (The Cincinnati Gas & Electric Company Project),
issued by the Authority pursuant to the Bond Resolution and the Indenture.

"Bonds Outstanding" or "Outstanding Bonds" means Outstanding Bonds as
defined in the Indenture.

"Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code and Sections of the Code include relevant
applicable regulations and proposed regulations thereunder and under the
Internal Revenue Code of 1954, as amended, and any successor provisions to those
Sections, regulations or proposed regulations and, in addition, all applicable
official rulings and judicial determinations under the foregoing applicable to
the Bonds.

"Company Mortgage" means the First Mortgage, dated as of August 1, 1936,
between the Company and the Company Mortgage Trustee, as amended, modified or
supplemented from time to time.

"Company Mortgage Trustee" means The Bank of New York (formerly Irving
Trust Company), as trustee under the Company Mortgage, and its successors and
assigns.

"Eligible Investments" means Eligible Investments as defined in the
Indenture.

"Engineer" means an engineer (who may be an employee of the Company) or
engineering firm qualified to practice the profession of engineering under the
laws of the State and who or which is acceptable to the Trustee.

"EPA" means the Environmental Protection Agency of the State and any
successor body, agency, commission or department.

"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.

"First Mortgage Bonds" means the $21,400,000 aggregate principal amount
of First Mortgage Bonds, 5.45% Series A Due 2024, issued under the Company
Mortgage pursuant to the Supplemental Mortgage Indenture.

"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1 hereof.

"Holder" or "Holder of a Bond" means the Person in whose name a Bond is
registered on the Register.

"Indenture" means the Trust Indenture, dated as of the same date as this
Agreement, between the Authority and the Trustee, as amended or supplemented
from time to time.

"Interest Rate for Advances" means the interest rate per year payable on
the Bonds.

"Kentucky Bonds" means the $48,000,000 Collateralized Pollution Control
Revenue Refunding Bonds, 1994 Series A (the Cincinnati Gas & Electric Company
Project) issued by the County of Boone, Kentucky.

"Loan" means the loan by the Authority to the Company of the proceeds
received from the sale of the Bonds.

"Loan Payment Date" means any date on which any Bond Service Charges are
due and payable.

"Loan Payments" means the amounts required to be paid by the Company on
the First Mortgage Bonds in repayment of the Loan pursuant to Section 4.1
hereof.

"1954 Code" means the Internal Revenue Code of 1954 as amended from time
to time through the date of enactment of the Code. References to the 1954 Code
and Sections of the 1954 Code include relevant applicable regulations (including
temporary regulations) and proposed regulations thereunder and any successor
provisions to those Sections, regulations or proposed regulations.

"1994 Bonds" means collectively, the Bonds, the Ohio Air Bonds and the
Kentucky Bonds.

"Notice Address" means:

(a) As to the Authority: Ohio Water Development Authority
88 East Broad Street
Suite 1300
Columbus, Ohio 43215
Attention: Executive Director

(b) As to the Company: The Cincinnati Gas & Electric Company
P.O. Box 960
Cincinnati, Ohio 45201
Attention: Treasurer

(c) As to the Trustee: The Bank of New York
101 Barclay Street
21st Floor
New York, New York 10286
Attention: Corporate Trust Administration

or such additional or different address, notice of which is given under Section
8.3 hereof.

"Ohio Air Bonds" means the $25,300,000 Collateralized Air Quality
Development Revenue Refunding Bonds, 1994 Series B (The Cincinnati Gas &
Electric Company Project).

"Opinion of Bond Counsel" means a written opinion of nationally
recognized bond counsel selected by the Company and acceptable to the Trustee
who is experienced in matters relating to the exclusion from gross income for
federal income tax purposes of interest on obligations issued by states and
their political subdivisions. Bond Counsel may be counsel to the Trustee or the
Company.

"Original Purchaser" means the Original Purchaser as defined in the
Indenture.

"Paying Agent" means the Paying Agent as defined in the Indenture.

"Person" or words importing persons mean firms, associations,
partnerships (including without limitation, general and limited partnerships),
societies, trusts, corporations, public or governmental bodies, other legal
entities and natural persons.

"Project" or "Project Facilities" means the real, personal or real and
personal property, including undivided or other interests therein, identified in
the Project Description.

"Project Description" means the description of the Project Facilities
identified in and attached hereto as Exhibit A (such portion hereinafter
referred to as "Killen Project Unit"), Exhibit B (such portion hereinafter
referred to as "Walter C. Beckjord Project Unit"), and Exhibit C (such portion
hereinafter referred to as "Miami Fort Project Unit") as each may be amended in
accordance with this Agreement.

"Project Purposes" means the purposes of Waste Water Facilities and/or
Solid Waste Facilities as described in the Act and as particularly described in
Exhibits A, B and C hereto.

"Project Site" means, as to the Killen Project Unit, the Killen Electric
Generating Station in Adams County, Ohio; as to the Miami Fort Project Unit, the
Miami Fort Electric Generating Station in Hamilton County, Ohio; and as to the
Walter C. Beckjord Project Unit, the Walter C. Beckjord Electric Generating
Station in Clermont County, Ohio.

"Project Units" means each of the three project units included in the
Project and described in Exhibits A, B and C hereto.

"Rebate Fund" means the Rebate Fund created in the Indenture.

"Refunded Bonds" means the $21,400,000 in aggregate principal amount of
State of Ohio Collateralized Water Development Revenue Bonds, 1983 Series (The
Cincinnati Gas & Electric Company Project) dated as of May 1, 1983.

"Refunded Bonds Indenture" means the Trust Indenture for the Refunded
Bonds between the Authority and the Refunded Bonds Trustee dated as of May 1,
1983.

"Refunded Bonds Loan Agreement" means the Loan Agreement between the
Authority and the Company dated as of May 1, 1983 entered into in connection
with the Refunded Bonds.

"Refunded Bonds Trustee" means The Bank of New York (formerly Irving
Trust Company), as trustee under the Refunded Bonds Indenture.

"Refunding Fund" means the Refunding Fund created in the Indenture.

"Register" means the books kept and maintained for the registration and
transfer of Bonds pursuant to Section 3.05 of the Indenture.

"Registrar" means the Registrar as defined in the Indenture.

"Revenues" means (a) the Loan Payments, (b) all other moneys received or
to be received by the Authority (excluding the Authority Fee) or the Trustee in
respect of repayment of the Loan, including without limitation, all moneys and
investments in the Bond Fund, (c) any moneys and investments in the Refunding
Fund (until applied to the redemption of the Refunded Bonds), and (d) all income
and profit from the investment of the foregoing moneys. The term "Revenues"
does not include any moneys or investments in the Rebate Fund.

"Solid Waste Facility" or "Solid Waste Facilities" means those
facilities which are solid waste facilities as defined in Section 6123.01, Ohio
Revised Code.

"State" means the State of Ohio.

"Supplemental Mortgage Indenture" means the Thirty-fifth Supplemental
Indenture, dated as of January 1, 1994, between the Company and the Company
Mortgage Trustee, as amended or supplemented from time to time.

"Trustee" means The Bank of New York, New York, New York, a corporation
duly organized and validly existing under the laws of the State of New York,
until a successor Trustee shall have become such pursuant to the applicable
provisions of the Indenture, and thereafter "Trustee" shall mean the successor
Trustee. "Principal Office" of the Trustee shall mean the principal corporate
trust office of the Trustee, which office at the date of issuance of the Bonds
is located at its Notice Address.

"Unassigned Authority's Rights" means all of the rights of the Authority
to receive Additional Payments under Section 4.2 hereof, to access and inspect
pursuant to Section 5.1 hereof, to be held harmless and indemnified under
Section 5.9 hereof, to take certain corrective measures as provided in Section
5.11 hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof and to give or withhold consent to amendments, changes, modifications,
alterations and termination of this Agreement under Section 8.6 hereof and its
right to enforce such rights.

"Waste Water Facility" or "Waste Water Facilities" means those
facilities which are waste water facilities as defined in Section 6121.01, Ohio
Revised Code.

Section 1.3. Interpretation. Any reference herein to the State, to the
Authority or to any member or officer of either includes entities or officials
succeeding to their respective functions, duties or responsibilities pursuant to
or by operation of law or lawfully performing their functions.

Any reference to a section or provision of the Constitution of the State
or the Act, or to a section, provision or chapter of the Ohio Revised Code, or
to any statute of the United States of America, includes that section, provision
or chapter as amended, modified, revised, supplemented or superseded from time
to time; provided, that no amendment, modification, revision, supplement or
superseding section, provision or chapter shall be applicable solely by reason
of this provision, if it constitutes in any way an impairment of the rights or
obligations of the Authority, the State, the Holders, the Trustee, the
Registrar, an Authenticating Agent, a Paying Agent or the Company under this
Agreement, the Indenture, the Bonds, the Company Mortgage, the Supplemental
Mortgage Indenture or the First Mortgage Bonds.

Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder" and similar terms refer to this Agreement; and
the term "hereafter" means after, and the term "heretofore" means before, the
date of delivery of the Bonds. Words of any gender include the correlative
words of the other genders, unless the sense indicates otherwise.

Section 1.4. Captions and Headings. The captions and headings in this
Agreement are used solely for convenience of reference and in no way define,
limit or describe the scope or intent of any Articles, Sections, subsections,
paragraphs or subparagraphs or clauses hereof.

(End of Article I)

<PAGE>
ARTICLE II

REPRESENTATIONS

Section 2.1. Representations of the Authority. The Authority
represents that: (a) it is a body politic and corporate duly organized and
validly existing under the laws of the State; (b) it has duly accomplished all
conditions necessary to be accomplished by it prior to the issuance and delivery
of the Bonds and the execution and delivery of this Agreement and the Indenture;
(c) it is not in violation of or in conflict with any provisions of the laws of
the State which would impair its ability to carry out its obligations contained
in this Agreement or the Indenture; (d) it is empowered to enter into the
transactions contemplated by this Agreement and the Indenture; (e) it has duly
authorized the execution, delivery and performance of this Agreement and the
Indenture; and (f) it will do all things in its power in order to maintain its
existence or assure the assumption of its obligations under this Agreement and
the Indenture by any successor public body.

Section 2.2. No Warranty by Authority of Condition or Suitability of
the Project. The Authority makes no warranty, either express or implied, as to
the suitability or utilization of the Project for the Project Purposes, or as to
the condition of the Project Facilities or that the Project Facilities are or
will be suitable for the Company's purposes or needs.

Section 2.3. Representations and Covenants of the Company. The Company
represents that:

(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State, with power and authority (corporate and other) to own its
properties and conduct its business, to execute and deliver this
Agreement, the Supplemental Mortgage Indenture and the First
Mortgage Bonds, and to perform its obligations under this
Agreement, the Company Mortgage, the Supplemental Mortgage
Indenture and the First Mortgage Bonds.

(b) This Agreement, the Supplemental Mortgage Indenture and
the Company Mortgage have been duly authorized, executed and
delivered by the Company; the First Mortgage Bonds have been duly
authorized, executed, issued and delivered; and this Agreement,
the Supplemental Mortgage Indenture, the Company Mortgage and the
First Mortgage Bonds constitute valid and legally binding
obligations of the Company, enforceable in accordance with their
respective terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights, to laws
relating to or affecting the enforcement of the security provided
by the Company Mortgage and to general equity principles.

(c) The execution, delivery and performance by the Company of
this Agreement and the Supplemental Mortgage Indenture and the
consummation of the transactions contemplated hereby and thereby
will not violate any provision of law or regulation applicable to
the Company, or of any writ or decree of any court or
governmental instrumentality, or of the Articles of
Incorporation, as amended, or the Regulations of the Company, or
of any mortgage, indenture, contract, agreement or other
undertaking to which the Company is a party or which purports to
be binding upon the Company or upon any of its assets.

(d) Substantially all (at least 90%) of the proceeds of the
Refunded Bonds were used to provide "water pollution control
facilities" and "solid waste disposal facilities" within the
meaning of Sections 103(b)(4)(E) and (F) of the 1954 Code, the
original use of which facilities commenced with the Company and
all of the proceeds of the Refunded Bonds have been spent for the
Project or to pay costs of issuance of the Refunded Bonds. The
proceeds of the Bonds (other than any accrued interest thereon)
will be used exclusively to refund the Refunded Bonds and none of
the proceeds of the Bonds will be used to pay for any costs of
issuance of the Bonds. The Refunded Bonds were issued prior to
August 16, 1986. The principal amount of the Bonds does not
exceed the outstanding principal amount of the Refunded Bonds.
The proceeds of the Bonds will be used to retire the Refunded
Bonds not later than 90 days after the date of issuance of the
Bonds.

(e) Either the acquisition and construction of the Project
Facilities financed with the Refunded Bonds, was not commenced
(within the meaning of Treasury Regulations Section 1.103-8(a)(5) as
applicable to the Refunded Bonds) prior to the adoption of the
respective resolutions of the Authority evidencing the intent of
the Authority to issue those Refunded Bonds (being March 11, 1976
with respect to the financing for the Killen Project Unit and
October 8, 1981 with respect to the financing for the Walter C.
Beckjord Project Unit and the Miami Fort Project Unit), or, any
proceeds of the corresponding Refunded Bonds used to pay costs
incurred prior to the adoption of such corresponding resolution
have been treated for purposes of this Agreement as having been
used to provide working capital (not land or depreciable
property) to the Company.

(f) It has caused the Project to be substantially completed.
The Project constitutes a combined Waste Water Facility and Solid
Waste Facility under the Act and is consistent with the purposes
of Section 13 of Article VIII of the Ohio Constitution and of the
Act. The Project is being, and the Company will cause the
Project to be, operated and maintained in such manner to conform
with all applicable zoning, planning, building, environmental and
other applicable governmental regulations and all permits,
variances and orders issued or granted pursuant thereto,
including the permit-to-install for the Project, which permits,
variances and orders have not been withdrawn or otherwise
suspended, and to be consistent with the Act.

(g) It has used or operated or has caused to be used or
operated, and presently intends to use or operate or cause to be
used or operated the Project Facilities in a manner consistent
with the Project Purposes until the date on which the Bonds have
been fully paid and knows of no reason why the Project Facilities
will not be so operated. The Company does not intend to sell or
otherwise dispose of the Project or any portion thereof.

(h) None of the proceeds of the Refunded Bonds were used and
none of the proceeds of the Bonds will be used to provide any
private or commercial golf course, country club, massage parlor,
tennis club, skating facility (including roller skating,
skateboard and ice skating), racquet sports facility (including
handball or racquetball court), hot tub facility, suntan
facility, racetrack, airplane, skybox or other private luxury
box, or health club facility; any facility primarily used for
gambling; any store the principal business of which is the sale
of alcoholic beverages for consumption off premises; or any
facilities for retail food and beverage services (except grocery
stores), automobile sales or service, or the provision of
recreation or entertainment.

(i) Less than 25% of the proceeds of the Refunded Bonds have
been used and less than 25% of the proceeds of the Bonds will be
used directly or indirectly to acquire land or any interest
therein, and none of such proceeds has been or will be used to
provide land which is to be used for farming purposes.

(j) No portion of the proceeds of the Refunded Bonds has been
used and no portion of the proceeds of the Bonds will be used to
acquire existing property or any interest therein unless the
first use of such property was by the Company and was pursuant to
and followed such acquisition.

(k) After the expiration of any applicable temporary period
under Section 148(d)(3) of the Code, at no time during any bond
year will the aggregate amount of gross proceeds of the 1994
Bonds invested in higher yielding investments (within the meaning
of Section 148(b) of the Code) exceed 150 percent of the debt
service on the 1994 Bonds for such bond year and the aggregate
amount of gross proceeds of the 1994 Bonds invested in higher
yielding investments, if any, will be promptly and appropriately
reduced as the outstanding amount of the 1994 Bonds is reduced,
provided however that the foregoing shall not require the sale or
disposition of any investments in higher yielding investments if
such sale or disposition would result in a loss which exceeds the
amount which would be paid to the United States (but for such
sale or disposition) at the time of such sale or disposition if a
payment were due at such time. At no time will any funds
constituting gross proceeds of the 1994 Bonds be used in a manner
as would constitute failure of compliance with Section 148 of the
Code.

The terms "bond year", "gross proceeds", "higher yielding
investments", "yield", and "debt service" have the meanings
assigned to them for purposes of Section 148 of the Code.

(l) The Refunded Bonds were not, and the Bonds will not be,
"federally guaranteed" within the meaning of Section 149(b) of
the Code.

(m) It is not anticipated that as of the date hereof, there
will be created any "replacement proceeds", within the meaning of
Section 1.148-1(c) of the Treasury Regulations, with respect to
the 1994 Bonds; however, in the event that any such replacement
proceeds are deemed to have been created, such amounts will be
invested in compliance with Section 148 of the Code.

(n) On the date of issuance and delivery of the Refunded
Bonds, the Company reasonably expected that all of the proceeds
of such Refunded Bonds would be used to carry out the
governmental purposes of each such issue within the 3-year period
beginning on the date each such issue was issued and none of the
proceeds of each such issue, if any, were invested in nonpurpose
investments having a substantially guaranteed yield for 3 years
or more.

(o) The average maturity of the 1994 Bonds does not exceed
120% of the average reasonably expected economic life of the
facilities financed or refinanced by the 1994 Bonds (determined
under Section 147(b) of the Code).

(p) The information furnished by the Company and used by the
Authority in preparing the certifications and statements pursuant
to Sections 148 and 149(e) of the Code or their statutory
predecessors with respect to the Refunded Bonds was accurate and
complete as of the dates of issuance of the Refunded Bonds, and
the information furnished by the Company and used by the
Authority in preparing the certification pursuant to Section 148
of the Code and in preparing the information statement pursuant
to Section 149(e) of the Code, both referred to in the Bond
Resolution, will be accurate and complete as of the date of
issuance of the Bonds.

(q) The Project Facilities do not include any office except
for offices (i) located on the Project Site and (ii) not more
than a de minimis amount of the functions to be performed at
which is not directly related to the day-to-day operations of the
Project Facilities.

(End of Article II)

<PAGE>
ARTICLE III

COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS

Section 3.1. Acquisition, Construction and Installation. The Company
represents that it and the other public utility companies which own undivided
interests in the Project Facilities with the Company as tenants-in-common have
caused the Project Facilities to be acquired, constructed and installed on the
applicable Project Sites, substantially in accordance with the Project
Description and in conformance with all applicable zoning, planning, building
and other similar regulations of all governmental authorities having
jurisdiction over the Project and all permits, variances and orders issued in
respect of the Project by EPA, and that the proceeds derived from the Refunded
Bonds, including any investment thereof, were expended in accordance with the
Refunded Bonds Indenture and the Refunded Bonds Loan Agreement.

Section 3.2. Project Description. The Project Description may be
changed from time to time by, or with the consent of, the Company provided that
any such change shall also be filed with the Authority and provided further that
no change in the Project Description shall materially change the function of the
Project Facilities unless the Trustee shall have received (i) an Engineer's
certificate that such changes will not impair the significance or character of
the Project Facilities as Waste Water Facilities and/or Solid Waste Facilities
and (ii) an Opinion of Bond Counsel or ruling of the Internal Revenue Service to
the effect that such amendment will not adversely affect the exclusion of
interest on the Bonds from gross income for federal income tax purposes.

Section 3.3. Issuance of the Bonds; Application of Proceeds. To
provide funds to make the Loan to the Company to assist the Company in the
refunding of the Refunded Bonds, concurrently with the delivery to the Trustee
of the First Mortgage Bonds as provided in Section 4.1 hereof, the Authority
will issue, sell and deliver the Bonds to the Original Purchaser. The Bonds
will be issued pursuant to the Indenture in the aggregate principal amount, will
bear interest, will mature and will be subject to redemption as set forth
therein. The Company hereby approves the terms and conditions of the Indenture
and the Bonds, and the terms and conditions under which the Bonds will be
issued, sold and delivered.

The proceeds from the sale of the Bonds (other than any accrued
interest) shall be loaned to the Company to assist the Company in refunding the
Refunded Bonds in order to reduce the interest cost payable by the Company and
shall be deposited in the Refunding Fund and disbursed as follows: all of the
proceeds of the Bonds (other than any accrued interest) will be deposited in the
Refunding Fund (as created and defined in the Indenture) and on February 14,
1994 all moneys on deposit in the Refunding Fund shall be deposited in the Bond
Fund created in the Refunded Bonds Indenture and applied by the Refunded Bonds
Trustee to the payment of principal of, redemption premium and interest on the
Refunded Bonds on February 15, 1994.

Pending disbursement pursuant to this Section, the proceeds so deposited
in the Refunding Fund, together with any investment earnings there on, shall
constitute a part of the Revenues assigned by the Authority to the Trustee for
the payment of Bond Service Charges. Any accrued interest shall be deposited in
the Bond Fund.

The Company hereby requests that the Authority notify the Refunded Bonds
Trustee that the entire outstanding principal amount of the Refunded Bonds is to
be redeemed on February 15, 1994 at a redemption price of 103% of the principal
amount thereof plus accrued interest to the redemption date.

Section 3.4. Investment of Fund Moneys. At the oral (confirmed
promptly in writing) or written request of the Company, any moneys held as part
of the Bond Fund, the Refunding Fund or the Rebate Fund shall be invested or
reinvested by the Trustee in Eligible Investments; provided, that such moneys
shall be invested or reinvested by the Trustee only in Eligible Investments
which shall mature, or which shall be subject to redemption by the holder
thereof at the option of such holder, not later than the date upon which the
moneys so invested are needed to make payments from those Funds. The Authority
(to the extent it retained or retains direction or control) and the Company each
hereby represents that the investment and reinvestment and the use of the
proceeds of the Refunded Bonds were restricted in such manner and to such extent
as was necessary so that the Refunded Bonds would not constitute arbitrage bonds
under the statutory predecessor of the Code and each hereby covenants that it
will restrict that investment and reinvestment and the use of the proceeds of
the Bonds in such manner and to such extent, if any, as may be necessary so that
the Bonds will not constitute arbitrage bonds under Section 148 of the Code.

The Company shall provide the Authority with, and the Authority may base
its certificate and statement, each as authorized by the Bond Resolution, on a
certificate of an appropriate officer, employee or agent of or consultant to the
Company for inclusion in the transcript of proceedings for the Bonds, setting
forth the reasonable expectations of the Company on the date of delivery of and
payment for the Bonds regarding the amount and use of the proceeds of the Bonds
and the facts, estimates and circumstances on which those expectations are
based.

Section 3.5. Rebate Fund. To the extent required by Section 5.09 of
the Indenture, within five days after the end of the fifth Bond Year (as defined
in the Indenture) and every fifth Bond Year thereafter, and within five days
after payment in full of all outstanding Bonds, the Company shall calculate the
amount of Excess Earnings (as defined in the Indenture) as of the end of that
Bond Year or the date of such payment and shall notify the Trustee of that
amount. If the amount then on deposit in the Rebate Fund created under the
Indenture is less than the amount of Excess Earnings (computed by taking into
account the amount or amounts, if any, previously paid to the United States
pursuant to Section 5.09 of the Indenture and this Section), the Company shall,
within five days after the date of the aforesaid calculation, pay to the Trustee
for deposit in the Rebate Fund an amount sufficient to cause the Rebate Fund to
contain an amount equal to the Excess Earnings. The obligation of the Company
to make such payments shall remain in effect and be binding upon the Company
notwithstanding the release and discharge of the Indenture. The Company shall
obtain and keep such records of the computations made pursuant to this Section
as are required under Section 148(f) of the Code.

(End of Article III)

<PAGE>
ARTICLE IV

LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

Section 4.1. Loan Repayment; Delivery of First Mortgage Bonds. Upon
the terms and conditions of this Agreement, the Authority agrees to make the
Loan to the Company. The proceeds of the Loan shall be deposited with the
Trustee pursuant to Section 3.3 hereof. As evidence of its obligation hereunder
to repay the Loan, the Company agrees to execute and deliver the First Mortgage
Bonds to the Authority, in the manner provided in Section 4.6 hereof. In
consideration of and in repayment of the Loan, the Company shall make, as Loan
Payments, to the Trustee for the account of the Authority, payments on the First
Mortgage Bonds which correspond, as to time, and are equal in amount, to the
Bond Service Charges payable on the Bonds. All Loan Payments received by the
Trustee shall be held and disbursed in accordance with the provisions of the
Indenture and this Agreement for application to the payment of Bond Service
Charges.

The Company shall be entitled to a credit against the Loan Payments
required to be made on any Loan Payment Date to the extent that the balance of
the Bond Fund is then in excess of amounts required (a) for the payment of Bonds
theretofore matured or theretofore called for redemption, or to be called for
redemption pursuant to Section 6.1 hereof (b) for the payment of interest for
which checks or drafts have been drawn and mailed by the Trustee or Paying
Agent, and (c) to be deposited in the Bond Fund by the Indenture for use other
than for the payment of Bond Service Charges due on that Loan Payment Date.

Except for such interest of the Company as may hereafter arise pursuant
to Section 8.2 hereof or Sections 5.07 or 5.08 of the Indenture, the Company and
the Authority each acknowledge that neither the Company, the State nor the
Authority has any interest in the Bond Fund, and any moneys deposited therein
shall be in the custody of and held by the Trustee in trust for the benefit of
the Holders.

Section 4.2. Additional Payments. The Company shall pay to the
Authority, the Authority Fee and, as Additional Payments hereunder, any and all
costs and expenses incurred or to be paid by the Authority in connection with
the issuance and delivery of the Bonds or otherwise related to actions taken by
the Authority under this Agreement or the Indenture.

The Company shall pay the Administration Expenses to the Trustee, the
Registrar, and any Paying Agent or Authenticating Agent, as appropriate, as
Additional Payments hereunder.

The Company may, without creating a default hereunder, contest in good
faith the reasonableness of any such cost or expense incurred or to be paid by
the Authority and any Administration Expenses claimed to be due to the Trustee,
the Registrar, any Paying Agent or any Authenticating Agent.

In the event the Company should fail to pay any Loan Payments or
Additional Payments (including Administration Expenses) when due, the payment in
default shall continue as an obligation of the Company until the amount in
default shall have been fully paid together with interest thereon during the
default period at the Interest Rate for Advances.

Section 4.3. Place of Payments. The Company shall make all Loan
Payments directly to the Trustee at its Principal Office. Additional Payments
shall be made directly to the person or entity to whom or to which they are due.

Section 4.4. Obligations Unconditional. The obligations of the Company
to make Loan Payments, Additional Payments (including Administration Expenses)
and any payments required of the Company under Section 5.09 of the Indenture
shall be absolute and unconditional, and the Company shall make such payments
without abatement, diminution or deduction regardless of any cause or
circumstances whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim which the Company may have or assert against the
Authority, the Trustee, the Registrar or any other Person.

Section 4.5. Assignment of Revenues, Agreement and First Mortgage
Bonds. To secure the payment of Bond Service Charges, the Authority shall
absolutely assign to the Trustee, its successors in trust and its and their
assigns forever, by the Indenture, all right, title and interest of the
Authority in and to (a) the Revenues, including, without limitation, all Loan
Payments and other amounts receivable by or on behalf of the Authority under the
Agreement in respect of repayment of the Loan, (b) the Agreement except for the
Unassigned Authority's Rights, and (c) the First Mortgage Bonds. The Company
hereby agrees and consents to those assignments.

Section 4.6. First Mortgage Bonds. To evidence and secure the
obligations of the Company to make the Loan Payments and repay the Loan, the
Company will, concurrently with the issuance of the Bonds, execute and deliver
First Mortgage Bonds to the Authority in an aggregate principal amount equal to
the aggregate principal amount of the Bonds. The Company agrees that First
Mortgage Bonds authorized pursuant to the Company Mortgage will be issued
containing the terms and conditions and in substantially the form set forth in
the Supplemental Mortgage Indenture. The First Mortgage Bonds shall:

(a) provide for payments of interest equal to the payments of
interest on the Bonds;

(b) provide for payments of principal and any premium equal
to the payments of principal (whether at maturity or by call for
mandatory or optional redemption or pursuant to acceleration or
otherwise) and any premium on the Bonds;

(c) require all such payments on such First Mortgage Bonds to
be made on or prior to the due date for the corresponding
payments to be made on the Bonds; and

(d) contain redemption provisions corresponding with such
provisions of the Bonds.

Unless the Company is entitled to a credit under this Agreement or the
Indenture, all payments on the First Mortgage Bonds shall be in the full amount
required thereunder. The First Mortgage Bonds shall be registered in the name
of the Trustee and shall not be transferred by the Trustee, except to effect
transfers to any successor trustee under the Indenture.

(End of Article IV)

<PAGE>
ARTICLE V

ADDITIONAL AGREEMENTS AND COVENANTS

Section 5.1. Right of Access. The Company agrees that, subject to
reasonable security and safety regulations and to reasonable requirements as to
notice, the Authority and the Trustee and their or any of their respective duly
authorized agents shall have the right at all reasonable times to enter upon the
Project Site to examine and inspect the Project. The Company further agrees
that the Authority and its duly authorized agents shall have such rights of
access to the Project Site as may be reasonably necessary to enable the
Authority to exercise its rights under Section 5.11 hereof, and for such purpose
the Company has executed and delivered to the Authority a good and sufficient
deed of easement pertaining to the Project Site. The Company warrants and
represents that it has good and sufficient title to the Project Site to permit
the maintenance and operation of the Project as contemplated herein.

Section 5.2. Maintenance. The Company shall use its best efforts to
keep and maintain the Project Facilities, including all appurtenances thereto
and any personal property therein or thereon, in good repair and good operating
condition so that the Project Facilities will continue to constitute Waste Water
Facilities and/or Solid Waste Facilities, for the purposes of the operation
thereof as required by Section 5.4 hereof.

So long as such shall not be in violation of the Act or impair the
character of the Project Facilities as Waste Water Facilities and/or Solid Waste
Facilities, and provided there is continued compliance with applicable laws and
regulations of governmental entities having jurisdiction thereof, the Company
shall have the right to remodel the Project Facilities or make additions,
modifications and improvements thereto, from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes, the cost of
which remodeling, additions, modifications and improvements shall be paid by the
Company and the same shall, when made, become a part of the Project Facilities.

Section 5.3. Removal of Portions of the Project Facilities. The
Company shall not be under any obligation to renew, repair or replace any
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary portions
of the Project Facilities, except that, subject to Section 5.4 hereof, it will
use its best efforts to ensure the continued character of the Project Facilities
as Waste Water Facilities and/or Solid Waste Facilities. The Company shall have
the right from time to time to substitute personal property or fixtures for any
portions of the Project Facilities, provided that the personal property or
fixtures so substituted shall not impair the character of the Project Facilities
as Waste Water Facilities and/or Solid Waste Facilities. Any such substituted
property or fixtures shall, when so substituted, become a part of the Project
Facilities. The Company shall also have the right to remove any portion of the
Project Facilities, without substitution therefor; provided, that the Company
shall deliver to the Trustee a certificate signed by an Engineer describing said
portion of the Project Facilities and stating that the removal of such property
or fixtures will not impair the character of the Project Facilities as Waste
Water Facilities and/or Solid Waste Facilities.

Section 5.4. Operation of Project Facilities. The Company will,
subject to its obligations and rights to maintain, repair or remove portions of
the Project Facilities, as provided in Sections 5.2 and 5.3 hereof, use its best
efforts to continue operation of the Project Facilities so long as and to the
extent that operation thereof is required to comply with laws or regulations of
governmental entities having jurisdiction thereof or unless the Authority shall
have approved the discontinuance of such operation (which approval shall not be
unreasonably withheld). The Company agrees that it will, within the design
capacities thereof, use its best efforts to operate and maintain the Project
Facilities in accordance with all applicable, valid and enforceable rules and
regulations of governmental entities having jurisdiction thereof; provided, that
the Company reserves the right to contest in good faith any such laws or
regulations. The Company agrees that sufficient qualified operating personnel
will be retained and operational tests and measurements necessary to determine
compliance with the preceding sentence will be performed to insure proper and
efficient operation and maintenance of the Project Facilities.

Nothing in this Agreement shall prevent or restrict the Company, in its
sole discretion, at any time, from discontinuing or suspending either
permanently or temporarily its use of any facility of the Company served by the
Project Facilities and in the event such discontinuance or suspension shall
render unnecessary the continued operation of the Project Facilities, the
Company shall have the right to discontinue the operation of the Project
Facilities during the period of any such discontinuance or suspension.

Section 5.5. Insurance. The Company agrees to insure its interest in
the Project Facilities in the amount and with the coverage required by the
Company Mortgage.

Section 5.6. Workers' Compensation Coverage. Throughout the term of
this Agreement, the Company shall comply, or cause compliance, with applicable
workers' compensation laws of the State.

Section 5.7. Damage; Destruction and Eminent Domain. If, during the
term of this Agreement, the Project Facilities or any portion thereof is
destroyed or damaged in whole or in part by fire or other casualty, or title to,
or the temporary use of, the Project Facilities or any portion thereof shall
have been taken by the exercise of the power of eminent domain, and the Company
or the Company Mortgage Trustee receives net proceeds from insurance or any
condemnation award in connection therewith, the Company (unless it shall have
exercised its option to prepay the Loan Payments pursuant to provisions of
Section 6.2 hereof), to the extent required to comply with applicable laws and
regulations with respect to the operations of facilities of the Company served
by the Project, shall promptly cause such net proceeds or an amount equal
thereto to be used to repair, rebuild or restore the portion of the Project
Facilities so damaged, destroyed or taken with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be necessary or desirable for the administration and operation of the Project
Facilities as Waste Water Facilities and/or Solid Waste Facilities and as shall
not impair the character or significance of the Project Facilities as furthering
the purposes of the Act. It is hereby acknowledged and agreed that any net
proceeds from insurance or any condemnation award relating to the Project
Facilities are subject to the lien of the Company Mortgage and shall be disposed
of in accordance with the terms and provisions of the Company Mortgage and that
any obligations of the Company under this Section 5.7 not satisfied by
application of such net proceeds shall be limited to the general credit of the
Company and does not require disposition of such net proceeds contrary to the
requirements of the Company Mortgage.

Section 5.8. Company to Maintain its Corporate Existence; Conditions
Under Which Exceptions Permitted. The Company agrees that during the term of
this Agreement it will maintain its corporate existence and will not sell its
electric properties as an entirety or substantially as an entirety or
consolidate with or merge into another corporation or permit one or more other
corporations to consolidate with or merge into it, except to the extent
permitted under the provisions of the Company Mortgage, provided that any
successor corporation resulting from any such sale, consolidation or merger
shall assume all obligations of the Company arising under or contemplated by the
provisions of this Agreement.

If consolidation, merger or sale or other transfer is made as provided
in this Section, the provisions of this Section shall continue in full force and
effect and no further consolidation, merger or sale or other transfer shall be
made except in compliance with the provisions of this Section.

Section 5.9. Indemnification. The Company releases the Authority from,
agrees that the Authority shall not be liable for, and indemnifies the Authority
against, all liabilities, claims, costs and expenses imposed upon or asserted
against the Authority on account of: (a) any loss or damage to property or
injury to or death of or loss by any person that may be occasioned by any cause
whatsoever pertaining to the construction, maintenance, operation and use of the
Project Facilities; (b) any breach or default on the part of the Company in the
performance of any covenant or agreement of the Company under this Agreement or
any related document, or arising from any act or failure to act by the Company,
or any of its agents, contractors, servants, employees or licensees; (c) the
authorization, issuance and sale of the Bonds, and the provision of any
information furnished in connection therewith concerning the Project Facilities
or the Company (including, without limitation, any information furnished by the
Company for inclusion in any certifications made by the Authority under Section
3.4 hereof or for inclusion in, or as a basis for preparation of, the
information statements filed by the Authority pursuant to Section 8(a)(ii) of
the Bond Resolution); and (d) any claim or action or proceeding with respect to
the matters set forth in (a), (b) and (c) above brought thereon; provided that
if the Authority has exercised its rights to operate and maintain the Project
Facilities under Section 5.11 hereof, the Company shall not be obligated to
indemnify the Authority against any loss or damage to, or any injury or death
of, any person if that loss, damage, injury or death results from the gross
negligence or willful misconduct of the Authority or its agents or employees.

The Company agrees to indemnify the Trustee, the Paying Agent and the
Registrar (each hereinafter referred to in this section as an "indemnified
party") for and to hold each of them harmless against all liabilities, claims,
costs and expenses incurred without negligence or willful misconduct on the part
of the indemnified party, on account of any action taken or omitted to be taken
by the indemnified party in accordance with the terms of this Agreement, the
Bonds or the Indenture or any action taken at the request of or with the consent
of the Company, including the costs and expenses of the indemnified party in
defending itself against any such claim, action or proceeding brought in
connection with the exercise or performance of any of its powers or duties under
this Agreement, the Bonds or the Indenture or any action taken at the request of
or with the consent of the Company.

In case any action or proceeding is brought against the Authority or an
indemnified party in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or proceeding
to the Company, and the Company upon receipt of that notice shall have the
obligation and the right to assume the defense of the action or proceeding;
provided, that failure of a party to give that notice shall not relieve the
Company from any of its obligations under this Section unless that failure
prejudices the defense of the action or proceeding by the Company. At its own
expense, an indemnified party may employ separate counsel and participate in the
defense; provided, however, where it is ethically inappropriate for one firm to
represent the interests of the Authority and any other indemnified party or
parties, the Company shall pay the Authority's legal expenses in connection with
the Authority's retention of separate counsel. The Company shall not be liable
for any settlement made without its consent.

The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees of
the Authority, the Trustee, the Paying Agent and the Registrar, respectively.
That indemnification is intended to and shall be enforceable by the Authority,
the Trustee, the Paying Agent and the Registrar, respectively, to the full
extent permitted by law.

Section 5.10. Company Not to Adversely Affect Exclusion of Interest on
Bonds From Gross Income For Federal Income Tax Purposes. The Company hereby
covenants and represents that it has taken and caused to be taken and shall take
and cause to be taken all actions that may be required of it for the interest on
the 1994 Bonds to be and remain excluded from the gross income of the Holders
for federal income tax purposes, and that it has not taken or permitted to be
taken on its behalf, and covenants that it will not take, or permit to be taken
on its behalf, any action which, if taken, would adversely affect that exclusion
under the provisions of the Code.

Section 5.11. Operation and Maintenance. In the event the Company
shall fail (i) to cause the Project Facilities to be kept in good repair and
operating condition, or (ii) to use its best efforts to cause the Project
Facilities to be operated in accordance with Section 5.4 hereof, the Authority
after 30 days' written notice to the Company specifying the particular failure
and the corrective measures which the Authority proposes to take and the refusal
by the Company to take such corrective measures as are needed to insure
compliance with Section 5.4 hereof, may take (but shall not be required to),
subject to all requirements and restrictions under which the production facility
served by the Project Facilities is operated, such corrective measures,
including employment of operating personnel (who must be approved by and act
under the direction and control of the Company) but excluding any curtailment in
whole or in part of the operation of the production facility served by the
Project Facilities other than to permit the repair of the Project Facilities, as
are specified in said notice to insure compliance with Section 5.4 hereof, and
provide for payment thereof. Any expenditures incurred by the Authority in
connection with its undertaking corrective measures pursuant to the provisions
of this Section, including without limitation the costs of any public liability
insurance which the Authority obtains in connection with such undertaking, shall
become an additional obligation of the Company to the Authority which, together
with interest thereon at the Interest Rate for Advances from the date such
expenditures are incurred by the Authority, the Company agrees to pay.

In the event the Authority exercises its right to take such corrective
measures, the Authority shall cease taking such measures and withdraw any
operating personnel from the Project Facilities at the earlier of (i) the time
as of which the Project Facilities have been restored to proper operating
condition or as of which proper operation of the Project Facilities has been
resumed by the Company or (ii) unless there exists an Event of Default under
Section 7.1(a) hereof, two months from the date on which such corrective
measures were originally taken.

Section 5.12. Use of Project Facilities. The Authority agrees that it
will not take any action, or cause any action to be taken on its behalf, to
interfere with the Company's ownership interest in the Project or to prevent the
Company from having possession, custody, use and enjoyment of the Project other
than pursuant to Section 5.11 or Article VII of this Agreement or Article VII of
the Indenture.

Section 5.13. Assignment by Company. This Agreement may be assigned in
whole or in part by the Company without the necessity of obtaining the consent
of either the Authority or the Trustee, subject, however, to each of the
following conditions:

(a) No assignment (other than pursuant to Section 5.8 hereof)
shall relieve the Company from primary liability for any of its
obligations hereunder, and in the event of any such assignment
the Company shall continue to remain primarily liable for the
payment of the Loan Payments and Additional Payments and for
performance and observance of the agreements on its part herein
provided to be performed and observed by it.

(b) Any assignment by the Company must retain for the Company
such rights and interests as will permit it to perform its
obligations under this Agreement, and any assignee from the
Company shall assume the obligations of the Company hereunder to
the extent of the interest assigned.

(c) The Company shall, within 30 days after execution
thereof, furnish or cause to be furnished to the Authority and
the Trustee a true and complete copy of each such assignment
together with any instrument of assumption.

(d) Any assignment from the Company shall not materially
impair fulfillment of the Project Purposes to be accomplished by
operation of the Project as herein provided.

Section 5.14. Agreements with Bond Insurer. So long as the Bond
Insurance Policy is in full force and effect with respect to the Bonds and the
Bond Insurer is not in default thereunder as defined in Section 7.10 of the
Indenture, the following provisions shall apply:

(a) Any action requiring the approval or consent of the
Holders, the Authority, the Trustee or the Company under the
Agreement shall also require the prior written consent of the
Bond Insurer.

(b) The Company shall provide the Bond Insurer annually with
copies of the Company's audited financial statements.

(c) Upon the occurrence and continuance of an Event of
Default hereunder, the Bond Insurer shall have the same right as
the Authority and the Trustee to pursue the remedies provided in
Sections 7.2 and 7.3 hereof; and

(d) The Company shall give notice to the Bond Insurer, not
less than two days prior to any Loan Payment Date, if the Company
does not intend or will be unable to make the Loan Payment on
that Loan Payment Date.

(End of Article V)

<PAGE>
ARTICLE VI

REDEMPTION

Section 6.1. Optional Redemption. Provided no Event of Default shall
have occurred and be subsisting, at any time and from time to time, the Company
may deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made and direct the Trustee to use the moneys so
delivered for the purpose of calling Bonds for optional redemption in accordance
with the applicable provisions of the Indenture providing for optional
redemption at the redemption price stated in the Indenture. Pending application
for those purposes, any moneys so delivered shall be held by the Trustee in a
special account in the Bond Fund and delivery of those moneys shall not, except
as set forth in Section 4.1 hereof, operate to abate or postpone Loan Payments
or Additional Payments otherwise becoming due or to alter or suspend any other
obligations of the Company under this Agreement.

Section 6.2. Extraordinary Optional Redemption. The Company shall
have, subject to the conditions hereinafter imposed, the option to direct the
redemption of the Bonds in whole in accordance with the applicable provisions of
the Indenture upon the occurrence of any of the following events:

(a) The Project or a Project Unit shall have been damaged or
destroyed to such an extent that (1) it cannot reasonably be
expected to be restored, within a period of six consecutive
months, to the condition thereof immediately preceding such
damage or destruction or (2) the Company is reasonably expected
to be prevented from carrying on its normal operations in
connection therewith for a period of six consecutive months.

(b) Title to, or the temporary use of, all or a significant
part of the Project or a Project Unit shall have been taken under
the exercise of the power of eminent domain (1) to such extent
that it cannot reasonably be expected to be restored within a
period of six consecutive months to a condition of usefulness
comparable to that existing prior to the taking or (2) to such an
extent that the Company is reasonably expected to be prevented
from carrying on its normal operations in connection therewith
for a period of six consecutive months.

(c) As a result of any changes in the Constitution of the
State, the Constitution of the United States of America or any
state or federal laws or as a result of legislative or
administrative action (whether state or federal) or by final
decree, judgment or order of any court or administrative body
(whether state or federal) entered after any contest thereof by
the Authority or the Company in good faith, this Agreement shall
have become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as
expressed in this Agreement.

(d) Unreasonable burdens or excessive liabilities shall have
been imposed upon the Authority or the Company with respect to
the Project or a Project Unit or the operation thereof,
including, without limitation, the imposition of federal, state
or other ad valorem, property, income or other taxes other than
ad valorem taxes at the rates presently levied upon privately
owned property used for the same general purpose as the Project
or a Project Unit.

(e) Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies or facilities
(including, but not limited to, facilities in connection with the
disposal of industrial wastes) necessary for the operation of the
Project or a Project Unit for the Project Purposes occur or
technological or other changes occur which the Company cannot
reasonably overcome or control and which in the Company's
reasonable judgment render the Project or a Project Unit
uneconomic or obsolete for the Project Purposes.

(f) Any court or administrative body shall enter a judgment,
order or decree, or shall take administrative action, requiring
the Company to cease all or any substantial part of its
operations served by the Project or a Project Unit to such extent
that the Company is or will be prevented from carrying on its
normal operations at the Project or a Project Unit for a period
of six consecutive months.

(g) The termination by the Company of operations at a Project
Unit.

The amount payable by the Company in the event of its exercise of the
option granted in this Section shall be the sum of the following:

(i) An amount of money which, when added to the moneys and
investments held to the credit of the Bond Fund, will be
sufficient pursuant to the provisions of the Indenture to pay, at
100% of the principal amount thereof plus accrued interest to the
redemption date, and discharge, all Outstanding Bonds on the
earliest applicable redemption date, that amount to be paid to
the Trustee, plus

(ii) An amount of money equal to the Additional Payments
relating to those Bonds accrued and to accrue until actual final
payment and redemption of those Bonds, that amount or applicable
portions thereof to be paid to the Trustee or to the Persons to
whom those Additional Payments are or will be due.

The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Authority are made for
paying those amounts as they accrue.

The rights and options granted to the Company in this Section may be
exercised whether or not the Company is in default hereunder; provided, that
such default will not relieve the Company from performing those actions which
are necessary to exercise any such right or option granted hereunder.

Section 6.3. Mandatory Redemption. The Company shall deliver to the
Trustee the moneys needed to redeem the Bonds in accordance with any mandatory
redemption provisions relating thereto as may be set forth in Section 4.01(b) of
the Indenture.

Section 6.4. Notice of Redemption. In order to exercise an option
granted in, or to consummate a redemption required by, this Article VI, the
Company shall, within 180 days following the event authorizing the exercise of
such option or at any time during the continuation of the condition referred to
in paragraphs (c), (d) or (e) of Section 6.2 hereof or promptly upon the
occurrence of a Determination of Taxability (as defined in the Indenture), give
written notice to the Authority, the Trustee and the Company Mortgage Trustee
that it is exercising its option to direct the redemption of Bonds, or that the
redemption thereof is required by Section 4.01(b) of the Indenture due to the
occurrence of a Determination of Taxability, as the case may be, in accordance
with the Agreement and the Indenture, and shall specify therein the date on
which such redemption is to be made, which date shall not be more than 180 days
from the date such notice is mailed. The Company shall make arrangements
satisfactory to the Trustee for the giving of the required notice of redemption
to the Holders of the Bonds, in which arrangements the Authority shall
cooperate. The Company shall make arrangements satisfactory to the Company
Mortgage Trustee to effect a concurrent redemption of an equivalent principal
amount of corresponding First Mortgage Bonds under the Supplemental Mortgage
Indenture.

Section 6.5. Actions by Authority. At the request of the Company or
the Trustee, the Authority shall take all steps required of it under the
applicable provisions of the Indenture or the Bonds to effect the redemption of
all or a portion of the Bonds pursuant to this Article VI.

Section 6.6. Concurrent Discharging of First Mortgage Bonds. In the
event any of the Bonds shall be paid and discharged, or deemed to be paid and
discharged, pursuant to any provisions of this Agreement and the Indenture, so
that such Bonds are not thereafter outstanding within the meaning of the
Indenture, a like principal amount of corresponding First Mortgage Bonds shall
be deemed fully paid for purposes of this Agreement and to such extent the
obligations of the Company hereunder shall be deemed terminated.

(End of Article VI)

<PAGE>
ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES

Section 7.1. Events of Default. Each of the following shall be an
Event of Default:

(a) The occurrence of an event of default as defined in
Section 7.01 (a) or (b) of the Indenture;

(b) The Company shall fail to observe and perform any other
agreement, term or condition contained in this Agreement, other
than such failure as will have resulted in an event of default
described in (a) above and the continuation of that failure for a
period of 90 days after notice thereof shall have been given to
the Company by the Authority or the Trustee, or for such longer
period as the Authority and the Trustee may agree to in writing;
provided, that failure shall not constitute an Event of Default
so long as the Company institutes curative action within the
applicable period and diligently pursues that action to
completion; and

However, the Company shall promptly give notice to the Trustee and the Authority
of the existence of an event of Force Majeure and shall use its best efforts to
remove the effects thereof; provided that the settlement of strikes or other
industrial disturbances shall be entirely within its discretion.

The term Force Majeure shall mean the following:

(i) acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any
kind of the government of the United States of America or of the
State or any of their departments, agencies, political
subdivisions or officials, or any civil or military authority;
insurrections; civil disturbances; riots; epidemics; landslides;
lightning; earthquakes; fires; hurricanes; tornados; storms;
droughts; floods; arrests; restraint of government and people;
explosions; breakage, nuclear accidents or other malfunction or
accident to facilities, machinery, transmission pipes or canals;
partial or entire failure of a utility serving the Project;
shortages of labor, materials, supplies or transportation; or

(ii) any cause, circumstance or event not reasonably within
the control of the Company.

The exercise of remedies hereunder shall be subject to any applicable
limitations of federal bankruptcy law affecting or precluding that declaration
or exercise during the pendency of or immediately following any bankruptcy,
liquidation or reorganization proceedings.

Section 7.2. Remedies on Default. Whenever an Event of Default shall
have happened and be subsisting, either or both of the following remedial steps
may be taken:

(a) The Authority or the Trustee may have access to, inspect,
examine and make copies of the books, records, accounts and
financial data of the Company, only, however, insofar as they
pertain to the Project; or

(b) The Authority or the Trustee may pursue all remedies now
or hereafter existing at law or in equity to recover all amounts,
including all Loan Payments and Additional Payments, then due and
thereafter to become due under this Agreement, or to enforce the
performance and observance of any other obligation or agreement
of the Company under those instruments.

Notwithstanding the foregoing, the Authority shall not be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Authority at no cost or expense to the Authority. Any
amounts collected as Loan Payments or applicable to Loan Payments and any other
amounts which would be applicable to payment of Bond Service Charges collected
pursuant to action taken under this Section shall be paid into the Bond Fund and
applied in accordance with the provisions of the Indenture or, if the
outstanding Bonds have been paid and discharged in accordance with the
provisions of the Indenture, shall be paid as provided in Section 5.08 of the
Indenture for transfers of remaining amounts in the Bond Fund.

The provisions of this Section are subject to the further limitation
that the rescission and annulment by the Trustee of its declaration that all of
the Bonds are immediately due and payable also shall constitute a rescission and
annulment of the consequences of that declaration and of the Event of Default
with respect to which that declaration has been made, provided that no such
rescission and annulment shall extend to or affect any subsequent or other
default or impair any right consequent thereon.

Section 7.3. No Remedy Exclusive. No remedy conferred upon or reserved
to the Authority or the Trustee by this Agreement is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement, or now or hereafter existing at law, in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default shall
impair that right or power or shall be construed to be a waiver thereof, but any
such right or power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Authority or the Trustee to exercise
any remedy reserved to it in this Article, it shall not be necessary to give any
notice, other than any notice required by law or for which express provision is
made herein.

Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. If an
Event of Default should occur and the Authority or the Trustee should incur
expenses, including attorneys' fees, in connection with the enforcement of this
Agreement or the collection of sums due hereunder, the Company shall be
required, to the extent permitted by law, to reimburse the Authority and the
Trustee, as applicable, for the expenses so incurred upon demand.

Section 7.5. No Waiver. No failure by the Authority or the Trustee to
insist upon the strict performance by the Company of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Company to observe or comply with any provision hereof.

Section 7.6. Notice of Default. The Company shall notify the Trustee
immediately if it becomes aware of the occurrence of any Event of Default
hereunder or of any fact, condition or event which, with the giving of notice or
passage of time or both, would become an Event of Default.

(End of Article VII)

<PAGE>
ARTICLE VIII

MISCELLANEOUS

Section 8.1. Term of Agreement. This Agreement shall be and remain
in
full force and effect from the date of delivery of the Bonds to the Original
Purchaser until such time as all of the Bonds shall have been fully paid (or
provision made for such payment) pursuant to the Indenture and all other sums
payable by the Company under this Agreement shall have been paid.

Section 8.2. Amounts Remaining in Funds. Any amounts in the Bond
Fund
remaining unclaimed by the Holders of Bonds for four years after the due date
thereof (whether at stated maturity, by redemption, upon acceleration or
otherwise), at the option of the Company, shall be deemed to belong to and shall
be paid, subject to Section 5.07 of the Indenture, at the written request of the
Company, to the Company by the Trustee. With respect to the principal of and
any premium and interest on the Bonds to be paid from moneys paid to the Company
pursuant to the preceding sentence, the Holders of the Bonds entitled to those
moneys shall look solely to the Company for the payment of those moneys.
Further, any amounts remaining in the Bond Fund and any other special funds or
accounts created under this Agreement or the Indenture, except the Rebate Fund,
after all of the Bonds shall be deemed to have been paid and discharged under
the provisions of the Indenture and all other amounts required to be paid under
this Agreement and the Indenture have been paid, shall be paid to the Company to
the extent that those moneys are in excess of the amounts necessary to effect
the payment and discharge of the Outstanding Bonds.

Section 8.3. Notices. All notices, certificates, requests or other
communications hereunder shall be in writing, except as provided in Section 3.4
hereof, and shall be deemed to be sufficiently given when mailed by registered
or certified mail, postage prepaid, and addressed to the appropriate Notice
Address. A duplicate copy of each notice, certificate, request or other
communication given hereunder to the Authority, the Company or the Trustee shall
also be given to the others. The Company, the Authority and the Trustee, by
notice given hereunder, may designate any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent.

The Bond Insurer shall receive copies of all notices required to be
given by the Trustee, the Authority or the Company under this Agreement,
including all notices to Holders. All notices required to be given to the Bond
Insurer under this Agreement shall be in writing and shall be sent by registered
or certified mail addressed to municipal Bond Investors Assurance Corporation,
113 King Street, Armonk, New York 10504, Attention: Surveillance.

Section 8.4. Extent of Covenants of the Authority; No Personal
Liability. All covenants, obligations and agreements of the Authority contained
in this Agreement or the Indenture shall be effective to the extent authorized
and permitted by applicable law. No such covenant, obligation or agreement
shall be deemed to be a covenant, obligation or agreement of any present or
future member, officer, agent or employee of the Authority in other than his
official capacity, and neither the members of the Authority nor any official
executing the Bonds shall be liable personally on the Bonds or be subject to any
personal liability or accountability by reason of the issuance thereof or by
reason of the covenants, obligations or agreements of the Authority contained in
this Agreement or in the Indenture.

Section 8.5. Binding Effect. This Agreement shall inure to the benefit
of the Authority, the Company, the Trustee, the Paying Agent, the Registrar and
their respective permitted successors and assigns and shall be binding in
accordance with its terms upon the Authority, the Company and their respective
permitted successors and assigns provided that this Agreement may not be
assigned by the Company (except as permitted under Sections 5.8 or 5.13 hereof)
and may not be assigned by the Authority except to (i) the Trustee pursuant to
the Indenture or as otherwise may be necessary to enforce or secure payment of
Bond Service Charges or (ii) any successor public body to the Authority.

Section 8.6. Amendments and Supplements. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Bonds and prior to all conditions provided for in the Indenture for release of
the Indenture having been met, this Agreement may not be effectively amended,
changed, modified, altered or terminated by the parties hereto except with the
consents and notices required by, and in accordance with, the provisions of
Article XI of the Indenture, as applicable.

Section 8.7. Execution Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.

Section 8.8. Severability. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein is determined by a judicial
or administrative authority to be invalid or unenforceable, that determination
shall not affect any other provision, covenant, obligation or agreement, each of
which shall be construed and enforced as if the invalid or unenforceable portion
were not contained herein. That invalidity or unenforceability shall not affect
any valid and enforceable application thereof, and each such provision,
covenant, obligation or agreement shall be deemed to be effective, operative,
made, entered into or taken in the manner and to the full extent permitted by
law.

Section 8.9. Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State and for all purposes shall be governed
by and construed in accordance with the laws of the State.

(End of Article VIII)

<PAGE>
IN WITNESS WHEREOF, the Authority and the Company have caused this
Agreement to be duly executed in their respective names, all as of the date
hereinbefore written.

OHIO WATER DEVELOPMENT AUTHORITY

By: /S/ Steve Grossman
----------------------------------
Executive Director

Attest: /S/ M. Donita Hoosier
-----------------------------
Secretary-Treasurer

THE CINCINNATI GAS & ELECTRIC COMPANY

By: /S/ William L. Sheafer
----------------------------------
Title: Treasurer

Attest: /S/ D. R. Blum
-----------------------------
Secretary

<PAGE>

EXHIBIT A

PROJECT FACILITIES COMPRISING
THE KILLEN PROJECT UNIT

General:

The Killen Electric Generating Station ("Killen") is located in Adams
County, Ohio, and its ownership is shared by the Company and The Dayton Power
and Light Company as tenants in common. The Company's undivided interest in the
portion of Killen comprising the Killen Project Unit is 33%. Killen is operated
by The Dayton Power and Light Company, which is responsible for managing the
acquisition, construction and installation of the Killen Project Unit.

Scope:

Circulating Water System

The circulating water system at Killen is a closed cycle system
utilizing one mechanical draft cooling tower. The round mechanical draft
cooling tower is approximately sixty-six feet high with a base diameter of
approximately two hundred twenty-seven feet.

Engineering, material, labor and supervision were provided for the
installation of the following components for the circulating water system:

Cooling tower including materials and hardware such as casing,
structural framework, fill, air inlet louvers, drift eliminators,
ferrous hardware and non-ferrous hardware

Water distribution system including riser pipes, distribution
piping, valving, fittings, tower deicing, etc.

Electrical supply to: fan motors, lighting, pump motors and any
other electrical work associated with the cooling tower

Access stairs, ladders, platforms and walkways

Lightning protection and grounding

Water circulation system including intake and discharge piping,
valves, circulating water pumps and motor

Substructure consisting of piling, footer and any other
construction technology necessary to support the cooling tower

Wastewater Treatment System

The wastewater treatment system at Killen represents a maximum
facility
required for the treatment of various plant wastewaters.

The treatment philosophy recommended for the various waste streams
generated at Killen was and is based on waste flows, characteristics and final
effluent limitations.

Sanitary wastes are treated in an extended aeration package unit which
provides secondary treatment. Effluent from this treatment facility is
subjected to disinfection by chlorination and discharged to the collection
basin. The sludge produced is hauled periodically for disposal in an approved
manner. Demineralizer and condensate polisher regenerate wastes, laboratory and
seal trough drains, coal pile area (active and dead storage) and precipitator
area runoff, bottom ash and fly ash sluicing pipe drainage and bottom ash system
overflow and seal water are all nonconcurrent and vary in flow rates. These
waste streams are all directed to the collection basin for equalization,
self-neutralization, retention and removal of particulates or solids by
sedimentation.

Boiler blowdown does not exceed the limitations set forth for iron and
copper and has been and will be directed to the collection basin. However,
facilities will be provided to divert this flow to the cleaning waste retention
basin, if it is found that the blowdown contains iron and copper at levels
higher than the effluent limitation. The waste is then treated in a treatment
facility either alone or combined with other cleaning wastes which are directed
to the cleaning waste retention basin. The effluent from the treatment system
is sent to the collection basin.

Boiler cleaning, reheater, superheater and air preheater cleaning wastes
which are occasional and may contain iron and copper in excess of effluent
limitations are directed to the cleaning waste retention basin and treated to
remove iron and copper. The effluent is directed to the collection basin. Any
sludge that is produced in the treatment facility is disposed of in an approved
manner.

Equipment drain, floor drain and other miscellaneous low volume
equipment cleaning wastes contaminated with oil are treated in an oil-water
separator system for separation of oil and the effluent sent to the collection
basin. The separated oil is collected in a waste oil storage tank for reuse or
disposal in an approved manner.

Storm water wastes from transformer and oil storage tanks area are
collected locally in a system of drains and directed to local oil-storm water
separator systems. The separated oil is collected in waste oil storage tanks
for reuse or disposal in an approved manner. The effluent water is directed to
the collection basin.

All waste streams directed to the collection basin are retained in the
basin for a minimum of 24 hours to permit sedimentation to occur. The overflow
or supernatant from the collection basin is directed to the bottom ash pond.

Cooling tower cleaning wastes, cooling tower blowdown and bottom ash
transport water are all directed to the bottom ash pond. Bottom ash pond water
is used for bottom ash and fly ash sluicing. Overflow from the bottom ash pond
is sent to the fly ash pond.

The fly ash pond, in addition to receiving the overflow from the bottom
ash pond, also receives the fly ash transport water. The final discharge from
the fly ash pond is to the river. An automatic liquid Carbon Dioxide
Recarbonation System neutralizes the high pH effluent to acceptable limits.

Ash Handling and Disposal

The ash handling system at Killen consists of a dry vacuum collection
system and a wet sluicing removal system designed to remove ash from the
electrostatic precipitator and bottom ash hoppers and to transport the collected
ash to on-site storage ponds.

Engineering, material, labor and supervision were provided for the
installation of the following components for the ash handling and disposal
system:

Hoppers, valves, controls, pumps, manifold pipe connection
system, vacuum producing equipment, discharge conveying
pipes to the wet ash disposal area
On-site ash disposal ponds
Supporting structural steel, pipe hangers and foundations
Necessary stairways, galleries and enclosures
Electrical work associated with the ash disposal system

<PAGE>
EXHIBIT B

PROJECT FACILITIES COMPRISING
THE WALTER C. BECKJORD PROJECT UNIT

General:

The Walter C. Beckjord Electric Generating Station ("Beckjord Station")
is located in Clermont County, Ohio, and ownership of Unit 6 of the Beckjord
Station is shared by the Company, The Dayton Power and Light Company and the
Columbus & Southern Ohio Electric Company as tenants in common. The Company's
undivided interest in the portions of the Beckjord Station comprising the
Beckjord Project Unit is 37.5%. The Company operates the Beckjord Station and
is responsible for managing the acquisition, construction and installation of
the Beckjord Project Unit.

Scope:

The Beckjord Project Unit involved improvements in connection with the
then existing ash settling pond and construction of a new ash settling pond for
the disposal of fly ash and bottom ash (as defined below) produced at the
Beckjord Station.

The fly ash that is collected in the precipitators for generating units
5 and 6, together with the bottom ash collected in the hoppers below such
generating units, is transported to the then existing ash settling pond ("Ash
Settling Pond") by means of a sluicing system. This sluicing system consists of
a series of pipes through which water is pumped to convey ash from the
precipitators and ash hoppers to the Ash Settling Pond, where the fly and bottom
ash settles to the bottom of the pond. Ash-free water flows from the top of the
Ash Settling Pond into the adjacent river. Periodically, the settled ash is
dredged out of the Ash Settling Pond and is disposed of off-site in a landfill.

The then existing Ash Settling Pond described above is located
immediately adjacent to the river bank. Improvements were necessary to shore up
the bank of the river to prevent the release of ash materials from the pond into
the river. These improvements were accomplished in four phases and involved the
installation of "rip-rap" along 2,200 feet of the river bank. "Rip-rap" is a
layer of materials consisting of a plastic fabric cloth placed on top of a six
inch layer of sand. A layer of small No. 2 stone is placed on the plastic
fabric and a twelve to eighteen inch layer of exposed stone of at least 10
inches in diameter covers the smaller stone.

Because the then existing Ash Settling Pond for units 5 and 6 was filled
with fly and bottom ash, a new Ash Settling Pond ("New Ash Settling Pond") was
constructed in order to accommodate further on-site disposal of ash. The New Ash
Settling Pond consists of a dike, constructed from clay on an 80 acre site, that
is 40 feet tall, 15 feet wide at the top, and 175 feet wide at its base. A
vertical overflow pipe is located at the end of the Pond through which clarified
water flows to the adjacent river.

<PAGE>
EXHIBIT C

PROJECT FACILITIES COMPRISING
THE MIAMI FORT PROJECT UNIT

General

The Miami Fort Electric Generating Station ("Miami Fort Station") is
located in Hamilton County, Ohio, and ownership of Units 7 and 8 of the Station
is shared by the Company and The Dayton Power and Light Company as tenants in
common. The Company's undivided interest in the portions of the Miami Fort
Station comprising the Miami Fort Project Unit is 64%. The Miami Fort Station
is operated by the Company, which is responsible for managing the acquisition,
construction and installation of the Miami Fort Project Unit.

Scope:

The Miami Fort Project Unit involved the acquisition of land for and the
construction of a Dry Fly Ash Disposal Basin ("Basin") and the construction of a
new Ash Settling Pond "B". The Pond and Basin are used for the disposal of fine
particulate residues ("fly ash") and heavy particulate residues ("bottom ash")
produced by the coal-fired boilers used to drive turbo generators at the Miami
Fort Electric Generating Station. The fly ash, which is captured in
electrostatic precipitators, and the bottom ash, which collects at the bottom of
the boilers in hoppers, are first transported by sluicing systems to ash
settling ponds. The Basin provides for the final disposal of fly and bottom ash
that is excavated from existing ash settling ponds and removed from fly ash
silos located adjacent to generating units 7 and 8.

Because the then existing Ash Settling Pond (Ash Basin "A") was filled
with ash, it became necessary to construct a new Ash Settling Pond "B" in order
to accommodate the deposit of additional ash. This addition involved raising
the elevation of the dike walls, which was accomplished in four stages. Upon
completion, the dike walls were raised to an elevation of 510 feet. Final site
work included the completion of the grading of the site, consulting services,
seeding the dike, construction of a floating walkway, and installation of an
erosion slab.

The Basin was constructed in a 30-40 foot deep gravel pit located on an
80 acre site. The gravel pit is lined with two feet of clay to prevent the fly
ash from seeping into underground water. Three monitoring wells were drilled
and monitoring equipment was installed to test ground water in selected areas
around the Basin for evidence of leaching of ash deposited in the Basin.
Rainwater is pumped from the surface of the Basin into a new clarifying pond
which was constructed to allow settling of any fly ash before discharge into the
adjacent river.

EXHIBIT 4-A-25

________________________________________________________________________________
________________________________________________________________________________

LOAN AGREEMENT

between

OHIO AIR QUALITY DEVELOPMENT AUTHORITY

and

THE CINCINNATI GAS & ELECTRIC COMPANY

_______________________________

$25,300,000
State of Ohio
Collateralized Air Quality Development
Revenue Refunding Bonds, 1994 Series B
(The Cincinnati Gas & Electric Company Project)
_______________________________

Dated

as of

January 1, 1994

________________________________________________________________________________

<PAGE>
INDEX

(This Index is not a part of the Agreement
but rather is for convenience of reference only.)

Page

Preambles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I
DEFINITIONS

Section 1.1 Use of Defined Terms. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.4 Captions and Headings . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE II
REPRESENTATIONS

Section 2.1 Representations of the Authority. . . . . . . . . . . . . . . . 9
Section 2.2 No Warranty by Authority of Condition or
Suitability of the Project. . . . . . . . . . . . . . . . . . 9
Section 2.3 Representations and Covenants of the Company. . . . . . . . . . 9

ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS

Section 3.1 Acquisition, Construction and Installation. . . . . . . . . . .13
Section 3.2 Project Description . . . . . . . . . . . . . . . . . . . . . .13
Section 3.3 Issuance of the Bonds; Application of
Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 3.4 Investment of Fund Moneys . . . . . . . . . . . . . . . . . . .14
Section 3.5 Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . .15

ARTICLE IV
LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

Section 4.1 Loan Repayment; Delivery of First Mortgage
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 4.2 Additional Payments . . . . . . . . . . . . . . . . . . . . . .16
Section 4.3 Place of Payments . . . . . . . . . . . . . . . . . . . . . . .17
Section 4.4 Obligations Unconditional . . . . . . . . . . . . . . . . . . .17
Section 4.5 Assignment of Revenues, Agreement and First
Mortgage Bonds. . . . . . . . . . . . . . . . . . . . . . . .17
Section 4.6 First Mortgage Bonds. . . . . . . . . . . . . . . . . . . . . .17

<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS

Section 5.1 Right of Access . . . . . . . . . . . . . . . . . . . . . . . .18
Section 5.2 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 5.3 Removal of Portions of the Project
Facilities. . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 5.4 Operation of Project Facilities . . . . . . . . . . . . . . . .18
Section 5.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 5.6 Workers' Compensation Coverage. . . . . . . . . . . . . . . . .19
Section 5.7 Damage; Destruction and Eminent Domain. . . . . . . . . . . . .19
Section 5.8 Company to Maintain its Corporate Existence;
Conditions Under Which Exceptions
Permitted . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 5.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . .21
Section 5.10 Company Not to Adversely Affect Exclusion of
Interest on Bonds From Gross Income For Federal
Income Tax Purposes . . . . . . . . . . . . . . . . . . . . .21
Section 5.11 Use of Project Facilities . . . . . . . . . . . . . . . . . . .21
Section 5.12 Assignment by Company . . . . . . . . . . . . . . . . . . . . .21
Section 5.13 Agreements with Bond Insurer. . . . . . . . . . . . . . . . . .21

ARTICLE VI
REDEMPTION

Section 6.1 Optional Redemption . . . . . . . . . . . . . . . . . . . . . .23
Section 6.2 Extraordinary Optional Redemption . . . . . . . . . . . . . . .23
Section 6.3 Mandatory Redemption. . . . . . . . . . . . . . . . . . . . . .24
Section 6.4 Notice of Redemption. . . . . . . . . . . . . . . . . . . . . .25
Section 6.5 Actions by Authority. . . . . . . . . . . . . . . . . . . . . .25
Section 6.6 Concurrent Discharging of First Mortgage
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES

Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . .26
Section 7.2 Remedies on Default . . . . . . . . . . . . . . . . . . . . . .27
Section 7.3 No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . .27
Section 7.4 Agreement to Pay Attorneys' Fees and
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .27
Section 7.5 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Section 7.6 Notice of Default . . . . . . . . . . . . . . . . . . . . . . .28

<PAGE>
ARTICLE VIII
MISCELLANEOUS

Section 8.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . .29
Section 8.2 Amounts Remaining in Funds. . . . . . . . . . . . . . . . . . .29
Section 8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 8.4 Extent of Covenants of the Authority; No Personal
Liability . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 8.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . .30
Section 8.6 Amendments and Supplements. . . . . . . . . . . . . . . . . . .30
Section 8.7 Execution Counterparts. . . . . . . . . . . . . . . . . . . . .30
Section 8.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 8.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .30

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

EXHIBIT A - AIR QUALITY FACILITIES AT MIAMI FORT GENERATING
STATION

EXHIBIT B - AIR QUALITY FACILITIES AT WALTER C. BECKJORD
ELECTRIC GENERATING STATION

EXHIBIT C - AIR QUALITY FACILITIES AT KILLEN ELECTRIC
GENERATING STATION

<PAGE>
LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into as of January 1, 1994
between the OHIO AIR QUALITY DEVELOPMENT AUTHORITY (the "Authority"), a body
politic and corporate organized and existing under the laws of the State of
Ohio, and THE CINCINNATI GAS & ELECTRIC COMPANY (the "Company"), a public
utility and corporation duly organized and validly existing under the laws of
the State of Ohio. Capitalized terms used in the following recitals are used as
defined in Article I of this Agreement.

Pursuant to Section 13 of Article VIII of the Ohio Constitution and
the Act, the Authority has determined to issue, sell and deliver the Bonds and
to lend the proceeds derived from the sale thereof to the Company to assist in
the refunding of the Refunded Bonds as defined below. The Refunded Bonds were
originally issued to provide funds to make loans to the Company to assist in the
financing of its portion of the costs of the Project as defined below.

The Company and the Authority each have full right and lawful
authority to enter into this Agreement and to perform and observe the provisions
hereof on their respective parts to be performed and observed.

<PAGE>
ARTICLE I

DEFINITIONS

Section 1.1. Use of Defined Terms. In addition to the words and
terms defined elsewhere in this Agreement or by reference to another document,
the words and terms set forth in Section 1.2 hereof shall have the meanings set
forth therein unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the singular and
plural forms of any of the words and terms defined therein.

Section 1.2. Definitions. As used herein:

"Act" means Chapter 3706, Ohio Revised Code, as enacted and amended
from time to time pursuant to Section 13 of Article VIII of the Ohio
Constitution.

"Additional Payments" means the amounts required to be paid by the
Company pursuant to the provisions of Section 4.2 hereof.

"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.

"Air Quality Facility" or "Air Quality Facilities" means those
facilities which are air quality facilities as defined in Section 3706.01, Ohio
Revised Code.

"Authenticating Agent" means the Authenticating Agent as defined in
the Indenture.

"Authority Fee" means an amount not to exceed $57,875.

"Bond Fund" means the Bond Fund created in the Indenture.

"Bond Insurance Policy" means the municipal bond insurance policy
issued by the Bond Insurer that guarantees payment when due of principal and
interest on the Bonds.

"Bond Insurer" means Municipal Bond Investors Assurance Corporation, a
stock insurance company incorporated under the laws of the State of New York, or
its successor.

"Bond Service Charges" means, for any period or time, the principal
of, premium, if any, and interest due on the Bonds for that period or payable
at that time whether due at maturity or upon acceleration or redemption or
otherwise.

"Bonds" means the $25,300,000 Collateralized Air Quality Development
Revenue Refunding Bonds, 1994 Series B (The Cincinnati Gas & Electric Company
Project), issued by the Authority pursuant to the Bond Resolution and the
Indenture.

"Bonds Outstanding" or "Outstanding Bonds" means Outstanding Bonds as
defined in the Indenture.

"Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to the Code and Sections of the Code include relevant
applicable regulations and proposed regulations thereunder and under the
Internal Revenue Code of 1954, as amended, and any successor provisions to those
Sections, regulations or proposed regulations and, in addition, all applicable
official rulings and judicial determinations under the foregoing applicable to
the Bonds.

"Company Mortgage" means the First Mortgage, dated as of August 1,
1936, between the Company and the Company Mortgage Trustee, as amended, modified
or supplemented from time to time.

"Company Mortgage Trustee" means The Bank of New York (formerly Irving
Trust Company), as trustee under the Company Mortgage, and its successors and
assigns.

"Eligible Investments" means Eligible Investments as defined in the
Indenture.

"Engineer" means an engineer (who may be an employee of the Company)
or engineering firm qualified to practice the profession of engineering under
the laws of the State and who or which is acceptable to the Trustee.

"EPA" means the Environmental Protection Agency of the State and any
successor body, agency, commission or department.

"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.

"First Mortgage Bonds" means the $25,300,000 aggregate principal
amount of First Mortgage Bonds, 5.45% Series B Due 2024, issued under the
Company Mortgage pursuant to the Supplemental Mortgage Indenture.

"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1 hereof.

"Holder" or "Holder of a Bond" means the Person in whose name a Bond
is registered on the Register.

"Indenture" means the Trust Indenture, dated as of the same date as
this Agreement, between the Authority and the Trustee, as amended or
supplemented from time to time.

"Interest Rate for Advances" means the interest rate per year payable
on the Bonds.

"Kentucky Bonds" means the $48,000,000 Collateralized Pollution
Control Revenue Refunding Bonds, 1994 Series A (The Cincinnati Gas & Electric
Company Project) issued by the County of Boone, Kentucky.

"Loan" means the loan by the Authority to the Company of the proceeds
received from the sale of the Bonds.

"Loan Payment Date" means any date on which any Bond Service Charges
are due and payable.

"Loan Payments" means the amounts required to be paid by the Company
on the First Mortgage Bonds in repayment of the Loan pursuant to Section 4.1
hereof.

"1954 Code" means the Internal Revenue Code of 1954 as amended from
time to time through the date of enactment of the Code. References to the 1954
Code and Sections of the 1954 Code include relevant applicable regulations
(including temporary regulations) and proposed regulations thereunder and any
successor provisions to those Sections, regulations or proposed regulations.

"1994 Bonds" means collectively, the Bonds, the Ohio Water Bonds and
the Kentucky Bonds.

"Notice Address" means:

(a) As to the Authority: Ohio Air Quality Development Authority
1901 LeVeque Tower
50 West Broad Street
Columbus, Ohio 43215
Attention: Executive Director

(b) As to the Company: The Cincinnati Gas & Electric Company
P.O. Box 960
Cincinnati, Ohio 45201
Attention: Treasurer

(c) As to the Trustee: The Bank of New York
101 Barclay Street
21st Floor
New York, New York 10286
Attention: Corporate Trust Administration

or such additional or different address, notice of which is given under Section
8.3 hereof.

"Ohio Water Bonds" means the $21,400,000 Collateralized Water
Development Revenue Refunding Bonds, 1994 Series A (The Cincinnati Gas &
Electric Company Project).

"Original Purchaser" means the Original Purchaser as defined in the
Indenture.

"Paying Agent" means the Paying Agent as defined in the Indenture.

"Project" or "Project Facilities" means the real, personal or real and
personal property, including undivided or other interests therein, identified in
the Project Description.

"Project Description" means, collectively, the description of the
Project Facilities attached hereto as Exhibit A (with respect to the Series 1976
Project), Exhibit B (with respect to the Series 1980 Project) and Exhibit C
(with respect to the Series 1983 Project), as the same may be amended in
accordance with this Agreement.

"Project Purposes" means the purposes of Air Quality Facilities as
described in the Act and as particularly described in Exhibits A, B and C
hereto.

"Project Site" means, with respect to the Series 1976 Bonds, the Miami
Fort Electric Generating Station in Hamilton County, Ohio; with respect to the
Series 1980 Bonds, the Walter C. Beckjord Electric Generating Station in
Clermont County, Ohio; and with respect to the Series 1983 Bonds, the Killen
Electric Generating Station in Adams County, Ohio.

"Rebate Fund" means the Rebate Fund created in the Indenture.

"Refunded Bonds" means, collectively, the Series 1976 Bonds, the
Series 1980 Bonds and the Series 1983 Bonds.

"Refunded Bonds Indenture" means, collectively, the Series 1976
Indenture, the Series 1980 Indenture and the Series 1983 Indenture.

"Refunded Bonds Loan Agreement" means, collectively, the Series 1976
Loan Agreement, the Series 1980 Loan Agreement and the Series 1983 Loan
Agreement.

"Refunded Bonds Trustee" means, collectively, the Series 1976 Trustee,
the Series 1980 Trustee and the Series 1983 Trustee.

"Refunding Fund" means the Refunding Fund created in the Indenture.

"Register" means the books kept and maintained for the registration
and transfer of Bonds pursuant to Section 3.05 of the Indenture.

"Registrar" means the Registrar as defined in the Indenture.

"Revenues" means (a) the Loan Payments, (b) all other moneys received
or to be received by the Authority (excluding the Authority Fee) or the Trustee
in respect of repayment of the Loan, including without limitation, all moneys
and investments in the Bond Fund, (c) any moneys and investments in the
Refunding Fund (until applied to the redemption of the Refunded Bonds), and (d)
all income and profit from the investment of the foregoing moneys. The term
"Revenues" does not include any moneys or investments in the Rebate Fund.

"Series 1976 Bonds" means the $10,000,000 State of Ohio Air Quality
Development Revenue Bonds, 1976 Series A (The Cincinnati Gas & Electric Company
Project) dated as of June 1, 1976.

"Series 1980 Bonds" means the $5,000,000 State of Ohio Air Quality
Development Revenue Bonds, Series 1980 (The Cincinnati Gas & Electric Company
Project) dated as of May 1, 1980.

"Series 1983 Bonds" means the $10,300,000 State of Ohio 9-5/8%
Collateralized Air Quality Revenue Bonds, 1983 Series (The Cincinnati Gas &
Electric Company Project) dated as of May 1, 1983.

"Series 1976 Indenture" means the Trust Indenture between the
Authority and the Series 1976 Trustee dated as of June 1, 1976.

"Series 1980 Indenture" means the First Supplemental Trust Indenture
between the Authority and the Series 1980 Trustee dated as of May 1, 1980.

"Series 1983 Indenture" means the Trust Indenture between the
Authority and the Series 1983 Trustee dated as of May 1, 1983.

"Series 1976 Loan Agreement" means the Loan Agreement between the
Authority and the Company dated as of June 1, 1976.

"Series 1980 Loan Agreement" means the First Supplemental Loan
Agreement between the Authority and the Company dated as of May 1, 1980.

"Series 1983 Loan Agreement" means the Loan Agreement between the
Authority and the Company dated as of May 1, 1983.

"Series 1976 Project" means the real, personal or real and personal
property including undivided or other interests therein financed with the
proceeds of the Series 1976 Bonds and identified in Exhibit A hereto.

"Series 1980 Project" means the real, personal or real and personal
property including undivided or other interests therein financed with the
proceeds of the Series 1980 Bonds and identified in Exhibit B hereto.

"Series 1983 Project" means the real, personal or real and personal
property including undivided or other interests therein financed with the
proceeds of the Series 1983 Bonds and identified in Exhibit C hereto.

"Series 1976 Trustee" means The Fifth Third Bank, as trustee under the
Series 1976 Indenture.

"Series 1980 Trustee" means The Fifth Third Bank, as trustee under the
Series 1980 Indenture.

"Series 1983 Trustee" means The Bank of New York (formerly Irving
Trust Company), as trustee under the Series 1983 Indenture.

"State" means the State of Ohio.

"Station Units" means the Miami Fort Generating Station Units 5 and
Unit 6, the Walter C. Beckjord Electric Generating Station Unit 6 and Killen
Electric Generating Station Unit 2.

"Trustee" means The Bank of New York, New York, New York, a
corporation duly organized and validly existing under the laws of the State of
New York, until a successor Trustee shall have become such pursuant to the
applicable provisions of the Indenture, and thereafter "Trustee" shall mean the
successor Trustee. "Principal Office" of the Trustee shall mean the principal
corporate trust office of the Trustee, which office at the date of issuance of
the Bonds is located at its Notice Address.

"Unassigned Authority's Rights" means all of the rights of the
Authority to receive Additional Payments under Section 4.2 hereof, to access and
inspect pursuant to Section 5.1 hereof, to be held harmless and indemnified
under Section 5.9 hereof, to be reimbursed for attorney's fees and expenses
under Section 7.4 hereof and to give or withhold consent to amendments, changes,
modifications, alterations and termination of this Agreement under Section 8.6
hereof and its right to enforce such rights.

Section 1.3. Interpretation. Any reference herein to the State, to
the Authority or to any member or officer of either includes entities or
officials succeeding to their respective functions, duties or responsibilities
pursuant to or by operation of law or lawfully performing their functions.

Any reference to a section or provision of the Constitution of the
State or the Act, or to a section, provision or chapter of the Ohio Revised
Code, or to any statute of the United States of America, includes that section,
provision or chapter as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision or chapter shall be applicable
solely by reason of this provision, if it constitutes in any way an impairment
of the rights or obligations of the Authority, the State, the Holders, the
Trustee, the Registrar, an Authenticating Agent, a Paying Agent or the Company
under this Agreement, the Indenture, the Bonds, the Company Mortgage, the
Supplemental Mortgage Indenture or the First Mortgage Bonds.

<PAGE>
Section 1.4. Captions and Headings. The captions and headings in
this Agreement are used solely for convenience of reference and in no way
define, limit or describe the scope or intent of any Articles, Sections,
subsections, paragraphs or subparagraphs or clauses hereof.

(End of Article I)

<PAGE>
ARTICLE II

REPRESENTATIONS

Section 2.3. Representations and Covenants of the Company. The
Company represents that:

(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State, with power and authority (corporate and other) to own its
properties and conduct its business, to execute and deliver this
Agreement, the Supplemental Mortgage Indenture and the First Mortgage
Bonds, and to perform its obligations under this Agreement, the
Company Mortgage, the Supplemental Mortgage Indenture and the First
Mortgage Bonds.

(b) This Agreement, the Supplemental Mortgage Indenture and the
Company Mortgage have been duly authorized, executed and delivered by
the Company; the First Mortgage Bonds have been duly authorized,
executed, issued and delivered; and this Agreement, the Supplemental
Mortgage Indenture, the Company Mortgage and the First Mortgage Bonds
constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights,
to laws relating to or affecting the enforcement of the security
provided by the Company Mortgage and to general equity principles.

(c) The execution, delivery and performance by the Company of
this Agreement and the Supplemental Mortgage Indenture and the
consummation of the transactions contemplated hereby and thereby will
not violate any provision of law or regulation applicable to the
Company, or of any writ or decree of any court or governmental
instrumentality, or of the Articles of Incorporation, as amended, or
the Regulations of the Company, or of any mortgage, indenture,
contract, agreement or other undertaking to which the Company is a
party or which purports to be binding upon the Company or upon any of
its assets.

(d) Substantially all (at least 90%) of the proceeds of each
issue of the Refunded Bonds were used to provide "pollution control
facilities" within the meaning of Sections 103(b)(4)(F) of the 1954
Code, the original use of which facilities commenced with the Company
and all of the proceeds of the Refunded Bonds have been spent for the
Project or to pay costs of issuance of the Refunded Bonds. The
proceeds of the Bonds (other than any accrued interest thereon) will
be used exclusively to refund the Refunded Bonds and none of the
proceeds of the Bonds will be used to pay for any costs of issuance of
the Bonds. The Refunded Bonds were issued prior to August 16, 1986.
The principal amount of the Bonds does not exceed the outstanding
principal amount of the Refunded Bonds. The proceeds of the Bonds
will be used to retire the Refunded Bonds not later than 90 days after
the date of issuance of the Bonds.

(e) Either the acquisition and construction of the Series 1976
Project, the Series 1980 Project and the Series 1983 Project financed,
respectively, with the Series 1976 Bonds, the Series 1980 Bonds and
the Series 1983 Bonds, was not commenced (within the meaning of
Treasury Regulations Section 1.103-8(a)(5) as applicable to the Refunded
Bonds) prior to the adoption of the respective resolutions of the
Authority evidencing the intent of the Authority to issue those
Refunded Bonds (being March 3, 1975 with respect to the Series 1976
Bonds, March 8, 1977 with respect to the Series 1980 Bonds and
November 19, 1975 with respect to the Series 1983 Bonds), or, any
proceeds of the corresponding Refunded Bonds used to pay costs
incurred prior to the adoption of such corresponding resolution have
been treated for purposes of this Agreement as having been used to
provide working capital (not land or depreciable property) to the
Company.

(f) It has caused the Project to be substantially completed.
The Project constitutes Air Quality Facilities under the Act and is
consistent with the purposes of Section 13 of Article VIII of the Ohio
Constitution and of the Act. The Project is being, and the Company
will cause the Project to be, operated and maintained in such manner
to conform with all applicable zoning, planning, building,
environmental and other applicable governmental regulations and all
permits, variances and orders issued or granted pursuant thereto,
including the permit-to-install for the Project, which permits,
variances and orders have not been withdrawn or otherwise suspended,
and to be consistent with the Act.

(g) It has used or operated or has caused to be used or
operated, and presently intends to use or operate or cause to be used
or operated the Project Facilities in a manner consistent with the
Project Purposes until the date on which the Bonds have been fully
paid and knows of no reason why the Project Facilities will not be so
operated. The Company does not intend to sell or otherwise dispose of
the Project or any portion thereof.

(h) None of the proceeds of the Refunded Bonds were used and
none of the proceeds of the Bonds will be used to provide any private
or commercial golf course, country club, massage parlor, tennis club,
skating facility (including roller skating, skateboard and ice
skating), racquet sports facility (including handball or racquetball
court), hot tub facility, suntan facility, racetrack, airplane, skybox
or other private luxury box, or health club facility; any facility
primarily used for gambling; any store the principal business of which
is the sale of alcoholic beverages for consumption off premises; or
any facilities for retail food and beverage services (except grocery
stores), automobile sales or service, or the provision of recreation
or entertainment.

(i) Less than 25% of the proceeds of each issue of the Refunded
Bonds have been used and less than 25% of the proceeds of the Bonds
will be used directly or indirectly to acquire land or any interest
therein, and none of such proceeds has been or will be used to provide
land which is to be used for farming purposes.

(j) No portion of the proceeds of the Refunded Bonds has been
used and no portion of the proceeds of the Bonds will be used to
acquire existing property or any interest therein unless the first use
of such property was by the Company and was pursuant to and followed
such acquisition.

(k) After the expiration of any applicable temporary period
under Section 148(d)(3) of the Code, at no time during any bond year
will the aggregate amount of gross proceeds of the 1994 Bonds invested
in higher yielding investments (within the meaning of Section 148(b)
of the Code) exceed 150 percent of the debt service on the 1994 Bonds
for such bond year and the aggregate amount of gross proceeds of the
1994 Bonds invested in higher yielding investments, if any, will be
promptly and appropriately reduced as the outstanding amount of the
1994 Bonds is reduced, provided however that the foregoing shall not
require the sale or disposition of any investments in higher yielding
investments if such sale or disposition would result in a loss which
exceeds the amount which would be paid to the United States (but for
such sale or disposition) at the time of such sale or disposition if a
payment were due at such time. At no time will any funds constituting
gross proceeds of the 1994 Bonds be used in a manner as would
constitute failure of compliance with Section 148 of the Code.

The terms "bond year", "gross proceeds", "higher yielding
investments", "yield", and "debt service" have the meanings assigned
to them for purposes of Section 148 of the Code.

(l) The Refunded Bonds were not, and the Bonds will not be,
"federally guaranteed" within the meaning of Section 149(b) of the
Code.

(m) It is not anticipated that as of the date hereof, there will
be created any "replacement proceeds", within the meaning of Section
1.148-1(c) of the Treasury Regulations, with respect to the 1994
Bonds; however, in the event that any such replacement proceeds are
deemed to have been created, such amounts will be invested in
compliance with Section 148 of the Code.

(n) On the date of issuance and delivery of each issue of the
Refunded Bonds, the Company reasonably expected that all of the
proceeds of each such issue of Refunded Bonds would be used to carry
out the governmental purposes of each such issue within the 3-year
period beginning on the date each such issue was issued and none of
the proceeds of each such issue, if any, were invested in nonpurpose
investments having a substantially guaranteed yield for 3 years or
more.

(o) The average maturity of the 1994 Bonds does not exceed 120%
of the respective average reasonably expected economic life of the
facilities financed or refinanced by the 1994 Bonds (determined under
Section 147(b) of the Code).

(p) The information furnished by the Company and used by the
Authority in preparing the certifications and statements pursuant to
Sections 148 and 149(e) of the Code or their statutory predecessors
with respect to the Refunded Bonds was accurate and complete as of the
dates of issuance of the Refunded Bonds, and the information furnished
by the Company and used by the Authority in preparing the
certification pursuant to Section 148 of the Code and in preparing the
information statement pursuant to Section 149(e) of the Code, both
referred to in the Bond Resolution, will be accurate and complete as
of the date of issuance of the Bonds.

(q) The Project Facilities do not include any office except for
offices (i) located on the Project Site and (ii) not more than a de
minimis amount of the functions to be performed at which is not
directly related to the day-to-day operations of the Project
Facilities.

(End of Article II)

<PAGE>
ARTICLE III

COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS

Section 3.2. Project Description. The Project Description may be
changed from time to time by, or with the consent of, the Company provided that
any such change shall also be filed with the Authority and provided further that
no change in the Project Description shall materially change the function of the
Project Facilities unless the Trustee shall have received (i) an Engineer's
certificate that such changes will not impair the significance or character of
the Project Facilities as Air Quality Facilities and (ii) an Opinion of Bond
Counsel or ruling of the Internal Revenue Service to the effect that such
amendment will not adversely affect the exclusion of interest on the Bonds from
gross income for federal income tax purposes.

(a) $10,000,000 of the proceeds of the Bonds (other than any accrued
interest) will be deposited in the Series 1976 Account of the
Refunding Fund (as created and defined in the Indenture) and on
February 14, 1994 all moneys on deposit in the Series 1976
Account shall be deposited in a separate account in the Bond Fund
created in the Series 1976 Indenture and applied by the Series
1976 Trustee to the payment of principal of, redemption premium
and interest on the Series 1976 Bonds on February 15, 1994.

(b) $5,000,000 of the proceeds of the Bonds (other than any accrued
interest) will be deposited in the Series 1980 Account of the
Refunding Fund (as created and defined in the Indenture) and on
February 14, 1994 all moneys on deposit in the Series 1980
Account shall be deposited in a separate account in the Bond Fund
created in the Series 1976 Indenture and applied by the Series
1980 Trustee to the payment of principal of, redemption premium
and interest on the Series 1980 Bonds on February 15, 1994.

(c) $10,300,000 of the proceeds of the Bonds (other than any accrued
interest) will be deposited in the Series 1983 Account of the
Refunding Fund (as created and defined in the Indenture) and on
February 14, 1994 all moneys on deposit in the Series 1983
Account shall be deposited in the Bond Fund created in the Series
1983 Indenture and applied by the Series 1983 Trustee to the
payment of principal of, redemption premium and interest on the
Series 1983 Bonds on February 15, 1994.

Pending disbursement pursuant to this Section, the proceeds so
deposited in the Refunding Fund, together with any investment earnings thereon,
shall constitute a part of the Revenues assigned by the Authority to the Trustee
for the payment of Bond Service Charges. Any accrued interest shall be
deposited in the Bond Fund.

The Company hereby requests that: (a) the Authority notify the Series
1976 Trustee (unless the Series 1976 Trustee has already received such notice)
that the entire outstanding principal amount of the Series 1976 Bonds is to be
redeemed on February 15, 1994 at a redemption price of 100% of the principal
amount thereof plus accrued interest to the redemption date; (b) the Authority
notify the Series 1980 Trustee (unless the Series 1980 Trustee has already
received such notice) that the entire outstanding principal amount of the Series
1980 Bonds is to be redeemed on February 15, 1994 at a redemption price of 102%
of the principal amount thereof plus accrued interest to the redemption date;
and (c) the Authority notify the Series 1983 Trustee that the entire outstanding
principal amount of the Series 1983 Bonds is to be redeemed on February 15, 1994
at a redemption price of 103% of the principal amount thereof plus accrued
interest to the redemption date.

The Company shall provide the Authority with, and the Authority may
base its certificate and statement, each as authorized by the Bond Resolution,
on a certificate of an appropriate officer, employee or agent of or consultant
to the Company for inclusion in the transcript of proceedings for the Bonds,
setting forth the reasonable expectations of the Company on the date of delivery
of and payment for the Bonds regarding the amount and use of the proceeds of the
Bonds and the facts, estimates and circumstances on which those expectations are
based.

(End of Article III)

<PAGE>
ARTICLE IV

LOAN BY AUTHORITY; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

Except for such interest of the Company as may hereafter arise
pursuant to Section 8.2 hereof or Sections 5.07 or 5.08 of the Indenture, the
Company and the Authority each acknowledge that neither the Company, the State
nor the Authority has any interest in the Bond Fund, and any moneys deposited
therein shall be in the custody of and held by the Trustee in trust for the
benefit of the Holders.

The Company shall pay the Administration Expenses to the Trustee, the
Registrar, and any Paying Agent or Authenticating Agent, as appropriate, as
Additional Payments hereunder.

Section 4.4. Obligations Unconditional. The obligations of the
Company to make Loan Payments, Additional Payments (including Administration
Expenses) and any payments required of the Company under Section 5.09 of the
Indenture shall be absolute and unconditional, and the Company shall make such
payments without abatement, diminution or deduction regardless of any cause or
circumstances whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim which the Company may have or assert against the
Authority, the Trustee, the Registrar or any other Person.

(a) provide for payments of interest equal to the payments of
interest on the Bonds;

(b) provide for payments of principal and any premium equal to
the payments of principal (whether at maturity or by call for
mandatory or optional redemption or pursuant to acceleration or
otherwise) and any premium on the Bonds;

(c) require all such payments on such First Mortgage Bonds to be
made on or prior to the due date for the corresponding payments to be
made on the Bonds; and

(d) contain redemption provisions corresponding with such
provisions of the Bonds.

(End of Article IV)

<PAGE>
ARTICLE V

ADDITIONAL AGREEMENTS AND COVENANTS

Section 5.2. Maintenance. The Company shall use its best efforts to
keep and maintain the Project Facilities, including all appurtenances thereto
and any personal property therein or thereon, in good repair and good operating
condition so that the Project Facilities will continue to constitute Air Quality
Facilities, for the purposes of the operation thereof as required by Section 5.4
hereof.

So long as such shall not be in violation of the Act or impair the
character of the Project Facilities as Air Quality Facilities, and provided
there is continued compliance with applicable laws and regulations of
governmental entities having jurisdiction thereof, the Company shall have the
right to remodel the Project Facilities or make additions, modifications and
improvements thereto, from time to time as it, in its discretion, may deem to be
desirable for its uses and purposes, the cost of which remodeling, additions,
modifications and improvements shall be paid by the Company and the same shall,
when made, become a part of the Project Facilities.

Section 5.3. Removal of Portions of the Project Facilities. The
Company shall not be under any obligation to renew, repair or replace any
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary portions
of the Project Facilities, except that, subject to Section 5.4 hereof, it will
use its best efforts to ensure the continued character of the Project Facilities
as Air Quality Facilities. The Company shall have the right from time to time
to substitute personal property or fixtures for any portions of the Project
Facilities, provided that the personal property or fixtures so substituted shall
not impair the character of the Project Facilities as Air Quality Facilities.
Any such substituted property or fixtures shall, when so substituted, become a
part of the Project Facilities. The Company shall also have the right to remove
any portion of the Project Facilities, without substitution therefor; provided,
that the Company shall deliver to the Trustee a certificate signed by an
Engineer describing said portion of the Project Facilities and stating that the
removal of such property or fixtures will not impair the character of the
Project Facilities as Air Quality Facilities.

Nothing in this Agreement shall prevent or restrict the Company, in
its sole discretion, at any time, from discontinuing or suspending either
permanently or temporarily its use of any facility of the Company served by the
Project Facilities and in the event such discontinuance or suspension shall
render unnecessary the continued operation of the Project Facilities, the
Company shall have the right to discontinue the operation of the Project
Facilities during the period of any such discontinuance or suspension.

Section 5.5. Insurance. The Company agrees to insure its interest in
the Project Facilities in the amount and with the coverage required by the
Company Mortgage.

Section 5.6. Workers' Compensation Coverage. Throughout the term of
this Agreement, the Company shall comply, or cause compliance, with applicable
workers' compensation laws of the State.

Section 5.7. Damage; Destruction and Eminent Domain. If, during the
term of this Agreement, the Project Facilities or any portion thereof is
destroyed or damaged in whole or in part by fire or other casualty, or title to,
or the temporary use of, the Project Facilities or any portion thereof shall
have been taken by the exercise of the power of eminent domain, and the Company
or the Company Mortgage Trustee receives net proceeds from insurance or any
condemnation award in connection therewith, the Company (unless it shall have
exercised its option to prepay the Loan Payments pursuant to provisions of
Section 6.2 hereof), to the extent required to comply with applicable laws and
regulations with respect to the operations of facilities of the Company served
by the Project, shall promptly cause such net proceeds or an amount equal
thereto to be used to repair, rebuild or restore the portion of the Project
Facilities so damaged, destroyed or taken with such changes, alterations and
modifications (including the substitution and addition of other property) as may
be necessary or desirable for the administration and operation of the Project
Facilities as Air Quality Facilities and as shall not impair the character or
significance of the Project Facilities as furthering the purposes of the Act.
It is hereby acknowledged and agreed that any net proceeds from insurance or any
condemnation award relating to the Project Facilities are subject to the lien of
the Company Mortgage and shall be disposed of in accordance with the terms and
provisions of the Company Mortgage and that any obligations of the Company under
this Section 5.7 not satisfied by application of such net proceeds shall be
limited to the general credit of the Company and does not require disposition of
such net proceeds contrary to the requirements of the Company Mortgage.

Section 5.9. Indemnification. The Company releases the Authority
from, agrees that the Authority shall not be liable for, and indemnifies the
Authority against, all liabilities, claims, costs and expenses imposed upon or
asserted against the Authority on account of: (a) any loss or damage to
property or injury to or death of or loss by any person that may be occasioned
by any cause whatsoever pertaining to the construction, maintenance, operation
and use of the Project Facilities; (b) any breach or default on the part of the
Company in the performance of any covenant or agreement of the Company under
this Agreement or any related document, or arising from any act or failure to
act by the Company, or any of its agents, contractors, servants, employees or
licensees; (c) the authorization, issuance and sale of the Bonds, and the
provision of any information furnished in connection therewith concerning the
Project Facilities or the Company (including, without limitation, any
information furnished by the Company for inclusion in any certifications made by
the Authority under Section 3.4 hereof or for inclusion in, or as a basis for
preparation of, the information statements filed by the Authority pursuant to
Section 8(a)(ii) of the Bond Resolution); and (d) any claim or action or
proceeding with respect to the matters set forth in (a), (b) and (c) above
brought thereon.

In case any action or proceeding is brought against the Authority or
an indemnified party in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or proceeding
to the Company, and the Company upon receipt of that notice shall have the
obligation and the right to assume the defense of the action or proceeding;
provided, that failure of a party to give that notice shall not relieve the
Company from any of its obligations under this Section unless that failure
prejudices the defense of the action or proceeding by the Company. At its own
expense, an indemnified party may employ separate counsel and participate in
the defense; provided, however, where it is ethically inappropriate for one firm
to represent the interests of the Authority and any other indemnified party or
parties, the Company shall pay the Authority's legal expenses in connection with
the Authority's retention of separate counsel. The Company shall not be liable
for any settlement made without its consent.

That indemnification is intended to and shall be enforceable by the Authority,
the Trustee, the Paying Agent and the Registrar, respectively, to the full
extent permitted by law.

Section 5.10. Company Not to Adversely Affect Exclusion of Interest
on Bonds From Gross Income For Federal Income Tax Purposes. The Company hereby
covenants and represents that it has taken and caused to be taken and shall take
and cause to be taken all actions that may be required of it for the interest on
the 1994 Bonds to be and remain excluded from the gross income of the Holders
for federal income tax purposes, and that it has not taken or permitted to be
taken on its behalf, and covenants that it will not take, or permit to be taken
on its behalf, any action which, if taken, would adversely affect that exclusion
under the provisions of the Code.

Section 5.11. Use of Project Facilities. The Authority agrees that
it will not take any action, or cause any action to be taken on its behalf, to
interfere with the Company's ownership interest in the Project or to prevent the
Company from having possession, custody, use and enjoyment of the Project other
than pursuant to Article VII of this Agreement or Article VII of the Indenture.

Section 5.12. Assignment by Company. This Agreement may be assigned
in whole or in part by the Company without the necessity of obtaining the
consent of either the Authority or the Trustee, subject, however, to each of the
following conditions:

(a) No assignment (other than pursuant to Section 5.8 hereof)
shall relieve the Company from primary liability for any of its
obligations hereunder, and in the event of any such assignment the
Company shall continue to remain primarily liable for the payment of
the Loan Payments and Additional Payments and for performance and
observance of the agreements on its part herein provided to be
performed and observed by it.

(b) Any assignment by the Company must retain for the Company
such rights and interests as will permit it to perform its obligations
under this Agreement, and any assignee from the Company shall assume
the obligations of the Company hereunder to the extent of the interest
assigned.

(c) The Company shall, within 30 days after execution thereof,
furnish or cause to be furnished to the Authority and the Trustee a
true and complete copy of each such assignment together with any
instrument of assumption.

(d) Any assignment from the Company shall not materially impair
fulfillment of the Project Purposes to be accomplished by operation of
the Project as herein provided.

Section 5.13. Agreements with Bond Insurer. So long as the Bond
Insurance Policy is in full force and effect with respect to the Bonds and the
Bond Insurer is not in default thereunder as defined in Section 7.10 of the
Indenture, the following provisions shall apply:

(a) Any action requiring the approval or consent of the Holders,
the Authority, the Trustee or the Company under the Agreement shall
also require the prior written consent of the Bond Insurer.

(b) The Company shall provide the Bond Insurer annually with
copies of the Company's audited financial statements.

(c) Upon the occurrence and continuance of an Event of Default
hereunder, the Bond Insurer shall have the same right as the Authority
and the Trustee to pursue the remedies provided in Sections 7.2 and
7.3 hereof; and

(d) The Company shall give notice to the Bond Insurer, not less
than two days prior to any Loan Payment Date, if the Company does not
intend or will be unable to make the Loan Payment on that Loan Payment
Date.

(End of Article V)

<PAGE>
ARTICLE VI

REDEMPTION

(a) The Project or a Station Unit shall have been damaged or
destroyed to such an extent that (1) it cannot reasonably be expected
to be restored, within a period of six consecutive months, to the
condition thereof immediately preceding such damage or destruction or
(2) the Company is reasonably expected to be prevented from carrying
on its normal operations in connection therewith for a period of six
consecutive months.

(b) Title to, or the temporary use of, all or a significant part
of the Project or a Station Unit shall have been taken under the
exercise of the power of eminent domain (1) to such extent that it
cannot reasonably be expected to be restored within a period of six
consecutive months to a condition of usefulness comparable to that
existing prior to the taking or (2) to such an extent that the Company
is reasonably expected to be prevented from carrying on its normal
operations in connection therewith for a period of six consecutive
months.

(c) As a result of any changes in the Constitution of the State,
the Constitution of the United States of America or any state or
federal laws or as a result of legislative or administrative action
(whether state or federal) or by final decree, judgment or order of
any court or administrative body (whether state or federal) entered
after any contest thereof by the Authority or the Company in good
faith, this Agreement shall have become void or unenforceable or
impossible of performance in accordance with the intent and purpose of
the parties as expressed in this Agreement.

(d) Unreasonable burdens or excessive liabilities shall have
been imposed upon the Authority or the Company with respect to the
Project or a Station Unit or the operation thereof, including, without
limitation, the imposition of federal, state or other ad valorem,
property, income or other taxes other than ad valorem taxes at the
rates presently levied upon privately owned property used for the same
general purpose as the Project or a Station Unit.

(e) Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies or facilities
(including, but not limited to, facilities in connection with the
disposal of industrial wastes) necessary for the operation of the
Project or a Station Unit for the Project Purposes occur or
technological or other changes occur which the Company cannot
reasonably overcome or control and which in the Company's reasonable
judgment render the Project or a Station Unit uneconomic or obsolete
for the Project Purposes.

(f) Any court or administrative body shall enter a judgment,
order or decree, or shall take administrative action, requiring the
Company to cease all or any substantial part of its operations served
by the Project or a Station Unit to such extent that the Company is or
will be prevented from carrying on its normal operations at the
Project or a Station Unit for a period of six consecutive months.

(g) The termination by the Company of operations at a Station
Unit.

The amount payable by the Company in the event of its exercise of the
option granted in this Section shall be the sum of the following:

(i) An amount of money which, when added to the moneys and
investments held to the credit of the Bond Fund, will be sufficient
pursuant to the provisions of the Indenture to pay, at 100% of the
principal amount thereof plus accrued interest to the redemption date,
and discharge, all Outstanding Bonds on the earliest applicable
redemption date, that amount to be paid to the Trustee, plus

(ii) An amount of money equal to the Additional Payments relating
to those Bonds accrued and to accrue until actual final payment and
redemption of those Bonds, that amount or applicable portions thereof
to be paid to the Trustee or to the Persons to whom those Additional
Payments are or will be due.

The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Authority are made for
paying those amounts as they accrue.

(End of Article VI)

<PAGE>
ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES

Section 7.1. Events of Default. Each of the following shall be an
Event of Default:

(a) The occurrence of an event of default as defined in Section
7.01 (a) or (b) of the Indenture;

(b) The Company shall fail to observe and perform any other
agreement, term or condition contained in this Agreement, other than
such failure as will have resulted in an event of default described in
(a) above and the continuation of that failure for a period of 90 days
after notice thereof shall have been given to the Company by the
Authority or the Trustee, or for such longer period as the Authority
and the Trustee may agree to in writing; provided, that failure shall
not constitute an Event of Default so long as the Company institutes
curative action within the applicable period and diligently pursues
that action to completion; and

The term Force Majeure shall mean the following:

(i) acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any kind
of the government of the United States of America or of the State or
any of their departments, agencies, political subdivisions or
officials, or any civil or military authority; insurrections; civil
disturbances; riots; epidemics; landslides; lightning; earthquakes;
fires; hurricanes; tornados; storms; droughts; floods; arrests;
restraint of government and people; explosions; breakage, nuclear
accidents or other malfunction or accident to facilities, machinery,
transmission pipes or canals; partial or entire failure of a utility
serving the Project; shortages of labor, materials, supplies or
transportation; or

(ii) any cause, circumstance or event not reasonably within the
control of the Company.

Section 7.2. Remedies on Default. Whenever an Event of Default shall
have happened and be subsisting, either or both of the following remedial steps
may be taken:

(a) The Authority or the Trustee may have access to, inspect,
examine and make copies of the books, records, accounts and financial
data of the Company, only, however, insofar as they pertain to the
Project; or

(b) The Authority or the Trustee may pursue all remedies now or
hereafter existing at law or in equity to recover all amounts,
including all Loan Payments and Additional Payments, then due and
thereafter to become due under this Agreement, or to enforce the
performance and observance of any other obligation or agreement of the
Company under those instruments.

Section 7.3. No Remedy Exclusive. No remedy conferred upon or
reserved to the Authority or the Trustee by this Agreement is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement, or now or hereafter existing at law, in equity or by
statute. No delay or omission to exercise any right or power accruing upon any
default shall impair that right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Authority or the
Trustee to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice, other than any notice required by law or for which
express provision is made herein.

Section 7.5. No Waiver. No failure by the Authority or the Trustee
to insist upon the strict performance by the Company of any provision hereof
shall constitute a waiver of their right to strict performance and no express
waiver shall be deemed to apply to any other existing or subsequent right to
remedy the failure by the Company to observe or comply with any provision
hereof.

(End of Article VII)

<PAGE>
ARTICLE VIII

MISCELLANEOUS

Section 8.1. Term of Agreement. This Agreement shall be and remain
in full force and effect from the date of delivery of the Bonds to the Original
Purchaser until such time as all of the Bonds shall have been fully paid (or
provision made for such payment) pursuant to the Indenture and all other sums
payable by the Company under this Agreement shall have been paid.

Section 8.2. Amounts Remaining in Funds. Any amounts in the Bond
Fund remaining unclaimed by the Holders of Bonds for four years after the due
date thereof (whether at stated maturity, by redemption, upon acceleration or
otherwise), at the option of the Company, shall be deemed to belong to and shall
be paid, subject to Section 5.07 of the Indenture, at the written request of the
Company, to the Company by the Trustee. With respect to the principal of and
any premium and interest on the Bonds to be paid from moneys paid to the Company
pursuant to the preceding sentence, the Holders of the Bonds entitled to those
moneys shall look solely to the Company for the payment of those moneys.
Further, any amounts remaining in the Bond Fund and any other special funds or
accounts created under this Agreement or the Indenture, except the Rebate Fund,
after all of the Bonds shall be deemed to have been paid and discharged under
the provisions of the Indenture and all other amounts required to be paid under
this Agreement and the Indenture have been paid, shall be paid to the Company to
the extent that those moneys are in excess of the amounts necessary to effect
the payment and discharge of the Outstanding Bonds.

Section 8.5. Binding Effect. This Agreement shall inure to the
benefit of the Authority, the Company, the Trustee, the Paying Agent, the
Registrar and their respective permitted successors an assigns and shall be
binding in accordance with its terms upon the Authority, the Company and their
respective permitted successors and assigns provided that this Agreement may not
be assigned by the Company (except as permitted under Sections 5.8 or 5.12
hereof) and may not be assigned by the Authority except to (i) the Trustee
pursuant to the Indenture or as otherwise may be necessary to enforce or secure
payment of Bond Service Charges or (ii) any successor public body to the
Authority.

Section 8.6. Amendments and Supplements. Except as otherwise
expressly provided in this Agreement or the Indenture, subsequent to the
issuance of the Bonds and prior to all conditions provided for in the Indenture
for release of the Indenture having been met, this Agreement may not be
effectively amended, changed, modified, altered or terminated by the parties
hereto except with the consents and notices required by, and in accordance with,
the provisions of Article XI of the Indenture, as applicable.

Section 8.7. Execution Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be regarded as an original
and all of which shall constitute but one and the same instrument.

Section 8.8. Severability. If any provision of this Agreement, or
any covenant, obligation or agreement contained herein is determined by a
judicial or administrative authority to be invalid or unenforceable, that
determination shall not affect any other provision, covenant, obligation or
agreement, each of which shall be construed and enforced as if the invalid or
unenforceable portion were not contained herein. That invalidity or
unenforceability shall not affect any valid and enforceable application thereof,
and each such provision, covenant, obligation or agreement shall be deemed to be
effective, operative, made, entered into or taken in the manner and to the full
extent permitted by law.

(End of Article VIII)

<PAGE>
IN WITNESS WHEREOF, the Authority and the Company have caused this
Agreement to be duly executed in their respective names, all as of the date
hereinbefore written.

OHIO AIR QUALITY DEVELOPMENT AUTHORITY

By: /S/ Mark R. Shanahan
----------------------------------
Executive Director

Attest: /S/ Judith A. Jones
-----------------------------
Secretary-Treasurer

THE CINCINNATI GAS & ELECTRIC COMPANY

By: /S/ William L. Sheafer
----------------------------------
Title: Treasurer

Attest: /S/ D. R. Blum
-----------------------------
Secretary

<PAGE>

EXHIBIT A

AIR QUALITY FACILITIES AT
MIAMI FORT GENERATING STATION

UNIT 5 PROJECT

There was installed at the Miami Fort Electric
Generating Station, Hamilton County, Ohio the following Air Quality Facilities
for Unit 5.

Qualifying Costs

Electrostatic Precipitators. Each of the two existing
coal-fired boilers was equipped with a new electrostatic
precipitator with a design collection efficiency of
99.5%, together with necessary controls, stairways,
galleries and enclosures. Each precipitator was located
over its respective boiler on the roof of the building
housing the Unit 5 boilers. Each precipitator is
approximately 15' long, 39' wide and 44' high and has an
operating weight of approximately 502,500 pounds.

Fly Ash Handling and Disposal System. Unit 5 was
equipped with a new fly ash removal system consisting of
12 fly ash collecting hoppers with outlet control
valves, manifold pipe conveyor, vacuum producing
equipment, discharge piping, control panel and pipeline
to the existing ash storage pond.

Electrical Equipment. The new precipitators and fly ash
handling and disposal system required new electrical
equipment to provide and transmit power to the
precipitators and the fly ash disposal system.

Ductwork and Structural Support Costs

Ductwork, Draft Fans and Gas Stack. New ductwork
(replacing existing ductwork) with insulation and
lagging carry flue gas from the precipitator to the new
induced draft fans, which were installed in replacement
of existing fans. Flue gases are then exhausted through
the existing, but extended, flue gas stack to the
atmosphere.

Structural Support. The existing building support
structures were reinforced by putting welding plates
onto existing columns in order to safely support the
added weight of the new precipitators to be located on
the building roof.

UNIT 6 PROJECT

There was installed at the Miami Fort Electric
Generating Station, Hamilton County, Ohio the following Air
Quality Facilities for Unit 6.

Qualifying Costs

Electrostatic Precipitator. The one existing coal-fired
boiler was equipped with a new electrostatic
precipitator, together with necessary controls,
stairways, galleries and enclosures. The precipitator
is located over its respective boiler on the roof of the
building housing the Unit 7 turbine. The precipitator
is approximately 31' long, 58' wide and 45' high and has
an operating weight of approximately 707,000 pounds.
The Unit 6 boiler was formerly equipped with a combined
mechanical and electrostatic precipitator (a designed
96% efficiency). The new precipitator was installed in
series with the existing electrostatic precipitator
after removal of the mechanical portion of the existing
collection system. The design combined collection
efficiency of the new and existing precipitators is
99.5%.

Fly Ash Handling and Disposal System. Unit 6 was
equipped with a new fly ash removal system consisting of
12 fly ash collecting hoppers with outlet control
valves, manifold pipe conveyor, vacuum producing
equipment, discharge piping, control panel and pipeline
to the existing ash storage pond.

Electrical Equipment. The new precipitator and fly ash
handling and disposal system required new electrical
equipment to provide and transmit power to the
precipitator and the fly ash disposal system.

Ductwork and Structural Support Costs

Ductwork. Flue gases from Unit 6 continue to be drawn
from the boiler through existing and new ductwork,
through the new precipitator, through new ductwork and
through the existing precipitator by the existing
induced draft fans, and then exhausted through the
existing flue gas stack.

Structural Support and Removal of Mechanical Collection
System. The existing building support structures were
reinforced by putting welding plates onto existing
columns in order to safely support the added weight of
the new precipitators to be located on the building
roof. The mechanical portion of the existing collection
system scrapped prior to installation of the new
precipitator.

<PAGE>

EXHIBIT B

AIR QUALITY FACILITIES AT WALTER C. BECKJORD
ELECTRIC GENERATING STATION

There is installed at the Walter C. Beckjord Electric
Generating Station, Clermont County, Ohio the following Air
Quality Facilities for Unit 6.

Electrostatic Precipitator. The one existing coal-fired
boiler is equipped with a new electrostatic
precipitator, together with necessary controls,
stairways, galleries, enclosures, ductwork and ash
removal system. The precipitator is located south of
the existing Unit 6 boiler and turbine room at grade.
The precipitator is approximately 160' wide, 47' long
and 36' high and has an operating weight of 2,387,000
pounds. The Unit 6 boiler was equipped with an
electrostatic precipitator (designed for 98%
efficiency). The new precipitator was installed in
series with the existing electrostatic precipitator.
The design combined collection efficiency of the new and
existing precipitators is 99.6%.

Fly Ash Handling and Disposal System. Unit 6 was
equipped with a new fly ash removal system consisting of
16 fly ash collecting hoppers with outlet control
valves, manifold pipe conveyor, vacuum producing
equipment, discharge piping, control panel and pipeline
to the existing ash sluice piping.

Ductwork and Structural Support Costs

Ductwork. Flue gases from Unit 6 are drawn from the
boiler through existing and new ductwork, through the
new precipitator, through new ductwork and through the
existing precipitator by the existing induced draft
fans, and then exhausted through the existing flue gas
stack.

<PAGE>
EXHIBIT C

AIR QUALITY FACILITIES AT
KILLEN ELECTRIC GENERATING STATION

General:

The Killen Electric Generating Station ("Killen") is
located in Adams County, Ohio, and its two electrostatic
precipitators were installed on the unit to collect particulate
matter from the flue gas. The precipitators are designed to
achieve a collection efficiency of 99.5%. The precipitators
will be hot with an operating temperature between 600` - 700` F.
The ownership is shared by the Company and The Dayton Power and
Light Company as tenants in common. The Company's undivided
interest is 33%.

Scope:

The Project consists of electrostatic precipitators and
related facilities constituting a boiler flue gas particulate
abatement project. Engineering, material, labor and supervision
was provided for the dust collection systems as follows:

Two hot electrostatic precipitators and
controls
Connecting ductwork
Supporting structural steel and foundations
Insulation and lagging
Necessary stairways, galleries and enclosure
Electrical work associated with the
precipitators
Collection hoppers with outlet controls
Air quality monitoring

EXHIBIT 4-A-26

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

LOAN AGREEMENT

between

THE COUNTY OF BOONE, KENTUCKY

and

THE CINCINNATI GAS & ELECTRIC COMPANY

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

$48,000,000
County of Boone, Kentucky
5-1/2% Collateralized Pollution Control
Revenue Refunding Bonds, 1994 Series A
(The Cincinnati Gas & Electric Company Project)

Dated

as of

January 1, 1994

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

<PAGE>
INDEX

(This Index is not a part of the Agreement
but rather is for convenience of reference only.)

Page
----

Preambles ............................................... 1

ARTICLE I
DEFINITIONS

Section 1.1 Use of Defined Terms ...................... 1
Section 1.2 Definitions ............................... 1
Section 1.3 Interpretation ............................ 6
Section 1.4 Captions and Headings ..................... 7

ARTICLE II
REPRESENTIONS

Section 2.1 Representations of the Issuer ............. 8
Section 2.2 No Warranty by Issuer of Condition or
Suitability of the Project .............. 8
Section 2.3 Representations, Warranties and Covenants of
the Company.............................. 8

ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS

Section 3.1 Acquisition, Construction and
Installation ............................ 13
Section 3.2 Issuance of the Bonds; Application of
Proceeds ................................ 13
Section 3.3 Investment of Fund Moneys ................. 14
Section 3.4 Rebate Fund ............................... 15

ARTICLE IV
LOAN BY ISSUER; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

Section 4.1 Loan Repayment; Delivery of First Mortgage
Bonds ................................... 16
Section 4.2 Additional Payments ....................... 16
Section 4.3 Place of Payments ......................... 17
Section 4.4 Obligations Unconditional ................. 17
Section 4.5 Assignment of Revenues, Agreement and
First Mortgage Bonds ...................... 17
Section 4.6 First Mortgage Bonds ...................... 17

<PAGE>
Page
----

ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS

Section 5.1 Maintenance ............................... 19
Section 5.2 Removal of Portions of the Project
Facilities .............................. 19
Section 5.3 Operation of Project Facilities ........... 20
Section 5.4 Insurance ................................. 20
Section 5.5 Damage; Destruction and Eminent Domain .... 20
Section 5.6 Company to Maintain its Corporate
Existence; Conditions Under Which
Exceptions Permitted .................... 21
Section 5.7 Indemnification ........................... 21
Section 5.8 Company Not to Adversely Affect
Exclusion of Interest on 1994 Bonds From
Gross Income For Federal Income Tax
Purposes ................................ 22
Section 5.9 Use of Project Facilities ................. 22
Section 5.10 Assignment by Company ..................... 23
Section 5.11 Agreements with Bond Insurer............... 23

ARTICLE VI
REDEMPTION

Section 6.1 Optional Redemption ....................... 24
Section 6.2 Extraordinary Optional Redemption ......... 24
Section 6.3 Mandatory Redemption ...................... 26
Section 6.4 Notice of Redemption ...................... 26
Section 6.5 Actions by Issuer ......................... 26
Section 6.6 Concurrent Discharging of First
Mortgage Bonds .......................... 26

ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES

Section 7.1 Events of Default ......................... 27
Section 7.2 Remedies on Default ....................... 28
Section 7.3 No Remedy Exclusive ....................... 29
Section 7.4 Agreement to Pay Attorneys' Fees and
Expenses ................................ 29
Section 7.5 No Waiver ................................. 29
Section 7.6 Notice of Default ......................... 29

ARTICLE VIII
MISCELLANEOUS

Section 8.1 Term of Agreement ......................... 30
Section 8.2 Amounts Remaining in Funds ................ 30

<PAGE>
Section 8.3 Notices ................................... 30
Section 8.4 Extent of Covenants of the Issuer;
No Personal Liability ................... 30
Section 8.5 Binding Effect ............................ 31
Section 8.6 Amendments and Supplements ................ 31
Section 8.7 Execution Counterparts .................... 31
Section 8.8 Severability .............................. 31
Section 8.9 Governing Law ............................. 31

Signatures .............................................. 32
Exhibit A .................................Project Description

<PAGE>
LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into as of
January 1, 1994 between the COUNTY OF BOONE, KENTUCKY (the
"Issuer"), a de jure county and a political subdivision of the
Commonwealth of Kentucky, and THE CINCINNATI GAS & ELECTRIC
COMPANY (the "Company"), a public utility and corporation duly
organized and validly existing under the laws of the State of
Ohio and duly qualified to do business in Kentucky. Capitalized
terms used in the following recitals are used as defined in
Article I of this Agreement.

Pursuant to the Act, the Issuer has determined to issue,
sell and deliver the Bonds and to lend the proceeds derived from
the sale thereof to the Company to assist in the refunding of the
Refunded Bonds. The Refunded Bonds were originally issued to
provide funds to make a loan to the Company to assist in the
financing of its portion of the costs of the Project.

The Company and the Issuer each have full right and
lawful authority to enter into this Agreement and to perform and
observe the provisions hereof on their respective parts to be
performed and observed.

NOW THEREFORE, in consideration of the premises and the
mutual representations and agreements hereinafter contained, the
Issuer and the Company agree as follows (provided that any
obligation of the Issuer created by or arising out of this
Agreement shall never constitute a general debt of the Issuer or
give rise to any pecuniary liability of the Issuer or a charge
upon its general credit or taxing powers but shall be payable
solely and only from and out of the Revenues, including Loan
Payments made pursuant to the First Mortgage Bonds):

ARTICLE I

DEFINITIONS

Section 1.1. Use of Defined Terms. In addition to the
words and terms defined elsewhere in this Agreement or by
reference to another document, the words and terms set forth in
Section 1.2 hereof shall have the meanings set forth therein
unless the context or use clearly indicates another meaning or
intent. Such definitions shall be equally applicable to both the
singular and plural forms of any of the words and terms defined
therein.

Section 1.2. Definitions. As used herein:

<PAGE>
"Act" means Sections 103.200 to 103.285, inclusive, of
the Kentucky Revised Statutes.

"Additional Payments" means the amounts required to be
paid by the Company pursuant to the provisions of Section 4.2
hereof.

"Administration Expenses" means the compensation (which
compensation shall not be greater than that typically charged in
similar circumstances) and reimbursement of reasonable expenses
and advances payable to the Trustee, the Registrar, any Paying
Agent and any Authenticating Agent.

"Agreement" means this Loan Agreement, as amended or
supplemented from time to time.

"Authenticating Agent" means the Authenticating Agent as
defined in the Indenture.

"Bond Insurance Policy" means the municipal bond
insurance policy issued by the Bond Insurer that guarantees
payment when due of principal and interest on the Bonds.

"Bond Insurer" means Municipal Bond Investors Assurance
Corporation, a stock insurance company incorporated under the
laws of the State of New York, or its successor.

"Bond Fund" means the Bond Fund created in the
Indenture.

"Bond Ordinance" means the ordinance of the Issuer
providing for the issuance of the Bonds and approving this
Agreement, the Indenture and related matters, as amended or
supplemented from time to time.

"Bond Service Charges" means, for any period or time,
the principal of, premium, if any, and interest due on the Bonds
for that period or payable at that time whether due at maturity
or upon acceleration or redemption or otherwise.

"Bonds" means the $48,000,000 Collateralized Pollution
Control Revenue Refunding Bonds, 1994 Series A (The Cincinnati
Gas & Electric Company Project), issued by the Issuer pursuant to
the Bond Ordinance and the Indenture.

"Bonds Outstanding" or "Outstanding Bonds" means
Outstanding Bonds as defined in the Indenture.

"1994 Bonds" means collectively, the Bonds and the Ohio
Bonds.

"Code" means the Internal Revenue Code of 1986, as
amended from time to time. References to the Code and Sections
of the Code include re1evant applicable regulations and proposed
regulations thereunder and under the Interna1 Revenue Code of
1954, as amended,<PAGE>
and any successor provisions to those Sections, regulations or
proposed regulations and, in addition, all applicable official
rulings and judicial determinations under the foregoing
applicable to the Bonds.

"Company Mortgage" means the First Mortgage, dated as of
August 1, 1936, between the Company and the Company Mortgage
Trustee, as amended, modified or supplemented from time to time.

"Company Mortgage Trustee" means The Bank of New York
(formerly Irving Trust Company), as trustee under the Company
Mortgage, and its successors and assigns.

"Eligible Investments" means Eligible Investments as
defined in the Indenture.

"Engineer" means an engineer (who may be an employee of
the Company) or engineering firm qualified to practice the
profession of engineering under the laws of the State and who or
which is acceptable to the Trustee.

"Event of Default" means any of the events described as
an Event of Default in Section 7.1 hereof.

"First Mortgage Bonds" means the $48,000,000 aggregate
principal amount of First Mortgage Bonds, 5-1/2% Series C Due
2024, issued under the Company Mortgage pursuant to the
Supplemental Mortgage Indenture.

"Force Majeure" means any of the causes, circumstances
or events described as constituting Force Majeure in Section 7.1
hereof.

"Government Ob1igations" means Government Obligations as
defined in the Indenture.

"Holder" or "Holder of a Bond" means the Person in whose
name a Bond is registered on the Register.

"Indenture" means the Trust Indenture, dated as of the
same date as this Agreement, between the Issuer and the Trustee,
as amended or supplemented from time to time.

"Interest Rate for Advances" means the interest rate per
year payable on the Bonds.

"Loan" means the loan by the Issuer to the Company of
the proceeds received from the sale of the Bonds.

"Loan Payment Date" means any date on which any Bond
Service Charges are due and payable.

"Loan Payments" means the amounts required to be paid by
the Company on the First Mortgage Bonds in repayment of the Loan
pursuant to Section 4.1 hereof.

<PAGE>
"1954 Code" means the Internal Revenue Code of 1954, as
amended from time to time through the date of enactment of the
Code. References to the 1954 Code and Sections of the 1954 Code
include relevant applicable regulations (including temporary
regulations) and proposed regulations thereunder and any
successor provisions to those Sections, regulations or proposed
regulations.

"Notice Address" means:

(a) As to the Issuer: County of Boone, Kentucky
Boone County Courthouse
Burlington, Kentucky 41005
Attention: County
Judge/Executive

(b) As to the Company: The Cincinnati Gas & ELectric
Company
139 East Fourth Street
Cincinnati, Ohio 45202
Attention: Treasurer

(c) As to the Trustee: The Bank of New York
101 Barclay Street, 21st Floor
New York, New York 10286
Attention: Corporate Trust
Administration

or such additional or different address, notice of which is given
under Section 8.3 hereof.

"Ohio Bonds" means, collectively: (i) $21,400,000
principal amount of State of Ohio 5.45% Collateralized Water
Development Revenue Refunding Bonds, 1994 Series A (The
Cincinnati Gas & Electric Company Project), dated January 1, 1994
and (ii) $25,300,000 principal amount of State of Ohio 5.45%
Collateralized Air Quality Development Revenue Refunding Bonds,
1994 Series B (The Cincinnati Gas & Electric Company Project),
dated January 1, 1994.

"Opinion of Bond Counsel" means a written opinion of
nationally recognized bond counse1 selected by the Company and
acceptable to the Trustee who is experienced in matters relating
to the exclusion from gross income for federal income tax
purposes of interest on obligations issued by states and their
political subdivisions. Bond Counsel may be counsel to the
Trustee or the Company.

"Original Purchasers" means the Original Purchasers as
defined in the Indenture.

"Paying Agent" means the Paying Agent as defined in the
Indenture.

"Person" or words importing persons mean firms,
associations, partnerships (including without limitation,
general<PAGE>
and limited partnerships), joint ventures, societies, estates,
trusts, corporations, public or governmental bodies, other legal
entities and natural persons.

"Pollution Control Facilities" means pollution control
facilities as that term is defined in KRS 103.246.

"Project" or "Project Facilities" means the real,
personal or real and personal property, including undivided or
other interests therein, identified in the Project Description.

"Project Description" means the description of the
Project Facilities attached hereto as Part 1 of Exhibit A.

"Project Purposes" means the purposes of Pollution
Control Facilities as described in the Act and as particularly
described in Part 1 of Exhibit A hereto.

"Project Site" means the East Bend Generating Station,
owned as tenants in common by the Company and The Dayton Power
and Light Company, located within the corporate boundaries of the
Issuer, within the State.

"Rebate Fund" means the Rebate Fund created in the
Indenture.

"Refunded Bonds" means the $48,000,000 principal amount
of "County of Boone, Kentucky, Pollution Control Revenue Bonds
(The Cincinnati Gas & Electric Company Project), 1979 Series A,"
dated October 1, 1979.

"Refunded Bonds Indenture" means the Indenture of Trust
dated as of October 1, 1979, by and between the Issuer and The
Fifth Third Bank, in respect of the Refunded Bonds.

"Refunded Bonds Loan Agreement" means the Loan Agreement
in connection with Pollution Control Facilities dated as of
October 1, 1979, by and between the Issuer and the Company, in
respect of the Refunded Bonds.

"Refunded Bonds Trustee" means The Fifth Third Bank, as
Trustee under the Refunded Bonds Indenture.

"Refunding Fund" means the Refunding Fund created in the
Indenture.

"Register" means the books kept and maintained for the
registration and transfer of Bonds pursuant to Section 3.05 of
the Indenture.

"Registrar" means the Registrar as defined in the
Indenture.

<PAGE>
"Revenues" means (a) the Loan Payments, (b) all other
moneys received or to be received by the Issuer or the Trustee in
respect of repayment of the Loan, including without limitation,
all moneys and investments in the Bond Fund, (c) any moneys and
investments in the Refunding Fund (until applied to the
redemption of the Refunded Bonds), and (d) all income and profit
from the investment of the foregoing moneys. The term "Revenues"
does not include any moneys or investments in the Rebate Fund.

"State" means the Commonwealth of Kentucky.

"Station Unit" means the East Bend Generating Station
Unit 2.

"Supplemental Mortgage Indenture" means the Thirty-fifth
Supplemental Indenture, dated as of January 1, 1994, between the
Company and the Company Mortgage Trustee, as amended or
supplemented from time to time.

"Trustee" means The Bank of New York, New York, New
York, a corporation duly organized and validly existing under the
laws of the State of New York, until a successor Trustee shall
have become such pursuant to the applicable provisions of the
Indenture, and thereafter "Trustee" shall mean the successor
Trustee. "Principal Office" of the Trustee shall mean the
principal corporate trust office of the Trustee, which office at
the date of issuance of the Bonds is 1ocated at its Notice
Address.

"Unassigned Issuer's Rights" means all of the rights of
the Issuer to receive Additional Payments under Section 4.2
hereof, to be held harmless and indemnified under Section 5.9
hereof, to be reimbursed for attorney's fees and expenses under
Section 7.4 hereof and to give or withhold consent to amendments,
changes, modifications, alterations and termination of this
Agreement under Section 8.6 hereof and its right to enforce such
rights.

Section 1.3. Interpretation. Any reference herein to
the State, to the Issuer or to any member or officer of either
includes entities or officials succeeding to their respective
functions, duties or responsibilities pursuant to or by operation
of law or lawfully performing their functions.

Any reference to a section or provision of the
Constitution of the State or the Act, or to a section, provision
or chapter of the Kentucky Revised Statutes, or to any statute of
the United States of America, includes that section, provision or
chapter as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification,
revision, supplement or superseding section, provision or chapter
shall be<PAGE>
applicable solely by reason of this provision, if it constitutes
in any way an impairment of the rights or obligations of the
Issuer, the Holders, the Trustee, the Registrar, an
Authenticating Agent, a Paying Agent or the Company under this
Agreement, the Indenture, the Bonds, the Company Mortgage, the
Supplemental Mortgage Indenture or the First Mortgage Bonds.

Unless the context indicates otherwise, words importing
the singular number include the plural number, and vice versa;
the terms "hereof", "hereby", "herein", "hereto", "hereunder" and
similar terms refer to this Agreement; and the term "hereafter"
means after, and the term "heretofore" means before, the date of
delivery of the Bonds. Words of any gender include the
correlative words of the other genders, unless the sense
indicates otherwise.

Section 1.4. Captions and Headings. The captions and
headings in this Agreement are used solely for convenience of
reference and in no way define, limit or describe the scope or
intent of any Articles, Sections, subsections, paragraphs or
subparagraphs or clauses hereof.

(End of Article I)

<PAGE>

ARTICLE II

REPRESENTATIONS

Section 2.1. Representations of the Issuer. The Issuer
represents that: (a) it is a de jure county and a political
subdivision of the State duly organized and validly existing
under the laws of the State; (b) it has duly accomplished all
conditions necessary to be accomplished by it prior to the
issuance and delivery of the Bonds and the execution and delivery
of this Agreement and the Indenture; (c) it is not in violation
of or in conflict with any provisions of the laws of the State
which would impair its ability to carry out its obligations
contained in this Agreement or the Indenture; (d) it is empowered
to enter into the transactions contemplated by this Agreement and
the Indenture; (e) it has duly authorized the execution, delivery
and performance of this Agreement and the Indenture; and (f) it
will do all things in its power in order to maintain its
existence or assure the assumption of its obligations under this
Agreement and the Indenture by any successor public body.

Section 2.2. No Warranty by Issuer of Condition or
Suitability of the Project. The Issuer makes no warranty, either
express or implied, as to the suitability or utilization of the
Project for the Project Purposes, or as to the condition of the
Project Facilities or that the Project Facilities are or will be
suitable for the Company's purposes or needs.

Section 2.3. Representations, Warranties and Covenants
of the Company. The Company represents, warrants and covenants
that:

(a) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Ohio, and is duly qualified to do business in the
State, with power and authority (corporate and other) to own its
properties and conduct its business, to execute and deliver this
Agreement, the Supplemental Mortgage Indenture and the First
Mortgage Bonds, and to perform its obligations under this
Agreement, the Company Mortgage, the Supplemental Mortgage
Indenture and the First Mortgage Bonds.

(b) This Agreement, the Supplemental Mortgage Indenture
and the Company Mortgage have been duly authorized, executed and
delivered by the Company; the First Mortgage Bonds have been duly
authorized, executed, issued and delivered; and this Agreement,
the Supplemental Mortgage Indenture, the Company Mortgage and the
First Mortgage Bonds constitute valid and 1egally binding
obligations of the Company, enforceable in accordance with their
respective terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other<PAGE>
laws of general applicability relating to or affecting
creditors' rights, to laws relating to or affecting the
enforcement of the security provided by the Company Mortgage and
to general equity principles.

(c) The execution, delivery and performance by the
Company of this Agreement and the Supplemental Mortgage Indenture
and the consummation of the transactions contemplated hereby and
thereby will not violate any provision of law or regulation
applicable to the Company, or any writ or decree of any court or
governmental instrumentality, or of the Articles of
Incorporation, as amended, or Code of Regulations, as amended, of
the Company, or any mortgage, indenture, contract, agreement or
other undertaking to which the Company is a party or which
purports to be binding upon the Company or upon any of its
assets.

(d) Substantially all (at least 90%) of the proceeds of
the Refunded Bonds were used to provide air and water pollution
control facilities and solid waste disposal facilities as
provided in and within the meaning of Sections 103(b)(4)(E) and
(F) of the 1954 Code, the original use of which facilities
commenced with the Company and all of the proceeds of the
Refunded Bonds have been spent for the Project or to pay costs of
issuance of the Refunded Bonds. All of such air and water
pollution control facilities and solid waste disposal facilities
consist either of land or of property of a character subject to
the allowance for depreciation provided in Section l67 of the
Code. The proceeds of the Bonds (other than any accrued interest
thereon) will be used exclusively to refund the principal of the
Refunded Bonds and none of the proceeds of the Bonds wil1 be used
to pay for any costs of issuance of the Bonds. The Refunded
Bonds were issued prior to August 16, 1986. The principal amount
of the Bonds does not exceed the outstanding principal amount of
the Refunded Bonds. The proceeds of the Bonds will be used to
retire, pay and discharge the Refunded Bonds not later than 90
days after the date of issuance of the Bonds.

(e) The acquisition and construction of the Project
financed by application of the proceeds of the Refunded Bonds was
not commenced (within the meaning of Treasury Regulations
Section 1.103-8(a)(5)) as applicable to the Refunded Bonds prior to the
adoption of the resolution of the Issuer evidencing the intent of
the Issuer to issue the Refunded Bonds (being February 17, 1976).

(f) It has caused the Project to be substantially
completed. The Project constitutes Pollution Control Facilities
under the Act and is consistent with the purposes of the Act.
The Project is being, and the Company will operate or cause the
Project to be, operated and maintained in such manner to
conform<PAGE>
with applicable zoning, planning, building, environmental
and other applicable governmental regulations and all permits,
variances and orders issued or granted pursuant thereto, which
permits, variances and orders have not been withdrawn or
otherwise suspended, and to be consistent with the Act.

(g) It has used or operated, and presently intends to
use and operate the Project Facilities in a manner consistent
with the Project Purposes until the date on which the Bonds have
been fully paid and knows of no reason why the Project Facilities
will not be so operated. The Company has not sold and does not
intend to sell or otherwise dispose of the Project or any portion
thereof.

(h) None of the proceeds of the Refunded Bonds were
used and none of the proceeds of the Bonds will be used to
provide any private or commercial golf course, country club,
massage parlor, tennis club, skating facility (including roller
skating, skateboard and ice skating), racquet sports facility
(including handball or racquetball court), hot tub facility,
suntan facility, racetrack, airplane, skybox or other private
luxury box, or health club facility; any facility primarily used
for gambling; any store the principal business of which is the
sale of alcoholic beverages for consumption off premises; or any
facilities for retail food and beverage services, automobile
sales or service, or the provision of recreation or
entertainment.

(i) Less than 25% of the proceeds of the Refunded Bonds
have been used and 1ess than 25% of the proceeds of the Bonds
will be used directly or indirectly to acquire land or any
interest therein, and none of such proceeds has been or will be
used to provide land which is to be used for farming purposes.

(j) No portion of the proceeds of the Refunded Bonds
has been used and no portion of the proceeds of the Bonds will be
used to acquire existing property or any interest therein unless
the first use of such property was by the Company and was
pursuant to and followed such acquisition.

(k) After the expiration of any applicable temporary
period under Section 148(d)(3) of the Code, at no time during any
bond year will the aggregate amount of gross proceeds of the 1994
Bonds invested in higher yielding investments (within the meaning
of Section 148(b) of the Code) exceed 150 percent of the debt
service on the 1994 Bonds for such bond year and the aggregate
amount of gross proceeds of the 1994 Bonds invested in higher
yielding investments, if any, will be promptly and appropriately
reduced as the outstanding amount of the 1994<PAGE>
Bonds is reduced, provided however that the foregoing shall
not require the sale or disposition of any investments in higher
yielding investments if such sale or disposition would result in
a loss which exceeds the amount which would be paid to the United
States (but for such sale or disposition) at the time of such
sale or disposition if a payment were due at such time. At no
time will any funds constituting gross proceeds of the 1994 Bonds
be used in a manner as would constitute failure of compliance
with Section 148 of the Code.

The terms "bond year", "gross proceeds", "higher
yielding investments", "yield", and "debt service" have the
meanings assigned to them for purposes of Section 148 of the
Code.

(1) The Refunded Bonds were not, and the Bonds will not
be, "federally guaranteed" within the meaning of Section 149(b)
of the Code.

(m) It is not anticipated that as of the date hereof,
there will be created any replacement proceeds, within the
meaning of Section 1.148-1(c) of the Treasury Regulations, with
respect to the 1994 Bonds; however, in the event that any such
replacement proceeds are deemed to have been created, such
amounts will be invested in compliance with Section 148 of the
Code.

(n) On the date of issuance and delivery of the
Refunded Bonds, the Company reasonably expected that all of the
proceeds of such Refunded Bonds would be used to carry out the
governmental purposes of such issue within the 3-year period
beginning on the date such issue was issued and none of the
proceeds of such issue, if any, were invested in nonpurpose
investments having a substantially guaranteed yield for 3 years
or more.

(o) The average maturity of the 1994 Bonds does not
exceed 120% of the average reasonably expected economic life of
the facilities refinanced by the 1994 Bonds (determined under
Section 147(b) of the Code).

(p) The information furnished by the Company and used
by the Issuer in preparing the certifications and statements
pursuant to Sections 148 and 149(e) of the Code or their
statutory predecessors with respect to the Refunded Bonds was
accurate and complete as of the date of issuance of the Refunded
Bonds, and the information furnished by the Company and used by
the Issuer in preparing the certification pursuant to Section 148
of the Code and in preparing the information statement pursuant
to Section 149(e) of the Code, both referred to in the Bond
Ordinance, will be accurate and complete as of the date of
issuance of the Bonds.

<PAGE>
(q) The Project Facilities do not include any office
except for offices (i) located on the Project Site and (ii) not
more than a de minimis amount of the functions to be performed at
which is not directly related to the day-to-day operations of the
Project Facilities.

(r) The Department of Natural Resources and
Environmental Protection of Kentucky (now the Natural Resources
and Environmental Protection Cabinet of Kentucky), having
jurisdiction in the premises, has previously certified that the
Project, as designed, is in furtherance of the purposes of
abating and controlling atmospheric pollutants and contaminants
and water pollution.

(s) The Company will, but only to the extent required
by law, cause the Indenture and/or any related instruments or
documents relating to the assignments made by the Issuer under
the Indenture to secure the Bonds, to be recorded and/or filed in
the manner and in the places required by law in order to preserve
and protect fully the security of the Holders and the rights of
the Trustee under the Indenture.

(End of Article II)

<PAGE>

ARTICLE III

COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS

Section 3.1. Acquisition, Construction and
Installation. The Company represents that it and the other
public utility company which owns an undivided interest in the
Project Facilities with the Company as tenants-in-common have
caused the Project Facilities to be acquired, constructed and
installed on the Project Site, substantially in accordance with
the Project Description and in conformance with the Plans and
Specifications, as defined in the Refunded Bonds Loan Agreement
and in conformance with all applicable zoning, planning, building
and other similar regulations of all governmental authorities
having jurisdiction over the Project and all permits, variances
and orders issued in respect of the Project by EPA, and that the
proceeds derived from the Refunded Bonds, including any
investment thereof, were expended in accordance with the Refunded
Bonds Indenture and the Refunded Bonds Loan Agreement.

Section 3.2. Issuance of the Bonds; Application of
Proceeds. To provide funds to make the Loan to the Company to
assist the Company in the refunding of the Refunded Bonds,
concurrently with the delivery to the Trustee of the First
Mortgage Bonds as provided in Section 4.1 hereof, the Issuer will
issue, sell and deliver the Bonds to the Original Purchaser. The
Bonds will be issued pursuant to the Indenture in the aggregate
principal amount, will bear interest, will mature and will be
subject to redemption as set forth therein. The Company hereby
approves the terms and conditions of the Indenture and the Bonds,
and the terms and conditions under which the Bonds will be
issued, sold and delivered.

The proceeds from the sale of the Bonds (other than any
accrued interest) shall be loaned to the Company to assist the
Company in refunding the Refunded Bonds in order to reduce the
interest cost payable by the Company and shall be deposited in
whole in the Refunding Fund. On or before February 15, 1994, all
moneys on deposit in the Refunding Fund shall be transferred to
and deposited in the bond fund created by the Refunded Bonds
Indenture and applied by the Refunded Bonds Trustee, with other
adequate moneys to be furnished by the Company, to the payment of
principal<PAGE>
of, redemption premium and interest on the Refunded Bonds on
February 15, 1994.

Pending disbursement pursuant to this Section and
Section 5.02 of the Indenture, the proceeds of the Bonds so
deposited in the Refunding Fund, together with any investment
earnings thereon, shall constitute a part of the Revenues
assigned by the Issuer to the Trustee for the payment of Bond
Service Charges. Any accrued interest received from the sale of
the Bonds shall be deposited in the Bond Fund.

The Company hereby requests that the Issuer notify the
Refunded Bonds Trustee that the entire outstanding principal
amount of the Refunded Bonds is to be redeemed on February 15,
1994 at a redemption price of 101% of the principal amount hereof
plus accrued interest to the redemption date.

Section 3.3. Investment of Fund Moneys. At the oral
(confirmed promptly in writing) or written request of the
Company, any moneys held as part of the Bond Fund, the Refunding
Fund or the Rebate Fund shall be invested or reinvested by the
Trustee in Eligible Investments; provided, that such moneys shall
be invested or reinvested by the Trustee only in Eligible
Investments which shall mature, or which shall be subject to
redemption by the holder thereof at the option of such holder,
not later than the date upon which the moneys so invested are
needed to make payments from those Funds. The Issuer (to the
extent it retained or retains direction or control) and the
Company each hereby represents that the investment and
reinvestment and the use of the proceeds of the Refunded Bonds
were restricted in such manner and to such extent, if any, as may
be necessary so that the Bonds will not constitute arbitrage
bonds under Section 148 of the Code and each hereby covenants
that it will restrict that investment and reinvestment and the
use of the proceeds of the Bonds in such manner and to such
extent, if any, as may be necessary so that the Bonds will not
constitute arbitrage bonds under Section 148 of the Code.

The Company shall provide the Issuer with, and the
Issuer may base its certificate and statement, each as authorized
by the Bond Ordinance, on a certificate of an appropriate
officer, employee or agent of or consultant to the Company for
inclusion in the transcript of proceedings for the Bonds, setting
forth the reasonable expectations of the Company on the date of
delivery of and payment for the Bonds regarding the amount and
use of the proceeds of the Bonds and the facts, estimates and
circumstances on which those expectations are based.

Section 3.4. Rebate Fund. To the extent required by
Section 5.09 of the Indenture, within five days after the end of
the fifth Bond Year (as defined in the Indenture) and every fifth
Bond Year thereafter, and within five days after payment in full
of all outstanding Bonds, the Company shall calculate or cause to
be<PAGE>
calculated the amount of Excess Earnings (as defined in the
Indenture) as of the end of that Bond Year or the date of such
payment and shall notify the Trustee of that amount. If the
amount then on deposit in the Rebate Fund created under the
Indenture is less than the amount of Excess Earnings (computed by
taking into account the amount or amounts, if any, previously
paid to the United States pursuant to Section 5.09 of the
Indenture and this Section), the Company shall, within five days
after the date of the aforesaid calculation, pay to the Trustee
for deposit in the Rebate Fund an amount sufficient to cause the
Rebate Fund to contain an amount equal to the Excess Earnings.
The obligation of the Company to make such payments shall remain
in effect and be binding upon the Company notwithstanding the
release and discharge of the Indenture. The Company shall obtain
and keep such records of the computations made pursuant to this
Section as are required under Section 148(f) of the Code.

(End of Article III)

<PAGE>

ARTICLE IV

LOAN BY ISSUER; LOAN PAYMENTS;
ADDITIONAL PAYMENTS; AND FIRST MORTGAGE BONDS

Section 4.1. Loan Repayment; Delivery of First
Mortgage Bonds. Upon the terms and conditions of this Agreement,
the Issuer agrees to make the Loan to the Company. The proceeds
of the Loan shall be deposited with the Trustee pursuant to
Section 3.2 hereof. As evidence of its obligation hereunder to
repay the Loan, the Company agrees to execute and deliver the
First Mortgage Bonds to the Issuer, in the manner provided in
Section 4.6 hereof. In consideration of and in repayment of the
Loan, the Company shall make, as Loan Payments, to the Trustee
for the account of the Issuer, payments on the First Mortgage
Bonds which correspond, as to time, and are equal in amount, to
the Bond Service Charges payable on the Bonds. All Loan Payments
received by the Trustee shall be held and disbursed in accordance
with the provisions of the Indenture and this Agreement for
application to the payment of Bond Service Charges.

The Company shall be entitled to a credit against the
Loan Payments required to be made on any Loan Payment Date to the
extent that the balance of the Bond Fund is then in excess of
amounts required (a) for the payment of Bonds theretofore matured
or theretofore called for redemption, or to be called for
redemption pursuant to Section 6.1 hereof (b) for the payment of
interest for which checks or drafts have been drawn and mailed by
the Trustee or Paying Agent, and (c) to be deposited in the Bond
Fund by the Indenture for use other than for the payment of Bond
Service Charges due on that Loan Payment Date.

Except for such interest of the Company as may
hereafter arise pursuant to Section 8.2 hereof or Sections 5.07
or 5.08 of the Indenture, the Company and the Issuer each
acknowledge that neither the Company nor the Issuer has any
interest in the Bond Fund, and any moneys deposited therein shall
be in the custody of and held by the Trustee in trust for the
benefit of the Holders.

Section 4.2. Additional Payments. The Company shall
pay to the Issuer, as Additional Payments hereunder, any and all
costs and expenses incurred or to be paid by the Issuer in
connection with the issuance and delivery of the Bonds or
otherwise related to actions taken by the Issuer under this
Agreement or the Indenture.

The Company shall pay the Administration Expenses to
the Trustee, the Registrar, and any Paying Agent or
Authenticating Agent, as appropriate, as Additional Payments
hereunder.

<PAGE>
The Company may, without creating a default hereunder,
contest in good faith the reasonableness of any such cost or
expense incurred or to be paid by the Issuer and any
Administration Expenses claimed to be due to the Trustee, the
Registrar, any Paying Agent or any Authenticating Agent.

In the event the Company should fail to pay any Loan
Payments, Additional Payments (including Administration Expenses)
when due, the payment in default shall continue as an obligation
of the Company until the amount in default shall have been fully
paid together with interest thereon during the default period at
the Interest Rate for Advances.

Section 4.3. Place of Payments. The Company shall
make all Loan Payments directly to the Trustee at its Principal
Office. Additional Payments shall be made directly to the person
or entity to whom or to which they are due.

Section 4.4. Obligations Unconditional. The
obligations of the Company to make Loan Payments, Additional
Payments (including Administration Expenses) and any payments
required of the Company under Section 5.09 of the Indenture shall
be absolute and unconditional, and the Company shall make such
payments without abatement, diminution or deduction regardless of
any cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim
which the Company may have or assert against the Issuer, the
Trustee, the Registrar or any other Person.

Section 4.5. Assignment of Revenues, Agreement and
First Mortgage Bonds. To secure the payment of Bond Service
Charges, the Issuer shall absolutely assign to the Trustee, its
successors in trust and its and their assigns forever, by the
Indenture, all right, title and interest of the Issuer in and to
(a) the Revenues, including, without limitation, all Loan
Payments and other amounts receivable by or on behalf of the
Issuer under the Agreement in respect of repayment of the Loan,
(b) the Agreement except for the Unassigned Issuer's Rights, and
(c) the First Mortgage Bonds. The Company hereby agrees and
consents to those assignments.

Section 4.6. First Mortgage Bonds. To evidence and
secure the obligations of the Company to make the Loan Payments
and repay the Loan, the Company will, concurrently with the
issuance of the Bonds, execute and deliver First Mortgage Bonds
to the Issuer in an aggregrate principal amount equal to the
aggregate principal amount of the Bonds. The Company agrees that
First Mortgage Bonds authorized pursuant to the Company Mortgage
will be issued containing the terms and conditions and in
substantially the form set forth in the Supplemental Mortgage
Indenture. The First Mortgage Bonds shall:

<PAGE>
(a) provide for payments of interest equal to the
payments of interest on the Bonds;

(b) provide for payments of principal and any
premium equal to the payments of principal (whether at maturity
or by call for mandatory or optional redemption or pursuant to
acceleration or otherwise) and any premium on the Bonds;

(c) require all such payments on such First
Mortgage Bonds to be made on or prior to the due date for the
corresponding payments to be made on the Bonds; and

(d) contain redemption provisions corresponding
with such provisions of the Bonds.

Unless the Company is entitled to a credit under this Agreement
or the Indenture, all payments on the First Mortgage Bonds shall
be in the full amount required thereunder. The First Mortgage
Bonds shall be registered in the name of the Trustee and shall
not be transferred by the Trustee, except to effect transfers to
any successor trustee under the Indenture.

(End of Article IV)

<PAGE>

ARTICLE V

ADDITIONAL AGREEMENTS AND COVENANTS

Section 5.1. Maintenance. The Company shall use its
best efforts to cause the Project Facilities to be kept and
maintained in good repair and good operating condition so that
the Project Facilities will continue to constitute Pollution
Control Facilities, for the purposes of the operation thereof as
required by Section 5.3 hereof.

So long as such shall not be in violation of the Act or
impair the character of the Project Facilities as Pollution
Control Facilities, and provided there is continued compliance
with applicable laws and regulations of governmental entities
having jurisdiction thereof, the Company shall have the right to
remodel the Project Facilities or make additions, modifications
and improvements thereto, from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes,
the cost of which remodeling, additions, modifications and
improvements shall be paid by the Company and the same shall,
when made, become a part of the Project Facilities.

Section 5.2. Removal of Portions of the Project
Facilities. The Company shall not be under any obligation to
renew, repair or replace any inadequate, obsolete, worn out,
unsuitable, undesirable or unnecessary portions of the Project
Facilities, except that, subject to Section 5.3 hereof, it will
use its best efforts to cause to be continued the character of
the Project Facilities as Pollution Control Facilities. The
Company shall have the right from time to time to substitute
personal or other property or fixtures for any portions of the
Project Facilities, provided that the personal or other property
or fixtures so substituted shall not impair the character of the
Project Facilities as Pollution Control Facilities. Any such
substituted property or fixtures shall, when so substituted,
become a part of the Project Facilities. The Company shall also
have the right to remove any portion of the Project Facilities,
without substitution therefor; provided, that the Company shall
deliver to the Trustee a certificate signed by an Engineer
describing such portion of the Project Facilities and stating
that the removal of such property or fixtures will not impair the
character of the Project Facilities as Pollution Control
Facilities.

<PAGE>
Section 5.3. Operation of Project Facilities. The
Company will use its best efforts to continue operation of the
Project Facilities so long as and to the extent that operation
thereof is required to comply with laws or regulations of
governmental entities having jurisdiction thereof or unless the
Issuer shall have approved the discontinuance of such operation
(which approval shall not be unreasonably withheld). The Company
agrees that it will, within the design capacities thereof, use
its best efforts to operate and maintain the Project Facilities
in accordance with all applicable, valid and enforceable rules
and regulations of governmental entities having jurisdiction
thereof; provided, that the Company reserves the right to contest
in good faith any such laws or regulations.

Nothing in this Agreement shall prevent or restrict the
Company, in its sole discretion, at any time, from discontinuing
or suspending either permanently or temporarily its use of any
facility of the Company served by the Project Facilities and in
the event such discontinuance or suspension shall render
unnecessary the continued operation of the Project Facilities,
the Company shall have the right to discontinue the operation of
the Project Facilities during the period of any such
discontinuance or suspension.

Section 5.4. Insurance. The Company agrees to insure
its interest in the Project Facilities in the amount and with the
coverage required by the Company Mortgage.

Section 5.5. Damage; Destruction and Eminent Domain.
If, prior to full payment of all 1994 Bonds outstanding (or
provision for payment thereof having been made in accordance with
the provisions of the Indenture), the Project Facilities or any
portion thereof is destroyed or damaged in whole or in part by
fire or other casualty, or title to, or the temporary use of, the
Project Facilities or any portion thereof shall have been taken
by the exercise of the power of eminent domain, and the Company
or the Company Mortgage Trustee receive net proceeds from
insurance or any condemnation award in connection therewith, the
Company (unless it shall have exercised its option to prepay the
Loan pursuant to provisions of Section 6.2 hereof) shall either
(i) cause such Net Proceeds to be used to repair, reconstruct,
restore or improve the Project, or (ii) take any other action,
including the redemption of Bonds, in whole or in part, on any
date, which, in the Opinion of Bond Counsel reasonably acceptable
to the Company and the Trustee, will not adversely affect the
exclusion of interest on any of the 1994 Bonds from gross income
for federal income tax purposes under Section 103(a) of the Code
and will not conflict with any provision of this Agreement or the
Indenture.

It is hereby acknowledged and agreed that any net
proceeds from insurance or any condemnation award relating to the
Project Facilities are subject to the lien of the Company
Mortgage and shall be disposed of in accordance with the terms
and provisions of the Company Mortgage and that any obligations
of the Company under this Section 5.5 not satisfied by
application of such net proceeds shall<PAGE>
be limited to the general credit of the Company and does not
require disposition of such net proceeds contrary to the
requirements of the Company Mortgage.

Section 5.6. Company to Maintain its Corporate
Existence; Conditions Under Which Exceptions Permitted. The
Company agrees that during the term of this Agreement it will
maintain its corporate existence and, will not sell its electric
properties as an entirety or substantially as an entirety or
consolidate with or merge into another corporation or permit one
or more other corporations to consolidate with or merge into it,
except to the extent permitted under the provisions of the
Company Mortgage, provided that any successor corporation
resulting from any such sale, consolidation or merger shall
assume all obligations of the Company arising under or
contemplated by the provisions of this Agreement.

If consolidation, merger or sale or other transfer is
made as provided in this Section, the provisions of this Section
shall continue in full force and effect and no further
consolidation, merger or sale or other transfer shall be made
except in compliance with the provisions of this Section.

Section 5.7. Indemnification. The Company releases
the Issuer from, agrees that the Issuer shall not be liable for,
and indemnifies the Issuer against, all liabilities, claims,
costs and expenses imposed upon or asserted against the Issuer on
account of: (a) any loss or damage to property or injury to or
death of or loss by any person that may be occasioned by any
cause whatsoever pertaining to the construction, maintenance,
operation and use of the Project Facilities; (b) any breach or
default on the part of the Company in the performance of any
covenant or agreement of the Company under this Agreement or any
related document, or arising from any act or failure to act by
the Company, or any of its agents, contractors, servants,
employees or licensees; (c) the authorization, issuance and sale
of the Bonds, and the provision of any information furnished in
connection therewith concerning the Project Facilities or the
Company (including, without limitation, any information furnished
by the Company for inclusion in any certifications made by the
Issuer under Section 3.4 hereof or for inclusion in, or as a
basis for preparation of, the information statements filed by the
Issuer pursuant to the Bond Ordinance); and (d) any claim or
action or proceeding with respect to the matters set forth in
(a), (b) and (c) above brought thereon.

The Company agrees to indemnify the Trustee, the Paying
Agent and the Registrar (each hereinafter referred to in this
section as an "indemnified party") for and to hold each of them
harmless against all liabilities, claims, costs and expenses
incurred without negligence or willful misconduct on the part of
the indemnified party, on account of any action taken or omitted
to be taken by the indemnified party in accordance with the terms
of this Agreement, the Bonds or the Indenture or any action taken
at the<PAGE>
request of or with the consent of the Company, including the
costs and expenses of the indemnified party in defending itself
against any such claim, action or proceeding brought in
connection with the exercise or performance of any of its powers
or duties under this Agreement, the Bonds or the Indenture or any
action taken at the request of or with the consent of the
Company.

In case any action or proceeding is brought against the
Issuer or an indemnified party in respect of which indemnity may
be sought hereunder, the party seeking indemnity promptly shall
give notice of that action or proceeding to the Company, and the
Company upon receipt of that notice shall have the obligation and
the right to assume the defense of the action or proceeding;
provided, that failure of a party to give that notice shall not
relieve the Company from any of its obligations under this
Section unless that failure prejudices the defense of the action
or proceeding by the Company. At its own expense, an idemnified
party may employ separate counsel and participate in the defense;
provided, however, where it is ethically inappropriate for one
firm to represent the interests of the Issuer and any other
indemnified party or parties, the Company shall pay the Issuer's
legal expenses in connection with the Issuer's retention of
separate counsel. The Company shall not be liable for any
settlement made without its consent.

The indemnification set forth above is intended to and
shall include the indemnification of all affected officials,
directors, officers and employees of the Issuer, the Trustee, the
Paying Agent and the Registrar, respectively. That
indemnification is intended to and shall be enforceable by the
Issuer, the Trustee, the Paying Agent and the Registrar,
respectively, to the full extent permitted by law.

Section 5.8. Company Not to Adversely Affect Exclusion
of Interest on 1994 Bonds from Gross Income for Federal Income
Tax Purposes. The Company hereby covenants and represents that
it has taken and caused to be taken and shall take and cause to
be taken all actions that may be required of it for the interest
on the 1994 Bonds to be and remain excluded from the gross income
of the Holders for federal income tax purposes, and that it has
not taken or permitted to be taken on its behalf, and covenants
that it will not take, or permit to be taken on its behalf, any
action which, if taken, would adversely affect that exclusion
under the provisions of the Code.

The Company covenants and agrees with Issuer that it
will cause the outstanding principal amount of the Refunded Bonds
to be paid and discharged in accordance with the Refunded Bonds
Indenture on or prior to the 90th day after the date of issuance
of the Bonds.

Section 5.9. Use of Project Facilities. The Issuer
agrees that it will not take any action, or cause any action to
be taken on its behalf, to interfere with the Company's ownership
interest in the Project or to prevent the Company from having
possession, custody, use and enjoyment of the Project other than
pursuant to Article VII of this Agreement or Article VII of the
Indenture.

<PAGE>
Section 5.10. Assignment by Company. This Agreement
may be assigned in whole or in part by the Company without the
necessity of obtaining the consent of either the Issuer or the
Trustee, subject, however, to each of the following conditions:

(a) No assignment (other than pursuant to Section 5.6
hereof) shall relieve the Company from primary liability for any
of its obligations hereunder, and in the event of any such
assignment the Company shall continue to remain primarily liable
for the payment of the Loan Payments and Additional Payments and
for performance and observance of the agreements on its part
herein provided to be performed and observed by it.

(b) Any assignment by the Company must retain for the
Company such rights and interests as will permit it to perform
its obligations under this Agreement, and any assignee from the
Company shall assume the obligations of the Company hereunder to
the extent of the interest assigned.

(c) The Company shall, within 30 days after execution
thereof, furnish or cause to be furnished to the Issuer and the
Trustee a true and complete copy of each such assignment together
with any instrument of assumption.

(d) Any assignment from the Company shall not
materially impair fulfillment of the Project Purposes to be
accomplished by operation of the Project as herein provided.

Section 5.11. Agreements with Bond Insurer. So long
as the Bond Insurance Policy is in full force and effect with
respect to the Bonds and the Bond Insurer is not in default
thereunder as defined in Section 7.10 of the Indenture, the
following provisions shall apply:

(a) Any action requiring the approval or consent of
the Holders, the Issuer, the Trustee or the Company under the
Agreement shall also require the prior written consent of the
Bond Insurer.

(b) The Company shall provide the Bond Insurer
annually with copies of the Company's audited financial
statements.

(d) The Company shall give notice to the Bond Insurer,
not less than two days prior to any Loan Payment Date, if the
Company does not intend or will be unable to make the Loan
Payment on that Loan Payment Date.

(End of Article V)

<PAGE>

ARTICLE VI

REDEMPTION

Section 6.1. Optional Redemption. Provided no Event
of Default shall have occurred and be subsisting, at any time and
from time to time, the Company may deliver moneys to the Trustee
in addition to Loan Payments or Additional Payments required to
be made and direct the Trustee to use the moneys so delivered for
the purpose of calling Bonds for optional redemption in
accordance with the applicable provisions of the Indenture
providing for optional redemption at the redemption price stated
in the Indenture. Pending application for those purposes, any
moneys so delivered shall be held by the Trustee in a special
account in the Bond Fund and delivery of those moneys shall not,
except as set forth in Section 4.1 hereof, operate to abate or
postpone Loan Payments or Additional Payments otherwise becoming
due or to alter or suspend any other obligations of the Company
under this Agreement.

Section 6.2. Extraordinary Optional Redemption. The
Company shall have, subject to the conditions hereinafter
imposed, the option to direct the redemption of the Bonds in
whole in accordance with the applicable provisions of the
Indenture upon the occurrence of any of the following events:

(a) The Project or the Station Unit shall have been
damaged or destroyed to such an extent that (1) it cannot
reasonably be expected to be restored, within a period of six
consecutive months, to the condition thereof immediately
preceding such damage or destruction or (2) the Company is
reasonably expected to be prevented from carrying on its normal
operations in connection therewith for a period of six
consecutive months.

(b) Title to, or the temporary use of, all or a
significant part of the Project or the Station Unit shall have
been taken under the exercise of the power of eminent domain (1)
to such extent that it cannot reasonably be expected to be
restored within a period of six consecutive months to a condition
of usefulness comparable to that existing prior to the taking or
(2) to such an extent that the Company is reasonably expected to
be prevented from carrying on its normal operations in connection
therewith for a period of six consecutive months.

(c) As a result of any changes in the Constitution of
the State, the Constitution of the United States of America or
any state or federal laws or as a result of legislative or
administrative action (whether state or federal) or by final
decree, judgment or order of any court or administrative body
(whether state or federal) entered after any contest thereof by
the Issuer or the Company in good faith, this Agreement shall
have become void or unenforceable or impossible of performance in
accordance with the intent and purpose of the parties as
expressed in this Agreement.

<PAGE>
(d) Unreasonable burdens or excessive liabilities
shall have been imposed upon the Issuer or the Company with
respect to the Project or the Station Unit or the operation
thereof, including, without limitation, the imposition of
federal, state or other ad valorem, property, income or other
taxes other than ad valorem taxes at the rates presently levied
upon privately owned property used for the same general purpose
as the Project or the Station Unit.

(e) Changes in the economic availability of raw
materials, operating supplies, energy sources or supplies or
facilities (including, but not limited to, facilities in
connection with the disposal of industrial wastes) necessary for
the operation of the Project or the Station Unit for the Project
Purposes occur or technological or other changes occur which the
Company cannot reasonably overcome or control and which in the
Company's reasonable judgment render the Project or the Station
Unit uneconomic or obsolete for the Project Purposes.

(f) Any court or administrative body shall enter a
judgment, order or decree, or shall take administrative action,
requiring the Company to cease all or any substantial part of its
operations served by the Project or the Station Unit to such
extent that the Company is or will be prevented from carrying on
its normal operations at the Project or a Station Unit for a
period of six consecutive months.

(g) The termination by the Company of operations at
the Station Unit.

The amount payable by the Company in the event of its
exercise of the option granted in this Section shall be the sum
of the following:

(i) An amount of money which, when added to the moneys
and investments held to the credit of the Bond Fund, will be
sufficient pursuant to the provisions of the Indenture to pay, at
100% of the principal amount thereof plus accrued interest to the
redemption date, and discharge, all Outstanding Bonds on the
earliest applicable redemption date, that amount to be paid to
the Trustee, plus

(ii) An amount of money equal to the Additional
Payments relating to those Bonds accrued and to accrue until
actual final payment and redemption of those Bonds, that amount
or applicable portions thereof to be paid to the Trustee or to
the Persons to whom those Additional Payments are or will be due.

The requirement of (ii) above with respect to Additional Payments
to accrue may be met if provisions satisfactory to the Trustee
and the Issuer are made for paying those amounts as they accrue.

<PAGE>
The rights and options granted to the Company in this
Section may be exercised whether or not the Company is in default
hereunder; provided, that such default will not relieve the
Company from performing those actions which are necessary to
exercise any such right or option granted hereunder.

Section 6.3. Mandatory Redemption. The Company shall
deliver to the Trustee the moneys needed to redeem the Bonds in
accordance with any mandatory redemption provisions relating
thereto as may be set forth in Section 4.01(b) of the Indenture.

Section 6.4. Notice of Redemption. In order to
exercise an option granted in, or to consummate a redemption
required by, this Article VI, the Company shall, (i) within 180
days following the event authorizing the exercise of such option
or at any time during the continuation of the condition referred
to in paragraphs (c), (d) or (e) of Section 6.2 hereof or (ii)
promptly upon the occurrence of a Determination of Taxability (as
defined in the Indenture), give written notice to the Issuer, the
Trustee and the Company Mortgage Trustee that it is exercising
its option to direct the redemption of Bonds, or that the
redemption thereof is required by Section 4.01(b) of the
Indenture due to the occurrence of a Determination of Taxability,
as the case may be, in accordance with the Agreement and the
Indenture, and shall specify therein the date on which such
redemption is to be made, which date shall not be more than 180
days from the date such notice is mailed. The Company shall make
arrangements satisfactory to the Trustee for the giving of the
required notice of redemption to the Holders of the Bonds, in
which arrangements the Issuer shall cooperate. The Company shall
make arrangements satisfactory to the Company Mortgage Trustee to
effect a concurrent redemption of an equivalent principal amount
of corresponding First Mortgage Bonds under the Supplemental
Mortgage Indenture.

Section 6.5. Actions by Issuer. At the request of the
Company or the Trustee, the Issuer shall take all steps required
of it under the applicable provisions of the Indenture or the
Bonds to effect the redemption of all or a portion of the Bonds
pursuant to this Article VI.

Section 6.6. Concurrent Discharging of First Mortgage
Bonds. In the event any of the Bonds shall be paid and
discharged, or deemed to be paid and discharged, pursuant to any
provisions of this Agreement and the Indenture, so that such
Bonds are not thereafter outstanding within the meaning of the
Indenture, a like principal amount of corresponding First
Mortgage Bonds shall be deemed fully paid for purposes of this
Agreement and to such extent the obligations of the Company
hereunder shall be deemed terminated.

(End of Article VI)

<PAGE>

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES

Section 7.1. Events of Default. Each of the following
shall be an Event of Default:

(a) The occurrence of an event of default as
defined in Section 7.01 (a) or (b) of the Indenture;

(b) The Company shall fail to observe and perform
any other agreement, term or condition contained in this
Agreement, other than such failure as will have resulted in an
event of default described in (a) above and the continuation of
that failure for a period of 90 days after notice thereof shall
have been given to the Company by the Issuer or the Trustee, or
for such longer period as the Issuer and the Trustee may agree to
in writing; provided, that failure shall not constitute an Event
of Default so long as the Company institutes curative action
within the applicable period and diligently pursues that action
to completion; and

Notwithstanding the foregoing, if, by reason of Force
Majeure, the Company is unable to perform or observe any
agreement, term or condition hereof which would give rise to an
Event of Default under subsection (b) hereof, the Company shall
not be deemed in default during the continuance of such
inability. However, the Company shall promptly give notice to
the Trustee and the Issuer of the existence of an event of Force
Majeure and shall use its best efforts to remove the effects
thereof; provided that the settlement of strikes or other
industrial disturbances shall be entirely within its discretion.

The term Force Majeure shall mean the following:

(i) acts of God; strikes, lockouts or other
industrial disturbances; acts of public enemies; orders or
restraints of any kind of the government of the United States of
America or of the State or any of their departments, agencies,
political subdivisions or officials, or any civil or military
authority; insurrections; civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires; hurricanes; tornados;
storms; droughts; floods; arrests; restraint of government and
people; explosions; breakage, nuclear accidents or other
malfunction or accident to facilities, machinery, transmission
pipes or canals;

<PAGE>
partial or entire failure of a utility serving the
Project; shortages of labor, materials, supplies or
transportation; or

(ii) any cause, circumstance or event not
reasonably within the control of the Company.

The exercise of remedies hereunder shall be subject to
any applicable limitations of federal bankruptcy law affecting or
precluding that declaration or exercise during the pendency of or
immediately following any bankruptcy, liquidation or
reorganization proceedings.

Section 7.2. Remedies on Default. Whenever an Event
of Default shall have happened and be subsisting, either or both
of the following remedial steps may be taken:

(a) The Issuer or the Trustee may have access to,
inspect, examine and make copies of the books, records, accounts
and financial data of the Company, only, however, insofar as they
pertain to the Project; and

(b) The Issuer or the Trustee may pursue all
remedies now or hereafter existing at law or in equity to recover
all amounts, including a11 Loan Payments and Additional Payments,
then due and thereafter to become due under this Agreement, or to
enforce the performance and observance of any other obligation or
agreement of the Company under those instruments.

Notwithstanding the foregoing, the Issuer shall not be obligated
to take any step which in its opinion will or might cause it to
expend time or money or otherwise incur liability unless and
until a satisfactory indemnity bond has been furnished to the
Issuer at no cost or expense to the Issuer. Any amounts
collected as Loan Payments or applicable to Loan Payments and any
other amounts which would be applicable to payment of Bond
Service Charges collected pursuant to action taken under this
Section shall be paid into the Bond Fund and applied in
accordance with the provisions of the Indenture or, if the
outstanding Bonds have been paid and discharged in accordance
with the provisions of the Indenture, shall be paid as provided
in Section 5.08 of the Indenture for transfers of remaining
amounts in the Bond Fund.

The provisions of this Section are subject to the
further limitation that the rescission and annulment by the
Trustee of its declaration that all of the Bonds are immediately
due and payable also shall constitute a rescission and annulment
of the consequences<PAGE>
of that declaration and of the Event of Default with respect to
which that declaration has been made, provided that no such
rescission and annulment shall extend to or affect any subsequent
or other default or impair any right consequent thereon.

Section 7.3. No Remedy Exclusive. No remedy conferred
upon or reserved to the Issuer or the Trustee by this Agreement
is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under this
Agreement, or now or hereafter existing at law, in equity or by
statute. No delay or omission to exercise any right or power
accruing upon any default shall impair that right or power or
shall be construed to be a waiver thereof, but any such right or
power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Issuer or the Trustee
to exercise any remedy reserved to it in this Article, it shall
not be necessary to give any notice, other than any notice
required by law or for which express provision is made herein.

Section 7.4. Agreement to Pay Attorneys' Fees and
Expenses. If an Event of Default should occur and the Issuer or
the Trustee should incur expenses, including attorneys' fees, in
connection with the enforcement of this Agreement or the
collection of sums due hereunder, the Company shall be required,
to the extent permitted by law, to reimburse the Issuer and the
Trustee, as applicable, for the expenses so incurred upon demand.

Section 7.5. No Waiver. No failure by the Issuer or
the Trustee to insist upon the strict performance by the Company
of any provision hereof shall constitute a waiver of their right
to strict performance and no express waiver shall be deemed to
apply to any other existing or subsequent right to remedy the
failure by the Company to observe or comply with any provision
hereof.

Section 7.6. Notice of Default. The Company shall
notify the Trustee immediately if it becomes aware of the
occurrence of any Event of Default hereunder or of any fact,
condition or event which, with the giving of notice or passage of
time or both, would become an Event of Default.

(End of Article VII)

<PAGE>

ARTICLE VIII

MISCELLANEOUS

Section 8.1. Term of Agreement. This Agreement shall
be and remain in full force and effect from the date of delivery
of the Bonds to the Original Purchaser until such time as all of
the Bonds shall have been fully paid (or provision made for such
payment) pursuant to the Indenture and all other sums payable by
the Company under this Agreement shall have been paid.

Section 8.2. Amounts Remaining in Funds. Any amounts
in the Bond Fund remaining unclaimed by the Holders of Bonds for
four years after the due date thereof (whether at stated
maturity, by redemption, upon acceleration or otherwise), at the
option of the Company, shall be deemed to belong to and shall be
paid, subject to Section 5.07 of the Indenture, at the written
request of the Company, to the Company by the Trustee. With
respect to the principal of and any premium and interest on the
Bonds to be paid from moneys paid to the Company pursuant to the
preceding sentence, the Holders of the Bonds entitled to those
moneys shall look solely to the Company for the payment of those
moneys. Further, any amounts remaining in the Bond Fund and any
other special funds or accounts created under this Agreement or
the Indenture, except the Rebate Fund, after all of the Bonds
shall be deemed to have been paid and discharged under the
provisions of the Indenture and all other amounts required to be
paid under this Agreement and the Indenture have been paid, shall
be paid to the Company to the extent that those moneys are in
excess of the amounts necessary to effect the payment and
discharge of the Outstanding Bonds.

Section 8.3. Notices. All notices, certificates,
requests or other communications hereunder shall be in writing,
except as provided in Section 3.3 hereof, and shall be deemed to
be sufficiently given when mailed by registered or certified
mail, postage prepaid, and addressed to the appropriate Notice
Address. A duplicate copy of each notice, certificate, request
or other communication given hereunder to the Issuer, the Company
or the Trustee shall also be given to the others. The Company,
the Issuer and the Trustee, by notice given hereunder, may
designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be
sent.

The Bond Insurer shall receive copies of all notices
required to be given by the Trustee, the Issuer or the Company
under the Agreement, including all notices to Holders. All
notices required to be given to the Bond Insurer under this
Agreement shall be in writing and shall be sent by registered or
certified mail addressed to Municipal Bond Investors Assurance
Corporation, 113 King Street, Armonk, New York 10504, Attention:

Surveillance.

Section 8.4. Extent of Covenants of the Issuer; No
Personal Liability. All covenants, obligations and agreements of
the Issuer contained in this Agreement or the Indenture shall be
effective to the extent authorized and permitted by applicable
law. <PAGE>
No such covenant, obligation or agreement shall be deemed to be a
covenant, obligation or agreement of any present or future
officer, agent or employee of the Issuer in other than his
official capacity, and neither the elected or appointed officers,
agents and employees of the Issuer nor any official executing the
Bonds shall be liable personally on the Bonds or be subject to
any personal liability or accountability by reason of the
issuance thereof or by reason of the covenants, obligations or
agreements of the Issuer contained in this Agreement or in the
Indenture.

Section 8.5. Binding Effect. This Agreement shall
inure to the benefit of the Issuer, the Company, the Trustee, any
Paying Agent and any Registrar, and their respective permitted
successors and assigns and shall be binding in accordance with
its terms upon the Issuer, the Company and their respective
permitted successors and assigns provided that this Agreement may
not be assigned by the Company (except as permitted under
Sections 5.8 or 5.12 hereof) and may not be assigned by the
Issuer except to (i) the Trustee pursuant to the Indenture or as
otherwise may be necessary to enforce or secure payment of Bond
Service Charges or (ii) any successor public body to the Issuer.

Section 8.6. Amendments and Supplements. Except as
otherwise expressly provided in this Agreement or the Indenture,
subsequent to the issuance of the Bonds and prior to all
conditions provided for in the Indenture for release of the
Indenture having been met, this Agreement may not be effectively
amended, changed, modified, altered or terminated by the parties
hereto except with the consents and notices required by, and in
accordance with, the provisions of Article XI of the Indenture,
as applicable.

Section 8.7. Execution Counterparts. This Agreement
may be executed in any number of counterparts, each of which
shall be regarded as an original and all of which shall
constitute but one and the same instrument.

Section 8.8. Severability. If any provision of this
Agreement, or any covenant, obligation or agreement contained
herein is determined by a judicial or administrative authority to
be invalid or unenforceable, that determination shall not affect
any other provision, covenant, obligation or agreement, each of
which shall be construed and enforced as if the invalid or
unenforceable portion were not contained herein. That invalidity
or unenforceability shall not affect any valid and enforceable
application thereof, and each such provision, covenant,
obligation or agreement shall be deemed to be effective,
operative, made, entered into or taken in the manner and to the
full extent permitted by law.

Section 8.9. Governing Law. This Agreement shall be
deemed to be a contract made under the laws of the State and for
all purposes shall be governed by and construed in accordance
with the laws of the State.

(End of Article VIII)

<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have
caused this Agreement to be duly executed in their respective
names, all as of the date hereinbefore written.

COUNTY OF BOONE, KENTUCKY
(Seal)

By: /S/ KENNETH R. LUCAS
--------------------------
KENNETH R. LUCAS
County Judge/Executive

Attest: /S/ CAROL RUDICILL
----------------------
CAROL RUDICILL

Fiscal Court Clerk

THE CINCINNATI GAS & ELECTRIC
COMPANY

By: /S/ WILLIAM L. SHEAFER
--------------------------
WILLIAM L. SHEAFER
Treasurer

<PAGE>

EXHIBIT A

LOAN AGREEMENT

DATED AS OF OCTOBER 1, 1979

BETWEEN

THE COUNTY OF BOONE, KENTUCKY, AND
THE CINCINNATI GAS & ELECTRIC COMPANY

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

PART I

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

THE PROJECT

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

Facilities to be Acquired, Constructed and Installed at the East Bend
Generating Station, Unit 2, and financed in part (51%) by Application of
the Proceeds of the 1979 Series A Bonds in Accordance with this Agreement
and the Indenture

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

EAST BEND GENERATING STATION
UNIT 2

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

ELECTROSTATIC PRECIPITATORS

Electrostatic precipitators will be installed to serve Unit 2 of the
East Bend Generating Station. Unit 2 of the East Bend Generating Station
is a new coal-fired steam electric generating unit, and the precipitators
are and will be installed simultaneously with construction and installation
of the generating unit itself. The electrostatic precipitators, together
with functionally related and associated structural supports and ductwork
are solely designed and intended to reduce particulate loading of flue
gases by removal of flyash and particulates from flue gases exiting the
Unit 2 steam boiler. The precipitators are designed to remove 99.6% of
particulate emissions and flyash when the steam boiler is being operated.
The precipitators operate upon the principle of creation of an
electromagnetic field which attracts and captures particulate

<PAGE>
matter (flyash) from the flue gases. The flyash is then removed and
conveyed to silos. Thereafter, the flyash is conveyed by pneumatic systems
to a sludge and flyash processing facility or to an ash pond for ultimate
disposal.

SULPHUR DIOXIDE REMOVAL SYSTEM

A complete sulphur dioxide removal system (scrubbers) will be provided
for the East Bend Generating Station, Unit 2. Following electrostatic
precipitation, flue gases will be transmitted from the precipitators to the
scrubber, where they will be reacted with a liquefied calcium hydroxide
solution utilized in the scrubbing process as a reactive agent. Sulphur
dioxide contained in flue gases undergoes chemical reaction upon contact
with calcium hydroxide, with resultant formation of non-commercial calcium
sulfite and calcium sulfate sludges. The sulphur dioxide scrubber is
designed to remove 87% of airborne sulphur dioxide and will also remove a
portion of any particulate matter remaining after electrostatic
precipitation, before emission of the cleansed gases to the atmosphere.
The sulphur dioxide scrubber system will be composed of the scrubber
itself, associated ductwork, structural supports and piping, electric
elements, reactive tanks for holding the reactive agents and recycling and
thickening tanks from which the resulting calcium sulfite and calcium
sulfate is withdrawn for final disposal. There will also be acquired and
installed certain functionally related facilities to prepare reactant
materials for use in scrubbers, together with pumps, mixers and holding
tanks and conveyors and other transport mechanisms situated at or near
reactant reception facilities in close proximity to the generating station
for the receipt of reactants and transmission thereof to storage facilities
or directly to the sulphur dioxide removal system.

SOLID WASTE DISPOSAL FACILITIES

Sludge produced by the sulphur dioxide removal system will be
conveyed, together with flyash collected by the electrostatic
precipitators, to the sludge and flyash processing facility, where sludge
and flyash will be mixed with lime, dewatered and prepared for ultimate
disposal. The system consists of receptacles for the storage and handling
of flyash, lime and sludge, mixers, sludge pits, pumps, dewatering and
solids-formation pads for receipt of the final waste product together with
functionally related and subordinate facilities.

COOLING TOWER

A mechanical draft cooling tower with a closed-loop water
system will be provided for the East Bend Generating Station, Unit 2. The
purpose of the cooling tower is to transfer to the atmosphere the heat
absorbed by waters circulated through the

<PAGE>
condenser, which condenses low pressure steam discharged from the steam
driven electric turbine. The closed-loop system with cooling tower is
designed to minimize the release of heated water (thermal pollution) to the
Ohio River and is required in order to conform to applicable water
pollution control regulations. The described water pollution control and
abatement facility consists of a mechanical draft cooling tower, pumps,
circulating water pipes, structural supports and associated and related
equipment. Because a portion of the cost of the closed-loop cooling tower
is allocable to cost savings resulting because an alternate facility need
not be constructed which would, without any pollution control restrictions,
be an adequate facility to cycle water to and from the generating unit,
only an incremental portion of the closed-loop cooling tower is deemed to
be a Project facility.

WASTEWATER DISPOSAL FACILITIES

Sumps, piping, a sewage treatment plant, a neutralization basin and an
ash pond will be acquired and constructed to provide for the disposal of
various liquid wastes, including oil, chemicals, contaminated water and
flow-off from coal piles.

ENGINEERING FEES, RESIDENT INSPECTION,
CAPITALIZED INTEREST AND TEST COSTS

Sargent & Lundy, Consulting Engineers of Chicago, Illinois, and other
firms have acted as Engineers to the Company in designing the Project
facilities and have performed and will perform resident inspection services
with respect thereto. Such costs, together with Company costs directly
attributable to design and construction of the Protect, capitalized
interest and the testing of Project facilities are a part of the Project.

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

PART II

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

ADDITIONAL POLLUTION CONTROL FACILITIES

The pollution control facilities constituting the Project
as described in Part I of this Exhibit A represent a portion of all of the
pollution control facilities intended to be acquired, constructed and
installed at the East Bend Generating Station, Units 1 and 2, which
complete pollution control facilities are described in that certain
Memorandum of Agreement dated as of February 17, 1976, by and between the
County of Boone, Kentucky, The Cincinnati Gas & Electric Company and The
Dayton Power and Light Company, as follows:

<PAGE>
DESCRIPTION OF POLLUTION CONTROL FACILITIES
TO BE CONSTRUCTED IN CONNECTION WITH UNIT 1 AND
UNIT 2 OF THE EAST BEND GENERATING STATION
(BOONE COUNTY, KENTUCKY

THE CINCINNATI GAS & ELECTRIC COMPANY
AND
TEE DAYTON POWER AND LIGHT COMPANY

The Project will consist of air, solid waste and water pollution
control and abatement facilities and systems. The Project will be
installed in conjunction with the construction of Unit 1 and Unit 2 of an
electric generation facility now known as the East Bend Generating Station,
being constructed by The Cincinnati Gas & Electric Company and The Dayton
Power and Light Company, to be situated near the community of Rabbit Rash,
in Boone County, Kentucky, on the Ohio River.

The Project facilities and systems hereafter described are designed
and are to be installed and utilized solely and only for the collection,
removal, abatement, alteration, control, containment and disposition of
atmospheric, solid waste and water pollutants so that gaseous and liquid
emissions and sanitary effluent from Unit 1 and Unit 2 of the East Bend
Generating Station meet applicable governmental air and water quality
standards or limitations.

The following, together with necessary appurtenant and incidental
facilities, constitute the major components of the Project:

ELECTROSTATIC PRECIPITATORS

Electrostatic precipitators or other comparable particulate control devices
will be constructed in connection with Unit 1 and Unit 2, together with
associated structural supports, power modules and electrical substations,
and necessary and incidental ductwork. The electrostatic precipitators or
other particulate control devices will be designed and intended solely and
only to remove flyash and particulate matter from flue gases exiting the
coal-fired steam boilers. Such air pollution control devices will be
designed to at least meet or exceed applicable governmental air quality
standards or limitations.

FLUE GAS DUCT SYSTEMS

Proposed flue gas duct systems will be designed to convey untreated
boiler flue gases emitted from the steam boilers to the electrostatic
precipitators or comparable particulate control devices where particulate
emissions and flyash will be removed.

<PAGE>
Induced draft fans and booster fans, as appropriate, will form an integral
part of the flue gas duct systems. The system will convey partiallY
cleansed flue gases to the sulphur dioxide removal systems following
particulate removal.

FLYASH STORAGE SILOS AND ASSOCIATES FACILITIES

Flyash and particulate loadings removed from boiler flue gases by
electrostatic precipitators or other particulate removal devices and
collected from economizer hoppers and air heater hoppers will be conveyed
either to storage silos for removal from the site in dry form or to
proposed waste retention basin or basins, or central storage and removal
facilities. Incorporated into all flyash storage silos will be bag-house
filter systems for the control of dust.

ASH HANDLING AND TRANSPORT SYSTEMS

Proposed ash handling and transport systems will be either air or
water pressure motivated. If water pressure motivated, the systems will
utilize blowdown from proposed water cooling towers. If air pressure
motivated, the systems will utilize compressors, fans or hydraulic
facilities. In either case, the ash handling and transport systems will be
designed to convey ash from collection hoppers at various generating
station facilities to either (i) storage silos, (ii) ash retention basins,
or (iii) other ash disposal facilities. Certain roadways solely for
transportation of wastes will be constructed.

WASTE RETENTION BASINS

Proposed waste retention basins, involving substantial land, will be
situated at the generating station and will serve no other purpose but to
receive, contain and neutralize (i) flyash and particulate matter captured
by operation of the electrostatic precipitators or by the dust control
systems, (ii) bottom ash produced by operation of the coal-fired steam
generators, (iii) liquid wastes produced by coal pile runoffs, chemical
spills, oil spills and other causes (with exception of sanitary wastes
which are treated by a separate sanitary sewer facility), and (iv) acid and
caustic liquid wastes produced by boiler operations. The waste retention
basins will allow neutralization of wastes collected therein, will function
on the gravity-settling principle and will incorporate barriers and
skimmers as appropriate to prevent floating flyash and floating liquid
wastes, including waste oils, from being transmitted to the water source
(Ohio Rivers).

OIL ELIMINATION SYSTEM

An oil elimination and control system will be incorporated in each
generating unit, which will collect oil runoffs, exudations

<PAGE>
and spills and convey them to a central oil waste receptacle for skimming
and separation of oils from watery effluent.

COAL DUST CONTROL SYSTEM

The proposed coal dust control system will provide facilities to
prevent atmospheric pollution while coal is being conveyed from the coal
storage and/or coal unloading facilities to the boilers. Coal is proposed
to be transported from river barges by means of a mechanical unloader and
conveyed to transfer houses where it will be crushed and thence delivered
to coal storage bunkers by belt conveyors. The coal conveyor systems will
be covered as required, and additional coal dust control devices will be
employed at each transfer point and at the coal storage bunkers.

WATER COOLING TOWERS AND ASSOCIATED EQUIPMENT

Water cooling towers, complete with all necessary associated
equipment, will be provided to remove heat (thermal pollution) from the
steam turbine exhausts. The heat will be dissipated to the atmosphere and
cooling tower blowdown streams will be utilized as required, to provide
motive power for transporting bottom ash, flyash and other wastes to the
waste retention basins or other waste disposal facilities.

SANITARY SEWAGE TREATMENT PLANT

A sanitary sewage treatment plant and necessary appurtenances will be
constructed upon the generating station site to nest appropriate federal,
state and local requirements. Such treatment plant will be adequate to
serve all personnel permanently assigned to the generating station as well
as all members of construction crews on the premises during construction of
the East Bend Generating Station.

SULPHUR DIOXIDE REMOVAL SYSTEMS

Sulphur dioxide removal systems will be installed as appropriate,
dependent upon the sulphur content of coal utilized in the generating
process and regulatory requirements. Such facilities will be designed to
reduce sulphur dioxide emissions to such level as will meet or exceed
applicable governmental air quality standards or limitations. The sulphur
dioxide removal facilities may utilize either the "wet scrubber" system, or
such other system as at the time of design represents the most appropriate
technology for the site and will meet or exceed applicable governmental air
quality standards or limitations.

<PAGE>
SLUDGE RETENTION BASINS

Sulphur dioxide removal systems may produce substantial solid or
liquid waste byproducts. Dependent upon the sulphur dioxide removal
process used, sludge retention basins will be provided to receive and hold
such liquid and/or solid waste products for ultimate disposition.

AUXILIARY FACILITIES ASSOCIATED WITH
SULPHUR DIOXIDE REMOVAL EQUIPMENT

Dependent upon the technology to be utilized, the sulphur dioxide
removal systems will require facilities for reception of reactant material,
together with holding vats or ponds, transmission lines, reactant tanks,
pumps, sprays, transmission facilities and other associated structures and
facilities.

ELEVATED FLUE GAS DIFFUSER

Proposed elevated flue gas diffusers (chimneys) will be constructed to
maximize diffusion of stack gases produced by operation of the generating
station.

MONITORING EQUIPMENT

Monitoring equipment, as required by appropriate laws and regulations,
will be installed to monitor liquid discharges, solid waste discharges,
stack gas discharges and ambient air quality.

ENGINEERING COSTS, RESIDENT INSPECTIONS,
TEST COSTS AND ISSUANCE COSTS

Amounts representing engineering costs, resident inspection and
testing of Project facilities, together with actual costs of Project
facilities and bond issuance costs, will form a part of the Project.

EXHIBIT 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference of our report, dated January 24, 1994, included in the Annual
Report on Form 10-K for the year ended December 31, 1993, of The Cincinnati
Gas & Electric Company, into its previously filed Registration Statement Nos.
33-38396, 33-45116, 33-45133, 33-45134, 33-50443 and 33-52335.

ARTHUR ANDERSEN & CO.

Cincinnati, Ohio,
March 15, 1994.