R-1


$86,395,500                                                     October 14, 1998



                                PSI ENERGY, INC.
                            UNSECURED PROMISSORY NOTE

FOR VALUE RECEIVED,  PSI Energy,  Inc., an Indiana  corporation (the "Company"),
with an address at 1000 East Main Street, Plainfield, Indiana, 46168 promises to
pay to the order of the  United  States of  America  (the  "Government")  acting
through the  Administrator  of the Rural  Utilities  Services,  an agency of the
United States Department of Agriculture, in lawful money of the United States of
America, at the United States Treasury, Washington, D.C. 20590, or at such other
location as the Government may designate from time to time, the principal sum of
EIGHTY-SIX MILLION, THREE HUNDRED NINETY-FIVE THOUSAND,  FIVE HUNDRED AND 00/100
DOLLARS  ($86,395,500.00) (the "Principal Amount"),  with interest on any unpaid
balance  accruing  from  January 1, 1998,  at the rate of six  percent  (6%) per
annum,  and payable in  thirty-five  (35)  annual  installments  of  $5,959,031,
commencing on December 31, 1998,  and  continuing on each December 31 thereafter
until paid in full.  Payment shall be made  utilizing  normal  electronic  funds
transfer procedures specified by the Government.

If any payment under this Note shall become due on a Saturday,  Sunday or public
holiday  under the laws of the State of Indiana,  such payment  shall be made on
the next  succeeding  business  day with the same force and effect as if made on
the specified  date for such payment and no interest shall accrue for the period
from and after such  date.  In any other case of late  payment,  interest  shall
accrue on the  amount due from the due date until  payment  is  received  by the
Government.

In the event of any late  payment or  partial  payment  hereunder,  such late or
partial  payment shall be applied  first to the payment of interest  accrued and
then to the repayment of the Principal Amount.

The Company shall have the right to prepay, in whole or in part, the outstanding
Principal Amount, plus accrued interest, if any.

In the event the Company shall fail to pay any amount due under this Note within
ten (10) days after such amount is due, the  Government may exercise any and all
remedies  available  in law and equity and may declare all  principal  remaining
unpaid on this Note, and all interest thereon, due and payable.

The Company and all other makers and endorsers of this Note hereby forever waive
presentment, protest, notice of dishonor and notice of non-payment.

The Company  shall not  transfer  the  obligation  to pay this Note  without the
consent of the Government.

                                PSI ENERGY, INC.


By:                                           By:                       
              William L. Sheafer                         Jerome A. Vennemann
          Vice President and Treasurer                   Assistant Secretary