2009 Annual Report & 10-K

CH Energyized!

Table of Contents

This Annual Report contains certain “forward-looking statements” within the meaning of, and subject to the safe harbor protection of, the Securities Litigation Reform Act of 1995. A number of important factors could cause actual results to differ materially from those stated in the forward-looking statements. In this regard, reference is made to the caption “FORWARD-LOOKING STATEMENTS” in Part I of the Form 10-K which accompanies this report, the provisions of which are incorporated herein by reference and shall be applicable to this Report.

Financial Highlights 1

Letter to Shareholders 2

CH Energized! 4

Corporate Information 12

10-K 13

Forward-Looking Statements

1

Financial Highlights

Weather Normalized Electric Volumes(MWH - Millions)

Residential Commercial Industrial Other

Weather Normalized Firm Gas Volumes(MCF - Millions)

EPS & Dividends(Dollars)

Residential Customers(In Thousands)

0 1 2 3 4 5 6 0 2 4 6 8 10 12

0.00 0.50 1.00 1.50 2.00 2.50 3.00 0 75 150 225 300 375 450

2009

2008

2007

2006

2005

EPS Dividends Electric Gas Petroleum

2009 2008 % Change Operating Revenues $1,332,851,000

Operating Expenses $1,254,145,000

Net Income $35,081,000

Earnings Per Share - Basic $2.22

Average Shares Outstanding 15,768,000

Dividends Declared Per Share $2.16

Total Assets $1,730,183,000

Electric Sales (kWh) 5,455,090,000

Natural Gas Firm Sales (000’s of cubic ft.) 13,834,591

Electric Customers (average) 300,600

Firm Natural Gas Customers (average) 74,200

Fuel Distribution Customers (average) 110,215

Fuel Distribution Volume (gallons) 151,550,000

2009

2008

2007

2006

2005

2009

2008

2007

2006

2005

2009

2008

2007

2006

2005

2

Dear Shareholder,

2009 was a year of rebounding earnings for CH Energy Group, as well

as several significant accomplishments that we expect will put us on a sus-

tainable path of earnings growth in 2010 and beyond. Earnings per share

were $____, up ____percent over the $2.22 per share we earned in 2008.

The first accomplishment of note in 2009 was the successful outcome

of the electric and gas rate cases filed by utility Central Hudson Gas &

Electric, our largest subsidiary, in July 2008, and decided by the New York

State Public Service Commission in June 2009. The PSC’s decision, which

authorized a $53 million annual increase in delivery rates, also contained

revenue decoupling mechanisms that stabilize delivery revenues and pre-

vent earnings volatility due to reduced usage, unusual weather or other fac-

tors. As a result of the rate increase, Central Hudson’s earnings rebound-

ed strongly in the third and fourth quarters of 2009. We expect that trend to

continue into 2010, despite the challenge of reducing our already-lean cost

structure to comply with an Austerity Order issued by the PSC in response

to the condition of the economy.

Even with the rate increase noted above – because of its growing capital

base – Central Hudson found it necessary to file in July 2009 a significantly smaller rate increase to cover projected

cost escalation for the year beginning on July 1, 2010. This filing has resulted in a three-year rate settlement with the

PSC Staff and other parties, which will, if approved as expected, provide Central Hudson with modest, staged increases

in delivery rates on July 1 of 2010, 2011 and 2012. The agreement contains cost-sharing provisions and productivity

imputations that will be challenging to meet, but we believe the settlement is fair to all parties and represents a preferred

alternative to a series of annual rate cases, which divert resources from other important goals.

Another significant accomplishment in 2009 was the successful completion of the strategic review of our Griffith

Energy Services subsidiary, whose primary business is delivering heating oil and motor fuels to homes and businesses.

Griffith was challenged by the 2008 peak in wholesale oil prices, and has since responded to that challenge effectively.

Entering 2009, we reduced Griffith’s expense structure significantly, producing an increase in earnings. More importantly,

following an analysis of each of our operating divisions, we made a decision to divest approximately 40 percent of the

business, specifically the Griffith divisions located in Pennsylvania, Connecticut and Rhode Island, to Superior Plus, a

Canadian firm. The transaction was a great success, producing an after-tax gain of $5.7 million or 35 cents per share,

as well as resulting in the accelerated recovery of approximately $10 million of goodwill, which will benefit the future

profitability of Griffith’s retained divisions in Delaware, Maryland, Virginia, West Virginia, and Washington, DC.

To Our Shareholders

Steven V. LantChairman of the Board, President & Chief Executive Officer

3

This outcome confirms that our strategic approach to our fuel oil business — increasing operating efficiency, providing

high-quality customer service and pursuing a disciplined acquisition approach — is working very well and creating value

for shareholders. Based on this demonstrated success, we intend to continue with this strategy in 2010, pursuing select

tuck-in acquisitions in the Mid-Atlantic region.

During 2009, we refocused and fine-tuned our business development efforts, with a view toward concentrating our

future investments in renewable energy projects that can produce “utility-like” stability of earnings and positive net cash

flows, as a complement to Central Hudson, which is a net user of capital due to its strong rate base growth. Doing so

will better position CH Energy Group to increase its dividend in the future. Two areas of the renewable energy market, in

our view, are most attractive: wind and landfill gas; and, two areas we’ve previously targeted are less attractive: ethanol

and biomass. In keeping with that assessment, in 2009 we invested in two landfill gas projects — CH Greentree in

Pennsylvania and CH Auburn, in upstate New York, and announced in December a significant wind project in Shirley, Wis.

The Greentree project is currently operating as planned, the Auburn project is expected to be operational very soon and

the Shirley project is expected to be completed by the end of 2010.

I’m also pleased to report on changes to our executive team. John E. Gould, formerly our outside general counsel, and

senior partner in Thompson Hine LLP, has joined CH Energy Group as Executive Vice President and General Counsel,

and will lead a transition to an in-house legal department. James P. Laurito has joined us as President of Central Hudson,

bringing with him a wealth of varied executive experience. He replaces Carl E. Meyer, who retired on December 31, 2009,

after 40 years of outstanding service — including 10 years as President of Central Hudson, for which we thank him and

wish him well.

We enter 2010, the beginning of a new decade of possibility, well positioned to grow and prosper. Our primary

subsidiary, Central Hudson Gas & Electric, has an excellent service territory, a constructive regulatory settlement awaiting

approval, significant opportunities to renew and expand its electric and gas system and improve customer service, and an

extremely skilled and dedicated group of employees. Griffith has a great core market area, a strong customer base and

excellent employees dedicated to serving them well. And our refocused renewable energy portfolio is growing in a manner

that will add incremental value to CH Energy Group.

I look forward to 2010 as a year of growth and progress for our Company. I hope you will agree –

we are CH Energized!

Steven V. LantChairman of the Board, President & Chief Executive Officer, CH Energy Group

4

Safety First. An electric line crew begins its day with a tailboard discussion emphasizing the need to work safely — a commitment made by every employee, every day. As a result of that corporate-wide approach, Central Hudson received national recognition for amassing a record of working two full years without a single lost-time accident during 2009. In all, employees worked nearly 750 consecutive days without incurring a serious accident, and earned recognition from the American Gas Association as the safest medium-sized utility in the nation.

It was a tough year: The economy struggled, and most every one suffered as a result. Like most other businesses, we tightened our corporate belt and cut costs whenever possible. Yet we were also determined to exit the decade as a stronger, better company – one focused on success, even in the face of daunting external challenges.

By year’s end, we had invested approximately $100 million via the capital expenditure budget of Central Hudson Gas & Electric to ensure that the Mid-Hudson Valley’s electric and natural gas system remained safe and reliable. We also strategically streamlined our unregulated business investments, and then re-invested more than $55 million in new renewable energy projects. The stories featured on the following pages illustrate just a few examples of the “CH Energized” ways we enhanced the long-term worth of your investment in our Company in 2009.

4

From left to right: Working Foreman Greg Goodwin, Service Worker James Clark Laird, Operating Supervisor Kevin Sheehan, Working Foreman Duane Stoddard

CH Energyized!

5

Meter Milestone. Central Hudson installed its 100,000th Encoder-Receiver Transmitter (ERT) device during 2009, improving the accuracy and timeliness associated with reading electric and natural gas meters throughout its eight-county service territory. Using handheld devices that are accurate as far as 800 feet away, employees can obtain accurate readings without ever having to gain access to the customers’ premises. Due to this and other productivity and routing initiatives, we’ve increased the average number of meters read per day per meter reader in the last decade from 196 in 1998 to 338 in 2009 – a nearly 75 percent improvement.

Innovation At Work. New Business Counselor William Brandt became the recipient of Central Hudson’s inaugural Innovation Award in 2009 in recognition of his development of a device that allows approved customers to self-activate electric service, eliminating the century-long need for an employee to return to “unlock” a residential or small commercial account meter in specific cases. Working on his own time in his own garage, Brandt invented what he called the C.A.S.H. (Customer Actuated Service Head) Device. It has eliminated travel, reduced expense and increased customer satisfaction – and demonstrated the 24/7 commitment our employees make to continuous improvement.

Real-Time Readiness. Though electronic monitoring equipment began being installed on Central Hudson’s natural gas system more than a decade ago, we moved ahead during the last year to centralize the collected data – making it easier for employees to access, analyze and archive data critical to the safe operation of the natural gas system. Previously, operators relied on paper charts, which were updated via required monthly visits to remote locations. Now, our new electronic pressure monitoring and recording system allows instantaneous access that better tracks system performance – and, importantly, the ability to address problems before they can potentially cause an interruption in service to customers.

5

Commercial Representative Meter Reader Jalal McMahon

New Business Counselor William Brandt

Assistant EngineerJames Keating

6

Trench Welfare. We’ve begun to use recycled materials, including crushed bottles that cannot be recycled due to their color, to refill trenches following excavation work around our natural gas pipeline system. Regulations prevent crews from returning original material to the trench, and the common practice of using sand or crushed stone requires those materials to be mined and then transported to the site. Using recycled materials is, on average, 26 percent cheaper than that traditional fill. It also reduces the amount of material sent to local landfills, puts waste material to good use and decreases transportation expense.

Mobility Matters. Already used to dispatch Central Hudson’s line crews, the Mobility computer system now also schedules the commercial representatives who estimate and complete a variety of other fieldwork tasks. Using GPS technology to efficiently structure route assignments in real time, Mobility improves productivity to save both time and expense. It models optimized assignments based on variables that include task duration, service priority and geography. The system also provides dispatchers the ability to monitor crew status and to reallocate resources among operating headquarters to address peak workloads.

Networking for a Solution. Wanted: A method to obtain a real-time stream of data to monitor the operation of our underground electric distribution system. Developed: a continuous-feed electronic monitoring system that allows us to proactively identify and correct problems in order to prevent potential service interruptions. Now installed in all three of our underground networks, the system is also providing historic information for trend analysis, a vast improvement over the “snapshot” of data once obtained by crews that descended into sidewalk vaults to obtain readings during routine maintenance.

6

Operating SupervisorDavid Schultz

Commercial RepresentativeMichael Moshier

Splicers Kevin Domer (standing) and Robert Pineiro

7

The Right Track. Off-road locations and environmentally sensitive areas present special challenges to Capital crews and other work groups when completing large-scale construction and maintenance projects. To reduce the impact of wheeled vehicles on these locations, Central Hudson has increased its use of track equipment in such remote areas. By doing so, productivity and safety have also been enhanced by reducing the amount of manual pole climbing. Track vehicles also improve the efficiency and minimize the impact of delivering materials to difficult-to-access construction sites.

Moving Parts. Effectively managing the inventory of a massive delivery network composed of millions of parts (everything from poles to transformers, from fuses to wire) requires the state-of-the-art pilot we launched in 2009 via a new bar coding system at our central storage facility. The scanning method allows inventory managers to quickly identify supply levels, track individual pieces of equipment and provide data to employees in remote locations. This best-in-class inventory management approach also ensures that only exact levels of materials are maintained, allowing capital to be freed up for other purposes.

Online Outage Info. Our new StormCentral website feature allows customers to obtain information regarding the location and estimated length of power interruptions with the click of a mouse. Accessible from laptops and alternate locations, the new computer feature provides critical information to customers, with the added benefit of reducing calls to our Call Center during emergencies. It’s an especially helpful tool for municipal officials who are often working alongside our crews clearing roadways and helping to restore other critical services during natural disasters.

7

Supervisor of Stores,John Lewis

8

More is Less. Central Hudson installed a second rack of IBM Blade Center servers in 2009, increasing our computer power while reducing our datacenter footprint for computer servers by 40 percent, as well as our energy use for both power and cooling requirements. In addition, approximately 30 percent of the utility’s servers are now “virtualized,” meaning they run multiple independent virtual operating systems on a single computer in order to optimize hardware investment. This reduces space requirements and provides centralized management synergies.

We’ve Got Mail. Central Hudson processes more than 2.15 million paper bills every year, an expensive proposition given their printing, postage and processing cost. That’s why we’ve increased efforts to enroll customers in electronic payment methods, recognizing that it costs 60 percent less to issue and process bills on line versus through the U.S. mail. About 24,000 customers now use this online option, an increase of 27 percent during 2009. Regardless of delivery method, we continually seek innovative ways to cut billing costs: paper and electronic bill expenses were reduced by 17 and 34 percent, respectively, last year.

8

Senior Systems AnalystJeffrey Johnson

Accounting ClerkLorraine Myers

9

Paper Over. Imagine a century’s worth of cumbersome paper maps of our natural gas pipeline system – all of them continuously updated, constantly referenced and critically important. Now, imagine the ability to search that database instantaneously, and to provide that access to every team member regardless of location in our headquarters, their division office or even a field location. That’s now the reality of our new GIS (Geographic Information System) computerized mapping project, which allows us to search by attributes such as location, size, and even by pipe lot. The system improves both map accessibility and accuracy, as changes are continuously uploaded to keep the database completely current.

Tracking Satisfaction. Our customer contact center handled 632,683 calls in 2009, 24 percent more than five years ago. As customers struggled with the economy, our Customer Service Representatives worked harder than ever to extend courteous assistance. We launched a new two-minute automated telephone satisfaction survey as an R&D project in 2009; we use feedback on items such as courtesy, wait time and one-call resolution to further improve our performance. We hope to phase out our traditional paper survey in the future as part of our commitment to reducing printing/postage expenses and our impact on the environment.

Rates of Change. Despite cost control and productivity improvement, Central Hudson recognized that additional financial resources were needed to cover expenses, meet regulatory requirements and make required infrastructure investments. The utility’s Cost & Rate department filed a comprehensive request with the Public Service Commission in July 2009 to modestly increase delivery rates, in a case that we anticipate will provide added revenue for the next three years. Beginning in the second half of 2009, the utility also operated under a Revenue Decoupling Mechanism that helped to better collect the cost of providing service to customers and reduce the volatility of impacts such as weather and conservation.

9

Contractor Kevin Burton with Drafting Supervisor Frank Bailey

Customer Service Representative Nicole Herring

Members of Regulatory Affairs & Financial Planning: Maida Lewis, Stanley Kardas, Michael Mosher, David Brideau, Glynis Bunt and Gina Smith

10

Bettering Biomass. During 2009, Central Hudson Enterprise Corporation (CHEC)’s biomass plant in Lyonsdale, N.Y., which burns wood to create electricity, achieved a 90-percent capacity factor for three consecutive months of operation. Part of the credit for the improved on-line performance belongs to the new foundation poured during the year for the plant’s massive Induced Draft (ID) fan, as well as installation of a new fan impeller. A reduction of $2 per ton in fuel costs also added to the profitability of this renewable energy plant during the year.

Landfill Gas = Electricity. Subsidiary CH-Auburn Energy LLC has invested $6.7 million to build and operate a plant that burns methane gas from the City of Auburn’s landfill to create electricity, which is in turn sold back to the municipality to operate its Waste Water Treatment plant and for other uses. The three-megawatt plant creates enough electricity to supply the equivalent of 1,600 homes. We have a 15-year contract to operate the renewable energy facility, which is located in New York’s upstate Cayuga County.

Investment Gateway. Subsidiary CH-Greentree, LLC, completed construction and began the lease of specialized equipment to a landfill gas facility in Kersey, Pa. during 2009. The $5.5 million investment in a “molecular gate” will allow for increased production of refined gas from the landfill into the local natural gas pipeline network. Our investment includes a seven-year lease on the equipment to Beacon Landfill Gas Holdings, LLC, and represents another example of our focus on renewable energy business opportunities.

10

11

Wisconsin Winds. In one of our largest commitments to unregulated business opportunities, CHEC subsidiary CH Shirley Wind LLC invested $50 million to acquire a 90-percent interest in a 20-megawatt Wisconsin windmill project in December 2009. The output of eight turbines — like this one manufactured by Nordex USA — will be sold through a contract to Wisconsin Public Service Corporation. The project is expected to generate nearly 64 million kilowatt hours of electricity per year, enough power to supply approximately 8,000 homes, and to be operational by the fourth quarter of 2010.

Griffith Gain. Subsidiary Griffith Energy Services sold select operating divisions serving markets in Rhode Island, Connecticut and Pennsylvania as part of a strategic streamlining that reduced cash flow volatility and allowed the fuel oil delivery firm to focus on its Mid-Atlantic operations. Canadian-based Superior Plus acquired approximately 47,000 customers in the deal for a purchase price of $76 million. The sale resulted in a gain of approximately $5.5 million for CH Energy Group, or about 35 cents per share.

Ethanol Efficiency. The Cornhusker ethanol plant in Lexington, Neb., in which we have an $11 million investment, is expanding production capacity from 42 million to 57 million gallons per year. During 2009, a new gas boiler and two molecular sieves were also installed to increase production efficiency — an increasingly important dynamic, given that crush margins (i.e. the difference between the value of the ethanol and the cost of a bushel of corn) were at their best levels in nearly two years during the closing months of 2009.

11

New Photo to Come

12

2009 2008

High Low Dividend High Low Dividend

1st Quarter $45.38 $34.53 $0.54

2nd Quarter $40.73 $34.25 $0.54

3rd Quarter $48.92 $34.00 $0.54

4th Quarter $52.36 $33.39 $0.54

Corporate Information

Analysts & Institutional Investors:Stacey A. Renner, Treasurer Phone: (845) 486-5730E-mail: SRenner@cenhud.com

Independent Accountants:PricewaterhouseCoopers LLP3600 HSBC CenterBuffalo, NY 14203

General Counsel:Thompson Hine LLP335 Madison Avenue, 12th FloorNew York, NY 10017

Internet:This Annual Report, our SEC filings and other information about our Company are all available on our website, www.CHEnergyGroup.com.

Affirmative Action Policy: It is the policy of CH Energy Group, Inc. to provide equal employment opportunities for all persons. CH Energy Group, Inc. is committed to recruit, hire, train, and promote persons in all positions without regard to race, color, creed, religion, veteran status, sexual orientation, age, national origin, disability, or sex. The Corporation will ensure that promotional decisions are in accord with principles of equal opportunity by imposing only valid requirements for promotional opportunities. All personnel actions, including compensation, benefits, transfers, layoffs, return from lay-offs, employer-sponsored training, education, tuition assis-tance, and social and recreation programs will be admin-istered without regard to race, sex, color, creed, religion, age, genetic information, national origin, or disability.

Common Stock Listing:New York Stock Exchange Symbol: CHG

Transfer Agent & Registrar:Computershare Trust Company, N.A.P.O. Box 43078, Providence, RI 02940-3078Telephone: 1 (800) 428-9578 Monday - Friday, 9:00 a.m. to 5:00 p.m. ET or www.computershare.com/investorFor investors interested in direct stock purchases or automatic dividend reinvestment, please contact Computershare Trust Company at 1 (800) 428-9578.

Multiple Copies of this Report:Shareholders receiving multiple copies of this report who would like to reduce that number may contact Computershare Trust Company at 1 (800) 428-9578.

Annual Meeting:The Annual meeting of Common Stockholders is expected to be held on Tuesday, April 28, 2009, at 10:30 a.m. at the Corporation’s General Offices, 284 South Avenue in Poughkeepsie, New York. The management welcomes the attendance of shareholders.

Financial & Statistical Report:A Financial & Statistical supplement to the Annual Report will be available April 28, 2009 to shareholders attending the Annual Meeting and via our web site: www.CHEnergyGroup.com.

Shareholder RelationsTo request copies of investor materials or for other share-holder matters, please contact CH Energy Group’s Share-holder Relations team at (845) 486-5204.

Common Stock Market Price and Dividends Paid / Share

Steven V. Lant Poughkeepsie, NYChairman of the Board, President and C.E.O.; Joined Board in 2002.

Margarita K. Dilley Washington, DCFormer Vice President & C.F.O., Astrolink International LLC; Chair of the Audit Committee and member of the Compensation Committee; Joined Board in 2004.

Steven M. Fetter Henderson, NVPresident, Regulation UnFettered; Former Chairman, Michigan Public Service Commission; Lead Independent Director; Chair of the Governance & Nominating Committee and member of the Audit Committee; Joined Board in 2002.

Stanley J. Grubel Irvington, NY Former C.E.O., MiCRUS; Chair of the Compensation Committee and member of the Governance and Nominating Committee; Joined Board in 1999.

Manuel J. Iraola Coral Gables, FLChairman, President and C.E.O., The Aloaris Group; Former President, Phelps Dodge Industries; Member of the Strategy & Finance Committee and the Compensation Committee; Joined Board in 2006.

Standing: Steven M. Fetter, Stanley J. Grubel, Ernest R. Verebelyi, Edward T. Tokar, Manuel J. Iraola, Jeffrey D. Tranen, Seated: Margarita K. Dilley, Steven V. Lant and E. Michel Kruse.

E. Michel Kruse Amelia Island, FL Former Vice Chairman & C.F.O., The Chase Manhattan Corp.; Chair of the Strategy & Finance Committee and member of the Audit Committee; Joined Board in 2002.

Edward T. Tokar Summit, NJ Director, The Gabelli Dividend and Income Trust, The Gabelli Global Deal Fund, Teton Advisors, Inc.; Senior Managing Director of Investments, Beacon Trust Company; Former Vice President-Investments Honeywell International, Inc.; Member of the Audit Committee and the Strategy & Finance Committee; Joined Board in 2009.

Jeffrey D. Tranen New York City, NYSenior Vice President, Compass Lexecon; Former President of New England Power Company and former President and C.E.O. of California I.S.O; Member of the Audit Committee and the Strategy & Finance Committee; Joined Board in 2004.

Ernest R. Verebelyi Ponte Vedra Beach, FLNon-Executive Chairman, Columbus McKinnon Corp.; Former President Americas, Terex Corp.; Member of the Governance & Nominating Committee and the Compensation Committee; Joined Board in 2006.

Board of Directors

Printed on Recycled Paper©

FSC

Forest Stewardship CouncilUnited States

www.CHEnergyGroup.com