Forward-looking statements Statements contained in this report that are not historical fact are forward-looking statements within the meaning of the 'safe-harbor' provisions of the Private Securities Litigation Reform Act of 1995. Whenever used in this report, the words "estimate," "expect," "believe," or similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve estimates, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Actual results will depend upon, among other things:

§ the actions of regulatory bodies with respect to allowed rates of return, continued recovery of regulatory assets and application of alternative regulation; § liquidity risks;
§ performance and continued operation of the Vermont Yankee nuclear power plant;
§ changes in the cost or availability of capital; § our ability to replace or renegotiate our long-term power supply contracts;
§ effects of and changes in local, national and worldwide economic conditions;
§ effects of and changes in weather; § volatility in wholesale power markets; § our ability to maintain or improve our current credit ratings;
§ the operations of ISO-New England; § changes in financial or regulatory accounting principles or policies imposed by governing bodies; § capital market conditions, including price risk due to marketable securities held as investments in trust for nuclear decommissioning, pension and postretirement medical plans;
§ changes in the levels and timing of capital expenditures, including our discretionary future investments in Transco;
§ our ability to replace a mature workforce and retain qualified, skilled and experienced personnel; and § other presently unknown or unforeseen factors.

We cannot predict the outcome of any of these matters; accordingly, there can be no assurance as to actual results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

EXECUTIVE SUMMARY
Our core business is the Vermont electric utility business. The rates we charge for retail electricity sales are regulated by the Vermont Public Service Board ("PSB"). Fair regulatory treatment is fundamental to maintaining our financial stability. Rates must be set at levels to recover costs, including a market rate of return to equity and debt holders, in order to attract capital. As discussed under the heading Retail Rates and Alternative Regulation below, the PSB approved the plan that we proposed in August 2007, with modifications. The implementation of this plan will provide more timely adjustments to power, operating and maintenance costs, which will better serve the interests of customers and shareholders.

Our consolidated earnings for the first quarter of 2009 were $6.9 million or 58 cents per diluted share of common stock, and $5.9 million, or 56 cents per diluted share of common stock for the same period in 2008. The primary drivers of the first quarter year-over-year earnings variance are described in Results of Operations below.

We continue to focus on key strategic financial initiatives including: restoring our corporate credit rating to investment-grade; ensuring that our retail rates are set at levels to recover our costs of service; evaluating financing options to support current and future working capital needs; planning for replacement power when long-term power contracts begin to expire in 2012; and implementing our asset management plan to ensure we continue to provide safe, reliable service to our customers at the lowest possible cost.

RETAIL RATES AND ALTERNATIVE REGULATION
Retail Rates Our retail rates are approved by the PSB after considering the recommendations of Vermont's consumer advocate, the Vermont Department of Public Service ("DPS"). Fair regulatory treatment is fundamental to maintaining our financial stability. Rates must be set at levels to recover costs, including a market rate of return to equity and debt holders, in order to attract capital. The return on common equity of our regulated business did not exceed the allowed return for 2008.

On September 30, 2008, the PSB issued an order approving, with modifications, the alternative regulation plan proposal that we submitted in August 2007. The plan became effective on November 1, 2008. It expires on December 31, 2011, but we have an option to petition for an extension beyond 2011. The plan replaces the traditional ratemaking process and allows for quarterly rate adjustments to reflect changes in power supply and transmission-by-others costs ("PCAM adjustment"); annual base rate adjustments to reflect changing costs; and annual rate adjustments to reflect changes, within predetermined limits, from the allowed earnings level. Under the plan, the allowed return on equity will be adjusted annually to reflect one-half of the change in the yield on the 10-year Treasury note as measured over the last 20 trading days prior to October 15 of each year. The earnings sharing adjustment mechanism ("ESAM") within the plan provides for the return on equity of the regulated portion of our business to fall between 75 basis points above or below the allowed return on equity before any adjustment is made. If the actual return on equity of the regulated portion of our business exceeds 75 basis points above the allowed return, the excess amount is returned to ratepayers in a future period. If the actual return on equity of our regulated business falls between 75 and 100 basis points below the allowed return on equity, the shortfall is shared equally between shareholders and ratepayers. Any earnings shortfall in excess of 100 basis points below the allowed return on equity is recovered from ratepayers. These adjustments are made at the end of each fiscal year.

The PCAM adjustment and the ESAM are not subject to PSB suspension, but the PSB may open an investigation and to the extent it finds, after notice and hearing, that the calculation was inaccurate or reflects costs inappropriate for inclusion in rates, it may require a modification of the of the associated adjustments to the extent necessary to correct the deficiencies.

On October 31, 2008, we submitted a base rate filing for the rate year commencing January 1, 2009 that reflected a 0.33 percent increase in retail rates. The result of the return on equity adjustment for 2009, in accordance with the plan, was a reduction of 0.44 percent, resulting in an allowed return on equity for 2009 of 9.77 percent. On November 17, 2008, the DPS filed a request for suspension and investigation of our filing. Citing concerns about staffing levels and inadequate supporting documentation for some proposed plant additions, the DPS recommended a 0.43 percent rate decrease.

On December 17, 2008, we filed a Memorandum of Understanding with the PSB setting forth agreements that we reached with the DPS regarding the PSB's investigation into our 2009 retail rates. Pursuant to the Memorandum of Understanding, we agreed to leave rates unchanged, with no increase or decrease, and that we and the DPS would request the PSB to open a docket to resolve the DPS's concerns regarding our level of staffing. On February 13, 2009, the PSB approved the Memorandum of Understanding, and ordered the rate investigation closed.

On February 2, 2009, we filed a motion with the PSB requesting to defer the incremental 2008 storm costs through our alternative regulation plan and collect through the ESAM over 12 months beginning on July 1, 2009. On February 3, 2009, the DPS filed a letter supporting our motion and on February 12, 2009, the PSB approved the request. The amount of the deferral, based on actual costs, was $3.2 million.

The first quarter 2009 PCAM adjustment was calculated to be an over collection of $0.6 million and was recorded as a regulatory liability. The over collection will be returned to customers over three months beginning July 1, 2009.

On February 13, 2009, the PSB opened an investigation into the staffing levels of the company as requested by us and the DPS. On March 25, 2009, the PSB convened a prehearing conference where we and the DPS agreed to a procedural schedule, and technical hearings are scheduled for June 2009. We and the DPS further agreed that the scope of the technical hearings could be narrowed to devising a methodology for deriving productivity measures that would be tracked over time. The parties do not agree, however, as to what the substantive elements of that tracking methodology should be. Accordingly, the PSB ordered that the purpose of hearings in this proceeding will be to resolve this disagreement about the makeup of the productivity tracking methodology.

LIQUIDITY AND CAPITAL RESOURCES
Cash Flows At March 31, 2009, we had cash and cash equivalents of $13.5 million compared to $6.4 million at March 31, 2008. The primary components of cash flows from operating, investing and financing activities for both periods are discussed in more detail below.

Operating Activities: Operating activities provided $15.1 million in the first quarter of 2009. Net income, when adjusted for depreciation, amortization, deferred income tax and other non-cash income and expense items, provided $12.3 million. This included $2.5 million of distributions received from affiliates, most materially from our investments in Transco. In addition, changes in working capital and other items provided $2.8 million, including a $6.5 million income tax refund.

During the first quarter of 2008, operating activities provided $11.2 million. Net income, when adjusted for depreciation, amortization, deferred income tax and other non-cash income and expense items, provided $9.7 million. This included $1.3 million of distributions received from affiliates, most materially from our investments in Transco. In addition, changes in working capital and other items provided $1.5 million.

Investing Activities: Investing activities used $5.9 million in the first quarter of 2009, including $5.8 million of construction and plant expenditures, and $0.1 million for other investing activities. During 2008, investing activities used $7.3 million in the first quarter of 2008 for construction and plant expenditures.

Financing Activities: In the first quarter of 2009, financing activities used $2.4 million, including $2.8 million for dividends paid on common and preferred stock, $1 million for preferred stock sinking fund payments, and $0.3 million for capital lease payments and other financing activities. These items were partially offset by $0.7 million from exercised stock options and the dividend reinvestment program and a $1 million reduction in special deposits for preferred stock sinking fund payments.

During the first quarter of 2008, financing activities used $1.3 million, including $2.4 million for dividends paid on common and preferred stock, $1 million for preferred stock sinking fund payments, and $0.2 million for capital lease payments. These items were partially offset by $1.2 million from exercised stock options and the dividend reinvestment program, a $1 million reduction in special deposits for preferred stock sinking fund payments, and $0.1 million for other financing activities.

Financing Credit Facility: We have a three-year, $40 million unsecured revolving credit facility with a lending institution pursuant to a credit agreement dated November 3, 2008. Our obligation under the credit agreement is guaranteed by our wholly owned, unregulated subsidiaries, C.V. Realty and CRC. The purpose of the facility is to provide liquidity for general corporate purposes, including working capital needs and power contract performance assurance requirements, in the form of funds borrowed and letters of credit. At March 31, 2009, there was less than $0.1 million in borrowings and no letters of credit outstanding under the credit facility.

Refinancing Plans: We are currently reviewing options to support working capital needs resulting from investments in our distribution and transmission system.

Covenants: At March 31, 2009, we were in compliance with all financial covenants related to our various debt agreements, articles of association, letters of credit and credit facility. A significant reduction in future earnings or a significant reduction to common equity could restrict the payment of common and preferred dividends or could cause us to violate our maintenance covenants. If we were to default on our covenants, the lenders could take such actions as terminate their obligations, declare all amounts outstanding or due immediately payable, or take possession of or foreclose on mortgaged property.

Investment opportunities in Transco Based on current projections, Transco expects to receive additional capital in 2009, 2010 and 2011, but its projections are subject to change based on a number of factors, including revised construction estimates, timing of project approvals from regulators, and desired changes in its equity-to-debt ratio. While we have no obligation to make additional investments in Transco, we continue to evaluate investment opportunities on a case-by-case basis. Based on Transco's current projections, we could have an opportunity to make additional investments of up to $21 million in 2009, $24 million in 2010 and $16 million in 2011, but the timing and amount depend on the factors discussed above and the amounts invested by other owners.

We are currently evaluating options to fund these investments, but any investments that we make in Transco are voluntary, and subject to available capital and appropriate regulatory approvals.

Capital spending We expect to invest approximately $30 million to $35 million in 2009 primarily in our transmission and distribution infrastructure to ensure continued system reliability. This compares to capital expenditures of $36.8 million in 2008. These estimates are subject to continuing review and adjustment, and actual capital expenditures and timing may vary. As of March 31, 2009 capital expenditures were $5.8 million.

Performance Assurance We are subject to performance assurance requirements through ISO-New England under the Financial Assurance Policy of the FERC-approved tariff for NEPOOL members. We are required to post collateral for all net purchased power transactions since our credit limit with ISO-New England is zero. Additionally, we are currently selling power in the wholesale market pursuant to contracts with third parties, and are required to post collateral under certain conditions defined in the contracts.

At March 31, 2009, we had posted $8.1 million of collateral under performance assurance requirements for ISO-New England and certain third party power contracts, of which $2.5 million was in cash and $5.6 million was represented by restricted cash. At December 31, 2008, we had posted $6.9 million of collateral under performance assurance requirements for certain power contracts, of which $3.3 million was in cash and $3.6 million was represented by restricted cash.

We are also subject to performance assurance requirements under our Vermont Yankee power purchase contract (the 2001 Amendatory Agreement). If Entergy-Vermont Yankee, the seller, has commercially reasonable grounds to question our ability to pay for our monthly power purchases, Entergy-Vermont Yankee may ask VYNPC and VYNPC may then ask us to provide adequate financial assurance of payment. We have not had to post collateral under this contract.

Cash flow risks Based on our current cash forecasts, we will require outside capital in addition to cash flow from operations and our $40 million unsecured revolving credit facility in order to fund our business over the next few years. Continued upheaval in the capital markets could negatively impact our ability to obtain outside capital on reasonable terms. If we were ever unable to obtain needed capital, we would re-evaluate and prioritize our planned capital expenditures and operating activities. In addition, an extended unplanned Vermont Yankee plant outage or similar event could significantly impact our liquidity due to the potentially high cost of replacement power and performance assurance requirements arising from purchases through ISO-New England or third parties. In the event of an extended Vermont Yankee plant outage, we could seek emergency rate relief from our regulators in addition to applying the proceeds of the Vermont Yankee forced outage insurance policy. Other material risks to cash flow from operations include: loss of retail sales revenue from unusual weather; slower-than-anticipated load growth and unfavorable economic conditions; increases in net power costs largely due to lower-than-anticipated margins on sales revenue from excess power or an unexpected power source interruption; required prepayments for power purchases; and increases in performance assurance requirements. See Retail Rates and Alternative Regulation above for additional information related to mechanisms designed to mitigate utility-related risks.

Off-balance-sheet arrangements We do not use off-balance-sheet financing arrangements, such as securitization of receivables, nor obtain access to assets through special purpose entities.

Prior to October 24, 2008, we leased our vehicles and related equipment under a single operating lease agreement. The individual leases under this agreement were mutually cancelable one year from lease inception. On November 14, 2008, we received notification from the lessor that this operating lease agreement was being terminated. Under the terms of the lease, we will be required to terminate all agreements under this lease by November 14, 2009 and pay the unamortized value of the equipment upon termination either by purchasing the equipment or through the sale of the equipment to a third party. At March 31, 2009, the unamortized value upon termination is $7.7 million.

On October 24, 2008, we entered into a second operating lease for vehicles and other related equipment with a different lessor. The lease schedules under this agreement are non-cancellable. At the end of the lease term, the lessor is entitled to recover a termination rental adjustment equal to 20 percent of the acquisition cost of the equipment. This payment can be recovered from us or through disposition of the equipment. In the case of disposition for less than 20 percent of the acquisition cost, our guarantee obligation is limited to 5 percent of the acquisition cost. If the entire lease portfolio had a fair value of zero at March 31, 2009, we would have been responsible for a maximum reimbursement of $2.2 million.

Global Economic Crisis Due to the global economic crisis, there has been a significant decline in lending activity. We expect to have access to liquidity in the capital markets when needed at reasonable rates. We also have access to a $40 million unsecured revolving credit facility. However, sustained turbulence in the global credit markets could limit or delay our access to capital. As part of our enterprise risk management, we are constantly monitoring our risks by reviewing our investments in various firms and financial institutions.

ACCOUNTING MATTERS
Critical accounting policies and estimates Our financial statements are prepared in accordance with U.S. GAAP, requiring us to make estimates and judgments that affect reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements. Our critical accounting policies and estimates are described in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2008 Annual Report on Form 10-K.

Recent Accounting Pronouncements FASB Codification: In March 2009, the FASB issued an exposure draft, The Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB No. 162. The proposed standard, FASB Accounting Standards CodificationTM ("Codification") does not change U. S. GAAP, but combines all authoritative standards such as those issued by the FASB, AICPA, and EITF, into a comprehensive, topically organized online database. The Codification is expected to become the single source of authoritative U. S. GAAP applicable for all nongovernmental entities, except for rules and interpretive releases of the SEC. The final standard is expected to be effective on July 1, 2009.

See Note 1 - Business Organization and Summary of Significant Accounting Policies for a discussion of newly adopted accounting policies and recently issued accounting pronouncements.

RESULTS OF OPERATIONS
The following is a detailed discussion of the results of operations for the first quarter of 2009 compared to the same period in 2008. It should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes included in this report.

Overview Our first quarter 2009 earnings increased by $1 million, or 2 cents per diluted share of common stock, compared to the same period in 2008. The table below provides a reconciliation of the primary year-over-year variances in diluted earnings per share. The earnings per diluted share for each variance shown below are non-GAAP measures:

2008 Earnings per diluted share                                      $  0.56
   Lower purchased power expense                                        0.07
   Lower other operating expenses                                       0.04
   Higher equity in earnings of affiliates                              0.02
   Common stock issuance (Nov. 2008) - 1,190,000 additional shares     (0.07 )
   Lower operating revenues                                            (0.03 )
   Higher transmission expense                                         (0.02 )
   Higher interest expense                                             (0.01 )
   Other                                                                0.02
2009 Earnings per diluted share                                      $  0.58

Note: The additional shares from the Nov. 2008 stock issuance were excluded from the 11,655,175 average shares of common stock - diluted for purposes of computing the individual EPS variances shown above in order to provide comparable information for 2009 vs. 2008.

Operating Revenues Operating revenues and related mWh sales for the three months ended March 31 are summarized below.

                                           Revenue                   mWh Sales
                                      2009         2008         2009          2008
        Residential                 $ 38,966     $ 38,512       284,094       280,995
        Commercial                    25,837       26,799       209,033       219,751
        Industrial                     8,810        9,630        96,280       104,925
        Other                            470          465         1,586         1,570
          Total retail sales          74,083       75,406       590,993       607,241
        Resale sales                  13,933       13,502       203,848       205,137
        Provision for rate refund          0          (62 )           0             0
        Other operating revenues       2,711        2,378             0             0
        Total operating revenues    $ 90,727     $ 91,224       794,841       812,378

Operating revenues decreased $0.5 million in the first quarter of 2009 as compared to 2008 due to the following:
§ Retail sales decreased $1.3 million comprised of a $1.7 million decrease due to lower sales volume, partly offset by a $0.4 million increase due to higher average retail rates. Sales volume decreased due to lower average usage by commercial and industrial customers resulting from economic conditions. § Resale sales increased $0.4 million resulting from higher average prices from new contracts. § The provision for rate refund was a reduction in operating revenues related to amounts that were included in retail rates in 2007 and January 2008 that were to be refunded to customers. It ended with retail rates effective February 1, 2008 because the customer refund was included in the new rates.
§ Other operating revenues increased $0.3 million from sales of additional transmission capacity from our share of Phase I/II transmission facility rights and an increase in wholesale rates. We began selling transmission capacity in April 2007, and we have the ability to restrict the amount of capacity assigned to the purchasers based on certain conditions. Revenue from these sales is estimated to be approximately $1.8 million annually in 2009 and 2010.

Operating Expenses Operating expenses decreased $0.7 million in the first quarter of 2009 as compared to 2008. Significant variances in operating expenses on the Condensed Consolidated Statements of Income are described below.

Purchased Power: Purchased power expense and volume for the three months ended March 31 are summarized below.

                                              Purchases (in thousands)              mWh Purchases
                                               2009               2008           2009          2008
VYNPC                                      $     15,733       $     15,900       386,711       393,572
Hydro-Quebec                                     17,059             16,421       268,162       251,089
Independent Power Producers ("IPPs")              5,909              7,904        47,952        56,306
 Subtotal long-term contracts                    38,701             40,225       702,825       700,967
Other purchases                                   2,380              1,744        13,403        16,526
SFAS No. 5 loss amortizations                      (299 )             (299 )           -             -
Maine Yankee, Connecticut Yankee and
Yankee Atomic                                       329                568             -             -
Amortizations and deferrals                         499                668             -             -
Total purchased power                            41,610             42,906       716,228       717,493

Purchased power decreased $1.3 million in the first quarter of 2009 compared to the same period in 2008 as a result of the following:
§ Purchases under long-term contracts decreased $1.5 million largely due to the Nov. 2008 termination of one IPP participant, resulting in fewer required IPP purchases at lower prices and lower output from VYNPC. This decrease was partially offset by increased deliveries from Hydro-Quebec, higher energy prices under the Hydro-Quebec and VYNPC contracts and a . . .