FIFTY-SIXTH SUPPLEMENTAL INDENTURE TO INDENTURE DATED SEPTEMBER 1, 1939 PSI ENERGY, INC.

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FIFTY-SIXTH SUPPLEMENTAL INDENTURE dated as of the first day of December, 2004, made and entered into by and between PSI ENERGY, INC. (hereinafter commonly referred to as the “Company”), a corporation organized and existing under the laws of the State of Indiana, formerly named Public Service Company of Indiana, Inc., and the successor by consolidation to Public Service Company of Indiana, an Indiana corporation, party of the first part, and LASALLE BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States and having its office or place of business in the City of Chicago, State of Illinois, formerly named LaSalle National Bank, and the successor trustee to The First National Bank of Chicago (hereinafter commonly referred to as the “Trustee”), party of the second part,

WITNESSETH:

WHEREAS, Public Service Company of Indiana (hereinafter commonly referred to as the “Initial Mortgagor”), prior to its consolidation with certain other corporations to form the Company, executed and delivered to the Trustee a certain indenture of mortgage or deed of trust (hereinafter called the “original Indenture” when referred to as existing prior to any amendment thereto, and the “Indenture” when referred to as heretofore, now or hereafter amended), dated September 1, 1939, and a First Supplemental Indenture thereto, dated as of March 1, 1941, to secure the bonds of the Initial Mortgagor, its successors and assigns, issued from time to time under the Indenture in series for the purposes of and subject to the limitations specified in the Indenture; and

WHEREAS, the Company on September 6, 1941, became, through a consolidation, the successor of the Initial Mortgagor (and four other companies) and succeeded to all the rights and became liable for all the obligations of the Initial Mortgagor (and such other companies); and

WHEREAS, after said consolidation, the Company executed and delivered a Second Supplemental Indenture, dated as of November 1, 1941, to the original Indenture for the purposes, among others, of (i) the making by the Company of an agreement of assumption and adoption by it of the Indenture, (ii) the assumption by the Company of the bonds (and interest and premium, if any, thereon) issued or to be issued under the Indenture, and of all terms, covenants and conditions binding upon it under the Indenture, and the agreeing by the Company to pay, perform and fulfill the same, and (iii) the conveying to the Trustee upon the trusts declared in the Indenture, but subject to any outstanding liens and encumbrances, all the property which the Company then owned or which it might thereafter acquire, except property of a character similar to the property of the Initial Mortgagor which is excluded from the lien of the Indenture; and

WHEREAS, all conditions have been met and all acts and things necessary have been done and performed to make the Indenture the valid and binding agreement of the Company and to substitute the Company for the Initial Mortgagor under the Indenture, and to vest the Company with each and every right and power of the Initial Mortgagor, including the right and power to issue bonds thereunder; and

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WHEREAS, the Company has subsequently executed and delivered, for purposes authorized under the Indenture, a Third Supplemental Indenture dated as of March 1, 1942, a Fourth Supplemental Indenture dated as of May 1, 1943, a Fifth Supplemental Indenture dated as of August 1, 1944, a Sixth Supplemental Indenture dated as of September 1, 1945, a Seventh Supplemental Indenture dated as of November 1, 1947, an Eighth Supplemental Indenture dated as of January 1, 1949, a Ninth Supplemental Indenture dated as of May 1, 1950, a Tenth Supplemental Indenture dated as of July 1, 1952, an Eleventh Supplemental Indenture dated as of January 1, 1954, a Twelfth Supplemental Indenture dated as of October 1, 1957, a Thirteenth Supplemental Indenture dated as of February 1, 1959, a Fourteenth Supplemental Indenture dated as of July 15, 1960, a Fifteenth Supplemental Indenture dated as of June 15, 1964, a Sixteenth Supplemental Indenture dated as of January 1, 1969, a Seventeenth Supplemental Indenture dated as of March 1, 1970, an Eighteenth Supplemental Indenture dated as of January 1, 1971, a Nineteenth Supplemental Indenture dated as of January 1, 1972, a Twentieth Supplemental Indenture dated as of February 1, 1974, a Twenty-First Supplemental Indenture dated as of August 1, 1974, a Twenty-Second Supplemental Indenture dated as of August 1, 1975, a Twenty-Third Supplemental Indenture dated as of January 1, 1977, a Twenty-Fourth Supplemental Indenture dated as of October 1, 1977, a Twenty-Fifth Supplemental Indenture dated as of September 1, 1978, a Twenty-Sixth Supplemental Indenture dated as of September 1, 1978, a Twenty-Seventh Supplemental Indenture dated as of March 1, 1979, a Twenty-Eighth Supplemental Indenture dated as of May 1, 1979, a Twenty-Ninth Supplemental Indenture dated as of March 1, 1980, a Thirtieth Supplemental Indenture dated as of August 1, 1980, a Thirty-First Supplemental Indenture dated as of February 1, 1981, a Thirty-Second Supplemental Indenture dated as of August 1, 1981, a Thirty-Third Supplemental Indenture dated as of December 1, 1981, a Thirty-Fourth Supplemental Indenture dated as of December 1, 1982, a Thirty-Fifth Supplemental Indenture dated as of March 30, 1984, a Thirty-Sixth Supplemental Indenture dated as of November 15, 1984, a Thirty-Seventh Supplemental Indenture dated as of August 15, 1985, a Thirty-Eighth Supplemental Indenture dated as of October 1, 1986, a Thirty-Ninth Supplemental Indenture dated as of March 15, 1987, a Fortieth Supplemental Indenture dated as of June 1, 1987, a Forty-First Supplemental Indenture dated as of June 15, 1988, a Forty-Second Supplemental Indenture dated as of August 1, 1988, a Forty-Third Supplemental Indenture dated as of September 15, 1989, a Forty-Fourth Supplemental Indenture dated as of March 15, 1990, a Forty-Fifth Supplemental Indenture dated as of March 15, 1990, a Forty-Sixth Supplemental Indenture dated as of June 1, 1990, a Forty-Seventh Supplemental Indenture dated as of July 15, 1991, a Forty-Eighth Supplemental Indenture dated as of July 15, 1992, a Forty-Ninth Supplemental Indenture dated as of February 15, 1993, a Fiftieth Supplemental Indenture dated as of February 15, 1993, a Fifty-First Supplemental Indenture dated as of February 1, 1994, a Fifty-Second Supplemental Indenture dated as of April 30, 1999, a Fifty-Third Supplemental Indenture dated as of June 15, 2001, a Fifty-Fourth Supplemental Indenture dated as of September 1, 2002, and a Fifty-Fifth Supplemental Indenture dated as of February 15, 2003, each supplementing and amending the Indenture; and

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WHEREAS, the Thirty-Fifth Supplemental Indenture authorized and appointed LaSalle Bank National Association, a national banking association duly organized and existing under the law of the United States of America with its principal office in Chicago, Illinois and formerly named LaSalle National Bank, as Successor Trustee to The First National Bank of Chicago, which appointment was accepted, and all trust powers under the Indenture were thereby transferred from The First National Bank of Chicago to LaSalle Bank National Association; and

WHEREAS, the Forty-Sixth Supplemental Indenture amended the Indenture to reflect a change in the name of the Company from Public Service Company of Indiana, Inc. to PSI Energy, Inc. effective as of April 20, 1990; and

WHEREAS, as of December 1, 2004, the only bonds that have been heretofore issued under the Indenture which are now outstanding are $7,500,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series VV, Due July 15, 2026” and $70,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series WW, Due August 15, 2027” and $50,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series ZZ, 5 3/4%, Due February 15, 2028” and $30,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series AAA, 7 1/8%, Due February 1, 2024” and $124,665,000 aggregate principal amount of  “PSI Energy, Inc. First Mortgage Bonds, Series BBB, 8%, Due July 15, 2009” (such bonds being hereinafter referred to as “Bonds of Series BBB”) and $53,055,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series CCC, 8.85%, Due January 15, 2022” and $38,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series DDD, 8.31%, Due September 1, 2032” and $325,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series EEE, 6.65%, Due June 15, 2006” and $23,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series FFF, Due March 1, 2031” and $24,600,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series GGG, Due March 1, 2019” and $35,000,000 aggregate principal amount of “PSI Energy, Inc. First Mortgage Bonds, Series HHH, Due April 1, 2022”; and

WHEREAS, in accordance with the provisions of Section 1 of Article XVIII of the Indenture, the Board of Directors has authorized the execution and delivery by the Company of a Fifty-Sixth Supplemental Indenture, substantially in the form of this Fifty-Sixth Supplemental Indenture, for the purpose of creating a fifty-fourth and fifty-fifth series of bonds to be issued under the Indenture, to be known as, respectively, “PSI Energy, Inc. First Mortgage Bonds, Series III, Due December 1, 2039” (such series to consist of a single bond being hereinafter referred to as the “Series III Bond”) and “PSI Energy, Inc. First Mortgage Bonds, Series JJJ, Due December 1, 2039”  (such series to consist of a single bond being hereinafter referred to as the “Series JJJ Bond”) (the Series III Bond and the Series JJJ Bond, when referred to collectively in this Fifty-Sixth Supplemental Indenture, shall be hereinafter referred to as the “Bonds of Series III and JJJ”), and prescribing the form and substance of the Bonds of Series III and JJJ and the terms, provisions and characteristics thereof, and for the purpose of adding to the covenants and agreements of the Company for the protection of the bondholders and of

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the trust estate and of making such changes in the Indenture as are deemed necessary or desirable and as are permitted by the Indenture; and

WHEREAS, all conditions and requirements necessary to make this Fifty-Sixth Supplemental Indenture a valid, binding and legal instrument have been done, performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized:

NOW, THEREFORE, in consideration of the premises, and of the acceptance and purchase of the Bonds of Series III and JJJ by the holders and registered owners thereof, and of the sum of One Dollar ($1.00) duly paid by the Trustee to the Company, the receipt whereof is hereby acknowledged, and in accordance with and subject to the terms and provisions of the Indenture, the Company and the Trustee, respectively, have entered into, executed and delivered this Fifty-Sixth Supplemental Indenture for the uses and purposes hereinafter expressed, that is to say:

ARTICLE I.

FIRST MORTGAGE BONDS , SERIES III, DUE DECEMBER 1, 2039 AND
FIRST MORTGAGE BONDS, SERIES JJJ, DUE DECEMBER 1, 2039

Section 1 .  There are hereby created a fifty-fourth and fifty-fifth series of bonds to be issued under and secured by the Indenture, to be designated as “PSI Energy, Inc. First Mortgage Bonds, Series III, Due December 1, 2039” (such series to consist of a single bond, which shall be the Series III Bond hereinbefore referred to) and “PSI Energy, Inc. First Mortgage Bonds, Series JJJ, Due December 1, 2039” (such series to consist of a single bond, which shall be the Series JJJ Bond hereinbefore referred to), respectively.

Section 2 .  The Series III Bond and Series JJJ Bond each shall be issued only in the form of a separate, single, authenticated, fully registered bond which (i) need not be in the form of a lithographed or engraved certificate, but may be typewritten or printed on ordinary paper or such paper as the Trustee may reasonably request, (ii) shall represent and be denominated in a principal amount not to exceed seventy-seven million one hundred twenty-five thousand dollars ($77,125,000) with respect to Series III Bond, and a principal amount not to exceed seventy-seven million one hundred twenty-five thousand dollars ($77,125,000) with respect to the Series JJJ Bond, (iii) shall be executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture, and (iv) shall be registered in the name of XL Capital Assurance Inc., or its permitted assigns (“XL Capital”).

The Series III Bond is being issued to XL Capital as security for the payment by the Company of its obligations under the Insurance Agreement, dated as of December 1, 2004, between XL Capital and the Company, which was entered into in connection with the delivery by XL Capital of its Financial Guaranty Insurance Policy insuring certain payments of principal of, and interest on, certain bonds (the “Series 2004B IDFA

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Bonds”) to be issued under a Trust Indenture, dated as of December 1, 2004, between the Indiana Development Finance Authority (“IDFA”) and Deutsche Bank National Trust Company, as trustee.  The proceeds of the Series 2004B IDFA Bonds will be loaned to the Company pursuant to a Loan Agreement, dated as of December 1, 2004, between IDFA and the Company.

The Series JJJ Bond is being issued to XL Capital as security for the payment by the Company of its obligations under an Insurance Agreement, dated as of December 1, 2004, between XL Capital and the Company, which was entered into in connection with the delivery by XL Capital of its Financial Guaranty Insurance Policy insuring certain payments of principal of, and interest on, certain bonds (the “Series 2004C IDFA Bonds”) to be issued under a Trust Indenture, dated as of December 1, 2004, between the IDFA and Deutsche Bank National Trust Company, as trustee.  The proceeds of the Series 2004C IDFA Bonds will be loaned to the Company pursuant to a Loan Agreement, dated as of December 1, 2004, between IDFA and the Company.

The Series III Bond and the Series JJJ Bond each shall be transferable only as required to effect an assignment thereof to a successor-in-interest of XL Capital under the applicable Insurance Agreement referred to hereinabove, provided that the Trustee shall have received notice from the Company of such an assignment (which notice the Trustee may rely upon without further inquiry).

The Series III Bond and the Trustee’s certificate to be endorsed thereon, and the Series JJJ Bond and the Trustee’s certificate to be endorsed thereon, shall be substantially in the following forms, respectively:

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]

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(FORM OF FACE OF THE SERIES III BOND)

THE HOLDER OF THIS BOND BY ACCEPTANCE HEREOF AGREES TO RESTRICTIONS ON TRANSFER, TO WAIVERS OF CERTAIN RIGHTS OF EXCHANGE, AND TO INDEMNIFICATION PROVISIONS AS SET FORTH BELOW.  IN ADDITION, THE BOND REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH BOND MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS.

THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TO XL CAPITAL ASSURANCE INC. UNDER THE INSURANCE AGREEMENT DATED AS OF DECEMBER 1, 2004 BETWEEN XL CAPITAL ASSURANCE INC AND PSI ENERGY, INC.

PSI ENERGY, INC.

FIRST MORTGAGE BOND, SERIES III,

DUE DECEMBER 1, 2039

PSI Energy, Inc., an Indiana corporation (hereinafter called the “Company”), for value received, hereby promises to pay to XL CAPITAL ASSURANCE INC., or registered assigns, the principal sum of                                                      Dollars ($   ) on the first day of December, 2039 and to pay interest on said principal sum, on each Interest Payment Date (hereinbelow defined), until said principal sum is paid, at the rate from time to time borne by the Indiana Development Finance Authority Environmental Revenue Bonds, Series 2004B (the “Series 2004B IDFA Bonds”) issued by the Indiana Development Finance Authority (“IDFA”) under a Trust Indenture, dated as of December 1, 2004, between IDFA and Deutsche Bank National Trust Company as trustee (the “IDFA Indenture”); provided, however, that in no event shall the rate of interest borne by this Bond exceed 13% per annum.  Both the principal of and the interest on this bond shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts at the office or agency of the Company in Plainfield, Indiana, or, at the option of the registered owner hereof, at the office or agency of the Company in the Borough of Manhattan, the City of New York, State of New York, except that interest on this bond may be paid, at the option of the Company, by check or draft mailed to the address of the person entitled thereto as it appears on the books of the Company maintained for that purpose.

This bond is issued to XL Capital Assurance Inc., or its permitted assigns (“XL Capital”) as security for the payment by the Company of its obligations under that certain Insurance Agreement dated as of December 1, 2004 between the Company and XL Capital (the “Insurance Agreement”).  The Insurance Agreement was entered into in connection with the delivery by XL Capital of its Financial Guaranty Insurance Policy insuring certain payments of principal of, and interest on, the Series 2004B IDFA Bonds.

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The proceeds of the Series 2004B IDFA Bonds have been loaned to the Company pursuant to a Loan Agreement, dated as of December 1, 2004, between IDFA and the Company.

Notwithstanding any other provision of this bond, no principal shall be due and payable on this bond unless and until an Event of Default shall have occurred under Section 4.01 of the Insurance Agreement by reason of a failure by the Company to pay its obligations under the Insurance Agreement and the Trustee shall have received notice from XL Captial or the Company of such an Event of Default (which notice the Trustee may rely upon without further inquiry).  If such an Event of Default under the Insurance Agreement shall occur, it shall be deemed to be a default, for purposes of the Indenture, in the payment of an amount of principal of this bond equal to the amount of such unpaid obligation.

REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET FORTH ON THE REVERSE HEREOF.  SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.

This bond shall not be valid or become obligatory for any purpose unless and until it shall have been authenticated by the execution by the Trustee, or its successor in trust under the Indenture, of the certificate endorsed hereon.

IN WITNESS WHEREOF, PSI Energy, Inc. has caused this bond to be executed in its name by the manual or facsimile signature of its President or an Executive Vice President or one of its Vice Presidents, and its corporate seal or a facsimile thereof to be hereto affixed and attested by the manual or facsimile signature of its Secretary or one of its Assistant Secretaries.

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(FORM OF REVERSE OF THE SERIES III BOND)

This bond is one of the bonds of the Company issued and to be issued from time to time under and in accordance with and all secured by an indenture of mortgage or deed of trust, dated September 1, 1939, from Public Service Company of Indiana (predecessor of the Company) to The First National Bank of Chicago, as Trustee, to which LaSalle Bank National Association is successor trustee, (which indenture as amended by all supplemental indentures is hereinafter referred to as the “Indenture”). Said Trustee or its successor in trust unde