ML17059C168

Revised Niagara Mohawk Powerchoice Settlement Document for NMPC PSC Case Numbers 94-E-0098 & 94-E-0099, Vols 1 & 2

ML17059C168
Person / Time
Site:	Nine Mile Point
Issue date:	03/19/1998
From:	NIAGARA MOHAWK POWER CORP.
To:
Shared Package
ML17059C167	List: ML17059C166 ML17059C168 ML18041A066
References
NUDOCS 9807310005
Download: ML17059C168 (708)

Text

OlVeP I IAAA HAWK OECe Settlement Document Volume 1 - Agreement Niagara Mohawk Power Corporation PSC Case Nos. 94-K-009S and 94-K-0099 Revised March 19, 199S 98073f0005 98072f PDR ADOCK 05000220 P PDR'

T NIASARA U MOHAWK NIAGARAMOHAWKPOWER CO1lPORATloN/SOO ERIE 80UIEVAROV/EST, SYRACUSE, N Y. l3202fTELEPHONE (315) 474.15'I l October 10, 1997 Hon. John C. Crary, Secretary NYS Department of Public Service Three Empire State Plaza 19th Floor Albany, New York 12223 Re: Niagara Mohawk Power Corporation Casos 9+E4098 et al.

Dear Secretary Crary; Enciosod for filing with the Commission, pursuant to 16 NYCRR Q3.5(f) and 3.9, are an original and twenty-five copes of the Sfipulabon and Agreement setting forth the settlement of these proceedlngL Niagara Mohawk is filing this Settlement with the expectation and understanding that Department of PubRc Service Commission staff, Muiple intervenors and others will sign it, We will provide signature pages as they become available, I ask that you kindly acknowledge receipt and filing of the enclosures by date-stamping the enclosed copy of this letter and returning it in the postag~id envelope provided for your convenience.

As background to this filing, the Company notes that over two years ago, by its October 1995 PowelChoice proposal, Niagara Mohawk became the first energy company in the State of New York to propose a comprehensive restructuring of its electric business. However, because of the need to address growing and crippling payments to independent Power Producers whose output the Company was required to purchase at government-mandated prices in excess of market prices, progress on PowerChoice was delayed. With this Settlement, it is now time to finalize and lmplemenl PowerChoice.

The Settlement is the result of intensive and lengthy negotiations among numerous parties having many differing perspectives on industry restructuring. lt has been reached after extensive analysis, negotiation, and giv~take, and the Company is offering it with the following five goals in mind:

Stabilize the Company's financial condition through consummation of the Master Restructuring Agreement with the Settling Independent Power Producers ('SIPPs").

Provide for the continued development of a competitive electric generation market through auction of all the Company's fossil and hydro generating plants to third parties.

Promote jobs and economic development in Central New York by reducing industrial rates substantially and by providing choice for such customers immediately.

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~ Reduce prices and introduce customer choice and competition for all other customers over the next three years, vvhlle lmprovino customer service,

~ Maintain and improve the effectiveness of essential environmental and other public policy programs.

The Settlement further requires that the Company's stockholders absorb a sIpnlficant portion of its stranded costs over the next five years, but affords the Company the opportunity to collect the remaining stranded costs through a compeNive transition charge and exit fees.

ln short, the Company believes that the SeNetnant balances the needs of all stakeholders and, therefore, should be approved.

Yo y Pau J. Ka cc: Hon. William Boutelllar All Parties on Attached Service LIst

~YQ~D

NIAGARAMOHAWKPOWER CORPORATION PSC CASE NOS, 94-E-0098 94-E-0099 Phase II Active Part List S De t of Public Service NYS Consumer Protection Board NYS De artment of Economic Hon. Jeflrcy Stockholm ¹S054 Mr. James F. Warden ¹R16 Hon. Jaclyn Brilling 5 Empire State Plaza Suite 2101 Ms. Gloria Kavanah Hon. Judith A. Lee Albany, NY 12223-1556 One Commerce Plaza Three Empire State Plaza PH: (518) 474-5015 Albany,NY 12245 OAH - Swan St. FX: (518) 473-7482 PH: (518) 4744102 Albany, NY 12223-1350 FX: (518) 473-8347 PH: (518) 474-8400 National Power Lenders Forum FX: (518) 473-3263 Mr. John Dax ¹R22 NYS itizen ilit Bo rd ¹S060 Cohen, Dax & Koenig 146 Washington Avc Sithe Ener ies Inc. ¹S055 90 State St. Suite 1030 Albany, NY 12210 Mr. Gany Brown Albany,NY 12207 PH: (518) 4264282 25 Eagle St. PH: (518) 432-1002 FX: (518) 432-6178 Albany, NY 12207-1901 FX: (518) 432-1028 PH: (518) 4624101 Executive A encies of the United FX: (518) 462-4256 R tail ouncil ofNew York¹R22 States ¹R18 Mr. Paul C. Rapp Mr. Robert A. Ganton Mr. Robert E. Fernandez, Esq. Cohen, Dax & Koenig Department of the Army Sithe Energies, Inc. ¹S056 90 State St. Suite 1030 Regulatory Law Office 450 Lexington Ave Albany, NY 12207 901 N. Stuart St Suite 713 37th Fl PH: (518) 432-1002 Arlington, VA 22203-1837 New York, NY 10017 FX: (518) 432-1028 PH: (703) 696-1645

(212) 450-9049 FX: (703) 696-2960

(212) 450-9055 Multi le Intervenors ¹R07 Ms. Barbara S. Brenner New York Power Authorit ¹R23 Public Utilit Law Pro'ec s ¹S062 Mr. Robert M. Loughney Mr. Eric J. Schmaler Mr.Gerald Norlander Mr. Algird F. White Ms. Maria Zazzera 90 State St. Suite 601 Couch, White, Brenner, Howard 1633 Broadway, 22nd Fl Albany, NY 12207-2717 & Fcigenbaum New York, NY 10019 PH: (518) 449-3375 P.O. Box 22222 PH: (212) 468-6138 FX: (518) 449-1769 540 Broadway FX: (212) 468-6272 Albany, NY 12201 NYS De t ofLaw ¹R15 PH: (518) 4264600 Inde endent Power Producers Mr. Richard W. Golden FX: (518) 426-0376 of NY Inc. ¹R04 120 Broadway Mr. Aaron L. Breidenbaugh New York, NY 10271 NY De fPublic Service ¹R06 291 Hudson Ave PH: (212) 416-8340 Ms. Elizabeth H. Liebschutz Albany,NY 12210 FX: (212) 416-6003 Ms. Jane C. Assaf PH: (518) 436-3749 Three Empire State Plaza FX: (518) 436-0369 NYS De t of Public Service ¹S059 OGC 18th Fl.

Mr. Francis Herbert Albany, N Y 12223-1350 ENRONCa ital & Trade Three Empire State Plaza PH: (518) 486-1895 Resources ¹S066 OAF - 6th Fl. FX: (518) 486-5710 Howard A. Fromer Albany, NY 12223-1350 130 Washington Ave.

PH: (518) 474A508 Albany,NY 12210 FX: (518) 486-7254 PH: (518) 427-0531 FX: (518) 427-0734 Naca ggLaael bl.wpd Page I Ocaober 9, l 997

NIAGARAMOHAWKPOWER CORPORATION P C CASE NOS. 94-F 0098 94-F 0099 Phase II Active Part List r

ace Ener Pro ect/NRD Co en Ener Technolo American Ref-Fuel Com an (Dial separately) Me an Racine ¹S068 ¹S082 Mr. Fred Zalcman Robert L. Daileadcr, Jr., Esq. Glenn J. Berger, Esq.

Mollie Lampi Nixon, Hargrave, Devans k Doyle Skadden, Arps, Slate, Meagher k Mr. David Wooley Suite 700 Flom Pace University School of Law One Thomas Circle, NW 1440 New York Ave NW 78 North Broadway Washington, DC 20006 Washington, DC 20005-2111 White Plains, NY 10603 PH: (202) 457-5318 PH: (202) 371-7920 PH: (914) 4224386 or: FX: (202) 457-5355 FX: (202) 393-5760 PH: (518) 472-1762 FX: (914) 4224180 or: Valerie S. J. Paul ¹S081 Cit of Fulton & Oswe o ¹R09 FX: 518) 472-1544 Nixon, Hargrave, Devans R Doyle Paul V. Nolan, Esq One Key Corp Plaza ~ 5515 North 17th St Natural Resources Defense Council Albany, NY 12207 Arlington, VA 22205 Ms.Kathcrinc Kennedy ¹R14 PH: (518) 427-2650 PH: (703) 534-5509 Ashok Gupta FX: (518) 427-2666 FX: (703) 538-5257 40W20th St New York, NY 10011 Me an-Racine Associates Inc. ¹R03 Kamine/Besico ¹S083 PH: (212) 7274463 Peter L. Hubbard, Esq. Jack Yoskowitz FX: (212) 727-1773 Menter, Rudin 2 Trivelpiece, P.C. Kelly Drye 8h Warren 500 S. Salina St Suite 500 101 Park Ave Sithe Ene ies ¹S026 Syracuse, NY 13202-3300 New York, NY 10178

. Craig Indyke PH: (315) 474-7541 PH: (212) 808-7800 ad and Laniado FX: (315) 474P040 FX: (212) 808-7897 5 Eagle St Albany, NY 12207-1901 Central Hudson Gas & Electric Coastal Gas Marketin Com an PH: (518) 465-9313 ~Cor PS070 Em ire State Pi eline FX: (518) 465-9315 Robert J. Glasser ANRPi eline Cpm an ¹S084 k

Gould Wilkie Arthur B. Cohn, Esq.

Adirondack H dro Deve. Co One Chase Manhattan Plaza Cullen and Dykman John M. Forester. Esq. ¹S058 New York, NY 10005-1401 177 Montague St 39 Hudson Falls Rd. PH: (212) 344-5680 Brooklyn, NY 11201-3611 S. Glens Falls, NY 12803 FX: (212) 809-6890 PH: (718) 855-9000 PH: (518) 747-0930 FX: (718) 855Q282 FX: (518) 747-2409 NYSEG ¹R24 Ms. Amy Davis Munici al Electric Utilities ¹S085 North American Ener Inc Huber, Lawrence, Abell Jeffrey C. Genzer J. Bradford Morris ¹S067 605 Third Ave. Duncan, Weinberg, Miller4 8850 West Route 20 New York, NY 10158 Pembroke P.O. Box 100 PH: (212) 682-6200 1615 M St NW Suite 800 Westfield, NY 14787-0100 FX: (212) 661-5759 or 5792 Washington, DC 20037 PH: (716) 326-4977 PH: (202) 467-6370 FX: (716) 3264970 New York State Electric & Gas FX: (202) 467-6379 Mr. Ernest Walker ¹S069 Ms. Cathy Hughto-Delzer 4500 Vestal Parkway East Binghamton, NY 13903 gkk (607) 762-7484 FX: (607) 762-8645 NMacs~1lsl.wpd Page 2 Oeseber 9, 1997

NIAGARAMOHAWKPOWER CORPORATION PSC CASE NOS. 94-E-0098 94-E-0099 Phase II Active Part List illamette Industries PS096 Indeck En r Services Inc PS075 Coastal Co oration PS088 Michael C. Dotten Steve Dowdy J. Gordon Pennington Andrew F. Behrend 1130 Lake Cook Rd Suite 300 2000 M St. NW Suite 300 Heller, Ehrman, White &, McAuliffe Buffalo Grove, IL 60089 Washington, DC 20036 200 SW Market ST Suite 1750 PH: (708) 520-3212 PH: (202) 331-4615 Portland, OR 97201 FX: (708) 520-9883 FX: (202) 331-4617 PH: (503) 227-7400 FX: (503) 241-0950 Hudson River Power Transmission Utilit Workers Union of America Wendy Jo Rabinowitz, PE PS076 Seth Goldstein PS074 Cit of Watertown QS091 The Hudson River Power Local 1-2 Frances Francis Transmission Company 386 Park Ave S. Suite 401 Spiegel & McDiannid 455 New Karner Rd New York, NY 10016-8846 1350New YorkAveNW Albany, NY 12205 PH: (212) 532-7110 Washington, DC 20005A798 PH: (518) 456-7712 FX: (212) 684-3987 PH: (202) 8794000 FX: (518) 456-8451 FX: (202) 393-2866 Cit ofNew YorkOS095 Consolidated Edison PS078 De t of Business Services Electric Power Association PS072 John D. McMahon Scott Butler Lynn Church Asst. General Counsel 110 William St 2nd Fl 1401H StNW Suite760 4 Irving Place Room 1815S New York, NY 10038 Washington, DC 20005 Ncw York, NY 10003 PH: (212) 618-8940 PH: (202) 789-7200 PH: (212) 460-6330 FX: (212) 618-8898

(202) 789-7201 FX: (212) 677-5850 NYPA Industrial Interven r PR12 L onsdale Ener PS077 Reduced Ener S ecialists Inc. David M. Kleppinger Bohdan Buchynsky Bruce N.J. Hotz, VP PR11 McNees, Wallace 2 Nurick 633 W. FiQh St Suite 2800 7095 E. Market St 100 Pine St Los Angeles, CA 90071 Warren, OH 44484 Harrisburg, PA 17108-1166 PH: (213) 892-1302 PH: (216) 526-9086 (Clevcl) PH: (717) 232-8000 FX: (213) 892-1332 FX: (330) 856-1806 (Warren) FX: (717) 237-5300 LG&E Power AS073 CNG Producin Com an HS087 New York State Assembl PS039 Anne M. Gleason-Roche CNG Transmission Cor Carol Taylor Director, Project Finance Michael Whiteman, csq. Ncw York State Assembly LGkE Power Inc. Paul C. Rapp, Esq. Program Development Group 12500 Fair Lakes Circle, Suite 350 Whiteman Osterman 2 Hanna Room 547 Capitol Fairfax, VA 22033-3804 One Commerce Plaza Albany,NY 12248 PH: (703) 968-7200 Albany, NY 12260 PH: (518) 455-4386 FX: (703) 968-5458 PH: (518) 487-7600 FX: (518) 455-5573 FX: (518) 487-7777 American Assoc. Of Retired CNG Transmission Corp Mr. George H. Dali, Jr.

Douglas H. Ward Henxy E. Brown, Esp. 37 Livingston St Ward, Sommer 8h Moore Drew Kovalak, Esq. Warsaw, NY 14569 122 South Swan St. CNG Transmission Corp PH: (716) 786-2015 Albany, NY 12210 445 West Main St FX: (716) 426-8088

(518) 472-1776 Clarksburg, WV 26302-2450 J .'518) 472-1774 NMocs~lhl.wpd Page 3 Ocuhcr 9, 1 997

NIAGARAMOHAWKPOWER CORPORATION PSC CASE NOS. 94-E-0098 94-E-0099 Phase II Active Part List or T wnofM l n PS045 LillianAnderson Duffy Steven Agrcsta PR01 American Rivers Inc. PS002 Attorney at Law Swidlcr &, Berlin Margaret Bowman, Esq.

55 West Main St 3000 K St. NW Suite 300 1025 Vermont Ave NW Suite 720 Malone, NY 12953 Washington DC 20007-3841 Washington, DC 20005 PH: (518) 483-6171 PH: (202) 424-7501 PH: (202) 547-6900 FX: (518) 481-5003 FX: (202) 424-7692 FX: (202) 347-9240 IBEW SS047 US Gcneratin Com an IIS098 Local Re ulato Counsel to the Charles T. Conine, Pres. Daniel DuBois Settlin IPPS PS026 713 Erie Blvd West 111 Washington Ave Suite 701 Sam M. Laniado Syracuse, NY 13204 Albany, NY 12210 Read and Laniado PH (315) 476-9797 PH: (518) 432-8725 25 Eagle St FX: (315) 4784070 FX: (518) 432-0587 Albany, NY 12207-1901 PH: (518) 465-9313 Wheeled Electric Power o. AlS048 S ecial Counsel to the Settlin FX: (518) 465-9315 T. Brendan Whalen 304 Rita Dr IMPS SS099 MerrillL. Kramer, Esq. Town of Bethlehem NY PS003 N Syracuse NY 13212 Akin, Gump, Strauss, Hauer tR Feld, Melvin H. Osterman, Esq.

PH (315) 458-3229 LLP D. Scott Bassinson, Esq.

FX (315) 458-6699 1333 New Hampshire Ave Suite 400 Whiteman Osterman &, Hanna Washington DC 20036 One Commerce Plaza O'rien PH: (202) 8874000 Albany, NY 12260 Charles Lindbergh Blvd. FX: (202) 8874288 PH: (518) 487-7600 Suite 207 FX: (518) 487-7777 Uniondale, NY 11553 Strate ic Power Mana ement Inc PH: (516) 390-7600 Mr. Daniel P. Duthie PS007 A a Ener Services Inc, NS004 FX: (516) 390-7628 51 Greenwich Avc Usher Fogel Goshen, NY 10924 Roland, Fogel, Koblenz 4 Carr LLP Mercer Com anies Inc. PS097 PH: (516) 922-6548 1 Columbia Place F. Michael Tucker FX: (516) 922-2705 Albany, NY 12207 330 Broadway PH: (518) 434-8112 Albany, NY 12207 Northeast Utilities PS081 FX: (518) 434-3232 PH (518) 434-1311 Andrew Gansberg FX (518) 434-6157 Nixon, Hargrave, Devans &, Doyle Teler Joint Venture PS005 LLP Theresa Atkins The Cit of Cohoes NS071 One KeyCorp Plaza Suite 900 20 Corporate Woods Peter Henner, Esq. Albany,NY 12207 Albany, NY 12211 P.O. Box 326 PH: (518) 427-2650 PH: (518) 462-1882 Clarksville, NY 12041-0326 FX: (518) 427-2666 FX: (518) 463-9937 PH: (518) 768-8332 FX: (518) 768-8235 Rochester Gas & Electric Richard N. George PS006 Nia ara Mohawk Power Co Nixon, Hargrave, Devans 8h Doyle Tim Shechan PR10 LLP Adams, Dayter &, Shcehan P.O. Box 1051 orth Pearl St. Rochester, NY 14603-1051 any, NY 12207 PH: (716) 263-1000 PH: (518) 463-3388 FX: (716) 263-1600 FX: (518) 463-3440 NMocs'yhascllsl.wpd Page 4 OeIober 9, 1997

NIAGARAMOHAWKPOWER CORPORATION PSC CASE NOS. 94-E-009S 94-E-0099 Phase II Fin erLakesNYCha terofNECA Mary Jane Ruderman Inc. PS008 Tannery Island Power Co Jan S. Kublick 30N. Main St McMahon, Kublick, McGinty R, Carthage, NY 13619 Smith, P.C. PH: (315) 493-1472 500 S. Salina St. FX: (315)

Syracuse, NY 13202 PH: (315) 424-1105 Cl FX: (315) 424-3793 John Sullivan City Attorney NYS Communi Acti n Assoc Muncipal Bldg.

Sue Montgomery Corey AS001 141 S. First St 754 Fourth Ave Fulton, NY 13069 Troy, N Y 12182 PH:

PH: (518) 238-1955 FX:

FX: (518) 238-1839 The E Cubed Com an for the Tim J. Lawrie National Association of Ener 1610 Woodstead Court Services Com anies and the Joint The Woodlands, TX 77380 orters PH: (281) 362-9966 in S. Brown PS092 FX: (281) 364-7325 201 West 70th St Suite 4 1E New York, NY 10023 NYS Senate Committee on Ener PH: (212) 724-1528 & Telecommunications FX: (212) 721-2556 Carol E. Coyne Legislative OQice Bldg.

Glenn Camus Room 307 CNG Energy Services Corp Albany, NY 12247 One Park Ridge Center PH: (518) 455-3131 P.O. Box 15746 FX: (518) 455-3123 Pittsburgh, Pa. 15244 (412) 4944222 Dian Grueneich Grueneich Resource Advocates 582 Market St. Suite 407 San Francisco, CA 94104 (415) 834-2300 NMocs~natwpd Page 5 l

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NIAGARAMOHAWKPOWER CORPORATION POWERCHOICE SETTLEMENT AGREEMENT Table of Contents Pacae

1.0 BACKGROUND

2.0 RATE PLAN .

2.1 Introduction/Summary 4 2.2 Term and Effective Date of Rates 2.3 Master Restructuring Agreement (MRA) 2.3.1 Prudence of the MRA . 5 2.3.2 Reasonable Opportunity to Recover Costs ....... 6 2.3.3 Recovery of Costs Associated with Termination of Related Gas Transportation and Peak Shaving Agreements .. 6 2.3.4 SIPP Cost Recovery .. 6 2.4 Overall Rate and Revenue Levels 2.4.1 Average Prices 2.4.1.1 Years One Through Three . 7 2.4.1.2 Price Cap for Years Four and Five .. 7 2.4.2 Revenues and Financial Forecast .. 8 2.4.3 Rate Adjustment Mechanisms .. 8 2 4.4 Gross Receipts Tax (GRT) Reform . 10 2.4.5 Securitization 10 2.5 Stranded Cost Recovery .. 10 2.6 Deferrals ..

2.6.1 Cost Categories Eligible for Deferrals .............

2.6.2 New York Power Authority Transmission Access Charge (NTAC) Deferral . 11 2.6.3 Tax Refunds/Payments . 11 2.6.4 Additional IPP Contract Termination or Restructuring . 12

2.6.5 Disposition of Existing Cost Deferrals Not Yet Reflected in Rates .. 12 2.6.5.1 Generally .. 12 2.6.5.2 Site Investigation and Remediation Program .. 12 2.7 SFAS No. 71 Applicability 14 2.8 Rate Filing for Period After Term of This Agreement 3.0 NIAGARAMOHAWKGENERATION 15 3.1 Introduction and Summary 15 3.1.1 Generation Owned by Niagara Mohawk .. 15 3.1.2 Generation Purchased from IPPs 16 3.2 Guiding Principles for Fossil/Hydro Generation Auction .. 16 3.2.1 Agreement to Divest Fossil/Hydro Generation .. 16 3.2.2 Non-Nuclear Generation Sale Incentive....... 19 3.2.3 Labor Issues Associated with Divestiture...... 20 3.2.3.1 Labor Contract Issues . 20 3.2.3.2 Retraining and Severance Costs 21 3.2 4 Unhedged Energy and the CTC for Fossil/Hydro Assets 21 3.3 Guiding Principles for Nuclear Assets .. 22 3.3.1 Study to Determine Future Disposition........... 22 3.3.2 Recovery of Stranded Costs 22 3.3.3 Cost Treatment if a Nuclear Plant is Sold, Transferred or Divested 23 3.3.4 Cost Treatment in the Event of a Plant Retirement . 23 3.4 Design Principles for Transition Contracts with Generators . 25 3.4.1 Design Features Common to All Generators ....... 25 3.4.1.1 Transition Contract Overview .. 25 3.4.1.2 Primary Design Components 25 3.4.2 NMPC Fossil and Hydro Generation Transition Contract(s) 26

3.4.3 Nuclear Generation Transition Contracts ~ ..,... 28 3.4.4 Settling Independent Power Producers (SIPPs) .. 29 3.5 Other Independent Power Producers (IPPs) 30 4.0 ELECTRIC PRICES 32 4.1 Overview of Bundled and Unbundled Prices 32 4.1.1 Bundled Prices 32 4.1.1.1 Residential and Commercial Class Price Levels......... 33 4.1.1.2 Industrial and Large Commercial Price Levels.... 34 4.1.2 Methodology for Arriving at Bundled Prices .. 35 4.1.2.1 Calculation of "Base" 1997 Rates Before Decreases.... 35 4.1.2.2 Application of Percentage Decreases for SC1,2,8 3 36 4.1.2.3 Calculation of SC-3A Rates ............ 37 4.1.3 Relationship to Dairylea Pilot .. 37 4.1.4 Planned Reductions Associated with Gross Receipts Tax Reform .. 38 4.1.5 Potential Securitization Savings 38 4.2 CTC and Market Price Hedging 38 4.2.1 Overview ... 38 4.2.2 General Calculation and Application ......... 38 4.2.3 Commodity Adjustment Charge ~ 39 4.2.4 Significance of Hedged and Unhedged Energy . 39 4.2.5 CTC Options and Market Price Forecast 40 4.2.5.1 For S.C. No. 3A and S.C. No.4

(>2 IVIW) Customers .. 40 4.2.5.2 For S.C. Nos. 1, 2, 8 3 Customers..... 42 4.2.6 Adjustments to the CTC in Years Four and Five 42 4.2.7 Alcan and Sithe/Independence 43 4.3 Surcharge and Reconciliation Mechanisms 43

4.3.1 Surcharge Mechanisms That Will Be Abolished . 43 4.3.2 Gross Receipts Tax Surcharge .. 44 4.3.3 NYPA Hydropower Benefit Reconciliation ...... 44 4.3.4 System Benefits Charge 44 4.3.5 Deferrals . 45 4.3.6 Recovery of Generation Sale Incentive 45 4.4 Unbundled Services and Prices ... 47 4.4.1 Unbundled Energy Commodity Charge 47 4.4.2 Unbundled Transmission Charges 48 4.4.3 Unbundled Distribution Charges .. 48 4.4.4 Price Cap Plan for Transmission and Distribution Services 49 4.4.4.1 T8 D Rate Increases 49 4.4.4.2 CTC Offsets to Increased T&D Prices 49 4.4.4.3 Price Cap for Years 4 and 5 .. 49 4.4.5 Availability of Unbundled Prices for Informational Pui'poses 50 4.4.6 Relationship to Generation Separation ......... 50 4.4.7 Customer Service Backout Credit .. 50 4.5 Residential Pricing Designs 50 4.5.1 Service Classification No. 1 - Standard Residential Rate. 50 4.5.1.1 Flat Rate Structure... 50 4.5.1.2 Phased-in Rebalancing of Customer and Energy Charge . 50 4.5.1.3 Phased-in Discount from Initial Price Levels 51 4.5.2 Service Classification Nos. 1B and 1C - Residential Time-of-Use Rates . 51 4.5.3 Service Classification No. 1H - Optional Residential Rate .~

52 4.5.4 CTC 52 4.6 Commercial Pricing Designs 52 4.6.1 Service Classification Nos. 2ND - Small General Service Rates 52

4.6.1.1 Flat Rate . 52 4.6.1.2 Phased-in Rebalancing of Customer-and Energy Charges ..... 52 4.6.1.3 Phased-in Discount from Initial Price Levels 4.6.2 Service Classification No. 2D - Small General Service Rates 53 4.6.2.1 Phased-in Rebalancing of Customer and Energy Charges 53 4.6.2.2 Phased-in Discount from Initial Price Levels 53 4.6.3 CTC.. 54 4.7 Large General Service (S.C. Nos. 3, 3A, 4 and 5) Pricing Designs 54 4.7.1 S.C. No. 3 (Large General Service <2 MW) and Smaller S.C. No. 4 Customers (<2 MW) ~......... 54 4.7.1.1 Rate Design .. ~ 54 4.7.1.2 Initial Price Levels 54 4.7.1.3 CTC 55 4.7.2 S.C. No. 3A (Large General Service, Mandatory Time-of-Use, High Demand) and Large S.C. No. 4 Customers

(>2 MW) 55 4.7.2.1 Rate Design ... 55 4.7.2.2 Initial Price Levels 55 4.7.2.3 Rebalancing of Demand Charges 56 4.7.2.4 CTC 56 4.7.3 S.C. No. 5 (Combination 25 8, 60 Cycle Power).... 56 4.7.4 Projected Industrial Prices 56 4.8 Customers with S.C. No. 11 Contracts and Economic Development Programs 57 4.9 Optional Tariffs for non-Residential Customers ...... 58 4.10 Customers Selling Power to Niagara Mohawk Under S.C. No. 6 58 4.11 Exit Fee for Customers who Bypass the Company's Delivery Service and Customers Taking Service Under S.C. No. 7 (Sale,

Backup, Maintenance and Supplemental Energy and Capacity to Customers with On-Site Generation Facilities)........... 59 4.11.1 Rationale ... 59 4.11.2 Applicability 59 4.11.3 Exit Fee .... 60 4.11.4 S.C. No. 7... 62 4.11.4.1 Existing Customers .... 62 4.11.4.2 New Subscribers and Existing S.C. No. 7 Customers Following Divestiture of the Company's Fossil and Hydro Assets..... 62 4.12 Economic Development Zone Rider (EDZR) 63 4.13 Pricing Designs for Service Classifications Under PSC No. 214 Electricity .... 64 4.14 Application of Unbundled Prices to NYPA Allocations 64 4.15 Annual Tariff Filings ... 67 4.16 Rate Flexibility . 67 4.16.1 General .. 67 4.16.2 Optional Rates and Services . 68 4.17 Miscellaneous Tariff Amendments 68 4.17.1 Aggregation of Demand and Customer Charges 68 4.17.2 Low Voltage Bypass... 68 5.0 CUSTOMER SERVICE BACKOUT CREDIT 69 5.1 Gross Revenue Exposure 69 5.2 Design Principles 69 5.3 Relationship to a Generic Proceeding 70 6.0 CUSTOMER SERVICE INCENTIVE 71 6.1 Customer Service Performance .

6.1.1 PSC Complaint Rate 71

6.1.2 Corporate Residential Transaction Satisfaction Index 71 6.1.3 Low Income Assistance Program... ~ 72 6.2 Statement of Intent 72 6.3 Service Reliability Incentive 72 6.3.1 System Interruption Frequency (SIF) . 72 6.3.2 Customer Interruption Duration (CID) 73 6.3.3 Power Quality ~ 73 6.4 Accounting Mechanism 73 7.0 SYSTEM BENEFITS CHARGE PROGRAMS 74 7.1 System Benefits Charge 74 7.1.1 Programs and Funding Levels 74 7.1.2 State-Wide Third Party Administrator . 75 7.1.3 Low Income Customer Assistance Program (LICAP)... 75 7.2 Miscellaneous 75 8.0 RETAIL ACCESS 81 8.1 Conditions Necessary For Retail Access 81 8.1.1 Proper Metering .... 81 8.1.2 Billing and Settlement Procedures Consistent with Market 81 8.2 Retail Access Timetable 82 8.2.1 Farm 8 Food Processor Pilot . 82 8.2.2 Group1 83 8.2.3 Group 2 83 8.2.4 Group 3 83 8.2.5 Group 4 84 8.2.6 Group 5 84 8.2.7 Customers With Special Contracts... 84 8.2.8 Monitoring Progress Through Time .... 84 8.2.9 Contingencies.......... 85 8.3 Retail Access Settlement Method .. ~ . 85

8.3.1 Forecasting and Scheduling Requirements 87 8.3.2 Metering Requirements .. 87 8.3.3 Services Not Covered by the Settlement System .. 88 8.3.4 Nondiscriminatory Treatment of Customers...... 88 8.3.5 Auditing of the Settlement Function .. 88 8.4 Reciprocity Assurances . 89 9.0 CORPORATE STRUCTURE AND AFFILIATERULES 92 9.1 Proposed Corporate Structure 92 9.2 Rules Governing Affiliate Transactions... 93 9.2.1 Organization 93 9.2.1.1 Separation and Location 93 9.2.1.2 Board of Directors Membership and Fiduciary Duty .... 93 9.2.1.3 Cost Allocation .... 94 9.2.2 Transfer of Non-Generation Assets . 94 9.2.3 Transfer of Services... 94 9.2.4 Special Services 95 9.2.5 Human Resources .... 96 9.2.5.1 Separation of Employees and Officers .. 96 9.2.5.2 Employee Transfers ~... 97 9.2.5.3 Employee Loans in an Emergency..... 97 9.2.5.4 Compensation for Transfers.......... 97 9.2.5.5 Employee Compensation and Benefits 98 9.2.5.6 Legal Representation... 98 9.2.6 Maintaining Financial Integrity ~... 98 9.2.7 Access to Books, Records and Reports 99 9.2.8 Reporting . 99 9.3 Standards of Competitive Conduct 99 9.3.1 Use of Corporate Name and Royalties........ 99 9.3.2 Sales Leads .... 100 9.3.3 Customer Inquiries... 100 9.3.4 No Advantage Gained by Dealing with Affiliate . 100 9.3.5 No Rate Discrimination 100

9.3.6 FERC Jurisdiction. ~ 101 9.3.7 Customer Information .. 101 9.3.8 Other Information .. 101 9.3.9 Complaint Procedures ... 101 9.4 Miscellaneous . 102 9.4.1 Applicability of Settlement Standards of Conduct ..... 102 9.4.2 Annual Meeting 102 9.4.3 Training and Certification 102 9.4.4 Telergy .. 103 9.5 Mergers and Acquisitions 103 9.5.1 Recovery of Premium .. 103 9.5.2 Relationship to Divestiture .... 103 9.5.3 Applicability of this Agreement Post Merger .. 103 9.54 Expedited Review 103 10.0 SUPPLIER OF LAST RESORT OBLIGATIONAND IMPLEMENTATION... 104 10.1 Obligation to Serve 104 10.2 Implementation 104 10.2.1 Energy Service Providers, Marketers and Brokers 104 10.2.2 Customer Operations Procedures 106 10.2.3 Credit and Collection Matters... 108 10.2.3.1 Customer Creditworthiness 108 10.2.3.2 ESCo Creditworthiness Evaluation 109 10.2.4 Termination Decisions ~ .. 110 10.2.5 Cost Recovery .. 111 11.0 REGULATORY CHANGES AND APPROVALS 112 11.1 Elimination of Certain Regulatory Requirements 112 11.1.1 Regulatory Reporting Requirements .... 112 11.1.2 Treatment of Future Refunds... 112 11.2 Regulatory Approvals 113 11.2.1 Commercialization of Products and Technologies

Developed as a Result of Research and Development 113 11.2.2 PSL Sections 69 and 70 Approval of the Sale, Leasing or Financing of Building Facilities.......... 113 11.2.3 Conversion of 25 Cycle Customers ... 115 12.0 LOW INCOME CUSTOMER ASSISTANCE PROGRAM (LICAP) .. 116 12.1 Eligibility Criteria . 116 12.2 Program Description 116 12.3 Program Funding 117 13.0 MISCELLANEOUS 118 13.1 Force Majeure 118 13.2 Commission Authority .. 118 13.3 Provisions Not Separable: Effect of Commission Modification 118 13.4 Provisions Not Precedent . 119 13.5 Dispute Resolution 119 13.6 Withdrawal from Litigation 119 13.7 Constriction of Terms 119 13.8 Steam Host Issues 120 14.0 TERM OF THIS AGREEMENT 121

SECTION

1.0 BACKGROUND

In February of 1994, Niagara Mohawk filed a comprehensive five-year rate proposal, which opened docket 94-E-0098. Following extensive public statement and evidentiary hearings, the proposal was split into two "phases" for briefing and decision by the Commission. The Commission decided the first phase, setting 1995 rates, in an April 21, 1995 "short order" and in Opinion 95-21.'he multi-year part of the record was never presented to the Commission. Rather, in the April 21 Order, the Commission urged the parties to attempt to negotiate a comprehensive long-term solution to Niagara Mohawk's escalating costs. The Commission ordered the parties, among other things, "to address [the Company's 1996-1999) rate levels, Niagara Mohawk's financial security, the protection of customer service quality, and regulatory changes reflecting increased competition.... [and] improve the company's competitive position, without anti-competitive effects, by addressing the excessive generation cost burden." The Commission also directed the parties to develop a multi-year plan "consistent with policies being developed in connection with the review of competitive opportunities in Case 94-E-0952."

The Company answered the Commission's call for a comprehensive solution and multi-year plan by filing its PowerChoice proposal on October 6, 1995, which followed informational sessions among all parties held June-September 1995.

PowerChoice proposed an electricity price freeze for most customer classes and reductions for others for the period 1996-2000; financial concessions by the Company and the IPPs in proportion to their contribution to strandable costs in order to finance the price freeze; creation of competitive wholesale generation market in the Company's service territory through the formation of an Independent System Operator (ISO) and divestiture of all of Niagara Mohawk's generation, including its nuclear units; and introduction of customer choice for all classes over a three-year period. In exchange for the Company's willingness to undertake these initiatives, Niagara Mohawk asked that the State help in ia a w we, Cases 94-E-0098 and 94-E-0099, et al., Order Setting Electric, Electric Street Lighting and Gas Rates (April 21, 1995), and Opinion and Order Concerning Revenue Requirement and Rate Design (December 29, 1995.)

'In the M tter of C etitive 0 rtunitie Re ardin tric Se i e, Cases 94-E-0952, ~et a . (also known as the "Competitive Opportunities Proceeding.").

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reducing the costs of above market IPP contracts; for assurance of a reasonable opportunity to recover strandable costs remaining after concessions by Niagara Mohawk and the IPPs; and for permission to form a holding company whose unregulated subsidiaries would have a fair opportunity to compete in the new market.

In the nine months following the filing of PowerChoice, the Company engaged in extensive negotiations and discussions with all parties. During this time, proceedings were ongoing in the Competitive Opportunities Proceeding.

Thereafter, in Opinion 96-12, 0 inion nd Order Re ardin Com titive 0 ortunities for Electric Service (issued May 20, 1996), the Commission expressed its "vision for the future of the electric industry in light of competitive opportunities . .," and added that utilities and IPPs "... are strongly encouraged to

~

pursue agreements that reduce rates to benefit ratepayers. If parties are unwilling, however, to restructure those contracts voluntarily, the Commission shall pursue policies to mitigate the impact of such contracts on rates." The Commission further directed the IPPs "to move forward aggressively in appropriate forums to seek solutions such as a buyout of contracts or renegotiations of them so as to align them more closely with a competitive framework." Opinion 96-12 went on to require each utility to file a rate/restructuring plan "consistent with our policy and vision for increased competition" by October 1, 1996. Niagara Mohawk was specifically excluded from that filing requirement because it had previously filed its PowerChoice plan.

By June 1996, it had become clear that no further progress in Niagara Mohawk's PowerChoice negotiations could be made until the Company could put forward a definitive rate plan, and a definitive rate plan would require a comprehensive settlement with the IPPs. The Company suspended PowerChoice negotiations and focused on negotiations with the IPPs.

On July 9, 1997, after 16 months of arduous and contentious negotiations against the backdrop of many years of court and administrative litigation and the very real prospect of years of future litigation, the Company executed the Master Restructuring Agreement, ("MRA")with 29 IPPs represented by 16 developers who collectively represent more than 80% of the Company's above-market IPP costs. These IPPs (the "Settling IPPs", or "SIPPs") agreed to restructure, amend or replace their current IPP contracts in exchange for:

o $ 3.6 billion in newly issued debt or cash; o 46 million shares of common stock (slightly less than 25% of the Company's equity); and Page 2

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o a portfolio of certain financial or physical delivery contracts.

On July 23, 1997, the Company filed a revised settlement offer for PowerChoice.

Two months of intensive negotiations followed, with the Company, Staff and several intervenors reaching an Agreement in Principle on September 25, 1997.

More than sixty parties have intervened in this proceeding, with almost 30 parties participating actively in the settlement negotiations. Unlike the other New York electric utility restructuring proceedings, the Company, Staff and other parties negotiated without waiver of the Commission's Settlement regulations.

Administrative Law Judge Stockholm has mediated the negotiations throughout, with Judges Lee and Brilling joining him since the Company's July 23, 1997 Settlement Offer filing, The Settlement Agreement (also the Agreement or Settlement) that follows, like the MRA upon which it rests, resolves many complex and seemingly insoluble issues and is the product of much hard bargaining among the many, normally-adversarial parties to this proceeding. The signatories to this Settlement Agreement strongly recommend its swift approval.

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SECTION 2.0 RATE PLAN

2.1 INTRODUCTION

AND

SUMMARY

Price level targets and price designs are described in Section 4.0. This Section describes the Rate Plan, including the date on which the Agreement becomes effective, the treatment of costs during the term of the Agreement, and the mechanisms for adjusting prices over time.

Rate Plan for Years One through Three. During years one through three of the Agreement, prices have been set at the targets listed in Table 4-1 and 4-2.

During the first three years, prices may only be adjusted for a limited number of surcharges which could raise or lower prices. These surcharges include the New York Power Authority (NYPA) Hydropower Credit described in Section 2.4.3, a surcharge to account for variations from forecasted costs in the event a nuclear power plant is retired (described in Section 2.5 and 3.3.4) and an increase in spending levels for the System Benefits Charge (if ordered by the Commission, as described in Section 2.4.3).

However, during the first three years, certain costs or savings can be deferred for recovery or refund beginning in years four and five of the Agreement. The items that can be deferred are limited and are described in Section 2.6.

Rate Plan for Years Four and Five. For years four and five of the Agreement,

'he Company can file for a rate increase, but that increase must be capped at 1% for all elements of rates except the market price of the electric commodity itself, and except as specified below. The details of this price cap plan are described in Section 2.4.1.2. In addition, Niagara Mohawk can begin to recover through a surcharge, the expenses that it was allowed to defer in the first three years of the Agreement. Surcharges applicable in years four and five are the surcharges applicable in the first three years as well as the generation auction incentive surcharge which is described in Section 2.4.3. Recovery of deferrals and the generation auction incentive in years four and five is limited such that these surcharges plus any allowed rate increase under the 1% price cap cannot exceed the rate of inflation. This mechanism is described in more detail in Section 2.4.3. Finally, the price cap and the inflation cap for deferral recovery exclude the recovery or refund of the difference between the actual and forecasted costs associated with certain approved IPP Indexed Contracts, which will begin in year four as described in Section 2.4.1.2.

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Stranded Cost Recovery. Upon fulfillingcertain commitments described herein, the Company shall have a reasonable opportunity to recover its stranded generation costs, including costs associated with its own generation as well as the costs associated with the Master Restructuring Agreement between the Company and the Settling Independent Powei'roducers (SIPPs) as described in Sections 2.3, 2.5 and 3.0.

2.2 TERM AND EFFECTIVE DATE OF RATES The Company proposes to implement the rate plan for a period of five years, commencing on the PowerChoice Implementation Date.

The PowerChoice Implementation Date is dependent upon receipt of Public Service Commission approval of this Settlement Agreement, as well as completion of other steps subsequent to PSC approval, including, but not limited to, obtaining various approvals to issue debt and sell equity, SIPPs settlement of their third party obligations and negotiation between the Company and the SIPPs of new contractual arrangements. New tariffs will not become effective until these steps are completed. The Company will file proposed tariffs to implement this agreement as soon as is reasonably possible following approval of this agreement, but in no event later than 60 days following approval of this agreement. The Company's objective is to consummate these steps as soon as possible. Many steps on the critical path to implementation are predicated on receiving written PSC approval. Any delays in receiving written PSC approval will result in a delay in the implementation of new rates. Any delay in the completion of subsequent steps would also delay the effective date.

For the purpose of defining the five year term of the rate plan, the first rate year begins with the PowerChoice Implementation Date and each subsequent rate year begins on the anniversary thereof.

2.3 MASTER RESTRUCTURING AGREEMENT (MRA) 2.3.1 Prudence of MRA The MRA and the contracts to be executed pursuant thereto are found to be prudent and recoverable to the extent provided herein. The specific details of debt and stock issuances required to finance the MRA will be subject to separate review and approval after filing.

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2.3.2 Reasonable 0 ortuni to Recover Costs The Company will have a reasonable opportunity to recover stranded costs associated with the MRA, including all costs of the contracts to be executed pursuant to the MRA (as described in Appendix A and Section 3.4), except for the return on the regulatory asset, through the Competitive Transition Charge (CTC) or, where applicable, exit fees. The Commission will consider any request for a return on the regulatory asset post year five of the PowerChoice Settlement Agreement.

2.3.3 Recove of Costs Associated w t Termination of Related Gas Trans ortation and Peak Shavin A reements The Parties agree that the Company will recover in gas rates certain costs associated with the termination of gas transportation and peak shaving agreements between the SIPPs and Niagara Mohawk, as described in Appendix B.

2.3.4 SIPP Cost Recove The costs of the SIPP contract restructuring and termination resulting from the MRA and associated contracts will be deferred and amortized over a period not to exceed ten years. To achieve the price levels described in Tables 4-1 and 4-2, the Company proposes not to set a specific rate of return on the regulatory asset, although it is obvious from the financial forecast in Appendix C that little or no return is forecast to be earned on that asset during the term of the settlement agreement.

The Company will be taking the position with the Internal Revenue Service generally that the cash and common stock portion of the SIPP settlement costs are currently deductible, creating a Net Operating Loss carry back that would entitle the Company to a refund of prior years paid taxes. The refund would be used to fund a portion of the cash needed for the SIPP settlement, and would not be otherwise deferred for other rate making purposes.

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2.4 OVERALL RATE AND REVENUE LEVELS 2.4.1 A~Pi 2.4.1.1 Years One Through Three The agreed upon prices for the major service classifications for years one through three are set forth in Tables 4-1 and 4-2 and described in greater detail in Section 4.0. The starting point for establishing the bundled retail prices that will apply for the duration of this agreement is the retail base rates that became effective April 27, 1995 adjusted to capture 1995 surcharges. Prices for distribution and transmission services will be increased during years one through three as described in Section 4.4.4, but offset by an equivalent reduction in the CTC to meet the overall price goals.

2.4.1.2 Price Cap For Years Four And Five Prices in years four and five can be increased by an amount not to exceed 1% of the all-in price except the commodity (e.g. inclusive of transmission, distribution and forecasted CTC charges) except for exclusions noted below. Unless an increase is sought, the Company is not required to file. Any rate increases to transmission prices approved by FERC that would be charged to retail customers would count towards the price cap increase.

The price cap excludes recovery of deferrals established pursuant to the Settlement Agreement and any generation sale incentive, and variations in the MRA contract costs due to the indexing provisions of the IPP contracts. The Company will be allowed to file for deferrals and generation sale incentive recovery pursuant to Section 2A.3, without a filing for the price cap.

Beginning in year four, the Company will adjust the CTC quarterly for changes in the IPP Indexed Contracts through the CAC as described in Section 4.2.6. The Company agrees to file the amended or restated contracts with the Commission for its review and approval of the indexing provisions. The contracts shall be approved as just and reasonable if the indexing provisions are consistent with the terms and conditions for amended and restated contracts contained in Exhibit A of the MRA. In particular, the indexing formula, when calculated using the assumptions set forth in Exhibit A, Attachment A-5 of the MRA, will result in weighted average contract prices that do not exceed the weighted Page 7

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average contract prices that are contained in Attachment A-3 to Exhibit A to the MRA, with such weighted average contract prices being subject to adjustment if one or more of the SIPPs do not consummate the contracts contemplated in the MRA.

2.4.2 Revenues and Financ'al Forecast The Company's projection of the financial impacts of the MRA and this settlement agreement are presented in Appendix C.

2.4.3 Rate Ad ustment Mechanisms The projected prices are subject to change only as specified in this Agreement. The parties have agreed upon several specific mechanisms that could change prices periodically. These mechanisms include Systems Benefits Charge (SBC)

As described in Section 7.0, the SBC will be used to collect the costs of public policy programs, to be imposed on all distribution customers except as otherwise provided herein. Spending for SBC-related programs will be set at $ 15 million annually for years one through three. That level of spending is included within the pricing goals set forth in Tables 4-1 and 4-

2. Additional spending, if approved by the PSC, would be collected through a surcharge to customers.

NYPA Residential Hydropower Credit In accordance with contracts between NYPA and the Company, residential customers are to receive the actual benefits of NYPA hydropower. The procedure to reflect actual benefits in residential prices is described in Section 4.3.3.

Generation Sale incentive Section 3.2.2 describes the Company's incentive for the sale of fossil and hydro assets. To collect this incentive, the Company will include a surcharge in years four and five. The surcharge will be limited to an amount equal to inflation less amounts authorized under the price caps filing and deferral recovery. Unamortized amounts of incentive remaining at the end of year 5 will be amortized over a period not to exceed 3 years.

Page 8 011810hNP6.1

All customers who pay the CTC, or, where applicable, exit fees, will pay the generation incentive through a surcharge. Customers who do not pay the CTC or exit fees will not be obliged to pay the generation incentive.

To the extent the sales price of the assets is sufficiently in excess of book value to fund some or all of the incentive, the Company will retain that cash and the incentive surcharge will be reduced or eliminated (book value includes related costs, such as parts and fuel inventory, allocation of common facility costs, etc.). To the extent there is a net book gain (after auction costs and incentive) on the sale of the assets, the net gain will be used to reduce stranded costs for all customers that pay the CTC. To the extent there are unrecovered costs remaining (i.e., stranded costs), these costs will be deferred for recovery in year six over a period up to the remaining life of the assets sold, as provided herein.

Recovery of Deferrals The Company will file for recovery of deferrals from years one through three, beginning in year four. Deferrals will include those referred to herein. The amount of amortization and recovery will be limited to an amount equal to the rate of inflation less the amount allowed under the price caps filing and generation sale incentive recovery if any. The rate of inflation will be the latest Blue Chip indicator forecast of GDPPI at the time of the Commission decision. New deferrals recorded in year four will be factored into the year five deferral filing. Any remaining unamortized deferrals at the end of year five will be recovered over a period not to exceed five years beginning in year six.

Deferrals will be collected through appropriate rate mechanisms, depending upon the nature of the cost, i.e., generation-related deferrals such as changes in nuclear costs will be collected through a surcharge to all customers who pay a CTC. Customers who do not pay the CTC or exit fee will not be obliged to pay for generation deferrals. Distribution-related deferrals will be collected through a distribution surcharge.

, When available, new deferred debits will be netted against new deferred credits arising during the term of this settlement agreement.

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2.4.4 Gross Recei ts Tax GRT Reform New York State enacted legislation in 1997 phasing in a 1% reduction of the State gross receipts tax by 2000. Such reduction in the GRT, as realized, will be passed through to customers as described in Section 4.1.4.

2.4.5 ~S Further rate reductions could be achieved if the State of New York were to authorize "securitization" of certain costs in a way that reduces the borrowing cost of the Company. To the extent that it is not otherwise prohibited by any legislation authorizing securitization, the benefits of securitization should be used to further reduce prices to SC1, 2, and 3 customers. The Company and Staff recommend that the Commission consider allocating a portion of such savings for energy efficiency and clean technology.

2.5 STRANDED COST RECOVERY Niagara Mohawk will be entitled to recover allowable stranded costs through a non-bypassable Competitive Transition Charge (CTC) or, in some circumstances, an exit fee. The details of the CTC and the exit fee are contained in Section 4.0.

As described in Section 3.0, Niagara Mohawk will have a reasonable opportunity to recover stranded costs associated with its fossil and hydro units, which will be quantified through auction and divestiture.

Niagara Mohawk will have a reasonable opportunity to recover stranded costs associated with its nuclear generation during the term of this agreement, as described in Section 3.0. Recovery of stranded costs associated with retirement of a nuclear unit during the term of this agreement is subject to a separate Commission review process described in Section 3.0.

As described in Section 2.3.2 above, Niagara Mohawk will have a reasonable opportunity to recover stranded costs associated with the MRA, with the exception of the return on the regulatory asset related to the MRA. During the term of this agreement, Niagara Mohawk has limited its return on the regulatory asset, resulting in a low projected return on equity, as shown in Appendix C. The projected forgone returns represent Niagara Mohawk's share of stranded cost responsibility during the term of this agreement.

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DEFERRALS 2.6.1 Cost Cate pries Eli lble for Deferrals Site Investigation and Remediation (SIR) costs are eligible for true-up and deferral. In addition, the following changes in forecast costs are eligible for deferral: changes in laws, regulations, rules and accounting that can be substantiated as increasing or decreasing the cost of doing business (in excess of

$ 500,000 per change), and nuclear costs beyond management's control (including decommissioning, the Price Anderson Act covering nuclear accidents, fuel storage, disposal of waste (exclusive of cost increases unrelated to changes in laws, regulations, etc.), significant NRC actions and other government agency mandates and policy issues). Changes in regulations will include financial consequences associated with a final decision in Case 97-E-0251. In addition, some gross revenue losses associated with the customer service backout credit (See Section 5.0) will be deferred. Any penalties accrued under the Customer Service Quality Incentive (See Section 6.0) will be deferred to offset cost deferrals.

The Company will be entitled to petition for deferral and recovery of any other incremental costs not specifically anticipated in the financial forecast and not otherwise provided for in the first sentence of this subparagraph, including incremental costs associated with the Company's role as provider of last resort as well as incremental business retention price discounts as described in herein.

2.6.2 New York Power Au ori Transmission Access Char e NTAC Deferral The Company shall be entitled to defer annually the actual NTAC costs up to a capped level reflecting the total of (1) the actual amount of leveraged co-funding and grants used for electric technologies, renewable projects and marketing and promotions related to energy efficiency or other projects qualifying for funding under the SBC, and (2) the actual amount of Low Income Customer Assistance Program (LICAP) program generated arrears forgiveness.

2.6.3 ax Refunds Pa ents The Company is subject to ongoing examinations by federal and state tax-authorities. No amounts have been provided for in the financial forecast for resolution, either resulting in a refund or liability, of these examinations. To the extent that refunds or payments, including interest and penalties and net of any deferred taxes, individually exceed $ 500,000, the Company will defer such refund or payment for disposition in rates as set forth in Section 2.4.3.

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2.6.4 Additional IPP Contract Termination or Restructurin There may be additional opportunities to restructure or terminate IPP contracts not included in the current MRA. With respect to any such opportunities that are pure IPP buyouts, the Company will defer the up-front costs and amortize those costs over a five year period from the date of the buyout. The up-front costs will be accounted for on an accrual basis (including instances where the buyout payment is structured over a number of years). The Company will retain the savings from the buyout during the five year period of the PowerChoice settlement. Unamortized costs and savings remaining at the end of year five will be recovered or refunded in subsequent rate proceedings subject to prudence review.

With respect to restructuring of additional IPP contracts, the Company will submit to the Commission for approval and rate treatment each proposed restructuring, along with a calculation of the anticipated savings on both a nominal and NPV basis. The parties agree that the Company should be entitled to a share of savings to provide as a meaningful incentive to pursue restructuring. The sharing level, shall be determined by the Commission on a case by case basis.

2.6.5 Dis osition Of Existin Cost Deferrals Not Yet Reflected In Rates 2.6.5.1 ~Generall Deferred debits and credits existing as of the PowerChoice Implementation Date shall be netted against each other, and the net balance shall be added/subtracted to/from any deferrals provided for herein. Appendix E sets forth the accounts and estimated balances to be netted.

The Company will discontinue true-up accounting for electric unbilled services. Revenues recorded by the Company in each year of this settlement agreement will reflect both billed and unbilled revenues of the period.

2.6.5.2. Site I ves i a o a d m d a 'o Pro ra The Company has conducted a Site Investigation and Remediation program (SIR) the purpose of which has been to efficiently and effectively manage a number of environmental clean-up activities over an extended period of time. The principal activities involve investigation and, where necessary, remediation and monitoring of manufactured gas plant sites and industrial waste sites. The Company expects to continue these activities Page 12

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through the term of the settlement agreement. Under previous electric and gas rate orders, the Company has been permitted to defer cost differences from amounts provided for in rates. This treatment continues under the existing gas rate settlement through 1999. The Company will apply deferral accounting as described herein, to cost differences from amounts provided for in the financial forecast presented in Appendix C and described below.

The amount the Company proposes to include in rates has been affected by two recent events. First, the Company entered into an amended Order on Consent with the New York Department of Environmental Conservation (NYDEC) on May 12, 1997 that provides for an annual "cost cap" of approximately $ 15 million on expenditures by the Company for 52 sites covered by the Order. The cost cap is not an absolute limit on the Company's annual or total spending on these sites, but represents an understanding between the Company and the NYDEC that it is in the best interests of both parties to provide for efficient management of the investigation and remediation process. However, where the NYDEC or the Company believes that public health and safety concerns warrant accelerated expenditures, the cost cap will be exceeded. Also, total annual expenditures may be influenced by requirements at sites over which the Company has little or no control (for example, where the Company is a "potentially responsible party"). The amended order also does not establish the method of remediation, which may vary site-by-site, creating uncertainty as to total required expenditures.

The Company has also been actively pursuing insurance recoveries for environmental remediation activities. Through December 31, 1996, the Company has reached settlements with a number of insurance carriers, resulting in payments to the Company of $ 49.8 million before costs incurred in pursuing recoveries, which have amounted to $ 13.4 million. The net proceeds have been deferred for disposition in this settlement agreement. In establishing an annual allowance for true-up, the Company proposes to amortize the proceeds, net of costs, over a ten year period.

The resulting annual electric net allowance is approximately $ 10.2 million.

The Company is continuing to pursue additional recoveries, and to the extent that additional proceeds are received by the Company during the settlement period, these will be deferred, net of costs and will be used to offset SIR costs expected to be incurred in the years beyond this settlement period.

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The Company will apply the accounting and ratemaking for certain net gains of property, the sale of timber, etc. on such land and any related land/mining lease revenues as set forth in Section III, A. of the Gas Stipulation and Agreement in Case 95-G-1095 and 95-G-0091. The Company will be permitted to conform prospectively the accounting for the electric allocable portion of the proceeds to the outcome of any gas proceeding during the first three years of this settlement, or propose different treatment as part of a price caps filing for year four.

2.7 SFAS NO. 71 APPLICABILITY The Company supports this settlement agreement in part because the agreement is consistent with the principles of SFAS No. 71. The parties agree that during the terms of this settlement, the Company should be regulated in a way that would allow it to continue the principles of SFAS No. 71 to its regulated operations (RegCo). The, parties further agree that any material change in the allocation of risk as set forth in this settlement agreement, whether made during the approval process or during the term of the settlement agreement, could jeopardize the application of SFAS No. 71, as well as the financial stabilization and recovery of the Company.

It is the intent of the Parties, and the Commission by virtue of its approval of this Agreement, that the Agreement meets the accounting requirements of Statement of Financial Accounting Standards No. 71, throughout its term.

2.8 RATE FILING FOR PERIOD AFTER TERM OF THIS AGREEMENT The Company will be permitted to file a rate case for rates to be effective beginning immediately after the conclusion of the fifth year of this settlement agreement. If the Company elects not to file a rate case, unbundled prices (exclusive of surcharges described herein) would remain unchanged.

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SECTION 3.0 NIAGARAMOHAWKGENERATION 3.1 iNTRODUCTiON AND

SUMMARY

3.1.1 Generation Owned b Nia ara Mohawk Niagara Mohawk has agreed to divest all fossil and hydro generation as described below. Until such divestiture is completed, the company will functionally separate its fossil and hydro generation from its regulated activities. Divestiture will be accomplished either by an auction process or, if acceptable bids are not received, by creating a legally separate generation company as described herein.

Nuclear generation will remain part of RegCo, but will stay in a business unit functionally separate from RegCo's transmission and distribution and gas businesses. It will be subject to further study and disposition as described in Section 3.3 infra.

The rate treatment of generation owned by Niagara Mohawk is governed by the provisions of the Rate Plan described herein. However, for internal accounting purposes, and to define the generation component of unbundled prices, RegCo will enter into certain transition "contracts" with its fossil and hydro businesses and its nuclear business unit governing quantities and prices for fossil/hydro and nuclear generation, respectively.

These "contracts" are designed to achieve the rates to which Niagara Mohawk is committed under this agreement. The fossil/hydro contracts have an initial term of 3 years, and the Company has agreed to explore an additional 2 years through the auction design. The nuclear "contracts" have 5 year terms, consistent with the term of this settlement.

When the fossil and hydro units are sold or spun to separate entities, the RegCo contracts will be sold with them. In that event, the contracts may govern the purchase of energy by RegCo from these independently owned generators for the remainder of the 3, or, if extended, 5-year term of the contracts'. After that point in time, the parties anticipate that the new owners of the former NMPC generating units will sell their output at market

'The Contracts are intended to be structured as financial instruments allowing customers to purchase energy from the market immediately.

Page 15

prices, either into a spot market or under bilateral contracts. They will have no remaining contract with or obligation to RegCo for the sale of energy or capacity.

Niagara Mohawk will define the terms and conditions of a two year extension in the fossil/hydro contract as part of the auction plan, which is subject to separate PSC approval. If the PSC determines that the 2-year extension is appropriate, then the net auction proceeds and CTC will reflect the incremental/decremental value of the contract extension.

As the generation transition contracts expire or are terminated, and if a nuclear plant is retired, the energy subject to them will become unhedged.

The market prices of unhedged energy will be flowed through directly to customers, unless otherwise specified herein (See Section 4.0).

3.1.2 Genera 'o Purchased from IPPs Contracts with IPPs who are not parties to the MRA shall continue in force and effect, subject to their own terms, except that Niagara Mohawk shall continue to pursue opportunities to restructure, auction, or buy out the IPP contracts. Rate treatment for such additional restructuring or buyouts is discussed in Section 2.6.4 herein.

Purchases of generation from IPPs who are parties to the MRA will be governed by the MRA and contracts executed pursuant to the MRA.

Some IPPs who are signatories to the MRA shall have their contracts terminated as a consequence. These IPPs will have discretion to sell their output to others, to sell to Niagara Mohawk at market prices, or to close their operations, among other options. Other IPPs who are signatories to the MRA shall have their contracts restated or amended as described therein.

3.2 GUIDING PRINCIPLES FOR FOSSIL/HYDRO GENERATION AUCTION 3.2.1 A reem o Divest Foss'I/H d o Generation

~Div stitur Niagara Mohawk will commit to hold a broad-based auction of its non-nuclear generation assets (the auction) and at its discretion may include some IPP Power Purchase Agreements (inclusion of the IPP contracts will Page 16

be consistent with contractual rights or consent of the IPPs). Any hydro projects that are part of a nuclear license and any wind and solar generation projects described elsewhere in this agreement will be excluded from the auction and divestiture.

After the auction and/or spinoff transactions described herein are complete, Niagara Mohawk and its subsidiaries agree not to own any generation assets in New York State, with the exception of any sale/leaseback transactions and reorganizations necessary to close the MRA and except as otherwise provided for in this agreement. In the case of a reorganization transaction pursuant to the MRA, NMPC will either lease any project facilities acquired in the reorganization to a third party operator, or enter into a management and services contract with such a third party approved by the PSC, or operate the facility itself but only for the purpose of generating a source, or a backup source, of supply for its own use and not for re-sale. In addition, neither HoldCo nor RegCo will own any generation assets inside or outside of New York, except as otherwise provided for in this agreement. However, any other affiliate of HoldCo is not restricted in any way by this agreement from owning generation assets outside New York.

Because the PSC will review merger applications under the Public Service Law, nothing in this agreement will limit the Company's ability to merge with or be acquired by another entity owning generation. Moreover, nothing in this agreement will limit the Company's ability to form partnerships or affiliations with entities who own generation in New York State, provided that those partnerships or affiliations do not involve ownership of generation assets. An unregulated affiliate of HoldCo may enter into arms length contracts with an entity owning generation in New York State.

The sale/leaseback transactions, reorganizations, partnerships and affiliations and arms-length contracts referred to above are all subject to the restriction that they must not create a conflict between the interests of RegCo ratepayers and Company stockholders by tying the profitability of the Company to the profitability of another entity's generation business.

Any material violation'of the above restrictions may result in, inter alia, an affiliate being prohibited from further transacting business with end users within the RegCo service territory or divestiture of the affiliate, provided, however, that the Company shall be given the opportunity to explain why a violation has not occurred and to remedy any such alleged violation in Page 17

accordance with the procedures outlined in Section 9.3.9 regarding Corporate Structure and Affiliate Transactions.

~uction Niagara Mohawk commits to file a detailed auction plan within 30 days of the PSC Order approving the PowerChoice Settlement Agreement. The detailed auction plan will undergo Commission review, with an opportunity for comment by other parties, and approval. Winning bidders in the auction will be selected within 11 months of plan approval. Niagara Mohawk will use its best efforts to transfer title within 9 months of the selection of winning bidders, contingent on Niagara Mohawk and the buyer(s) receiving all necessary regulatory approvals to effectuate the transaction(s) ~

The auction process will include a screening stage to establish minimum standards for qualified bidders, and one or more bidding stages. The auction features may include the sale of the portfolio in its entirety, in any combination, or as individual plants or sites. (Likely sub-groupings are: (a) coal plants, (b) Albany, (c) Oswego, (d) 1-3 hydro plant combinations, (e) other generation, and (f) any IPP contracts included in the auction) After ~

completion of the transactions resulting from the auction process as described herein, no fossil or hydro assets included in the auction and receiving positive bids will remain part of Niagara Mohawk.

Niagara Mohawk retains the right to reject the following types of bids for any asset or group of assets:

(1) An bids t at are less th n zero:. The rejected bid will cap the level of mitigated stranded costs for assets whose bids were rejected.

The assets whose bids are rejected will remain part of RegCo.

(2) Bi sth t e r t rthanzerothataredeemedtoolow: Niagara Mohawk reserves the to right reject any and all bids that it deems too low. If it rejects all bids for an asset or group of assets, then it commits to form a subsidiary consisting of the assets with non-negative bids, and spin the assets to a legally separate generating company. The greater of the rejected bid(s) or the average trading value of the stock of the spun entity for the 30 trading days after the stock is publicly traded, will determine the market value of the assets for the purpose of mitigating stranded costs. Nothing in this agreement precludes the Commission from ordering an alternative Page 18

to the rejected bid approach in its review and approval of the Company's auction plan.

To the extent that the IPP contracts are grouped with other generation assets, Niagara Mohawk waives its right to reject the bids for that group.

3.2.2 Non-Nuclea Genera on Sale Incentive Niagara Mohawk will receive an incentive based on the net proceeds (gross sales price less auction costs (external third party costs)) of the auction as an incentive to obtain the maximum value in the sale of its generation assets, and to offset in part the stranded costs being absorbed by its shareholders as part of this settlement. The incentive will be recovered as described in Section 2.4.3. Niagara Mohawk will have the right to use the incentive in any manner it sees fit so long as it is consistent with this agreement. The incentive will not apply to bids rejected as described above.

The incentive will be calculated as follows:

(a) For all fossil/hydro assets sold, except for the Oswego Steam Station, the Company will receive an incentive equal to the following percentage of net auction proceeds:

0% of the proceeds between 0 and $ 250 million 12% of the proceeds between $ 250 and $ 500 million 18% of the proceeds between $ 500 and $ 750 million 10% of the proceeds above $ 750 million (b) For the Oswego Steam Station:

The Company will receive an incentive equal to the following percentage of net auction proceeds:

o 0% of the proceeds between $ 0 and $ 100 million o 5% of the proceeds above $ 100 million Page 19

3.2.3 Labor Issues Associated wi h Divestiture 3.2.3.1 Labor Contract Issues The parties recognize that the Company and the IBEW Local 97, AFL-CIO, are bound by a collective bargaining agreement effective March 1, 1996 through May 31, 2001, which includes a provision at Article II entitled "Territory." Article II provides that:

1. The territory covered by this agreement shall include all the franchise territory of the Company.

2. This agreement shall bind the successors of the Company by merger or consolidation as to the provisions and territory covered by this agreement. For the ur ose o reservin and r tectin work o ortunities a d ob securit f r the bar ainin unit it is a reed th t:

An absolute recondition to the sale lease transfer or takeover b sale transfer lease assi nment cor or te reor ani ation re eivershi or ank tc c in of h entir o r tionoran rt there f is that n ur haser trans ee less assi nee etc hall a r e and ecome art to andboundb all theterms nditi n nd obl'tio f thi BQMUD n i cre se radditional work of co tin i r erma e atu or d torin c n'unction wit th C m a 's existin f cilities or fr m a transfer of work c sion d b th lo in or rtial losin of an rati n revio sl ove ed b thisar m tsa be Page 20

deemed bar ainin unit work and shall be full covered b the terms c nditions and obli ations of this a reement.

(a) Nothing in this Settlement Agreement adds to, subtracts from, or otherwise modifies any rights, duties, or obligations set forth in that collective bargaining agreement, except as otherwise indicated below.

(b) The Company agrees to provide a copy of the collective bargaining agreement to any party that indicates an interest to bid in any auction of the Company's generation assets.

3.2.3.2 Retraining and Severance Costs The auction of generation assets could have an impact on Company employees. To address this prospect, up to $ 10 million of incremental retraining costs and severance payment, out placement, voluntary early retirement program and related costs, if any, incurred in 1999-2002 will be provided for and deferred by the Company for later recovery. These activities are limited to direct consequences of the disposition of fossil/hydro generation assets, including the bumping process as set forth in the collective bargaining agreement. Although the deferral is not defined in reference to specific levels of management or represented employees, it is the understanding of the parties that approximately 75% of the existing employees in fossil/hydro generation are covered by the collective bargaining agreement. The actual costs incurred, up to the $ 10 million cap, will be paid for through a reduction in the net proceeds of the auction that will determine stranded costs to be recovered.

3.2.4 Unhed edE er and heCTCforFoss'IH droAssets The net sales proceeds less the incentive will be used to retire the capital structure. Consummation of the sale pursuant to an approved auction will establish the level of stranded cost recovery for the assets sold. Niagara Mohawk will be entitled to a reasonable opportunity to collect, in the CTC, or where applicable, exit fees, all remaining stranded costs from the non-nuclear assets sold in the auction.

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When the fossil/hydro assets are sold or spun, and when RegCo's contract with the fossil/hydro assets expires, the quantity of energy that was previously purchased from those assets will become unhedged. The contribution to the CTC associated with the fossil/hydro assets will become a fixed amount reflecting the difference between the book cost of the assets and the market proceeds received for them (as adjusted, when applicable, for the generation auction incentive and for retraining and severance costs). The risk associated with the market price of the unhedged energy will be shifted to customers except as otherwise provided herein.

3.3 GUIDING PRINCIPLES FOR NUCLEAR ASSETS 3.3.1 S ud to Determine Fu ure Dis osition The nuclear assets held by Niagara Mohawk will remain part of RegCo as a separate business unit until they are either transferred or divested.

Niagara Mohawk will continue to pursue Statewide solutions for its nuclear assets through discussions in formation of NYNOC and in any generic proceedings established by the Commission. Statewide solutions for nuclear plants will be explored before other potential solutions.

The proposed solutions for Niagara Mohawk's nuclear plants are contingent on the following:

treatment of the nuclear plants meets all requirements of the NRC, and there is consistent regulatory treatment for sale and cost recovery for all the co-tenants of NMP2.

Absent a Statewide solution, Niagara Mohawk commits to file a detailed plan, analyzing the proposed solutions for its nuclear assets, within 24 months of this Settlement Agreement. The plan will consider the feasibility of auction, transfer, and/or divestiture of Niagara Mohawk's nuclear assets.

The detailed plan will undergo an appropriate level of Commission review and approval to be concluded on an expedited basis.

3.3.2 ecove of Stranded Costs Subject to price-cap considerations discussed herein, nuclear will remain subject to cost-based regulation including a rate of return for the five year Page 22

term of this agreement or until the nuclear plants are divested or another statewide solution is developed.

RegCo will be allowed annual deferrals during the term of this settlement for changes in costs for categories which are beyond management's control as described in Section 2.6.1.

Customers will not be allowed to negotiate one time buyouts for all nuclear costs.

Subject to other provisions in this settlement, sunk capital costs, fuel inventory, and material and supplies inventory, and all decommissioning and shutdown costs (including 08M rampdown, property taxes and insurance, and fuel and low level waste storage and disposal) are considered to be unavoidable. To the extent that such cost levels are deemed prudent, they will be recovered through a non by-passable competitive transition charge.

Accordingly, Niagara Mohawk will be entitled to a reasonable opportunity to recover all nuclear sunk and decommissioning costs allocable to the five-year period of the settlement agreement (as described in Sections 3.3.3, 3.3.4 and 3.4.3) through the CTC or, where applicable, exit fees, during the five-year term of this agreement. If the assets are divested within the term of this agreement, Niagara Mohawk will be allowed to recover the full decommissioning costs and the return of and on the nuclear assets less the market value received in divestiture through the CTC or, where applicable, exit fees.

3.3.3 Cost Trea nt if a Nuc ear Plant is Sold Transfe red or Divested As part of its plan analyzing the feasibility of auction, transfer or divestiture of its nuclear plants (see Sec. 3.3.1), the Company will propose treatment for recovery of any remaining stranded costs consistent with the intent that (a) unhedged commodity risk be shifted to customers, and (b) that the CTC reflect revised nuclear costs for the Company (including recovery of sunk costs net of sale proceeds) and any remaining cost obligations that stay with the company such as decommissioning costs.

3.3.4 Cost Treatment in the Event of a Plant Retiremen If Niagara Mohawk decides to retire or abandon a plant before a sale or auction, then it agrees to file an economic study with the Commission that justifies the decision. The Commission will review the study on an Page 23

expedited basis, and determine the prudence of the retirement decision before the plant is retired or abandoned.

If the Company retires a nuclear plant, the following will apply:

~ Until the Company announces its intent to retire a plant, it will be responsible for replacement power costs as outlined in Sec. 3.4.3.

~ On the date that the Company announces that it plans to retire the plant, if the plant is not then operating, the Company will begin passing through to customers (through the Commodity Adjustment Charge) the difference between the spot market price of energy and the nuclear plant's avoided fuel costs. Such passthrough will be in the form of temporary rates, subject to refund, as described below. On that same date, the difference between the level of nuclear 08M and decommissioning costs embedded in rates and the actual level of 08 M and decommissioning costs incurred will be deferred on a monthly basis for later recovery. In any month in which such deferral shows a net credit and the spot market price exceeds the plant's avoided costs, the credit will be used to offset the passthrough. In the event the plant is operating when the Company announces its plans to retire the plant, the passthrough described above will commence on the date the plant is permanently shut down.

~ The Company will prepare and file with the Commission a study assessing the economics of continued operation versus retirement, and explaining why it believes a retirement is prudent and in the ratepayers'nterests. The study will include a proposal to account for, defer and recover estimated remaining unfunded decommissioning costs. The costs passed through to customers above will be subject to refund or adjustment, pending the Commission's finding that the retirement was prudent and that the cost impacts are justified.

~ Upon PSC approval of the retirement decision, the CTC (competitive transition charge) for the nuclear plant will be recalculated consistent with the intent (a) that unhedged commodity risk be shifted to certain customers, and (b) that the CTC reflect revised nuclear costs (sunk costs and decommissioning costs (including rampdown and shutdown costs), and reduced operation and maintenance costs (including fuel cost savings).) The PSC approval will also address the amortization (in excess of $ 500,000 per change) schedule of any deferral balance as created in Section 2.6.1.

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In the event of a nuclear plant retirement, replacement power costs (RPC) (defined herein as the difference between the cost of commodity purchased at market prices and the cost of nuclear fuel),

offset by any operations and maintenance cost reductions, should be flowed through to all customers that pay CTCs. It is the intent of the parties that cost deviations resulting solely from variations between actual and forecast market prices be flowed through only to customers with floating CTCs. The RPCs for customers with fixed CTC's will be determined based on forecasted rather than actual market prices. The forecast market prices used for this purpose will be based on the option chosen by the customers pursuant to Section 4.2. Forecast RPCs, offset by 08 M savings in years 1 through 3, for SC 3A customers will be deferred for recovery from SC 3A customers in year 4 and beyond, subject to the price caps set forth herein.

3.4 TRANSITION CONTRACTS WITH GENERATORS 3.4.1 Desi n Features Common to Al Generators 3.4.1.1 Transition Contract Overview The transition contracts utilize financial contract structures (financial swaps - Contracts-For-Differences (CFDs) and financial call options-swaptions) to allow the collection of strandable costs for a fixed time period, while requiring generators to participate in the market.

The fossil/hydro and nuclear contracts operate only as internal accounting devices within Niagara Mohawk until,such assets are divested.

Details concerning financial contracts, including a general description of the primary design components and the general structure of the financial contracts, are provided in Appendix F and subsequent sections of this document.

3.4.1.2 Primary Design Components Financial contracts have three primary design components: contract price, contract quantity, and contract term.

Page 25

~ The contract prices were developed using forecasted costs.

Contracts will have a two part pricing design that includes a fixed cost charge and a volumetric price. For the swaptions, the fixed cost charge will become the reservation fee in the contract.

~ The contract quantities have been developed primarily through the use of forecasted generator output to serve existing Niagara Mohawk retail load in Promod. Generator loads are metered at the generator busbar.

~ The term for the financial contracts have been established based on the contract price, contract quantity, and total strandable costs to be collected. Financial contracts that have been negotiated between RegCo and generators will begin on the date that the existing Power Purchase Agreements of Settling IPPs are terminated.

The general structure of financial swaps and swaptions is described in Appendix F.

3.4.2 NMPC Fossil a d dro Generation Transition Contract s There will be separate financial swaption contracts for each Niagara Mohawk fossil unit. The contracts are established based on the forecasted revenue for fossil and hydro generation that fit within Niagara Mohawk's retail price commitments. The forecast of energy output to serve retail load serves as the basis for the contract quantity of the transition contracts. Tables 3-1a and 3-1b contain the aggregate annual contract quantities and contract prices and revenues for fossil and hydro.

The contract quantity for hydro generation will be adjusted annually to reflect variations in actual water flow. The expected output less 650 GWH (i.e., 2299 GWH) has a variable price of zero. The actual output less 2299 GWH is priced at the variable price described in Table 3-1b. The forecast of wholesale sales margins has been imputed as a credit against the generation fixed payment in the transition contract for each fossil unit.

Three-year transition contracts were developed for Niagara Mohawk fossil and hydro assets, which will begin on the PowerChoice implementation date. Niagara Mohawk will evaluate the cost/benefit of extending the transition contracts for two additional years in the auction process.

Page 26

The quantity available under the swaption will be limited to the capacity of generation assets sold or spun (adjusted for availability, maintenance outages and unit minimums, response rates and cycling limitations, etc. ).

Niagara Mohawk's fossil and hydro generation and the transmission and distribution facilities were designed and constructed as integrated facilities with interdependent control and protection functions. Niagara Mohawk will prepare a separation agreement, prior to implementation of the contracts, which describes points of demarcation and any shared services agreements between RegCo and the entity purchasing generation.

Table 3-1a Fossil Contract Quantities, Contract Prices, and Revenue Contract Variable Annual Fixed Retail Total Quantity Contract Payment Revenue '$

Revenue ~

(GWH) PriceA ($ million) million) ($ million)

($ /MWH) 1998 3,532 $ 14.90 $ 139.6 $ 192.2 $ 291.3 1999 3,562 $ 14.62 $ 137.8 $ 189.9 $ 282.1 Will vary by unit.

Retail revenues are the sum of (1) contractual payments by RegCo to the generators under the contract, and (2) revenues received by the generators for physical sales into the spot market for the contract quantities.

Total revenues are retail revenues plus imputed wholesale market revenues.

Page 27

Table 3-1b Hydro Contract Quantities, Contract Prices, and Revenue Contract Variable Contract Annual Fixed Quantity Price" Payment Retail Revenue (GWH) ($ /MWH) ($ million) ($ million) 1998 2,949 $ 10 $ 62.4 $ 68.9 1999 2,949 $ 10 $ 58.9 $ 65.4 2000 2,949 $ 10 $ 60.6 $ 67.1 Applies to 650 GWH Retail revenues are the sum of (1) contractual payments by RegCo to the generators under the contract, and (2) revenues received by the generators for physical sales into the spot market for the contract quantities.

3.4.3 Nuclear Generation Transition Contrac s For the five year term of this agreement Niagara Mohawk will have a transition contract (financial swap) for each of its nuclear plants reflecting its forecast level of going forward costs. This forecast will be updated for years four and five as part of the rate filing. Niagara Mohawk will terminate the transition contract if it retires a unit during the term of the contract, and the energy associated with the retired unit will become unhedged.

All forecast costs to operate the nuclear units are included within the rate goals in Tables 4-1 and 4-2.

After the initial five year period, RegCo will make a filing to the Commission for continued transition cost recovery treatment for the nuclear units.

The contract quantities, contract prices, and revenues for each unit are shown in the Tables 3-2a and 3-2b.

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Table 3-2a NM1 Contract Quantities, Contract Price, and Revenue Contract Variable Annual Fixed Quantity Contract Payment Revenue (GWH) Price ($ 1,000) ($ 1,000)

($ /Mwh) 1998 4,564 $ 5.46 $ 235,084 $ 260,003 1999 4,027 $ 4.79 $ 239,240 $ 258,529 2000 4,577 $ 4.71 $ 233,994 $ 255,552 2001 4,027 $ 4.73 $ 247,175 $ 266,223 Table 3-2b NM2 Contract Quantities, Price and Revenue Contract Variable Annual Fixed Quantity Contract Payment Revenue (GWH) Price ($ 1,000) ($ 1,000)

($ /Mwh) 1998 3,079 $ 4.65 $ 231,124 $ 245,441 1999 3,489 $ 4.87 $ 240,721 $ 257,712 2000 3,087 $ 4.57 $ 239,839 $ 253,947 2001 3,489 $ 4.73 $ 239,038 $ 255,541 Note: Year to year variations are due to refueling and scheduled outages.

3.4.4 Settlin Inde dent Power Producers SIPPs A detailed description of the contracts for the Settling IPPs is included as Exhibit A of the Master Restructuring Agreement in Appendix A. An outline of the negotiated schedule of aggregate contract quantities, weighted average contract prices, and contract term are contained in Table 3-3. Variations in contract costs due to the indexing provisions of the contracts will be passed through to customers after year three, subject to the provisions described herein. The form of the individual Page 29

contracts remain to be negotiated between Niagara Mohawk and the IPPs. The dominant type of contracts will be financial swaps and swaptions. However, there will be some physical bilateral contracts between Niagara Mohawk and some of the IPPs.

Table 3-3 Settling IPP Contract Quantities, Contract Price, and Revenue Contract Contract Total Quantity Price Revenue (GWH) ($ /Mwh) ($ 1,000) 1998 4,993 $ 45.13 $ 225,357 1999 4,993 $ 45.56 $ 227,484 2000 5,043 $ 42.91 $ 216,399 2001 5,083 $ 44.90 $ 228,215 2002 5,089 $ 46.17 $ 234,965 2003 7,108 $ 50.18 $ 356,645 2004 8,118 $ 52.60 $ 427,012 2005 9,131 $ 54.51 $ 497,760 2006 9,139 $ 56.93 $ 520,238 2007 9,151 $ 60.24 $ 551,219 2008 8,353 $ 60.99 $ 509,440 2009 8,353 $ 61.11 $ 510,424 2010 353 $ 40.70 $ 14,367 2011 353 $ 41.90 $ 14,791 2012 353 $ 43.20 $ 15,250 2013 353 $ 44.50 $ 15,709 3.5 OTHER INDEPENDENT POWER PRODUCERS (IPPs)

Table 3P shows the current forecast of payments to the 109 IPP contracts that are not part of the buyout group. The contract quantities and prices represent the forecasted amounts in the existing Power Purchase Agreements (PPAs).

Page 30

RegCo will update the level of transition cost recovery for approximately 109 IPP PPAs in the rate filing adjusting for rates in years four and five of this Agreement consistent with Section 2.6.4 of this Agreement. The forecast contract quantities, contract prices, and revenues in aggregate are shown in Table 3-4.

Table 3Q Other lPP Contract Quantities, Contract Price, and Revenue Contract Total Contract Total Quantity Price Revenue (GWH) ($ /Mwh) ($ 1,000) 1998 3,839 $ 64 $ 246,530 1999 3,839 $ 66 $ 255,059 2000 3,839 $ 68 $ 261,913 2001 3,839 $ 64 $ 246,207 Page 31

SECTION 4.0 ELECTRIC PRICES 4.1 d OVERVIEW OF BUNDLED AND UNBUNDLED PRICES In accordance with the schedule contained in Section 8, over the life of this agreement all Niagara Mohawk customers will come to have the option of selecting their own energy supplier.

Services and prices will be unbundled for all customers who have the option of choosing their own retail supplier even if they elect to continue taking energy service from Niagara Mohawk. The unbundling of services and prices will make available to customers who are eligible for retail access cost information for generation, transmission, customer service and distribution services.

An essential predicate for unbundling is the establishment of a Competitive Transition Charge (CTC).

Both the bundled and unbundled prices called for under this Agreement will be implemented through the filing of tariffs with the appropriate regulatory agencies.

The Company will continue to work with the parties and resolve any outstanding issues so as to file unbundled prices on a minimum of 30 days prior to the PowerChoice Implementation date.

1.1.1 ~Bd d Appendix D4 sets forth the proposed prices for the major service classifications for the term of this agreement and shall become effective on the PowerChoice Implementation Date.

4.1.1.1 Residential and Commercial Class Price Levels

'he calculations contained in Appendix D assume a PowerChoice implementation date of January 1, 1998. If the PowerChoice implementation is later than January 1, 1998, then the prices shown in Tables 4-1 and 4-2 and Appendix D will apply to the first, second and third years of the settlement agreement, except for the table in Appendix D which reflects the market price forecast. For those market price forecasts, the calendar year amounts will be proportionately weighted to arrive at the market price forecast for the split rate year (e.g. if the implementation date slips to April 1, 1998, the first year's market price will be equal to 9/12 of the 1998 price and 3/12 of the 1999 price).

Page 32

Table 4-1 summarizes the projected class-average prices for Service Classifications 1, 2 and 3, including the effects of the System Benefits Charge and currently planned gross receipts tax reductions. The Company expects that 1997 prices will generally be 'consistent with 1995 prices. If 1997 results vary, the percentage reductions may change but the price levels will not.

TABLE 4-1 AVERAGE ELECTRICITY PRICES FOR THE YEARS 1998-2000 BY CUSTOMER CLASS(C) 1997(A) 1998 1999 2000 SC1 Cents/KWh 12.724 12.623 12.503 12.286

% Change (B) -0.79% 1 74% -3 44%

SC1B Cents/KWh 8.557 8.557 8.557 8.557

% Change 0.00% P PP% P PP%

SC1C Cents/KWh 9.628 9.626 9.626 9.626

% Change -0.02% -0.02% 0 02%

SC2ND Cents/KWh 16.492 16.37 16.224 15.968

% Change -P 74% -1.63% -3.18%

SC2D Cents/KWh 11.945 11.853 11.747 11.562

% Change 0.77% -1.66% -3.21%

SC3 Cents/KWh 10.43 10.222 10.198 10.103

% Change -1.99% -2.22% 3 14%

(A) Based on 1995 Freeze Prices applied to Company's 1997 Sales Forecast.

(B) Percentage reductions are as calculated based on 1997 projected prices.

Actual percentage reductions may vary based on actual 1997 results.

(C) Inclusive of SBC and GRT.

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4.1.1.2 Industrial and Large Commercial Price Levels Table 4-2 summarizes the Company's estimates of the individual class rate levels that would result from this settlement including the effects of the System Benefits Charge and currently enacted gross receipts tax reductions.

Table 4-2 Average Electricity Prices for the SC3A/ SC4(>2MW) / ED Programs/SC11 1997 1998 1999 2000  % Change QmhLkSh (A) Qmhl!QMh QmhL~W QmhlkKh fmm ~7 SC3A / SC4 / 7.98 5.99 24.95%

ERIR/EDR Special Contracts 7.84 5.77 -26.40%

EDZR 7.99 3.00 -62.44%

Total Class (B) 7.93 6.28 6.0 5.84 26 38%

(A) Values are full tariff based on 1995 Freeze Prices and Company's Hours Use Rate Design applied to Actual 1996 Billing Data (B) Individual customer reductions may vary from the class average. Includes SBC and GRT By the year 2000, Niagara Mohawk will supply and deliver power to larger commercial and industrial customers (S.C. No. 3A, large S.C. No. 4 and S.C. No. 11) at a forecasted class weighted average price (including ERIR, EDR and EDZR discounts) of approximately $ 0.0585 per KWh (based on current load and price forecasts) inclusive of all currently enacted New York State gross receipts tax reductions. If the currently enacted gross receipts tax reductions are repealed, these prices will-increase accordingly.

The company has allocated certain funds ($ 17.1 million in 1998, $ 17.8 million in 1999 and $ 18.3 million in 2000) to incremental, uncommitted S.C. No. 11 and EDZR/EDR/ERIR discounts as a means-of achieving its price goals. These funds are in addition to those funds necessary to Page 34

develop the phase-in plan for existing EDZR customers as described in Section 4.12. To the extent that the price goals are not met and these incremental uncommitted discounts are not ultimately issued, the company shall flow back either the unused discounts or an amount necessary to achieve the price goals, whichever is less, to S.C. No. 3A customers. Should implementation of this provision become necessary, it will be accomplished via a one time pass-back initiated during the 12-month period immediately following year three of this agreement.

Comparisons between annual price goals and actual billing experience shall be recorded following each of the first three years of this agreement, with carrying charges applied to the equivalent revenue discrepancies (plus or minus) in deriving an accumulated three year net discrepancy.

The net revenue discrepancy so determined will be compared to the remaining uncommitted incremental discounts (as may exist). To the extent that the price goals are not met, the lesser of these two quantities shall become the amount to be passed back to S.C. No. 3A customers.

The level of year 4 and 5 uncommitted incremental discounts will be determined in the proceeding setting rates for years 4 and 5, but in no event will the Company propose or recommend uncommitted incremental discount levels for years 4 and 5 less than the level of any excess uncommitted incremental discounts so determined after year 3. Should the Company forecast that actual incremental discounts will exceed the incremental uncommitted discount funds discussed above, the Company will notify the Parties, and the Company or any Party will have the right to petition the Commission for ratemaking treatment to fund additional discounts that may be needed for business retention and revitalization purposes.

M hodolo for Arrivln at Bundled Prices 4.1.2.1. Calculation of "Base" 1997 Rates Before Decreases The starting point for establishing the bundled retail prices that will apply for the duration of this agreement is the retail base rates that became effective April 27, 1995 adjusted to capture surcharges. To capture the effect of external surcharge mechanisms that were in effect at that time, Niagara Mohawk rolled into base rates all surcharge balances that existed as of December 31, 1995. Surcharges applied volumetrically (e.cC., FAC, DIRAM, IPP buyouts and fuel amortization) were translated into annual rates per KWh and added to the energy components of base rates; surcharges applied on a net base rate revenue basis (e.cC,, NERAM, MERIT, Regulatory Deferral and Extension of Suspension) were translated into class specific factors and applied to the net base rate revenue components of base rates. The resulting prices, when applied to Page 35

an individual customer's 1995 usage, would produce the same electric bill amounts as would be produced by the application of base rates and individual surcharges factors. The adjusted prices were applied to 1997 sales to produce 1997 revenues and 1997 class-average prices.

4.1.2.2. Application of Percentage Decreases for SC 1, 2, & 3 Given the class-average prices developed above, the price reductions were implemented for residential (S.C. No. 1), small commercial (S.C. No.

2, and S.C. 2 Demand (S.C. 2D)) customers using the following five-step procedure:

(1) The Company will reduce prices for these customers by approximately 2.2% over three years following the effective date of tariffs implementing the Settlement Agreement prices (the "PowerChoice" Implementation Date)'.

(2) Class-Average 1997 prices were multiplied by projected 1998 sales to estimate 1998 revenues and class-average prices under the preceding year's rates. These average rates were reduced by approximately 0.7% to get 1998 class-average prices.

(3) Class-average 1998 prices were multiplied by the forecast sales for 1999 to estimate 1999 revenues and class-average prices under the preceding year's rates. These average rates were reduced by approximately 0.7% again to derive 1999 class-average prices.

(4) Class average 1999 prices were multiplied by the forecast sales for 2000 to estimate 2000 revenues and class average prices under the preceding year's rates. These average rates were reduced by approximately 0.8% to derive 2000 class-average prices.

(5) Additional savings in New York State Gross Receipts Tax will be applied, as realized, pursuant to Subsection 4.1.4.

Smaller large general service (S.C. No. 3) customers and smaller customers taking a portion of their electric requirements from NYPA (S.C.

No. 4 customers under 2 MW) would receive an approximate 2.2%

phased in reduction over three years (composed of approximately 2.0% in 1998, an additional 0.1% in 1999 and an additional 0.1% in 2000). These customers will also receive the phased in reductions in New York State 5 As further described in Section 2, tariffs implementing the Settlement Agreement prices cannot become effective until certain conditions have been satisfied.

Page 36

gross receipts tax, as they are realized, as specified in Section 4.1.4 below.

4.1.2.3. Calculation of SC-3A Rates As described in Section 4.1.1.2 and illustrated on Table 4-2, S.C. No. 3A rates have been designed to achieve targeted prices.

4.1.3 Relations to Dai lea Pilot Niagara Mohawk is implementing a pilot retail access program for commercial farmers and food processors in compliance with the Commission's June 23, 1997 Order Establishing Retail Access Pilot Programs and September 18, 1997 order concerning compliance filings (the "Pilot Program Orders" ).'he lost margins associated with the Dairylea pilot program will count towards rate decreases outlined in Section 4.1.2. Such lost margins will be allocated to participating classes according to the estimates shown in Table 4-3.

Table 4-3 Projected Cost of Dairylea Pilot Lost Mar in SC1 $ 172,800 SC1B $ 11,600 SC1C $ 490,000 SC2ND $ 11,000 SC2D $ 118,000 SC3 $ 395,400 SC3A 5227~ 5 IO

$ 1,470,300

-'Lost margin estimate assumes less than 100% participation. With 100%

participation, the lost margin would be approximately $ 5 million.

6 Case No. 96-E-0948, Pro am for Farm a

a F od Proce ec i iv n usto e Esta i a CC Page 37

4.1.4 Pla ned Reductions Associated with Gross Recei ts Tax Reform New York State has enacted legislation to reduce its gross receipts tax (GRT) by a phased-in 1% beginning in October 1998. These GRT reductions will be applied as realized.

4.1.5 Potentia Securitization Savin s To the extent that it is not otherwise prohibited by legislation, the benefits of securitization should be used to further reduce prices to S.C. No. 1, S.C. No. 2 and S.C. No. 3 customers. The Company and Staff recommend that the Commission consider allocating a portion of such savings for energy efficiencies and clean technologies.

4.2 CTC AND MARKET PRICE HEDGING 4.2.1 Overview For most customers, the CTC floats inversely with the market price in order to guarantee the fixed total price levels in Years 1-3. The Commodity Adjustment Charge (CAC) is the mechanism that accomplishes this variation in the CTC.

Customers will have the option of a fixed CTC, as described in section 4.2.5 below.

In general, as more of Niagara Mohawk's supply portfolio becomes unhedged, more of the market price risk of energy is passed on to customers.

4.2.2 General Calculation and Application Except as otherwise provided in this agreement, all customers, regardless of their energy supplier, will be assessed a non-bypassable CTC to cover their strandable cost allocation. During the first three years of this agreement, the CTC.for each service classification will be derived by deducting from the Company's bundled retail prices, i) an Energy Commodity Charge, ii) a transmission charge, and iii) a customer service and distribution charge. During years 4-5, the CTC may not be reduced to totally offset increases in transmission or distribution prices. In Page 38

addition, the CTC will be subject to certain adjustment mechanisms, deferrals and incentives as described in Section 4.3 .

As described in Subsection 4.2.3, the CTC will be a function of the market price of electricity. This approach will produce a location-specific CTC.

4.2.3 Commodity Adjustment Charge A Commodity Adjustment Charge will be implemented to adjust the CTC for those customers with floating CTCs. This will generally include customers served under S.C. No. 1, S.C. No. 2 Demand (S.C. No. 2D),

S.C. No. 2 Non-Demand (S.C. No. 2ND), S.C. No. 3, and S.C. No 4 (customers < 2MW only).

The CTC for each service classification reflects a location specific estimate of the market price of electric energy and capacity. The Commodity Adjustment Charge will be implemented by location, voltage delivery level, load factor and service classification in order to reconcile the actual market price with the forecast of market prices upon which the CTC is initially set.

Customers served on S.C. No. 3A, S.C. No. 4 (greater th'an 2 MW only),

S.C. No. 11, and certain other customers (described in Section 4.2.5) will not be subject to the Commodity Adjustment Charge.

4.2.4. Significance of Hedged and Unhedged Energy The Company has hedged a large portion of its transition costs through the contracts described in Section 3. Except as otherwise provided in Section 4.2.5, the Company is bearing the risk of the amount of unhedged energy in the forecast, except for any changes in prices associated with unhedged energy resulting from a nuclear plant retirement (which shall be addressed as provided in Section 3.3.4). Over time, as described in detail in Section 3.2 for fossil/hydro assets, and Section 3.3 for nuclear assets, an increasing proportion of energy purchased by RegCo will become unhedged. The parties agree that the CTC in years four and five should be designed: (1) to recover allowable stranded costs and (2) to pass through to certain customers the market price of unhedged energy. In the event of a nuclear retirement within the first three years of this agreement, the related unhedged energy effects on the CTC are discussed in Section 3.3.4.

Page 39

4.2.5 CTC Options and Market Price Forecast The Company will make available fixed CTC options as described below.

The options described below do not preclude adjustments to the CTC that may otherwise be provided for in this agreement. If the Company should retire a nuclear unit, energy prices and the CTC will be adjusted in a manner consistent with Section 3.3.4.

4.2.5.1 For S.C. No. 3A and S.C. No. 4 (>2 MW) customers:

Thirty days prior to the PowerChoice implementation date, SC¹ 3A and SC¹ 4 customers greater than 2 MW will have a choice of three pricing options. Following this one time thirty day selection period, the only offer available to S.C.¹ 3A customers will be the default (option 1) program described below. Tariffs for each of these options will be available at, least sixty days prior to the PowerChoice Implementation Date, subject to Commission approval Existing SC¹11

~

customers with expiring contracts will have the choice of either taking the standard tariff or extending their SC¹11 contracts on the same terms and conditions through the term of this settlement agreement. Such SC¹11 customers choosing the standard tariff will only be allowed to choose option 1. The implementation of these options will be in conjunction with the Company's hours use design and individual customer load profiles.

(1) Option 1 (Default): Fixed CTC and Floating Commodity Price Compute CTC to reflect the "revised" market price forecast in Appendix D, page 28. The estimate of the market price forecast varies by region, service class, load factor and voltage level.

The Floating Commodity Price will be the Energy Commodity Charge discussed in Section 4.4.1.

Appendix D contains the market price forecast (also called energy backout rate) for each service classification and voltage level Appendix D will be adjusted for the final rate

~

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year as discussed in Section 4.1.1. These prices are measured at the customer meter. Market prices for years four and five will be reforecasted in year three.

(2) Option 2a: Fixed CTC and Fixed Commodity Charge This option will be designed with the "original" market price forecast (contained in Appendix D at page 27),

such that if all SC-3A customers choose this option, the rate goal will be met.

Customers commit to contract to purchase forecast quantity of electricity from Niagara Mohawk for the five year period.

(3) Option 2b: Customers who select Option 2a can purchase the right to exit the contract on six months notice. The purchase price of the option to exit will be provided by the Company as part of its tariff filing. The fee would be paid during the five-year period regardless of whether the option to exit the contract is exercised.

(4) Prior to December 1, 1997, the Company must elect one of the following alternatives.

a) After customers have chosen option 2a or 2b, the Company will solicit and award bids for the right and obligation to provide the commodity to customers that choose Option 2a or 2b, but only subject to customer approval; or b) The Company will offer a 5-year fixed CTC, Floating Commodity Price Option (in addition to the 3-year fixed CTC Floating Commodity Price Option, above) which shall be based upon the "original" market price forecast underlying Options 2a and 2b, above.

(5) For all customers who choose an alternative supplier and return, they return to the Floating Commodity Price and the fixed CTC option originally selected by the customer. If a customer's SC-11 contract expires and they do not choose Page 41

to renew it, then they return to the default of a floating commodity price and a fixed CTC.

4.2.5.2 For S.C. Nos. 1, 2, 3 customers:

(1) Option 1: Fixed CTC and Floating Commodity Price and Fixed CTC An amount of energy up to 75 percent of the amount of forecasted energy necessary to serve SC-3A customers choosing Option 2 (flixed CTC and fixed commodity charge) will be made available for those SC-1, 2 and 3 customers who have retail access.

Customers who choose this option will have their CTC based on the "revised" market price forecast, adjusted for region and load shape as shown in Appendix D, page 28.

For customers who choose an alternative supplier and return, they return to the default of Option 2, floating CTC and floating commodity price.

(2) Option 2 (Default): Floating CTC and Floating Commodity.

The CTC is adjusted to reflect the level of unhedged energy after adjustments to reflect customers choosing the fixed CTC and floating commodity option described above.

(3) The parties will continue to pursue mechanisms to increase the availability of fixed CTCs for SC 1, 2, and 3 customers in Years 3 and beyond. Any final resolution of this issue will not negate the Company's obligation to cover unhedged energy in years one through three.

4.2.6 Adjustments to the CTC in Years Four and Five The CTC will be adjusted to reflect a new market price forecast for years four and five. The CTC may also be adjusted in years four and five due to generation-related deferrals, recovery of a generation sale incentive (Section 2.4.3), and if a nuclear plant is retired, sold or divested (Section Page 42

3.3). In addition, variations between the actual and forecasted cost of the indexing provisions of certain IPP contracts, as described in Section 2.4, will be passed through the. Commodity Adjustment Charge beginning in year four.

4.2.7 Alcan and Sithe/Independence Alcan and/or Sithe/Independence's stranded cost responsibility with t t service to Alcan will be handled in accordance with the Order issued and effective 11-3-94 in Case No. 94-E-01 36. Accord'n i g I y, Alcan and/or Sithe/Independence will not be assessed a CTC access fee or exit fee for Alcan load served by Sithe/independence, except as provided for in Case No. 94-E136. The Company reserves the right to petition the Commission for changes in those obligations in accordance with the Order in that case.

4.3 SURCHARGE AND RECONCILIATION MECHANISMS 4.3.1 Surchar e Mechanisms That Will Be Abolished in, ',

Upon the / owerChoice Implementation Date, the following surcharge mechanisms will be abolished:

Rule 29: Ad'ustment in Accordance With Changes in The Cost of Fuel (inclusive of the FAC, fuel amortizations, and DIRAM), excep t that a the d e ferre d FAC fuel u balance at the PowerChoice Implementation Date will be flowed through to customers over the next two complete monthly billing cycles following the PowerChoice Implementation Date.

Rule 43: Adjustment of Charges Pursuant to the Measured Equity Return Incentive Term (MERIT)

Rule 44: Adjustment of Charges Pursuant to the Niagara Mohawk Electric Revenue Adjustment Mechanism (NERAM)

Rule 46: Adjustment of Charges Pursuant to the Regulatory Surcharge Mechanism Rule 47: Adjustment of Charges Pursuant to the Extension of Suspension Period Surcharge Mechanism Page 43

4.3.2 Munici al Gross ece ts Tax Surchar e For the terms of this Agreement and beyond, the surcharge for PSC No.

207 Rule 32- Increase in Rates Applicable in Municipality Where Service is Supplied, more commonly referred to as Gross Receipts Tax (GRT), will continue to be applied as a surcharge due to variances in tax rates by municipal taxing authorities.

4.3.3 NYPA H dro owe Benefit Reconciliation A New York Power Authority (NYPA) Hydropower Benefit Reconciliation Mechanism for residential service will be established. Under certain contracts for the sale of low-cost hydropower to Niagara Mohawk, the price benefits of that power are to be passed on to the Company's residential customers. As a result of the elimination of the FAC, a new reconciliation mechanism must be established to ensure that Niagara Mohawk can fulfillthis requirement.

Because 1995 FAC surcharge balances were rolled into 1995 base rates, as described in Subsection 4.1.2, the resulting residential prices reflect NYPA hydropower benefits that accrued in 1995. Accordingly, the Company will perform an annual reconciliation comparing actual benefits received in 1998 and subsequent years with those that were received in 1995. The variance resulting from the reconciliation (credit or debit) will be applied as an annualized reconciliation factor during the 12 months following completion of the reconciliation. For residential customers who are ineligible for retail access, a reconciliation factor will be applied to their overall bill. For residential customers who have a choice of power suppliers, a reconciliation factor will be applied to the CTC.

Due to reporting lag, the 1998 calendar year reconciliation cannot be performed until February 1999, which will delay the application of the annualized reconciliation factor until March 1999.

4.3.4 S s e Benefits Cha e As further described in Section 7, a System Benefits Charge (SBC) will be implemented as part of customer service and distribution charges, although stipulated as a distinctly separate charge, for all customer service classifications (with the exception of Economic Development Zone power, S.C. No. 11 contracts (except as specifically allowed by contract) and certain NYPA allocations) in order to recover costs associated with Page 44

public policy programs. Table 44 shows the projected SBC recoveries for 1998-2000.

Table 4-4 Projected SBC Recoveries 1998 1999 2000 1 ~ Base Public Policy Programs ($ 000) 15,000 15,000 15,000 2.Sales Forecast (Mwh) subject to SBC 24,174,398 24,472,671 24,650,753 recoveries

3. SBC Charge (Line 1)/(Line 2) ($ /KWh) .000620 .000613 .000609 4.3.5 Deferrals The cost categories eligible for deferrals are described in Section 2.6.

Starting in year four, deferrals will be collected through appropriate rate mechanisms, depending upon the nature of the cost, i.e., generation-related deferrals such as changes in nuclear costs will be collected through a surcharge to all customers who pay a CTC, distribution-related deferrals will be collected through a distribution surcharge. Customers who do not pay the CTC will not pay generation related deferrals.

4.3.6 Recove of Genera io Sale Incentive As described in Section 3.2.2, the Company will receive an incentive for the sale of fossil and hydro assets. All customers who pay the CTC or, where applicable, exit fees will pay the generation incentive through a surcharge. Customers who do not pay the CTC will not pay the generation incentive.

Table 4-5 summarizes all of the adjustment mechanisms described in Sections 4.2 and 4.3 and their applicability to service classifications.

Page 45

Table 4-5 Surcharges and Reconciliation Mechanisms S.C. No. S.C. No. S.C. No. 3 S.C. No. 3A S.C. No.

1/1B/1 C 2D/2ND (Small S.C. No. (Including Large 11

4) and S.C. No. 7 S.C. No. 4)

Gross Receipts Tax Yes Yes Yes Yes Yes NYPA Hydropower Benefit Yes No No Commodity Adjustment Charge Yes*** Yes*** Yes** No SBC Yes Yes Yes~*** Yes*'*~

Deferrals"/Generation Incentive Yes Yes Ye~+kkt Yes****

• Contract Specific

• • Applies to years 4-5 only

• • • Assumes default option is chosen Except as provided for certain NYPA customers in Section 4.14 and Table 4-6 Page 46

4.4 UNBUNDLED SERVICES AND PRICES 4.4.1 Unbundled Ener Commodi Char e To ensure that customers receive correct price signals, it is important to establish a reliable proxy for the generation commodity price embedded in Niagara Mohawk's bundled retail rates. Prior to the time the ISO tariff becomes effective, the actual market price of electricity will be based upon Niagara Mohawk's Commission approved methodology for determining marginal cost. This document is on file with the Commission (entitled Technical Administrative Rules and Procedures ("TARPS")) and is associated with S.C. No. 11 and the now expired S.C. No. 8. These prices will be delineated by hour, month and voltage level for each class.

In addition, the Company will adjust the TARPS prices, on a revenue neutral basis, to reflect differences in prices for the western, central regions. If, prior to the effectiveness of an ISO tariff, the New and'astern York Power Pool (NYPP) begins to calculate and publish location-specific marginal prices of power, Niagara Mohawk reserves the right to employ those prices instead of the TARPS values.

If the TARPs prices are used in the Company's unbundled prices, the Company will, after consulting with the parties, develop rules and/or procedures designed to oversee and audit the Company's development of the TARP process.. The Company will submit these rules and/or procedures to the Commission for review.

Once the ISO tariff becomes effective, assuming a fully functioning ISO and a viable market, the commodity value represented in retail tariffs will be based upon locational prices posted by the ISO.

The CTC inherently reflects a forecast of commodity prices. A portion of the differential between forecasted and actual commodity prices will be reconciled and refunded to or recovered from customers with floating CTC's through the Commodity Adjustment Charge.

There will be no prudence review associated with RegCo's energy or capacity purchases during the period of this rate Settlement Agreement.

As described above, commodity prices will be capped by the spot market price. RegCo is free to enter into longer term contracts, other than those described in Section 3.0, for capacity and energy, but will bear the full risks of such contracts (i.e., will keep any savings or absorb any losses Page 47

during the five year period). If RegCo enters into a contract for energy and capacity whose duration is longer than five years (i.e., whose duration extends beyond the term of this Settlement Agreement), the cost associated with that contract will be subject to the normal revenue requirements review that occurs in the next rate case RegCo files for rates beyond the fifth year. If RegCo does not enter into any longer-term contract, there will be no prudence review associated with its not having entered into longer-term contracts.

4.4.2 Unbundled Transmission Cha es Niagara Mohawk's retail access tariff will be filed with the Commission and the FERC and cover all components of the retail access tariff described herein. The transmission component of such retail access tariffs will be provided under Niagara Mohawk's Open Access Transmission Tariff

("OATT").

Network service charges under the OATT are calculated as the FERC approved annual revenue requirement multiplied by the customer's load ratio share (the 12-month rolling average of the customer MW load divided by the total demand on the Transmission System at the time of the monthly transmission peak). To ease the administrative burden of applying this formula to calculate and bill the transmission charges applicable to each customer under the OATT, and decreasing the distribution charge by that value, Niagara Mohawk proposes to implement a procedure whereby the total delivery charge (transmission and distribution) does not require an individual, customer-specific OATT value.

That is, the total delivery charge will be designed to recover both the transmission and distribution revenue requirements using PSC rules for the assignment of costs even as transmission service is provided under the terms and conditions of the OATT applicable to each customer.

Niagara Mohawk will seek from the FERC a waiver to implement this administrative simplification.

4.4.3 Unbundled Dls rlbution C ar es Distribution services include power delivery services other than transmission services, and encompass not only local "wires" services but also metering, billing, collections, and customer service telephone.

Distribution prices are cost-based. Distribution prices for 1998 were estimated to recover fully the costs associated with distribution services, Page 48

and allocated to rate classes and rate components based on the Company's latest cost of service studies. Distribution service prices for the years two through five will be increased according to the Price Cap plan described in Section 4.4.4 and the price goals described in Section 4.1.

4.4.4 Price Ca Plan for Transmission and Distribution Services A price cap plan for the Company's transmission and distribution services will apply for years 2 through 5 of this settlement.

4.4.4.1 T&D Rate Increases The Company may increase its prices for transmission and distribution services up to a cap in each year except as otherwise provided herein. The cap will be based on the projected increase in the cost of providing transmission and distribution services as set forth in the financial forecast in Appendix C.

4.4.4.2 CTC Offsets to Increased T&D Prices Except as provided in Section 4.14, in years 2 and 3, any increase in T&D prices will be exactly offset by a decrease in the CTC charges for those years in order to satisfy the overall bundled price targets outlined in Sections 4.5 through 4.8. In years 4 and 5, there will be no explicit offset to the CTC for increases in T& D prices.

4.4.4.3 Price Gap for Years 4 and 5 As described in Section 2.4.1.2, prices in years four and five can be increased by an amount not to exceed 1% of the all-in price excluding the commodity (e.g. inclusive of transmission, distribution and forecasted CTC charges). The price cap excludes recovery of deferrals and the generation sale incentive. The price cap also excludes the variations in contract costs due to the indexing provisions of IPP indexed contracts (See Section 2). The filing to propose an increase under the cap or to recover deferred costs or to recover the generation sale incentive will address the design of the rate recovery mechanism.

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4.4.5 Availabili of Unbundled Prices for Informational Pur oses Prior to the time a customer becomes eligible for retail access, Niagara Mohawk, upon request, will provide the customer with unbundled price data for the customer's use.

4.4.6 Relat'onshi to Generation Se aration A reallocation of costs between the transmission/distribution and CTC components of unbundled prices may be necessary as a result of a sale, spin off or transfer of generation assets. To the extent this reallocation is necessary, it will be done on a class-average revenue neutral basis.

4.4.7 Gusto er Service Back u Credit The customer service backout credit is described in Section 5. Once the credit is designed, customers who select an alternate supplier will receive an appropriate credit for the particular Company services provided by the ESCO, and a minimum credit regardless of the services offered.

4.5 RESIDENTIAL PRICING DESIGNS 4.5.1 Service Classifica on No. 1 - S andard esidential Rate 4.5.1.1 Flat Rate Structure The design will remain a flat rate structure consisting of a single energy rate with a customer charge.

4.5.1.2 Phased-In Rebalancing.of Customer and Energy Charge The customer charge will be phased in to achieve a $ 17.44 level in the year 2000 with additional changes to be considered in years 4 and 5. The Company and Staff share the objective of continuing to move volumetric charges toward marginal energy costs. The increase in customer charge revenue will be offset by an equal reduction in the energy charge revenues to ensure that the rebalancing of Page 50

customer and energy charge is revenue neutral on a class-average basis.

Phased-in Discount from Initial Price Levels As described in Section 4.1, over the three years beginning with the PowerChoice Implementation Date, tariff rate reductions will be phased-in so as to ultimately produce an approximate 2.2 percent reduction in class average prices.

(As described in Section 4.1.4, additional savings associated with currently planned reductions in New York gross receipts taxes will be applied as realized). These reductions will be applied to the energy rate. The pricing designs and resulting bill impacts are illustrated in Appendix D.

4.5.2 Service Class'ca 'on Nos. 1B d 1C - Res den ial Timeef-Us Rates Currently the Company has two Time-of-Use (TOU) offerings for residential customers. Service Classification No. 1B is a voluntary offering; approximately 3700 customers take service under this rate.

Service Classification No. 1C is a mandatory rate for all residential and farm customers who consume greater than 30,000 KWh annually. There are approximately 12,000 customers served under S.C. No. 1C.

As of the PowerChoice Implementation Date, S.C. No. 1B will be closed to new subscribers other than subscribers who will use geothermal technology. Existing S.C. 1B customers will have the option of remaining under the existing program or changing to S.C. No. 1 service. No price reductions will be applied to the S.C. No. 1B class.

As of the PowerChoice Implementation Date, S.C. No. 1C will no longer be mandatory. S.C. No 1C will become the optional TOU offering for residential customers. Customers served under this service classification will have the option of remaining under the existing program or changing to S.C. No. 1 No price reductions will be applied to the S.C. No. 1C class.

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4.5.3 Service Classification No. 1H - 0 tional Residential Rate This option consists of higher customer charge and a lower flat energy charge. On the PowerChoice Implementation Date, S.C. No. 1H will be closed to new subscribers. Existing S.C. No. 1H customers will have the option of remaining under the existing program until the beginning of year 4 of this agreement at which time they will be transferred to S.C. No. 1.

These customers will have the option to migrate to S.C. No. 1 at any time prior to year 4 of this agreement. No price reductions will be applied to the SC No. 1H rate.

4.5.4. CTC The CTC will be recovered volumetrically in accordance with the actual usage of each residential customer.

4.6 COMMERCIALPRICING DESIGNS 4.6.1 Service Classification No. 2ND - Small General Service Rates 4.6.1.1 Flat Rate Under S.C. No. 2ND, the design will remain a flat rate structure consisting of a single energy rate with a customer charge.

4.6.1.2 Phased-in Rebalancing of Customer and Energy Charges The customer charge will be phased in to achieve a $ 23.95 level in the year 2000 with additional changes to be considered in years 4 and 5. The Company and Staff share the objective of continuing to move volumetric charges toward marginal energy costs. The increases in customer charge revenues will be offset by an equal reduction in the energy charge revenues to ensure that the rebalancing of customer and energy charge is revenue neutral on a class-average basis.

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4.6.1.3 Phased-in Discount from Initial Price Levels As described in Section 4.1, over the three years beginning with the PowerChoice Implementation Date, rate reductions will be phased-in so as to produce an approximate 2.2 percent reduction in class average prices. (As described in Section 4.1.4, additional savings associated with currently planned reductions in New York gross receipts taxes will be applied as realized). These reductions will be applied to the energy rates. The pricing designs and resulting bill impacts are illustrated in Appendix D.

4.6.2 Service Classi cation No. 2D - Small General Service Rates Upon the PowerChoice Implementation date, the design of Niagara Mohawk's Small General Demand Service (S.C.2 Demand (S.C. No. 2D))

will be altered as described below:

4.6.2.1 Phased-ln Rebalancing of Customer and Energy Charges The customer charge for S.C. No. 2D will be phased-in to achieve a $ 63.49 level in the years 2000 with additional changes to be considered in years 4 and 5. The Company and Staff share the objective of continuing to move volumetric charges toward marginal energy costs. The increases in customer charge revenues will be offset by equal reductions in the energy charge revenues to ensure that the rebalancing of customer and energy charges is revenue neutral on a class-average basis. The existing demand charge for S.C. No. 2D will remain unchanged for the first three years of this agreement.

4.6.2.2 Phased-in Discount from Initial Price Levels As described in Section 4.1, over the three years beginning with the PowerChoice Implementation Date, rate reductions will be phased-in so as to produce an approximate 2.2 percent reduction in class average prices. (As described in Section 4.1.4, additional savings associated with currently planned reductions in New York gross receipts taxes will be Page 53

applied as realized). These reductions:will be applied to the energy rate. The pricing designs and resulting bill impacts are illustrated in Appendix D.

4.6.3 CTC The CTC will include per KW (where applicable) and per KWh charges applied to 100 percent of actual demand and usage quantities of each commercial customer for the billing period.

4.7 LARGE GENERAL SERVICE (S.C. NOS. 3, 3A, 4 AND 5) PRICING DESIGNS Prices for Niagara Mohawk's S.C. No. 3, S.C. No. 3A, and S.C. No. 4 (customers who also take power from NYPA), will be structured as declining block rates as described below. Unbundled prices will include a CTC if applicable.

4.7.1 S.C No. 3 Lar General Se ice <2MW and Smaller S.C. No.4 Customers <2INW Prices for customers taking service under S.C. No. 3 and customers taking service under S.C. No. 4 whose demand (exclusive of the portion of demand served by NYPA) is less than 2 megawatts will be developed as follows:

4.7.1.1 Rate Design Prices will include a customer charge, a demand charge, a reactive demand charge and energy charges based on two blocks. The blocks will be established based on the usage above and below 450 hours0.00521 days <br />0.125 hours <br />7.440476e-4 weeks <br />1.71225e-4 months <br /> of use of the peak demand (61.6% load factor). This design is referred to as an "hours use" design. The pricing designs and resulting bill impacts are illustrated on Appendix D.

4.7.1.2 Initial Price Levels As described in Subsection 4.1, the class average prices for S.C. No. 3 and smaller S.C. No. 4 customers will be reduced by approximately 2.2 percent. The reduction will be Page 54

reflected in the tail block energy price. (As described in Section 4.].4, additional savings associated with currently planned reductions in New York gross receipts taxes will be applied as realized) ~

4.7.1.3 CTC The CTC will include per KW and per KWh charges applied to 100 percent of actual demand and usage quantities for each customer during the billing period.

4.7.2 S.C. No. 3A Lar eGe eral Service INa dato Tmeof Use i Demand and La e S.C. No. 4 Customers ~>2MW Prices for customers taking service under S.C. No. 3A and customers taking service under S.C. No. 4 whose demand (exclusive of the portion of demand served by NYPA) is greater than 2 megawatts will be developed as follows:

4.7.2.1 Rate Design Prices will include a customer charge, a demand charge, a reactive demand charge and energy charges based on declining blocks. Effective upon the PowerChoice Implementation Date, two blocks will be established based on the usage above and below 250 hours0.00289 days <br />0.0694 hours <br />4.133598e-4 weeks <br />9.5125e-5 months <br /> of use at the peak demand (34.2% load factor). One year later, a third block will be established at 400 hours0.00463 days <br />0.111 hours <br />6.613757e-4 weeks <br />1.522e-4 months <br /> of use (54.8% load factor).

This design is referred to as an "hours usen design. The pricing designs and resulting bill impacts are illustrated on Appendix D.

4.7.2.2 Initial Price Levels Price reductions are designed to be phased-in during the three years following the PowerChoice Implementation Date such that the average price, based on current forecasts, in the year 2000 for all customers under S.C. Nos. 3A, 11, and large S.C. No. 4 (including ERIR, EDR, and EDZR discounts) will be $ .0585 per KWh inclusive of all currently Page 55

0 enacted New York State gross receipts tax reductions. If the currently enacted gross receipts tax reductions are repealed, the prices will increase accordingly.

4.7.2.3 Rebalancing of Demand Charges While the demand charge for S.C. No. 4 is currently based on the peak demand occurring within the billing period, the demand charge under S.C. No. 3A is based entirely on the customer's maximum demand during peak hours. Niagara Mohawk will file tariff revisions to establish a demand charge based on the customer's maximum demand during all hours to cover transmission and distribution costs. The on-peak demand charge has been reduced to offset the revenue increases resulting from this change.

4.7.2.4 CTC The CTC will include per KW (based on the maximum demand occurring during peak hours) and per KWh charges applied to 100 percent of actual demand and usage quantities for the billing period.

4.7.3 S.C. No. 5 Combi ation 25 & 60 C cle Power The Company currently provides combination 25 cycle and 60 cycle power to approximately 7 customers. The Company will freeze the existing 25 cycle S.C. No. 5 rates (which were approved in April 1995) and hold them constant for the term of this Agreement. The Company will reduce the rates for 60 cycle service to those contained in S.C. No. 2, S.C. No. 3 or S.C. No. 3A, depending on the size of the customer. The Customer will then be eligible to receive unbundled 60 cycle electric service according to the otherwise applicable service classification.

4.7.4 Pro'ected ndu ria rices The weighted average price has been computed by summing the forecasted revenues associated with the S.C. No. 3A, "large" S.C. No. 4, S.C. No. 11 (those qualifying for S.C. No. 3A) and dividing. by the Page 56

forecasted kilowatt-hours associated with the same classes. (This will include all economic development riders with the exception of revenues and sales associated with EDP customers). The Company plans to administer the phased-in price reductions in a manner similar to that contained in Table 4-2.

4.8 CUSTOMERS WITH S.C. NO. 11 CONTRACTS AND ECONOMIC DEVELOPMENT PROGRAMS The Company will honor all existing S.C. No. 11 contracts through their normal expiration.

Upon implementation of the ISO, the Company will revise the definition and calculation of marginal cost under tariff to: 1) incorporate the prices, terms and conditions of the ISO tariff and 2) calculate and administer a system-wide weighted average marginal cost consistent with the existing S.C. No. 11 tariff for the billing of S.C. No. 11 contracts entered into prior to July 23, 1997.

In the event that an existing Customer's S.C. No.11 contract expires during the term of this agreement, at the Customer's request and upon 60 days prior notice, the Company will extend the S.C. No. 11 contract on the same terms and conditions for the remaining term of this agreement, or until the Company files for a rate increase or otherwise petitions the Commission post year five, after which such contract shall expire unless otherwise specifically agreed to between the Company and Customer.

The Company will offer EDR and ERIR customers a choice of their existing rider, the otherwise applicable tariff rate, or if eligible, retail access.

The Company will not petition the Commission to modify or cancel its current S.C. No. 11, ERIR or EDR tariffs until an adequate replacement tariff is developed that meets the economic development objectives of the existing tariffs. The Company will contemporaneously file its replacement tariff with its petition to cancel or modify its current SC-11, ERIR and EDR tariffs.

The Company will continue to work with the parties to design the S.C; No. 11 replacement tariff with the objective that the revised tariff will be filed as soon as possible, but in no event later than December 31, 1997.

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Under no circumstances will the Company require that a customer purchase the commodity from the Company in order to qualify for an S.C. No. 11 contract.

The Company will not be precluded from proposing other programs of general applicability to address economic development issues.

4.9 OPTIONAL TARIFFS FOR NON-RESIDENTIAL CUSTOMERS The Company will cease signing Customers to the Optional Tariff Schedules effective with the PowerChoice Implementation Date. Customers currently served on the Optional Pricing Schedules will be given the option to continue to receive their optional provisions until such customers become eligible for retail access after which optional pricing schedules will be eliminated; provided, however, that the optional rates will continue to be changed to reflect changes in the marginal cost of electricity. Customers who choose to retain their optional provisions prior to their eligibility for retail access will be subject to the rates in effect on April 27, 1995 for the Contract Load portion of their bill.

4.10 CUSTOMERS SELLING POWER TO NIAGARAMOHAWK UNDER S.C. NO. 6 (a) Separate S.C. No. 6 buy back rates shall be determined for Load Areas 1, 2, 3, and 4. Niagara Mohawk's payments for deliveries from Independence Station shall be the applicable rates (as set forth in paragraphs b and c below) for Area 2.

(b) Commencing January 1, 1998 until the date the Master Restructuring Agreement ("MRA")is consummated as defined in Section 10.2 of that agreement ("Consummation Date" ), the buy back rates shall be the time-differentiated price by month. Appendix 0 sets forth the prices to be used in the tariff. Area 3 prices are equal to Area 2 prices plus one mill.

(c) Commencing with the MRA Consummation Date, the buy back rates for each Load Area shall be the time-differentiated prices, set forth by month in Appendix D hereto. The rates set forth in Appendix D shall remain in effect until December 31, 1998.

(d) Commencing no later than August 1, 1998, the parties shall convene technical conferences to, (i) (assuming there is an operating ISO/PE on August 1, 1998) determine the appropriateness of using the ISO market data to set 1999 SC 6 buy-back rates, and the specific market data from Page 58

the ISO/PE which should be used to calculate a market-based buy back rate that is consistent with PURPA, or (ii) administratively redetermine the S.C. No. 6 rates for the rate year commencing January 1, 1999 if a transition to market-based rates will not occur on January 1, 1999.

(e) If, after such technical conferences, the parties do not reach a consensus as to the appropriate rates or mechanism for setting the 1999 S.C. No. 6 rates, then on or before October 1, 1998, the parties will jointly request the assistance of a settlement judge to resolve these issues. If after a reasonable period of intervention by the settlement judge, an S.C. No. 6 rate or mechanism has not been reached by consensus of the affected parties, any party may request evidentiary hearings followed by briefs and a recommended decision to the Commission that will enable the Commission to issue an order on the 1999 S.C. No. 6 rates prior to January 1, 1999. Any S.C. No. 6 rate filing shall be subject to discovery under the Commission's Rules and to public comment under the State Administrative Procedures Act.

4.11 CUSTOMERS TAKING SERVICE UNDER S.C. NO. 7 (SALE, BACKUP, MAINTENANCEAND SUPPLEMENTAL ENERGY AND CAPACITY TO CUSTOMERS WITH ON-SITE GENERATION FACILITIES) AND EXIT FEES FOR CUSTOMERS WHO BYPASS THE COMPANY'S DELIVERY SERVICE.

4.11.1 Rationale The intention of the Exit Fee and the CTC provisions of SC¹7 is to discourage uneconomic bypass of the Company's services and charges in cases where such bypass is not economic from society's standpoint and would therefore shift costs to other stakeholders.

4.11.2 A llcabi i The following table sets forth the applicability of the Exit Fee and SC¹7 in specific circumstances. In addition, applicability of exit fees for NYPA allocations will be determined in accordance with Section 4.14 and Table 4-6 of this Settlement. For circumstances not included in this table, or contemplated herein, the company will be permitted to petition the Commission to assess an Exit Fee or apply SC¹7 in accordance with the intentions of this Section 4.11.

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Exit Fee and SC 7 A licabilit Circumstance ~Eit Fee SC 7 Municipalization, including cases where Yes No the municipal disconnects from the Company's delivery system.

2. Customer remains in the same location, Yes No disconnects from the Company's delivery system and connects to another utility's delivery system such as that of another utility or IPP.

3. Self generation with backup from the Yes company's delivery system.

4. Self generation where the customer No No disconnects from the interconnected system or is not connected to the interconnected system.

5. Customers that received an SC¹11 No Contract prior to 7/23/97 based on a showing of a viable cogeneration threat up to the electric capacity of the demonstrated viable cogeneration project.

6. Customers that relocate or close No their operation.

Exit Fee (a) Exit Fee Calculation Methodology Page 60

The Company will use a "revenues lost" exit fee methodology similar to that proposed by the FERC in Order 888. The exit fee would be calculated on a one-time basis. However, the Company is willing to entertain levelized annual payments or other options that may be negotiated between the Company and the customer, subject to adequate security. The "revenues lost" formula is equal to the net present value (at the Company's weighted average cost of capital) over Y years of:

(R-E)

Where, R shall equal the annual estimated revenue from the customer using the bundled price designs contained in the settlement agreement. There will be no credit for transmission related revenues, as proposed in FERC Order 888, since the customer will not be using the Company's delivery system.

E is the Company's estimate of the annual revenues that it can receive by selling the released capacity and associated energy. As in FERC Order 888, the customer will have the option to market a portion of the released capacity and associated energy.

Y is the number of years required for the Company to recover its full stranded costs. Since Y is dependent upon a number of factors, including the timing of the departure, the Company will address Y on a case-by-case basis.

In addition, the Company will charge departing customers for their allocation of nuclear decommissioning costs through time.

(b) Accounting for Exit Fees The Company agrees with the concept that any exit fees received should be deferred to affect stranded costs. The Company will work with the parties to develop the specific accounting, and subsequent amortization, of the deferral for exit fees. To the extent that exit fees are received during the term of this settlement that result in a reduction in revenues otherwise expected to be collected by the Company through the CTC, the parties agree that a portion Page 61

of the exit fee can be recognized during the term of the Settlement to hold the Company harmless.

S.C. No. 7 Effective with the PowerChoice Implementation Date, S.C. No. 7 will be closed to new subscribers.

4.11.4.1 Existing Customers Existing customers shall be subject to the S.C. No. 7 prices in effect on July 23, 1997, as well as any applicable surcharges as identified on Table 4-5.

At such time as all or the majority of the Company's Fossil and Hydro units are divested and the commodity portion of backup, supplemental and maintenance service are available on a competitive basis, the rates for existing S.C.

No. 7 users shall be changed to those described in 4.11.4.2 below.

The Company agrees to use its best efforts to acquire ancillary services from the competitive market at the time of divestiture. The Company, however, will not be required to create new systems to allow for the procurement of such services on a competitive basis.

4.11.4.2 New Subscribers and Existing S.C. No. 7 Customers Following Divestiture of the Company's Fossil and Hydro Assets New tariff leaves shall be added which will apply to all non-residential customers with on-site generation (except as provided for under circumstance no. 5 of Section 4.11.2) and existing customers with on-site generation who are not currently served under S.C. No. 7. In addition, these new tariff leaves shall apply to existing S.C. No. 7 customers at a later date as provided in Section 4.11.4.1 These tariff

~

leaves shall provide for rates which include: i) a combination of an access charge and an energy charge for the baseline Page 62

customer load ("CL") and, ii) the rates contained in the customer's otherwise applicable service classification (or S.C. No. 11., if qualified) for any load which exceeds the CL, where:

The CL shall be based on the customer's load in a historic period.

The access charge for load at or below the CL shall be equal to the customer's contribution to the Company's fixed costs during the historic period. The access charge shall be subject to adjustment for surcharges as identified on Table 4-5.

The energy charge for load at or below the CL shall equal the commodity cost under the otherwise applicable tariff, if the commodity is purchased from the Company.

4.12 ECONOMIC DEVELOPMENT ZONE RIDER (EDZR)

The Parties will continue to work on developing a rate plan that will result in current economic development zone rates that are equal to full marginal commodity and distribution cost (excluding the SBC) and full transmission cost by the end of the five year settlement period for customers taking service under the current rider. The rate plan will be developed as soon as possible but in no event later than December 31, 1997.

ln developing the EDZR rate plan the following principles shall govern:

(a) Non-contestable customers will be phased into full marginal costs on an accelerated schedule that takes into account the level of rate impacts on individual customers.

(b) Contestable loads will be phased in over the full five years of the settlement period.

(c) For a limited number of customers that may need special economic development considerations, the Company will work with the parties to address these special cases.

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For new EDZR customers or new growth, the. tariff rate will be equal to full marginal commodity and distribution cost (excluding the SBC) and full transmission cost.

4.13 PRICING DESIGNS FOR SERVICE CLASSIFICATIONS UNDER PSC NO. 214 ELECTRICITY Niagara Mohawk's prices for outdoor lighting services are set forth in PSC No.

214 Electricity (formerly PSC No. 213 Electricity). Service Classification Nos. 1, 2, 3 and 6 under PSC No. 214 represent private area and street lighting.

The Company is proposing a rebalancing of the facility-specific and volumetric charges. The proposed facility charges have been set at marginal cost as calculated under the current long-run incremental cost of service studies. The proposed volumetric component of these service classifications has been increased to offset the decrease in facility specific charges to ensure that the rebalancing is revenue neutral. The prices for these service classifications are attached in Appendix D. The Company will phase in these price changes over the first three years of this agreement.

Service Classification No. 4 of PSC No. 214- Traffic Signals, is energy and delivery-only related. The charge for this classiTication does not include the cost of owning or maintaining facilities and therefore has not been changed.

The resulting volumetric charges under PSC No. 214 will be unbundled when customers become eligible for retail access.

4.14 APPLICATION OF UNBUNDLED PRICES TO NYPA ALLOCATIONS (a) NYPA Economic Development Power Allocations The Company agrees to maintain for existing EDP allocations its existing tariff rates for the first three years of the settlement. For new allocations the Company will use its unbundled rate schedules and the sales will be conducted as a direct sale from NYPA.

(b) NYPA Rural and Domestic (R 8 D) Hydro Credit The benefits of the R 8 D hydro credit will flow through to consumers in accordance with the 1990 Contract. NMPC and NYPA agree to work in Page 64

good faith to modify as appropriate, the 1990 Contract to reflect the changes in industry structure.

(c) Table 4-6 delineates the treatment of NYPA allocations. A "yes" under a column heading means the charge identified in the column heading applies to the allocation. A "no" means the charges shall not apply.

Table 4-6 Application of Unbundled Prices to NYPA Allocations (3)

Exit Fees Transmission & Distribution Supply Distribution CTC Related Qp~lted SBC Replacement Power (4) no no no no 445 MW Expansion Power(1) (4) no no no no 250 MW EDP <46 MW (4) no no no no EDP >46 MW (4) yes yes yes yes HLFF Schedule A 8 First (4) no no no no 50MW Replacement(2)

HLFF above (4) yes yes yes yes Schedule A 8 First 50MW Replacement(2)

(d) Notes to Table 4-6:

(1) Except deliveries of EP allocated pursuant to paragraph 13(b) of Section 1005 of the Public Authorities Law for revitalization purposes will be subject to the CTC if and to the extent that the Page 65

amount of any allocation when added to the then existing EP sales in NMPC service area exceeds 210 MW.

Schedule A as provided for in the Agreement Among Niagara Mohawk Corporation, New York Power Authority and Department of Public Service Resolving and Settling Certain Disputes, dated May 22, 1997. The first 50MW of replacement refers to a provision of the May 22, 1997 agreement that allows the Power Authority to replace certain HLFF allocation prior to the PowerChoice Implementation Date.

All rights and responsibilities contained in the "May 22, 1997 Agreement" shall remain legally binding in accordance with its terms, and nothing contained in the PowerChoice Settlement or this Section shall be construed to overrule, explain or otherwise modify the May 22, 1997 Agreement except that in the event of any conflict between the provisions of paragraph 5 of the May 22, 1997 Agreement entitled "Delivery of Expansion and Replacement Power" and the provisions of this Section 4.14 and Table 4-6 relating to Expansion and Replacement Power, the provisions of this Section 4.14 and Table 4-6 shall prevail. The following abbreviations apply to Table 4-6: Expansion Power ("EP");

Economic Development Power ("EDP"); High Load Factor Power

("HLF"); Replacement Power ("RP").

Delivery service for all NYPA Replacement, Expansion, EDP and HLF Power transmitted and delivered by NMPC are governed by existing agreements and/or authorities, provided however that nothing herein shall be construed as an admission or agreement by NMPC or NYPA or any other party that delivery services provided to new EP, RP or other customers or modifications of delivery services provided to existing EP, RP or other customers shall or shall not be provided under NMPC's Open Access Transmission Tariff filed with the Federal Energy Regulatory Commission and a separate agreement for local distribution services, and provided further that nothing contained herein shall be regarded as a'waiver by NMPC of its rate change rights under any existing agreement between NMPC and NYPA except as expressly specified herein.

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4.15 ANNUALTARIFF FILINGS The Company will file tariff amendments to implement the initial rates and terms of this agreement as soon as practicable after the conditions described in Section 2 have been satisfied. During the term of this agreement, the Company may make annual tariff filings to be effective on each anniversary of the PowerChoice Implementation Date. These annual filings will be made approximately 120 days prior to their effective date and will reflect the terms of this agreement including the pricing design changes, deferrals (years 4-5 only),

the generation sale incentive (years 4-5 only) and transmission/distribution price escalation.

4.16 RATE FLEXIBILITY 4.16.1 General During the term of this Agreement, the Company will have the right to seek rate changes that are revenue-neutral on a class average basis. Such rate proposals will be filed with the Commission and subject to regulatory approval. The type of changes that may be proposed include:

changes in service class segmentation by consumption levels, load factors, end-use purposes, or any other distinguishing factors;

b. reallocation of revenue within classes between demand, energy and customer charges; C. reallocation of revenue among customer groups based on cost-of-service and competitive analyses; additions, deletions or other changes to rate blocks or rating periods; and

e. changes to establish uniform transmission and distribution rates across rate classifications offset, if necessary, by changes to the CTC.

This Agreement will not preclude the Company from proposing pricing changes in response to competitive developments.

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4.16.2 0 tlonal Rates and Services The initial services contained in this agreement would be available to all qualified customers for the term of this agreement. The Company may, additionally, propose optional rates and/or services at any time. Tariffs for such rates and/or services would become effective 30 days after they are filed.

4.17 MISCELLANEOUS TARIFF AMENDMENTS The Company will make amendments to its tariff to reflect the following issues:

4.17.1 A re a io of Demand and Customer Char es Since the prices contained in this Agreement for service classifications that include demand and customer charges have been calculated based on historical non-coincident customer demands, the aggregation of customers in those service classes likely would result in the shifting of costs to other customers or to the Company. ESCos accordingly will not be permitted to aggregate customers'oads and pay demand and customer charges based on their coincident demands. The benefits of load diversity have already been reflected in the calculation of these charges. It is not the intent of this Section 4.17.1 to prohibit ESCos from aggregating the commodity for customers eligible for retail access.

4.17.2 L wVola eB ass Customers may be reconnected to a delivery point at a higher voltage level at no additional cost to the customer if in the Company's sole judgment, such reconnection will alleviate reliability or safety problems; provided, however, that the Company may permit such reconnection in other circumstances if the customer agrees to pay 1) the differential in distribution charges and CTC, and 2) the incremental reconnection costs.

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SECTION 5.0 CUSTOMER SERVICE BACKOUT CREDIT The details of a customer service backout credit will be established by December 31, 1997 through continued negotiations among the parties, based on agreement on the following general principles:

5.1 GROSS REVENUE EXPOSURE The Company's gross revenue exposure attributable to the customer service backout credit will be limited as follows:

Year 1 $ 6M Year 2 $ 10M Year 3 $ 14M The Company may defer for future recovery pursuant to Section 2.4.3 and 2.6 one-half of each dollar of lost revenue.

If the limits of Company liability and deferrals outlined above are reached, the backout credit will be capped, either by numbers of customers, amount of load, or other method.

5.2 DESIGN PRINCIPLES (1) Several categories of the backout credit will be established so that different amounts will be backed out depending on which services are taken over by the ESCo. However, there would be a minimum credit that will be backed out regardless of the services offered.

(2) The credit could be calculated volumetrically or per customer.

(3) There will be different levels of the backout rate by service class.

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(4) The Company will provide a study of avoidable customer service costs by June 1999. Upon petition of any party after the end of Year 2 of this agreement, the Commission can revisit the customer service backout credit, including the appropriate level of any credit or alternate mechanisms for handling the movement of customers to other suppliers (See Section 8.2.8). In any event, the Company's gross revenue exposure in year 3 shall not exceed the caps set forth above in 5.1.

5.3 RELATIONSHIP TO A GENERIC PROCEEDING If there is a final PSC Order or an order which has not been stayed pending appeal in a Generic Proceeding regarding customer services currently provided by regulated utilities which should be made competitive and/or the method for determining avoided costs associated with those services, that Order shall supersede this agreement. Whether or not there is a Generic Order regarding customer services, the Company's gross revenue exposure in years 1-3 shall not exceed the caps in 5.1. In years four and five the backout shall not exceed the Company's avoided costs unless the incremental exposure is offset by other revenue sources (e.g. deferrals). If there is no Generic Order regarding competitive customer services, the Company's study, including comments of other parties thereon, will provide the basis for determining the Company's avoided customer service costs in years 4 and 5.

This Agreement does not limit any Party's rights to challenge or otherwise petition for relief from any proposed policy in the Generic Proceeding.

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SECTION 6.0 SERVICE QUALITYINCENTIVE There will be a service quality incentive whose total value is 30 basis points or $ 6.6 million, where 1 basis point for both electric and gas will be valued at $ 220,000 after-tax, or $ 338,000 before-tax, for the purposes of this agreement. All of the amounts reflected below are after-tax dollars.

6.1 CUSTOMER SERVICE PERFORMANCE For 1998 and beyond, the Customer Service Performance incentive is equal to a maximum of $ 3.3 million per year. The measures of customer service performance described in this Section 6.1 supersede the provisions of Section Vill, Customer Service Guarantees set forth in the Stipulation and Agreement approved by the Commission in Niagara Mohawk Cases 96-G-1095 and 96-G-0091, Opinion No. 96-32 (December 19, 1996).

6.1.1 PSC Com laint ate The PSC Complaint Rate is the 12-month complaint rate, measured at each year end. The targets are average monthly rates of total complaints per 100,000 customers, including collection-related complaints. The maximum penalty is $ 1,100K.

Rate Interval ax. Penalt wit in Scaled Interval

<10 $0 10.0 - 10.9 $ 220K 11.0 - 11.9 $ 660K 12.0 and above $ 1,100K 6.1.2 Cor orate R s dentlal Tra sa t'on Satisfaction Index The Corporate Residential Transaction Satisfaction Index is the cumulative index of 4 quarterly surveys of customers who have had transactions with the Company. It excludes collections transactions. The maximum penalty is $ 1,100K.

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CSI Interval Max. Penalt withi Scaled Interval 800 5 CSI -$ 0 78.0 < CSI < 80.0 $ 220K 76.0 < CSI < 78.0 $ 660K CSI < 76.0 $ 1,100K 6.1.3 Low Income Customer Assistance Pro ram A Low Income Customer Assistance Program (LICAP) performance incentive mechanism will be negotiated prior to December 31, 1997. The mechanism will include enrollments and energy service targets. The maximum penalty is $ 1,100K.

6.2 STATEMENT OF INTENT There is agreement in principle to consider whether a program of individual customer service guarantees may in part or wholly replace the broad-based penalty measures adopted above, including within the time frame of this agreement. The Company will continue to work with Staff on the development of customer service guarantees as a mechanism for insuring a high level of customer service. Specifically and initially, the Company and Staff have a mutual interest in improving customer convenience and satisfaction with scheduling of appointments.

6.3 SERVICE RELIABILITYINCENTIVE The maximum penalty for service reliability performance is $ 3,300K.

6.3.1 S stem lnterru t'o Fre uenc SI The maximum penalty for System Interruption Frequency (SIF) performance is $ 1,320K. Targets are the number of outages per customer, excluding major storms.

SIFI ~Pnalt 0.93 < SIF $ 1,320K SIF < 0.93 $0 Page 72

6.3.2 Gusto er Interru tion Duration CID The maximum penalty for CID performance is $ 1,320K. The targets are the average hours per interruption, excluding major storms.

C ID Inter val ~Penalt 2.07 < CID $ 1,320K CID < 2.07 $0 6.3.3 6~6i The maximum penalty for Power Quality is $ 660K. Targets will be updated annually based on most recent four year data. Targets displayed below are for 1997.

Inte~gl Penalte3

~1'I KV 294 < Momentaries $ 220K 247 < Momentaries < 294 $ 110K Momentaries < 247 $0 23-69K V 848 < Momentaries $ 220K 743 < Momentaries < 848 $ 110K Momentaries < 743 $0

~33 2095< Momentaries $ 220K 1951< Momentaries < 2095 $ 110K Momentaries < 1951 $0 6.4 ACCOUNTING MECHANISM Any penalties accrued will be used to offset cost deferrals.

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SECTION 7.0 SYSTEM BENEFITS CHARGE PROGRAMS 7.1 SYSTEM BENEFITS CHARGE 7.1.1 Pro rams and Fundin Levels The parties agree that the System Benefits Charge (SBC) applies as follows:

The SBC covers programs related to demand-side management (DSM), Research and Development (R8 D), and low income energy efficiency.

2. Spending levels will be set at $ 15 million (approximately 1995 spending levels) for years 1 through 3 with an equal amount removed from base rates, i.e., spending levels are included within the pricing (rate) goals in Tables 4-1 and 4-2.

3. The continuation of the SBC and appropriate funding levels will be revisited in a proceeding for year 4 notwithstanding the assumptions in Appendix C.

Activities that are integral to RegCo business functions will not be funded through the SBC. These include, for example, activities which are part of a bundled package of services that allow RegCo to maintain customer satisfaction and service including outreach, information, education, dialogue, and customer consultation programs and other activity that are not within the scope of the System Benefit Charge as set by the Commission and the third party administrator.

5. Unexpended SBC funds will be accumulated for future SBC program use.

6. New programs that the Commission orders or expansion of existing programs that would increase spending above the $ 15 million target will be passed through to customers outside of the price caps.

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7.1.2 State-Wide Third Pa Administrator The Company will propose the use of a state-wide, third party administrator for DSM and R&D program spending consistent with PSC policy on the SBC and the other PSC approved utility settlement agreements. The Company will work with the parties to accomplish the transition from the Company-administered programs to a third party administrator as rapidly as possible, recognizing the funding that has been committed to certain projects. RegCo and unregulated affiliates will be allowed to bid to implement various DSM and R8D projects.

Until a third party administrator is established, the Company will file a Public Policy Plan annually for Commission approval. In developing the Public Policy Plan, the company will establish a Public Policy Advisory Panel, comprised of representatives from various constituencies to provide advice and guidance to program development.

Nothing in this agreement will prohibit the Statewide administrator from allocating a significant portion of the total SBC revenues derived from Niagara Mohawk customers to be disbursed within Niagara Mohawk's service territory through competitive standard performance contracts which provide for stipulated pricing for energy efficiency, consistent with any generic guidelines for SBC expenditures separately developed from this proceeding by the PSC.

7.1.3 Low Income Gusto er Assistance Pro ram LICAP The energy efficiency portion of the LICAP program will be funded through the SBC.

7.2 MISCELLANEOUS

(i) The Company will continue to develop detailed annual forecasts of transmission and distribution ("T8 D") capital budget requirements and will identify for each major T8 D project (i.e., projects of $ 2.5 million or more), the location, reason for project, scope of project, projected capital costs, appropriate load and other data. The Company will also perform load monitoring consisting of monitors at a significant sample of the transmission and area substations Page 75

scheduled for expansion/upgrade in the five-gear T&D capital plan.

The Company will evaluate and implement cost-effective measures as alternatives to major T&D projects that defer major T8 D system projects through the use of technologies or services that could reduce peak T&D loads. For such cost-effective projects, consideration will be given to technologies or services that minimize the environmental impacts of electricity usage including demand side and other new cost effective technologies (such as wind, solar and distributed generation) where practicable. The Company will continue to seek to minimize costs and environmental impacts for T8 D projects that are not major T8 D projects. The Company will include testimony in its next rate case discussing alternatives to transmission and distribution capital spending, including on site generation and demand side management programs and the relationship between current rate structures, energy efficiency alternatives and distribution revenues and profits.

Plum Street Enterprises or any successor companies shall offer to all its retail electric commercial and industrial customers for-profit energy efficiency services; and will make a good faith effort to market for-profit energy efficiency services or products for all of its residential and small commercial customers. Plum Street Enterprises or any successor companies will offer a green pricing program designed, in cooperation with interested parties, as a profit making enterprise to aggregate demand of customers interested in receiving electric power from renewable energy resources (e.g.

wind, solar and biomass).

NMPC agrees to donate 5,000 SO, allowances to the Adirondack Council for retirement.

Niagara Mohawk agrees to donate to the State of New York, in fee, 1000+ acres of high intrinsic habitat value lands surrounding Dead Creek, Town of Piercefield within the Adirondack Park and commits to negotiate in good faith with the State of New York for the sale of a conservation and development right easement for the remaining 2400+ acres surrounding Dead Creek (Town of Piercefield).

The Company commits to negotiate in good faith with the State of New York for the sale of a conservation and development right Page 76

easement for 1000+ acres that are on the west side of Carry Falls Reservoir. NMPG agrees to offer to the State of New York fee interest to 600+ acres on the east side of Carry Falls Reservoir for a set price 'of $ 258.00 per acre which represents a 50% donation of our appraisal value. (This amounts to a donation of $ 155,000 in value.) The Company commits to also making the offer contained in sections 7.1(v) through 7.1(x) in the Raquette River relicensing negotiations. In consideration of reaching a mutually satisfying settlement of the Raquette River relicensing negotiations, the Company commits to donate to New York State fee interest to 600+ acres on the east side of Carry Falls Reservoir.

The Company commits to donate to the State of New York in fee a portion of land at the southern tip of Carry Falls being a parcel or parcels of lands of approximately 200 acres +, less any lands necessary for Niagara Mohawk's FERC Project purposes. (This amounts to a donation of $ 92,000 in value.)

Niagara Mohawk commits to negotiate in good faith with the State of New York for the sale of a conservation and development rights easement for 2200+ acres of land on the northern side of Rainbow Falls Reservoir.

Niagara Mohawk commits to negotiate in good faith with the State of New York for the sale of fee interest in the 135+ acres on the easterly and westerly sides of Stark Reservoir.

Niagara Mohawk commits to negotiate in good faith with the State of New York for the sale of a conservation and development rights easement for 1639+ acres of land surrounding Blake Reservoir.

Niagara Mohawk commits to negotiate in good faith with the State of New York for the sale of a conservation and development rights easement for a 1943+ acres of land on Five Falls and South Colton Reservoir.

The Company will develop 10 MW of wind power generation and 1.6 MW of photovoltaic generation that will be funded through available third party funds/grants and the SBC funding provided for in this agreement (See Section 7.1.1). The SBC funding will be based on the debt service of the cost of the facilities in excess of Page 77

third party funding, subject to an amortization schedule within the five years of the Agreement. Any electricity produced from these facilities will be sold to a third party marketer for resale under a competitive bidding process designed to attract purchasers engaged in green pricing offers in the retail market. At the end of the fifth year, the Company will seek bids to sell these facilities to the market. Any proceeds from the sale of the electricity and the sale of the facilities will go to fund future SBC projects. T&D facilities constructed to connect these projects to the system will be amortized over the projected life of the projects and recovered as part of the project cost during the first five years of this Agreement and as part of T&D revenue requirements after the first five years.

Nothing in this paragraph shall limit the third party administrator's ability to override this provision.

(xii) A portion of the SBC will be used to fund existing long-term ecological monitoring programs such as the Adirondack Lake Survey (ALS). The parties expect that these activities will be funded by the Statewide SBC administrator in proportion to contributions from each utility. In the event that other utilities'BC funds are not available, then funding sufficient to continue the ALS shall be made available from the SBC established in this agreement (not to exceed 5% of available funds). Nothing in this paragraph shall limit the third party administrator's ability to override this provision.

(xiii) The Company will continue to offer information to all customers regarding available energy efficiency services (e.g., bill stuffers and referrals to companies offering energy audits and other services) and facilitate customer access to energy efficiency products and services available in the market by third party product vendors and service providers (e.g., by arranging manufacturers'ebates).

These activities shall be carried out in a manner which does not give preferential treatment to any energy service provider.

(xiv) The Company will support legislation or state agency rulemaking which would upgrade New York State building codes to meet the 1995 Model Energy Codes and ASHRAE Standard 90.1. The Company believes that the implementation of such legislation or state agency rulemaking should consider the economic impact to the State of New York of the building codes.

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(xv) The Company will support the inclusion of environmental protection provisions in federal utility restructuring legislation, insofar as congressional consideration of such provisions does not unduly delay progress toward creating a deregulated and open competitive market for electricity in the United States. With regard to such environmental measures:

a) The Company will support establishment of a national system benefits trust (national wires charge), with the understanding that such a trust would not be constituted in a manner which would competitively disadvantage companies in a state that has established a parallel, state-level system benefits charge.

b) The Company will support nationwide "environmental comparability" requirement for fossil generating units for nitrogen oxides (NOx) emissions (i.e., a uniform generation performance standard implemented in combination with an emissions "cap and trade" program), with the understanding such a standard would apply uniformly throughout the entire United States and with the understanding such a standard would be phased in so that its imposition would not unreasonably devalue current fossil generation assets.

c) The Company will support national environmental disclosure requirements for emissions that would apply to all energy retailers, with the understanding such disclosure requirements would be practical and not unreasonably burdensome to administer. Niagara Mohawk recognizes that in a competitive market, some retailers may choose to go beyond the minimum requirements with respect to characterizing the environmental aspects of the energy they provide.

d) The Company will support a clean energy portfolio standard that requires all vendors to have a minimum amount of renewables and other non-emitting or ultra low emitting (e.g.,

fuel cells) energy sources in their generating mix and that avoids unintended and undesirable economic incentives; i.e., the Company will support a standard that would prevent Page 79

any bypass of the requirement and utilizes a renewable energy credits purchase provision.

(xvi) The Company and Staff agree that customer choice would be enhanced by the availability of environmental information concerning the power being provided to them. To effectuate such disclosure, the Company and Staff agree to work with load serving entities and others to develop and implement, where feasible, meaningful and cost-effective, an approach to providing customers with fuel mix and emission characteristics of the generation sources relied on by the load serving entity. Such an approach would facilitate informed customer choice, promote resource diversity and improve environmental quality.

(xvii) To the extent the accounting for such revenues is not otherwise provided herein, all revenues derived from sales will be accounted for in accordance with the Uniform System of Accounts.

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Clg SECTION 8.0 RETAIL ACCESS 8.1 CONDITIONS NECESSARY FOR RETAIL ACCESS In addition to other conditions described in this agreement, retail choice depends upon proper metering and appropriate billing and settlement procedures.

8.1.1 ~P As described in Section 8.3, it is essential that proper metering, meter reading and billing be performed to insure the integrity of the new retail access system. In addition, the parties agree that customers will pay all incremental costs associated with these requirements as provided by Niagara Mohawk.

8.1.2 Billi and Settlement Procedures Consistent with Marke Billing and settlement procedures that are consistent with the demands of the market must be established.

Niagara Mohawk will prepare its settlement and billing system to accommodate retail access within a wholesale electricity market and bulk power transmission system operated by an independent system operator and one or more power exchanges. The billing and settlement system described in Section 8.3 supporting the retail access schedule will be designed and developed to function within the market structure proposed by the member systems of the New York Power Pool in their January 31, 1997 FERC filing.'he FERC proceeding to review this filing is in progress and the timing of a decision is therefore uncertain.

Until the ISO and the other new market institutions are in operation, Regco will develop methods to facilitate wholesale settlement with marketers and ESCos within the framework of the New York Power Pool.

When the new institutions are in place, Regco will modify its settlement 7~ee, "Comprehensive Proposal to Restructure the New York Wholesale Electric Market," FERC Docket ER-97-1523-000.

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approaches to ensure consistency with the new marl<et environment. In the event that key features of the market structure are modified substantially from those proposed in the filing, the Company reserves the right to petition the Commission for approval to adjust the schedule for retail access to permit corresponding changes to be incorporated into the billing and settlement systems. Key features include, but are not limited to, the two settlement system, locational based marginal pricing and the ISO Open Access Transmission Tariff.

8.2 RETAILACCESS TIMETABLE Retail access for customers in Niagara Mohawk's service territory will be offered on a schedule shown in Table 8-1. As described below, customers will receive access in several phases.

8.2.1 Farm & Food Processor D lea PI o On February 25, 1997 the Public Service Commission issued an order'o Niagara Mohawk and three other utilities to develop retail access programs for commercial farms and food processors. In response to that order, on April 11, 1997 NMPC filed its proposal', including a draft tariff.

On June 23, 1997, the Commission issued an order" to implement the program, requiring a tariff filing by August 4, 1997 and the commencement of retail deliveries by November 1, 1997. On September 18, 1997 the Commission issued an additional order directing certain changes to the August tariff filing."

The Company's plan to introduce retail access has been designed to accommodate the Farm 8 Food Processor (F&FP) pilot program. Table 8-1 includes the F8 FP program for illustrative purposes only. If implementation of the F8 FP program is delayed due to rehearing, Order Concerning Retail Access Proposals, PSC cases 94-E-0948 and 94-E-0385.

'Proposal of Niagara Mohawk Power Corporation for a Retail Access Pilot Program for Commercial Farms and Food Processors, PSC cases 94-E-0948 and 94-E-0385.

"Order Establishing Retail Access Pilot Programs, case 96-E-0948.

"Order Concerning Compliance Filings, case 96-E-0948 Page 82

litigation, or other causes, the timetable for retail access for other customers will not be affected.

Reflecting the Commission's desire for expedited implementation, the F&FP proposal utilizes methods that Niagara Mohawk does not necessarily propose to use when retail access is extended to its other customers. The Company does not view the methods used for the pilot as precedent-setting or binding in any way.

Customers participating in the F8 FP program will be offered the option to be removed from the pilot and served under the full retail access program when other customers of their rate class, size, and voltage delivery become eligible for retail access.

It is the intent of the Parties that this agreement and the Dairylea Pilot fulfills the obligation of the Company in cases 94-E-0385 et al. and 95-E-0924.

8.2.2 ~Gou 1 Group 1 consists of all customers in rate class SC-3A served at transmission voltages (greater than 60 kV), plus customers in rate class SC-4 served at transmission voltages with demands served by Niagara Mohawk of 2 MW or more. The timing of retail choice for these customers will be no later than one month after the PowerChoice Implementation Date.

8.2.3 ~Gou 2 Group 2 consists of all remaining SC-3A and SC-4 customers with peak demands of 2 MW or more. The timing of retail choice for these customers will be no later than seven months after the PowerChoice Implementation Date.

8.2.4 gi~ro i3 Group 3 consists of all remaining customers served at transmission and subtransmission voltage levels (22 kV and above) This group will

~

become eligible no later than May 1, 1999.

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~Grou 4 Group 4 consists of all remaining residential customers not already participating in the Farm and Food Processor pilot program. Retail access for these residential customers will begin no later than April 2, 1999, and will be completed no later than December 31, 1999. All parties agree to work on a good faith basis during 1998 to develop a residential phase-in plan, which includes processes and procedures that achieve as smooth and workable a transition as possible, taking into account different ways to resolve the POLR obligation, and the desire to minimize financial impact on the Company, ensure customer satisfaction, and address the needs of marketers and ESCos. The plan will be completed by December 31, 1998.

As part of the residential retail access phase-in plan, the Company commits to developing, in consultation with other parties, and implementing an outreach and education program to help residential customers understand and act upon their right to choose their energy supplier.

The Company reserves the right to conduct a pilot of retail access in a defined geographic area, but, if it chooses to do so, the pilot will not have the effect of delaying the schedule for residential customers, nor will it delay the possibility for earlier access for residential customers.

8.2.6 ~Grou 5 Group 5 consists of all remaining non-residential customers except for 25 cycle customers. These customers will receive retail access no later than August 1, 1999. If the Company chooses to conduct an area pilot, this date will not be affected, nor will the pilot delay the possibility of earlier access for this group of customers.

8.2.7 Cus o ers With S ecial Contracts Unless otherwise provided for in their contracts, customers with special contracts will become eligible for retail access when the later of the following occurs: (a) the customer groups to which they belong become eligible (as shown in Table 8-1), or (b) their contracts expire.

8.2.8 Monitorin Pro r ss Throu h Ti e Over the longer-term, all parties agree to work together on a good faith basis during 1998 and 1999 to evaluate the response of customers to t

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retail access, both here and in other areas, to determine whether the transition process is working well or should be modified. Alternatives that could be considered include but are not necessarily limited to: (i) alternative ways of satisfying the POLR responsibility, (ii) whether a fixed CTC option should be offered to a larger number of customers, (and, in particular, whether a fixed CTC is needed for residential customers), (iii) whether a mandatory balloting process should be employed to require customers to choose their supplier, and (iv) the mandatory assignment of customers to alternate suppliers. The parties will also consider whether a viable competitive market exists, including a fully functioning ISO.

8.2.9 C~ti The dates for initiating access for residential and small non-residential customers are not formally linked to having an operational statewide Independent System Operator (ISO). However, the Company retains the right to petition the Commission to alter the schedule if the ISO that is ultimately implemented differs substantially from the proposal filed with FERC on January 31, 1997 by the members of the New York Power Pool, and if implementing the revised ISO proposal on the current schedule would likely cause serious implementation problems (such as major cost shifting or mass confusion). In addition, the dates for retail access for customers in groups 3, 4 and 5 are contingent upon timely receipt of regulatory approvals from the PSC. (A delay of several months should not affect the residential and small non-residential access timetable unless such a delay affects the ability of the Company to implement the MRA and the overall settlement.)

8.3 RETAIL ACCESS SETTLEMENT METHOD To enable retail access within its service territory, RegCo will develop a billing and settlement system that will provide the following features. These features will be modified as necessary to comply with any Commission orders regarding billing and metering in a restructured market environment but this Agreement does not limit any Party's rights to challenge or otherwise petition for relief from any proposed policy in the Generic Proceeding.

o RegCo will bill customers taking service from its transmission and distribution systems for services provided by the Company.

o ESCos will have the option of billing their customers directly for the services they provide, or requesting RegCo to provide billing services for them for a fee.

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ESCos will be able to arrange physical bilateral purchases with wholesale suppliers, and RegCo will handle the scheduling of these transactions with the NYPP or ISO, as the case may be at different points in time.

ESCos will be able to purchase power from the spot markets, as administered by power exchanges and/or the ISO, and RegCo will provide any ESCo interfaces that may not otherwise be accommodated by these institutions.

o All charges incurred by RegCo as a consequence of its role in providing interfaces for ESCos with power exchanges or the ISO shall be passed along to the ESCos responsible for those costs. This includes any charges or costs for losses", transmission services, ancillary services, balancing, uplift, transmission congestion rents, etc.

o RegCo will meter or determine through load shape methods all customer loads by hour, location, and voltage for the purposes of determining total load for each ESCo by those categories. Loads for customers receiving power directly from RegCo will be determined in the same method to ensure that no cross-subsidization occurs.

o RegCo will be permitted to include reasonable charges for the services it provides in the administration of the retail access system. These charges will be included in the tariffs filed by the Company, implementing the terms of this Settlement Agreement.

Figure 8-1 illustrates the approach RegCo intends to take in performing these functions. Should the statewide ISO and/or power exchanges, when operational, provide settlement services that enable ESCos to interact directly with those institutions, RegCo will modify or discontinue use of those features of this settlement system as appropriate.

8.3.1 Fo ecasti a Schedui Re u e ents ESCos or their agents will be required to submit to RegCo at least a day in advance (or multiple days in advance for weekends and holidays) hourly bilateral scheduled deliveries including the source of generation supply and location of the load being supplied. When the power exchanges and the ISO are operational, ESCos will also be required to provide hourly load forecasts, and specify what portion of their forecasted loads should be served from the day-ahead energy market. RegCo will "Losses include adjustments for transmission and distribution losses, theA of service, etc.

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accommodate load management bids provided by ESCos to the extent possible within the bidding provisions of the power exchanges and the ISO.

8.3.2 e erin Re uir ents In order to facilitate retail access, all customers in classes SC-3 and above will be required to have a meter whose capabilities are at least equivalent to a single directional meter with a recorder capable of registering hourly (or shorter) integrated readings (interval metering),

whether or not they choose an alternate supplier. The incremental costs of metering will be borne by these customers.

All other customers will be permitted to continue to utilize existing kWh meters. For settlement purposes, RegCo will use load shapes applicable to the customer's class to estimate hourly usage. Since load shapes have not been used in RegCo's area for this purpose, the company reserves the right to modify the specific techniques as necessary to attain reasonable and accurate results. Customer classes may be subdivided if deemed necessary to ensure that representative load shapes are applied.

Any customer not otherwise required to have interval metering may request that interval metering be installed provided that the customer bears the incremental costs of such metering.

RegCo will adjust its methodology for the application of load shapes and/or interval meters as necessary based on experience, and in conformance with Commission orders resulting from the ongoing metering and billing efforts in the Competitive Opportunities Proceeding.

In the event that meter availability or installation resources result in some customers in the SC-3 class not having hourly metering at the time they otherwise would become eligible for retail access, access will be permitted and load shapes utilized on an interim basis until the metering is in place.

8.3.3 Serv ces Not Covered b the Settlement S ste Certain services acquired by ESCos will not be included in the settlement system. RegCo will not be involved in payments between ESCos and generators for bilateral transactions between them. The ISO may have installed reserve requirements that all load serving entities must fulfill; RegCo does not intend to serve as a broker for the acquisition of installed capacity for ESCos (although ESCos will be free to separately negotiate for purchase of installed capacity from Niagara Mohawk or its subsidiaries, if desired). In general, RegCo does not intend to include in its settlement Page 87

system any service for which appropriate billing and payment methods are available directly between supplier and ESCo.

8.3.4 Nondiscriminato Treatment of Customers RegCo will implement the curtailment procedures of NYPP or the ISO (as applicable) consistent with its existing transmission arrangements and will not discriminate between those bilateral transactions serving ESCo customers and those serving RegCo customers.

RegCo will conform to all operating criteria and guidelines established by the ISO and the PSC. RegCo will not discriminate in any way in providing reliable service to customers that receive energy supply from RegCo or those that are supplied from ESCos. Customers of RegCo and customers of ESCos will be subject to the same emergency load curtailment provisions.

8.3.5 Audit of he Settlemen F nctio To ensure that the settlement functions performed by RegCo to facilitate retail access are being performed in accordance with appropriate procedures that treat all market participants equitably, audits of these functions may be performed under the direction of the PSC. The scope of these audits shall be limited to those functions and procedures related to the determination and assessment of charges to the ESCos obtaining retail access through RegCo. All audits shall be performed either by the Staff of the PSC, or by an independent auditing firm with a national practice selected by the PSC.

Any incremental costs associated with the auditing of the settlement functions that are incurred by RegCo shall be borne by all ESCos serving retail load through RegCo's retail access framework, and RegCo itself, in proportion to the total energy served by these entities in the three-month period preceding the commencement of the audit. Incremental costs shall include auditor costs invoiced directly to RegCo, auditor costs invoiced separately to RegCo by the PSC, and any RegCo costs incurred specifically in response to audit requirements.

All data provided for audit purposes to the PSC or to another auditor shall be regarded as confidential and shall not be disclosed to any market participant, or to the general public, unless such data is already accessible to the public through separately established regulations or procedures except as otherwise decided by the Commission or its records Page 88

access officer. Audit reports and findings, excluding confidential data, shall be made available to all market participants and the general public.

8.4 Reciprocity Assurances Full retail access in Niagara Mohawk's service territory may occur before comparable access is available in other electric utilities'ervice territories.

Other energy service providers may gain access to customers in Niagara Mohawk's service territory before Niagara Mohawk is able to gain comparable access to customers in other electric utilities'ervice territories. If there is such a disparity in the companies'elative degrees of access, Niagara Mohawk is concerned that it could experience substantial financial disadvantage. However, as part of this settlement, the Company agrees there will be no restrictions on commodity sales to retail customers unless the Company petitions the Commission for relief and the Commission approves the restriction.

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Table 8-1 Retail Access Phase-In Schedule and Statistics Revenue Sales Number of Timing Group of Retail Customers Choice

%of Mwh

%of Cumulative Millions Total Total % of Total Farm & Food Processor Pilot Commercial 22,237 41.8 1.4 384,025 1.3 Farms'ood 11/1/97 589 44.0 1.4 479,000 1.7 Processors'&FP Pilot Total 22,826 85.9 2.8 863,025 3.0 3.0 Group 1 Transmission level t+1 mo. 348.0 11.2 4,590,144 16.0 19.0 customers'8 SC-3A and SC4 Group 2 All remaining 158 t+7 mo. 213.7 6.9 2,517,270 8.8 27.8 customers >2 MW Group 3 All remaining transmission and 229 68.8 2.2 800,879 2.8 5/1/99 30.6 subtrans mission level customers4 Group 4 All remaining Phased residential in, 4/2/99 63.5 1,200.1 38.8 32.9 customers 1,402,657 through 9,440,920 12/31/99 Group 5 All remaining 149,706 1,179.2 38.1 10,482,296 36.5 non-residential 100.0 customers'otals 1,575,674 3,095.6 100.0 28,694,534 100.0 100.0 Page 90

Notes on Table 8-1 Statistics are based on 1998 forecast data. Revenue estimates reflect Base Rate for 1998.

Customers with special contracts will not become eligible until expiration of their contracts. The table estimates do not reflect possible delayed eligibility due to special contracts.

t = The PowerChoice Implementation Date Rough estimates based on full participation of all customers currently shown in Company records as farms. Actual participation is likely to be lower; however, the Company does not have sufficient data to more accurately predict actual eligibility or participation prior to program implementation.

2. Assumes eligibility and participation of all customers with SIC codes of 2000 to 2099; special contract rates, economic development discounts, or optional pricing schedules may make some customers ineligible.

3. SC-4 customers must also have 2 MW of NMPC demand to qualify. Transmission level is above 60 kV.

4. Subtransmission level is 22 kV and above.

5. Excludes 25 cycle customers.

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Figure 8-1: Retail Settlement & Billing One- or two-bill system with ESCo load aggregation and load shapes Billing parameters (rates, delivery charges, etc.) Statewide PE/ISO Bill for imbalance

~

LBMP pricing

~ OATI (Transmission Service Charge, uplift, Payment RegCo Customer Billing congestion rents, etc.) Generators System ESCo customer data Invoice Identify ESCo and Payment Reg Co customers New Retail Loads b Access Procedure New RegCo Retail Note:

hour Settlement Procedure Bilaterals must be

. ESCo load aggregation scheduled voltage in advance ESCo customer-specific data; with PE/ISO Invoice for: balancing, through Payment ESCo customer hourly usage, RegCo Payments RegCo service temtog uplift 8 other PE/ISO charges Payment RegCo ESCo Pa ment Invoices for Customers Customers Invoice'SCo*

Invoices for energy and bilateral transactions delivery charges, Hourly, monthly, as applicable2 & bimonthly RegCo's ESCo function treated the same as other ESCos for this purpose meter readings 'For optional one-bill approach, RegCo handles customer billing for ESCo 2Altemative one-bill approaches, with ESCos handling billing for RegCo, will be accommodated as necessary to comply with any Commission orders regarding billing and metering in a restructured market environment but this Agreement does not limit any Party's rights to challenge or otherwise petition for lief from any proposed policy in the Generic Proceeding.

SECTION 9.0 CORPORATE STRUCTURE AND AFFILIATE RULES 9.1 PROPOSED CORPORATE STRUCTURE Niagara Mohawk shall separate its existing operations, as indicated below or as described in any petition filed by Niagara Mohawk within one year of the approval of this settlement proposing the formation of a holding company in substantially the same structure described below:

HoldCo: The HoldCo may be, at the Company's option, a legally distinct entity that directly owns no state or federal jurisdictional assets and, therefore, is unregulated or a functionally separate unit serving the same purposes of a holding company.

Recet o: RegCo shall be a wholly owned subsidiary of HoldCo or a utility parent owning in whole or in part one or more regulated and/or unregulated subsidiaries. The RegCo shall carry on the full range of Niagara Mohawk's regulated transmission and electric and gas distribution services. To the extent not carried on through a statewide nuclear operating company and subject to the other provisions of this settlement regarding nuclear assets, Niagara Mohawk's nuclear operations may remain a part of RegCo.

Plum Street Enter r se /Unre I ted Affiliates: Niagara Mohawk may form unregulated or lightly regulated affiliates, which may be owned, in whole or in part, by HoldCo or may be a subsidiary of a utility parent under either proposed corporate structure. If Niagara Mohawk seeks to form subsidiaries of RegCo, it will be subject to all applicable regulatory requirements including Section 107 and 69 of the Public Service Law.

Transiti n GenCo: Niagara Mohawk may form all subsidiaries necessary to effectuate the fossil and hydro asset auction contemplated in this settlement.

Prior to that auction, Niagara Mohawk may maintain its current functional unbundling of its fossil and hydro generation business.

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9.2 RULES GOVERNING AFFILIATETRANSACTIONS 9.2.1 0~1* ti 9.2.1.1 Separation and Location RegCo, HoldCo, and the HoldCo's other subsidiaries will each be operated as separate entities and will maintain separate books and records of account. HoldCo's unregulated subsidiaries and RegCo will operate from physically separate buildings. RegCo and HoldCo may occupy the same building.

9.2.1.2 Board of Directors Membership and Fiduciary Duty A majority of the RegCo Board of Directors will be Outside Directors (i.e., neither an officer nor director of HoldCo or any HoldCo unregulated affiliate).

In any calendar year RegCo will limit dividends paid to HoldCo as follows:

Dividend Limitation: Net Income Available for Common Yi'aas Div'dend Pl 1998 $ 50 million 1999 $ 75 million 2000 $ 100 million 2001 $ 100 million 2002 $ 100 million 2003 $ 80 million 2004 $ 60 million 2005 $ 40 million 2006 $ 20 million 2007 and beyond $0 The calculation of net income will exclude any one-time, non-cash accounting charges, and the dividend limitation will exclude any one-time dividends to HoldCo attributable to major transactions such as asset sales, the Page 93

transfer of generating assets associated with HoldCo and subsidiary formation as necessary to implement the terms of this settlement, or securitization.

Notwithstanding the above, if the Company files for rates for years 2003, 2004, 2005, 2006, or 2007, the measure for the dividend limitation will be reassessed in the context of the rate filing.

9.2.1.3 Cost Allocation Appropriate cost allocation procedures will be followed by HoldCo and its affiliates to assure the proper allocation on a fully distributed basis, to HoldCo, RegCo, PSE or other affiliates of the costs of any HoldCo personnel, property or services used by RegCo or other affiliates or HoldCo.

A complete manual of cost allocation guidelines will be developed and filed with the Director of the Office of Accounting and Finance of the Department of Public Service. All amendments and supplements to these guidelines will be filed thirty days prior to the effective date of such amendments and supplements. The cost to develop these guidelines, accounting, auditing and monitoring systems for affiliates will be paid by shareholders.

9.2.2 Transfer of Non-Generation Assets Transfers of non-generation assets (or rights to use such assets) from RegCo to an affiliate will be priced at the higher of book value or fair market value.

9.2.3 T nsfer of Services RegCo may provide tariffed and corporate services (such as corporate governance, administrative, legal and accounting) to HoldCo and HoldCo's other subsidiaries. The provision of corporate services shall be subject to a written contract that, as applicable, identifies the personnel, assets, and services which will be provided. The services will be provided on a fully loaded cost basis. Such services may be provided by RegCo so long as RegCo's total assets are equal to or greater than 85% of the consolidated total assets of HoldCo.

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At such time as RegCo's total assets are less than 85% of the consolidated total assets of HoldCo, corporate services may not be provided by RegCo to HoldCo and its other subsidiaries; however, HoldCo may provide corporate services to RegCo and its other subsidiaries at any time provided that such services are priced at not higher than fully loaded cost and are pursuant to a written contract that, as applicable, identifies the personnel, assets, and services to be provided. RegCo will not purchase any other products or services from HoldCo or its unregulated affiliates unless these are purchased as a result of a fair and open competitive bidding process.

To the extent that the Company does not move the function to RegCo, the existing Energy Services and Gas Services contracts with Plum Street will be subject to a fair and open competitive bidding process by December 31, 2000, or at the renewal or expiration dates of the current agreements, whichever is earlier. Any such contract will be filed with the Public Service Commission in accordance with Public Service Law Section 110. The Company will meet with Staff to determine which, if any, functions should return to RegCo.

Furthermore, any generic order regarding the provision of these services will supersede this agreement.

The RegCo, the HoldCo and the unregulated affiliates may be covered by common property/casualty and other business insurance policies. The costs of such policies shall be allocated among the RegCo, the HoldCo and the unregulated affiliates in an equitable manner as defined in the cost allocation manual.

9.2.4 S eclal Services The Company through RegCo will not provide or offer to provide services to customers that are normally provided by Energy Services Companies (ESCos) such as energy audits, energy efficiency equipment, etc. without prior Commission approval except as provided for in Section 7.2 (xiii). The Company will be allowed to provide operation, maintenance and construction services to customer's equipment at a customer's explicit request that is related to energy delivery services (Rule 28 of P.S.C. 207). Any such services provided by the Company will be subject to the following:

(1) Under no circumstances will such customer-requested services provided by RegCo to individual customers impose a cost on other utility ratepayers. Customers will be charged fully loaded rates for these services.

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(2) The Company will provide these sewices on a first-come, first-served basis to customers who request them on non-discriminatory terms and conditions, i.e., similarly situated customers would be charged the same rates.

(3) The Company will make customers aware if there are other entities that may be able to provide the requested services.

(4) The utility will maintain records relative to all such services, including scope of work, copies of customer requests including acknowledgment that the customer was aware of alternate suppliers, revenues received, any profits made as a result of providing the services, and identifying any direct or indirect benefits to other ratepayers that the Company estimates was derived from the provision of the service.

(5) The Company will provide the Commission in Year 3 an analysis of the impact of the Company providing such service and the Commission will then decide if the Company will be allowed to continue the provision of such services.

(6) RegCo will not hire any additional employees or purchase additional equipment in order to provide these services.

To the extent the Company's current or planned provision of the services described above requires Commission authorization pursuant to Public Service Law Section 107, that authorization is in the public interest and in approving this settlement, the Commission thereby grants that authorization for the term of this settlement.

9.2.5 ~R 9.2.5.1 Separation of Employees and Officers RegCo and the unregulated subsidiaries will have separate operating employees. Operating officers (i.e., those officers providing other than corporate services) of RegCo will not be operating officers of any of the unregulated subsidiaries. Officers of HoldCo may be officers of RegCo or an unregulated affiliate, provided that a HoldCo officer may not be an officer of both RegCo and an unregulated affiliate.

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9.2.5.2 Employee Transfers If a RegCo employee accepts a position with an unregulated subsidiary, he or she will be required to resign from RegCo unless there is a conflict with the collective bargaining agreement in which case the collective bargaining agreement would control. Any such employee shall be prohibited from copying or taking any non-public customer or competitively sensitive market information from RegCo.

Employees may be transferred from RegCo to an affiliate. Transferred employees may not be reemployed by RegCo for a minimum of one year after transfer. Employees returning to RegCo may not be transferred again to an unregulated affiliate for a minimum of one year.

RegCo will file annual reports to the Commission, beginning 45 days after the end of the first calendar quarter following formation of HoldCo showing transfers between RegCo and unregulated affiliates by employee name, former company, former position, new company, new position, and salary or annualized base compensation. There will not be any temporary employee transfers between RegCo, HoldCo and any HoldCo unregulated affiliates.

9.2.5.3 Employee Loans in an Emergency The foregoing provisions in no way restrict any affiliate from loaning employees to RegCo to respond to an emergency that threatens the safety or reliability of service to consumers.

9.2.5.4 Compensation for Transfers An employee transfer credit equal to 25% of the employee's salary will be applied to reduce any stranded costs. This fee will apply for all transfers except for (i) the initial transfer of RegCo employees to HoldCo on or within the 30 days after the formation of HoldCo, (ii) the transfer of RegCo employees from one regulated subsidiary to another regulated subsidiary, (iii) the transfer of RegCo employees to an affiliate if their function is no longer regulated, (iv) any represented or other employee covered by a collective bargaining agreement targeted by a layoff in the one year following the implementation date of PowerChoice, and (v) the transfer of employees involved in the performance of corporate services to HoldCo when RegCo no longer constitutes more than 85% of HoldCo's assets as per section 9.2.3.

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Transfer charges for employees transferred ta Plum Street to date are reflected in rate levels.

9.2.5.5 Employee Compensation and Benefits The compensation of RegCo employees may not be tied to the performance of any of the unregulated subsidiaries, provided, however, that stock of the HoldCo may be used as an element of compensation and the compensation of common officers of the HoldCo and RegCo may be based upon the operations of the HoldCo and RegCo.

Employees of HoldCo, RegCo and the unregulated subsidiaries may participate in common pension and benefit plans.

9.2.5.6 Legal Representation The affiliates of HoldCo other than RegCo and Canadian Niagara shall have their own Chief Legal Officer/General Counsel, who shall report to the affiliate's management and not be an employee or officer of RegCo.

The same law firm may represent RegCo and any affiliate on any matter other than transactions between RegCo and that affiliate. On any matter not involving such an intracorporate transaction in which the interests of RegCo may be adverse to the interests of an affiliate, RegCo will take appropriate steps to ensure that RegCo's interests are vigorously and independently protected (such steps, by way of example and not limitation, could include having separate attorneys if a single law firm is used and creating a Chinese wall between such attorneys) ~

With respect to all matters handled by outside counsel, HoldCo and its affiliates shall instruct outside counsel to take all reasonable steps to ensure the non-public customer and competitively sensitive information in the possession of RegCo is not communicated to an affiliate.

9.2.6 Maintai 'n Financial lnte ri Niagara Mohawk will agree to the following financial restrictions: (i) RegCo assets will not be used as collateral for affiliate debt; and (ii) debt and equity requirements will be established for RegCo through the regulatory process.

RegCo will not provide any financial assistance to its affiliates through loans, loan guarantees, letters of credit or other commitments.

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Nothing in these restrictions will prevent Niagara Mohawk from transferring funds from its Opinac affiliate to any other affiliate at any time without Commission authorization.

9.2.7 Access to Books Records and Re orts Staff will have full access, on reasonable notice, and subject to resolution of confidentiality and privilege (e.g., attorney client, attorney work product, self critical) issues, to: 1) the books and records of HoldCo and the HoldCo majority owned subsidiaries; and 2) the books and records of all other HoldCo subsidiaries to the extent necessary to audit and monitor any transactions which have occurred between the RegCo and such subsidiaries.

9.2.8 ~Re ortin Annually, RegCo will file reports on: Transfers of assets, cost allocations, employee transfers and employees in common benefit plans. Quarterly, HoldCo will file a list of all SEC filings with the Commission.

9.3 STANDARDS OF COMPETITIVE CONDUCT The following standards of competitive conduct shall govern RegCo's relationship with any unregulated affiliates.

9.3.1 Use of Cor orate Name and Ro alt es The rate plan in this settlement shall be in lieu of any and all "royalty" payments that could or might be asserted to be payable by any affiliate or imputed to the RegCo or credited to RegCo customers at any time, including after the expiration of this settlement.

There are no restrictions on any affiliate using the same name, trade names, trademarks, service names, service marks or a derivative of a name of the HoldCo or RegCo, or in identifying itself as being affiliated with the HoldCo or RegCo.

Promotional material may identify the affiliate as being affiliated with RegCo or HoldCo.

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9.3.2 Sales Leads RegCo will not provide sales leads involving customers in its service territory to any affiliate.

9.3.3 Customer In uires If a customer requests information about securing any service or product offered by ESCos, the RegCo may provide a list of all known ESCos operating in the area which may include its unregulated affiliate.

9.3.4 No Advanta e Gained b Deal with Affila e RegCo will refrain from giving any appearance that RegCo speaks on behalf of an affiliate or that an affiliate speaks on behalf of the RegCo. RegCo will not participate in any joint promotion or marketing with its affiliates.

The RegCo will not represent to any customer, supplier or third party that an advantage may accrue to such customer, supplier or third party in the use of the RegCo's services as a result of that customer, supplier or third party dealing with any affiliate.

RegCo's affiliates will not represent to any customer, supplier or third party that an advantage may accrue to such customer, supplier or third party in the use of the affiliate services as a result of that customer, supplier or third party dealing with RegCo.

These provisions do not restrict the use of the name of HoldCo or RegCo as set forth in Section 9.3.1.

9.3.5 No e D All similarly situated customers, including ESCos and customers of ESCos, whether affiliated or unaffiliated, will pay the same rates for the RegCo's utility services. If there is discretion in the application of any tariff provision, RegCo must not offer its affiliate more favorable terms and conditions than it has offered to all similarly situated competitors of the affiliate.

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FERC Jurisdiction Transactions subject to FERC's jurisdiction will be governed by FERC's orders or standards as applicable.

Cus o er Information RegCo will provide 24 months of a customer's data to that customer or its authorized ESCo at no charge, except as provided by law consistent with the Commission orders in the Generic Proceeding related to Metering and Billing (94-E-0952). Additional customer billing information will be provided to a customer for a reasonable fee to be established pursuant to a tariff. If the Company releases other information, it will do so for a fee and on a non-discriminatory basis.

0 er Info mation Other customer or market information in the Company's possession will be released as necessary, as authorized or required under FERC and PSC regulations, subject to protection of confidential information and recovery of attendant costs. RegCo will not disclose to any affiliate any market information relative to its service territory, which is not otherwise public, that it has not disclosed contemporaneously on an equal basis to all potential competitors of its affiliate.

pm a t e es Any competitor or customer of RegCo or competitor of any HoldCo subsidiary who believes that RegCo or HoldCo or its subsidiaries has violated these principles may file a complaint with the PSC and serve a copy on the Company which shall respond in writing in fourteen business days, with a copy to the PSC. Thereafter, the complainant and the Company shall meet to resolve the complaint informally. If no resolution can be reached within thirty days after RegCo's response, either party may notify the Secretary of the PSC. The Secretary shall send a copy of such notice to the other party, and shall promptly address the complaint pursuant to the Commission's complaint procedures.

If the Commission determines, per the procedure outlined above or as a result of its own investigation, that the RegCo or HoldCo has violated these Page 101

standards, it shall provide the RegCo/HoldCo an opportunity to remedy such conduct or explain why such conduct is not a violation. If the RegCo/HoldCo fails to remedy such conduct within a reasonable time after receiving such notice, the Commission may take such remedial action for which it has authority under the Public Service Law.

9.4 MISCfLLANEOUS 9.4.1 A Ilcabill of Settlement Standards of Conduct The standards of conduct set forth in this Agreement will apply in lieu of any existing generic standards of conduct (~e, the interim gas standards established in Case 93-G-0932) and in lieu of any future generic standards of conduct established by the Commission during the term of this Agreement.

Before the Commission makes any changes to these standards, either through a generic or specific Company proceeding, it will consider the Company's specific circumstances, including its performance under the existing standards.

9.4.2 k~lti Senior management of RegCo and HoldCo will meet annually with senior Commission Staff to discuss the Company's plans related to capital attraction and financial performance.

9.4.3 Trainin and Ce ficatlon HoldCo and RegCo shall conduct training on these principles for officers, directors and senior managers. The officers, directors and senior managers of HoldCo, RegCo, and unregulated affiliates shall certify familiarity with these principles within forty-five days of PSC approval. New officers, directors and senior management should similarly certify familiarity within 45 days after taking their positions.

On an annual basis, designated officers should provide certification to the PSC of the companies'dherence to these standards.

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9.4.4 Telerqlr The rate plan and standards of conduct in this settlement shall constitute settlement of the issues that have arisen with regard to or resulting from the so-called "Telergy" venture, including those identified in Case No. 96-M-0138 pertaining to adequate compensation for the use of Niagara Mohawk's rights-of-way, and use of "Telergy" Calling Cards.

9.5 MERGERS AND ACQUISITIONS 9.5.1 Recove of Prem um Pursuant to a petition filed jointly or individually by the Company, Niagara Mohawk shall have the flexibilityto retain, on a cumulative basis, all savings associated with the acquisition or merger with another utility for a period of five years from the date of closing of any such merger or acquisition up to the amount of acquisition premium paid over the lesser of book value or fair market value of assets merged or acquired. Savings in excess of that recovery will be disposed of by order of the Commission.

9.552 Relationshi to Divesti ure Because the PSC will review merger applications under the Public Service Law, nothing in this agreement will limit the Company's ability to merge with or be acquired by another entity owning generation.

9.5.3 A licabili of this A reement Post Mer er The provisions of this agreement shall continue in any merged entity.

9.5.4 ~B* dll d 9 Staff and the Commission will give expedited review and treatment to any petition by RegCo or HoldCo in connection with a merger with another utility.

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SECTION 10.0 SUPPLIER OF LAST RESORT OBLIGATION AND IMPLEMENTATION 10.1 OBLIGATIONTO SERVE The Public Service Law requires regulated utilities to provide safe and adequate electric service at just and reasonable rates. RegCo will maintain an obligation to provide the electricity commodity to all customers during the term of this settlement, as further described in Section 4.0. The Company agrees to work with other parties, in the continuing proceedings in Case 94-E-0952 and other forums as appropriate, to develop a definition of the obligation to serve that is consistent with a competitive generation market and a competitive energy services market.

10.2 IMPLEMENTATION 10.2.1 Ener Service Providers Marketers and Bro e s Niagara Mohawk will accept financial risk for the performance of energy service companies if the Company is allowed to employ reasonable standards of operational conduct and acceptable standards of commercial credit worthiness. To the extent that Niagara Mohawk has incurred costs to provide energy to balance an ESCo's customers loads, it will collect its costs for doing so from that ESCo and/or from customers as provided for below. Niagara Mohawk's ESCo will have the same requirements as other ESCos.

As discussed in Section 8.3 RegCo will bill customers directly for transmission and distribution services. An ESCO will have the option of billing customers for its services directly (two bill model) or having RegCo bill on its behalf (one bill model).

Under the one bill model, issues concerning operational conduct and credit worthiness can be addressed in the commercial terms established under service level contracts with the ESCos. Therefore, no additional credit or security requirements shall apply.

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With respect to the two bill model, the Company has a greater level of business risk from balancing services. This business risk can be mitigated by establishment of reasonable standards of operational performance and credit worthiness. The following procedures address these operational business risks:

ESCos are required to maintain a credit requirement with the Company or provide adequate security in lieu of such credit requirement, in an amount that is equal to or greater than the summation of the kilowatthours of all customers under each ESCo's service, multiplied by the Company's highest monthly average on peak energy buy back rate during the preceding twelve month period (the current rate under S.C, 6 is $ .02333 per kilowatthour). The Company reserves the right to revise the rate as appropriate to reflect changes in tariff provisions.

This credit requirement will be updated on a continuous basis.

A customer's kilowatthour summation for credit requirement purposes only, will be determined by computing the two highest monthly billing cycle kilowatthour consumptions or the highest bi-monthly billing cycle kilowatthour consumptions over the prior twelve-month period for the eligible customers. If a prior twelve-month period does not exist, the kilowatthour summation will be determined by computing the two highest kilowatthour consumptions or the highest bi-monthly kilowatthour consumptions over the prior twelve-month period for an "average customer" of the same rate class and voltage level of the eligible customer.

The application of these ESCo credit worthiness standards will be accomplished by performing the evaluation as described more fully in Section 10.2.3.2 of this settlement.

An interim imbalance billing may be presented to the ESCo with payment due within 21 days of receipt of the billing when actual deliveries fall below 75% of the required scheduled deliveries during a seven day period. If payment from the ESCo is not received, the Company may institute an expedited proceeding with the PSC to revoke or suspend the ESCo's eligibility, and to propose a transition plan to convert the ESCo's customers to an Page 105

alternative supplier. The Company expects a decision on this petition to be completed within 23 days of such filing.

To the extent that the PSC does not respond to the petition request or alters the conversion date of the ESCo's customers, beyond sixty days from the beginning of the period that generated the interim imbalance bill or 23 days from the filing of the petition with the PSC, whichever is greater, the Company will not be at risk of loss associated with imbalance services for those customers from this date through the conversion date set forth in the PSC decision. The Company would seek to recover such'losses first, from any remaining security from the ESCo, second through the transition plan for the ESCo's customers as approved by the PSC, and lastly from ratepayers in general, consistent with deferral provisions contained in Section 2.0 Rate Plan of this settlement. The Company will continue to use its best efforts to pursue recovery of all losses from the ESCo and to the extent additional recoveries are achieved, such recoveries will be offset against deferrals.

These procedures will be revised as necessary upon the establishment of a fully operational ISO and Power Exchange.

10.2.2 Gusto er 0 eratlons Procedures To facilitate the Company's operations under the rate plan, provisions of Part 11, Part 13, Part 140 and Part 273 of 16 NYCRR and the requirements for a plain language bill format adopted in Case 28080, Ord r Re irin Gas and Electric Utilities to Bil in Form t (Oct. 31, 1985), are waived to the extent F'evise that any such provisions are inconsistent with the Company's ability to:

institute non-discriminatory procedures which require an applicant to provide reasonable proof of the applicant's identity as a condition of service;

b. modify its bill content and format in response to industry restructuring; provided, however, the Company's bills will contain the following:

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an explanation of how bills may be.'paid total charges due due date unit price of energy consumed or other appropriate itemization of charges (including sales taxes and other informative tax itemization) complete name and address of customer unique account number or customer number assigned to the customer meter readings period of time associated with each product or service name of entity rendering bill local or toll-free telephone number customers may call with inquiries plain language basis of calculations of billed amounts late payment charges that apply estimated reads, if applicable posting of cash receipts to previous balance

c. include non-tariffed items in a bill; provided, however, that customer payments are credited first to tariffed items and service cannot be terminated for failure to pay non-tariffed items.

Niagara Mohawk will be permitted to disclose to other service providers: whether or not a deposit could be requested from the customers by Niagara Mohawk due to delinquency, as defined in 16 NYCRR Section 11.12(d)(2) or in 16 NYCRR Section 13.1(b)(13), or for any reason provided in 16 NYCRR Section 13.7(a)(1); whether or not a customer could be denied service by Niagara Mohawk due to unpaid bills on an existing or prior account; or, whether a customer's service could be terminated by Niagara Mohawk provided that:

such information is to be used by other service providers only for the purposes of determining whether unregulated energy services will be provided to the customer, whether a deposit will be collected from such customer, or for other purposes approved by the Commission; and, Page 107

such information request is made by a service provider in response to a bona fide request from the customer to the service provider for electric service or with other customer consent.

The Company will be permitted to accept credit card payments for utility service, provided, however, that any costs imposed on Niagara Mohawk associated with the receipt of payment by credit card are to be considered among the general costs of doing business and will not be a separate additional charge to the customers whose payments are made by credit card.

10.2.3 Credit and Collect on Ma ers 10.2.3.1 Customer Creditworthiness Change to Parts 11 and 13 of the Commission's Regulations are expected to be made and necessary for the Company to mitigate its risks of being the supplier of last resort. In Case 96-M-0706, for example, the Company proposes changes to the Regulations, including (1) requiring payment in full of security deposits prior to initiation of service for some customers; (2) requiring alternate payment plans for certain applicants and for customers who have defaulted on deferred payment agreements (DPA);

(3) requiring completed applications for service; (4) increasing minimum DPA payments and down payments; (5) revising the standards for determining financial need; (6) allowing utilities to deny service under certain circumstances to those who have breached DPAs; and (7) reducing the duration of DPAs. The Company plans to pursue changes as described above as part of the generic proceeding covering these issues, however, it reserves the right to petition for further waiver of such rules as necessary.

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ESCo Creditworthiness Evaluation Niagara Mohawk will establish credit limits or security requirements for all energy suppliers prior to their serving customers on Niagara Mohawk's system by applying, on a consistent, non-discriminatory basis, the same financial evaluation standards it currently employs in determining creditworthiness of energy suppliers providing supply services to its gas transportation customers (See Appendix G). Energy suppliers will be notified of the established credit limit within two weeks of receipt of a completed credit application accompanied by the two most current years of audited financial statements. Credit limits must be maintained and will be reviewed continually.

If an entity is assigned a credit limit that is not sufficient to meet the requirements of this section, it may meet the requirements by paying any outstanding balances due to Niagara Mohawk and providing security in the form of (1) an advance deposit; (2) an irrevocable letter of credit in such form, and drawn upon such bank, as are satisfactory to Niagara Mohawk; (3) a security interest in collateral satisfactory to Niagara Mohawk; or (4) a guarantee, in form acceptable to Niagara Mohawk, by another entity which is assigned a credit limit adequate to meet the requirements of this section (e.g., parental guarantee) Such security must be in an amount at

~

least sufficient to cover the difference between the credit limit assigned to the entity by Niagara Mohawk and the credit limit required by this section.

In the event the level of credit indicates security is no longer required, and in conjunction with a creditworthiness evaluation, such security will be returned in kind, within two weeks of such determination. Security deposits held by Niagara Mohawk Power Corporation for energy suppliers will accrue interest at the Commission's "Other Customer Capital Rate." If Niagara Mohawk is unable to establish a credit limit based on information available Page 109

from acceptable financial reporting agencies or commercial credit reporting organizations, and the financial statements noted above, an energy supplier must provide such supplemental financial and credit information as Niagara Mohawk may deem necessary. This may include information as to the energy supplier's legal structure; its officers, partners, or proprietors; trade references; recent financial statements; and such other credit information as might reasonably be required in the exercise of due diligence by a potential creditor of the energy supplier.

10.2.4 Ter ination Decislo s RegCo will serve as the supplier of last resort, thus it will make all service termination decisions associated with non-payment of amounts owed to the Company. Its termination decisions will continue to be guided by regulation.

RegCo will not charge for a customer's initial switch from RegCo to an alternative energy supplier. If a competitive ESCo wants to discontinue electric service, it will notify the customer and RegCo of the termination in writing at least 21 days before the customer' next cycle meter reading date. If a customer wants to discontinue service from an ESCo, it will notify the ESCo and RegCo of the termination in writing at least 21 days before the customer's next meter reading date. If, after receiving the ESCo's written termination notice, or sending its own written termination notice, the customer has not contacted RegCo or some other ESCo during the 21 day period, service would thereafter be provided by RegCo.

RegCo will charge customers a switching charge that fully reflects all incremental costs as provided under tariffs. RegCo also will charge customers who return to RegCo for commodity service rates for energy supply according to the rates for their applicable rate class. Any other charges associated with the discontinuance and/or reconnection of service will be borne by the ESCo. RegCo may recover those charges from the ESCo by acquiring a commensurate amount of the ESCo's security and receiving a replacement amount of security from the ESCo.

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RegCo's revenue sources may be in jeopardy to the extent welfare reform on the state and federal levels limits public assistance and Home Energy Assistance Program benefits that customers now use to pay their utility bills. RegCo may incur a revenue shortfall from those sources that is not currently being mitigated. To mitigate that shortfall, RegCo has the right to petition for recovery of losses consistent with the treatment of deferrals as described in Section 2.0, Rate Plan of this settlement.

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SECTION 11.0 REGULATORY CHANGES AND APPROVALS 11.1 ELIMINATIONOF CERTAIN REGULATORY REQUIREMENTS 11.1 ~ 1 Re ulato Re ortin Re uirements Niagara Mohawk will continue its participation in the Reporting Requirements Working Group of Case 94-E-0952 - Competitive Opportunities Proceeding - Phase II.

The reporting requirements that may be established in Case 94-E-0952 by a final, Commission order or an order which has not been stayed pending appeal will apply during the term of this Agreement.

11.1.2 Treatme t of uture Refunds The Company is subject to ongoing examinations by federal and state tax authorities. No amounts have been provided for in the financial forecast for resolution, either resulting in a refund or liability, of these examinations. To the extent that refunds or payments, including interest and penalties and net of any deferred taxes, individually exceed $ 500,000, the Company will defer such refund or payment for disposition in rates after the term of the settlement agreement. When available, new deferred debits will be netted against new deferred credits arising during the term of this settlement agreement.

In addition, the Company expects to receive a tax benefit resulting from the offset of the common stock, equity, and cash it will provide under the MRA against tax amounts paid in past and future'years, as described in Section 2.3.4.

During the term of this settlement, the treatment described above covers all refunds and tax benefits that might otherwise have been passed back to customers. Thus, in approving this settlement, the Commission thereby approves the treatment of all such refunds and the total amount of the tax benefit described Page 112

above. The Company will not be required to file any formal notice of tax refunds under. Section 89.3 of the Commission's Regulations (16 NYCRR Section 89.3). No hearings will be held pursuant to Section 113(2). However, the Company will provide Staff with documentation and supporting workpapers of any such tax refunds on a timely basis. This settlement constitutes full compliance with the provisions of Section 113(2) and the Commission's Regulations.

11.2 REGULATORY APPROVALS 11.2.1 Commercialization of P oducts and Technolo ies Develo ed as a Result of Research a d Develo men During the term of this Agreement, Niagara Mohawk will not defer and true up its cost of investment in research and development (R&D) activities. Nor will the Company defer and true up any royalty revenue it receives from commercialization of products and technologies that emerge from such R8 D activities.

The Company's affiliates may invest in commercialization of R8 D products and technologies developed by RegCo consistent with affiliate rules generally and with Sec. 9.2.2 specifically. If an affiliate elects to invest, it will fairly compensate RegCo, assume the business risk(s) and will be entitled to the benefits associated with that investment.

11.2.2 PSLSectio s 69 a d 0 royal of the Sale Leasin or Financin of Buildi F cilit es Niagara Mohawk intends to implement an Occupancy Cost Reduction Initiative ("OCRI"). The purpose of this initiative is to reduce the total occupancy cost to, and revenue requirements of, Niagara Mohawk, while increasing corporate flexibilityand enhancing operational efficiency. One key objective of OCRI will be to realign the Company's asset base to maximize flexibilityand minimize capital commitment as the needs of the Company change. Niagara Mohawk wishes to achieve this objective by disposing of least cost-effective space; bringing all facilities to fully-utilized status; and extracting capital from surplus assets.

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Annexed hereto as Appendix H is a list of Niagara Mohawk facilities that have been identified as potential candidates for sale, leasing, or sale leaseback transactions. For each facility, Appendix H sets forth its associated net book value.

During the term of this Agreement, Niagara Mohawk will observe the following procedures in connection with the sale, leasing, or sale-leaseback of its Appendix H facilities:

If and when a facility is no longer needed to provide electric and gas services, the Company will evaluate the best utilization or disposition of the facility, including, but not limited to, sale to NM Holdings or sale or lease to a third party.

11.2.2.2 In the event Niagara Mohawk decides to sell or lease a facility, the Company may utilize brokers or other service providers to identify prospective buyers or tenants. Niagara Mohawk will use every effort to obtain the highest market value for the facility based upon independent appraisals and market conditions.

Any sale will require the prior approval of Niagara Mohawk's Board of Directors. Any lease will require the approval of a Niagara Mohawk officer.

11.2.2.3 Under no circumstances will the sale or lease of a facility prevent Niagara Mohawk from providing electric and gas services to its customers, or from otherwise being able to discharge its public service responsibilities and to meet its electric and gas load requirements.-

11.2.2.4 To the extent the accounting for such revenues is not otherwise provided for herein, all revenues derived from sales will be accounted for in accordance with the Uniform System of Accounts.

11.2.2.5 All contract documents will include provisions limiting Niagara Mohawk's liabilities, such as environmental liabilities. In the case of lease transactions, tenants will also be required, ~int r Jaa, to maintain insurance Page 114

coverage, protect Niagara Mohawk property, and observe all Niagara Mohawk rules and regulations regarding the use of the premises. Any initial lease term shall not exceed five (5) years.

11.2.2.6 Any sale-leaseback transaction will be revenue neutral or will reduce revenue requirements.

To the extent implementation of the OCRI requires Commission authorization under Public Service Law Sections 69 and 70, that authorization is in the public interest for the sale, lease or financing of facilities of $ 3 million or less. In approving this settlement, the Commission thereby grants that authorization for the term of this settlement. Sale, lease or financing of facilities in excess of $ 3 million will be subject to a separate petition.

11.2.3 Conversion of 25 C cle Customers In its Western Region, several of the Company's customers maintain equipment that requires 25 cycle electricity rather than the 60 cycle power the Company provides elsewhere on its system. The Company will eliminate 25 cycle service to all such customers on December 31, 2007. Prior to that time, in the event of failure of significant 25 cycle equipment, e.g., transformers, frequency changers, the Company will not repair or replace such equipment unless it secures agreements from the affected customer(s) to pay the cost of such repair or replacement.

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SECTION 12.0 LOW INCOME CUSTOMER ASSISTANCE PROGRAM (LICAP)

RegCo will seek, at the lowest possible cost, to assist low-income customers who are unable to pay fully for their electric and gas usage, and to thereby minimize uncollectible accounts expense. As part of its provider of last resort responsibilities, RegCo will pursue these objectives by expanding the availability of Niagara Mohawk's Low Income Customer Assistance Afford/AbilityPlan to all low-income customers who do not receive public assistance and who, on the basis of objective criteria, are unable to pay their full energy bills. Based on research conducted in the Fall of 1995, it is estimated that approximately 29,000 customers will be eligible for services under the expanded Afford/AbilityPlan.

RegCo expects to have enrolled approximately 9,000 customers by the end of 1997 and to have enrolled all eligible customers by 2002 with the program continuing through the end of this Agreement.

RegCo will also offer Afford/AbilityPlan services on a pilot basis to a number of customers who receive public assistance and have accounts that are in arrears, but whose accounts are not paid directly by county departments of social services. If the results indicate that Afford/AbilityPlan services are more cost effective than current procedures for obtaining direct county payment of utility bills, RegCo will further expand the Afford/AbilityPlan to include public assistance customers.

12.1 ELIGIBILITYCRITERIA Current eligibility criteria for the Afford/AbilityPlan include receipt of Federal Home Energy Assistance Program ("HEAP") grants, a negative cash flow (as determined using Department of Social Services Form 3596),

and a history of broken payment agreements. Given the future uncertainty of the HEAP program, RegCo may be required to implement alternative methods of identifying and verifying eligible candidates for Afford/Ability Plan services.

12.2 PROGRAM DESCRIPTION The Afford/AbilityPlan involves three steps. First, based on the customer's financial circumstances as measured by objective standards, the utilitywill agree to accept partial payment for future energy use.

Second, the customer must agree to participate in an energy use management program designed to reduce overall usage. Program Page 116

services include weatherization, attendance at an energy services workshop, an electric appliance retrofit analysis (including, where appropriate, refrigerator replacement) and an in-home energy service education packet. To ensure cost-effectiveness, specific energy use management services will be provided to customers on the basis of the customer's previous usage and location; While the investment per customer will vary according to the package of services provided, the total annual program cost for energy use management services will approximate Niagara Mohawk's expenditure for the former Utility Low Income Energy Efficiency Program. Third, at the end of each year, the utility will forgive a percentage of arrearages for those Afford/AbilityPlan customers who have made all their agreed monthly payments. Continued participation in the Afford/AbilityPlan will require annual recertification. It is a condition of recertification that the customer has made all agreed partial payments during the previous year.

12.3 PROGRAM FVNDING The cost of the energy efficiency services outlined above will be funded through the SBC. The costs associated with arrears forgiveness for years one through three under the program will be absorbed by the Company except as otherwise provided for under Section 2.6.2. The costs of any other low income programs that may be required by any new legislation or regulation or of additional Afford/AbilityPlan services that may be offered as a result of the pilot study will also be funded through SBC. The Afford/AbilityPlan will be evaluated on an ongoing basis to ensure that the program remains cost effective. The Company will budget expenditures under the LICAP Program to be $ 4.377 million in 1998, $ 4.952 million in 1999 and $ 5.598 million in 2000. Year four and five budgets will be established in the proceedings that will set rates for years four and five.

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SECTION 13.0 MISCELLANEOUS 13.1 FORCE MAJEURE If a circumstance occurs which, in the judgment of the Company, threatens the Company's economic viability, including its ability to access capital markets at reasonable rates, or its ability to maintain safe and adequate service, the Company will be permitted to petition the Commission for relief from the terms of this Agreement, including filing for an increase in its prices.

13.2 COMMISSION AUTHORITY Nothing in this Agreement shall be construed to limit the Commission's authority to reduce the Company's rates should it determine, in accordance with the provisions of the Public Service Law, that the established rates are in excess of just and reasonable rates for the Company's electric service.

13.3 PROVISIONS NOT SEPARABLE: EFFECT OF COMMISSION MODIFICATION The parties have negotiated and accepted this agreement ~toto with each provision in consideration for, in support of, and dependent on the others.

If the Commission does not approve this agreement in its entirety, without modification, any signatory may withdraw its acceptance of this agreement by serving written notice on the other parties, and shall be free to pursue its position in this proceeding without prejudice.

If the Commission approves this Settlement Agreement or modifies it in a manner acceptable to the parties, the parties intend that this settlement thereafter be implemented in accordance with its terms. If a material modification is thereafter authorized or required by the Commission that is unacceptable to any party to this Settlement Agreement adversely affected by such modification, then, in addition to any other remedies a party may have, such party may withdraw from the agreement and will not be bound thereafter to its provisions.

Page 118

13.4 PROVISIONS NOT PRECEDENT The terms and provisions of this Agreement apply solely to and are binding only in the context of the purposes and results of this Agreement. None of the terms and provisions of this Agreement and none of the positions herein by any party may be referred to, cited or relied upon by any other party in any fashion as precedent in any other proceeding before this Commission or any other regulatory agency or before any court of law except in furtherance of the purposes and results of this Agreement.

13.5 DISPUTE RESOLUTION In the event of any disagreement over the interpretation of this Settlement or the implementation of any of the provisions of this Settlement, which cannot be resolved informally among the Parties, such disagreement shall be resolved in the following manner unless otherwise provided herein: The Parties shall promptly convene a conference and in good faith shall attempt to resolve such disagreement. If any such disagreement cannot be resolved by the Parties, any Party may petition the Commission for relief on a disputed matter.

13.6 WITHDRAWALFROM LITIGATION In consideration for the foregoing, the Company, upon final approval of this Settlement by the Commission, agrees to petition the Appellate Division of the Supreme Court for permission to withdraw as a party to the appeal in the Article 78 proceeding brought to challenge Opinion 96-12, EnercCy Association v. Pu li Service Commi sion (Sup. Ct. Albany Co. Index No.

5830-96). The Company's withdrawal as a party to the Ener As o iation case shall be effected through Stipulations of Withdrawal, mutually agreed to by the Company and the Commission. Until the aforementioned petition with respect to the E r A ociat'on case is granted, the Company will discontinue its litigation activities to the extent that it is able to do so without prejudicing its rights in the Article 78 proceeding.

13.7 CONSTRUCTION OF TERMS This Settlement Agreement was written to reflect formation of a legally separate HoldCo. In the event that the HoldCo is not a legally separate Page 119

entity, the terms and conditions of this Settlement shall be read to give full effect to their meaning and intent.

13.8 STEAM HOST ISSUES The parties to this Agreement recognize the need for certain of the SIPPs and companies ("the Steam Hosts Action Group" or "SHAG") that have contracts with those SIPPS regarding steam/thermal arrangements in the post-MRA period to conduct negotiations to reach a satisfactory settlement of issues related to changes in SIPP operations as a result of the MRA.

The parties to this Agreement acknowledge, among other priorities, the importance to the economy of the State of New York of addressing steam/thermal issues as expeditiously as possible. The following parties-Empire State Development by the Department of Economic Development, the Job Development Authority and the Empire State Development Corporation (Urban Development Corp.), Niagara Mohawk Power Corporation, New York Power Authority, Multiple Intervenors, the SHAG, and the SIPPS, Joint Supporters and the National Association of Energy Service Companies - specifically agree, in a good faith effort, to pursue diligently ways to minimize any economic or operational difficulties due to changes in SIPP steam production which could occur as a result of the MRA and to otherwise reach a mutually satisfactory settlement of the issues.

No party to this Agreement shall be deemed to waive (including, but not limited to, in connection with the Commission's review'of this Agreement),

any right to recommend to the Commission, or to oppose any such recommendation or to take any other position (including, but not limited to, with respect to Commission jurisdiction), that the Commission undertake any specific course of action regarding the resolution of these negotiations between such SIPPs and SHAG, except that all parties specifically waive any right to challenge the prudence of the MRA, and the contracts executed pursuant thereto.

Page 120

SECTION 14.0 TERM OF THIS AGREEMENT Except as otherwise provided herein, the term of this Agreement shall be five years from the PowerChoice Implementation Date.

Page 121

ra Moha ar orporation Staff of the Oepartment of Public Service (Signatures continued on the following pages)

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~ LocaI 97 i/~'BEW g g.4$

fd/y~/cg New York State C mm nity Action Association

Joint Supporters by The E Cubed Company

National Association of Energy Service Companies by

P nergyPr ect Natural Resourc Defense Coun I Adirondack Coun for Energy Affordability

'ssociation New York Rivers United

Niagara Mohawk Power Corporation Case Nos.94-'E-009S and 94-E-0099 St of the Department of Pu ervice

Niagara Mohawk Power Corporation Case Nos.94-2-0098 and 94-E-0099 Settling Independent Power Producers

1P/14/97 10: 11 ~518 405 q015 READ AND LANIADO ~~~ IPPNY QOO0 Niagara Mohawk Power Corporation Case Nos.94-E-0098 and 94-E-0099 ln ependent Power Prod rs NY, Inc.

Niagara Mohawk Power Corporation Case Nos. 94-E-0098 and 94-E-0099 Sithe/Independence Power Pa ers, L.P.

Niagara Mohawk Power Corporation Case Nos.94.-E-0098 and 94-E-0099 Multiple Interv nors

Niagara Mohawk Power Corporation Case Nos.94-E-0098 and 94-E-0099 Steam Host Acti n Gro

W OBK AUTHORITY

New k

/

State Department of 5;l.,

Economic Development yu /~

/d /'d F7 E pire State Development orporation Job Development Authority

16/13/1997 15:58 518-473-8347 PAGE 83 New Yoz State Department o Economic 'Development Empire State Deve opment Corpozati on 8'o .Development C oxity

0%VII'2C8 Settlement Document Volume 2 - Appendices Niagara Mohawk Power Corporation PSC Case Nos. 94-E-0098 and 94-E-0099 Qctober 10, 1997

POWERCHOICE SETTLEMENT PROPOSAL October 6, 1997 APPENDICES A- Master Restructuring Agreement B- Recovery of Costs Associated with Termination of Gas Transportation and Peak Shaving Agreements C - Niagara Mohawk Power Corporation Five-Year Financial Forecast D- Electric Prices E - Balances of Deferred Debits and Credits Not Yet Reflected in Rates F - General Structure of Financial Swaps and Swaption G- Credit Worthiness Evaluation H- List of Facilities That Are Potential Candidates for Sale, Lease or Sale Leaseback Transactions

APPENDIX A MASTER RESTRUCTURING AGRKKMKNT BY AND BETWEEN NIAGARAMOHAWKPOWER CORPORATION AND INDEPENDENT POWER PRODUCERS

MASTER RESTRUCTURING AGREElVG< NT BY AND BETWEEN M[AGARAMOHAWKPOWER CORPORATION AND INDEPENDENT POWER PRODUCERS JULY 9, 1997

MASTER RESTRUCTURING AGREEMENT TABLE OF CONTENTS Page RE CITALSootwwtttotwwwttwttwwwowwwwew tNwNN~+tttttwow ttw wtw owttwwotwtwwwwtwtwtottwttwtwtwtowowowwwtttoooool D EFINITIONSwtw woowweoootNowwtNwtltN1oooewtwNwooooowtweoeooowoowoootooowow wowwwtwwtww\w wttwtttww woooool

2. REST RUCTURING oow ooo wtooooooooo oooowwoowwowwooowowwooooooooootowwowooooooto ~ wt oottotttt ~ eo eoooooooeooo 8 2.l. TERMINATINGPPAS ~ eoeoe 8

22. AMENDED PPAs.

2.3. REsrATED CONIRAcrs 2.4. FIXED PRICE SWAP CONTRACTS 2.5. NORCON. ~ oo to ~ 10 2.6. OxBow ~ o ~ ~ .10 2.7. NEGOTIATIONS 2.&. DELIVERYOF CONTRACTS TO ESCROW AGENT. 13 2.9. CONIACT ADIUSIMENT.......... .14

3. ALLOCABLECONSIDERATION; SHORT-TERM NOTES; ALLOCATION...........,..............15 3.1. ALLOCABLECONSIDERATION. 15 3.2. SHORT-TERM NOTES> ADDITIONALCASH PAYMENT. . 15 3.3. DEUVERY OF ALLOCABLECONSIDERATION, SHORT-TERM NOTES AND ADDmoNALCAsH PAYMENTTo DEPoslTARY. ...... 15 3 4. AU OCAIION. .16 3.5. NON-DILUTION. .19 3.6. PRIVATE PLACEMENT; REGISTRATION OF COMPANY SHARES. 20 3.7. SHAREHOLDER'S AGREEMENT 22 3.8. BOARD oF DIREcroas.

4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................23 4.l. ORGANIZATION;STANDING.

4.2. EXECUIION; AUTHORITY; ENFORCEABILITY. .....24 4.3. No CONFUCTS .. 24 4.4. LITIGATION. ~ eee o oe 24 4.5. CAPITALIZAIION. 25 4.6. VALlDISSUANCE OF COMPANY SHARES..

4.7. SEC REPORTS AND FINANCIALSTATEMENTS ........-.

4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS ............ ..26 4.9. NMPC RESTRUCTURING.. e ~ oe ..26

5. REPRESENTATIONS AND WARI~I'IESOF EACH IPP ..........................,.....................27 5.1. ORGANIZATlON;STANDING. 27 5.2. EXECUnoN; AUTHORITY;ENFORCEABILITY.... 27 5.3. No CONFLICTS ..... ..27 5.4. LmGAIION............... .27 5.5. CERTAIN TRANSFERS. 28 5.6. ACQUISITIONOf COMPANY SHARES.. 28 5.7. FORM OF ALLOCATION,CONTRACTS ALLOCATION. .......29

6. CONDUCT AND TRANSACTIONS PRIOR TO THE CONSUMMATION DATE......,.................29 6.1. DEBT SECURITIES. 29 6.2. SALE/LEASEBACK; TAX-FREE EXCHANGES. 30 6.3. PROXY STATEMENT. .31 6.4. NMPC RESTRUCIURING. 31 6.5. HART-SCOTT-RODlNO ACT NOTlFICATION. .33 6.6. REGULATORY APPROVALS... 33 6.7. COOPERATION WITH RESPECT To REGULATORY APPROVALS. 34 6.8. COOPERATION WITH RESPECT TO IPPffNRD PARTY CONSENTS AND NMPCfhaRD PARTY RELEASES.. 36 6.9. PERFGRMANcE UNDER ExlsTING PPAs 36 6.10. STAYOF LITIGATION. 38 6.11. CONDUCT OF BUSINESS. 39 6.12. PUBUc DISCLOSURE. 39 6.13. FURTHER ASSURANCES. ..40 6.14. NO ACCUMULATION. ..40 6.15. TAx RULINGS........................................ ..40

7. INTENTIONALLYLEFT BLANK. ~ tH O1 ~ OIHHOWIIHttott ~ 0 tHIIOHH\WOOO10i1004tt I~ ~ 10& A 4 I

8. CONDITIONS TO EACH IPP'S OBLIGATIONSON THE CONSUMMATION DATE............. 41 S.l. REPRESENTATIONS AND WARRANIIES. 41

82. PERFORMANCE. ...41 8.3. REPRESENTATION LEVIER; SECRErARY'S CERTIFICATE; OPINION OF THE COMPANY'S COUNSEL 41 8.4. REGlJLATORY APPROVALS. 41 8.5. No ININCIION, ACTION OR PROCEEDING.. 42 8.6. NO MATERIALADVERSE EVENT. 42 8.7. CONTRACTS ..42 8.8. GENERAL RELEASE; WITHDRAWALOFLITIGATION. 42 8.9. INTENIIONALLYLEFT BLANK. ..43 8.10. THIRD PARTY CONTRACTS; IPP APPROVALS. 43 8.11. GAS MmGA11ON.

8.12. REGISTRATION OF COMPANY SHARES. 44 8.13. PAYMENT OF FEES...

9. CONDITIONS TO THE COMPANY'S OBLIGATIONS ON THE CONSUMMATIONDATE....44 9.1. REPRESENTATIONS AND WARRANIIES.. ....45 9.2. PERFORMANCE. ..45 9.3. REPRESENTATION LETTER; SECRETARY'S CERTIFICATE; OPINION OF IPP'S COUNSEL. ...45 9.4. REGULATORY APPROVALS. ..45 9.5. No INJUNCHON, ACTION OR PROCEEDING. ..45 9.6. CONTRACTS.. ..46 9.7. NMPC/AQRD PARTY CONSENTS AND NMPC/THIRD PARTY RELEASES .. .......46 9.8. GENERAL RELEASE; WIIHDRAWALOF LITIGATION.... ........46 9.9. BOARD AND SHAREHOLDER APPROVALS. ..47 9.10. NMPC FINANCING. .47

10. SATISFACTION OF CONDITIONS; CONSUMMATION.. ~ NHH@ON 01%41%&1 47 10.1. NOTlCE OF SATISFACTION OR WAIVER OF CONDITloNS ....47 10.2. CONSUMMA11ON DATE .49 I l 7440

10.3. DELIVERIES BY THE COMPANY.................................. ..49 10.4. DELIVERIES BY THE IPPS .....50 10.5. DELIVERIES BY THE DEPOSITARY AND THE ESCROW AGENT. ~~ 50 1 I REGULATORY AND OTHER MA7fERS tttoootot<<ooototttooooottt<<ooottoo<<tattoo+<<toootoo<<o<<ootttoo<<o<<tt<<ot<<ot<<t .50 11.1. MAINTENANCEOF QF STATUS ~~ to ~ 50 112. COMPETITIVE TRANSITION CHARGE; RETAIL BYPASS ~ ~~o 52 11.3. CONSISTENT TAX REPORTING....,...... 52

12. TERMINATIONOF AGREEMENT .. ~ <<ooo<<tttooo<<<<ottto<<o<<too<<o<<<<otottttooootttoo<<ooooto<<oo53 12.1. EVENTS OF TERMINATlONOF THE AGREEMENT IN ITS ENTIREIY. ...53 122. EVENTS OF TERMINATIONWITH RESPECT To ONE OR MORE OF THE IPPS ...54 12.3. EXPIRATION.. ~~ t 55 12.4. EFFECT OF TERMINATION. .56 12.5. EFFEcr oN ExlslING PPAs. .57 12.6. BANKRUPTCYTERMINATION.. .58

13. NOTICES ~ tttttttttt ttttttttttttt t<<t ttt<<<<ttttt<<o<<\<<t <<<<<<toooooootttto ototttooootott58

14. MISCELLANEOUS <<ttt tt<<tt<<<<t<<<<ttttttt<<<<t<< t<<<<t<<t<<t tt ~o ttttt ~ ~ oo60 14.1. ENIIRE AGREEMENT. .60 14.2. AMENDMENTSAND WAIVERS.............., ............ ..........., .....60 14.3. SUCCESSORS AND ASSIGNS .60 14A. GOVERNING LAW. .. ~,60 14.5. SEVERABILIIY. .61 14.6. CAFIIONS .61 14.7. COUNTERPARTS......................................................... ~~~~~ ~~ ~ ~ 6I 14.8. FEES. ...............6 I 14.9. EXPENSES. ...........62 14.10. ATTORNEYS'EES.. 62 14.11. REMEDIES. .............. ............62 14.12. SURVIVAL. .............................62 14.13. SEVERAL OBLIGATIONS.................................... .......... ....... ....63 14.14. CON FIDENTVLLfIY.... .......................63 14.15. NO PREJUDICE ... ..........65 SCHEDULES SCHEDULE A NAMES ANDNOIICE ADDRESSES OF IPPS SCHEDULE 2.1 EXISIING PPAS To BE TERMINATEDPURSUANT To SECIION 2.1 SCHEDULE 2.2 EXISIING PPA To BE AMENDED PURSUANT To SECIION 22 SCHEDULE 2.3 EXISTING PPAS TO BE AMENDEDANDfOR RESTATED PURSL'AVT TO SECIION 2.3 SCHEDULE 3.5 CERTAIN EXCLUSIONS FROM ANTI-DILUTIONPROVISIONS SCHEDULE 3.7 IPP SPONSOR ENTHlES TO ENTER INTO SHAREHOLDER'S AGREEMENT SCHEDULE 4.5 NMPC CAPITALIZATION SCHEDULE 4.8 CERTAIN CHANGES OR EVENTS SCHEDULE 5.4 CERTAIN DISCLOSED LmGATION SCHEDULE 6.6C MATIERS To BE INCLUDED IN PSC APPROVAL SCHEDULE 6.10A LITIGATIONAND REGULATORY PROCEEDINGS To BE STAYED BY THE PARTIES SCHEDULE 6.10B CERTAIN LITIGATION AND REGULATORY PROCEEDINGS (INVOLVING 6tCENT ISSUES)

SCHEDULE 6.11 CERTAIN PERMITTED CONDUCT I I 7440

SCHEDULE 8.8 LIIIGA1IONAND PROCEEDINGS TO BE WlTHDRAWNBY THE PARTIES SCHEDULE 9.10 NMPC FINANCING EXHIBITS EXHIBITA TERMS AND CONDITIONS OF AMENDED PPA AND RESTATED CONTRACTS EXHIBIT2.1 FORM OF TERMINATIONAGREEMENT EXHIBIT3.6 FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT3.7 FORM OF SHAREHOLDER'S AGREEMENT EXHIBIT5.7 BLANK FORMS OF ALLOCATION, CONTRACTS ALLOCATION AND CONTRACT ADJUSlMENT ALLOCATION EXHIBIT8.3A FORM OF NMPC REPRESENTATION LETTER EXHIBIT83C FORM OF OPIMON OF NMI'CS COUNSEL EXHIBIT9.3A FORM Of IPP REPRESENTA11ON LETIER EXHIBIT93C FORM OF OPINION OF IPP'S COUNSEL EXHIBIT14.14 FORM Of THIRD PARTY'ON-DISCLOSIJRE AGREEMENT II 7440

MASTER RESTRUCTURING AGREEMENT THIS MASTER RESTRUCTURING AGREEMENT is entered into on July 9, 1997 (the "Agreement" ) by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company" ), and the several independent power producers identified as such on the signature pages and on Schedule A hereto (the "Independent Power Producers" or "IPPs").

RECITALS (A) The Company, among other things, is a regulated utility engaged in the business of generating, transmitting and distributing electric power to customers in the State ofNew York; (B) The Independent Power Producers are owners and operators of co-generation and small power production facilities; (C) The Company previously has entered into twenty-nine (29) separate power purchase agreements with the IPPs (referred to herein as "Existing PPAs");

(D) The Company has overed to amend, amend and restate or terminate the Existing PPAs, upon and subject to the terms and conditions contained herein; and (E) The IPPs are not willing to amend, amend and restate or terminate each of the Existing PPAs, except upon and subject to the terms and conditions contained herein.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1. DEFINITIONS For purposes of this Agreement (including any Exhibit or Schedule hereto, unless otherwise defined therein), the terms set forth below shall have the following meanings:

"Additional Cash Pa ment" shall have the meaning set forth in Section 3.2.

"Affiliate"shall mean, with respect to any Party, any other person or entity which controls, is controlled by, or is under common control with, such Party, wherein the term "control" shall mean the power to direct the management and policies by or of such Party through ownership of voting securities, by contract or otherwise.

"Afliliate IPPs" shall mean, with respect to any IPP, any other IPP which is an Affiliate of such IPP.

n~Areemento or "Master Restrnctnrin A reement" shall mean this Master Restructuring Agreement, including the Exhibits and Schedules hereto, as amended and in effect from time to time.

"Allocable Consideration" shall have the meaning set forth in Section 3.1.

"Allocation" shall have the meaning set forth in Section 3.4.

"Amended PPA" shall have the meaning set forth in Section 2.2.

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"Base Share Price" shall have the meaning set forth in Section 3.5(a).

hdl ydyd*g 3 d,g d U d which banks in the State of New York are authorized or required to be closed.

nigh ~ * 'dlh *3 '

f hl 3* I 3.1(3.

"Class A PPAs" shall mean those Existing PPAs with respect to which an IPP will receive a portion of the Allocable Consideration, but not the Amended PPA or a Restated Contract.

"Class B PPAs" shall mean those Existing PPAs with respect to which an IPP will receive a Restated Contract(s) (but not the Amended PPA), whether or not such IPP will receive a portion of the Allocable Consideration.

"Class D PPA" shall mean the Existing PPA with respect to which the! PP party thereto will receive a portion of the Allocable Consideration and will receive the Amended PPA.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Common Stock" shall mean the Company's common stock, $ 1.00 par value per share.

R~Com an " or "NMPC" shall mean Niagara Mohawk Power Corporation, a New York corporation.

"C~hh "

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• I g f hi 3* I 3.1(33.

"Corn titive Transition Char e" shall mean a charge, however designated, for recovery of strandable costs.

"Conditions Determination Date" shall mean the date which is the later to occur of (i) December 1, 1997 and (ii) ninety (90) days after the PSC Approval Date, except as otherwise provided in Section 2.7(b).

"Consummation" shall have the meaning set forth in Section 10.2.

"Consummation Date" shall have the meaning set forth in Section 10.2.

"Contract Ad'ustment" shall have the meaning set forth in Section 2.9.

"Contract Ad'ustment Allocation" shall have the meaiung set forth in Section 3.4(a).

"Contract Year" shall have the meaning set forth in Exhibit A.

"Contracts" shall have the meaning set forth in Section 2.8.

"Contracts Allocation" shall have the meaning set forth in Section 3.4(a).

"Curtailment" shall mean any curtailment of electricity under the provisions of 18 C.F.R. $ 292.304(f) (1997), or any subsequent or similar rule or regulation adopted by the PSC or the FERC, or any rule or order of the PSC, the FERC, or any other Governmental Authority interpreting or applying those provisions or authorizing the Company to reserve any rights under those provisions.

"Debt Re istration Statement" shall have the meaning set forth in Section 6.1(b).

"Debt Securities" shall have the meaning set forth in Section 6.1.

"De sit A reement" shall have the meaning set forth in Section 3.3.

"~De osits" shall mean such bank or trust company as may be selected by the Parties to act as the Depositary hereunder.

"DLJ" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.

"DRIP Plan" shall mean the Company's Dividend Reinvestment and Stock Purchase Plan.

"Effective Time" shall mean 11:59:59 p.m. on the Consummation Date.

"E I' II A& .G p,S .H * &9*Id.L.L.P.

"Escrow A cement" shall have the meaning set forth in Section 2.8,

"~&h * *" I II U*p** 'I E I 9 A 93939, dd.

hdt & *&*9 h*d**'*H date of this Agreement between the Company and the several IPPs, as listed on Schedules lp*

2.1, 2.2 and 2.3 hereto.

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"E hUI Ap'Il,3998,***9 U 'd*dl Sections 2.7(b) and 12.3(b).

"EWG" shall have the meaning set forth in Section 11.1(b).

"FERC" shall mean the Federal Energy Regulatory Commission.

"Fixed Price Swa Contracts" shall have the meaning set forth in Section 2.4.

"Gas IPPs" shall mean those IPPs which produce power using primarily natural "Gas Miti ation Third P " shall mean a natural gas supplier or natural gas transporter with whom any Gas IPP has a contract or agreement as of the date of this Agreement and any counterparty under any hedging or other financial instrument existing as of the date of this Agreement with respect to the supply or transportation of natural gas under any such contract or agreement, with respect to which any Gas IPP desires that its obligations thereunder be released, satisfied or amended in connection with the transactions contemplated by this Agreement.

"Governmental Authori " shall mean any federal, state, municipal or local governmental authority, department, commission, board, agency, body or official, whether executive, legislative, administrative, regulatory or judicial, including but not limited to the FERC and the PSC.

"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

"Inde ndent Power Producers" or "IPPs" shall mean the several independent power producers identified as such on the signature pages and on Schedule A hereto. If this Agreement shall be terminated in accordance with the terms hereof with respect to

one or more but less than all of the IPPs, then, except with respect to any provisions hereof which expressly or by their terms survive any termination of this Agreement, upon any such termination such terminated IPP shall cease to be an "IPP" for purposes of this Agreement.

"Indexed Swa Contracts" shall have the meaning set forth in Exhibit A.

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• i g

• i hi S i iiii.

"IPP Re ulato A royal" shall have the meaning set forth in Section 6.6(b).

"IPP Re resentatives" shall mean WP&Co., the IPPs'pecial Counsel and'the IPPs'ocal Regulatory Counsel.

"IPP Status Notice" shall have the meaning set forth in Section 10.1(c).

"IPP/Third P Consent" shall have the meaning set forth in Section 8.10.

"IPPs'ocal Re ulato Counsel" shall mean Read and Laniado, LLP.

"IPPs'ocal Re ulato Counsel Fee Letter" shall have the meaning set forth in Section 14.9.

"IPPs' ial Counsel" shall mean Akin, Gump, St'rauss,'Hauer & Feld, L.L.P.

"IPPs' cial Counsel Fee Letter" shall have the meaning set forth in Section 14.9.

"Material Adverse Effect" shall mean, with respect to any Party, either (i) a material and adverse eQect on the business, properties, operations or condition (financial or otherwise) of such Party and its subsidiaries, taken as a whole, or (ii) a material and adverse effect on such Party's ability to enter into and perform its obligations under this Agreement or any other agreements to be executed by such Party pursuant hereto.

"NMPC Re ulato A royal" shall have the meaning set forth in Section 6.6(a).

"NMPC Restructurin " shall have the meaning set forth in Section 6.4.

"NMPC Status Notice" shall have the meaning set forth in Section 10.1(b).

"NMPC/Third P A reement" shall have the meaning set forth in Section 6.8(b).

"NMPC/Third Part Consent" shall have the meaning set forth in Section 4.2.

"NMPC/Third P Release" shall have the meaning set forth in Section 6.8(b).

uNorCon" shall mean NorCon Power Partners, L.P.

"NorCon A eernent" shall have the meaning set forth in Section 2.5.

"NYPSL" shall mean the New York Public Service Law, as amended.

"NYSE" shall mean the New York Stock Exchange.

"Oxbow" shall mean Oxbow Power of North Tonawanda, New York, Inc.

"Oxbow A reement" shall have the meaning set forth in Section 2.6.

"Party~ies " shall mean the Company and the several IPPs. If this Agreement shall be terminated in accordance with the terms hereof with respect to one or more but less than all of the IPPs, then, except with respect to any provisions hereof which expressly survive any termination of this Agreement, upon any such termination such terminated IPP shall cease to be a "Party" hereunder.

"Power Put Contract" shall have the meaning set forth in Exhibit A.

"~pro'ect" shall mean each lPP's generation and production facilities, including the property, plant and equipment and associated real property and fixtures.

S *

• u hllh *6* S**SC i~ 6**) 63.

"PSC" shall mean the New York State Public Service Commission.

"Ppsc p I" hllh *6* g** 6 hl 6**I 66) ).

"PSC A royal Date" shall mean the date on which the PSC issues the order containing the PSC Approval.

"~hg Ch'*' hglh *6*

• I hl 6* I 6).

"PVHCA" shall mean the Public Utility Holding Company Act of 1935, as amended.

"PURPA" shaB mean the Public Utility Regulatory Policies Act of t97g, as amended.

"QF" shall have the meaning set forth in Section 11.1.

F Monitorin Pro ram" shall mean any program of the Company, whether authorized, implemented or proposed, designed to monitor any IPP's status under PURPA as a qualifying cogeneration or small power production facility or under NYPSL as a co-generation facility, including any right to demand or receive information from any IPP, third party or Governmental Authority.

"Reasonable Best ERorts" shall mean, with respect to any Party, such Party' diligent pursuance of the course of action or result stated as determined by such Party itself in good faith, but shall not require such Party to pay any sum or other consideration or incur or assume any liabilityor obligation that is not otherwise expressly required to be.

paid, incurred or assumed pursuant to this Agreement, excluding (i) normal and customary incidental outwf-pocket costs and expenses and (ii) attorneys'ees (except, with respect to any IPP, attorneys'ees required to be paid by the Company pursuant to the IPPs'pecial Counsel Fee Letter or the IPPs'ocal Regulatory Counsel Fee Letter).

"Re istiation Ri hts A ement" shall have the meaning set forth in Section 3.6(b).

"Re lato A rovals" shall mean the PSC Approval and all other consents, approvals, qualifications, orders, authorizations, extensions, waivers, exemptions and other actions or inactions of the FERC, the PSC or any other Governmental Authority (including expirations of applicable waiting periods under the Hart-Scott-Rodino Act) as may be required by applicable law or desired by any Party with respect to this Agreement and the consummation of this Agreement and the transactions contemplated hereunder, including but not limited to the execution, delivery and performance of the Contracts.

For purposes hereof "Regulatory Approvals" shall not include any SEC approvals which may be required in connection with the Shelf Registration Statement, Debt Registration Statement or Proxy Statement.

"Restated Contract" shall have the meaning set forth in Exhibit A.

"R~" hllh *R * 'g *f hl g* I 2.

"SEC" shall mean the Securities and Exchange Commission.

'R~ECR* "hll flfg C p 2' IRp P Ih.gf the fiscal year ended December 31, 1996, as amended by Form 10-KA filed with the SEC on May 1, 1997, (ii) the Company's Current Report on Form 8-K dated March 10, 1997, (iii) the Company's Proxy Statement filed with the SEC on April 7, 1997, (iv) the Company's Form U-3A-2 filed pursuant to PUHCA on April 2, 1997, (v) the Company's

Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997, and (vi) all subsequent filings, up to the Consummation Date, required to be made by the Company under the Exchange Act or any other securities laws applicable to the Company.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Scheduled Date" shall have the meaning set forth in Section 10.2.

"Shareholders A reement" shall have the meaning set forth in Section 3.7.

"Shelf Re istration Statement" shall have the meaning set forth in Section 3.6.

"Short-Term Notes" shall have the meaning set forth in Section 3.2, "Solid Fuel IPPs" shall mean those IPPs which produce power using primarily coal or waste fuels.

"Terminatin PPAs" shall have the meaning set forth in Section 2.1.

"Termination A ement" shall have the meaning set forth in Section 2.1.

"Underwriters" shall have the ineaning set forth in Section 6.1(c).

"WP&Co." shall mean Wasserstein Perella & Co., Inc.

"WP&Co. Fee Letter" shall have the meaning set forth in Section 14.8.

2. RESTRUCTURING Subject to the terms and conditions of this Agreement, effective as of the Consummation Date, the Parties shall enter into the following transactions (referred to herein collectively as the "Restructuring" ):

2.1. Terminatin PPAs. The Company and each IPP which is a party to an Existing PPA listed on Schedule 2.1 hereto (a "Terminating PPA") shall enter into an agreement, substantially in the form annexed as Exhibit 2.1 (a "Termination Agreement" ), pursuant to which, effective as of the Effective Time, all rights, duties and obligations of the Company and such IPP under each such Terminating PPA and under any associated gas transportation and peak shaving agreement and, if the IPP so elects, interconnection agreement and existing interconnection arrangements, between the Company (or any Affiliate of the Company) and such IPP shall be terminated, released

and discharged, and containing such other terms and conditions as the Company and each such IPP inay mutually agree.

2.2. Amended PPAs. The Company and the IPP which is a party to the Existing PPA listed on Schedule 2.2 hereto shall enter into an amendment to such Existing PPA (the "Amended PPA"), as described in Exhibit A hereto, including the related Attachments to Exhibit A, eG'ective as of the Effective Time, 2.3. Restated Contracts. The Company and each IPP which is a party to an Existing PPA listed on Schedule 2.3 hereto shall conduct good faith negotiations and use their Reasonable Best Efforts to enter into a Restated Contract, as defined in Exhibit A hereto. Each Restated Contract shall be an amendment and/or restatement of each such Existing FPA, shall be dated as of the date of each such Existing PPA and the terms of such amendment and/or restateinent shall be effective as of the Effective Time. As a part of such process, the IPPs which are parties to the Existing PPAs listed on Schedule 2.3 hereto shall use their Reasonable Best Efforts to enter into Restated Contracts which will include option provisions with respect to an aggregate of 500 GWh of electricity per annum over a term of up to six Contract Years for periods within each year that are mutually agreed upon; provided such option provisions include a term, periods, contract quantities, contract prices and other terms and conditions which are acceptable to the applicable IPF, and provided, further, that no IPP will be obligated to include such option provisions if such provisions, in such IPP's judgment, are not economically neutral in comparison to the Contract Allocation of such applicable IPP before giving effect to such option provisions. With respect to each IPP entering into a Restated Contract, as applicable, (a) the Company shall continue to provide local gas transportation under its existing agreements with such IPP (and, if requested by such IPP, the Company shall conduct good faith negotiations concerning the amendment of such gas transportation agreements, and, if requested by the Company, the IPP shall conduct good faith negotiations to amend such existing agreements to insure that the Company has a reasonable ability to interrupt such transportation due to system emergencies), (b) peak shaving obligations on the part of such IPP shall be eliminated, effective as of the Consummation Date, without penalty to the IPP or compensation to the Company and without reducing the value of the Allocable Consideration or in any way affecting the Restated Contracts, (c) minimum take and demand charges in existing gas transportation agreements between the Company and such IPP shall remain in full force and effect if (subject to the good faith negotiations described in clause (a) above) and (d) such IPP has eliminated its peak shaving anangements with the Company and will have gas supply and transportation arrangements after the Consummation Date, it shall use Reasonable Best Efforts to assist the Company to arrange for replacement of peak shaving services.

2.4. Fixed Price Swa Contracts. The Company also shall execute and deliver to the Escrow Agent, for the benefit of and at the direction of all of the IPPs or their respective designees, a series of Fixed Price Swap Contracts as defined in and in

accordance with the terms and conditions set forth in Exhibit A hereto, including the related Attachments to Exhibit A (the "Fixed Price Swap Contracts" ). The Fixed Price Swap Contracts shall be in such denominations and with such counterparties as the IPPs shall designate to the Company not later than eight (8) Business Days prior to the Consummation Date, provided that each such counterparty shall (i) be an IPP, (ii) be a Gas Mitigation Third Party or (iii) meet the requirements for an "Approved Assignee" (as such tenn is defined in Section 2 of the termsheet attached as Attachment A-11 to Exhibit A) of an IPP or a Gas Mitigation Third Party.

2.5. NorCon. The Company and NorCon shall conduct separate good faith negotiations to enter into an agreement (the "NorCon Agreement" ) regarding the amendment, amendment and restatement, other restructuring or termination of NorCon's Existing PPA. The Company and NorCon agree to commence such negotiations, at a iniitually agreeable location(s), promptly following the date of this Agreement and to meet not less frequently than weekly during the first month following the date of this Agreement and thereafter as the Company and NoiCon may mutually agree. Although there is no obligation on the Company's part to agree to any further consideration to NorCon, should the Company and NorCon mutually so determine, NorCon may receive consideration pursuant to the NorCon Agreement which is in addition to the portion of the Allocable Consideration and the Restated Contracts allocated to NorCon in the Allocation (the "NorCon Allocation"). Any such additional consideration shall not affect the Allocation, increase or reduce the Allocable Consideration payable to any other IPP (i.e., the Allocable Consideration less the NorCon Allocation), nor in any way affect the Short-Term Notes or Additional Cash Payment, as applicable, or the terms of the Amended PPAs or Restated Contracts to be received by any other IPP or the Fixed Price Swap Contracts. In the event that the Company and NorCon should agree that NorCon's Existing PPA shall be a Terminating PPA, then the contract quantity and the installed capacity under the Restated Contracts each shall be reduced by the contract quantity and the installed capacity under the Restated Contracts allocated to NorCon pursuant to the original Allocation, and the aggregate contract adjustment identified on Attachment A-3 to Exhibit A shall be reduced by the portion of the Contract Adjustment allocated to if NorCon pursuant to the original Allocation, any, and in such event such reduction shall not affect the terms and conditions, including contract price, of any of the Restated Contracts to be entered into by any other IPPs. In the event the Company and NorCon are unable to agree in writing on the additional consideration, if any, to be received by NorCon within seventy-five (75) days after the date of this Agreement (which date may be extended with the mutual agreement of the Company and NorCon), then (i) this Agreement shall terminate with respect to NorCon, with the effect described in Section 12.4(b), and except as otherwise provided in Section 6.9(d), and (ii) the provisions of Section 12.5 shall apply with respect to NorCon's Existing PPA.

2.6. Oxbow. The Company and Oxbow shall conduct separate good faith negotiations to enter into an agreement (the Oxbow Agreement" ) regarding the 10

termination of Oxbow's Existing PPA pursuant to Section 2,1 Although there is no

~

obligation on the Company's part to agree to modify the form of consideration to Oxbow, should the Company and Oxbow mutually so determine, Oxbow may receive consideration pursuant to the Oxbow Agreement which is in lieu of the portion of the Restated Contracts allocated to Oxbow in the Allocation (the "Oxbow Allocation"). Any such substitute consideration shall not affect the Allocation, increase or reduce the Allocable Consideration payable to any other IPP (i.e., the Allocable Consideration less the Oxbow Allocation), nor in any way affect the Short-Term Notes or Additional Cash Payment, as applicable, or the terms of the Amended PPAs or Restated Contracts to be received by any other IPP or the Fixed Price Swap Contracts. In the event that the Company and Oxbow should agree that Oxbow's Existing PPA shall be a Terminating PPA, then the contract quantity and the installed capacity under the Restated Contracts shall be reduced by of the contract quantity and the installed capacity under the Restated Contracts allocated to Oxbow pursuant to the original Allocation, and the aggregate contract adjustment identified on Attachment A-3 to Exhibit A shall be reduced by the portion of the Contract Adjustment allocated to Oxbow pursuant to the original Allocation, if any, and in such event such reduction shall not affect the terms and conditions, including contract price, of any of the Restated Contracts to be entered into by any other IPPs. In the event the Company and Oxbow are unable to conclude negotiations and agree on the substitute consideration, if any, to be received by Oxbow

,within seventy-five (75) days after the date of this Agreement (which date may be extended with the mutual agreement of the Company and Oxbow), then (i) this Agreement shall terminate with respect to Oxbow, with the effect described in Section 12.4(b) and (ii) the provisions of Section 12.5 shall apply with respect to Oxbow's Existing PPA. Oxbow agrees to provide its Contracts Allocation to the Company within fifteen (15) days after the date of this Agreement.

2.7. N~eotietions.

(a) All negotiations to be conducted by the Company and any IPP pursuant to this Article 2 shall be comnenced not later than immediately following the PSC Approval Date. Notwithstanding the foregoing, any IPP may elect in its sole discretion to commence its own negotiations with the Company prior to the PSC Approval Date. If an IPP so elects, the dates for the negotiation meetings shall be scheduled by the Company and such IPP within seven (7) days after the date of such request. If an IPP makes a request therefor, a representative of DLJ andlor a representative of WP&Co. shall attend and participate in any or all negotiations between the Company and such IPP. Ifthe Company and any IPP shall conclude negotiations and agree on a final form of the respective Termination Agreement, Amended PPA, Restated Contract(s), NorCon Agreement or Oxbow Agreement, as the case may be, then the Company and such IPP shall each initial and exchange counterparts of such final form and give notice thereof to the IPPs'pecial Counsel, but no Party shall be bound thereto or obligated thereby except as provided in Section 2.8. In addition, the Company and a

committee of IPPs designated by notice to the Company within fourteen (14) days after the date of this Agreement shall use Reasonable Best Efforts to commence and conclude negotiations and agree on a final form of the Fixed Price Swap Contracts as promptly as possible, and the Company and the chairman of such committee of IPPs shall initial such final form to indicate that such form has been agreed upon by the Company and on behalf of all IPPs and shall give notice thereof to the IPPs'pecial Counsel on or before the Conditions Determination Date, but no Party shall be bound thereto or obligated thereby except with respect to the Company as provided in Section 2.8.

(b) If the Company and any IPP shall not have sooner agreed on the final form of their respective Contract(s) (excluding for these purposes the Fixed Price Swap Contracts and, if this Agreement is terminated with respect to NorCon or Oxbow pursuant to Sections 2.5 or 2.6, respectively, the NorCon Agreement and Oxbow Agreement, respectively), the Company shall give all IPPs notice of such fact (including the identity of the IPPs which have not agreed on the final form of their respective Contract(s)) not later than the date which is ten (10) Business Days prior to the Conditions Determination Date (a "Company Notice" ). The Company Notice shall include the Company's determination of whether (x) the Company intends to terminate this Agreement pursuant to Section 12.1(d) in the event the Company and all such IPPs identified in such notice are unable to agree on the final form of their respective Contract(s) on or before the Conditions Determination Date, (y) the Company is willing to consummate the transactions contemplated hereby (subject to the other conditions to the Company's obligations contained in this Agreement) without the inclusion. of those IPPs which are unable to agree on the final form of their respective Contract(s) on or before the Conditions Determination Date, or (z) the Company elects to extend the Conditions Determination Date and the Expiration Date for a period of thirty (30) days.

(i) If the Company shall notify the IPPs that it will terminate this Agreement pursuant to Section 12.1(d) on the Conditions Determination Date in the event the Company and all such IPPs ideritified in such notice are unable to agree on the final form of their respective Contract(s) on or before the Conditions Determination Date (a "sub-clause (x) notice") and the Company and all such IPPs identified in such notice are unable to agree on the final form of their respective Contract(s) on or before the Conditions Determination Date, then this Agreement shall terminate in its entirety on the Conditions Determination Date pursuant to Section 12.1(d). If the Company shall notify the IPPs that it is willing to consummate the transactions contemplated hereby (subject to the other conditions to the Company's obligations contained in this Agreement) without the inclusion of those IPPs which have not agreed on the final form of their respective Contract(s) as of the date of such notice (a "sub-clause (y) notice"), then the provisions of clause (ii) below shall be applicable. If the Company elects to extend the Conditions Determination Date and the Expiration Date for a period of thirty (30) days (a "sub-clause (z) notice"), or ifthe IPPs shall elect to extend the 12

Conditions Determination Date and the Expiration Date pursuant to clause (ii) below, then not later than ten (10) Business Days prior to the extended Conditions Determination Date the Company shall give all IPPs a further Company Notice pursuant to sub-clause (x), (y) or (z) above, provided that the Company's right to extend the Conditions Determination Date pursuant to a sub-clause (z) notice shall be limited such that the aggregate number of days by which the Conditions Determination Date and the Expiration Date may be extended by the Company pursuant to sub-clause (z) and by the IPPs pursuant to clause (ii) below shall be sixty (60) days (the "maximum extension period"). Notwithstanding the foregoing, if the Company shall give a su&clause (x) notice and prior to the Conditions Determination Date the Coinpany shall notify the IPPs that it has agreed on the final form of their respective Contract(s)'with one or more of the IPPs with which it previously was unable to agree, then the Company shall have the right to convert its sub-clause (x) notice to either a subclause (y) notice or a sub-clause (z) notice; in the event the Coinpany gives a sub-clause (y) notice pursuant to this sentence, the Conditions Determination Date automatically shall be extended until the fifth (5 ) Business Day following the giving of such notice, subject to further extension pursuant to clause (ii) below (and, further, in such event, the 604ay maximum extension period described above shall be increased by any such five (5) Business Day Period).

(ii) Ifthe Company shall at any time give the IPPs a subclause (y) notice pursuant to this Section 2.7(b) that it is willing to proceed to consummate the transactions contemplated hereby (subject to the other conditions to the Company's obligations contained in this Agreement) without the inclusion of those IPPs which are unable to agree on the final form of their respective Contract(s) if such IPPs have not agreed on the final form of their respective Contract(s) on or before the Conditions Determination Date, as the same may be extended from time to time pursuant to clause (i) above, then, within five (5)

Business Days following the receipt of such notice, all IPPs shall determine whether the IPPs desire to extend for a period of thirty (30) days (subject to the maximum extension period) the Conditions Determination Date and the Expiration Date. Ifeighty percent (80%) of the IPPs do not so elect to extend the Conditions Determination Date and the Expiration Date pursuant to this Section 2.7(b)(ii) on or before ten (10) Business Days aher receipt of the Company's sub-clause (y) notice (or ifno such extension may be elected because of the maximum extension period), then this Agreement shall terminate on the Conditions Determination Date with respect to any IPPs identified in such notice which are unable to agree on the final form of their respective Contract(s) on or before the Conditions Determination Date.

2.8. Delive of Contracts to Escrow Aeent. On the Conditions Determination Date, the Company and each IPP shall execute the agreed final form of the respective

Termination Agreement, Amended PPA, Restated Contract(s), NorCon Agreement or Oxbow Agreement, as the case may be, and the Company shall execute the Fixed Price Swap Contracts (all such agreements and contracts, collectively, the "Contracts" ), and the parties thereto shall deliver all executed counterparts of the Contracts to the Escrow Agent. Once delivered to the Escrow Agent, the Contracts may not thereafter be amended, except by a written amendment executed by the parties thereto and deposited with the Escrow Agent. The delivery of the Contracts to the Escrow Agent shall be irrevocable, subject only to the satisfaction or waiver of the conditions set forth in Sections 8 and 9 hereof in accordance with the terms thereof, and to the provisions of Section 12.4. Upon the satisfaction or waiver of such conditions, on the Consummation Date, the Escrow Agent shall be authorized and instructed to deliver counterparts of the Contracts to each of the respective parties thereto, whereupon the Contracts (subject to any conditions as may be contained therein) shall be in full force and effect as of the Effective Time. Upon any termination of this Agreement in its entirety in accordance with the terms hereof, or any termination of this Agreement with respect to any individual IPP(s) in accordance with the terms hereof, any Contracts theretofore delivered to the Escrow Agent by any of the Parties, or by the Company and any terminated IPP(s), as the case may be, shall be void ab initio and shall be destroyed by the Escrow Agent. Each of the Parties agrees to execute and deliver, as promptly as possible following the date of this Agreement, such escrow agreement as may be reasonably requested by the Escrow Agent or any other Party hereto setting forth the rights and obligations of the Parties and the Escrow Agent, consistent arith the terms and conditions of this Agreement, with respect to the Contracts to be delivered to the Escrow Agent pursuant to this Section 2.8, and the agreements and other documents to be delivered to the Escrow Agent pursuant to Sections 10.3 and 10.4 (the "Escrow Agreement" ). The Escrow Agreement shall contain customary provisions, including customary exculpatory and indemnification provisions in favor of the Escrow Agent.

2.9. Contract Ad'ustment. Not later than thirty (30) days prior to the anticipated Conditions Determination Date, the IPPs shall demonstrate to the Company that the annual aggregate Contract Adjustment set forth on Attachment A-3 to Exhibit A

("Contract Adjustment" ), as the same may be adjusted pursuant to Sections 2.5, 2.6, 2.7 or 12.4(b), will be realized by the Company upon the consummation of the transactions contemplated hereby, whether by reduction of the aggregate contract price under the Restated Contracts or Fixed Price Swap Contracts, by reduction of the Allocable Consideration, Short-Term Notes or Additional Cash Payment (as applicable), or any if combination thereof, or, mutually agreed to by the Parties, in any other manner.

14

3. ALLOCABLE CONSIDERATION; SHORT-TERM NOTES; ALLOCATION 3.1. Allocable Consideration. The Company shall, on the Consummation Date, pay and/or deliver to the Depositary on behalf of the IPPs or their respective designees, the following (referred to herein as the "Allocable Consideration" ):

(a) Three billion five hundred fifty-five million dollars

($ 3,555,000,000) in immediately available funds (the "Cash Payment" ); and (b) Forty-six million (46,000,000) newly-issued, fully-paid and nonassessable shares ("Company Shares" ) of Common Stock of the Company, which number of Company Shares shall be subject to adjustment in accordance with Section 3.5 hereof.

3.2. Short-Term Notes Additional Cash Pa ment. The Company, on the Consummation Date, shall also deliver to the Depositary, for the benefit of and at the direction of all of the IPPs or their respective designees, either, at the Company s option, (i) note obligations issued by the Company in the aggregate principal amount of fifty million dollars ($ 50,000,000) (the "Short-Term Notes" ) or (ii) the sum of fifty million dollars ($ 50,000,000) in immediately available funds (the "Additional Cash Payment" ).

The Company shall give the IPPs notice if it elects to deliver the Additional Cash Payment in lieu of the Short-Term Notes, not later than the Conditions Determination Date. The Short-Term Notes, if applicable, shall mature ninety (90) days after the Consummation Date and shall have a yield which is at least equivalent to commercial paper issued by comparable issuers at the time of the Consummation Date and such other terms as may be agreed among the Parties not later than the Conditions Determination Date. The Short-Term Notes shall not be subject to any restrictions on transfer.

3.3. Delive of Allocable Consideration Short-Term Notes and Additional Cash Pa ent to De si . The Cash Payment, Company Shares and Short-Term Notes or Additional Cash Payment, as applicable, each shall be irrevocably delivered by the Company on the Consummation Date to the Depositary, which shall hold the Cash Payment and Company Shares for the benefit of and at the direction of the several IPPs who are parties to this Agreement as of the Consummation Date in the respective amounts set forth in the Allocation and shall hold the Short-Term Notes or Additional Cash Payment, as applicable, for the benefit of and at the direction of the IPPs who are parties to this Agreement as of the Consummation Date. The Cash Payment, Company Shares and Short-Term Notes or Additional Cash Payment, as applicable, shall be paid or delivered without any setoff, deduction or claim whatsoever. The Cash Payment and, if applicable, the Additional Cash Payment shall be paid by wire transfer of federal funds to the account of the Depositary, which account shall be set forth in a notice to the Company given not later than five (5) Business Days prior to the Consummation Date. The 15

Company Shares shall be issued in certificated form (with the restrictive legend described in Section 3.6 and, if applicable, the restrictive legend described in the Shareholder's Agreement) in the names of the IPPs in the respective amounts set forth in the Allocation, or in the names of the respective designees of such IPPs in such amounts or denominations as the respective IPPs may determine, in each case as shall be set forth in a notice to the Company given not less than eight (8) Business Days prior to the Consummation Date; any designee of the IPP which shall receive any Company Shares pursuant to this Agreement shall, simultaneously with the giving of such notice, provide the Company with a representation letter containing substantially the same representations set forth in Section 5.6 of this Agreement. Unless otherwise set forth in a notice to the Company given not later than five (5) Business Days prior to the Consummation Date, the Short-Term Notes (if applicable) shall be registered to and issued in the name of the Depositary, as agent for the IPPs, subject to subsequent re-registration and re-issuance to the several IPPs or their respective designees in such denominations as the Depositary may request and which the Company shall execute, at the Company's expense, within three (3) Business Days after receipt of any such request.

Each of the Parties agrees to execute and deliver, as promptly as possible following the date of this Agreement, such deposit, escrow or similar agreement as may be reasonably requested by the Depositary or any other Party hereto setting forth the rights and obligations of the Parties and the Depositary, consistent with the terms and conditions of this Agreement, with respect to (a) the Allocable Consideration and Short-Term Notes or Additional Cash Payment, as applicable, to be delivered to the Depositary pursuant to this Section 3.3 and (b) the Allocation and the certifications of information contained in the Allocation required to be given by the Depositary pursuant to the provisions of this Agreement (the "Deposit Agreement" ). The Deposit Agreement shall contain customary provisions, including customary exculpatory and indemnification provisions in favor of the Depositary.

3A. Allocation.

(a) Each of (i) the Allocable Consideration, (ii) the contract quantity and contract price under the Amended PPA, (iii) the aggregate contract quantities of electricity and aggregate capacity for a term of ten Contract Years and weighted average contract prices for the first two Contract Years under the Restated Contracts and (iv) the Contract Adjustment have been allocated by and among the several IPPs in accordance with an allocation separately agreed to by the IPPs and deposited by the IPPs with WP&Co. and in a sealed envelope with the Escrow Agent on or before the date of this Agreement (clauses (i), (ii), (iii) and (iv) are referred to herein as the "Allocation",

clauses (ii) and (iii) only are referred to herein as the "Contracts Allocation" and clause (iv) only is referred to herein as the "Contract Adjustment Allocation"). Promptly following the execution of the Deposit Agreement, the Escrow Agent shall deliver the Allocation to the Depositary. If the Deposit Agreement is not executed by the Parties and the Depositary within thirty (30) days after the date of this Agreement, the Escrow Agent 16

r shall, unless otherwise directed in writing by the Parties to deliver the Allocation to a successor escrow agent, destroy the Allocation. Upon such delivery to the Depositary or successor escrow agent or destruction of the Allocation, as the case may be, the Escrow Agent shall have no further obligation with respect to the Allocation, and the Escrow Agent shall have no obligation with respect to the Allocation except as set forth in this Section 3.4(a). Subject to the following sentence, the Company agrees that the Allocation shall not be subject to challenge or modification by the Company, and that the Company shall not initiate, encourage or support any such challenge or attempted modification by any Governmental Authority or other third party. The IPPs may modify the Allocation only with the prior written consent of all IPPs; except that (i) the Company and any IPP may mutually agree to increase or reduce the Allocable Consideration or contract quantity and contract price under the Amended PPA or a Restated Contract to be paid to or received by such IPP and (ii) any IPP may, in its sole discretion, adjust the components of the Allocable Consideration allocated collectively to such IPP and its Af51iate IPPs as among such IPP's and AQiliate IPP's Existing PPAs; provided, however, in any such case such adjustment (x) shall not affect any other non-Affiliate IPP's allocation of the Allocable Consideration or contract quantity and contract price under the Amended PPA or a Restated Contract and (y) shall not reduce the Cash Payment and Company Shares payable with respect to Class A PPAs to less than two billion dollars

($ 2,000,000,000) (except to the extent that such amount is reduced as a result of the termination of this Agreement with respect to any IPPs which are parties to Class A PPAs). For purposes of the foregoing determination of whether the Cash Payment and Company Shares payable with respect to Class A PPAs is at least $ 2,000,000,000 pursuant to any provision of this Agreement, the Company Shares shall be valued at the Base Share Price. The affected IPP shall notify the Depositary and WP&Co. of any such permitted adjustment, whereupon the Allocation shall be amended accordingly. The Depositary shall maintain a schedule of all such adjustments to the Allocation.

(b) Neither the Allocation, nor any portion thereof nor any information contained therein shall be furnished or disclosed to the Company or any Governmental Authority, except that:

(i) any individual IPP shall be &ee to disclose its own portion of the Allocation (x) to the Company, (y) to any Governmental Authority or (z) to any third party; and NorCon and any other individual IPP which elects to cominence its own negotiations with the Company prior to the PSC Approval Date shall disclose to the Company its own portion of the Contracts Allocation not later than five (5) Business Days prior to the commencement of such negotiations, provided that the Company is willing to commence negotiations regarding non-economic terms with any IPP prior to receiving the Contracts Allocation.

17

(ii) the IPPs shall cause WP&Co. to furnish in writing to the Company (and each IPP) immediately following the execution of this Agreement:

(x) a schedule setting forth (A) the number of IPPs (considered on an aggregate basis with any IPPs which are Aftiliates of such IPPs) which, pursuant to, the Allocation, will acquire pursuant to Section 3.1(b) less than 1,903,906 Company Shares; 1,903,906 or more but less than 3,807,812 Company Shares; 3,807,812 or more but less than 5,711,718 Company Shares; 5,711,718 or more but less than 7,615,624 Company Shares; 7,615,624 or more but less than 9,519,531 Company Shares; and 9/19,531 or more but less than 10,650,000 Company Shares, respectively, as of the date of this Agreernen, which together shall constitute all of the IPPs acquiring Company Shares pursuant to Section 3.1(b), and (B) the aggregate amount, if any, of the Allocable Consideration allocated to Class A PPAs and collectively to Class 8 PPAs and the Class D PPA, respectively, as of the date of this Agreement (it being agreed that the portion of the Cash Payment and Company Shares allocated to Class A PPAs pursuant to the Allocation as of the date of this Agreement shall not be less than two billion dollars ($ 2,000,000,000));

(y) a certification that the contract quantity of electricity and capacity for a term of ten Contract Years under the Restated Contracts allocated to each Class B PPA on the Contracts Allocation when added together will equal the aggregate quantity of electricity (rounded to the nearest GWh) and capacity under the Restated Contracts on Attachment A-3 to Exhibit A and that the contract price for a term of ten Contract Years under the Restated Contracts allocated to each Class B PPA on the Contracts Allocation when weight averaged will yield the weighted average price (rounded to the nearest penny per MWh) under the Restated Contracts under the columns "weighted average price" and "example of weighted average price" on Attachment A-3 to Exhibit A; and (z) a certification that the Contract Adjustment allocated to each Class B PPA on the Contract Adjustment Allocation when added together will equal the amounts under the column "aggregate contract adjustment" (rounded to the nearest $ 1,000) set forth on Attachment A-3 to Exhibit A.

(iii) the IPPs shall cause WP&Co. to furnish in writing to the Company within three (3) Business Days after the PSC Approval Date a schedule setting forth the Contracts Allocation; and 18

(iv) the IPPs shall cause WP&Co. to furnish in writing to the Company, on the Consummation Date, a schedule setting forth the aggregate amount, if any, of the Cash Payment and Company Shares allocated to Class A PPAs, Class B PPAs and Class D PPA, respectively, as of the Consummation Date (it being agreed that the portion of the Cash Payment and Company Shares allocated to Class A PPAs shall not be less than $ 2,000,000,000, except to the extent that such amount is reduced as a result of the termination of this Agreement with respect to any IPPs which are parties to Class A PPAs).

The Company may, in coordination with such IPP or WP&Co., confirm with the Depositary any information disclosed by any IPP or %P&Co., respectively, to the Company pursuant to this clause (b). Any information disclosed to the Company pursuant to this Section 3.4(b) shall be subject to the confidentiality provisions of Section 14.14.

(c) Subject to Section 6.2, the information contained in the Allocation which is furnished to the Company pursuant to Section 3.4(b) shall be utilized by the Parties for all tax reporting purposes (subject to any adjustments mutually agreed between the Company and any individual IPP in the Amended PPA, any Restated Contract, or otherwise).

3.5. Non-Dilution. It is understood that the number of Company Shares to be issued and delivered by the Company pursuant to Section 3.1(b) represents approximately 24.16% of the Company's fully-diluted Common Stock outstanding as of September 30, 1996, after giving effect to the issuance of the Company Shares pursuant to Section 3.1(b). Accordingly, ifat any time between September 30, 1996 and the Consummation Date there shall have occurred any of the following (it being understood that there shall be sequential adjustments for each transaction described below):

(a) any (i) issuance of shares of Common Stock for a consideration per share which is less than $ 8.70 (the "Base Share Price" ), then the number of Company Shares to be acquired by the IPPs pursuant to Section 3.1(b) shall be increased by the amount equal to the number of shares of Common Stock issued for a consideration less than the Base Share Price, multiplied by the difference between the Base Share Price and the issue price, and then dividing the product by the Base Share Price; or (ii) issuance of options, wiuTants or rights to purchase shares of Common Stock for a consideration per share of Common Stock which is less than the Base Share Price, or the issuance of other securities of the Company (or any subsidiary of the Company) convertible into Common Stock at a conversion price per share of Common Stock which is less than the Base Share Price, then the number of Company Shares to be acquired by the IPPs pursuant to Section 3.1(b) shall be increased by the amount equal to the number of shares of Common Stock deliverable upon the exercise or conversion of such options, warrants, rights or other

securities, multiplied by the difference between the Base Share Price and the exercise or conversion price, and then dividing the product by the Base Share Price; (b} any change in the number of shares of Common Stock (or options, warrants or rights, or other securities of the Company exercisable, exchangeable or convertible into Common Stock) as a result of a reclassification, combination, exchange, subdivision, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, issuer tender or exchange offer, or other similar transaction, then the number of Company Shares to be acquired by the IPPs pursuant to Section 3.1(b) shall be appropriately and equitably adjusted; or (c) any (i) reorganization (other than as provided in subsection (b) above), (ii) inerger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other piaperty, whether in the form of securities, cash or otherwise or (iii) sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the IPPs shall thereafter be entitled to receive the number of shares of stock or other securities or property of the successor corporation or corporations resulting &om such reorganization, merger, consolidation, sale or transfer that the IPPs mould have been entitled to receive in such reorganization, consolidation, merger, sale or transfer ifthe Consummation Date had occurred and the Company Shares had been acquired by the IPPs immediately before such reorganization, merger, consolidation, sale or transfer.

Notwithstanding the foregoing, there shall be no adjustment pursuant to this Section 3.5 for any shares of Common Stock issued with respect to any of the transactions described on Schedule 3.5 hereto. Any additional shares of Common Stock delivered by the Company pursuant to this Section 3.5 shall be received by the IPPs, pro rata, based on the Company Shares allocated to each of the IPPs pursuant to the Allocation.

3.6. Private Placement'e istration of Com an Shares.

(a) The issuance of the Company Shares to the IPPs hereunder shall be effected as a private placement pursuant to Section 4(2) of the Securities Act. The certificates evidencing the Company Shares shall bear a legend in substantially the following form:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), AND MAY NOT BE 20

OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT, (2) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT OR (3) IN ACCORDANCE WITH ANOTHER APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

Upon issuance, the Company Shares shall not be subject to any restrictions on transfer other than as may be required by the federal securities laws and, ifapplicable, as may be set forth in the Shareholder's Agreement. The Company shall use its Reasonable Best Efforts to cause the Company Shares to be registered for sale &om time to time by the IPPs (or their assigns) on a shelf registration statement on Form S-3 (the "Shelf Registration Statement" ), which Shelf Registration Statement shall (i) be declared effective by the SEC on or prior to the Consummation Date, (ii) remain effective for a period of two (2) years following the Consummation Date and (iii) permit as an intended method of distribution of the Company Shares (among others) an underwritten offering by an underwriter selected by the holders of the Company Shares that is reasonably satisfactory to the Company. The Company covenants and agrees that, as of its effective date and as of the Consummation Date, none of the Shelf Registration Statement, any document incorporated by reference therein, any prospectus included therein or filed with the SEC, or any amendment thereof or supplement thereto, shall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(b) In connection with the preparation and filing of the Shelf Registration Statement under the Securities Act, the Company shall give the Counsel the opportunity to participate in the preparation of (including, but not IPPs'pecial limited to, reviewing, commenting on and attending all meetings with underwriters, if any, wiith respect to) the Shelf Registration Statement, each prospectus included therein or filed with the SEC, each amendment thereof or supplement thereto, and will provide the IPP's Special Counsel the opportunity to comment on the description of the transactions contemplated hereunder to be contained in the current, quarterly or annual report filed by the Company in connection with the consummation of the transactions contemplated hereunder, and will make available for inspection by the IPPs'pecial Counsel and any attorney, accountant or other agent retained by any IPP, all documents incorporated by reference therein, all pertinent financial and other records, pertinent corporate documents and properties of the Company, as shall be reasonably necessary to enable each IPP to conduct a reasonable investigation within the meaning of the Securities Act, and shall cause the Company's officers, directors and employees to supply all information which any IPP may reasonably request for purposes of such investigation; provided that any records, information or documents that are designated by the Company in writing as confidential (and which are not generally available to the public, have not become available to such person on a nonconfidential basis &om a source which has represented 21

to such person that such source is entitled to disclose same or which was known to such person on a nonconfidential basis prior to its disclosure by the Company) shall be kept confidential by such person unless disclosure of such records, information or documents is required by court or administrative order or any Governmental Authority having jurisdiction. The Company shaB permit the IPPs'pecial Counsel to review and comment on the Shelf Registration Statement and each such prospectus, amendment or supplement, as the case may be, a reasonable period of time prior to the filing of same with the SEC, shall not file same in a form to which such counsel reasonably objects within five (5) Business Days of the receipt thereof, and shall provide the IPPs'pecial Counsel with copies of all correspondence from or with the SEC incidental to the Shelf Registration Statement or any such prospectus, amendment or supplement. All expenses incident to the registmtion of the Company Shares including, without limitation, all registration, qualification and filing fees, "blue sky" fees and expenses, printing and related expenses, fees and expenses of listing the Company Shares on the NYSE, fees and expenses of counsel and independent certified public accountants of the Company and fees and expenses of the IPPs'pecial Counsel shall be borne by the Company. In addition, on the Consummation Date, the Company and each IPP receiving Company Shares pursuant to the Allocation (or its designee) shall enter into a registration rights agreement in the form annexed as Exhibit 3.6 hereto ("Registration Rights Agreement" ).

3.7. Shareholder's A ment. On the Consummation Date, each IPP listed on Schedule 3.7 hereto (unless, as a result of any reallocation of Company Shares prior to the Consummation Date or as a result of any designation of third parties pursuant to Sections 3.3. and 5.6 to receive Company Shares on the Consummation Date, such IPP, together with its Affiliate IPPs, members of its Sponsor Group and its Excluded Affiliates (as said latter two capitalized terms are defined in the Shareholder"s Agreement), shall acquire on the Consummation Date Company Shares representing less than two percent (2%) of the outstanding Common Stock of the Company) shall cause the corresponding entity or entities listed on Schedule 3.7 to enter into a shareholder's agreement with the Company in the form annexed as Exhibit 3.7 hereto (each, a "Shareholder's Agreement" ).

If any IPP not listed on Schedule 3.7, as a result of any reallocation of Company Shares prior to the Consummation Date, shall receive, together with its Affiliates, Company Shares representing two percent (2%) or more of the outstanding Common Stock of the Company, then such IPP shall notify the Company and shall identify such sponsor

. entities as may be appropriate (consistent with the sponsor entities listed on Schedule 3.7) to enter into, and such IPP and sponsor entities shall enter into, a Shareholder's Agreeinent with the Company on the Consummation Date. If any designee of one or more IPPs with respect to the Company Shares in accordance with Sections 3.3 and 5.6 shall receive Company Shares representing more than four and nine-tenths percent (4.9%)

of the outstanding Common Stock of the Company, then such designee shall enter into a Shareholder's Agreement with the Company on the Consummation Date, unless the Company shall otherwise agree. The IPP shall cause any such designee with respect to Company Shares in accordance with Sections 3.3 and 5.6 (if not an Affiliate of the IPP) 22

to provide a representation letter to the Company (which shall survive the Consummation Date) representing that, together with its Affiliates, such designee shall not, immediately following the Consummation, be the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of more than nine and nine-tenths percent (9.9%) of the outstanding Common Stock of the Company. Ifany Excluded Affiliate (as defined in the Shareholder's Agreement) receives Company Shares pursuant to this Agreement on the Consummation Date then, for purposes of the Shareholder's Agreement, such Company Shares shall be treated as ifthey were transferred to the Excluded Affiliate following the Consummation Date.

3.8. Board of Directors. Promptly aAer the date of this Agreement, the Company and the IPPs shall jointly select a nationally recognized executive search firm, whose fees and expenses will be paid by the Company, to develop a list of individuals unaffiliated with the Company or any IPP who are qualified to serve as directors of the Company. Both the Company and the IPPs may propose potential directors to the search firm, but the search firm shall decide which individuals will be included on the search 6rm's list. Once the search firm's list has been prepared and presented simultaneously to the Company and the IPPs, the Company and the IPPs shall mutually agree upon a final list of ten (10) individuals who are mutually acceptable to the Company and the IPPs.

The Company shall select two (2) individuals &om the final list to serve on the Board of Directors of the Company, effective immediately following the Consummation Date.

Each such individual shall stand for reelection for a three (3) year term at the Company's next annual meeting of shareholders. Each such individual shall be proposed and supported by the Company for election to the Board. In the event either such individual shall be unable to serve or continue to serve on the Board, such individual's replacement shall be selected by the Company Rom the final list. The provisions of this Section 3.8 shall survive the Consummation Date until fully performed.

4. REPRESENTATIONS AND WARI~TIES OF THE COMPANY The Company hereby represents and warrants to each IPP, as follows:

4.1. Or anization. Standin . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, and has all requisite corporate power and authority to own its properties and assets and to carry on its business in the manner now conducted and, subject to receipt of the NMPC Regulatory Approvals, as proposed to be conducted in accordance with this Agreement and the Contracts. The Company is duly qualified to transact business and is in good standing in each jurisdiction except where the failure so to qualify would not have a Material Adverse Effect on the Company.

23

4.2. Execution Authorit Enforceabili . Subject in each case to (i) receipt of the NMPC Regulatory Approvals and applicable federal and state securities laws and the rules of the NYSE, (ii) receipt of required consents to the transactions contemplated by this Agreement by the third parties whose names are disclosed in a notice given by the Company to all IPPs within thirty (30) days after the date of this Agreement, which notice shall not include NMPC/Third Party Releases (each, an "NMPCffhird Party Consent" ), (iii) receipt of the NMPC/Third Party Releases and (iv) approval of this Agreement and the transactions contemplated hereby by the Company's Board of Directors and, to the extent required, by the Company's shareholders, (a) the Company has all requisite corporate power and authority to execute and deliver this Agreement and all other agreements to be executed by it pursuant hereto, and to carry out the provisions of this Agreement in accordance with the terms hereof, and all other agreements to be executed by it pursuant hereto, including, but not limited to, the power and authority to issue and sell the Company Shares and Short-Term Notes, and to enter into and perform the Contracts; (b) this Agreement has been and all other agreements to be executed by the Company pursuant hereto will be, duly and validly executed and delivered by the Company; and (c) this Agreement constitutes, and all other agreements to be executed by the Company pursuant hereto will constitute, valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, 4.3. No Conflicts. Subject to (i) receipt of the NMPC Regulatory Approvals, (ii) receipt of the NMPCfThird Party Consents, (iii) receipt of the NMPCfIMrd Party Releases and (iv) approval of this Agreement and the transactions contemplated hereby by the Company's Board of Directors and, to the extent required, by the Company's shareholders, the execution, delivery, and performance by the Company of this Agreement, any other agreements to be executed by the Company pursuant hereto, and the consummation of the transactions contemplated hereby and thereby, will not result in a violation or default of any provision of its Certificate of Incorporation or By-Laws.

4.4. ~Litt ation. Except as set forth in Schedules 6.10A and 6.10B or in the SEC Reports, as of the date of this Agreement there is no action, suit, arbitration, or other legal or administrative proceeding pending or, to the best knowledge of the Company, any investigation pending or any action, suit, arbitration, or other legal or administrative proceeding or investigation threatened against the Company or any of its subsidiaries which (a) questions the validity of this Agreement, the agreements to be executed by the Company pursuant hereto or the right of the Company to enter into this Agreement or such other agreements, or to consummate the transactions contemplated hereby or thereby if or (b) adversely determined, would be likely to have a Material Adverse EAect on the Company. The Company is not a party to or subject to any order, writ, injunction, decree, judgment or other restriction of any Governmental Authority which has or is reasonably likely to have a material adverse effect on the Company's ability to enter into and perform its obligations under this Agreement or any other agreements to be entered into by the Company pursuant hereto.

24

45. 5 5 ll 5 . hhdl*45

• 5 hfi)5 h dl I'fd*

Company, (ii) the number of shares of Common Stock issued and outstanding and (iii) the number of shares of Common Stock issuable upon the exercise of any options, warrants or rights, or upon conversion or exchange of any other securities outstanding, in each case as of (x) September 30, 1996 and (y) June 27, 1997. The Company is not obligated to repurchase, redeem or otherwise acquire any shares of its capital stock, other than as set forth in Schedule 4.8.

4.6. Valid Issuance of Com an Shares. The Company Shares to be acquired by the IPPs hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, will be &ee of restrictions on transfer other than restrictions if on transfer required by federal securities laws and, applicable, as may be set forth in the Shareholder's Agreement, and will be duly listed on the NYSE. The Company Shares to be acquired by the IPPs hereunder are not and will not be subject to any preemptive rights or rights of first refusal, Assuming the truth and accuracy of each IPP's representations set forth in Section 5.6 (or, with respect to any designee of an IPP, such designee's representations set forth in a representation letter containing substantially the same representations set forth in Section 5.6), the offer, sale and issuance of the Company Shares pursuant to this Agreement (i) will not require registration under the Securities Act and (ii) will not require registration or qualification under such of the "blue sky" or securities laws of the jurisdictions in the United States (or will be in compliance therewith) as shall be applicable to the offer, sale and issuance of the Company Shares (subject to the last two sentences of Section 5.6 and subject further to the limitation that the Company makes no representation or warranty with respect to any offer by any IPP to any designee of such IPP as contemplated by Sections 3.3 and 5.6), and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would require such registration.

4.7. SEC Re rts and Financial Statements. Since January 1, 1995, the Company has made all filings required to be made by it under the Exchange Act and any other securities laws applicable to the Company and i's otherwise eligible to file a registration statement on Form S-3 covering the offering and sale of the Company Shares and the Debt Securities. As of their respective dates or, ifamended, as of the date of such amendinent, the SEC Reports complied in all material respects with the requirements of the Exchange Act, and the rules and regulations of the SEC thereunder. As of their if respective dates or, amended, as of the date of such amendment, the SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997 comply as to form in all material respects with 25

applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles as stated in such financial statements applied on a consistent basis during the period covered and fairly present, in all material respects, the financial position of the Company as of the date thereof and the results of operations and changes in financial position of the Company for the period then ended subject, in the case of unaudited statements, to notes and normal year-end audit adjustments, none of which shall be material in amount or effect.

4.8. Absence of Certain Chan es or Events. Except as set forth in the SEC Reports or in Schedule 4.8, between December 31, 1996 and the date of this Agreement there has not been nor has the Company incurred: (a) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting any material portion of its assets; (b) any satisfaction or discharge of any material lien, claim or encumbrance or payment of any material obligation by the Company, except in the ordinary course of business; (c) any material change to, or cancellation of, a material contract, agreement, lease or commitment by which the Company or any of its material assets is bound or subject; (d) other than in the ordinary course of business, any material change or increase in any compensation arrangement or agreement with any officer, director or executive employee of the Company, including any grant of stock appreciation rights; (e) any sale or other disposition of any material portion of the Company's assets; (f) any mortgage, pledge, security interest or lien created by the Company, with respect to any material portion of its assets; (g) any material change in the manner of keeping the Company's books, accounts or records or the accounting practices therein reflected; (h) as of the date of this Agreement, any merger or consolidation of the Company with or into any other entity, or any issuance, sale or other disposition of any shares of the Company's capital stock; or (i) any declaration, setting aside, or payment or other distribution in cash or property in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company, other than pursuant to the operation of the DRIP Plan or as required by the terms of the Company's preferred stock.

I 4.9. NMPC Restructurin . As of the date of this Agreement, the Company has disclosed to the IPPs all material plans and proposals concerning the NMPC Restructuring which have been disclosed to any Governmental Authority or approved by the Board of Directors of the Company and which could reasonably have a material adverse effect on any IPP or the Restructuring, including but not limited to the Contracts or any of the consideration to be received by the IPPs hereunder. As of the date of this Agreement, the Company has not been authorized by its Board of Directors, nor is the Company seeking such authorization, to file a petition under the Bankruptcy Code or otherwise to commence, authorize or acquiesce in the commencement of a proceeding under any bankruptcy or similar law for the protection of creditors, or to make a general assignment or any general arrangement or compromise for the benefit of creditors, nor 76

has the Company made, commenced, authorized or acquiesced in the commencement of any such proceeding or assignment or had any such petition, proceeding or assignment conunenced against it.

5. REPRESENTATIONS AND %AEG~TIES OF EACH IPP Each IPP (severally and not jointly) hereby represents and warrants to the Company, as follows:

5.1. Or anization Standin . The IPP is a corporation, partnership or other entity duly organized, validly existing and in good standing under the laws of its state of incorporation or formation, and, subject to receipt of the IPP Regulatory Approvals, has all requisite corporate or partnership power and authority, as the case may be, to own its properties and assets and to carry on its business in the manner-now conducted and as proposed to be conducted in accordance with this Agreement and the Contracts.

5.2. Execution Authori . Enforceabili . Subject in each case to receipt of (i) the IPP Regulatory Approvals, (ii) the IPPffhird Party Consents and (iii) the IPP Approvals, (a) the IPP has all requisite corporate or partnership power and authority, as the case may be, to execute and deliver this Agreement and all other agreements to be executed by it pursuant hereto, and to carry out the provisions of this Agreement in accordance with the terms hereof, and all other agreements to be executed by it pursuant hereto, including, but not limited to, the power and authority to enter into and perform the Contracts to which it is a party; (b) this Agreement has been, and all other agreements to be executed by the IPP pursuant hereto will be, duly and validly executed and delivered by the IPP; and (c) this Agreement constitutes, and all other agreements to be executed by the IPP pursuant hereto will constitute, valid and legally binding obligations of the IPP, enforceable against the IPP in accordance with their respective terms.

5.3. No Conflicts. Subject to receipt of (i) the IPP Regulatory Approvals, (ii) the IPP/Third Party Consents and (iii) the IPP Approvals, the execution, delivery, and performance by the IPP of this Agreement, any other agreements to be executed by the IPP pursuant hereto, and the consummation of the transactions contemplated hereby and thereby, will not result in a violation or default of any provision of its Certificate of Incorporation or By-Laws or partnership agreement, as applicable.

5.4.'Liti ation. Except as set forth in Schedules 5.4, 6.iOA and 6.10B, as of the date of this Agreement there is no action, suit, arbitration, or other legal or administrative proceeding pending or, to the best knowledge of the IPP, any investigation pending or any action, suit, arbitration, or other legal or administrative proceeding or investigation threatened against the IPP which (a) questions the validity of this Agreement, the agreements to be executed by the IPP pursuant hereto or the right of the 27

IPP to enter into this Agreement or such other agreements, or to consummate the transactions contemplated hereby or thereby or (b) if adversely determined, would be likely to have a material and adverse effect on the IPP's ability to enter into and perform its obligations under this Agreement or any other agreements to be executed by the IPP pursuant hereto. The IPP is not a party to or subject to any order, writ, injunction, decree, judgment or other restriction of any Governmental Authority which has or is reasonably likely to have a material and adverse effect on the IPP's ability to enter into and perform its obligations under this Agreement or any other agreements to be executed by the IPP pursuant hereto.

5.5. Certain Transfers; As of the date of this Agreement, the IPP does not have any agreement or understanding with any other IPP to (i) re-allocate or transfer to such other IPP (excluding for these purposes any AQiliate IPP of such IPP), whether before or after the Consummation Date, any portion of the Cash Payment or Company Shares allocated to the IPP pursuant to the Allocation or (ii) assign or transfer a Restated Contract or Amended PPA to any IPP whose Existing PPA is a Class A PPA.

5.6. Ac uisition of Com an Shares. If the IPP, pursuant to the Allocation, will acquire any Company Shares pursuant to Section 3.1(b): (a) the Company Shares to be acquired by such IPP shall be acquired for its own account and without a view to the resale or distribution thereof or shall be issued (in whole or in part) to designees of such IPP, consisting of partners and shareholders (at any tier), Affiliates, lenders, steam hosts or Gas Mitigation Third Parties (provided any such designee shall provide the Company with a letter containing substantially the same representations set forth in this Section 5.6 and, if applicable, designating a suitable purchaser representative, which letter shall be reasonably satisfactory to the Company and its counsel); provided, however, that the foregoing shall not preclude the IPP from transferring or selling the Company Shares to be acquired by it in the manner described in clauses (c)(i), (ii) or (iii) below; (b) such IPP is either (x) an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities Act or (y) ifnot an "accredited investor", either alone or with its purchaser representative, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Company Shares, within the meaning of Rule 506(b)(2)(ii) of Regulation D under the Securities Act; and (c) such IPP understands that the sale of the Company Shares to such IPP has not been registered under the Securities Act or any applicable state securities laws and, therefore, the Company Shares cannot be transferred, sold, pledged or otherwise disposed of, except (i) pursuant to the Shelf Registration Statement or another effective registration statement under the Securities Act and in compliance with the prospectusAelivery requirement under the Securities Act, (ii) in accordance with Rule 144 under the Securities Act after the applicable time period specified therein or (iii) in accordance with another exemption &orn the registration requirements of the Securities Act. For purposes hereof, the IPPs'urchaser representative, if any, is WP&Co. or another equivalent investment banker. Not later than ten (10) Business Days prior to the 28

Consummation Date, the IPP shall give a notice to WP&Co. stating the number of non-accredited investors to which such IPP shall designate that any part of the Company Shares to be acquired by such IPP pursuant to Section 3.1(b) shall be issued on the Consummation Date. The IPP acknowledges that such number of non-accredited investors, together with the number of non-accredited investors to which any other IPP shall designate that any part of its Company Shares to be acquired by any such other IPP pursuant to Section 3.1(b) shall be issued on the Consummation Date, shall not exceed thirty-five (35). Notwithstanding the foregoing, without the Company's consent, no person may be a designee of an IPP with respect to any Company Shares if the acquisition of Company Shares by such person would (i) require the Company to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualiGed, (ii) subject the Company to taxation in respect of doing business in any jurisdiction in which it is not so subject or (iii) require the Company to make filings with any state securities commissioners other than notice filings. The IPP agrees to give the Company notice of the identity of any proposed designee as soon as practicable in order to permit the Company to make a determination pursuant to the preceding sentence.

5.7. Form of Allocation Contracts Allocation. Annexed as Exhibit 5.7 are blank forms of the Allocation, Contracts Allocation and Contract Adjustment Allocation deposited with the Escrow Agent and %P&Co. prior to the date of this Agreement, which forms, as delivered to the Escrow Agent and WP&Co., do not and will not include any formulas, notations, conditions or other qualifications with respect to the determination of the respective amounts, quantities or prices allocated to the IPP (with the exception of the NorCon Allocation, a copy of which has been delivered to the Company simultaneously with the execution of this Agreement).

6. CONDUCT AND TRANSACTIONS PRIOR TO THE CONSUMMATION DATE 6.1. Debt Securities.

(a) The Company has advised the IPPs of its intention to finance the payment of up to three billion two hundred million ($ 3,200,000,000) dollars of the Cash Payment by issuing debt securities of the Company ("Debt Securities" ) in an underwritten public offering registered with the SEC to be consummated on or prior to the Consummation Date (the "Public Offering"). The Parties agree that the successful consummation of the Public Offering is of material importance to the successful consummation of the Restructuring pursuant to this Agreement and that the terms and conditions of the Debt Securities issued therein are of material importance to the IPPs in their capacities as holders of Company Shares and/or Short-Term Notes, and as parties to the Contracts. The terms and conditions of the Debt Securities shall be developed by the Company in conjunction with the Underwriters. The Company agrees that the material 29

terms and conditions of the Debt Securities shall be subject to the approval of a majority of a committee consisting equally of representatives of the Company, Sterling Power Partners, Ltd. and East Syracuse Generating Company, L.P. provided that (i) such committee shall not be entitled to demand specific terms and conditions and (ii) the approval of such committee, if unanimously recommended by the Underwriters, shall not be unreasonably withheld. The Company agrees that (x) the aggregate principal amount of the Debt Securities issued in connection with the Public Offering shall not exceed three billion two hundred million ($ 3,200,000,000) dollars, (y) the Debt Securities shall be priced to trade initially at par and (z) unless applicable securitization legislation is enacted in the State of New York and the Debt Securities are securitized pursuant thereto, the Debt Securities shall be general unsecured obligations of the Company.

(b) The Company covenants and agrees that, as of its effective date and as of the Consummation Date, none of the registration statement prepared by the Company in connection with the offering of the Debt Securities (the "Debt Registration Statement" ), any document incorporated by reference therein, any prospectus included therein or filed with the SEC, or any amendment thereof or supplement thereto, shall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Company shall provide the IPPs'pecial Counsel with all drafts of the Debt Registration Statement and any such prospectus, amendment or supplement, as the case may be, which are provided to the Underwriters a reasonable period of time prior to the filing of same with the SEC, 'and shall provide the IPPs'pecial Counsel with copies of all correspondence &om or with the SEC incidental to the Debt Registration Statement or any such prospectus, amendment or supplement.

(c) If the Debt Securities are to receive a credit rating of less than investment grade, the Debt Securities shall be underwritten by (i) DLJ, acting as lead manager, (ii) WP&Co., acting as a co-manager, and (iii) by such additional investment banking firms selected by the Company, acting as co-managers (collectively, the "Underwriters" ). The Public Offering shall bear the usual and customary fees and expenses, consistent with high-yield financings of similar type, which fees and expenses shall be borne solely by the Company. DLJ and WP&Co. shall have the right to attend all material presentations to rating agencies and investors in connection with the Public Offering.

6.2. Sale/Leaseback Tax-Free Exchan es. Upon the request of any IPP made within sixty (60) days aAer the date of this Agreement containing a specific proposal by such IPP with respect thereto, the Company shall conduct good faith negotiations and use its Reasonable Best Efforts to modify the transactions contemplated by this Agreement with respect to such IPP in a mutually acceptable manner in order to effect the Restructuring through (a) sale and leaseback arrangements of the Project facilities of such IPP or (b) a transaction that qualifies as a "reorganization" under Section 368(a) of the 30

Code (and any corresponding provision of applicable state or local law), provided, however, that the Company will not be obligated to modify the transactions contemplated if by this Agreement with respect to such IPP (i) in the Company's reasonable judgment, such modification would have a material adverse effect on the timing of the Restructuring contemplated by this Agreement, the anticipated tax effect on the Company of the Restructuring, the implementation of the NMPC Restructuring, or the Company's ability to complete the sale of the Debt Securities on terms reasonably satisfactory to it, or would require the Company to incur additional costs or liabilities, including contingent liabilities (net of the value of any asset assumed), other than normal and customary incidental out-of-pocket costs and expenses and attorneys'ees or (ii) as a result thereof, IPPs would receive (in the aggregate), with respect to Class A PPAs, a portion of the Cash Payment and Company Shares of less than $ 2,000,000,000 (except to the extent that such amount is reduced as a result of the termination of this Agreement with respect to any IPPs which are parties to Class A PPAs).

6.3. ~PS *. I *i 'U U*p*p i dfl'g f6*

proxy statement to be distributed in connection with the special meeting of the Company's shareholders to be called to consider for approval certain of the transactions contemplated by this Agreement under the Exchange Act (the "Proxy Statement" ), the Company shall provide the IPPs'pecial Counsel vrith all drafts of the Proxy Statement and each amendment of the Proxy Statement, in each case which are provided to the Underwriters, a reasonable period of time prior to the filing of same with the SEC, and shall provide the IPPs'pecial Counsel with copies of all correspondence from or with the SEC incidental to the Proxy Statement and any such amendment. The Company covenants and agrees that, as of its distribution date, none of the Proxy Statement or any amendment thereof, or any document incorporated by reference therein, shall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Subject to applicable fiduciary duties, the Proxy Statement shall contain a statement of the Company's Board of Directors recommending approval of this Agreement and the transactions contemplated hereunder to the Company's shareholders.

6.4. NMPC Restructurin (a) The Parties acknowledge the existence of the Company's proposed corporate restructuring and disaggregation in connection with its Po~erChoice proposal (the "NMPC Restructuring" ) and agree that the Restructuring contemplated by this Agreement is an integral and substantial part of the NMPC Restructuring. The Company shall disclose to the IPPs all material plans and proposals concerning the NMPC Restructuring which are disclosed to any Governmental Authority (including but not limited to PSC staff) or approved by the Board of Directors of the Company, and which could reasonably have a material adverse effect on any IPP or the Restructuring, including but not limited to the Contracts or any of the consideration to be received by 31

the IPPs hereunder. Except as expressly set forth in this Agreement, each IPP shall be free to oppose or challenge any aspect of the NMPC Restructuring which such IPP deems to be adverse to the interests of such IPP or its Affiliates.

(b) Ifat any time, whether before or after the Consummation Date, the Company restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, then in no event shall the IPPs or their assigns, in their respective capacities as holders of Common Stock or Short-Term Notes or as parties to the Contracts, be treated less favorably in any material respect than other similarly-situated holders of Common Stock or Short-Term Notes or parties to comparable agreements (including comparable agreements between the Company and/or its Af5liates) are treated in their capacities as such. In addition, in the event of any such restructuring, each of the Contracts will be assigned to and assumed by the entity or entities owning all or substantially all of the Company's electric transmission and distribution assets or, if separated &om the Company's electric transmission assets pursuant to the restructuring, the Company's electric distribution assets, provided that, upon the effective date of the restructuring, (i) the assuming entity's performance under the Contracts shall be unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the IPP (or its assign) under any such Contract, by each of the other entities arising out of the restructuring, including any entity(ies) spun-off to the Company's shareholders or any Affiliate of the Company holding significant assets held by the Company (or any subsidiary of the Company) prior to the restructuring, unless the assuming entity's long-tenn unsecured debt credit rating issued by Moody's Investors Service, Standard & Poor's Corporation or another nationally recognized rating agency is at least as favorable as the Company's long-term unsecured debt credit rating immediately if prior to the effective date of the restructuring, and (ii) the assuming entity is not the entity which will collect 6om customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval, the assuming entity's performance under the Contracts shall be unconditionally guaranteed, pursuant to a guanuitee in form and substance reasonably satisfactory to the IPP (or its assign) under any such Contract, by the eiitity(ies) which will collect from customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval. In the event of any such restructuring, the IPP (or its assign) under any such Contract(s) shall have the right to replace its Contract(s), as applicable, with power purchase and/or hedging contractual arrangements substantially equivalent to those that are entered into between the entity(ies) holding the transmission and/or distribution assets of the Company or which will collect from customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval and the entity(ies) holding the non-nuclear generating assets of the Company, whether or not such assets are spunwff to the Company's shareholders (a "Genco Contract" ), provided that the term, price and quantity under such IPP's Contract(s) shall not be altered thereby, unless any of such terms are materially and 32

expressly conditioned by certain provisions in the Genco Contract, in which case appropriate and equitable adjustments in such terms shall be mutually agreed upon.

6.5. Hart-Scott-Rodino Act Notification. Each IPP or its designee with respect to Company Shares shall make its own determination of whether it (or any of its Affiliates) is required to file the Notification and Report Form for Certain Mergers and Acquisitions pursuant to the Hart-Scott-Rodino Act in connection with the transactions contemplated by this Agreement. Any IPP or designee that determines it (or any of its Affiliates) is so required shall file such Notification and Report Form in a timely manner, and shall give notice thereof to the Company. The Parties shall make all required filings and shall cooperate with each other in connection with such filings and any responses thereto. The Company shall pay all filing fees required to be paid under the Hart-Scott-Rodino Act in connection with the acquisition of the Company Shares hereunder, as and when the applicable filings are made; the Company's obligation to pay any such fee incurred by an IPP prior thereto shall survive the Consummation Date or any termination of this Agreement (either in its entirety or with respect to such IPP).

6.6. Re ulato A rovals.

(a) The Company shall use Reasonable Best Efforts to seek and obtain, on or before the Expiration Date, each Regulatory Approval which is set forth in a notice given to the IPPs'pecial Counsel promptly after it determines that such Regulatory Approval is desired or required, specifying the need therefor and the nature thereof in reasonable detail (collectively, the "NMPC Regulatory Approvals" ). All NMPC Regulatory Approvals shall be sought in the order and in the manner which the Company, after consultation with the IPP Representatives, believes will be most likely to result in receipt of the NMPC Regulatory Approvals prior to the Expiration Date.

(b) Each IPP shall use Reasonable Best Efforts to seek and obtain, on or before the Expiration Date, each Regulatory Approval applicable to such IPP which is set forth in a notice given to the Company promptly after it determines that such Regulatory Approval is desired or required, specifying the need therefor and the nature thereof in reasonable detail (collectively, the "IPP Regulatory Approvals" ). All IPP Regulatory Approvals shall be sought in the order and in the manner which each IPP,

, after consultation with the IPP Representatives and, with respect to any filings to be made to the PSC or the FERC (excluding any filings pertaining to an IPP's status, rights or obligations as a QF or EWG or any of such IPP's rights or obligations pursuant to PURPA), after consultation with the Company, believes will be most likely to result in receipt of the IPP Regulatory Approvals prior to the Expiration Date.

(c) Notwithstanding anything to the contrary contained in Sections 6.6(a) or 6.6(b), the Company shall use its Reasonable Best Efforts to submit this Agreement, together with all other requisite docuinents and instruments, to the PSC 33

within fourteen (14) days following the date of this Agreement, for purposes of obtaining the PSC's approval and order solely with respect to the matters set forth in Schedule 6.6C hereto (such approval and order being referred to herein as the "PSC Approval").

(d) In the event that this Agreement and/or any of the transactions contemplated hereby could reasonably subject any IPP, its partners or Aftiliates, individually or collectively, to become subject to any regulation or jurisdiction of any Governmental Authority from which they were previously exempt (including but not limited to SEC or FERC regulation under PUHCA, PSC regulation under NYPSL, and FERC regulation under the Federal Power Act), then (i) such IPP and the Company shall use their Reasonable Best Efforts to seek and obtain appropriate exemptions or waivers prior to the Consununation Date (provided the Company shall not be required to use its Reasonable Best Efforts to assist an IPP in obtaining an exemption &om PUHCA with respect to such IPP's and/or such IPP's Af5liates'wnership of 10% or more of the if Common Stock of the Company, ifapplicable), (ii) such exemptions or waivers cannot be obtained, such IPP and the Company shall use their Reasonable Best Efforts to conform this Agreement and/or the transactions contemplated hereby prior to the Consummation Date in a manner mutually satisfactory to such IPP and the Company and the other Parties hereto as may be necessary in order for such IPP, its partners or Affiliates, to avoid becoming subject to such regulation or jurisdiction and (iii) suchif exemptions or waivers cannot be obtained and ifthis Agreement and/or the transactions contemplated hereby cannot be so conformed, the provisions of Section 12.2(c)(iii) shall be applicable.

6.7. Coo ration with res ct to Re ulato A rovals.

(a) From the date of this Agreement until the earlier to occur of (x) the Effective Time, (y) the termination of this Agreement in its entirety or (z) with respect to any individual IPP, the termination of this Agreement with respect to such IPP, the Parties shall cooperate with each other in preparing and filing any and aH submissions to the FERC, PSC, SEC and other Governmental Authorities in order to obtain any Regulatory Approvals. The Parties, in conjunction with the IPP Representatives and DLI, shaH form a committee to prepare and make a joint presentation to the PSC and/or the PSC staff (if the PSC so permits) in connection with the submission of this Agreement to the PSC pursuant to Section 6.6(c). The Company shall consult with the IPP Representatives on a regular basis in developing overall regulatory strategies, and shall provide the IPP Representatives with a draft copy of each filing for NMPC Regulatory Approvals to be made by the Company with the PSC, FERC, SEC or any other Governmental Authority in connection with the Restructuring, a reasonable period of time prior to the anticipated filing of same, and shall inform the IPP Representatives of any material changes therein. The Company shall at all times keep the IPP Representatives fully apprised of the status of all applications for NMPC Regulatory Approvals, including with respect to all material discussions with Governmental 34

Authorities (including PSC stafI), and shall provide the IPPs with copies of all correspondence given to or received from any Governmental Authority in connection therewith. Each IPP shall provide the Company with a draft copy of each filing to be made by such IPP concerning NMPC Regulatory Approvals a reasonable period of time prior to the anticipated filing of same, shall inform the Company of any material changes therein, and shall at all times keep the Company fully apprised of all applications made by such IPP concerning NMPC Regulatory Approvals, including with respect to all material discussions with Governmental Authorities (including PSC staff) concerning NMPC Regulatory Approvals. Except as expressly set forth in this Agreement, nothing contained herein shall limit or restrict any IPP from opposing or challenging any application for an NMPC Regulatory Approval which such IPP deems to be adverse to the interests of such IPP or its Affiliates, and nothing contained herein shall limit or restrict the Company &om opposing or challenging any application for an IPP Regulatory Approval which the Company deems to be adverse to its interests. Nothing contained in this Agreement shall require any IPP to disclose the Allocation, any portion thereof or any information contained therein to any Governmental Authority except as set forth in Section 3.4.

(b) The Company, upon request and at the expense of any requesting IPP, and each IPP, upon request and at the expense of the Company, shall use Reasonable Best Efforts to assist the other Party to obtain any Regulatory Approval that is required to be obtained, provided, however, that (i) a Party that is exempt from regulation or jurisdiction of any Governmental Authority as of the date of this Agreement shall not be required to take any steps in assistance to another Party that could reasonably subject it, its partners or Affiliates to the regulation or jurisdiction of any Governmental Authority

&om which it or they were previously exempt, (ii) no Party shall be required pursuant to this Section 6.7 to support any position taken by any other Party except as may otherwise be expressly set forth in this Agreement and (iii) the Company shall not be required to use its Reasonable Best Efforts to assist an IPP in obtaining an exemption Rom PUHCA with respect to such IPP's and/or such IPP's Affiliates'wnership of 10% or more of the Common Stock of the Company, ifapplicable.

(c) The Parties shall endeavor to maintain the confidentiality of any information that one or more Parties deem commercially sensitive (which the Parties agree shall include, without limitation, the designation of which Existing PPAs are set forth on Schedules 2.1, 2.2 and 2.3 hereof, respectively), and shall cooperate in seeking trade secret protection or other appropriate confidential treatment for commercially sensitive information that is submitted to any Governmental Authority in the course of obtaining any Regulatory Approval. Any Party seeking to maintain confidentiality of such information shall notify the other Parties of such desire upon delivery of such information.

35

6.8. Coo ration with res ct to IPP/Third Part Consents and NMPCfThird

~Plt I (a) Upon an IPP's request, the Company agrees to use its Reasonable Best Efforts, in a timely manner, to assist the IPP (including, without limitation, by providing relevant consents, representations and warranties) to amend, restructure, assign or terminate its existing third party agreements, including but not limited to fuel supply, transportation, financing, lease, operations and steam supply agreements, relating to or arising out of such IPPs Project or Existing PPA or the termination, amendment or amendment and restatement, as the case may be, of such IPP's Existing PPA, in each case in a manner that (i) will enable such IPP to obtain the IPP/Third Party Consents required or desired to be obtained by such IPP and (ii) will accommodate the terms of this Agreement without reducing its economic value to such IPP and otherwise in a manner reasonably satisfactoiy to such IPP.

(b) Upon the Company's request, each IPP agrees to use its Reasonable Best Efforts, in a timely manner, to assist the Company (including, without limitation, by providing relevant consents, representations and warranties) in connection with the Company's efforts to obtain a waiver, release, amendment or termination of the Coinpany's obligations under existing third party agreements with lenders, suppliers and other third parties which the Company previously has entered into at the request or on behalf of any IPP and which relate to or arise out of such IPP's Project or Existing PPA (each, an "NMPCfH6rd Party Agreement" ) and which waiver, release, amendment or termination is desired by the Company to be obtained in connection with the termination, amendment or amendment and restatement, as the case may be, of such IPP's Existing PPA as contemplated by this Agreement. Each IPP agrees to perform a diligent review of its files and provide to the Company, within thirty (30) days after the date of this Agreement, a schedule of all NMPCfMrd Party Agreements disclosed by such review, but the IPP shall have no liability to the Company or any third party in the event such review does not disclose all NMPC/Third Party Agreements with respect to which the Company may desire to obtain a waiver, release, amendment or termination as a result of the transactions contemplated hereby. Any waiver, release, amendment or termination required to be obtained with respect to any NMPC/Third Party Agreement is referred to herein as an "NMPCfChird Party Release."

6.9. Performance under Existin PPAs.

(a) From the date of this Agreement until the earlier to occur of (x) the Effective Time, (y) the termination of this Agreement in its entirety or (z) with respect to any individual IPP, the termination of this Agreement with respect to such IPP, the Parties agree and stipulate that the Existing PPAs shall continue with the same force and effect as if this Agreement had not been executed by any Party, and the Parties (respectively) shall continue to perform all obligations, covenants and agreements

required to be performed by them pursuant to the terms of the Existing PPAs, provided that no IPP, regardless of the terms of its Existing PPA, shall be subject to (i) any Curtailment or (ii) any claim that electricity produced and delivered to the Company by such IPP exceeds the estimates of energy in megawatt-hours and capacity in megawatts set forth in its Existing PPA.

(b) From the date of this Agreement until the earlier to occur of (x) the Effective Time, (y) the termination of this Agreement in its entirety or (z) with respect to any individual IPP, the termination of this Agreement with respect to such IPP, the Company (i) shall not initiate or continue any request for regulatory authorization or any regulatory proceeding with respect to, and ifauthorized to do so (whether before or after the date of this Agreement) will not implement or enforce, any Curtailment, adequate assurances (including firm security) or other regulatory initiative which is reasonably likely to have a material adverse effect on any IPP or the Restructuring, including but not limited to-the Contracts or any of the consideration to be received by any IPP hereunder and (ii) shall not implement or continue to implement any QF Monitoring Program as to any IPP.

(c) Notwithstanding the provisions of Section 6.9(a) and (b), in the event that the PSC rnandates that the Company implement or enforce any Curtailment with respect to any IPP that is a Party to this Agreement, the Company agrees that it shall jointly seek, with any such affected IPP, a PSC and, if necessary, judicial stay of such Curtailment, on the grounds that the Curtailment would result in substantial injury to the IPP and, to the extent it could affect the consummation of'the transactions contemplated by this Agreement, the Parties. In addition, each of the Company and any such affected IPP shall be &ee to assert any other grounds it deems appropriate in order to oppose the Curtailment. The Company shall oppose any effort of the PSC to mandate Curtailments with respect to any IPP which is a Party to this Agreement. If, notwithstanding the Company's and such IPP's joint efforts, the PSC or a court of competent jurisdiction rnandates such Curtailment, then nothing contained in this Agreement shall prohibit the Company &om implementing or enforcing such Curtailment to the minimum extent required by such mandate, provided that the foregoing shall not be deemed to waive any rights such IPP may have under this Agreement, pursuant to law or otherwise to restrict, limit or oppose the implementation or enforcement of such Curtailment. Nothing contained in this Section 6.9(c) shall be deemed to authorize the Company to implement or enforce any Curtailment with respect to any Existing PPA to the extent such Existing PPA prohibits or limits the Company Irom implementing or enforcing such Curtailment.

(d) Notwithstanding the provisions of sub-clause (z) in each of Section 6.9(a) and (b) and in Section 6.10(b), if this Agreement shall terminate with respect to NorCon pursuant to Section 2.5, the provisions of Sections 6.9(a) and (b) shall continue to apply to NorCon (subject to suMlauses (x) and (y) thereof) until December I, 1997, and the provisions of Section 6.10(b), insofar as they may pertain to Curtailment, shall 37

continue to apply to NorCon (subject to sub-clauses (x) and (y) thereof) until December 1, 1997.

6.l0. S~fLi i (a) Promptly following the date of this Agreement, each Party shall use Reasonable Best Efforts to stay the pending litigation and regulatory proceedings listed in Schedules 6.10A and 6.10B, if applicable to such Party, with such stays to remain in effect until the earlier to occur of (x) the Effective Time, (y) the termination of.

this Agreement in its entirety or (z) with respect to any individual IPP, the termination of this Agreement with respect to such IPP. With respect to those proceedings listed in Schedule 6.10B, each Party shall (i) use Reasonable Best Efforts to stay the pending proceedings and (ii) whether or not such stay is granted, if any Party desires to continue its participation in such proceeding as a result of the last sentence of this Section 6.10(a),

each Party shall use Reasonable Best EfForts to obtain an order from the court in each such proceeding stating that the disposition of such proceeding will not have any material adverse impact on the Existing PPAs or on the claims asserted by the Company with respect to the Existing PPAs in such proceedings. The Parties, as promptly as practicable aQer the date of this Agreement, shall determine the appropriate judicial or regulatory bodies to which to apply, and the text of the necessary notices, motions or applications to be filed, in order to effectuate the stays and/or obtain the orders contemplated by the provisions of this Section, and promptly, shall file the same with such bodies.

Notwithstanding whether any such litigation or proceedings shall be stayed, the rights and obligations of the Parties pursuant to this Agreement shall not be affected by any judgment, ruling, order, decision or other action which may be issued or rendered in any such litigation or proceeding between the date of this Agreement and the Consummation Date except as otherwise provided in Sections 8.5 and 9.5, and no Party shall seek to enforce such judgment, ruling, order, decision or other action against any other Party.

The obligations of the Parties pursuant to this Section 6.10(a) shall be subject to the condition that no Party shall be required to take any action or suffer any inaction, that would lead to forfeiture, loss of rights, imposition of sanctions or penalties, or otherwise cause a material adverse impact on its prospects for success with respect to any such litigation or regulatory proceeding with respect to itself or third parties; but any action necessary to avoid any such result shall to the maximum extent possible avoid any material adverse impact (including the incurrence of any cost or expense) upon any other Party.

(b) From the date of this Agreement until the earlier to occur of (x) the Effective Time, (y) the termination of this Agreement in its entirety or (z) with respect to any individual IPP, the termination of this Agreement with respect to such IPP(i) the Company shall refrain from commencing any new litigation or regulatory proceeding the outcome of which could have a material adverse effect on any IPP or any IPP's rights or obligations under its Existing PPA, including the purchase of power thereunder, (ii) each 38

IPP shall refrain from commencing any new litigation or regulatory proceeding potentially adversely affecting the Company or the Company's rights or obligations under the Existing PPAs, including the purchase of power thereunder, except that an IPP may commence any such litigation or proceeding, or assert any claim, in response to any action or proceeding, including but not limited to any proceeding with respect to Curtailment, initiated (whether before or after the date of this Agreement) by the Company or any Governmental Authority and except, further, that each Party may commence any litigation or proceeding, or assert any claim, arising out of any breach of this Agreement or of any Existing PPA or other agreement relating to the delivery of power under an Existing PPA, and (iii)each Party accordingly agrees to waive any statute of limitations for such period that would otherwise bar such proceedings unless commenced during such period.

(c) The Parties, within thirty-five (35) days after the date of this Agreement, also shall determine the appropriate judicial and regulatory bodies to which to apply, and the text of the necessary notices, motions or applications to be filed, in order to effectuate the dismissals and withdrawals contemplated by the provisions of Sections 8.8(b) and 9.8(b), which are to be delivered and subsequently filed pursuant to such Sections as of the Consumnation Date.

6.11. Conduct of Business. Except as expressly permitted by this Agreement or set forth in Schedule 6.11, &om the date of this Agreement until the Consuinmation Date, the Company (a) shall conduct the business and operations of the Company in accordance with past practice and in the ordinary course of business; (b) shall not enter into any transaction or perform (or fail to perform) any act which would constitute a material breach of the representations, wairanties, covenants and agreements of the Company contained herein, whether as of the date of this Agreement or as of the Consummation Date; (c) shall not make any amendment or modification of the Certificate of Incorporation or By-Laws of the Company which would be reasonably likely to have a material and adverse effect on any rights of the IPPs pursuant to this Agreement or any agreement to be entered into pursuant hereto; (d) shall not effect any issuance, sale or other disposition of any shares of the Company's capital stock; (e) shall not make any declaration, setting aside, or payment or other distribution in cash or property in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company; and (f) shall not make any material change or increase in any compensation anangement or agreement (including but not limited to any grant of stock appreciation rights) with any officer, director or executive employee of the Company outside the ordinary course of business. In addition, the Company shall promptly notify the IPPs of any happening or event which has, or which is reasonably likely to result in, a Material Adverse Effect on the Company.

6.12. Public Disclosure. Except as otherwise provided in this Agreement, from the date of this Agreement until the Consummation Date or sooner termination of this 39

Agreement in its entirety, no Party to this Agreement shall directly or indirectly make or cause to be made any public announcement or issue any public notice in any form with respect to this Agreement or the transactions contemplated hereby, without the consent of the other Parties except if in the opinion of such Party's counsel it is required by the securities laws of the United States or the rules of the NYSE or any other securities exchange or market on which the securities of such Party or its Affiliates are quoted or traded to make such disclosure. The Parties agree, to the extent practicable, to consult with each other regarding any such public announcement in advance thereof.

6.13. Further Assurances. Subject to the terms and conditions herein provided, each of the Parties hereto agrees to use its Reasonable Best Efforts to take promptly, or cause to be taken promptly, all actions and to do promptly, or cause to be done promptly, all things necesmy, proper or advisable under applicable laws to consummate and make effective the transactions contemplated by this Agreement, and to satisfy all of the conditions to the consummation of the transactions contemplated by this Agreement to be satisfied by such Party, including using its Reasonable Best Efforts to obtain all necessary consents, approvals, qualifications, orders, authorizations, extensions, waivers, exemptions and other actions or inactions &om all applicable Governmental Authorities, third parties, boards of directors, shareholders and partners, and effecting all necessary registrations and filings.

6.14.s** li .m tiPP*d this Agreement until the earlier to occur of I**V f Ud*f (x) the Effective Time, (y) the termination of this Agreement in its entirety or (z) the termination of this Agreement with respect to such IPP, it shall not, directly or indirectly, alone or in concert with others, except for the acquisition of the Company Shares pursuant to this Agreement, acquire, ofter to acquire or agree to acquire, by purchase, gift or otherwise, beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of any of the Company's outstanding Common Stock. Each IPP covenants and agrees that such IPP, together with any Affiliates of such IPP (to the knowledge of such IPP,~thout any duty of inquiry, with respect to any Affiliates of such IPP), shall not, on the Consummation Date, be the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of more than five percent (5%) of the then outstanding Common Stock of the Company (assuming the number of shares of Common Stock outstanding as of the Consummation Date is not less than 190,390,600 shares) except for a certain group of Affiliate IPPs who shall be the beneficial owners of not more than five and six-tenths percent (5.6%) of the then outstanding Common Stock of the Company.

6.15. T~ax Rulin s. The Company agrees to permit the IPPs'pecial Counsel, and each IPP agrees to permit the Company's tax counsel, to review Md comment on all requests for federal, state or local tax rulings to be made in connection with the Restructuring, and to provide to such other Party's counsel copies of all tax ruling requests a reasonable period of time prior to the submission of same. The Company 40

hereby consents to the IPPs seeking such tax rulings within the meaning of, and agrees to pay the fees 'and expenses of the IPPs'pecial Counsel in connection with any such tax ruling requests pursuant to, the IPPs'pecial Counsel Fee Letter.

7. INTENTIONALLYLEFT BLANK S. CONDITIONS TO EACH IPP'S OBLIGATIONS ON THE CONSUMMATIONDATE The obligations of each IPP (severally and not jointly) to consummate the Restructuring and make the deliveries specified in Section 10 to be made by it on the Consummation Date are subject to the satisfaction on or before the Consummation Date (or, ifotherwise set forth in Section 10.1(c), the Conditions Determination Date) of each of the following conditions, the waiver of which shall not be effective against any IPP unless such IPP gives its consent in writing thereto or such waiver is deemed to be given pursuant to Section 10.1(c):

8.1. Re resentations and Warranties. The representations and waixanties of the Company contained in Section 4 shall be true in all material respects on and as of the Date with the same effect as though such representations and warranties 'onsummation had been made on and as of the Consummation Date (or on the date when made in the case of any representation or warranty which expressly relates to an earlier date).

8.2. Performance, The Company shall have performed and complied in all material respects with all agreements, obligations, covenants and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Consummation Date.

8.3. Re resentation Letter'ecre 's Certificate' inion of the Com an 's Counsel. The IPP shall have received on the Consummation Date (a) a representation letter executed by the Company in substantially the form annexed as Exhibit 8.3A, (b) a certificate of the Secretary of the Company certifying (i) the Certificate of Incorporation and By-Laws of the Company, (ii) the resolutions of the Board of Directors and shareholders of the Company authorizing the transactions contemplated by this Agreement and (iii) the incumbency of any officers of the Company executing this Agreement or any agreements to be executed by the Company pursuant hereto, in form and substance reasonably satisfactory to such IPP, and (c) an opinion, from Sullivan &

Cromwell andlor Swidler & Berlin, outside counsel for the Company, dated the Consummation Date, in substantially the form annexed as Exhibit 8.3C.

8.4. Re ulato A rovals. The IPP shall have received on or before the Consummation Date each IPP Regulatory Approval and, if the IPP will benefit therefrom

or be affected thereby, any NMPC Regulatory Approval set forth in the NMPC Status Notice, in a form reasonably acceptable to the IPP, and each such Regulatory Approval shall be in full force and effect and either (i) shall be final and non-appealable or (ii) if not final and non-appealable, shall not be subject to the possibility of appeal, review or reconsideration which, in the opinion of the IPP, is reasonably likely to be successful and, ifsuccessful, would have a Material Adverse Effect on such IPP.

8.5. No In'unction Action or Proceedin . (a) No court or Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, statute, ordinance, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) that is in effect on the Consummation Date and which restrains, enjoins or otherwise prohibits consummation of the transactions contemplated hereby and (b) no claim, action, suit, investigation or other proceeding brought by a Governmental Authority or third party concerning the transactions contemplated by this Agreement shall be pending which in the opinion of such IPP is reasonably likely to be successful and which, ifadversely determined, would grant relief from or against such IPP which is reasonably likely to have a Material Adverse Effect on such IPP.

8.6. No Material Adverse Event. Between September 30, 1996 and the Consutntnation Date, there shall not have occurred any event or condition (including but not limited to any action or inaction of any Governmental Authority) which has had or may reasonably be expected to have a Material 'Adverse Effect on the Company (provided, however, that neither (i) the impact of the Existing PPAs nor (ii) the transactions contemplated by this Agreement shall constitute a Material Adverse EQect on the Company).

8.7. Contracts. The Company and the IPP shall have executed and delivered to the Escrow Agent the respective Terinination Agreement, Amended PPA, Restated Contract(s), NorCon Agreement or Oxbow Agreement, as applicable, in accordance with Section 2.8, on or before the Conditions Determination Date.

8.8. General Release Withdrawal of Liti ation.

(a) The IPP shall have received from the Company on the Consummation Date a general release, in form and substance reasonably satisfactory to the IPP, of all claims, liabilities or obligations of or against the IPP which the Company had, has or may have with respect to facts, circumstances or occurrences existing on or arising at any time through and including the Effective Time arising out of or in connection with such IPP's Existing PPA, except claims, liabilities or obligations (i) arising out of or in connection with this Agreement, (ii) arising out of or in connection with any litigation, regulatory proceedings or pleadings which are not to be dismissed and withdrawn (or effectively withdrawn) by the Company pursuant to Section 8.8(b) and (iii) 42

unless dismissed or withdrawn pursuant to Section 8.8(b), arising out of or in connection with any payment due to the Company, whether or not disputed, for any services provided by the Company pursuant to the Existing PPA or any related gas transportation, peak shaving, interconnection or other related agreement between the Company and the IPP, provided that ifsuch payment relates to any period more than sixty (60) days prior to the date of this Agreement the Company's entitlement to such payment shall have been set forth in a writing given to the IPP on or before June 1S, 1997. The Parties acknowledge and agree that ail claims, liabilities and obligations relating to tracking, adjustment or advance payment account provisions under any Existing PPA shall be extinguished as of the Effective Time (and such extinguishment shall be reflected in the general release).

(b) In addition, the IPP shall have received &om the Company (i) an original counterpart of a stipulation or other appropriate document(s), in form and substance reasonably satisfactory to the IPP, suf5cient to dismiss or withdraw as to the IPP (except as otherwise provided in the footnotes thereto) the litigation, proceedings and pleadings, as the case may be, listed on Schedule 8.8 with respect to such IPP and (ii) with respect to the proceedings listed on Schedule 6.10B, an original counterpart of a stipulation or other appropriate document(s), in form and substance reasonably

~

satisfactory to the IPP, suf5cient to effectively withdraw such proceedings as to the IPP, in each case by the Company, with prejudice and with no costs awarded, as of the Consummation Date. Following the Consummation Date the Company shall take promptly, or cause to be taken promptly, all actions and to do promptly, or cause to be done promptly, all things necessary, proper or advisable as may be requested by the IPP to file all such documents and fully effectuate all such dismissals and withdrawals.

8.9. Intentionally Left Blank.

8.10. Third P Contracts IPP A rovals. The IPP (a) (i) shall have obtained a satisfactory amendment, restructuring, assignment or termination of, or consents or approvals with respect to, or releases from, its existing third party agreements, including but not limited to fuel supply, transportation, 6nancing, lease, operations and steam supply agreements, relating to or arising out of such IPP's Existing PPA or the termination, amendment or amendment and restatement, as the case may be, of such IPP's Existing PPA and (ii) with respect to any IPP which is not entering into a Termination Agreement, shall have entered into new third party agreements with fuel suppliers, transporters, lenders, lessors, power and fuel marketers and other third parties, in the case of both (i) and (ii) in a manner that (x) will enable such IPP to restructure its Project on an economic basis reasonably satisfactory to such IPP and (y) will accommodate the terms of this Agreement without reducing the economic value of the transactions contemplated by this Agreement to such IPP and otherwise in a manner reasonably satisfactory to such IPP (each, an "IPPffhird Party Consent" ) and (b) shall have obtained all other necessary or appropriate approvals, including corporate and partnership 43

approvals of the IPP and its partners of the transactions contemplated by this Agreement (each, an "IPP Approval" ).

8.ll. ~G88'i I Th* IPP I dl h

. hlf I 8 dd dl 8 hill l*

and obligations of all Gas IPPs to all Gas Mitigation Third Parties have been released, satisfied or amended or will be released, satisfied or amended as of the Consummation Date, in a manner that (x) will enable such IPP to restructure its Project on an economic basis reasonably satisfactory to such IPP and (y) will accommodate the terms of this Agreement without reducing its economic value to such IPP and otherwise in a manner reasonably satisfactory to such IPP.

8.12. Re istrationofCom an Shares. VithrespecttotheCompanyShares,(a) the Shelf Registration Statement (in accordance with the terms set forth in Section 3.6) shall have been declared effective by the SEC, shall be effective as of the Consummation Date, no stop order or similar proceeding relating to the Shelf Registration Statement shall be pending or threatened, and there shall be no happening or event which requires the Company to amend or supplement the Shelf Registration Statement (unless such amendment or supplement has been filed) or which otherwise prevents the sale by the IPP of any Company Shares pursuant to the Shelf Registration Statement as of and after the Consummation Date (and, in furtherance thereof, the Company shall file not later than the next Business Day following the Consuinmation Date its Current Report on Form 8-K disclosing the consummation of the Restructuring), (b) the Company shall have taken such action as shall be necessary to qualify, or to obtain an exemption for, the sale to the IPPs pursmmt to this Agreement of the Company Shares under such of the securities laws of jurisdictions in the United States as shall be applicable to the sale of the Company Shares pursuant to the Shelf Registration Statement and (c) the Coinpany Shares shall have been duly listed on the NYSE.

8.33. ~PIP . Th* f** d* p fWP&G ., &*IPP Counsel and the IPPs'ocal Regulatory Counsel incurred through and including

'p IG the Consummation Date that the Company has agreed to pay pursuant to the WP&Co. Fee Letter, the IPPs'pecial Counsel Fee Letter and the IPPs'ocal Regulatory Counsel Fee Letter, respectively, and the fees and expenses of the Depositary incurred through and including the Consummation Date, shall have been paid in fu11 at or prior to the Consummation Date.

9. CONDITIONS TO THE COMPANY'S OBLIGATIONS ON THE CONSUMMATIONDATE The obligations of the Company to consummate the Restructuring and make the deliveries specified in Section 10 to be made by it on the Consummation Date with respect to each IPP (severally but not jointly) are subject to the satisfaction on or before 44

the Consummation Date (or, if otherwise set forth in Section 10.1(b), the Conditions Determination Date) of each of the following conditions, the waiver of which shall not be effective against the Company unless the Company gives its consent in writing thereto or such waiver is deemed to be given pursuant to Section 10.1(b):

9.1. Re resentations and Warranties. The representations and warranties of such IPP contained in Section 5 shall be true in all material respects on and as of the Consummation Date with the same effect as though such representations and wananties had been made on and as of the date of the Consummation Date (or on the date when made in the case of any representation or warnuity which expressly relates to an earlier date).

92. Performance. Such IPP shall have performed and complied in all material respects with all agreements, obligations, covenants and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Consummation Date.

9.3. Re resentation Letter Secre 's Certificate 0 inion of IPP's Counsel.

The Company shall have received on the Consummation Date (a) a representation letter executed by such IPP in substantially the form annexed as Exhibit 9.3A, (b) a certificate of the Secretary of such IPP (or the managing general partner of such IPP) certifying (i) the resolutions of the Board of Directors and shareholders of such IPP (or such managing general partner) or partners of such IPP authorizing the transactions contemplated by this Agreement and (ii) the incumbency of the officers of such IPP executing this Agreement or any agreements to be executed by such IPP pursuant hereto, in form and substance reasonably satisfactory to the Company, and (c) an opinion or opinions from counsel for such IPP (which may be such IPP's in-house counsel), dated the Consummation Date, in substantially the form annexed as Exhibit 9.3C.

9.4. Re ulato A rovals. The Company shall have received on or before the Consummation Date each NMPC Regulatory Approval and, ifthe Company will benefit therefrom or be affected thereby, any IPP Approval set forth in any IPP Status Notice, in a form reasonably acceptable to the Company, and each such Regulatory Approval shall if be in full force and effect and either (i) shall be final and non-appealable or (ii) not final and non-appealable, shall not be subject to the possibility of appeal, review or

'reconsideration which, in the opinion of the Company, is reasonably likely to be successful and, ifsuccessful, would have a Material Adverse Effect on the Company.

9.5. No Inunction Action or Proceedin . (a) No court or Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, statute, ordinance, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) that is in effect on the Consummation Date and which restrains, enjoins or otherwise prohibits consummation of

the transactions contemplated hereby and (b) no claim, action, suit, investigation or other proceeding brought by a Governmental Authority or a third party concerning the transactions contemplated by this Agreement shall be pending which in the opinion of the if Company is reasonably likely to be successful and which, adversely determined, would grant relief from or against the Company which is reasonably likely to have a Material Adverse Effect on the Company.

9.6. Contracts. The Company and such IPP shall have executed and delivered to the Escrow Agent the respective Termination Agreement, Amended PPA, Restated Contract(s), NorCon Agreement or Oxbow Agreement, as applicable, in accordance with Section 2.8, on or before the Conditions Determination Date.

9.7. NMPCfMrd P Consents and NMPC/Third P Releases. The Company shall have received (a) the NMPCfIMrd Party Consents, in form and substance reasonably satisfactory to the Company and (b) the NMPC/Third Party Releases with respect to such IPP, in form and substance reasonably satisfactory to the Company, provided, however, that an NMPCfAurd Party Release shall be deemed to have been received by the Company in the event such IPP shall elect, in its sole discretion, to provide the Company with an indemnity, in form and substance reasonably satisfactory to the Company, against any claims of the third party under the NMPCffhird P'arty Agreement resulting Gom the termination, amendment or amendment and restatement, as the case may be, of such IPP's Existing PPA.

9.8. General Release WithdrawaI of Liti ation.

(a) The Company shall have received &om the IPP on the Consummation Date a general release, in form and substance reasonably satisfactory to the Company, of all claims, liabilities or obligations of or against the Company which the IPP had, has or may have with respect to facts, circumstances or occurrences existing on or arising at any time through and including the Effective Time, arising out of or in connection with such IPP's Existing PPA, except claims, liabilities or obligations (i) arising out of or in connection with this Agreement, (ii) arising out of or in connection with any litigation or regulatory proceedings which are not to be dismissed and withdrawn by the IPP pursuant to Section 9.8(b) and (iii) unless dismissed or withdrawn pursuant to Section 9.8(b), arising out of or in connection with any payment due to the IPP, whether or not disputed, for any power or services purchased by the Company pursuant to the Existing PPA or any related gas transportation, peak shaving, interconnection or other related agreement between the Company and the IPP, provided that ifsuch payment relates to any period more than sixty (60) days prior to the date of this Agreement, the IPP's entitlement to such payment shall have been set forth in a writing given to the Company on or before June 15, 1997. The Parties acknowledge and agree that all claims, liabilities and obligations relating to tracking, adjustment or advance

payment account provisions under any Existing PPA shall be extinguished as of the Effective Time (and such extinguishment shall be reflected in the general release).

(b) In addition, the Company shall have received from the IPP an original counterpart of a stipulation or other appropriate document(s), in form and substance reasonably satisfactory to the Company, sufficient to dismiss or withdraw as to the Company by the IPP (except as otherwise provided in the footnotes thereto) the

.litigation, proceedings and pleadings, ifany, as the case may be, listed on Schedule 8.8 with respect to such IPP, with prejudice and with no costs awarded, as of the Consummation Date. Following the Consummation Date the IPP shall take promptly, or cause to be taken promptly, all actions and to do promptly, or cause to be done promptly, aH things necessary, proper or advisable as may be requested by the Company to file all such documents and fullyeffectuate all such dismissals and withdrawals.

9.9, Board and Shareholder A rovals. This Agreement and the transactions contemplated hereby shall have been approved by (a) the Company's Board of Directors and, (b) to the extent required, by the Company's shareholders.

9.10. NMPC Financin . The Company shall have consummated (a) the Public Offering of the Debt Securities and (b) the other financing transactions set forth on Schedule 9.10 hereto, on terms reasonably satisfactory to the Company.

10. SATISFACTION OF CONMTIONS; CONSUMMATION 10.1. Notice of Satisfaction or Waiver of Conditions.

(a) The Company shall notify the IPPs'pecial Counsel, and each IPP shall notify the Company and the IPPs'pecial Counsel, (i) not less frequently than monthly, of the satisfaction of any of the conditions'to the obhgations of such Party pursuant to Sections 8 or 9 of this Agreement and/or (ii) promptly, in the event such Party shall receive notice or information &om any Governmental Authority or third party indicating that the conditions to the obligations of such Party pursuant to Sections 8 or 9 of this Agreement cannot be, or are not reasonably likely to be, satisfied on or before the Expiration Date.

(b) On or within three (3) Business Days before the Conditions Determination Date, the Company shall give a notice to each IPP (the "NMPC Status Notice" ) setting forth:

(i) a description of each NMPC Regulatory Approval which the Company has obtained or is seeking to obtain pursuant to the provisions of Section 6.6(a) or (c), including the name of the Governmental Authority, the 47

specific findings, approvals and authorizations obtained or sought to be obtained, all notices given or received and all actions taken in connection therewith, and the status thereof, together with a representation and warranty of the Company that to the best knowledge of the Company the NMPC Regulatory Approvals described therein are the only Regulatory Approvals required as of such date with respect to the consummation of the Company's obligations hereunder; (ii) whether the conditions to the Company's obligations set forth in Sections 9.7 (NMPCffhird Party Consents and NMPC/Third Party Releases) have been satisfied. In the event any condition set forth in Section 9.7 has not been satisfied by the Conditions Determination Date, then the Company, pursuant to the NMPC Status Notice, either (x) shall be deemed to have waived any such condition (except that any such waiver shall not be deemed a waiver of any condition in Section 9.9(b) or Section 9.10) or (y) shall elect to terminate this Agreement pursuant to Section 12.1(e);

(iii) the status of (x) the Shelf Registration Statement with respect to the Company Shares, (y) the Debt Registration Statement with respect to the Public OQering of the Debt Securities and the other financing transactions set forth on Schedule 9.10 and (z) the Proxy Statement and the shareholder approval to be obtained thereby; and (iv) whether, to the best of the Company's knowledge, there is any reason why any other condition to either the Company's or any IPP's obligations pursuant to Sections 8 or 9 will not be satisfied on or before the Expiration Date (excluding any condition the satisfaction of which is solely within the control of any IPP).

(c) On or within three (3) Business Days before the Conditions Determination Date, each IPP shall give a notice to the Company and the IPPs'pecial Counsel (an "IPP Status Notice" ) setting forth:

(i) a description of each IPP Regulatory Approval which the IPP has obtained or is seeking to obtain pursuant to the provisions of Section 6.6(b), including the name of the Governmental Authority, the specific findings, approvals and authorizations obtained or sought to be obtained, all notices given or received and all actions taken in connection therewith, and the status thereof, together with a representation and warranty by the IPP that to the best knowledge of such IPP the IPP Regulatory Approvals described therein and, at such IPP's option, in the NMPC Status Notice are the only Regulatory Approvals required as of such date with respect to the consummation of the IPP's obligations hereunder; 48

(ii) whether the conditions to the IPP's obligations set forth in Sections 8.l0 (IPP/Third Party Consents; IPP Approvals) and 8.11 (Gas Mitigation) have been satisfied. In the event any condition set forth in Section 8.10 or 8.11 has not been satisfied by the Conditions Determination Date, then the IPP, pursuant to the IPP Status Notice, either (x) shall be deemed to have waived any such condition or (y) shall elect to terminate this Agreement pursuant to Section 12.2(c) as of the Conditions Determination Date; (iii) whether, to the best of the IPP's knowledge, there is any reason why any other condition to either the Company's or such IPP's obligations pursuant to Sections 8 or 9 will not be satisfied on or before the Expiration Date (excluding any condition the satisfaction of which is solely within the control of the Company or any other IPP).

(d) Within ten (10) days aAer the Conditions Determination Date, the Company either (x) shall be deemed to have waived the condition set forth in Section 9.9(a) or (y) by notice given on or before such date shall elect to terminate this Agreement pursuant to Section 12.1(e), effective as of the date of such notice.

10.2. Consummation Date. The consummation of the Restructuring and other transactions contemplated by this Agreement (the "Consummation" ) shall takee p ace a t plac th e offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York. Within fifteen (15) days aAer the Conditions Determination Date, the Parties shall mutually agree on a schedule to achieve the Consummation by a date certain (the "Scheduled Date" ) and thereafter the Parties shall use their Reasonable Best Efforts to achieve the Consummation by the Scheduled Date. The Consummation shall occur on the later to occur of (i) the Scheduled Date and (ii) the third (3") Business Day following the satisfaction or waiver of all of the Parties'onditions set forth in Sections 8 and 9, or shall take place at such other place or on such other date as the Parties may mutuall Y agree. In no event shall the Consummation occur sooner than December 31, 1997 or later than the Expiration Date. The date on which the Restructuring and other transactions contemplated by this Agreement actually are consummated is referred to herein as the "Consummation Date."

10.3. Deliveries b the Com an .

(a) On the Consummation Date, the Company shall deliver to the Depositary, on behalf of the IPPs, (i) the Cash Payment, in the manner described in Section 3.3; (ii) the Company Shares, in the manner described in Sections 3.3 and 3.6; and (iii) the Short-Term Notes or Additional Cash Payment, as applicable, in the manner described in Section 3.3.

(b) On the Consummation Date, the Company shall deliver to the Escrow Agent, on behalf of the IPPs, all other agreements, instruments, certificates, resolutions, opinions and other documents (including but not limited to the general releases and the dismissals and withdrawals of litigations, regulatory proceedings and pleadings contemplated by Section 8.8(b)) required to be delivered by the Company on or before the Consummation Date pursuant to this Agreement, either in the respective form annexed as an Exhibit to this Agreement, if applicable, or in form and substance reasonably satisfactory to each IPP and the IPPs'pecial Counsel.

10.4. Deliveries b the IPPs. On the Consummation Date, each IPP {as applicable) shall deliver to the Escrow Agent, on behalf of the Company, all other agreements, instruments, certificates, resolutions, opinions and other documents (including but not limited to the general releases and the dismissals and withdrawals of litigations and regulatory proceedings contemplated by Section 9.8(b)) required to be delivered by such IPP on or before the Consummation Date pursuant to this Agreement, either in the respective form annexed as an Exhibit to this Agreement, ifapplicable, or in fomi and substance reasonably satisfactory to the Company and its counsel.

10,5. Deliveries b the De si and the Escrow A ent. Qn the Consummation Date, the Parties shall execute and deliver to the Depositary and the Escrow Agent such authorizations and instructions as may be required to cause the Depositary and the Escrow Agent to deliver (i) counterparts of the Contracts, the.

Shareholder's Agreement, the Registration Rights Agrccmcnt and all.other agreements, instruments, certificates, resolutions, opinions and other documents delivered by the Parties to the Escrow Agent pursuant to this Agreeinent (excluding the Allocation) to the.

Company and the respective IPPs, as applicable, and (ii) the Cash Payment, Company Shares, Short-Term Notes and/or Additional Cash Payment, as applicable, delivered by the Company to the Depositary pursuant to this Agreement, to the respective IPPs or their designecs.

11. REGULATORY AND OTHER MATTERS 11.1. Maintenance of F Status.

(a) Each IPP (whether or not it is to enter into the Amended PPA or Restated Contract) shall have the right, but not the obligation, to obtain and/or maintain its status as a state and/or federal qualifying facility ("QF") under New York law (including compliance with NYPSL $ 2(2-a)) and/or PURPA, respectively, but the Company's obligations under each Contract shall continue as a matter of contract right regardless of whether the IPP maintains its state or federal QF status. Following the Consummation Date, the Company shall not implement or continue to implement any QF Monitoring Program with respect to any IPP. Notwithstanding the foregoing, failure to 50

comply with the requirements applicable to state and/or federal QF status under New York law (including compliance with NYPSL $ 2(2-a)) shall have no adverse effect on the lPF or the Company's continuing performance under any Contract.

(b) In the event an IPP (whether or not it is to enter into the Amended PPA or Restated Contract) wishes to qualify or perform as an Exempt Wholesale Generator ("EWG") under Section 32 of PUHCA and the FERC's regulations promulgated thereunder, as the same may be amended, modified or restated from time to time, whether before or after the Consuinmation Date, the Company shall cooperate with (including, without limitation, by providing consents and affidavits), and shall not take any action to oppose, impede or subvert, such IPP's efforts to obtain appropriate regulatory exemptions and approvals, including market-based rate approval.

(c) Each IPP shall have the right to have the Company wheel the output of its Project to third parties pursuant to applicable law, or the Company's, or other companies', duly filed transmission and distribution tariffs or schedules.

(d) Except to the extent that the contract price under the Amended PPA or Restated Contract is or may be based thereon, from and after the Consummation Date (i) each IPP shall waive any 'statutory right it may have under Section 66m of NYPSL pursuant to which such IPP may demand a 6g per KWh minimum power purchase rate from the Company and (ii) each IPP shall waive, for itself and for the successors and assigns of its respective Project, with respect to its Project, any statutory right it may have under PURPA or NYPSL to require the Company to enter into a power purchase contract or otherwise take the output of such IPP's Project, provided, however, that prior to the end of the Proxy-Market Price Period the Company agrees, at the IPP's request, to act as agent for each IPP (or, if necessary to effectuate such sales to the New York Power Pool, by purchase and resale of each IPP's capacity and energy, at no cost to the Company), for the sale on up to a monthly basis, of each such Project's capacity and energy to the New York Power Pool or any third party, in each case on a nondiscriminatory basis with respect to the Company's or any third party's capacity and energy, at no cost to such IPP. The Company agrees to use its Reasonable Best Efforts to effect such sales on the most favorable terms, including price, to the IPP, giving consideration to the quantity, term and market conditions prevailing at the time of sale.

For purposes of this Section 11.1(d), the Proxy-Market Price Period shall have the meaning set forth in Exhibit A, except that the Proxy-Market Price Period shall commence as of the Effective Time, the last sentence of the definition contained in Exhibit A shall not be applicable, and this provision shall apply whether or not such IPP is to enter into the Amended PPA or a Restated Contract. Further, nothing herein shall be construed to constitute a waiver by any IPP of any other rights it may have under PURPA, NYPSL or applicable law, including rights with respect to back-up services, interconnection, reactive power or similar rights, whether or not a contract is required or desirable.

51

11.2. Com titive Transition Char e'etail B ass.

(a) Each IPP covenants not to take any action to oppose, impede or subvert the Company's entitlement to recover Competitive Transition Charges from any party other than an IPP and its Affiliates (except in their capacities as retail customers),

including the level, design or duration of such charges, and the imposition of such charges on backup power services (including services to self-generators); provided, however, that each IPP reserves the right to challenge any proposal that discriminates against one source of generation relative to another or places any IPP or its Affiliates at a competitive disadvantage as compared to other generators or suppliers. Each IPP agrees not to support in any regulatory or judicial proceeding any effort by a customer of the Company to avoid payment of a Competitive Transition Charge. The provisions of this Section shall not apply to any IPP following (x) the termination of this Agreement in its entirety or (y) the termination of this Agreement with respect to such IPP.

(b) Each IPP agrees that, between the date of this Agreement and the earlier to occur of (x) the Effective Time, (y) the termination of this Agreement in its entirety or (z) the teimination of this Agreement with respect to such IPP, it will not (other than to the Company or any Affiliate of the Company) provide electric power directly or indiiectly to an existing retail customer of the Company located in the Company's retail service territory or to a person or entity which directly or indirectly provides 'electric power to any such retail customer, unless pursuant to an agreement approved by the PSC. The provisions of this Section 11.2(b) shall not apply to (i) sales by any IPP permitted as of the date of this Agreement, (ii) the sale of electricity by any IPP to a utility, including the Company, (iii) the provision by any IPP of its internal auxiliary load or (iv) any sales by any power marketing or retail energy services AQiliate of any IPP.

11.3. Consistent Tax Re rtin . The Company and each applicable IPP agree that the terms and conditions to be contained in each Restated Contract and Fixed Price Swap Contract are and shall be the result of arms-length negotiations. The Company will not treat the Restated Contracts or Fixed Price Swap Contracts in a manner that is inconsistent with the character of such Restated Contracts or Fixed Price Swap Contracts, as the case may be, for income tax and reporting purposes as bona fide hedging or delivery agreements and will not claim a deduction or loss for income tax purposes in respect of such Restated Contracts or Fixed Price Swap Contracts prior to a taxable year in which (i) payments pursuant to such Restated Contracts or Fixed Price Swap Contracts are paid or accrue pursuant to the terms thereof or (ii) such Restated Contracts or Fixed Price Swap Contracts lapse, terminate or are canceled, unless required to do so pursuant to a "determination" within the meaning of Section 1313(a) of the Code.

52

12. TERMINATIONOF AGggEMKNT 12.1. Events of Termination of the A reement in its Entire . This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, at any time prior to the Consummation Date:

(a) by the mutual written consent of all the Parties, or pursuant to Section 2.7(b);

(b} by the IPPs, acting unanimously, ifthe Company breaches in any material respect any of its covenants or agreements contained in this Agreement, or any of its representations or waminties contained in this Agreement is inaccurate in any material respect when made, and such breach or misrepresentation is not cured to the reasonable satisfaction of the IPPs, acting unanimously, within ten (10) days aher the date notice of such breach or misrepresentation is given to the Company (or, if such breach or misrepresentation is not reasonably capable of cure within such ten (10) day period but is capable of cure, such longer period as may be reasonably necessary to effect such cure, not to exceed thirty (30} days in the aggregate, provided that during the period of such extension the Company uses Reasonable Best Efforts to effect such cure);

(c) by the Company, if all of the IPPs breach in any material respect any of their respective covenants or agreements contained in this Agreement, or any of eir respective representations or warranties contained in this Agreement is inaccurate in any material respect when made, and such breach or misrepresentation is not cured to the reasonable satisfaction of the Company for more than ten (10) days after the date notice of such breach or misrepresentation is given to all IPPs (or, if such breach or misrepresentation is not reasonably capable of cure within such ten (10) day period but is capable of cure, such longer period as may be reasonably necessary to effect such cure, not to exceed thirty (30) days in the aggregate, provided that during the period of such extension, the IPPs use Reasonable Best Efforts to effect such cure);

(d) by the Company, ifthe Company determines, in its sole discretion, that, as a result of the termination of this Agreement with respect to one or more but not necessarily all of the IPPs, the benefits anticipated to be received by the Company as a result of the transactions contemplated by this Agreement have been materially and adversely affected (provided that any notice of termination solely as a result of the termination of this Agreement with respect to NorCon and/or Oxbow pursuant to Sections 2.5 or 2.6, respectively, shall be made not later than ten (10) Business Days after receipt of the Depositary's certification pursuant to Section 12.4(b) following the termination of this Agreement with respect to NorCon and/or Oxbow, as thee case ma may be and provided, further, that the Company may not terminate this Agreement pursuant to this Section 12.1(d) following delivery by the Company of a sub-clause (y) notice pursuant to Section 2.7(b), unless any of the IPPs which are not identified in such suh-53

clause (y) notice shall thereafter have been terminated from this Agreement prior to the Consummation Date; or (e) by the Company, if the Company determines, in the Company's sole discretion, that any of the conditions (which have not previously been waived) to the Company's obligations set forth in Section 9 are not reasonably likely to be satisfied (and the Company is not willing to waive same) on or before the Expiration Date, provided that the Company may not terminate this Agreement pursuant to this Section 12.1(e) prior to the Conditions Determination Date, except that the Company may terminate this Agreement prior to the Conditions Determination Date if the PSC Approval has been denied or ifno PSC action has been taken as of a date at which it is no longer possible for the Consummation to occur by the Expiration Date.

12,2. Events of Termination with res ct to One or M re of the IPPs. This Agreement may be terminated by or with respect to any one or more but not necessarily all of the IPPs, and the transactions contemplated hereby may be abandoned by or with respect to any one or more but not necessarily all of the IPPs, at any time prior to the Consummation Date:

(a) by the mutual written consent of the Company and any one or more IPPs or pursuant to Sections 2.5, 2.6 or 2.7(b) hereof; provided, however, that in the case of any termination pursuant to this Section 12.2(a), this Agreement shall be terminated with respect to such terminating or terminated IPP(s) only; (b) by any one or more IPPs, acting singly, ifthe Company breaches in any material respect any of its covenants or agreements contained in this Agreement or any of its representations or warranties contained in this Agreement is inaccurate in any material respect when made, and such breach or misrepresentation is not cured to the reasonable satisfaction of such IPP(s) within ten (10) days aAer the date notice of such breach or misrepresentation is given to the Company (or, if such breach or misrepresentation is not reasonably capable of cure within such ten (10) day period but is capable of cure, such longer period as may be reasonably necessary to effect such cure, not to exceed thirty (30) days in the aggregate, provided that during the period of such extension the Company uses Reasonable Best Efforts to effect such cure); provided, however, that in the case of any termination pursuant to this Section 12.2(b), this Agreement shall terminate with respect to such terminating IPP(s) only; (c) by any one or more IPPs, acting singly, ifany such IPP determines, in such IPP's sole discretion, (i) that any of the conditions (which have not previously been waived) to such IPP's obligations set forth in Sections 8 are not reasonably likely to be satisfied (and such IPP is not willing to waive same) on or before the Expiration Date, (ii) that the NMPC Restructuring, as implemented or proposed to be implemented by the Company at any time, has had or is reasonably likely to have a material adverse effect on 5a

such IPP with respect to the transactions contemplated hereby, (iii) that appropriate exemptions or waivers from the regulation or jurisdiction of any Governmental Authority resulting from this Agreement or any of the transactions contemplated hereby with respect to such IPP, its partners or Affiliates, individually or collectively, from which it or they were previously exempt, including but not limited to SEC or FERC regulation under PUHCA, PSC regulation under the NYPSL, and FERC regulation under the Federal Power Act, are not reasonably likely to be obtained on or before the Expiration Date, and this Agreement is not conformed prior to the Consummation Date in a manner mutually satisfactory to the Parties as may be necessary in order for the IPP, its partners or Affiliates, to avoid becoming subject to such regulation or jurisdiction, (iv) that such IPP is, or is reasonably likely to be, subject to any Curtailment with respect to its Existing PPA (whether authorized to do so before or after the date of this Agreement), or (v) that such IPP is unable to effect the Restructuring in a manner contemplated by Section 6.2; or upon any merger or consolidation of the Company with or into any other entity (except as permitted by Schedule 6.11); provided, however, that in the case of any termination pursuant to this Section 12.2(c), this Agreement shall terminate with respect to such teiminating IPP(s) only; or (d) if by the Company, any IPP breaches in any material respect any of its covenants or agreements contained in this Agreement or any of its representations or wammties contained in this Agreement is inaccurate in any material respect when made, and such breach or misrepresentation is not cured to the reasonable satisfaction of the Company for more than tcn (10) days after notice of such breach or misrepresentation is if given to all IPPs (or, such breach or misrepresentation is riot reasonably capable of cure within such ten (10) day period but is capable of cure, such longer period as may be reasonably necessary to effect such cure, not to exceed thirty (30) days in the aggregate, provided that during the period of such extension the IPP uses Reasonable Best Efforts to effect such cure); provided, however, that in the case of any uncured breach by less than all of the IPPs, the Company may terminate this Agreement with respect to any such breaching IPP(s) only.

12.3. ~Ex iration.

(a) This Agreement shall be terminated, and the transactions

.contemplated hereby shall be abandoned, without further notice or consent, if for any

'eason (including but not limited to the non-satisfaction and non-waiver of any of the conditions set forth in Sections 8 and 9 hereof) the Consummation Date has not occurred on or prior to the Expiration Date unless, by mutual written consent of all the Parties, the Parties elect to extend the Expiration Date.

(b) Notwithstanding the provisions of Section 12.3(a), ifthe Company and less than all the IPPs desire to extend the Expiration Date (other than as provided in Section 2.7(b), which shall govern any extension pursuant to that Section), this 55

Agreement shall not be terminated and shall instead be extended by the mutual written.

consent of such Parties; in such event, this Agreement shall be deemed to be terminated (with the eKect described in Section 12.4(b)) with respect to any IPP which does not desire to extend the Expiration Date.

12.4. EAect of Termination.

(a) In the event that this Agreement shall terminate in its entirety pursuant to Section 12.1, 12.2 or 12.3(a), then (i) this Agrecmcnt shall forthwith terminate and have no further effect, (ii) any Contracts theretofore executed by the if Company and any IPPs shall be void ab initio and, theretofore delivered to the Escrow Agent, shall be destroyed by the Escrow Agent and (iii) no Party shall have any further obligation or liability hereunder (except with respect to any provisions hereof which by their terms expressly survive any termination of this Agreemcnt).

(b) In the event that this Agreement shall terminate with respect to one or morc but less than all of the IPPs pursuant to Section 2.5, 2.6, 2.7(b), 12.2 or 12.3(b),

then (i) this Agreement shall terminate forthwith and have no further effect with respect to any such IPP (cxcept with respect to any provisions hereof which expressly survive any termination of this Agreement), (ii) the Allocable Consideration and the contract quantity under the Amended PPA'hall be reduced by the portion of the Allocable Consideration and the contract quantity under the Amended PPA allocated to such IPP pursuant to the original Allocation, (iii)the Allocable Consideration, the contract quantity of energy and the contract quantity of installed capacity under the Restated Contracts shall bc reduced by the portion of the Allocable Consideration, the contract quantity of energy and the contract quantity of installed capacity under the Restated Contracts allocated to such IPP pursuant to the original Allocation, (iv) the aggregate Contract Adjustment shall be reduced by the portion of the Contract Adjustment allocated to such IPP pursuant to the original Allocation, if any, (v) any Contracts theretofore executed by if such IPP shall be void ab initio and, theretofore delivered to the Escrow Agent, shall be destroyed by the Escrow Agent and (vi) the Company shall not have any further obligation or liability to such IPP hereunder and such IPP shall not have any further obligation or liability to the Company or any other IPP hereunder (except with respect to any provisions hereof which expressly survive any termination of this Agreement). In such event, the Depositary shall certify to the Company and the other IPPs the portion of the Allocable Consideration, the contract quantity, the installed capacity and the contract adjustment, as applicable, under the Amended PPA or the Restated Contracts which if pursuant to the original Allocation (without regard to any amendment thereof, any) had been allocated to the IPP so terminated. For purposes hereof, any reduction in the Allocable Consideration due to the termination of this Agreement with respect to an individual IPP shall mean a reduction in both the Cash Payment and Company Shares allocated to such individual IPP pursuant to the Allocation. Except as expressly set forth in this Section 12.4(b), the termination of this Agreement with respect to one or more but 56

less than all of the IPPs shall not increase or reduce the portion of the Allocable Consideration payable to the remaining IPPs, nor in any way affect the Short-Term Notes or Additional Cash Payment, as applicable, or the terms and conditions, including contract price, of the Contracts, nor in any way affect any other terms of this Agreement with respect to any other IPP, all of which terms sbaH continue in full force and effect.

(c) The termination of this Agreement in its entirety pursuant to Section 12.1, 12.2 or 12.3(a), or the termination of this Agreement pursuant to Section 2.5, 2.6, 2.7(b), 12.2 or 12.3(b) with respect to one or more but less than all of the IPPs, shall not relieve the Company of any liability to any! PP, or any IPP of any liability to the Company, for damages directly resulting from the breach in any material respect of any covenant or obligation of such Party, or any inaccuracy in any material respect of any representation or warnmty of such Party, in each case occurring prior to such termination; and any such termination shaH not be deemed to be a waiver of any available remedy for any such breach or misrepresentation. Notwithstanding any other provision contained in this Agreement to the contrary, provided such Party uses its Reasonable Best Efforts with respect to the pursuance of any course of action or result stated herein as requiring the use of Reasonable Best Efforts by such Party, such Party shall not have any liability to any other Party for any failure to achieve such course of action or result. In no event shall (i) any IPP have any liability to any other IPP hereunder or (ii) any Party have any liability for consequential, special or other indirect damages resulting from any breach or misrepresentation. The provisions of this Section 12.4(c) shall survive any termination of this Agreement (either in its entirety or with respect to less than all of the IPPs).

12.5. EfFect on Existin PPAs. In the event of termination of this Agreement as to any IPP for any reason on or prior to the Consummation Date, notwithstanding any other provision of this Agreement, the Parties agree and stipulate that the Existing PPA of such IPP shall continue with the same force and effect as ifthis Agreement had not been executed by such IPP, and that nothing contained herein shall in any way reduce, mitigate or modify the amount or types of claims, whether asserted or unasserted on the date of this Agreement, that such IPP may have which arise out of or are related to its Existing PPA, and all rights and obligations of the Parties with respect to such Existing PPA shall in no manner be affected or compromised by the terms of this Agreement. Without limiting the foregoing, the Parties acknowledge and agree that none of (i) the execution and delivery of this Agreement or any agreement executed or to be executed pursuant

'ereto by the Parties, (ii) the submission of this Agreement or any agreement executed or to be executed pursuant hereto to any Governmental Authority for its review and/or approval or (iii) any of the Parties'iscussions, negotiations or actions occurring in anticipation of, or subsequent to, the execution of this Agreement or any agreement executed or to be executed pursuant hereto shall (excepting, with respect to any individual IPP, the actual consummation of the Restructuring and other transactions contemplated by this Agreement pertaining to such IPP's Existing PPA), constitute or be deemed or asserted to constitute an amendment or modification to, or a termination,

cancellation, rejection, invalidation, suspension or waiver of, any provision, term, condition, right, obligation or requirement contained in or applicable to any Existing PPA or any other contract, instrument or document relating thereto.

12.6. Bankru tc Termination. In the event that the Company, at any time on or before the Consumnation Date, makes a general assignment or any general arrangement or compromise for the benefit of creditors, files a petition under the Bankruptcy Code or otherwise commences, authorizes or acquiesces in the commencement of a proceeding under any bankruptcy or similar law for the protection of creditors, or has a petition commenced against it, then (i) this Agreeinent shall terminate forthwith, with the effect described in Section 12A(a), and (ii) the provisions of Section 12.5 shall apply with respect to the Existing PPAs The Parties agree and stipulate that this Agreement is a contract to (i) extend debt financing to or for the benefit of the Company, (ii) extend financial accommodations to or for the benefit of the Company and (iii)issue one or more securities of the Company. As a consequence, the Parties further agree and stipulate that the provisions of Sections 365(c)(2) and (e)(2)(B) of the Bankruptcy Code, among others, would be applicable and binding on the Parties in the event the Company becomes a debtor under the Bankruptcy Code.

13. NOTICES Unless otherwise provided, any notice, consent, approval, authorization, waiver or other communication required or permitted under'this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the Party to be notified, on the next Business Day aAer delivery to a nationally recognized overnight courier service, upon confirmation of receipt of a facsimile transmission or five days after deposit with the United States Post Office, by registered or certified mail, postage prepaid, and addressed to the Party to be notified at the address or facsimile number indicated below for such Party, or at such other address as such Party may designate upon written notice to the other Parties (except that notice of change of address shall be deemed given upon receipt). Notices may be given to the Company on behalf of any or all IPPs by the IPPs'pecial Counsel.

(a) In the case of the Company:

Niagara Mohawk Power Corporation 300 Erie Boulevard West Syracuse, NY 13202 Facsimile: (315) 428-3406 Attn: William F. Edwards 58

with a copy to:

Donaldson Lufkin & Jenrette Securities Corporation 272 Park Avenue New York, NY 10172 Facsimile: (212) 892-7272 Attn: Michael Ranger and with a copy to:

Sullivan & Cromwell 1701 Pennsylvania Avenue, N.W.

Washington, DC 20006 Facsimile: (202) 293-6330 Attn: Janet T. Geldzahler Swidler & Berlin 3000 K Street, N.W., Suite 300 Washington, DC 20007 Facsimile: (202) 424-7643 Attn: Steven J. Agresta (b) In the case of the IPPs, at the addresses set forth on Schedule A with a copy to:

Wasserstein Perella & Co Inc.

31 West 52~ Street New York, NY 10019 Facsimile: (212) 969-7971 Attn: Kenneth A. Buckfire and with a copy to:

Akin, Gump, Strauss, Hauer & Feld, L.L.P.

590 Madison Avenue New York, NY 10022 Facsimile: (212) 872-1002 Attn: Steven H. Scheinman 59

14. MISCELLANEOUS 14.1. Entire A reement. This Agreement, the Exhibits and Schedules annexed hereto, and the documents and agreements referred to herein or to be executed and delivered pursuant hereto, constitute the entire agreement among the Parties with respect to the subject matter hereof, supersede all prior agreements and understandings, written or oral, among the Parties with respect thereto, and no Party shall be liable or bound to any other Party in any manner by any promises, conditions, warranties, representations, or covenants except as specifically set forth herein or therein. Notwithstanding the foregoing, neither this Agreement, the Exhibits and Schedules hereto, nor the documents and agreements referred to herein or to be executed and delivered pursuant hereto shall be

'eemed to supersede, terminate, amend or modify any existing written agreement between the Company (or any Affiliate of the Company) and any IPP, unless such existing written agreement is expressly superseded, terminated, amended or modified pursuant to the terms of this Agreement. The provisions of this Section 14.1 notwithstanding, the terms of that certain Agreement to Protect Confidential Information and Discussions executed by, among others, the Company, on June 10, 1996 shall survive in accordance with their terms with respect to all information disclosed thereunder prior to the date of this Agreement.

14.2. Amendments and Waivers, Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only by an instrument in writing and signed by the Party against whom such amendment or waiver is sought to be enforced; provided that the provisions of Section 14.14(c) may be amended by the IPPs without the consent of the Company.

14.3. Successors and Assi ns. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties. Except as otherwise expressly provided herein, the rights and obligations of the Parties pursuant to this Agreement may not be assigned (other than by operation of law). Nothing in this Agreement, express or implied, is intended to confer upon any person or entity other than the Parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

144. G~iL rights and obligations of

. LG*AA* .I I df gg* dfdfgd I dg the parties hereunder, and all amendments and supplements hereof and all waivers and consents hereunder, shall be construed in accordance with and governed by the domestic substantive laws of the State of New York vrithout giving 60

effect to any choice of law or conflicts of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

14.5. S~everabiiit . ifany provisions of this Agreement as applied to any part or to any circumstance or to any Party shall be adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other provision of this Agreement, the application of such provision in any other circumstances or to any other Party or the validity or enforceability of this Agreement, and the Parties affected thereby shall use Reasonable Best Efforts to negotiate in good faith to make such equitable adjustments to this Agreement as may be appropriate, so as to effect the original intent of such Parties as closely as possible in a mutually acceptable manner.

14.6. ~Ca tions. The table of contents, headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Unless otherwise specified, all references herein to "Sections" refer to Sections in this Agreement.

14.7. Co~teretarts. This Agreement may be executed in nvo or more counterparts, each- of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

14.8. Fees. Except for (i) DLJ, the fees and expenses of which the Company has agreed to pay, pursuant to a separate agreement, and (ii) WP&Co., the fees and expenses of which the Company has agreed to pay pursuant to a separate agreement dated May 15, 1996, as amended as of the date hereof (as amended, the "WP&Co. Fee Letter"), each Party represents that it neither is nor will be obligated for any investment banking fee, commission or similar fee in connection with the transactions contemplated by this Agreement. The Company agrees to indemnify and hold harmless each IPP from any liability for any commission or compensation in the nature of an investment banking fee, commission or, similar fee, and associated expenses (and the costs and expenses of defending against such liability or asserted liability) which is (x) payable to DLJ, (y) payable to WP&Co. pursuant to the WP&Co. Fee Letter or (z) for which the Company or any of the Company's officers, employees or representatives otherwise is 'responsible.

Each IPP (severally and not jointly) agrees to indemnify and hold harmless the Company 6om any liability for any commission or compensation in the nature of an investment

~

banking fee, commission or similar fee, and associated expenses (and the costs and expenses of defending against such liability of asserted liability) for,which such IPP or any of such IPP's respective officers, employees or representatives is responsible, other than any such fee or expense which is (x) payable to DLJ, (y) payable to WP&Co.

pursuant to the WP&Co. Fee Letter or (z) for which the Company or any of the Company's officers, employees or representatives otherwise is responsible. The provisions of this Section 14.8 shall survive the Consummation Date and any termination of this Agreement (either in its entirety or with respect to less than all of the IPPs). By its

execution hereof, each IPP hereby agrees to the terms of the amendment to the WP&Co.

Fee Letter dated as of the date hereof.

14.9. ~Ex nses. Irrespective of whether the Consummation Date shall occur or whether any Regulatory Approval is obtained, and except as otherwise expressly provided herein or therein, each Party shall pay all costs and expenses (including, but not limited to, legal and accounting fees and expenses) that it incurs with respect to the negotiation and execution of this Agre.'ment and any other agreements to be executed pursuant hereto, and the performance of any covenants to be performed by such Party and satisfaction of any conditions to be satisfied by such Party which are contained herein or therein. Notwithstanding the foregoing, (i) pursuant to an agreement dated January 31, 1997 (the "IPPs'pecial Counsel Fee Letter" ), the Company shall pay certain fees and expenses of the IPPs'pecial Counsel, (ii) pursuant to an agreement dated June 30, 1997 (the "IPPs'ocal Regulatory Counsel Fee Letter" ), the Company shall pay certain fees and expenses of the IPPs'ocal Regulatory Counsel and (iii) the Company shall pay all fees and expenses of the Depositary with respect to the transactions contemplated by this Agreement. The provisions of this Section 14.9 shall survive the Consuinmation Date and any termination of this Agreement (either in its entirety or with respect to less than all of the IPPs).

I4.LO. * 'I .F y

'iyi ~

the terms of this Agreement or any other agreement or document to be executed

• d'nterpret or delivered pursuant hereto, the prevailing Party shall be entitled to reasonable attorneys'ees, costs and disbursements in addition to any other relief to which such Party may'be entitled.

14.11. Remedies. In case any one or more of the covenants and/or agreements set forth in this Agreement shall have been breached by any Party hereto, the Party or Parties entitled to the benefit of such covenants or agreements may, except as may otherwise be expressly provided in this Agreement, proceed to protect and enforce their rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant. or agreement contained in this Agreement. Except as otherwise provided herein, the rights, powers and remedies of the Parties under this Agreement are cumulative and not exclusive of any other right, power or remedy which such Parties may

. have under any other agreement or law. No single or partial assertion or exercise of any right, power or remedy of a Party hereunder shall preclude any other or further assertion or exercise thereof.

14.12. Survival. Except as set forth in the representation letters to be delivered by the Parties pursuant to Sections 8.3(a) and 9.3(a}, and except as may be set forth in any of the Contracts, the representations and warranties of the Company contained in Section 4, and the representations and warranties of each IPP contained in Section 5, shall not 62

survive the Consummation Date, provided that any rights, obligations or habilities existing pursuant to law (including, without limitation, pursuant to the Securities Act) shall survive until the expiration of any applicable statute of limitations. %ithout limiting the survival of any other provision of this Agreement which may expressly or by its terms survive the Consummation Date, the provisions of Sections 3.8, 6.4, 6.7(c), 8.8, 9.8, 11 and 14 of this Agreement shall survive the Consummation Date until fully performed.

14.13. Several Obli ations. The obligations of the IPPs contained in this Agreement are several and not joint. No IPP shall be responsible for the performance or failure on the part of any other IPP to perform its obligations contained in this Agreement.

14,14. C~ad (a) Each Party agrees that it will not, at any time before or after the Consummation Date, divulge, disclose, use, publish or in any other manner reveal, directly or indirectly, by any means whatsoever, to any person, firm or corpomtion (i) any confidential or proprietary information of any other Party obtained by such Party &om the other Party, whether orally or in writing, at any time, including prior to the date of this Agreement, during the course of or as a result of the negotiation, execution or performance of this Agreement, any other agreement, document or instrument relating

'ereto or any of the transactions contemplated hereby or thereby and known by such Party to be confidential or proprietary information or (ii) any of the terms or conditions of this Agreement, any other agreement, document or instrument. relating hereto or any of the transactions contemplated hereby or thereby, or the progress, status or schedule of any discussions or negotiations relating hereto or thereto. In the event that any Party is requested or becomes legally compelled (by oral questions, interrogatories, request for information or documents, subpoena, criniinal or civil investigative demand or similar process) to disclose any such confidential or proprietary information, such Party will provide the other Party with prompt written notice so that the other Party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section, and such Party will cooperate with the other Party in any effort the other Party undertakes to obtain a protective order or other remedy. In the event that such protective order or other remedy is not obtained, or that the other Party waives compliance with the provisions of this Section, such Party will furnish only that portion of the information which is legally required and will use Reasonable Best Efforts to obtain reliable assurance that confidential treatment will be accorded the information, provided, however, ifsuch efforts involve any expense the other Party, if it has received prior notice thereof, will reimburse such Party for same. The provisions of this Section shall not preclude any Party from making a disclosure of any information ifin the opinion of such Party's counsel such disclosure is required by the securities laws of the United States or the rules of the NYSE or any other securities exchange or market on which the securities of such Party (or its Affiliates) are quoted or traded, provided that such Party 63

shall disclose only that portion of the information which is required to be disclosed and, to the extent practicable, the disclosing Party shall consult with the Party which provided such information in advance of making any such disclosure.

(b) Notwithstanding the provisions of Section 14.14(a), no Party hereto or representative thereof shall be precluded &om, and each Party agrees that it shall not assert any breach or violation of this Agreement with respect to or as a result of, the furnishing of any confidential or proprietary information to (i) any consultant, advisor or other third party retained by any Party to prepare reports, studies, analyses or memoranda or (ii) any fuel supplier, transporter, lender, steam host or other third party, in each case in connection with such Party's efforts to obtain any IPPfIMrd Party Consent, NMPC/fhird Party Consent or NMPClMrd Party Release. Each Party shall, prior to the disclosure of any information to any person pursuant to this Section 14.14(b), execute and cause such person to execute a Third Party Non-Disclosure Agreement substantially in the form annexed hereto as Exhibit 14.14.

(c) Without limiting in any manner the foregoing provisions of this Section 14.14, each IPP agrees with each other IPP that such IPP will only divulge, disclose, use or in any other manner reveal any confidential or proprietary information of any other IPP or. Affiliate of any other IPP regarding this Agreement, any other agreement, document or instrument relating hereto, or the transactions contemplated hereby or thereby, which was or is obtained at any time, including prior to the date of this Agreement, during the course of or as a result of. the negotiation, execution or performance of this Agreement, any other agreement, document or instrument relating hereto, or any of the transactions contemplated hereby or thereby (collectively, "Confidential 1PP Information"), to its Affiliates and to those of its and its Affiliates'espective directors, officers, shareholders and partners (at any tier), and their respective employees, financial advisors, attorneys, accountants and consultants ("IPP Participants" ), who need to know the Confidential IPP Information for purposes of participating in the transactions contemplated by this Agreement or any other agreement, document or instniment relating hereto, and who are informed by such IPP of the confidential nature of the Confidential IPP Information and who shall agree to be bound by and to act only in accordance with the terms and conditions of this Section 14.14(c).

Notwithstanding the foregoing, in the event that any IPP's IPP Participant is a Conflicted Person (as hereinaAer defined), such IPP shall (x) not permit such Conflicted Person to

.participate in the negotiation or performance of any agreement, document or instrument relating hereto or any of the transactions contemplated hereby or thereby, (y) segregate all files, work papers, reports, analyses, data or other documents based, in whole or in part, on any Confidential IPP Information and shall not allow any Conflicted Person to have access thereto, and (z) not communicate or exchange any Confidential IPP Information to or with any such Conflicted Person, except, with respect to each of (x), (y) and (z) above, to the extent necessary for such lPP to obtain its own IPPfIMrd Party Consents or IPP Approvals, if any, from such Conflicted Person. A "Conflicted Person" shall mean, 64

collectively, any IPP Participant that is a financial institution, steam host, fuel supplier or fuel transporter and which is or has a material interest in a person (or Affiliate of such person) Rom whom any IPP is required to obtain an IPP/Third Party Consent or IPP Approval &om such IPP Participant. Each IPP shall be responsible for any failure by such IPP's IPP Participant to comply with the terms of this Section 14. l4(c).

(d) 'Re provisions of this Section 14.14 shall be inoperative as to any information which (i) is or becomes generally available to the public other than as a result of any breach of this Section by any person subject hereto or its representatives, (ii) becomes available to a person subject hereto on a nonconfidential basis &om a source (other than any other person subject hereto or its representatives) which has represented to such person subject hereto that such source is entitled to disclose it or (iii) was known to such person subject hereto on a nonconfidential basis prior to its disclosure to such person subject hereto by any other person subject hereto or its representatives.

(e) Each Party acknowledges that unauthorized disclosure of information may result in liability for judicial judgments including, but not limited to, monetary damages, and that any Party harmed by such disclosure is entitled to pursue any legal and equitable remedies in the event of an unauthorized disclosure. Each Party hereby waives any objections to the immediate issuance by a court of competent jurisdiction of injunctive or other equitable relief barring the further disclosure or use of any information in the event of an unauthorized disclosure.

(f} The provisions of this Section. 14.14 shall survive the Consummation Date and any termination of this Agreement (either in its entirety or with respect to less than all of the IPPs):

l4.15.N P*'h . Th* P 8* U '*U'g*** h b

• d'n the context of litigation settlement negotiations. All evidentiary rules, whether federal or state, applicable to the rights and claims of the Parties, including but not limited to Rule 408 of the Federal Rules of Evidence, shall be applicable. The Parties agree and stipulate that this Agreement and any written or oral statement made in connection with this Agreement by a Party or its representatives were made in compromise negotiations, if and asserted to be evidence of (i) furnishing or offering or promising to furnish or (ii) accepting or oFering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, are not admissible to prove liability for or invalidity of such claims or their amounts.

fSIGNATURES APPEAR ON FOLLOWING SIGNATURE PAGESl 65

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES IN WITNESS WHEREOF, the parties hereto have entered into this Master Restructuring Agreement as of the date first above written.

Niagara Mohawk Power Corporation By:

Name: w 1

Title:

Chairman of the Board and Chief Executive Officer American Ref-Fuel Company ofNiagara, L.P.

By:

Name: Richard Oliver

Title:

Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By:

Name: David C. Brauer

Title:

Vice President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES IN WITNESS WHEREOF, the parties hereto have entered into this Master Restructuring Agreement as of the date first above written.

Niagara Mohawk Power Corporation By:

Name:

Title:

American Ref-Fuel Company of Niagara, L.P.

By:

Name: Richard Oliver

Title:

Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By:

Name: David C. Brauer

Title:

Vice President

MASTER RESTRUCTURING AGREEMENT SICNATURE PAGES IN WITNESS WHEREOF, the parties hereto have entered into this Master Restructuring Agreement as of the date first above written.

Niagara Mohawk Power Corporation By:

Name:

Title:

American Ref-Fuel Company of Niagara, L.P.

By:

Name: Richard Oliver

Title:

Vice President - Development Onondaga Cogeneration Limited Partnership By: Geddes Cogeneration Corporation, Its General Partner By:

Name: David C. Brauer

Title:

Vice President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Project Orange Associates, L.P.

By: NCP Syracuse, Inc.,

Its General Partner By: NCP Energy, Inc.,

Its Attorney-in-Fact Name: David C. Brauer

Title:

Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner By:

Name: Mark P. Barry

Title:

Vice President Cogen Energy. Technology L.P, By: Cogen Energy Technology, Inc.,

Its General Partner By:

Name: John E. Guinness

Title:

President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Project Orange Associates, L.P.

By: NCP Syracuse, Inc.,

Its General Partner By: NCP Energy, Inc.,

Its Attorney-in-Fact By:

Name: David C. Brauer

Title:

Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner (ORE

~a~a~~

Name: Mark P. Barry

Title:

Vice President Cogen Energy Technology L.P.

By: Cogen Energy Technology, Inc.,

Its General Partner By:

Name: John E. Guinness

Title:

President

b ZASTER RESTRUCYUggqo AGREEMEgy SIGNAYURZ PAGES Project Orange Associates, L.P.

By: NCP Syracuse, Inc.,

Its General Partner By: NCP Energy, Inc.,

Its Attorney-in-Fact By:

Name: David C. Brauer

Title:

Vice President Fulton Cogeneration Associates, a New York limited partnership By: ANR Venture Fulton Company, Its Managing General Partner By:

Name: Mark P. Barry

Title:

Vice President Cogen Energy Technology L.P.

By: Cogen Energy Technology, inc.,

Its General Partner zA6BF'ame:

John E. Gumness

Title:

President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Moose River Energy, Inc.,

Its Managing General Partner Name: Mr. Yojiro Okazaki

Title:

President Encogen Four Partners, L.P.

By: EDC Four Inc.,

Its General Partner By:

Name: Melvin E. Wentz

Title:

President NorCon Power Partners, L.P.

By: Northern Consolidated Power, Inc Its General Partner By:

Name: J. Douglas Divine

Title:

Vice President - Strategic Planning

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Moose River Energy, Inc.,

Its Managing General Partner By:

Name: Mr. Yojiro Okazaki

Title:

President Encogen Four Partners, L.P.

By: EDC Four Inc.,

Its General Partner

~Z.W Name: Melvin E. %entz

Title:

President NorCon Power Partners, L.P.

By: Northern Consolidated Power, Inc.,

Its General Partner By:

Name: J. Douglas Divine

Title:

Uice President - Strategic Planning

MASTER RESTRVCTVRING AGREEMENT SIGNATURE PAGES Lyonsdale Energy Limited Partnership, a Delaware Limited Partnership By: Moose River Energy, Inc.,

Its Managing General Partner By:

Name: Mr. Yojiro Okazaki

Title:

President Encogen Four Partners, L.P.

By: EDC Four Inc.,

Its General Partner By:

Name: Melvin E. Wentz

Title:

President NorCon Power Partners, L.P.

By: Northern Consolidated Power, Inc.,

Its General Partner By:

Name: .Dou as Divine

Title:

Vice President - Strategic Planning

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Indeck-Ilion Limited Partnership By: Indeck Energy Services of Ilion, Inc.,

Its General Partner By:

Name: Thomas M. Campone

Title:

President Indeck-Yerkes Limited Partnership By: Indeck Energy Services of Yerkes, Inc.,

Its General Partner By:

Name: Thomas M. Campone

Title:

President Indeck-Olean Limited Partnership By: Indeck Energy Services of Oleon, Inc.,

Its General Partner By:

Name: Thomas M. Campone

Title:

President

MASTER RESTRUCTUMNG AGREEMENT SIGNATURE PAGES Indeck-Oswego Limited Partnership By: lndeck Energy Services of Oswego, Inc Its General Partner By:

Name: Thomas M. Campone

Title:

President Black River Limited Partnership By: Jones Black River Services, Inc.,

Its Managing General Partner By:

Name: William A. Garnett

Title:

President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power IS Incorporated, A General Partner By:

Name:

Title:

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Indeck-Oswego Limited Partnership By: Indeck Energy Services of Oswego, Inc.,

Its General Partner By:

Name: Thomas M. Campone

Title:

President Black River Limited Partnership By: Jones Black River Services, Inc.,

Its Managing General Partner By.

Name: William A. Garnett

Title:

President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power 15 Incorporated, A General Partner By:

Name:

Title:

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Indeck-Oswego Limited Partnership By: Indeck Energy Services of Oswego, Inc.,

Its General Partner By:

Name: Thomas M. Campone

Title:

President Black River Limited Partnership By: Jones Black River Services, Inc.,

Its Managing General Partner" By:

Name: William A. Garnett

Title:

President LG&E Westmoreland Rensselaer, a California general partnership By: LG&E Power 15 Incorporated, A Gene er By:

Name: PxNCHg

Title:

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES By: Westmoreland-Rensselaer, L.P.,

A General Partner By: WEI-Rensselaer, Inc.

A General Partner By:

Name:

Title:

Oxbow Power of North Tonawanda, New York, Inc.

By:

Name: Bernard H. Cherry

Title:

President Salt City Energy Venture, L.P.

By: Salt City Energy, LLC, Its General Partner By:

Name: Edward Barno

Title:

Member

MASTER RESTRUCXUIGNG AGRIMMENT SIGNATURE PAGES By: Westmoreland-Rensselaer, L.P.,

A General Partner By: WEI-Rensselaer, Inc.

A General Panner By:

Name:

Title:

I t

i Oxbow Power ofNorth Topawanda, New York, Inc.

Name. Bernard H. Cherry

Title:

President Salt City Energy Venture, L;P.

By: Salt City Energy, LLC, Its General Partner By:

Name: Edward Baxno

Title:

Member

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES By: Westmoreland-Rensselaer, L.P.,

A General Partner By: WEI-Rensselaer, Inc.

A General Partner By:

Name:

Title:

Oxbow Power of North Tonawanda, New York, Inc.

By:

Name: Bernard H. Cherry

Title:

President Salt City Energy Venture, L.P.

By: Salt City Energy, LLC, Its General Partner s: 8 Name: Edward Barno

Title:

Member

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES AG-Energy, L.P.

By: AG-Energy, lnc.,

Its General Partner Name: teven D. Burton

Title:

Secretary>General Counsel Seneca Power Partners, L.P.

By: Seneca Power Corporation, Its General Partner By Name: Steven D. Burton

Title:

Secretary<General Counsel Sterling Power Partners, L.P.

By: Sterling Power, Ltd.,

Its General Partner By:

Name: Steven D. Burton

Title:

Secretary<General Counsel

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Power City Partners, L.P.

By: Power City Generating, Inc.,

Its General Partner 8

Name: Steven D. Burton

Title:

SecretaryhGeneral Counsel PEAN Partners, L.P.

By: P&N Energy Systems, Inc.,

Its General Partner B:

teven D. Burton

Title:

SecretaryhGeneral Counsel Selkirk Cogen Partners, L.P.

By: JMC Selkirk, Inc.,

Managing General Partner By:

Name: George J. Grunbeck

Title:

Vice President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES Power City Partners, L.P.

By: Power City Generating, Inc.,

Its General Partner By:

Name: Steven D. Burton

Title:

SecretaryhGeneral Counsel P&N Partners, L.P.

By: P&N Energy Systems, Inc.,

Its General Partner By:

Name: Steven D. Burton

Title:

SecretaryhGeneral Counsel Selkirk Cogen Partners, L.P.

By: JMC Selkirk, Inc.,

Managing General Partner By:

Name: George . G beck

Title:

Vice President

lgASTER RE<STRUCTURING AGREEMENT SIGNATURE PAGES East Syracuse Generating Company, L.P.

By:

Name: George J. G nb

Title:

Vice President Kamine/Besicorp Carthage L.P.

By: Kamine Carthage Cogen Co., Inc.,

Its General Partner By:

Name: Harold N. Kamine

Title:

President By: Beta Carthage, Inc.,

Its General Partner By:

Name: Michael J. Daley

Title:

Vice PresidenthSecretaryhTreasurer Kamine/Besicorp South Glens Falls L.P.

By: Kamine South Glens Falls Cogen Co., Inc.,

Its General Partner By:

Name: Harold N. Kamine

Title:

President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES East Syracuse Generating Company, L.P.

By:

Name: George J. Grunbeck

Title:

Vice President Kamine/Besicorp Carthage L.P.

By: Kamine Carthage Cogen Co., Inc.,

General P er By.

Name: Harold N. Kamine

Title:

President

, By: Beta Carthage, Inc.,

Its General Partner By: v',H Name: Michael J. Dal y

Title:

Vice PresidenthSecretaryhTreasurer Kamine/Besicorp South Glens Falls L.P.

By: Kamine South Glens Falls Cogen Co., Inc.,

Its General Partner By:

Name: Harold N. Kamine

Title:

President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES By: Beta South Glens Falls, Inc.,

Its General Partner By:

Name: Michael J. Dale

Title:

Vice President<SecretaryhTreasurer Kamine/Besicorp Natural Dam L.P.

By: Kamine Natural Dam Cogen Co., Inc.,

Its General Partner By:

N . arold N. Kamine

Title:

President By: Beta Natural Dam, Inc.,

Its General Partner By:

Name: Michael J. Daley

Title:

Vice President>Secretary)Treasurer Kamine/Besicorp Syracuse, L.P.

By: Kamine Syracuse Cogen Co., Inc.,

Its General Partner By:

Name: Harold N. Kamine

Title:

President

MASTER RESTRUCTURING AGREEMENT SIGNATURE PAGES By: Beta Syracuse, Inc.,

Its General Partner Byi Name: Michael J. Daley

Title:

Vice PresidenthSecretary>Treasurer Kamine/Besicorp Beaver Falls, L.P.

By: Kamine Beaver Falls Cogen Co., Inc.,

Its ral Partner By:

Name: Harold N. Kamine

Title:

President By: Beta Beaver Falls, Inc.,

Its General Partner By:

Name: Michael J. Daley UP

Title:

Vice President)Secretary(Treasurer United Development Group - Niagara, L.P.

'By: United Development Group - Niagara, Inc.,

Its General Partner By:

Name: %. John Fair

Title:

President

t MASTER RESTRUCTVRING AGREEMENT SIGNATURE PAGES By: Beta Syracuse, Inc.,

Its General Partner By:

Name: Michael J. Daley

Title:

Vice President>Secretary<Treasurer Kamine/Besicorp Beaver Falls, L.P.

By: Kamine Beaver Falls Cogen Co., Inc.,

Its General Partner By:

Name: Harold N. Kamine

Title:

President By: Beta Beaver Falls, Inc.,

Its General Partner By:

Name: Michael J. Daley

Title:

Vice President>SecretaryhTreasurer United Development Group - Niagara, L.P, By: United Development Group - Niagara, Inc.,

Its General Partner By:

Name: W. John Fair

Title:

President

SCHEDULE A Names and Notice Addresses of IPPs IPP Notice Address American Ref-Fuel Company of Niagara, Air Products & Chemicals L.P. 7201 Hamilton Boulevard Allentown, PA 18195 Facsimile: 610-706-6765 Attn: Jim Butz American Ref-Fuel Company 777 N. Eldridge Houston, TX 77079 Facsimile: 713-584-8626 Attn: Tyler Scofield Onondaga Cogeneration Limited Partnership do GPU International, Inc.

Project Orange Associates, L.P. One Upper Pond Road Parsippany, NJ 07054 Facsimile: 201-2634977 Attn: Wendy Greengrove Fulton Cogeneration Associates do ANR Venture Fulton Company Nine Greenway Plaza, 16 Floor Houston, TX 77046 Facsimile: 713-297-1556 Attn: Mark Barry Cogen Energy Technology L.P. 1902 River Road Castleton-on-Hudson, NY 12033 Facsimile: 518-732-4006 Attn: Frank Lyman Tower East, Suite 303 20600 Chagrin Boulevard Shaker Heights, OH 44122 Facsimile: 216-921-2558 Attn: John Guinness

fPP Notice Address Lyonsdale Energy Limited Partnership c/o Diamond Energy 633 West 5 Street Suite 2800 Los Angeles, CA 90071 Facsimile: 213-892-1332 Attn: Bo Buchynsky Encogen Four Partners, L.P. c/o Enserch Development Corporation 1817 Wood Street Suite 550 West Dallas, TX 75201 Facsimile: 214670-2974 Attn: Timothy O. Curley NorCon Power Partners, L.P. c/o CalEnergy Company 302 S. 36 Street Omaha, NE 68131 Facsimile: 402-231-1668 Attn: Douglas Divine Indeck-Ilion Limited Partnership Indeck Energy Services, Inc.

indeck-gerkes Limited Partnership 1130 Lake Cook Road Indeck-Olean Limited Partnership Facsimile: 847-520-9883 Indeck-Oswego Limited Partnership Buffalo Grove, IL 60089 Attn: Steven Dowdy Black River Limited Partnership c/o Jones Capital Corporation J.A. Jones Drive Charlotte, NC 28287 Facsimile: 704-553-3037 Attn: John Woodcock LG&E Westmoreland Rensselaer c/o LG&E Power, Inc.

12500 Fair Lake Circle, N350 Fairfax, VA 22033-3804 Facsimile: 703-968-5458 Attn: Anne Gleason-Roche N I7l l3

IPP Notice Address Oxbow Power of North Tonawanda, New 1601 Forum Place York, Inc. West Palm Beach, FL 33401 Facsimile: 561-640-8847 Attn: Bernard H. Cherry Salt City Energy Venture, L.P. 56 Industrial Drive Syracuse, NY 13204 Facsimile: 315487M77 Attn: Edward Barno AG-Energy, L.P. c/o Sithe Energies, Inc.

Seneca Power Partners, LP. 450 Lexington Avenue Sterling Power Partners, L.P. 37 Floor Power City Partners, LJ. New York, NY 10017 P&N Partners, L.P. Facsimile: 212450-9025 Attn: Steven Burton Selkirk Cogen Partners, L.P. c/o US Generating Co.

East Syracuse Generating Company, L.P. 7500 Old Georgetown Road Bethesda, MD 2081M161 Facsimile: 301-7184906 Attn: JeFMcParland Steve Herman c/o US Generating Co.

One Bowdoin Square Boston, MA 02114-2910 Attn: George Grunbeck Peter Meier

~ Kamine/Besicorp Carthage L.P. c/o K:unine Development Corp.

Kamine/Besicorp South Glens Falls L.P. 1545 Rt. 206 Kamine/Besicorp Natural Dam L.P. Suite 300 Kanune/Besicorp Syracuse L.P. Bedminster, NJ 07921-2567 Katnine/Besicorp Beaver Falls L.P. Facsimile: 908-719-8774 Attn: Mark Slifkin NI7I l3

IPP Notice Address do Besicorp Group, Inc.

1151 Flatbush Road Kingston, NY 12401 Facsimile: 914-336-7172 Attn: Michael J. Daley United Development Group - Niagara, L.P. 1401 Main Street Suite 1115 Columbia, SC 29211 Facsimile: 803-799-8039 Attn: W. John Fair Nl7l l3

SCHEDULE 2.1 Existing PPAs to be Terminated pursuant to Section 2.l CONFIOENTlhL

SCHEDULE 2.2 Existing PPA to be Amended pursuant to Section 2.2 CONFlOENTNL

SCHEDULE 2.3 Existing PPAs to be Amended and/or Restated pursuant to Section 2.3 CONFIOENTIAL

SCHEDULE 3.5 Certain Exclusions from Anti-DilutionProvisions Common Stock may be issued pursuant to:

the Company's Dividend Reinvestment and Stock Purchase Plan the Amended and Restated Merger Agreement between Syracuse Suburban Gas Company, Inc. and the Company dated March 13, 1992 the Employee Savings Fund Plan for Represented Employees of Niagara Mohawk Power Cotporation the Employee Savings Fund Plan for Non-Represented Employees of Niagara Mohawk Power Corporation the Company's 1992 Stock Option Plan N20073

SCHEDULE 3.7 IPP Sponsor Entities to Enter Into Shareholder's Agreement IPP ~~ SE~

Indeck-Ilion Limited Partnership Indeck Energy Services, Inc.

Indeck- Yerkes Limited Partnership Indeck-Olean Limited Partnership Indeck-Oswego Limited Partnership AG-Energy, L.P. Sithe Energies, Inc, Seneca Power Partners, L.P.

Sterling Power Partners, L,P.

Power City Partners, L.P.

P&N Partners, L.P.-

East Syracuse Generating Company, I..P. U.S. Generating Co.

Kamine/Besicorp Carthage L.P.. Kamine Development Corp. and Kamine/Besicorp South Glens Falls L,P. Besicorp Group, Inc.

Kamine/Besicorp Natural Dam L.P.

Kamine/Besicorp Syracuse L.P.

Kamine/Besicorp Beaver Falls L.P.

¹12704

Schedule 4.5 Niagara Mohawk Power Corporation Capitalization 4S g) Authorized capital:

Common Stock, Sl par value, 185,000,000 shares Cumulative Preferred Stock, S 1'00 par value 3,400,000 shares Cumulative Preferred Stock, $ 25 par value 19,600,000 shares Curnulativc Prefcrcncc Stock, $ 25 par value 8,000,000 shares 4$ (ti) Common Stock Issued and Outstanding:

As ofSeptember 30, 1996 144/65+14 shares As ofJune 27, 1997 144/90,619 shares 4E gii) Common Stock Issuable:

Issuablc in connection with the acquisition of Syracuse Suburban Gas Corporation-As of September 30, 1996 54,137 shares As ofJune 27, 1997 28,732 shares Issuable under the 1992 Stock Option Plan-As of September 30, 1996 322,875 shares AsofJune 27, 1997 322,875 shares

SCHEDULE 4.8 CERTAIN CHANGES OR EVENTS (d) The Company has:

authorized the funding of a rabbi trust in the event of prospecfive changes of control changed period for vesting of lifetime medical benefit from ten years to eight years for senior officers provided certain senior officers with life insurance providing death beneflt two and one-half times annual salary agreed to purchase one senior officer's house at appraised value (h) Common Stock has been issued pursuant to:

the Company's Dividend Reinvestment and Stock Purchase Plan the Amended and Restated Merger Agreement Between Syracuse Suburban Gas Company, Inc. and the Company dated March 13, 1992 the Employee Savings Fund Plan for Represented Employees of Niagara Mohawk Power Corporation the Employee Savings Fund Plan for Non-Represented Employees of Niagara Mohawk Power Corporation (i) Common Stock has been purchased by the Company pursuant to:

the Amended and Restated Merger Agreement Between Syracuse Suburban Gas Company, Inc. and the Company dated March 13, 1992 the Employee Savings Fund Plan for Represented Employees of Niagara Mohawk Power Corporation the Employee Savings Fund Plan for Non-Represented Employees of Niagara Mohawk Power Corporation

SCHEDULE 5.4 Certain Disclosed Litigation Westmoreland Coal Company and Westmoreland Energy, Inc., Affiliates of Westmoreland Rensselaer L.P., a general partner of LG&E Westmoreland Rensselaer, a California general partnership and one of the IPPs hereunder, are debtors in possession in a proceeding under Chapter 11 of the Bankruptcy Code (Joint Case No. 96-26092 MSK, et al.) in the United States Bankruptcy Court for the District of Colorado, and as such the approval of the Bankruptcy Court may be required for of LG&E Westmor'eland Rensselaer to consummate the transactions contemplated by this Agreement, N 20415

SCHEDULE g gC Matters to be Included in PSC Approval The PSC Approval shall:

(i) find the Restructuring and the Agreement and the obligations incurred by NMPC thereunder to be prudent; (ii) authorize the issuance of shares of stock, bonds, and any other securities required to be issued pUrsuant to the Agreement; (iii) approve NMPC's full recovery in rates of all costs that NMPC will incur in connection with the Restructuring and as a result of performance of its obligations under the Agreement, including a determination that such costs were prudently incuned; (iv) authorize NMPC to establish a regulatory asset for the full amount of the unamortized costs associated with implementation of the Agreement; (v) authorize NMPC to establish a non-bypassable Competitive Transition Charge, which, together with costs recovered in base rates, willprovide for the full recovery of all costs, including strandable costs, that are incurred over the term of the debt anticipated to be incurred in connection with this Agreement; and (vi) authorize NMPC to perform any other act required to'be performed pursuant to the Agreement for which PSC approval is required or authorize any other act as to which PSC approval is required.

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SCHEDULE 6 10A Litigation and Regulatory proceedings to be Stayed by the Parties Federal Court Cases

1. Encogen Four Partners L.P. v. Niagara Mohawk Power Corp., Docket No. 96-9642 (2d Cir.)

2. Indeck-lllion LP. & Power City Partners v. AVPSC & Niagara Mohawk Power Corp., No.

95-CV-0143 (N.D.N.Y.)

3. Niagara Mohawk Power Corp. v. United States Dep 't ofEnergy, Case No. 95-CV-952 (D.D.C.; motion for summary judgment granted Feb. 23, 1996), appeal docketed, No. 96-5246 (D.C. Cir. Aug. 6, 1996)

4. ¹iagara Mohawk Power Corp. v. United States Dep 't ofEnergy v. Sterling Power Partners, et al., Case No. 96-5082 (D.C. Cir.) - consolidated with case No. 96-5246 (case P1 above) in the D.C. Circuit

5. NorCon Power Partners, LP. v. Niagara Mohawk Power Corp., Case No. 96 Civ. 2947 (S.D.N.Y.)

6. NorCon Po~er Partners, LP. v. Niagara Mohawk Power Corp., Docket No, 96-7283 (2d Cir.)

New York State Court Cases

7. Niagara Mohawk Power Corp. v. Sterling Power, Ltd., Index No. 95-2981

8. Ag-Energy, LP., Power City Partners, L.P., Seneca Power Partners, LP. & Sterling Power Partners, LP. v. ¹ragara Mohawk Power Corp., Index No. 111207/95" Black River LP. v. ¹iagara Mohawk Power Corp., Docket Nos. CA 97-0036 & CA 97-0087 (4th Dep't)

10. Sterling Power Partners, LP. v. Niagara Mohawk Power Corp., Index No. 94-110354"

'his proceeding was withdrawn on April 14, 1997, but is subject to reinstatement aAer a decision in thc NorCon proceeding (case ¹3 above). The parties agrcc that the Encogen case can bc reinstated by NMPC solely as to Encogen in thc cvcnt that Encogen is not a Party to the Agreement on the Consummation Date.

"As to this case, thc parties thereto agree to usc their Reasonable Best Efforts to amve at a consented settlement bcforc the Consummation Date. In thc event a settlement is not reached, thc parties thereto agree that the stay is to be lifted as of the Consummation Date and the case will resume. In the event a settlement is reached, the parties thereto shall dismiss and withdraw this case as of the Consummation Date.

"'s to this case, the parties thereto. agrce to usc their Reasonable Best Efforts to anivc at a consented settlement before thc Consummation Date. In the event a settlement is not reached, thc parties thereto agree that the stay is to

¹l2704

11. Sterling Power Partners, LP., Seneca Power Partners, L.p., power City Partners, L.P. Ck Ag-Energy, L.P. v. Niagara Mohawk Power Corp., Index No. 106895/94 (1st Dep't)

N YPSC Proceedings

12. Niagara Mohawk Power Corp. Petition for Approval ofCurtailment Procedures, NYPSC Case No. 92-E-0814 (combined with Proceeding on Motion ofthe Commission to Establish Conditions Governing Curtailment Clauses in Contracts for On-Site Generation, NYPSC Case No. 88-E481)

13. Niagara Mohawk Power Corp. Petition for Clarification ofCertain Aspects ofthe Monitoring and Compliance Requirements ofthe Commission 's 80 M8'Output Limitation, NYPSC Case No. 96-E-1020

14. ¹iagara Mohawk Power Corp. Petition for an Order Requiring Firm Security for Certain Power Supply Contracts, or, Alternatively, Canceling Such Contracts, NYPSC Case No. 95-E-1162

15. Niagara Mohawk Power Corp. - Petition for Clarification ofthe Conditions Set Forth in the Commission's Order dated December 9, 1987 Approving Contract No. 514 with Lyonsdale Power Limited Partnership (20 MW Docket), NYPSC Case No. 95-E-1177 be IIRed as of the Consummation Date and thc case will resume. ln thc event a settlement is reached, thc parties thereto shall dismiss and withdraw this case as of the Consummation Date.

tel 2104

SCHEDULE 6.lOB Certain Litigation and Regulatory Proceedings (Involving 6went Issues)

Federal Court Cases

1. Niagara Mohawk Power Corp. v. FERC, Case Nos. 95-1222, et al. (D.C. Cir.)

2. Niagara Mohawk Power Corp. v. FERC, Civil Action No. 95-CV-634 (N.D.N.Y.)

012704

SCHEDULE 6.11 CERTAIN PERMITTED CONDUCI The Company may merge or consolidate with any of its affiliates or any other entity.

The Company may amend its Certificate of Incorporation to authorize additional common stock and make any amendments necessary to restructure or amend the terms of the Company's preferred stock The Company may issue, sell or otherwise distribute its capital stock pursuant to:

the Company's Dividend Reinvestment and Stock Purchase Plan; the Amended and Restated Merger Agreement Between Syracuse Suburban Gas Company, Inc. and the Company dated March 13, 1992; the Employee Savings Fund Plan for Represented Employees of Niagara Mohawk Power Corporation; the Employee Savings Fund Plan for Non-Represented Employees of Niagara Mohawk Power Corporation; the Company's 1992 Stock Option Plan; any transactions undertaken as part of a plan to restructure, or amend the terms of, the Company's preferred stock; and the Company shall be permitted to issue up to a further 1,000,000 shares of Common Stock in the ordinary course of business.

The Company may declare, set aside, pay or make any other distribution in cash or property in respect of any of the Company's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock pursuant to:

the Company's Dividend Reinvestment and Stock Purchase Plan; the Amended and Restated Merger Agreement Between Syracuse Suburban Gas Company, Inc. and the Company dated March 13, 1992; the Employee Savings Fund Plan for Represented Employees of Niagara Mohawk Power Corporation; the Employee Savings Fund Plan for Non-Represented Employees of Niagara Mohawk Power Corporation; the Company's 1992 Stock Option Plan;

the terms of the Company's Preferred Stock; and any transactions undertaken as part of a p1an to restructure, or amend the terms of, the Company's preferred stock.

SCHEDULE 8.8 Litigation and Proceedings to be Withdrawn by the Parties Federal Court Cases

l. Encogen Four Partners LP. v. Niagara Mohawk Power Corp. (Encogen), Docket No. 96-9642 (2d Cir.)'.

Indeck-Illion LP, & Power City Partners v. NYPSC & Niagara Mohawk Power Corp., No.

95-CV4143 (N.D.N.Y.)

3. Niagara Mohawk Power Corp. v. United States Dep 't ofEnergy, Case No. 95-CV-952 (D.D.C.; motion for summary judgment granted Feb. 23, 1996), appeal docketed, No. 96-5246 (D.C. Cir. Aug. 6, 1996)

4. Niagara Mohawk Power Corp. v. United States Dep 't ofEnergy v. Sterling Power Partners, et al., Case No. 96-5082 (D.C. Cir.) - consolidated with case No. 96-5246 (case Ql above) in the D.C. Circuit.

5. NorCon Power Partners, LP. v. Niagara Mohawk Power Corp., Case No. 96 Civ. 2947 (S.D.N.Y.)

6. NorCon Power Partners, LP. v. ¹iagara Mohawk Power Corp., Docket No. 96-7283 (2d Cir.)

New York State Court Cases

7. Niagara Mohawk Power Corp. v. Sterling Power, Ltd., Index No. 95-2981

8. Ag-Energy, LP., Power City Partners, L.P., Seneca Power Partners, LP. & Sterling Power Partners, L.P. v. Niagara Mohawk Power Corp., Index No. 111207/95"

9. Black River L.P. v. Niagara Mohawk Power Corp., Docket Nos. CA 97-0036 & CA 97-0087 (4th Dep't)

10. Sterling Power Partners, LP. v. Niagara Mohawk Power Corp., Index No. 94-110354 This proceeding was withdrawn on April 14, 1997, but is subject to reinstatement after a decision in the NorCon proceeding (case Q3 above). The parties thereto agree that the &cogen case can be reinstated by NMPC solely as to Encogen in the event that Encogen is not a Party to the Agreement on the Consummation Date.

As to this case, the parties thereto agree to use their Reasonable Best Efforts to amve at a consented settlement before the Consummation Date. In thc event a settlement is not reached, the parties thereto agree that thc stay is to be liRed as of the Consummation Date and the case will resume. In the event a settlement is reached, the parties thereto shall dismiss and withdraw this case as of the Consummation Date.

As to thLs case, the parties thereto agree to use their Reasonable Best Efforts to arrive at a consented settlement before thc Consummation Date. In thc event a settlement is not reached, the parties thereto agree that the stay is to N12704

11. Sterling Power Partners, L.P., Seneca Power Partners, L.p., power City Partners, L.P. dc Ag-Energy, L.P. v. Niagara Mohawk Power Corp., [ndex No. 10689SI94 (1st Dep't)

FERC Proceedings

12. ¹ragara Mohawk Power Corp., FERC Docket Nos. EL95-45-0000, QF90-154-005 NYPSC Proceedings

13. Niagara Mohawk Power Corp. Petition for Approval ofCurtailment Procedures, NYPSC Case No. 92-E-0814 (combined with Proceeding on Motion ofthe Commission to Establish Conditions Governing Curtailment Clauses in Contracts for OnCite Generation, NYPSC Case No. 88-E-081)

14. Niagara Mohawk Power Corp. Petition for Clarification ofCertain Aspects ofthe Monitoring and Compliance Requirements ofthe Commission 's 80 M8'Output Limitation, NYPSC Case No. 96-E-1020

15. Niagara Mohawk Power Corp. Petition for an Order Requiring Firm Security for Certain Power Supply Contracts, or, Alternatively, Canceling Such Contracts, NYPSC Case No. 95-E-1162

16. Niagara Mohawk Power Corp. - Petition for Clarification ofthe Conditions Set Forth in the Commission's Order dated December 9, 1987 Approving Contract No. 514 with Lyonsdale Power Limited Partnership (20 MW Docket), NYPSC Case No. 95-E-1177 Pleadings

17. All pleadings filed by NMPC in Indeck-Olean LP. Olean Cogeneration Facility, FERC Docket Nos. EL95-11-0000, QF90-[54-004 be liAed as of thc Consummation Date and thc case willresume. ln the event a settlement is reached, the parties thereto shall dismiss and withdraw this case as of the Consummation Date.

012704

SCHEDULE 9.10 NMPC FINANCING Financing transactions necessary to the Company's consummation of the transactions contemplated in the Master Restructuring Agreement (the "Company's Consummation" )

may include:

obtaining amendments, waivers or consents with respect to, or the replacement of:

the $ 125,000,000 Revolving Credit Agreement, the $ 255,000,000 Term Loan Agreement, the Amended and Restated Letter of Credit and Reimbursement Agreement with Morgan Guarantee Trust Company of New York, the Amended and Restated Letter of Credit and Reimbursement Agreement with Toronto-Dominion Bank, the Amended and Restated Letter of Credit and Reimbursement Agreement with Canadian Imperial Bank of Commerce, the Master Creditor Agreement; and the First Mortgage Bond Indenture, each dated as of March 20, 1996, together with all Interest Rate.Cap Agreements, Letters of Credit and other agreements of even date therewith that together constitute the Company's senior bank financing.

the Company's'trade receivables financing facility with NM Receivables Corp.,

Corporate Receivables Corporation, Citibank, NA. and Citicorp North America, Inc.

obtaining financing for all transaction costs payable by the Company arising &om the Company's Consurxunation or any conditions precedent thereto, including, but not limited to, fees and expenses arising in connection with the Public Offering of the Debt Securities, the issuance of the Common Stock, and the restructuring or amendment of the terms of the preferred stock.

obtaining a restructuring of, or amendment of the terms of, the Company's preferred stock.

obtaining all other financing, including bridge financing (including but not limited to borrowing the amount of any tax refunds due as a result of the Company's Consummation), necessary, in the Company's reasonable judgment, to effect the Company's Consummation or any conditions precedent thereto.

EXHIBITA TERMS OF AMENDED POWER PURCHASE AGREEMENTS, RESTATED CONTRACTS AND FIXED PRICE SWAP CONTRACTS NMPC and the IPPs which are parties to the Existing PPAs listed on Schedule 2,2 to the Mastering Restructuring Agreement have agreed to amend their Existing PPAs and NMPC and the IPPs which are parties to the Existing PPAs listed on Schedule 2.3 to the Master Restructuring Agreement have agreed to conduct good faith negotiations and use their Reasonable Best Efforts to enter into Restated Contracts (as such term is defined below), all in accordance with the material terms and conditions set forth below. NMPC has also agreed to enter into certain fixed price swap contracts (the "Fixed Price Swap Contracts" ), which are described below. Capitalized terms used herein, including the Attachments hereto, which are not otherwise defined herein shall have the meanings given to such terms in the Master Restructuring Agreement.

General This Exhibit A includes the following Attachments hereto which set forth specific matters relating to the general description contained herein:

Att'achment A-I Pntcntionally Omitted]

Attachment A-2 Amcndcd PPA with the Solid Fuel IPP (quantities and prices)

Attachment A-3 Indexed Swap Contracts with Gas IPPs (quantities and prices)

Attachment A-4 Calculation of Payments under Indexed Swap Contracts Nnth Gas IPPs Attachment A-5 Pricing Assumptions for Indexed Swap Contmcts with Gas IPPs Attachment AW Termshect for Indexed Swap Contracts with Gas IPPs Auachment A-7 Power Put Contracts with Gas IPPs (quantities and prices)

Attachment A-8 Termsheet for Power Put Contracts with Gas IPPs Auachment A-9 Option Provisions for Restated Contracts with Gas IPPs Attachment A-10 Fixed Price Swap Contracts (quantities and prices)

Attachment A-11 Termsheet for Fixed Price Swap Contracts Attachment A Additional Terms, Conditions and Provisions for Amended PPA and Restated Contracts Solid Fuel IPP NMPC and the Solid Fuel IPP party to the Existing PPA listed on Schedule 2.2 to the Master Restructuring Agreement shall 'amend such Existing PPA effective as of the Effective Time to reflect the quantity of electricity in gigawatt hours ("GWh") which NMPC shall purchase under such Amended PPA and the price which NMPC shall pay therefor in dollars per megawatt hour ("$/MWh") for each Contract Year (as such term is defined below) of the Amended PPA as is set forth in Attachment A-2 hereto. The

'.~'.",ti'-." PVA:-hà -L: !;" ~.i~<<" "i >"."i:"' ".'. of the additional terms',editions and sl90!4

provisions set forth in Attachment A-12 hereto, unless the Solid Fuel [pp and NMpC.

otherwise mutually agree.

For purposes of this Exhibit A, "Contract Year" shall mean the period commencing at 11:59:59 p.m. on the Consummation Date (the "Effective Time"), and ending at 11:59:59 p.m. on the first anniversary of the last day of the month in which the Consummation Date occurs and each successive 12-month period thereafter to the extent applicable.

Gas IPPs NMPC and each Gas IPP which is a party to an Existing PPA listed on Schedule 2.3 to the Master Restructuring Agreement shall conduct good faith negotiations and use their Reasonable Best Efforts to enter into a Restated Contract(s) which amends and/or restates each such Gas IPP's Existing PPA. Such Restated Contracts shall be dated as of the date of each such Gas IPP's Existing PPA and the terms of such amendment and/or restatement shall be effective as of the Effective Time and shall be in the form of an indexed swap contract (the "Indexed Swap Contract" ) and a power put contract (the "Power Put Contract" ), or a cash-settled forward or swap contract, an option cash-settled forward or swap contract, a power supply agreement, an energy contract or a tolling contract, or other contract or any combination thereof, which may be simultaneous or sequential and shall contain such terms and conditions as are mutually agreed (collectively, the "Restated Contracts" ). Any such Restated Contract (other than the Indexed Swap Contracts (which shall be for a term of ten Contract Years) and the Power Put Contracts (which shall be for the term specified in Attachment A-8)) may be for a tern of up to ten Contract Years. Each Restated Contract,.regardless of the form of such Restated Contract (other than the Indexed Swap Contracts or the Power Put Contracts) shall include all of the additional terms, conditions and provisions set forth in Attachment A-12 hereto, unless the applicable Gas IPP and NMPC otherwise mutually agree.

Set forth below is a general description of the terms and conditions of the Indexed Swap Contract and the Power Put Contract. The following Attachments are relevant to these agreements:

Attachment A-3 (quantities and prices for Indexed Swap Contracts);

Attachment A-4 (formula for payments under Indexed Swap Contracts);

Attachment A-5 (pricing assumptions for Indexed Swap Contracts);

Attachment A-6 (termsheet for Indexed Swap Contracts);

Attachment A-7 (quantities and prices for Power Put Contracts);

Attachment A-8 (termsheet for Power Put Contracts);

Attachment A-9 (option provisions for Restated Contracts); and Attachment A-12 (additional terms for Restated Contracts).

Indexed Swa Contract. This form of Restated Contract will generally be based on the terms and conditions set forth in Attachment A-6 hereto.

Each Indexed Swap Contract shall become effective as of the Effective Time and mature periodically (each, a "Settlement Date" ) each calendar month (each, a "Settlement Period" ) throughout a term of ten Contract Years. The Indexed Swap Contract will provide for a series of monthly payments (i.e. actual physical sales or purchases of electricity shall not be required) which shall be calculated by reference to (i) a proxy market price (the "Proxy-Market Price", as such term is defined in Attachment A-6, and which price shall be identical for all Indexed Swap Contracts and Power Put Contracts) during the period (the "Proxy-Market Price Period",

as such term is defined in Attachment A4) prior to the establishment of a competitive market price through the implementation of a New York Independent System Operator and Power Exchange (the "ISO/PE"), and (ii) a market price (the "Market Price", as such term is defined in Attachment A upon the establishment of the ISO/PE. Accordingly, on each Settlement Date (x) if and to the extent the contract price exceeded if the Proxy-Market Price or the Market Price plus, applicable the Market Capacity Price (as such term is defined in Attachment A+, as the case may be, during any applicable time interval for which the Gas IPP and NMPC were contractually committed (an "Interval", as such term is defined in Attachment A-6), NMPC shall owe the Gas IPP the difference between (A) the contract price multiplied by the contract quantity of electricity in megawatt hours ("MWh") for each Interval occurring during the Settlement Period, and (B) such Proxy-Market Price or Market Price,.'s the case may be, multiplied by the contract quantity of electricity in MWh for each Interval occumng during the Settlement Period plus if commencing upon the establishment of the ISO/PE and only there then exists a separate market for capacity, the Market Capacity Price in $ /MW for the Settlement Period multiplied by the weight averaged capacity associated with the contract quantity of electricity for each Interval occumng during such Settlement Peiiod, and (y) if and to the extent the Proxy-Market Price or the Market Price, as the case may be, exceeded the contract price during any applicable Interval, the Gas IPP shall owe NMPC the difference between (A) such Proxy-Market Price or Market Price, as the case may be, multiplied by the contract quantity of electricity in MWh for each Interval occurring during the Settlement Period plus if commencing upon the establishment of the ISO/PE and only there then exists a separate market for capacity, the Market Capacity Price in $ /MW for the Settlement Period multiplied by the weight averaged capacity associated with the contract quantity of electricity for each Interval occumng during such Settlement Period, and (B) the contract price multiplied by the contract quantity of electricity in MWh for each Interval occumng during the Settlement Period. On each Settlement Date, the payment obligations due under the Indexed Swap Contract for each Interval occurring during the Setter.m~".< Period.:sha!l. h.,~en~Wa~~i"it"-

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each other, and the party owing the greater amount shall make a net payment to the other party.

~ The formula for calculating the amount of payments to be made under the Indexed Swap Contract is set forth on Attachment A4 hereto.

~ The contract prices under the Indexed Smp Contracts shall be fixed during the first two Contract Years of the tenn of the Indexed Swap Contracts. Thereafter, the contract prices shall be. indexed and calculated in accordance with an indexing formula similar to either of those set forth in Appendix 6-3 to Attachment A-6 hereto. During the negotiation of each Indexed Swap Contract, each Gas IPP shall propose a contract price indexing formula. If the Gas IPP demonstrates to

%P8cCo. and DLJ that such pricing formula, when calculated using the assumptions set forth in Attachment A-5 hereto, results in a contract price for each of the third through the tenth Contract Years which is equal to the annual contract prices set forth in the allocation for such Gas IPP in the Contract Allocation, such pricing formula shall be deemed acceptable to NMPC.

~ Subject to adjustment in accordance with Sections 12.4(b), 2.5 and 2.6, as applicable, of the Master Restructuring Agreement, the aggregate quantity of electricity. in GWh, the. aggregate installed capacity in megawatts ("MW") and the weighted average contract price in $ /MVh for the first two Contract Years of the Indexed Swap Contracts are set forth in Attachment A-3 hereto. Subject to adjustment in accordance with Sections 12.4(b), 2.5 and 2.6, as applicable, of the Master Restructuring Agreement, Attachment A-3 also sets forth the aggregate quantity of electricity, the aggregate installed capacity and an example, based on the assumptions set forth in Attachment A-5 hereto, of the weighted average indexed contract prices for Contract Years thee through ten of the Indexed Swap Contracts.

~ For purposes of the Indexed Swap Contracts (i) prior to the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exists, the price for the applicable capacity shall equal zero, and (ii) following the Proxy-Market Price Period and only ifthere then exists a separate market for capacity, the applicable capacity will be adjusted on a basis consistent with the structure of such separate market.

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Power Put Contract. This form of Restated Contract will generally be based on the terms and conditions set forth in Attachment A-8. Each Power Put Contract shall become effective as of the Effective Time and shall provide for a series of put options which shall expire periodically on a monthly basis (each, a "Settlement Period" ) throughout a term equal to the Proxy-Market Price Period (as such term is defined in Attachment A-8). At the option of the Gas IPP, the Gas IFP shall have the right to put (i) energy to NMPC up to the contract quantity of electricity (including energy subject to overgeneration provisions), and (ii) capacity associated with the contract quantity of electricity, in each case, for each applicable time interval for which the Gas IPP and NMPC were contractually committed (an "Interval", as such term is defined in Attachment A-8) during the Settlement Period, and NMPC shall be obligated to take and pay for such energy and capacity from the Gas IPP, at the Proxy-Market Price (as such term is defined in Attachment A-8, and which shall be identical for all Power Put Contracts and Indexed Swap Contracts) prior to if the establishment of the ISO/PE and at the Market Price and, applicable, the Market Capacity Price, upon the establishment of the ISO/PE. If the Gas IPP determines not to exercise its rights to put energy and capacity to NMPC, such Gas IPP may sell its energy or capacity to third parties, provided such Gas IPP has first offered to sell energy and associated capacity up to the contmct quantity of electricity to NMPC at the Pioxy-Market Price or the Market Price (as such term is defined in Attachment if A-8), and, applicable, the Market Capacity Price (as such term is defined in Attachment A-8), as the case may be, and NMPC has declined the opportunity to purchase such energy and capacity. Energy and. associated capacity in excess of the contract quantity of electricity for any Interval shall not be subject to the Power Put Contract and, at the option of the Gas IPP, may be sold to third parties.

Subject to adjustment in accordance with Sections 12.4(b), 2.5 and 2.6, as applicable, of the Master Restructuring Agreement, the maximum aggregate quantity (subject to oveigeneration provisions and option provisions (as described below), if any) of electricity in GWh and the maximum aggregate installed capacity, in MW under the Power Put Contracts during the Proxy-Market Price Period for each of ten Contract if Years (or such lesser period of time the Proxy-Market Price Period ends prior thereto) are set forth in Attachment A-7 hereto. Prior to the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exists, the price for the applicable capacity under the Power Put Contracts shall equal zero, except to the extent included in the Proxy-Market Price.

During the negotiation of the Restated Contracts, the Gas IPPs which are parties to the Existing PPAs listed on Schedule 2.3 to the Master Restructuring Agreement shall use their Reasonable Best Efforts to enter into Restated Contracts which wiii'nciude'optioii p'rvv'isions with'i'expect io an a'ggregate of 500 GWh of electricity per NI90I4 5

annum over a term of up to six Contract Years for periods within each year that are mutually agreed upon; provided such option provisions include a term, periods, contract quantities, contract prices and such other terms and conditions which are acceptable to the applicable Gas IPP and provided, further, that no Gas IPP will be obligated to include such option provisions in its Restated Contract(s) if such provisions, in such Gas IPP's judgment, are not economically neutral in comparison to the Contract Allocation of such applicable Gas IPP before giving effect to such option provisions. Attachment A-9 hereto sets forth certain information relating to these option provisions.

Fixed Price Swa Contracts NMPC shall also negotiate, execute and deliver to the Depositary a number of Fixed Price Swap Contracts, which shall be substantially similar to the Indexed Swap Contracts, except that the Fixed Price Swap Contracts will be based on fixed prices for electricity and fixed quantities of electricity. The Fixed Price Swap Contracts shall become effective as of the Effective Time, with payments to occur thereunder during the period commencing January 1, 2003 and ending December 31, 2009. Payments under the Fixed Price Swap Contracts shall be calculated based on the difference between the contract price and the Proxy-Market Price (as such term is defined in Attachment A-11) or the Market Price and, ifapplicable, the Market Capacity Price (as such terms are defined in Attachment A-ll), as the case may be, multiplied by the contract quantity of electricity for each Interval. The Fixed Price Swap Contracts will be based on the terms and conditions set forth in Attachment A-11 hereto.

The aggregate quantity of electricity in GWh, the aggregate capacity in MW and the contract price in $ /MWh applicable thereto for each applicable year of the Fixed Price Swap Contracts are set forth in Attachment A-'10 heieto. For purposes of the Fixed Price Swap Contracts (i) prior to the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exists, the price for the applicable capacity shall equal zero, and (ii) following the Proxy-Market Price Period and only ifthere then exists a separate market for capacity, the applicable capacity will be adjusted on a basis consistent with the structure of such separate market.

At the request of the IPPs, NMPC and the IPPs shall conduct good faith negotiations and use their Reasonable Best Efforts to enter into physical delivery

. contracts based on the annual quantities of electricity in GWh, the aggregate capacity in MW and the annual contract prices in $ MWh set forth in Attachment A-10 hereto, in lieu of all or a portion of the Fixed Price Swap Contracts, provided that in no event shall an IPP party to an Existing PPA listed on Schedule 2.1 to the Master Restructuring Agreement (a "Terminating PPA"), be a counterparty to any such physical delivery contract.

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ATTACHMENTA-1

)Intentionally Omitted]

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ATTACHMENTA-2 AMENDED PPA WITH SOLID FUEL IPP'ONTRACT QUANTITY PRICE'$

YEAR (GWh) /MWh) 353 28.50 2 353 29.40

'53 30.30 353 31.20 353 32.10 353 33.10 353 34.10 353 35.10 353 36.10 10 353 37.20 353 38.30 12 353 39.50 13 353 40.70 14 353 41.90 15 353 43.20 16 353 44.50 17 176 45.84 I The Amended PPA will contain provisions with respect to capacity that are consistent with the capacity provisions contained in the Existing PPA between NMPC and thc Solid Fuel IPP.

2 Such prices shall replace and be substituted for the prices reflected in Attachment 1 to thc Existing PPA

.,between NMPC and the Solid Fuel IPP.

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ATTACHMENTA-3 SWAP CONTRACTS WITH GAS IPPS DUEUNG CONTRACT YEARS 1 AND 2 WEIGHTED AGGREGATE WEIGHTED AGGREGATE AVERAGE INSTALLED AGGREGATE AVERAGE CONTRACT PRICE AFTER CONTRACT CAPACITY QUANTITY PRICE ADJUSTMENT ADJUSTMENT YEAR (MW)i (GWh) ($ /MWh)'8.55 ($ (S/MWh)'6.40 000s)'9,981) 606.15 4,640 606.85 4&,83 (9,448) 46.79 SWAP CON'I%ACTS WITH GAS IPPS UIUNG CONTRACT YEARS 3 THROUGH 10 OF EXAMPLE OF WEIGHTED AGGREGATE WEIGHTED s)'XAMPLE AVERAGE INSTALLED AGGREGATE /MWh)'GGREGATE AVERAGE CONTACT PRICE AFAR CONTRACT CAPACITY QUANTITY PRICE ADJUSTMENT ADJUSTMENT

($ ($ 000 ($

611.85 4,690 45.82 (9,199) 43.86

/MWh)'0 616.75 4,730 47.40 (6,975) 45.92

'16.95 4,736 50.53 (15,665) 47.22 619.55 4,755 52.72 (14,903) 49.59 620.45 4,765 54.55 (14,474) 51.51 621.75 4,778 55.95 (13,992) 53.02 623.05 4,786 5&.33 (13,574) 55.49 624.45 4,798 . 62.93 (13,050) 60.21 I Such iastalled capacity is subject to both seasonal variations aad degradation and represents the aggregate installed capacity which NMPC is entitled to claim from the Gas IPPs that are parties to Restated Contracts during the Proxy-Market Price Period for purposes of reporting to the Near York Power Pool. Prior to thc establishmeat of thc ISO/PE and thereafter at any time when no separate market for capacity exists, the price for the applicable capacity shall equal zero. Following the Proxy-Market Price Period and only if there then exists a separate market for capacity, thc applicable capacity will be adjusted on a basis consistent with thc structure of such scparatc market.

2 Rcprcsents a fixed price bcforc giving effect to the aggregate contract adjustment.

3 Rcflccts the aggregate contract adjustment agreed to.

4 Rcprescnts the contract price after applying an indexing formula and before giving effect to the aggregate contract adjustment.

S Reflects the economic impact of the aggrcgatc contract adjustmcnt on thc weighted average price (it being understood that the aggregate contract adjustment may be provided to NMPC as an annual adju.mc"< as.sn.~4jpsltn:at tr; it r,.reatracr..p~c~ i" rvPA1ual Gas IPP Restated Contracts or as." "

mutually agreed). 'thctwisc ai9oi4 9

ATTACHMENTA4 CALCULATIONOF PAYMENTS UNDER INDEXED SWAP CONTRACTS WITH GAS IPPS On each Settlement Date, the payments owing with respect to the preceding calendar month shall be based on the difference between (a) the contract price during each Interval multiplied by the contract quantity of electricity for such Interval, and (b)(i) the Proxy-Market Price or Market Price, as applicable, during each Interval multiplied by the contract quantity of electricity for such Interval, plus (ii) upon the establishment of the ISO/PE and only if there then exists a separate market for capacity, the Market Capacity Price in $ /MW for the applicable Settlement Period multiplied by the weight averaged capacity associated with the contract quantity of electricity for each Interval occurring during such Settlement Period. On the Settlement Date, NMPC shall be obligated to pay such difference to the Gas IPP if the amount described in clause (a) above is greater than the amount described in clause (b) above, and the Gas IPP shall be obligated to pay the absolute value of such difference to NMPC ifthe amount described in clause (b) above is greater than the amount described in clause (a) above. Such payments shall be calculated in accordance with the following formula:

Payment = Z(Pc'Qi)-(Z(Psi~Qi)+Ci~Zi hi

%here:

Pc - contract price Qi - contract quantity of electricity per Interval for the Settlement Period Pst the Proxy-Market Price or Market Price, as applicable, per Interval C - MarketCapacity Pricein 8/MWforthe SettlementPeriod'i number of hours per Interval multiplied by the number of Intervals in the Settlement Period I C shall bc zero prior to the establishment of thc ISO/PE and thercaf'ter at any time when no scparatc market for capacity exists. Following thc Proxy-Market Price Period and only if there then exists a

~ s"~ u Re'.ot". <~t:i;2e consistent with the suueturc of such

':: ..y p44e"of this.formula:will be adjusted-on a'basis separate market.

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ATTACHMENTA4 TERMSHEET FOR INDEXED SWAP CONTRACTS WITH GAS IPPS Set forth below is a termsheet for a Schedule which will be attached to and be made a part of a Master Agreement for Indexed Swap Contracts. The Master Agreement for the Indexed Swap Contracts will be based on an ISDA standard form of Master Agreement, which is a form that is frequently used for swap contracts. In the case of Restated Contracts that are forward contracts contemphting both physical deliveries and financial cash-settlement payments, the Master Agreement to be used will be based on a standard form which is frequently used for forward contracts in the electric industry or such other foan of agreement that is mutually acceptable to the parties. All Master Agreements will set forth general terms and conditions, including representations and warranties aud events ofdefault.

TERMSHEET FOR SCHEDULE to the Master Agreement for Indexed Swap Contracts between Niagara Mohawk Power Corporation ("NMPC").and (uIPPn)

1. (a) Payment on Settlement Date.

I THE OBLIGATIONS INCUIGtED PURSUANT TO THIS SCHEDULE SHALL REQUIRE CASH PAYMENTS AND SHALL IN NO EVENT BE INTERPRETED TO REQUIRE THE PURCHASE OR SAKE. OF ELECTRICITY.

(i) Subject to Section 1(a)(ii) of this Schedule, on the Settlement Date, NMPC shall be obligated to pay to IPP the Fixed Payment and IPP shall be obligated to pay to NMPC the Floating Payment. Such payment obligations shall be paid on a net basis pursuant to Section of this Agreement on the Payment Date.

(ii) Pa ent Di ute Mechanism: IfIPP, in good faith, disputes any part of any Notice of a net payinent obligation, IPP shall provide a written explanation of the basis for such dispute and the undisputed portion of the net payment obligations set forth in such Notice shall be paid by the party obligated to pay such amounts no later than the applicable Payment Date. Any adjustment under this Section 1(a)(ii) shall bear interest at the prime rate for U.S. currency as published &om time to time under "Money Rates" in 77re 8'all Street Journal, from and including the Payment Date any such underpayment or overpayment was originally due to but excluding the date on which such underpayment or overpayment is finally settled by the parties hereto, or in the event the parties hereto are unable to settle such matter, such matter shall be s."tl>el..~v CPi.49~ep"..".4",g'~tieaallv ~~n: .. ~-... .;

~

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public accounting firm mutually selected by the parties, whose determination shall be final and binding on the parties hereto and whose fees and expenses shall be borne by the party found to be at substantial fault by such independent public accounting firm. No Notice (or payment obligation thereunder) shall be subject to this Section 1(alii) unless a notice of dispute is given with respect thereto within two years of the Payment Date applicable to such Notice.

(b) Related Definitions and Provisions.

P~D*: yh Py

• D

• hdlt 2 I Itltth*yl dy Id calendar month, provided such day is a Business Day, and ifsuch day is not a Business Day on the first Business Day following such 25 day, or (ii) the 15~ day after the receipt by IPP of Notice &om NMPC, provided such day is a Business Day, and ifsuch is not a Business Day, on the Gist Business Day following such 15~ day. Notwithstanding the foregoing, in the event that following the Proxy-Market Price Period ISO/PE procedures require alternate dates for payments, such alternate payment dates shall automatically be deemed to be incorporated in, and shall supersede, the payment dates set forth herein..

ISO/PE: Shall mean a New York Independent System Operator and Power Exchange.

NMPC Pa ent Obli ation: NMPC shall be obligated to pay to IPP an amount equal to the product of the Notional Q'uantity of electricity during the applicable Interval multiplied by the Contract Price or the Indexed Contract Price, as the case.may be, applicable to such Interval (the "NMPC Payment Obligation").

D~dy

• yh*y'Dyy

• I D** I

• d hdlt equal to the sum of (i) the Fixed Payment for the prior Interval (which shall be zero for the Initial Interval), and (ii)the NMPC Payment Obligation for the current Interval.

IPP Pa ent Obli ation: IPP shall be obligated to pay to NMPC an amount equal to the product of the Notional Quantity of electricity. during the applicable Interval multiplied by the Proxy-Market Price or the Maiket Price, as the case may be, applicable to such Interval (the "IPP Payment Obligation").

Floatin Pa t: The Floating Payment for the current Interval shall be an amount equal to the sum of (i) the Floating Payment for the prior Interval (which shall be zero for the Initial Interval), (ii) the IPP Payment Obligation for the current Interval, and if (iii) applicable, the Market Capacity Price in $/MW for the period &om the Initial Interval to the Settlement Date multiplied by the weight averaged capacity associated with the Notional Quantity of electricity for each Interval Rom the Initial Interval to the Settlement Date.

Contract Price: Shall mean for the first two Contract Years of the Term of this Agreement$ /MWhand$ /MWh,respectively.

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Indexed Contract Price. Shall mean beginning on the first day of the third Contract Year of the Term of this Agreement and continuing thereafter, the price calculated in accordance with an indexing formula similar to those sct forth in ~AL)cndix 6-3 to this Schedule (thc "Indexed Contract Price" ).

Contract Year: Shall mean the period commencing at I 1:59:59 p.m. on the Consummation Date and ending at 11:59:59 p.m. on the first anniversary of the last day of the month in which the Consummation Date occurs and each successive 12-month period thereafter to the extent applicable.

Settlement Date: Shall be the last day of the calendar month specified in the Confirmation delivered in accordance with the terms of the Master Agreement.

interval: Shall be (i) I hour, pmvided that in the event that following the Pmxy-Market Price Period iSO/PE pmcedures require the use of an alternate time period, such alternate time period shaQ automaticaHy be deemed to be incorporated in, and shall supersede, the 1 hour1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br /> period set forth herein, or (ii) such time peri(4 as NMPC and IPP shall mutually agree upon; provided that such mutually agreed upon time period may only be modified upon the prior written consent of NMPC and IPP.

Initial Interval: Shall be the Interval specificd in the Confirmation delivered in accordance with the terms of the Master Agreement.

Notice: After netting the Fixed Payment and the Floating Payment, NMPC shall pmvide )PP with notice (each, a "Notice") of sny net payment obligation resulting therefrom on or before the 10 day of the first calendar month following the Settlement Date; provided that in the event that following thc Proxy-Maiket Price Period ISO/PE procedures require an alternate date for payment notices, such alternate notice date shall f6 I*'. 6 AN 'UII automatically be deemed to be incorporated in, and shall supersede, the notice date set 6 'Uly'*f faUUU'.1 6'greement.

N~Wi: UANI I 6* 2 'y f*l 'ly 2'qqt 6

~A'2 which IPP and NMPC are contractually committed, U AU as set forth on the table contained in Pro -Market Price: Shall mean (i) prior to the establishment of the ISO/PE, NMPC's short-tenn avoided energy and capacity costs at the voltage level of the IPP's Project's bus bar, as stated in its tariffapproved by the PSC providing for the purchase of power from PURPA qualifying facilities, which tariffis currently designated as S.C.-6, as the same may be in effect from time to time, or any successor tariffthereto or such other price as may be agreed upon by NMPC and IPP during the individual negotiations, and (ii) on the first day of the month following the calendar month in which the ISO/PE is established, the Market Price and, if applicable, the Market Capacity Price; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referenced in clatisc.ci) aW+c,ft, a wsitiinilv p~ up .e~~!tional period of. time. The. Proxy---*

~

Market Price shall not be reduced or offset by any costs that NMPC may incur, including, gl90I4 l4

witIiout limitation, costs for ancillaiy services, transmission services or transitioii (or stranded) costs.

Prox -Market Price Period: Shall mean the period commencing on the date of this Agreement and ending on the first day of the month following the calendar month in which the ISO/PE has been fully established and successfully functioning, provided the following conditions have been satisfied for each of the previous six months: (i) a minimum of 65% (which percentage shall include the aggregate contract quantities of energy during such period under all physical delivery Restated Contracts with Gas IPPs and all physical delivery Contracts between NMPC and any IPP party to the Master Restructuring Agreement entered into in lieu of Fixed Price Swap Contracts, regardless of whether the IPPs parties thereto actually effected such sales and all sales on up to a monthly basis of energy (other than sales through the ISO/PE) by the IPPs parties to the Master Restructuring Agreement which are effectuated by NMPC acting as agent for any such IPP) of the energy sales and purchases within the Upstate Market have been transacted through the ISO/PE in the day ahead market based upon the day ahead pricing mechanism adopted by the FERC for the ISO/PE in the Upstate Market; and (ii) only a if separate market for capacity then exists, a mitiimum of SO'/o (which percentage shall include the aggregate capacity associated with the aggregate contract quantities of energy during such period under all physical deliveiy Restated Contracts with Gas IPPs and all physical delivny Contracts between NMPC and any IPP party to the Master Restructuring Agreement entered into in lieu of Fixed Price Swap Contracts, tegardless of whether the IPPs parties thereto actually effected such sales and all sales on up to a monthly basis of capacity (other than sales through the ISO/PE) by the IPPs parties to the Master Restructuring Agreement which are effectuated by NMPC acting as agent for any such IPP) of the capacity sales and purchases within"the Upstate Market have been transacted through the ISO/PE capacity auction. Notwithstanding the foregoing, if NMPC and IPP mutually agree, the Proxy-Market Price Period may be extended or terminated even ifthe conditions set forth in the immediately preceding sentence have not been satis6ed.

tl *M k:Shdl It 'y(AH* ' '

'Ibd i h*

regions currently served by NMPC, New York State Electric & Gas Corporation, Rochester Gas & Electric Corporation and Central Hudson Gas & Electric Corporation (collectively, the "Utilities"), and (ii) wholesale sales transactions by any of the Utilities to third parties outside the regions cunently served by such Utility, excluding any such sales which are effectuated pursuant to contracts having a term of at least one year existing as of the date of the Master Restructuring Agreement to the extent such contracts are in effect thereafter.

Market Price: Shall mean commencing on the first day of the month following the calendar month in which the ISO/PE is established, the day ahead locational based market price ("LBMP") paid to sellers for energy, at the IPP's Project's bus bar or the region in which the IPP's Project's bus bar is located, specified and published by the ISO/PE; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to

continue the pricing referred to in clause (i) of the definition of Proxy-Market Price for a mutually agreed upon additional period of time.

Market Ca aci Price: Shall equal zero prior to the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exits. Commencing on the first day of the month following the calendar month in which the ISO/PE is established and only if there then exists a separate market for capacity, the Market Capacity Price shall mean the market price paid to sellers for capacity, at the region in which the IPP's Project's bus bar is located, established by the ISO/PE capacity auction; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best EForts to mutually determine whether to continue'he pricing referred to in clause (i) of the definition of Proxy-Market Price for a mutually agreed upon additional period of time. Following the Proxy-Market Price Period and only if there then exists a separate market for capacity, the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to adjust the applicable capacity on a basis consistent with the structure of such separate market.

~i.

Term: The term of this Agreement shall commence at 1 1;59:59 p.m. on the Consummation Date and end at 11:59:59 p.m. on the tenth anniversary of the last day of the month in which the Consununation Date occurs.

2. UW NMPC. tPP y a f*

this Agreement in whole or in part, without the consent of NMPC (a) as collateral security for purposes of securing indebtedness, or (b) to any approved assignee or transferee (an "Approved Assignee" ). An Approved Assignee shall be (i) any person having a long-tenn unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency; (ii) any Affiliate of IPP; provided (x) such Af61iate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency, or (y) such Af61iate has a net worth calculated in accordance with generally accepted accounting principles ("Net Worth"), that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment

, or transfer, or (z) IPP unconditionally guarantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such Affiliate in connection with such assignment or transfer; (iii) any of the other Gas IPPs party to a Restated Contract with NMPC or their respective Affiliates; provided (x) such other Gas IPP or such Affiliate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency, or (y) such other Gas IPP or such Affiliate has a Net Worth that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, or (z) IPP (in the case of an assignment or transfer to another'Gas IPP) or such other Gas IPP (in the case of an assignment or transfer to any of it~ Affiliates) unconditionally guarantees, pursuant'o a puarantee in form and substance reasonably satisfactory to NMPC, the obligations of such other Cias IPP or' l90I4 l6

such Affiliate, as the case may be, in connection with such assignment or transfer; or (iv) any other person who has a Net Worth that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, provided that evidence of such qualifying Net Worth is reasonably demonstiated to NMPC. IPP may split and assign the Notional Quantities of electricity and Intervals to Approved Assignees, each in respect of a lesser Notional Quantity and/or!ntervals than the full amounts thereof hereunder, provided that (a) each such assignment is for 50,000 MWh of electricity per year or any integral multiples thereof and to the extent that the remaining unassigned balance of the Notional Quantity of electricity hereunder for any such year is less than 50,000 MWh, then for such remaining balance, (b) each such assignment is for a period of at least one year, and (c) the sum of all assigned and retained Notional Quantities of electricity and Intervals does not exceed the total Notional Quantities of electricity and Intervals hereunder. At the request of the IPF during the individual negotiations and during the term of this Agreement, NMPC and the IPP shall use their Reasonable Best Efforts to mutually agree upon reasonable alternatives to the assignment qualifications contained in the immediately preceding sentence. Except to the extent expressly provided in any applicable guarantee, upon any such assignment or transfer, IPP shall be released and have no further obligations to NMPG hereunder with respect to the assigned or transferred Notional Quantities and/or Intervals.

3. Assi ament b NMPC. NMPC. shall not assign its rights and obligations hereunder except as expressly authorized under this Section 3.

I \

(a) NMPC Restructurin . In the event that NMPC. restructures its corporate structure or assets, including by creating any new entities that hold signi6cant assets, whether in connection with the NMPC Restructuring or otherwise, upon notice to the IPP (or its assignee hereunder) this Agreement will be assigned to and assumed by the entity or entities owning all or substantially all of NMPC's electric transmission and distribution assets or, ifseparated Rom NMPC's electric transmission assets pursuant to such a restructuring, NMPC's electric distribution assets, provided that, upon the effective date of the restructuring (i) such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guaaintee in form and substance reasonably satisfactory to IPP (or its assignee hereunder), by each of the other entities arising out of the restructuring, including any entity spunwff to NMPC's shareholders or any Af51iate of NMPC holding signiGcant assets that were held by NMPC (or any subsidiary of NMPC) prior to the restxuctuxing, unless such assignee has a long-term unsecured debt

+edit rating issued by Moody's Investors Service, Standard & Poor's Corporation or another nationally recoyuzed rating agency that is at least as favorable as NMPC's long-term unsecured debt credit rating immediately prior to the effective date of the restructuring, and (ii) ifsuch assignee is not the entity which will collect Born customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval, such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the IPP (or its l l90l4

assignee hereunder), by each of the entities which will collect from customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval.

(b) Third P Assi ament. Upon notice to the IPP (or its assignee hereunder),

NMPC may assign its rights and obligations under this Agreement. to any third party

("NMPC Assignee" ) (except those parties referenced in Section 3(a) above) provided that the NMPC Assignee has (i) received a long-term unsecured debt credit rating by Moody s Investors Service or Standard 8c Poor's Corporation of at least investment grade or the equivalent of such rating from another pationally recognized rating agency, as of the date of consummation of the assignment; or (ii) furnished IPP with such collateral security as may be reasonably acceptable to the IPP in order to limit the IPP's credit risk in connection with such assignment.

4. Further Assurances. Subject to the terms and conditions contained herein, upon the request from time to time of either party hereto, the other party shall promptly execute and deliver or use its Reasonable Best Efforts to cause to be executed and delivered, such consents, approvals and other instruments, including, without limitation, assignments of this Agreement as collateral, estoppel certificates and utility certificates, in form and substance reasonably satisfactory to both parties and their respective counsel to implement any financing or other material business transaction undertaken by the requesting party.

5, uali in Facili Monitorin and Status. (a) NMPC shall have no contractual right and shall waive any other right which it might have under state or federal law to demand information from the IPP, or any other person, including but not limited to any Governmental Authority, with respect to such IPP's status: as a state and/or federal qualifying facility ("QF Status" ).

(b) NMPC acknowledges and agrees that the IPP is not required to maintain a generating facility pursuant to the terms hereof. for the performance of its obligations hereunder. Notwithstanding the foregoing, the IPP shall have the right, but not the obligation, in its sole discretion to obtain and/or maintain its QF Status under New York law (including compliance with NYPSL g 2(2-a)) andlor PURPA, respectively. NMPC's rights and obligations hereunder shall continue as a matter of contractual right regardless of whether the IPP maintains its QF Status. Any failure by the IPP to comply with the requirements applicable to QF Status under New York law (including compliance with NYPSL g 2(2-a)) shall have no adverse impact on the IPP under this Agreement. In the event the IPP wishes to qualify or perform as an Exempt Wholesale Generator under Section 32 of PUHCA and FERC's regulations promulgated thereunder, as the same may be amended, modified or restated &om time to time, NMPC shall cooperate with (including, without limitation, by providing consents and affidavits), and shall not take any action to oppose, impede or subvert, the IPP's efforts to obtain appropriate regulatory exemptions and approvals, including market-based rate approval. Except to the extent that the contract prices under this Agreement are or may be based thereon, during the term of this Agreement the IPP (i) shall waive any statutory right it may have under Section 66-c of NYPSL pursuant to which the IPP mav demand a,6) per KWh minimum power purchase rate Rom Hlvo.'t ', and (ii) shall waive, for itself and for the successors N I90I4 IS

and assigns of its Project, with respectto such Project, any statutory right it may have under PURPA or NYPSL to require NMPC to enter into a power purchase contract or otherwise take the output of the IPP's Project; provided, however, that until the end of the Proxy-Market Price Period NMPC agrees, at the IPP's request, to act as agent for the IPP if (or, necessary to effectuate such sales to the New York Power Pool, by purchase and resale of the IPP's capacity and energy, at no cost to NMPC), for the sale on up to a monthly basis, of the IPP's Project's capacity and energy to the New York Power Pool or any third party, in each case on a nondiscriminatory basis with respect to NMPC's or any third party's capacity and energy, at no cost to the IPP. NMFC agrees to use its Reasonable Best Effort to effect such sales on the most favorable terms, including price, to the IPP giving consideration to the quantity, term and market conditions prevailing at the time of sale, Nothing contained herein shall be construed to constitute a waiver by the IPP of any other rights it may have under PURPA, NYPSL or applicable law, including rights with respect to back-up services, interconnection, reactive power or other similar rights, whether or not a contract is requited or desirable.

6. Certaia Amendments. In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, IPP (or its assignee hereunder) shall have the right to replace this Agreement, as applicable, with power purchase and/or hedging contractual arrangements substantially equivalent to those that are entered into between the entity(ies) holding the transmission and/or distribution assets of NMPC or which will coHect &om customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval and the entity(ies) holding the non-nuclear generating assets of NMPC, whether or not such assets are spun-off to NMPC's shareholders (a "Genco Contract" ), provided that the term, price and quantity under this Agreement shall not be altered thereby, unless any of such terms are materially and expressly conditioned by certain provisions in the Genco Contract, in which case appropriate and equitable adjustments in such terms shall be mutually agreed upon by NMPC or its assignee, as the case may be, and the IPP.

Nl90I4 l9

APPENDIX 6-1 FORM OF NOTICE fto be supplied]

~ ~

20 419014

APPENDIX 6-2 Contract Quantity Contract Period h Period 8 Period C Period D Period N Contract Year (KWh) (KWh) (Kwh) (KWh) (KWb) Price (SMWb}

10 Periods to be divided in Intervals.

)~ so ~ 'De >a~

<<l90I4

APPENDIX 6-3 INDEXING FORMULAE The indexing formulae set forth below are indicative of an indexing formula that shall be used on each Settlement Date to adjust the contract price for the preceding month beginning on the first day of the third Contract Year of each Indexed Swap Contract:

~To own" Contract Price Formula ICP = CP ~ [(x%'(GClGco)) + (y%'(INFIINFo)) + (z/o'(TBD/TBDo))]-$

5/MWh'here:

ICP = indexed contract price CP = the contract price in the reference year x = weighting factor assigned to price of gas GC = average price of gas for the applicable period Gco= reference price of gas y = weighting factor. assigned to inflation INF = average inflation for the applicable period INFQ= reference inflation factor z = weighting factorassigned to additional factor TBD= average of the other factor [to be determined - example could be electricity pool price]

TBDo = reference other factor The average price of gas (GC) used in the above formula shall, at the option of the Gas IPP, be determined by one of the following gas price indices: (i) the NYMEK Gas Price Index at Henry Hub; (ii) the CNG south pool Appalachian Index published by Inside FERC and Natural Gas JYeelc (iii) the Weighted Average Commodity Cost of Gas ("WACCOG") published by Natural Fuel Gas Distribution Corporation (iv) the I The "-$5/MWh" sh~; 'm ..i:J'gv. t: "-4-':".<".";+.";."'r'~~i '"."~'.";~t~y of the teach Contract"'.~~

Year of each Indexed Swap Contract.

NI90I4 22

Niagara Border Spot Price for natural gas (Delivered to Pipe U.S. I) published by

. Natural Gas Week in its Canadian Price Report; or (v) another regularly published gas price index, provided, in each case, such gas price index meets the following requirements:

(a) such gas price index shall be a tradable and liquid market index; and (b) such gas price index shall present basis differential risks to the Gas IPP which are acceptable to such Gas IPP, if compared with the actual gas purchase prices for such Gas IPP at the local distribution company delivery point or the Gas IPP's plant burner tip, as the case may be.

The reference inflation factor (INFO) and the average inflation for the applicable period (INF) used in the above formula shall, at the option of the Gas IPP, be based on or generally consistent with (i) Producer Price Indices published by the U.S. Department of Labor, Bureau of Statistics, (ii) Consumer Price Indices published by the U.S.

Department of Labor, Bureau of Statistics, (iii) inflation forecast indices published by Data Resources Incorporated/McGraw-Hill, or (iv) such other regularly published indices relating to inflation, "Bottom-u " Contract Price Formula The bottom-up formulation is based on recognizable fixed and variable costs and margins, with which such Gas IPP and NMPC managers are already familiar.

This formulation also allows the inclusion of a fixed schedule of cost increases or decreases, for example in connection with a schedule of future fixed payments which anticipate a major overhaul and then decline, or step wise increases, in property taxes, or in accordance with a PILOT agreement or an for'xample, abaternent agreement etc.

This formulation is based on a traditional build-up of fixed and variable costs and margins including:

Fixed costs:

Fixed Operations and Maintenance Costs

~ Debt Service (ifany)

~ GEcA including insurance and taxes other than income taxes

~ Auxiliary boiler costs

~ Margin I l9014 23

Variable Costs:

~ Variable operations and maintenance

~ Start-up and shutdown costs

~ Heat rate and fuel cost

~ Margin It is not intended that Gas IPP will be required to provide NMPC with such line items of cost or margin. The intent is that the Gas IPP will provide factors which are composed of such linc items or parts of such line items or groupings of the same as may be selected by each Gas IPP.

The factors selected by each Gas IPP shall be indexed using the formulation below.

On each Settlement Date, the contract price shall be adjusted for the preceding month, using the following formula:

Price/MWh= (CPAX~II +(CPBX~JI +(CPCX~Kl +

JO . KO (CPXXLl )+Cl+C2+

LO CN-$ 5/Mls'O CPA, CPB, CPG and CPX, are defined portions of the above fixed and variable costs and margin's, as the Gas IPP may elect, and which are base-year costs expressed in S/MWh.

IO, JO, KO, LO are. base-year values of the indices selected by such Gas IPP And I1, Jl, Kl and Ll are the applicable inflated values of those indices, used in calculating the adjustments in the contract price.

And Cl, C2, CN are a fixed schedule of cost values expressed in $ /MWh, which may increase and/or decrease, which are displayed and fixed at the time of entering into the Indexed Swap Contract.

=5.; r- "'"tlat'.: '~ .imaged to "-$2.50MWh" beginning on the first day'6t Year of each Mexed Swap Contract.

5 ttaaCcatrCf ll90t4 24

ATTACHMENTA-7 POWER PUT CONTRACTS WITH GAS IPPS APPROXIMATE APPROXIMATE AGGREGATE AGGREGATE CONTRACT INSTALLEDCAPACITY QUANTITY YEAR (G%h)

(M%)'06.15 4,640 606.85 4,640 611.85 4,690 616.75 4,730 616.95 4,736 619.55 4,755 620A5 4,765 621.75 4,778 623.05 4,786 10 624.45 4,798 I Such installed capacity is subject to both seasonal variations and degradation and rcprescnts the aggrcgatc installed capacity which NMPC is entitled to claim from the Gas IPPs that arc parties to Restated Contracts during thc Proxy-Market Price Period for purposes of reporting to thc Ncw York Power Pool. Prior to the establishment of the ISO/PE and thereafter at any time when no separate dt.t~:.', -'-..z~:ki"",.rists, the price. for capacity shall'equal 'zero', exdepl ~ tl;'etc'at->ztudM '..- <-"-=t-r the Proxy-Market Price.

25

ATTACHMEYEA-8 TERMSHEET FOR POWER PUT CONTRACTS WITH GAS IPPS Set forth below is a termsheet for.Schedules which will be attached to and made part of a Master Agreement for Power Put Contracts. The Master Agreement will be based on a standard form of Master Agreement which is &equently used for power put contracts.

The Master Agreement will set forth general terms and conditions, including representations and warranties and events of default.

EFFECTIVE DATE AND TERM The Agreement will take effect as of the Effective Time. The effectiveness of the provisions in respect of the put option contained in Schedule 1 below shall expire at the end of the. Proxy-Market Price Period, but in no event later than 10 Contract Years Rom the Consummation Date. The effectiveness of the provisions contained in Schedule 2 below shall expire 10 Contract Years Gom the Consummation Date, unless otherwise provided in Schedule 2 below.

SCHEDULE 1 - PUT OPTION .

DELIVERYAND ACCEPTANCE OF ELECTRICITY Ener and Ca aci Sub'ect to Put 0 tions. The right of the IPP to put energy and capacity to NMPC hereunder shall be limited to energy and associated capacity of the IPP's Project, subject to the IPP's rights to assign this Agreement pursuant to the assignment provisions contained herein. The IPP shall not object to NMPC's inclusion of all capacity associated with the contract quantity of electricity pursuant to the terms

. hereof as capacity available to NMPC for regulatory purposes.

dP'i ~ AU*

. p'U*IPP d*tPP I llh *Ih* 'Rhi Hay basis, to put (i) energy to NMPC up to the specified contract quantity of electricity (including energy subject to the Overgeneration Amount (as such term is defined herein)), and (ii) capacity, which capacity is subject to both seasonal variation and degradation, associated with the contract quantity of electricity, in each case, for each Interval (as such term is defined herein) during the immediately succeeding Settlement Period, and NMPC shall be obligated to take and pay for such energy and capacity from the IPP at the Proxy-Market Price or the Market Price and, if applicable, the Market Capacity Price, as the case may be. Energy and associated capacity in excess of the contract quantity of electricity',fi..<~n, induc~'."'..",h..'!,",r..l . ".~ ~je~.~. !i:;

NI9014 26 p~~nt and; ., ~

at the option of the IPP, may be sold to third parties without an obligation to offer such energy and capacity to NMPC.

Notice of Fut Exercise and Len th of Exercise Period. To be agreed upon by NMPC and the IPP during the individual negotiations.

Pa ment Notices and Pa ment Dates. The IPP shall provide NMPC with notice (each, a "Notice") of any payments due for energy and/or capacity put to NMPC during the preceding calendar month on or before the 10~ day of the calendar month, unless the IPP and NMPC otherwise agree during the course of the individual negotiations. Payments shall be due (each, a "Payment Date" ) on the later of (i) the 25 day of the calendar month in which such notice is given, or (ii) the 15 day after delivery by the IPP to NMPC of such notice. In the event such 25 or 15 day is a Saturday, Sunday or legal holiday, the corresponding payment shall be due on or before the first'business day following such 25~ or 15~ day, as the case may be.

Pa ent Dis utes. IfNMPC, in good faith, disputes any part of any Notice of a payment obligation, NMPC shall provide a written explanation of the basis for such dispute and the undisputed portion of the net payment obligations set forth in such Notice shall be paid by the party obligated to pay such amounts no later than the applicable Payment Date. Any adjustment under this Section shall bear interest at the prime'rate for U.S.

currency as published &om time to time under "Money Rates" in The 8'all Street Journal, &om and including the Payment Date any such underpayment or overpayment was originally due to but excluding the date on which such underpayment or overpayment is finally settled by the parties hereto, or in the event th'e parties hereto are unable to settle such matter, such matter shall be settled by an independent nationally recognized public accounting firm mutually selected by the parties, whose determination shall be final and binding on the parties hereto and whose fees and expenses shall be borne by the party found to be at substantial fault by such independent public accounting firm. No Notice (or payment obligation thereunder) shall be subject to this Section unless a notice of dispute is given with respect thereto within two years of the Payment Date applicable to such Notice.

NMPC Ri ht of First Refusal. Ifthe IPP determines not to exercise its rights to put energy and capacity to NMPC, such IPP may sell any energy or capacity. associated with the contract quantity of electricity to third parties, provided such IPP has first offered to sell such energy and capacity to NMPC and NMPC has declined the opportunity to purchase such energy and capacity. The notice period for such offers and the length of time which NMPC has to respond thereto shall be agreed upon by the IPP and NMPC during the individual negotiations.

CERTAIN DEFINED TERlvlS AhfD PROVISIONS Over eneration Amount: Shall mean an amount of energy in excess of the contract quantity of electricity; provided such amount of excess energy shall not exceed 5% of the contract quantity of electricity for the applicable Interval (the "Overgeneration Amount"). The IPP shall have the right to put the Overgeneration Amount to NMPC hereunder at the Proxy-Market Price or the Market Price, as the case may be.

interval:- Shall mean i bouc or such other time period as NMpc and the ipp shall mutually agree upon, provided that such mutually agreed upon time period may only be modified upon the prior written consent of NMPC and the IPP.

Contract Year: Shall mean the period commencing at 11:59:59 p.m. on the Consummation Date and ending at 11:59:59 p.m. on the first anniversary of the last day of the month in which the Consummation Date occurs and each successive 12-month period thereafter to the extent apphcable.

Pro -Market Price: Shall mean (i) prior to the establishment of the ISO/PE, NMPC's short-tean avoided energy and capacity costs at the voltage level of the IPP's Project's bus bar, as stated in its tariffapproved by the PSC providing for the purchase of power Irom PURPA qualifying facilities, which tariffis currently designated as S,C.-6, as the same may be in effect Gom time to time, or any successor tariff thereto or such other price as may be agreed upon by NMPC and IPP duriiig the individual negotiations, and (ii) on the Grst day of the month following the calendar month in which the ISO/PE is established, the Market Price and; if applicable, the Market Capacity Price; provided, however, that at 'such time the parties shall conduct good. faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referenced in clause (i) above for a mutually agreed upon additional period of time. The Proxy-Market Price shaH not be reduced or onset by any costs that NMPC may incur, including, without limitation, costs for ancillary services, transmission services or transition (or stranded) costs.

Pro -Market Price Period; Shall mean the period commencing on the date of this Agreement and ending on the Qrst day of the month following the calendar month in which the ISO/PE has been fully established and successfully functioning, provided the following conditions have been satisfied for each of the previous six months: (i) a minimum of 654/o (which percentage shall include the aggregate contract quantities of energy during such period under all physical delivery Restated Contracts with Gas IPPs and aH physical delivery Contracts between NMPC and any IPP party to the Master Restructuring Agreement entered into in lieu of Fixed Price Swap Contracts, regardless of whether the IPPs parties thereto actually effected such sales and all sales on up to a monthly basis of energy (other than sales through the ISO/PE) by the IPPs parties to the Master Restructuring Agreement which are effectuated by NMPC acting as agent for any such IPP) of the energy sales and purchases within the Upstate Market have been transacted through the ISO/PE in the day ahead market based upon the day ahead pricing

~ ~

gnaw:ig~g i~~.adonteA.by <be ~~R<, ~or the ISO/PE in the Upstate Market; and (ii)~~.'v ',~ ".

separate market for capacity then exists, a minimum of 50'/0 (which percentage shall tg l90 l4 28

include the aggregate capacity associated with the aggregate contract quantities of energy during such period under all physical delivery Restated Contracts with Gas IPPs and all physical delivery Contracts between NMPC and any lpP party to the Master Restructuring Agreement entered into in lieu of Fixed Price Swap Contracts, regardless of whether the IPPs parties thereto actually effected such sales and all sales on up to a monthly basis of capacity (other than sales through the ISO/PE) by the IPPs parties to the Master Restructuring Agreement which are effectuated by NMPC acting as agent for any such IPP) of the capacity sales and purchases within the Upstate Market have been transacted through the ISO/PE capacity auction. Notwithstanding the foregoing, if NMPC and IPP mutually agree, the Proxy-Market Price Period may be extended or terminated even ifthe conditions set forth in the immediately preceding sentence have not been satisfied.

IJ *M k*:Shdl II '*lyte)U* i* *

• 'll d the regions currently served by NMPC, New York State Electric & Gas Corporation, Rochester,Gas & Electric Corporation and Central Hudson Gas & Electric Corporation (collectively, the "Utilities"), apd (ii) wholesale sales transactions by any of the Utilities to third parties outside the regions currently served by such Utility, excluding any such sales which are effectuated pure~it to contracts having a term of at least one year existing as of the date of the Master Restructuring Agreement to the extent such contracts are in effect thereafter.

Market Price: Shall mean commencing on the first day of the month following the calendar month in which the ISO/PE is established, the day ahead locational based market price ("LBMP") paid to sellers for energy, at the IPP's Project's bus bar or the region in which the IPP's Project's bus bar is located, specified and published by the ISO/PE; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referred to in clause (i) of the definition of Proxy-Market Price for a mutually agreed upon additional period of time.

Market Ca aci Price: Shall equal zero prior the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exists. Commencing on the first day of the month following the calendar month in which the 'ISO/PE is established and only if there then exists a separate market for capacity, the Market Capacity Price shall mean the market price paid to sellers for capacity, at the region in which the IPP's Pmject's bus bar is located, established by the ISO/PE capacity auction; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referred to in clause (i) of the definition of Proxy-Market Price for a mutually agreed upon additional period of time.

~ ~

NI90l4 29

SCHEDULE 2, - ADDITIONALAGREEMENTS RE UIRED PAYMENTS FOR CHANGES IN COSTS Re uired Nettin Pa ments for Cost Chan es. On each Settlement Date, NMPC shall be obligated to pay to the IPP (to the extent that such number is positive) and the IPP shall be obligated to pay NMPC (to the extent that such number is negative'and in such case the absolute value of such number) (x) the difference between (A) any increase as compared to the costs under the IPP's contractual anangements with NMPC as of January 1, 1997 during the associated Settlement Period in (i) NMPC local distribution system gas transportation and fixed and variable charges and retainages actually incurred by the IPP, and (ii) electrical interconnection costs and costs associated with industry reliability standards actually incurred by the IPP, and (B) any decreases as compared to the costs under the IPP's contractual arrangements with NMPC as of January 1, 1997 during the associated Settlement Period in those costs listed in (i) and (ii) above, and (y) any increase as compared to the costs under the IPP's contractual arrangements with NMPC as of January 1, 1997 during the associated Settlement Period in costs incurred by the IPP caused by changes in federal, state or local laws, rules or regulations; provided that this clause (y) shall only be effective during the Proxy-Market Price Period and any periods thereafter during which like adjustments in costs are also recovered by any entity that owns any of NMPC's non-nuclear generating assets.

Certain Other Cost Additions. On each Settlement Date, NMPC shall be obligated to pay to the IPP any increase as compared to the costs under the IPP's contractual arrangements with NMPC as of January 1, 1997 in electrical transmission costs or access or other charges, which are actually incurred by the IPP during the associated Settlement Period while physically delivering electricity to (x) NMPC during the Proxy-Market Price Period or (y) an ISO/PE following the Proxy-Market Price Period; provided that this clause (y) shall only be effective during the periods when like increases in costs or charges are then also recovered by any entity that owns any of NMPC's non-nuclear generating assets.

Reactive Power Uolta e Su rt Services and Line-Loss Char es. NMPC and the IPP acknowledge that the contract prices under the Indexed Swap Contract relating to the Agreement do not include charges for reactive power, voltage support services or line losses. In the event NMPC tariffs require the IPP to pay NMPC for reactive power or line-losses during periods when the IPP's generating facilities are generating electricity, the contract prices under the related Indexed Swap Contract on each applicable Settlement Date will be equitably increased in an amount equal to all reactive power charges and/or line-loss charges or costs actually incurred by such IPP during the associated Settlement Period. In addition, in the event (i) under any ISO tariff an IPP is required to provide voltage support services, as defined by such ISO tariff, NMPC shall pay to the IPP on each Settlement Date any and all voltage support service payments made by the ISO to NMPC in the associated Settlement Period which are attributable to the voltage support services provided by the IPP, and (ii) the ISO charges the IPP for any line-losses, the contract prices under ~h . r. I~ted Ir dexed...~r-..~. C"rtract "."<> ~ ~'ably .>> ,

<<l90I4 30

increased in an amount equal to all such line-loss charges actually incurred by such IPP during the associated Settlement Period.

Pa ment Notices and Pa ment Dates. After netting the amounts owing pursuant to the payment provisions of this Schedule 2, the IPP shall provide NMPC with notice (each, a "Notice") of any net payments obligation resulting therefrom on or before the 10 day of the first calendar month following the Settlement Date. Payments in connection with such Notice shall be due (each, a "Payment Date" ), on the later of (i) the 25 day of the calendar month in which such Notice is given, or (ii) the 15 day after delivety by the IPP to NMPC of such Notice. In the event such 25~ or 15 day is a Saturday, Sunday or legal holiday, the corresponding payment shall be due on or before the first business day following such 25 or 15* day, as the case may be. The party owing any such payment as so indicated in such Notice shall make such payment to the other party, subject to the payment dispute provision set forth below.

Pa ent Dis ute Mechanism: IfNMPC, in good faith, disputes any part of any Notice of a net payment obligation, NMPC shall provide a written explanation of the basis for such dispute and the undisputed portion of the net payment obligations set forth in such Notice shall be paid by the party obligated to pay such amounts no later than the applicable Payment Date. Any adjustinent under this Section shall bear interest at the prime rate for U.S. currency as published &om time to time under "Money Rates" in The 8'all Street Journal, Rom and including the Payment Date any such underpayment or overpayment was originally due to but excluding the date on which such underpayment or overpayment is finally settled by the parties hereto, or in the event the parties hereto are unable to settle such matter, such matter shall be settled by an independent nationally recognized public accounting firm mutually selected by the parties, whose determination shall be final and binding on the parties hereto and whose fees and expenses shall be borne by the party found to be at substantial fault by such independent public accounting firm. No Notice (or payment obligation thereunder) shall be subject to this Section unless a notice of dispute is given 'with respect thereto within two years of the Payment Date applicable to such Notice.

OTHER PROVISIONS D~li* P'.NMtC 1ll electricity pursuant to such IPP's p I Existing

'ly PPA 6 de or such vp'hi IPP's p

existing interconnection agreement with NMPC or at any other interconnection on NMPC's system.

Allocation of Certain Res nsibilities. Allocations of responsibility and other arrangements made under such IPP's Existing PPA and/or existing interconnection agreements for maintaining service and equipment on each side of the delivery point and for responsibility to third parties shall continue in eQect.

Technical Re uirements. Provisions of Existing PPAs and/or existing interconnection agreements establishing operating parameter limits with respect to such matters as voltage, frequency, phase, relay set-pnints. etc., shall rema! q i pygect.,

4 l90l4

~Meterin . Electricity shall he'measured as provided under the Existing PPAs. Existing PPA provisions with respect to such matters as location, access, ownership, cost responsibility, meter maintenance, inspection and testing, financial adjustment for faulty meters, use of duplicate meters, etcea shall continue to apply.

Assi nment b IPP. Upon notice to NMPC, IPP may assign or transfer the Agreement in whole or in part, without the consent of NMPC (a) as collateral security for purposes of securing indebtedness, or (b) to any approved assignee or transferee (an "Approved Assignee" ). An Approved Assignee shall be (i) any person who (x) (A) acquires the IPP's plant, or (B) has a plant with technical capability that is equal to or greater than the technical capability of the IPP's plant, and (y) has (A) a long-tenn unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard

& Poor's Corporation or the equivalent of such rating 6om another nationally recognized rating agency, or (B) a net worth calculated in accordance with generally accepted accounting principles ("Net Worth"), that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, provided that evidence of such qualifying Net Worth is reasonably demonstrated to NMPC; or (ii) any Affiliate of the IPP; provided (x) such Affiliate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating Gom another nationally recognized rating agency, or (y) such Affiliate has a Net Worth that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, or (z) IPP unconditionally guarantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such Af5liate in connection with such assignment or transfer.'PP may split and assign the quantities of electricity and Intervals to Approved Assignees, each iri respect of a lesser quantity and/or Intervals than the full amounts thereof hereunder, provided that (a) each such assignment is for 50,000 MWh of electricity per year or any integral multiples thereof and to the extent that the remaining unassigned balance of the quantity of electricity hereunder for any such year is less than S0,000 MWh, then for such remaining balance, (b) each such assignment is for a period of at least one year, and (c) the sum of all assigned and retained quantities of electricity and Intervals does not exceed the total quantities of electricity and Intervals hereunder. At the request of the IPP during the individual negotiations and during the term of the Agreement, NMPC and the IPP shall use their Reasonable Best Efforts to mutually agree upon reasonable alternatives to the assignment qualifications contained in the immediately preceding sentence. Except to the extent expressly provided in any applicable guarantee, upon any such assignment or transfer, IPP shall be released and have no further obligations to NMPC hereunder with respect to the assigned or transferred quantities and/or Intervals.

Assi nment b NMPC. NMPC shall not assign its rights and obligations hereunder except as expressly authorized under this Section (a) NMPC Restructurin . In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets,

."hi.,'."er..'.n tLo;inc;.i; -.:'.-',i-2 ':. '- .? a=st;~ng or otherwise, upon neolicee'to the IPP" '

NI90l4 32

(or its assignee hereunder) the Agreement will be assigned to and assumed by the entity oi'ntities owning all or substantially all of NMPC's electric transmission and distribution assets or, ifseparated from NMFC's electric transmission assets pursuant to such a restructuring, NMPC's electric distribution assets, provided that, upon the effective date of the restructuring (i) such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the IPF (or its assignee hereunder), by each of the other entities arising out of the restructuring, including any entity spunwff to NMPC's shareholders or any Affiliate of NMFC holding significant assets that were held by NMPC prior (or any subsidiary of NMPC) to the restructuring, unless such assignee has a long-term unsecured debt credit rating issued by Moody's Investors Service, Standard & Poor's Corporation or another nationally recognized rating agency that is at least as favorable as NMPC's long-term unsecured debt credit rating immediately prior to the effective date of the restructuring, and (ii) ifsuch assignee is not the entity which willcollect from customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval, such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the IPP (or its assignee hereunder), by each of the entities which will collect from customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval.

(b) Third P Assi ent. Upon notice to the IPP (or its assignee hereunder),

NMPC may assign its rights and obligations under this Agreement to any third party

("NMPC Assignee" ) (except those parties referenced in Section U (a) above) provided that the NMPC Assignee has (i) received a long-term unsecured debt credit rating by Moody's Investors Service or Standard & Poor's Corporation of at least investment grade or the equivalent of such rating &om another nationally recognized rating agency, as of the date of consummation of the assignment; or (ii) furnished the IPP with such collateral security as may be reasonably acceptable to the IPP in order to limit the IPP's credit risk in connection with such assignment.

Further Assurances. Subject to the terms and conditions contained herein, upon the request kom time to time of either party hereto, the other party shall promptly execute and deliver or use its Reasonable Best Efforts to cause to be executed and delivered, such consents, approvals and other instruments, including, without limitation, assignments of the Agreement as collateral, estoppel certificates and utility certificates, in form and substance reasonably satisfactory to both parties and their respective counsel to implement any financing or other material business transaction undertaken by the requesting party.

0 l90 I 4 33

Curtailment.

(a) NMPC agrees that its obligation to accept and pay for electricity as provided herein shall in no event be subject to any curtailment of electricity under the provisions of l8 C.F.R. g 292.304(f) (1997), or any subsequent or similar rule or regulation adopted by the PSC or the FERC, or any rule or order of the PSC, the FERC, or any other Governmental Authority interpreting or applying those provisions or authorizing NMPC to reserve any rights under those provisions.

(b) NMPC's acceptance of and obligation to pay for electricity produced by the IPP may from time to time be suspended for any periods of time during which, for reasons of necessary maintenance, repair, system emergency, safety or similar actions, NMPC's transmission system is temporarily physically unable to accept such electricity.

NMPC shall give reasonable notice under the circumstances of the need for such disconnection to the IPP, upon receipt of which the IPP shall carry out the required action without delay. During any such period of suspension, NMPC shall use its best efforts to restore NMPC's capability to accept delivery of electricity as promptly as possible.

NMPC will use its best efforts to schedule any planned outages upon consultation with the IPF and commensurate with the IPP's schedule for planned maintenance or other outages. NMPC shall bear any costs incurred by it in connection with any such disconnection or reconnection. All deliveries of power which are subject to any such suspension may be rescheduled at the option of the IPP.

Certain Amendments. In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, the IPP (or- its assignee hereunder) shall have the right to replace the Agreement, as applicable, with power purchase and/or hedging contractual arrangements substantially equivalent to those that are entered into between the entity(ies) holding the transmission and/or distribution assets of NMPC or which will collect Rom customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval and the entity(ies) holding the non-nuclear generating assets of NMPC, whether or not'such assets are spun-off to NMPC's shareholders (a "Genco Contract" ), provided that the term, price and quantity under the Agreement shaH not be altered thereby, unless any of such terms are materially and expressly conditioned by certain provisions in the Genco Contract, in which case appropriate and equitable adjustments in such terms shall be mutually agreed upon by NMPC or its assignee, as the case may be, and the IPP.

uali in Facili Monitorin and Status.

(a) NMPC shall have no contractual right and shall waive any other right which it might have under state or federal law to demand information Gom the IPP, or any other person, including but not limited to any Governmental Authority, with respect to such IPP's status as a state and/or federal qualifying facility ("QF Status" ).

NI9014

(b) The IPP shall have the right, but not the obligation, in its sole discretion to obtain and/or maintain its QF Status under New York law (including compliance with NYPSL g 2(2-a)) and/or PURPA, respectively. NMPC's rights and obligations, including without limitation its obligation to pay for electricity produced by the IPP as set forth hereunder, shall continue as a matter of contractual right regardless of whether the IPP maintains its QF Status. Any failure by the IPP to comply with the requirements applicable to QF Status under New York law (including compliance with NYPSL g 2(2-a)) shall have no adverse impact on the IPP under this Agreement. In the event the IPP wishes to qualify or perform as an Exempt Wholesale Generator under Section-32 of PUHCA and FERC's regulations promulgated thereunder, as the same may be amended, modifted or restated from time to time, NMPC shall cooperate with (including, without limitation, by providing consents and aQidavits), and shall not take any action to oppose, impede or subvert, the IPP's efforts to obtain appropriate regulatory exemptions and approvals, including market-based rate approval. Except to the extent that the contract prices under this Agreement are or may be based thereon, during the term of the Agreement the IPP (i) shall waive any statutory right it may have under Section 66-c of NYPSL pursuant to which the IPP may demand a 6g per KWh minimum p'ower purchase rate Gom NMPC, and (ii) shall waive, for itself and for the successors and assigns of its Project, with respect to such Project, any statutory right it may have under PURPA or NYPSL to require NMPC to enter into a power purchase contract or otherwise take the output of the IPP's Project; provided, however, that until the end of the Proxy-Market Price Period NMPC agrees, at the IPP's request, to act as agent for the IPP (or, if necessary to effectuate such sales to the New York Power Pool, by purchase and resale of the IPP's capacity and energy, at no cost to NMPC), for the sale on up to a monthly basis, of the IPP's Project's capacity and energy to the New York Power Pool or any third party, 'in each case on a nondiscriminatory basis with respect to NMPC's oi any third party's capacity and energy, at no cost to the IPP. NMPC agrees to use its Reasonable Best Efforts to effect such sales on the most favorable terms, including price, to the IPP giving consideration to the quantity, term and market conditions prevailing at the time of sale. Nothing contained herein shall be construed to constitute a waiver by the IPP of any other rights it may have under PURPA, NYPSL or applicable law, including rights with respect to back-up services, interconnection, reactive power or other similar rights, whether or not a contract is required or desirable.

Relocation of Power Lines. In the event it becomes necessary -for NMPC to relocate or rearmnge its transmission system to which the IPP is connected, NMPC shall advise the IPP at least one year in advance in writing. Ifsuch relocation or rearrangement is ordered or required by a Governmental Authority, NMPC shall give prior written notice to the IPP equal in time to the notice given to NMPC by such Governmental Authority. NMPC shall consult with the IPP on the new facilities that NMPC shall propose to reestablish the connection. Such new facilities shall be reasonably satisfactory to the IPP and, at a minimum, shall provide the IPP with at least as much output capacity as with the prior connection facilities. NMPC shall bear the full cost and expense of reestablishing the connection to the IPP. NMPC shall use its best efforts to minimize the duration of any disruption to the IPP's service during the relocation or rearrangement of NMPC's l

Nl90I4 35

transmission facilities. Notwitbstanding anything to the contrary contained herein, the provisions of this Section shall not apply to the abandonment of power lines.

~~ling. The IPP shall have the right to have NMPC wheel some or all of the output of its Project to third parties pursuant to applicable law, or NMPC's, or other companies',

duly filed transmission and distribution tariffs or schedules.

• hh '*

(a) ln the event either party hereto is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under the Agreement, other than the obligation to make payments of amounts due hereunder, it is agreed that upon notice, with reasonably full particulars of such Force Majeure given by such party to the other party in writing within a reasonable time kame after the occurrence of the cause relied upon, then the obligation or obligations hereunder of the party giving such notice, so far as they are afFected by such Force Majeure, shall be suspended during the continuance of an inability so caused. Such cause shall, as far as possible, be remedied with all reasonable dispatch.

(b) The term "Force Majeure" as used herein means acts of God, strikes, lockouts, acts of public enemies, wars, blockades, insurrections, riots, epidemics, landslides, lightning, system emergencies, earthquakes, fires, storms, Goods, washouts, arnis, explosions, breakage or accident to machinery, equipment or transmission or distribution lines; provided that the term Force Majeure does not mean or include any cause which by the exercise of reasonable diligence of the party claiming suspension could be overcome.

Persons Bound and Benefited. The Agreement shall bind and benefit assigns and other successors.

G * 'gh* g*

irrespective of conflicts

• hglh*g

• of law rules.

Hhyg* h i*I fg* Yg, t l9014 36

ATTACHMENTA-9 OPTION PROVISIONS FOR RESTATED CONTRACTS WITH GAS IPPS'ONTRACT AGGREGATE WEIGHTED OPTION AVERAGE AVOIDED OPTION QUANTITY PRICE YEAR (GWh) ($ /MWh)'4.07 500 23.85 24.71 500 26.19 500 27.29 500 28.51 l This table 2 Represents cstimatcs proposed by NMPC.

>l90I4 represents the aggregate quantities and weighted average avoided prices for the option pre<<aeons wl '4 cd/ o <<clijiÃ<<w.'~ -"

37

~ ~ ~

ATTACHMENTA-10 FIXED PRICE SWAP CONTRACTS AGGREGATE AGGREGATE CAPACITY QUANTITY PRICE YEAR (GWh) (SjMWh)

(MW)'28.3.

2003 54.58 2004 342.5 3,000 56.51 2005 456.6 4,000 58.01 (4) 2006 456.6 60.48 2007 456.6 4,000 62.30 2008 913.2 8,000 61.99 2009 913.2 8,000 62.06 l Represents the aggregate ~ity during all periods within each relevant year which is subject to the Fixed Price Swap Contracts. Prior to the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exists, the price foi'he applicable capacity shall equal zero. Following the Proxy-Market Price Period and only if there exists a separate market for

.;.;eel.,-. = appiicabic capacity will be adjusted'ca a basis t. - is!='. ader iL's '":" s; u.b""b~

separate market.

sl90I4 38

ATTACHMENTA-11 TERNISHEET FOR FIXED PRICE SWAP CONTRACTS Set forth below is a termsheet for a Schedule which will be attached to and be made a part of a Master Agreement for the Fixed Price'wap Contracts. The Master Agreement for the Fixed Price Swap Contracts will be based on an ISDA standard form of Master Agreement, which is a form that is &equently used for swap contracts. The Master Agreement vrill set forth general terms and conditions, including representations and warranties and events of default.

TERMSHEET FOR SCHEDULE to the Master Agreement for Fixed Price Swap Contracts between Niagara Mohawk Power Corporation ("NMPC") and "Counterparty")

(a) Payment on Settlement Date.

THE OBLIGATIONS INCURRED PURSUANT TO THIS SCHEDULE SHALL REQUII& CASH PAYMENTS AND SHALL IN NO EVENT BE INTERPRETED TO REQUIRE THE PURCHASE OR SALE OF ELECTRICITY.

(i) Subject to Section 1(a)(ii) of this Schedule, on the Settlement Date, NMPC shall be obligated to pay to Counterparty the Fixed Payment and Counterparty shall be obligated to pay to NMPC the Floating Payment. Such payment obligations shall be paid on a net basis pursuant to Section of this Agreement on the Payment Date.

(ii) Pa ment Dis ute Mechanism: If Counterparty, in good faith, disputes any part of any Notice of a net payment obligation, Counterparty shall provide a written explanation of the basis for such dispute and the undisputed portion of the net payment obligations set forth in such Notice shall be paid by the party obligated to pay such amounts no later than the applicable Payment Date.

Any adjustment under this Section 1(a)(ii) shall bear interest at the prime rate for U.S. currency as published &om time to time under "Money Rates" in The Fall Street Journal, from and including the Payment Date any such underpayment or overpayment was originally due to but excluding the date on which such underpayment or overpayment is finally settled by the parties hereto, or in the event the parties hereto are unable to settle such matter, such matter shall be settled by an independent nationally recognized public accounting firm mutually selected by the parties, whose determination shall be final and binding on the parties hereto and whose fees and expenses shall be borne by the party found to be at substantial fault by such inde@ ~hei t opal! c ac<:o>>niirpe.,f~r>>i., No "i~!ic~. ~~~."

4I90I4 39

payment obligation thereunder) shall be subject to this Section l(a)(ii) unless a notice of dispute is given with respect thereto within two years of the Payment Date applicable to such Notice.

(b) Related Definitions and Provisions.

P

• 2 *: PP*Py

• D hllh g I fflyg 22 hy fl calendar month, provided such day is a Business Day, and ifsuch day is not a Business Day on the first Business Day following such 25~ day, or (ii) the 15~ day after the receipt by Counterparty of Notice Gom NMPC, provided such day is a Business Day, and ifsuch is not a Business Day, on the first Business Day following such 15~ day. Notwithstanding the foregoing, in the event that following the Proxy-Market Price Period ISO/PE procedures require alternate dates for payments, such alternate payment dates shall automatically be deemed to be incorporated in, and shall supersede, the payment dates set forth herein.

ISO/PE: ShaU mean a New York Independent System Operator and Power Exchange.

NMPC Pa nt Obl ation: NMPC shall be obligated to pay to Counterparty an amount equal to the product of the Notional Quantity of electricity during the applicable Interval multiplied by the Contract Price applicable to such Interval (the "NMPC Payment Obligation").

PiDP Ihy'P

• f D* I

• D tglh equal to the sum of (i}the Fixed Payment for the prior Interval (which shall be zero for the Initial Interval), and (ii) the NMPC Payment Obligation for the current Interval.

Counte Pa ent Obli ation: Counterparty shall be obligated to pay to NMPC an amount equal to the product of the Notional Quantity of electricity during the applicable Interval multiplied by the Proxy-Market Price or the Market Price, as the case may be, applicable to such Interval (the "Counterparty Payment Obligation").

P~l' *: yh PD 'Py f g

• I D hglh*

amounthequal to the sum of (i) the Floating Payment for the prior Interval (which shall be zero for the Initial Interval), (ii) the Floating Payment for the current Interval, and (iii) if applicable, the Market Capacity Price in $ /MW for the period &om the Initial Interval to the Settlement Date multiplied by the weight averaged capacity associated with the Notional Quantity of electricity for each Interval &om the Initial Interval to the Settlement Date.

Contract Price: Shall mean for each year of the Term of this Agreement commencing with January I, 2003, $ / MWh, $ / MWh, $ / MWh,

$ /MWh, $ / MWh, $ / MWh and $ /MWh, respectively.

P.y I/ l90 I 4 40

Settlement Date: Shall be the last day of the calendar month specified in the Confirmation delivered in accordance with the terms of the Master Agreement.

Interval: Shall be (i) I hour; provided that in the event that foltoviing the Proxy-Market Price Period ISOiPE procedures require the use of an alternate time period, such alternate time period shall automatically be deemed to be incorporated in, and shall supersede, the 1 hour1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br /> period set forth herein, or (ii) such time period as NMPC and Counterparty shall mutually agree upon; provided that such mutually agreed upon time period may only be modified upon the prior written consent of NMPC and Counterparty.

Initial Interval: Shall be the Interval specified in the Confirmation delivered in accordance with the terms of the Master Agreement.

Notice: Alter netting the Fixed Payment and the Floating Payment, NMPC shall provide Counterparty with notice (each, a "Notice") of any net payment obligation resulting there&om on or before the 10 day of the first calendar month following the Settlement Date; provided that in the event that following the Proxy-Market Price Period ISO/PE procedures require an'alternate date for payment notices, such alternate notice date shall automatically be deemed to be incorporated in, and shall supersede, the notice 3

• f hl**' hN 3** hhlh 3 'dly'*f fash dh this Agreement.

N~if ': Shdlt 3 y .* * '3 '3 3 ~32dhhh*

following contract quantities of electricity (in GWh) for which Counterparty and NMPC are contractually committed: 2,000, 3,000, 4,000, 4,000, 4,000, 8,000 and 8,000, respectively.

Pro -Market Price: Shall mean (i) prior to the establishment of the ISO/PE, NMPC's short-term avoided energy and capacity costs at the transmission level, as stated in its tariff approved by the PSC providing for the purchase of power &om PURPA qualifying facilities, which tariff is currently designated as S.C.-6, as the same may be in effect from time to time, or any successor tariff thereto or such other price as may be agreed upon'by NMPC and IPPs prior to the execution and delivery of the Fixed Price Swap Contracts, and (ii) on the first day of the month following the calendar month in which the ISO/PE is established, the Market Price and, ifapplicable, the Market Capacity Price; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referenced in clause (i) above for a mutually agreed upon additional period of time. The Proxy-Market Price shall not be reduced or offset by any costs that NMPC may incur, including, without limitation, costs for ancillary services, transmission services or transition (or stranded) costs.

Prox -Market Price Period: Shall mean the period commencing on the date of this Agreement and ending on the first day of the month following the calendar month in which the ISO/PE has been fully established and successmly functioning, provided the following conditions have been satisfied for each of the previous six months: (i) a mi",imue ~f.65'yp.<v.lush.ib'""."i)tate ~",.<3'. "".",'!>~=.. the aggregate contract quantities of-..-

Nr 0 l90I4

energy during such period under all physical delivery Restated Contracts with Gas IPPs and all physical delivery Contracts between NMFC and any IPP party to the Master Restructuring Agreement entered into in lieu of Fixed Price Swap Contracts, regardless of whether the IPPs parties thereto actuaBy effected such sales and all sales on up to a monthly basis of energy (other than sales through the ISO/PE) by the IPPs parties to the Master Restructuring Agreement which are effectuated by NMPC acting as agent for any such IPP) of the energy sales and purchases within the Upstate Market have been transacted through the ISO/PE in the day ahead market based upon the day ahead pricing mechanism adopted by the FERC for the ISO/PE in the Upstate Market; and (ii) only ifa separate market for capacity then exists, a minimum of 50% (which percentage shall include the aggregate capacity associated with the aggregate contract quantities of energy during such period under all physical delivery Restated Contracts with Gas IPPs and all physical delivery Contracts between NMPC and any IPP party to the Master Restructuring Agreement entered into in lieu of Fixed Price Swap Contracts, regardless of whether the IPPs parties thereto actually effected such sales and all sales on up to a monthly basis of capacity (other than sales through the ISO/PE) by the IPPs parties to the Master Restructuring Agreement which are effectuated by NMPC acting as'gent for any such IPP) of the capacity sales and purchases within the Upstate Market have been transacted through the ISO/PE capacity auction. Notwithstanding the foregoing, if NMPC and Counterparty mutually agree, the Proxy-Market Price Period may be extended or terminated even ifthe conditions set forth in the immediately preceding sentence have not been satisfied.

.IJ

• M*:Shel II* 'ly(0 a* ' '

regions currently served by NMPC, New York State Electric & Gas Corporation, Rochester Gas & Electric Corporation and Central Hudson Gas & Electric Corporation (collectively, the "Utilities"), and (ii) wholesale sales transactions by any of the Utilities to third parties outside the regions currently served by such Utility, excluding any such sales which are effectuated pursuant to contracts having a term of at least one year existing as of the date of the Master Restructuring Agreement to the extent such contracts are in effect thereafter.

Market Price: Shall mean commencing on the first day of the month following the calendar month in which the ISO/PE is established, the.day ahead locational based market price ("LBMP")paid to sellers for energy, at the Sithe/Independence Project's bus bar or the region in which such bus bar is located, specified and published by the ISO/PE; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referred to in clause (i) of the definition of Proxy-Market Price for a mutually agreed upon additional period of time.

Market Ca aci Price: Shall equal zero prior to the establishment of the ISO/PE and thereafter at any time when no separate market for capacity exists. Commencing on the first day of the month following the calendar month in which the ISO/PE is established and only if there then exists a separate market for capacity, the Market Capacity Price shall mean market price paid to sellers for capacity, at. the region in which

'he '.~.~"'ic~-i<<".dence Project's'us bar is located; establish!c~ by"-."iSG/PI-:-'i-"~'caiy" '-' '"

4 l90l4 42

auction; provided, however, that at such time the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to mutually determine whether to continue the pricing referred to in clause (i) of the definition of Proxy-Market Price for a mutually agreed upon additional period of time. Following the Proxy-Market Price Period and only if there then exists a separate market for capacity, the parties shall conduct good faith negotiations and use their Reasonable Best Efforts to adjust the applicable capacity on a basis consistent with the structure of such separate market.

Term: The term of this Agreement shall commence as of the Effective Time with payments to occur hereunder during the period commencing January 1, 2003, and ending December 31, 2009.

2. Assi nment b Counte a . Upon notice to NMPC, Counterparty may assign or transfer this Agreement in whole or in part, without the consent of NMPC (a) as collateral security for purposes of securing indebtedness, or (b) to any approved assignee or transferee (an "Approved Assignee" ). An Approved Assignee shall be (i) any person having a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency; (ii) any Affiliate of Counterparty; provided (x) such Affiliate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency, or (y) such Affiliate has a net worth calculated in accordance with generally accepted accounting principles ("Net Worth"), that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, or (z) Counterparty unconditionally guarantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such Affiliate in connection with such assignment or transfer, (iii) any of the Gas IPPs party to a Restated Contract with NMPC or their respective Affiliates; provided (x) such Gas IPP or such Af5liate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating Gom another nationally recognized rating agency, or (y) such Gas IPP or such Affiliate has a Net Worth that is equal to or ~ter than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, or (z)

Counterparty (in the case of an assignment or transfer to a Gas IPP) or such Gas IPP (in the case of an assignment or transfer to any of its Affiliates) unconditionally guarantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such Gas IPP or such Affiliate, as the case may be, in connection with such assignment or transfer; or (iv) any other person who has a Net Worth that is equal to or greater than the Net Worth of the entity making such assignment or tmnsfer on the date of such assignment or transfer, provided that evidence of such qualifying Net Worth is reasonably demonstrated to NMPC. Counterparty may split and assign the Notional Quantities of electricity and Intervals to Approved Assignees, each in respect of a lesser Notional Quantity and/or Intervals than the full amounts thereof hereunder, provided that (a) each such assignment is for 50,000 MWh of electricity per year or any integral multiples thereof and to the extent that the remaining unassigned balance of the Notional quantity of electricity hereunder for any such year is less thar 50,000 'M'w'h, inen for" '

l90 I 4 43

such remaining balance, (b) each such assignment is for a period of at least one year, and (c) the sum of all assigned and retained Notional Quantities of electricity and Intervals does not exceed the total Notional Quantities of electricity and Intervals hereunder. At the request of (x) the IPPs prior to the execution and delivery of the Fixed Price Swap Contracts, and (y) at the request of Counterparty during the term of this Agreement, NMPC and the IPPs or Counterparty, as the case may be, shall use their Reasonable Best Efforts to mutually agree upon reasonable alternatives to the assignment qualifications contained in the immediately preceding sentence. Except to the extent expressly provided in any applicable guarantee, gipon any such assignment or transfer, Counterparty shall be released and have no further obligations to NMPC hereunder with respect to the assigned or transferred Notional Quantities and/or Intervals.

3. Assi ment b NMPC. NMPC shall not assign its rights and obligations hereunder except as expressly authorized under this Section 3.

(a) NMPC Restructurin . In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, upon notice to Counterparty (or its assignee hereunder) this Agreement will be assigned to and assumed by the entity or entities owning all or substantially all of NMPC's electric transinission and distribution assets or, ifseparated Rom NMPC's electric transmission assets pursuant to such a restructuring, NMPC's electric distribution assets, provided that, upon the effective date of the restructuring (i) such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to Counterparty (or its assignee hereunder), by each of the other entities arising out of the restructuring, including any entity spunwff to NMPC's shareholdes or any Affiliate of NMPC holding significant assets that were held by NMPC (or any subsidiary of NMPC) prior to the restructuring, unless such assignee has a long-term unsecured debt credit rating issued by Moody's Investors Service, Standard & Poor's Corporation or another nationally recognized rating agency that is at least as favorable as NMPC's long-term unsecured debt credit rating immediately prior to the effective date of the restructuring, and (ii) if such assignee is not-the entity which will collect &om customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval, such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the Counterparty (or its assignee hereunder), by each of the entities which will collect &om customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval.

(b) Third P Assi ent. Upon notice to Counterparty (or its assignee hereunder), NMPC may assign its rights and obligations under this Agreement to any third party ("NMPC Assignee" ) (except those parties referenced in Section 3(a) above) provided that the NMPC Assignee has (i) received a long-term unsecured debt credit rating by Moody's Investors Service or Standard & Poor's Corporation of at least investment grade or the equivalent of such rating &om another nationally recognized rating agency. as of the date of consummation of the assignment; or (ii) furnished Counterparty with such collateral security as may be reasonably acceptable to the 4190I4 44

Counte5arty in order to limit the Counterparty's credit risk in connection with such assignment.

4. Further Assurances. Subject to the terms and conditions contained herein, upon the request from time to time of either party hereto. the other party shall promptly execute and deliver or use its Reasonable Best Efforts to cause to be executed and delivered, such consents, approvals and other instruments, including, without limitation, assignments of this Agreement as collateral, estoppel certificates and utility certificates, in form and substance reasonably satisfactory to both parties and their respective counsel to implement any financing or other material business transaction undertaken by the requesting party.

5. Certain Amendments. In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, Counterparty (or its assignee hereunder) shall have the right to replace this Agreement, as applicable, with power purchase and/or hedging contractual arrangements substantially equivalent to those that are entered into between the entity(ies) holding the transmission and/or distribution assets of NMPC or which willcollect &om customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval and the entity(ies) holding the non-nuclear generating assets of NMPC, whether or not such assets are spun-off to NMPC's shareholders (a "Genco Contract" ), provided that the term, price and quantity under this Agreement shall not be altered thereby, unless aiiy of such terms are materially and expressly conditioned by certain provisions in the Genco Contract, in which case appropriate and equitable adjustinents in s'uch terms shall be mutually agreed upon by NMPC or its assignee, as the case may be, and Counterparty.

N l90I4 45

APPENDIX 11-1 FORM OF NOTICE

[to be supplied]

N19014 46

ATTACHMENTA-12 ADDITIONALTERMS, CONDITIONS AND PROVISIONS FOR THE AMENDED PPA AND RESTATED CONTRACTS Unless the applicable IPP and NMPC mutually agree otherwise, (i) the Amended PPA shall also be amended to include all of the following provisions, which shall supersede and replace in their entirety, the provisions, ifany, with respect to the subject matter thereof contained in the Existing PPA, and (ii) each Restated Contract (other than Indexed Swap Contracts and Power Put Contracts) shall include all of the following provisions:

tThe following provision is to be included in the Amended PPA and in Restated Contracts that provide for physical deliveries of electricity.]

Assi ent b IPP. Upon notice to NMPC, IPP may assign or transfer this Agreement in whole or in part, without the consent of NMPC (a) as collateral security for purposes of securing indebtedness, or (b) to any approved assignee or transferee (an "Approved Assignee" ). An Approved Assignee shaB be (i) any person who (x) (A) acquires the IPP's plant, or (B) has a plant with technical capability that is equal to or greater than the technical capability of the IPP's plant, and (y) has (A) a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating Rom another nationally recognized rating agency, or (B) a net worth calculated in accordance with generally accepted accounting principles ("Net Worth"),.that. is equal to or greater than the Net %orth of the entity mako>g such assignment or transfer on the date of such assignment or transfer, provided that evidence of such qualifying Net Worth is reasonably demonstrated to NMPC; or (ii) any Af6liate of the IPP; provided (x) such Affiliate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency, or (y) such Affiliate has a Net Worth that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, or (z) IPP unconditionally guarantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such Af61iate in connection with such assignment or transfer.

IPP may split and assign the quantities of electricity and Intervals to Approved Assignees, each in respect of a lesser quantity and/or Intervals than the full amounts thereof hereunder, provided that (a) each such assignment is for 50,000 MWh of electricity per year or any integral multiples thereof and to the extent that the remaining unassigned balance of the quantity of electricity hereunder for any such year is less than 50,000 MWh, then for such remaining balance, (b) each such assignment is for a period of at least one year, and (c) the sum of all assigned and retained quantities of electricity and Intervals does not exceed the total quantities of electricity and Intervals hereunder. At the request of the lPP during the individual negotiations and during the term of this Agreement. NMPC and the IPP shall use their Reasonable Be~t F Anrts.to m! ihip'!i~ pg~o.p upon reasonable alternatives to the assignment qualifications contained in the 0 i90 I 4 47

immediately preceding sentence. Except to the extent expressly provided in any applicable guarantee, upon any such assignment or transfer, IPP shall be released and have no further obligations to NMPC hereunder with respect to the assigned or transferred quantities and/or Intervals.

Phe following provision is to be included in Restated Contracts that do not provide for physical deliveries of electricity.]

Assi nment b IPP. Upon notice to NMPC, IPP may assign or transfer this Agreement in whole or in part, without the consent of NMPC (a) as collateral security for purposes of securing indebtedness, or (b) to any approved assignee or transferee (

"Approved Assignee" ). An Approved Assignee shall be (i) any person having a lon-erm unsecured debt credit ratmg of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating &om another nationally recognized rating agency; (ii) any Af5liate of IPP; provided (x) such Affiliate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating Rom another nationally recognized rating agency, or (y) such Affiliate has a net worth calculated in accordance with generally accepted accounting principles ("Net Worth"), that is equal to or greater than the Net Worth of the entity making such.

assignment or transfer on the date of such assignment or transfer, or (z) IPP unconditionally guarantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such Afniate in connection with such assignment or transfer; (iii) any of the other Gas IPPs party to a Restated Contract with NMPC or their respective AKliates; provided (x) such other Gas IPP or such Affiliate has a long-term unsecured debt credit rating of no less than investment grade issued by Moody's Investors Service or Standard & Poor's Corporation or the equivalent of such rating Rom another nationally recognized rating agency, or (y) such other Gas IPP or such Af5liate has a Net Worth that is equal to or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, or (z) IPP (in the case of an assignment or transfer to another Gas IPP) or such other Gas IPP (in the case of an assignment or transfer to any of its Affiliates) unconditionally yuuantees, pursuant to a guarantee in form and substance reasonably satisfactory to NMPC, the obligations of such other Gas IPF or such Af51iate, as the case may be, in connection with such assignment or transfer; or (iv) any other person who has a Net Worth that is eq ual tot or greater than the Net Worth of the entity making such assignment or transfer on the date of such assignment or transfer, provided that evidence of such qualifying Net Worth is reasonably demonstrated to NMPC. IPP may split.and assign the contract quantities of electricity and Intervals to Approved Assignees, each in respect of a lesser contract quantity and/or Intervals than the full amounts thereof hereunder, provided that (a) each such assignment is for 50,000 MWh of electricity per year or any integral multiples thereof and to the extent that the remaining unassigned balance of the quantity of electricity hereunder for any such year is less than 50,000 MWh, then for such remaining balance, (b) each such assignment is for a period of at least one year, and (c) e sum of all assigned and retained contract quantities of electricity and Intervals does not exceed the total contract og~tities.nf.e3e;~ci~, gad, <rht~~i~!o t.ero.under: At th - ~ - "

request of the IPP during the individual negotiations and during the term of this g l90 l4 4it

Agreement, HMPC and the IPP shall use their Reasonable Best Efforts to mutually agree upon reasonable alternatives to the assignment qualifications contained in the

=

immediately preceding sentence. Except to the extent expressly provided in any applicable guarantee, upon any such assignment or transfer, IPP shall be released and have no further obligations to NMPC hereunder with respect to the assigned or transferred contract quantities and/or Intervals.

Assi nment b NMPC. NMPC shall not assign its rights and obligations hereunder except as expressly authorized under this Section (a) NMPC Restructurin . In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, upon notice to the IPP (or its assignee hereunder) this Agreement will be assigned to and assumed by the entity or entities owning all or substantially all of NMPC's electric transmission and distribution assets or, ifseparated Gem NMPC's electric transmission assets pursuant to such a restructuring, NMPC's electric distribution assets, provided that, upon the effective date of the restructuring (i) such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the IPP (or its assignee hereunder), by each of the other entities arising out of the restructuring, including any entity spunwff to NMPC's shareholders or any Affiliate of NMPC holding significant assets that were held by NMPC prior (or any subsidiary ofNMPC) to the restructuring, unless such assignee has a long-teiin unsecured debt credit rating issued by Moody's Investors Service, Standard & Poor's Corporation or another nationally recognized rating agency that is at least as favorable as NMPC's long-term unsecured debt credit rating immediately prior to the effective date of the restructuring, and (ii) ifsuch assignee is not the entity which will collect &om customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval, such assignee's performance under this Agreement is unconditionally guaranteed, pursuant to a guarantee in form and substance reasonably satisfactory to the!PP (or its assignee hereunder), by each of the entities which will collect &om customers the Competitive Transition Charge approved by the PSC,pursuant to the PSC Approval.

(b) Third P Assi ent. Upon notice to the IPP (or its assignee hereunder),

NMPC may assign its rights and obligations under this Agreement to any third party

("NMPC Assignee" ) (except those parties referenced in Section Q (a) above) provided that the NMPC Assignee has (i) received a long-term unsecured debt credit rating by Moody's Investors Service or Standard & Poor's Corporation of at least investment grade or the equivalent of such rating &om another nationally recognized rating agency, as of the date of consummation of the assignment; or (ii) furnished the IPP with such collateral security as may be reasonably acceptable to the IPP in order to limit the IPP's credit risk in connection with such assignment.

U Further Assurances. Subject to the terms and conditions contained herein, upon the request from time to time of either party hereto, the other party shall promptly execute and deliver or use its Re~sollablc Best FPorls t~ ".a~i~e to i. ~va~!!t~d ~nd delivered, approvals and other instruments, including, without limitation, assignments of such"'onsents, ll l90l4 49

th is Agreement as collateral, estoppel certificates and utility certificates, in form and substance reasonably satisfactory to both parties and their respective counsel to implement any financing or other material business transaction undertaken by the requesting party.

Curtailment.

(a) NMPC agrees that its obligation to accept and pay for electricity as provided herein shall in no event be subject to any curtailment of electricity under the provisions of 18 C.F.R. $ 292.304(f) (1997), or any subsequent or similar rule or regulation adopted by the PSC or the FERC, or any rule or order of the PSC, the FERC, or any other Governmental Authority interpreting or applying those provisions or authorizing NMPC to reserve any rights under those provisions.

(b) NMPC's acceptance of and obligation to pay for electricity produced b th e IPP may &om tune to time be suspended for any periods of time during which, for reasons of necessary maintenance, repair, system emergency, safety or similar actions, MPC's transmission system is temporarily physically unable to accept such electricity.

NMPC shall give reasonable notice under the circumstances of the need for such disconnection to the IPP, upon receipt of which the IPP shall carry out the required action without delay. During any such period of suspension, NMPC shall use its best efforts to restore NMPC's capability to accept deliveiy of electricity as promptly as possible.

C will use its best efforts to schedule any planned outages upon consultation with the IPP and commensurate with the IPP's schedule for planned maintenance or other outages. NMPC shall bear any costs. incurred by it in connection with any such isconnection or reconnection. All deliveries of power. which are subject to any such suspension may be rescheduled at the option of the IPP.

U Certain Amendments, In the event that NMPC restructures its corporate structure or assets, including by creating any new entities that hold significant assets, whether in connection with the NMPC Restructuring or otherwise, the IPP (

hereunder) shall have the right to replace this Agreement, as applicable, with power purchase and/or hedging contractual arrangements substantially equivalent to those that are entered into between the entity(ies) holding the transmission and/or distribution assets of NMPC or which will collect Rom customers the Competitive Transition Charge approved by the PSC pursuant to the PSC Approval and the entity(ies) holding the non-nuclear generating assets of NMPC, whether or not such assets are spunwff to NMPC's shareholders (a "Genco Contract" ), provided that the term, price and quantity under this Agreement shall not be altered thereby, unless any of such terms are materially and expressly conditioned by certain provisions in the Genco Contract, in which case appropriate and equitable adjustments in such terms shall be mutually agreed upon by NMPC or its assignee, as the case may be, and the IPP.

Phe following provision is to be included in the Amended PPA and in Restated Contracts that provide for physical deliveries of electricity.]

NI90I4 50

(J ~O'NMPC k 1 dg t h q ip f I 'p ~iy produced by the IPP may vary based on factors external to the IPP. NMPC shall be required to purchase from the IPP, at the same price which NMPC is then required to pay pursuant to the terms of this Agreement for contract quantities of electricity, an amount of energy in excess of the contract quantity of electricity; provided such amount of excess energy does not exceed 5% of the contract quantity of electricity for the applicabIe Interval.

uali in Facili Monitorin and Status.

(a) NMPC shall have no contractual right and shall waive any other right which it might have under state or federal law to demand information Gem the IPP, or any other person, including but not limited to any Governmental Authority, with respect to such IPP's status as a state and/or federal qualifying facility ("QF Status" ).

(b) The IPP shall have the right, but not the obligation, in its sole discretion to obtain and/or maintain its QF-Status under New York law (including compliance with NYPSL '$ 2(2-a)) and/or PURPA, respectively. NMPC's rights and obligations, including without limitation its obligation to pay for electricity produced by the IPP as set forth hereunder, shall continue as a matter of contractual right regardless of whether the IPP maintains its QF Status. Any failure by the IPP to comply with the requirements applicable to QF Status under New York law (including compliance with NYPSL g 2(2-a)) shall have no adverse impact on the IPP under this Agreement. In the event the IPP wishes to qualify or perform as an Exempt Wholesale Generator under Section 32 of PUHCA and FERC's regulations promulgated thereunder, as the same may be amended, modi6ed or restated from time to time, NMPC shall cooperate with (including, without limitation, by providing consents and afBdavits), and sha11 not take any action to oppose, impede or subvert, the IPP's efforts to obtain appropriate regulatoty exemptions and approvals, including market-based rate approval. Except to the extent that the contract prices under this Agreement are or may be based thereon, during the term of this Agreement the IPP (i) shall waive any statutory right it may have under Section 6&c of NYPSL pursuant to which the IPP may demand a 6g per KWh minimum power purchase rate &om NMPC, and (ii) shall waive, for itself and for the successors and assigns of its Project, with respect to such Project, any statutory right it may have under PURPA or NYPSL to require NMPC to enter into a power purchase contract or otherwise take the output of the IPP's Project; provided, however, that until the end of the Proxy-Market Price Period NMPC agrees, at the IPP's request, to act as agent for the IPP (or, if necessary to effectuate such sales to the New York Power Pool, by purchase and resale of the IPP's capacity and energy, at no cost to NMPC), for the sale on up to a monthly basis, of the IPP's Project's capacity and energy to the New York Power Pool or any third party, in each case on a nondiscriminatory basis with respect to NMPC's or any third party's capacity and energy, at no cost to the IPP. NMPC agrees to use its Reasonable Best Efforts to effect such sales on the most favorable terms, including price, to the IPP giving consideration to the quantity, term and market conditions prevailing at the time of sale. Nothing contained herein shall be construed to constitute a waiver by the IPP of any

.'> ".i ngb'..=':: 'w > .+vunder.PURPA; NYPSL or applicabld law, A ~lbuliig'nghf '"oui l90I4 SL

respect to back-up services, interconnection, reactive power or other similar rights whether or not a contract is required or desirable.

Relocation of Power Lines. ln the event it becomes necessary for NMPC to relocate or rearrange its transmission system to which the IPP is connected, NMPC shall advise the IPP at least one year in advance in writing. If such relocation or rearrangement is ordered or required by a Governmental Authority, NMPC shall give prior written notice to the IPP equal in time to the notice given to NMPC by such Governmental Authority.

NMPC shall consult with the IPP on the new facilities that NMPC shall propose to reestablish the connection. Such new facilities shall be reasonably satisfactory to the IPP and, at a minimum, shall provide the IPP with at least as much output capacity as'with the prior connection facilities. NMPC shall bear the full cost and expense of reestablishing the connection to the IPP. NMPC shall use its best efforts to minimize the duration of any disruption to the IPP's service during the relocation or rearrangement of NMPC's transmission facilities. Notwithstanding anything to the contrary contained herein, the provisions of this Section shall not apply to the abandonment of power lines.

~ ~Wheeho . 'the IPP shaB have the right to have NMPC wheel some or aii of the output of its Project to third parties pursuant to applicable law, or NMPC's, or other companies', duly filed transmission and distribution tariffs or schedules.

(J l'hl '*

(a) In the event either party hereto is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than the obligation to oiake payments of amounts due hereunder, it is agreed that upon notice, with reasonably full particulars of such Force Majeure given by such party to the other party in writing within a reasonable time Game after the occurrence of the cause relied upon, then the obligation or obligations hereunder of the party giving such notice, so far as they are affected by such Force Majeure, shall be suspended during the continuance of an inability so caused. Such cause shall, as far as possible, be remedied with all reasonable dispatch.

(b) The term "Force Majeure" as used herein means acts of God, strikes, ockouts, acts of public enemies, wars, blockades, insuirections, riots, epidemics,

'landslides, lightning, system emergencies, earthquakes, fires, storms, floods, washouts, arrests, explosions, breakage or accident to machineiy, equipment or transmission or distribution lines; provided that the term Force Majeure does not mean or include any cause which by the exercise of reasonable diligence of the party claiming suspension could be overcome.

0 l 9014 52

EXHIBIT2.1

- Form of Termination Agreement 012704

Exhibit 2.1 TERMINATIONAGREEMENT THIS TERMINATION AGREEMENT (the "Termination Agreement" ) entered lllto On 199, by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company" ), and I

(the "IPP") (NMPC and the IPP each are referred to herein as a "Party" and collectively as the "Parties" ). Capitalized teims used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Master Restructuring Agreement (as hereinafter defined).

(A) The Company and the IPP are parties to, among other agreements, a certain power purchase agreement described on Schedule 1 hereto (referred to herein as "Existing PPA") pursuant to which the Company purchases power produced by the IPP's co-generation facility located in , New York (the "Project" ); and (B) The Company and the IPP, among others, have entered into a certain Master Restructuring Agreement, dated as of July 9, 1997 (the "Master Restructuring Agreement" or "MRA"), pursuant to which, among other things, the Company and the IPP have agreed to terminate the Existing PPA and certain other related agreements between the Company (or its Affiliates) and the IPP.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1. Termination of the PPA Documents. Each of the Parties hereby agrees that effective as of the Effective Time, without any further notice or action on the part of the Company or the IPP, and except as set forth in Section 2 hereof, (a) the Existing PPA and each fgas transportation and peak shaving agreement and, at IPP's option, interconnection agreement and interconnection anangements] listed on Schedule 2 hereto (the Existing PPA and such other documents, collectively, the "PPA Documents" ) shall be irrevocably terminated and rescinded; (b) all rights and privileges granted, accruing or

'nuring to each Party pursuant to the PPA Documents shall be irrevocably relinquished and surrendered; (c) all obligations and duties owed or required by the PPA Documents to be performed for or on behalf of one Party by any other Party thereto shall be irrevocably waived and released; and (d) each Party to the PPA Documents and its respective predecessors and successors in interest, agents, directors, officers, partners, trustees, employees and affiliates, shall be irrevocably released and forever discharged from all manner of actions, causes of action, suits, debts, sums of money, accounts, reckonings,

'o bc dated as of Consummation Date.

NI3235

bonds, bills, covenants, contracts, controversies, agreements, judgments, claims and demands whatsoever in law or in equity, known or unknown, which any other Party ever had, now has or hereafter can, shall or may have, based upon or by reason of any maatte, cause or thing related to or arising out of the PPA Documents. Each of the Parties hereby agrees that (i) any requirement for notice (whether written or oral) with respect to the termination of any of the PPA Documents is hereby irrevocably waived by the respective Parties to the PPA Documents and (ii) any other requirement or condition precedent to the termination of any of the PPA Documents which is contained in any of the PPA Documents is hereby irrevocably waived or shall be deemed to have been satisfied, as the case may be.

2. Continuin Ri hts and Obli ations. Notwithstanding the foregoing, the following rights and obligations shall survive the termination of the PPA Documents:

(a) The IPP shall have the right, but not the obligation, to obtain and/or maintain its status as a state and/or federal qualifying facility ("QF") under New York law (including compliance with NYPSL 52(2-a)) and/or-PURPA, respectively.

(b) The Company shall not implement any QF Monitoring Program with respect to the IPP.

(c) In the event the IPP wishes to qualify or perform as an Exempt Wholesale Generator under Section 32 of PUHCA and the FERC's regulations promulgated thereunder, as thc same may be amended, modified or restated from time to time, the Company, upon request and at the expense of the IPP, shall cooperate with (including, without limitation, by providing consents and affidavits), and shall not take any action to oppose, impede or subvert, the IPP's efforts to obtain appropriate exemptions and approvals, including market-based rate approval. 'egulatory (d) The IPP shall have the right to have the Company wheel the output of its Project to third parties pursuant to applicable law, or the Company's, or other companies', duly filed transmission and distribution tariffs or schedules.

~ (e) The IPP shall waive any statutory right it may have under Section of NYPSL pursuant to which the IPP may demand a 6c per Kwh minimum power purchase rate from the Company and the IPP shall waive, for itself and its successors and assigns of the Project, with respect to the Project, any statutory right it may have under PURPA or NYPSL to require the Company to enter into a power purchase contract or otherwise take the output of the Project, provided, however, that prior to the end of the Proxy-Market Price Period. (as such term is defined in Exhibit A to the MRA) the Company agrees, at the IPP's request, to act as agent for the IPP (or, if necessary to effectuate such sales to the New York Power Pool, by purchase and resale of the IPP's capacity and energy, at no cost to the Company), for the sale on up to a monthly basis, of the Project's capacity and energy to the New York Power Pool or any 013235

third party, in each case on a nondiscriminatory basis with respect to the Company's or any third party's capacity and energy, at no cost to the IPP. The Company agrees to use its Reasonable Best Efforts to effect such sales on the most favorable terms, including price, to the IPP, giving consideration to the quantity, term and market conditions prevailing at the time of sale. Further, nothing herein shall be construed to constitute a waiver by the IPP of any other rights it may have under PURPA, NYPSL or applicable law, including rights with respect to back-up services, interconnection, reactive power or other similar rights, whether or not a contract is required or desirable.

(f) Except as expressly provided herein, the IPP shall have all rights and obligations pursuant to applicable law.

(g) Nothing contained herein shall constitute a waiver or release of any claims, liabilities or obligations (i) arising out of or in connection with this Termination Agreement, (ii) arising out of or in connection with any litigation or regulatory proceedings which are not to be dismissed and withdrawn (or effectively withdrawn) by the Company or the IPP pursuant to Sections 8.8(b) and 9.8(b) of the MRA and (iii) unless dismissed or withdrawn pursuant to the Section 8.8(b) or 9.8(b) of the MRA, arising out of or in connection with any payment due to the IPP whether or not disputed, for any power or services purchased by the Company, or any payment due to the Company whether or not disputed, for any services provided by the Company, pursuant to the Existing PPA or any related gas transportation, peak shaving, interconnection or other related agreement between the Company and the IPP, provided that if such payment relates to any period more than sixty (t30) days prior,to the date of the MRA the IPP's or the Company's, as the case may be, entitlement to such payment shall have been set forth in a writing given to the Company or the IPP, as the case may be, on or before June 15, 1997. The Company and the IPP acknowledge and agree that in accordance with Section 1 hereof all claims, liabilities and obligations relating to tracking, adjustment or advance payment account provisions under any Existing PPA shall be extinguished as of the Effective Time

3. Entire A ment. This Termination Agreement, together with the Master Restructuring Agreement, constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, between the Parties with respect thereto.

4. Amendments and Waivers. Any term of this Termination Agreement may be amended and the observance of any term of this Termination Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only by an instrument in writing and signed by the Party against whom such amendlnent or waiver is sought to be enforced.

N l 3235

5. Success rs and Assi ns. Except as otherwise expressly provided herein, Ole terms and conditions of this Termination Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Nothing in this Termination Agreement, express or implied, is intended to confer upon any person or entity other than the Parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Termination Agreement, except as may be expressly provided in this Termination Agreement.

6. G~il . Tg T Ag .'ggg TGG hereof and the rights and obligations of the Parties hereunder, and all amendments and supplements hereof and all waivers and consents hereunder, shall be construed in accordance with and governed by the domestic substantive laws of the State of New York without giving effect to any choice of law or conflicts of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

7. S~everabili . If any provisions of this Termination Agreement as applied to any part or to any circtunstance shall be adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other provision of this Termination Agreement, the application of such provision in any other circumstances or the validity or enforceability of this Termination Agreement.

6

g. ~Ca tions. The headings and captions used in this Termination Agreement are used for convenience only and are not to be considered in construing or interpreting this Termination Agreement.

9. ~C""* . Tg' Ag lg more counterparts', each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have entered into this Termination Agreement as of the date first above written.

Niagara Mohawk Power Corporation By:

Its.

PPP)

By:

Its.

ffl3235

EXHIBIT3.6 Form of Registration Rights Agreement 0 l2704

Exhibit 3.6 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT entered into on 199 (the "Agreement" ) by and between NIAGARA MOHAWK POWER CORPORATION, a New York corporation ("NMPC" or the "Company" ) and the several independent power producers identified as such on the signature pages and on Schedule A hereto (the "IPPs") and ("the IPP Designees")" (NMPC, the IPPs and the IPP Designees are each referred to herein as a "Party" and collectively as the "Parties" ).

RECXTALS (A) Pursuant to a Master Restructuring Agreement, dated as of July 9, 1997 (the "Master Restructuring Agreement" ), the Company has issued [forty-six million (46,000,000)"'] shares (the "Company Shares" ) of common stock, $ 1.00 par value per sharc, of the Company ("Common Stock" ), to the IPPs or the IPP Designees on the date hereof; (8) The Company has filed with the SEC a Shelf Registration Statement on Form S-3 (as amended through the date hereof, the "Registration Statement" ) covering the resale by the Holders (as hereinafter defined), Rom time to time, of the Registrable Securities (as hereinafter defined), which Registration Statement has been declared effective by the SEC on or before the date hereof and is currently in effect; (C) The IPPs desire the Company to maintain the effectiveness of the Registration Statement and cooperate with the IPPs in connection with any sale or ofFering, including any underwritten public offering, of the Company Shares, and the Company has agreed to same, in accordance with the terms and conditions hereof; and (D) It is a condition to the consuinmation of the transactions contemplated by the Master Restructuring Agreement that the Company and the IPPs shall have entered into this Agreement.

NO%', THEREFORE, in consideration of the foregoing premises and for other

'good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

dated as of Consummation Date.

"ToAddbe designees of IPPs of Company Shares pursuant to MRA.

"'ubject to adjustment pursuant to Section 3.5 and 12.4(b) of the MRA.

4 I3538

DEFINITIONS 1.1 For purposes of this Agreement, the terms set forth below shall have the following meanings:

"Afhliate" shall mean, with respect to any Party, any other person or entity which controls, is controlled by, or is under common control with, such Party, wherein the term "control" shall mean the power to direct the management and policies by or of such Party through ownership of voting securities, by contract or otherwise, and any other person which is a partner (general or limited) or shareholder of any Party or partner (general or limited) or shareholder of such partner or shareholder.

"Blackout Period" shall have the meaning set forth in Section 2.1(a).

'SHE* d9" hdll *9 '

2 h' 'l[).

~H* I Iffd* " hdll *9 '

fH '

'.2().

'*~g*h * " hdl 9 S

H*h g*h f ldll, amended.

"Hoider" shall mean any iPP or iPP Designee which receives any of the Company Shares pursuant to the Master Restructuring Agreement and any Afnliate or Institutional Pledgee of any such IPP or IPP Designee which is a subsequent holder of Registrable Securities whose Registrable Securities have not been sold to the public .

pursuant to an effective registration statement or Rule 144 of the Securities Act after the date hereof.

Hld* "I III 9 'g f h' '2(l.

"Institutional Pled ee" shall mean any lending institution to which any of the Registrable Securities may be pledged.

"~Re ister", "~re istered" and "~re istration" shall refer to a registration effected by preparing and filing a registration statement or statements or similar documents in compliance with the Securities Act and pursuant to Rule 415 under the

'ecurities Act or any successor rule providing'for offering securities on a continuous basis ("Rule 415") and the declaration or ordering of effectiveness of such registration statement or document by the SEC.

"Re istrable Securities" shall mean (i) the Company Shares issued by the Company to any IPP or designee of an IPP pursuant to the Master Restructuring Agreement and (ii) any other shares of Common Stock or any other security convertible or exchangeable into or exercisable to shares of Common Stock issued in respect of the Company Shares upon or as a result of any stock split, stock dividend, rggnhinatiop t r tg l3538

reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means; provided, however, that Registrable Securities shall not include any Company Shares which previously have been sold to the public. pursuant to an effective registration statement or Rule 144 of the Securities Act aAer the date hereof.

"SEC" shall mean the Securities and Exchange Commission.

"Securities Act" shall mean the Securities Act of 1933, as amended.

12 Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Master Restructuring Agreement.

2. OBLIGATIONS OF THE COMPANY 2.1 Re istration Statement. In connection with the registration of the Registrable Securities, or any sale of the Registrable Securities, pursuant to the Registration Statement, the Company shall:

(a) keep the Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) such time as all of the Registrable Securities have been disposed of in accordance with the intended methods of disposition set forth in the Registration Statement and (ii) such date as is two.(2) years aAer the date hereof (the period ending on such time or date, the Effectiveness Period" ); provided, however, that if, at any time after sixty (60) days following the date of this Agreement, the Company and its counsel determine in good faith that maintaining the effectiveness of the Registxation Statement would require disclosure of non-public material information not in the best interests of the Company to disclose, then the Company, one time only during any twelve (12) month period, and upon notice to the Holders, may require the Holders not to make any sale of Registrable Securities pursuant to the Registration Statement until such date as such non-public material information is disclosed (the period commencing on the date of such notice and ending on the date of such disclosure, the "Blackout Period" ), provided that in no event shall any Blackout Period exceed sixty (60) days in If any twelve (12) month pericxL the Company provides the IPPs'pecial Counsel with a proposed schedule for disclosure of its announcements of its quarterly and year end results. at least thirty (30) days prior to any such announcement, any Holder desiring to sell Registrable Securities pursuant to the Registration Statement during the fourteen (14) day period prior to the date of any such scheduled announcement occumng during the Effectiveness Period shall give the Company two (2) Business Days'rior notice of such proposed sale. The Company represents and vnmants to each Holder that, other than during any Blackout Period, (x) the Registration Statement (including any amendments or supplements thereto and any prospectuses or preliminary prospectuses contained therein),

at the time it was Gist filed with the SEC, at the time it was declared effective by the SEC, as of the date hereof, and at all times during which it is required to be effective hereunder (and each such amendment and supplement at the time it is filed with the SEC and at all times during which it is available for use in connection with the offer and sale

of the Registrable Securities) does not and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (y) the prospectus or preliminary prospectus used in connection with the Registration Statement and any amendment or supplement thereto does not and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (b) promptly prepare and file with the SEC such amendments (including post~ffective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective and the prospectus current, including any amendment or supplement with respect to an underwritten offering of Registrable Securitie's and including any amendment or supplement to reflect any transfer of Registrable Securities to any AfBliate or Institutional Pledgee of a Holder which will have the right to be named as a selling shMeholder in the Registration Statement, at all times during the Effectiveness Period, and, during. such period, comply with the provisions of the Securities Act applicable to the Company in order to permit the disposition by the Holders of all Registrable Securities; (c) furnish .promptly to the IPPs'pecial Counsel and lead underwriter(s), if any, (i) one copy of the Registration Statement and any amendment thereto, each prospectus and each amendment or supplement thereto including all financial statemeng and schedules, and, to the extent so requested, all documents incorporated by reference therein, and all exhibits thereto (including those incorporated by reference therein), (ii) each letter written by or on behalf of the Company to the SEC or the staff of the SEC and each item of correspondence received &om the SEC or the staff of the SEC relating to such Registration Statement and (iii) such number of copies of a prospectus and all amendments and supplements thereto and such other documents, as the IPPs'. Special Counsel or any Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holder, (d) use its best efforts to (i) register and qualify the Registrable Securities under the securities or "blue sky" laws of such jurisdictions as each Holder may reasonably request, (ii) prepare and file in those jurisdictions such, amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof at all times during the Effectiveness Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications as may be necessary to maintain the effectiveness thereof at all times during the Effectiveness Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale by the Holders in such jurisdictions (provided that the Company shall not be required in connection therewith or as a condition thereto to qualify generally to do business or file a NI3$ 3S

general consent to service of process in any jurisdiction where it would not otherwise be required to qualify but for this Section 2.1(d));

(e) promptly notify each Holder of the happening of any event, (i) as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing or (ii) which requires the Company to amend or supplement the Registration Statement due to the receipt by the Company of new or additional information about a Holder or its intended plan of distribution of its Registrable Securities; and, in such event, the Company, subject to Section 2.1(a), shaB promptly supplement or amend the Registration Statement to correct such untrue statement or omission or to reflect such new or additional information, so that, as thereafter delivered by any Holder to any purchaser of such securities, such prospectus, as supplemented or amended, shaB not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circuinstances under which they were made; and promptly furnish to each Holder and lead underwriter(s), if any, a number of copies of such supplement to or an amendment. of such prospectus as any Holder or such lead underwriter(s) may reasonably request; (f) if promptly notify each Holder and the lead underwriter(s), any, of the issuance by the SEC of any stop order or other suspension of effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Company wiB use its best efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible time; (g) permit the IPPs'pecial Counsel to participate, to the extent applicable to the period following the date of this Agreement, in the preparation of (including, but not limited to, reviewing, commenting on and attending all meetings with if underwriters, any, with respect to) the Registration Statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and shall permit the IPPs'pecial Counsel to review and comment on such Registration Statement, prospectus, amendment or supplement, as the case may be, a reasonable period of time prior to the filing of same with the SEC, and shall not, during the Effectiveness Period, file any such document in a form to which the IPPs'pecial Counsel reasonably objects within three (3) Business Days of the receipt thereof; (h) make generally available to its security holders as soon as pmcticable, but not later than ninety (90) days after the close of the period covered thereby, an earning statement (in form complying with the provisions of Rule 158 under the Securities Act) covering a twelve (12) month period beginning not later than the first day of the Company's fiscal quarter next following the effective date of the Registration Statement; 413538

(i) make available (at reasonable times and places) for inspection by any underwriter participating in any disposition of the Registrable Securities, and any attorney, accountant or other agent retained by any Holder or any such underwriter, including but not limited to the IPPs'pecial Counse], all documents incorporated by reference in the Registration Statement, each prospectus included therein, and each amendment thereof or supplement thereto, all pertinent financial and other records, pertinent corporate documents and properties of the Company, as shall be reasonably necessary to enable each Holder or underwriter to conduct a reasonable investigation within the meaning of the Securities Act, and cause the Company's officers, directors and employees to supply all information which any such Holder, underwriter, attorney, accountant or other agent may reasonably request for purposes of such investigation, provided that any records, information or documents that are designated by the Company in writing as confidential (and which are not generally available to the public, have not become available to such person on a nonconfiidential basis from a source which has represented to such person that such source is entitled to disclose same or which was known to such person on a nonconfidential basis prior to its disclosure by the Company) shall be kept confidential by such person unless disclosure of such records, information or documents is required by court or administrative order or any Governmental Authority having jurisdiction; (j) use its best efforts to maintain the listing of the Registrable Securities on the New York Stock Exchange (the "NYSE") and on any other securities exchange on which similar securities issued by the Company are then listed; (k) cooperate with each Holder and the lead underwriter(s), ifany, to facilitate the timely preparation and delivery of certificates (not bearing any. restrictive legends) representing Registrable Securities and enable such certificates to be in such denominations or amounts as any Holder and the lead underwriter(s), if any, may reasonably request and registered in such names as such Holder and the lead underwriter(s), if any, may reasonably request. The Company shall give appropriate instructions to the Company's transfer agent to cause the transfer agent to deliver certificates representing the Registrable Securities without any restrictive legends upon receipt of the Holder's certification that such Registrable Securities have been sold pursuant to the Registration Statement and shall cause the Company's legal counsel to deliver to the transfer agent an opinion in customary form as required to remove such restrictive legends provided that if such sales have occurred other than pursuant to an underwritten offering such counsel may reasonably require such certifications and opinion of counsel &om Holders; (1) cause legal counsel selected by the Company to deliver to the Holders and the underwriters, such opinions as may be customary in connection with any underwritten sale of Registrable Securities pursuant to the Registration Statement, in form and substance reasonably acceptable to the Holders and the underwriters, ifany; 4!3538

(m) during the Effectivkness Period, the Company shall not bid for or purchase any Common Stock or any right to purchase Common Stock or attempt to induce any person to purchase any such security or right ifsuch bid, purchase or attempt would in any way limit the right of the Holders to sell Registrable Securities by reason of the limitations of Regulation M under the Exchange Act; (n) take all other reasonable actions (including entering into customary agreements) necessary to expedite and facilitate disposition by the Holders of Registrable Securities pursuant to the Registration Statement; and (o) use its best efforts to comply with all applicable r'ules and regulations of the SEC in connection with any offer or sale of Registrable Securities under the Registration Statement.

2.2 Underwritten Offerin .

(a) The Company acknowledges that the intended plan of distribution set forth in the Registration Statement permits the sale of Registrable Securities in the form of an underwrittea offering. The Company and the IPPs agree that any such underwritten offering shall be effectuated at any time upon the request of a Holdt;r or Holders designating at least 5,000,000 shares of Registrable Securities to be included in such underwritten offering (the "Initiating Holders" ). Notice of any such request (together with a copy thereof) simultaneously shall be given by the Initiating Holder(s) to all other Holders. In such event, any other Holder or Holders shall have the right to join in such request by designating in a notice given by the Initiating Holder(s) to the Company and the Initiating Holders within twenty (20) days after such notice &om the Initiating Holder is given, the number of Registrable Securities held by such Holder which such Holder desires to include in such underwritten offering (the Initial Holders and such additional Holders, collectively, the "Electing Holders" ). A majority in interest (based on the number of shares of Registrable Securities held by such Electing Holders) of the Electing Holders shall select and obtain-an underwriter or underwriters to administer the offering, provided the lead underwriter(s) are reasonably satisfactory to the Company. In connection with any underwritten offering, (i) the Company will effect a roadshow with such Company personnel and covering such locations and amount of time as is reasonably requested by the lead underwriter(s) for the offering; provided that the Company shall not be obligated to effect a roadshow for more than three separate underwritten offerings; (ii) the Company and the Electing Holders will enter into an underwriting agreement with the lead underwriter(s) to effect the offer and sale of Registrable Securities, containing customary provisions including without limitation those relating to indemnification and contribution on the part of the Company of the underwriters and the Electing Holders; and (iii) the Company will use its best efforts to obtain a comfort letter and updates thereof 6em the Company's independent public accountants addressed to the Electing Holders and the underwriters and covering such matters of the type customarily covered by coinfort letters with respect to underwritten

<<I3538

public oKrings and in form and substance reasonably satisfactory to the lead underwriter(s) and the IPPs'pecial Counsel.

(b) Ifthe lead underwriter(s) advise the Electing Holders in writing that marketing factors require a limitation on the number of shares of Registrable Securities to be underwritten in any underwritten offering, the number of shares of Registrable Securities to be included in the underwriting shall be allocated among the Electing Holders pro rata on the basis of the number of shares of Registrable Securities held by such Holders. If a Holder who has elected to be included in such underwriting as provided above does not agree to the terms of any such underwriting, such Holder shall be excluded therefrom by written notice 60m the lead underwriter(s) or a majority in interest of the remaining if Electing Holders. Ifshares are so withdrawn Gom the underwriting and the number of shares to be included in such underwriting was previously reduced as a result of marketing factors pursuant to this Section 22(b), then the Electing Holders who were unable to include the maximum number of shares of Registrable Securities requested by such Holders to be included in the underwriting shall have the right to include additional Registmble Securities in the underwriting in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated pro rata on the basis of the number of shnes of Registrable Shares held by such Holders. In addition to the foregoing, so that any such allocation shall not operate to reduce the aggregate number of Registrable Securities to be if included in such underwritten offering, any Electing Holder does not request inclusion of the maximum number of shares of Registrable Securities which may be requested by it pursuant to the abov~ribed procedure, the remaining portion of its allocation shall be reallocated among those Electing Holders whose allocations did not satisfy their requests pro rata on the basis ofthe number of shares of Registrable Securities held by such Holders, and this procedure shall be repeated until all of the shares of Registrable Securities. which may be included in the underwritten offering by the Electing Holders have been so allocated.

2.3 Rule 144 Re rtin . With a view to making available the benefits of certain rules and regulations of the SEC that may permit the sale of the Registrable ~

Securities to the public without registration, the Company agrees to use its best efforts to:

(a) make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act; (b) file with the SEC in a timely manner all reports and other documents required ofthe Company under the Securities Act and the Exchange Act; and (c) furnish to any Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting provisions contained in Rule 144(c) under the Securities Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so Gled as any Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any of the Registrable Securities without registration.

0 13538

The Company shall give appropriate instructions to the Company's transfer agent to cause the transfer agent to deliver certificates representing the Registrable Securities without any restrictive legends upon receipt of the Holder's certification that such Registrable Securities have been sold pursuant to Rule 144 under the Securities Act. Each Holder shall cause its legal counsel to deliver to the transfer agent for the Registrable Securities an opinion in customary form as may be required to remove such restrictive legends following a sale pursuant to Rule 144.

3. OBLIGATIONS OF THE HOLDERS 3.1 Each Holder shall:

(a) upon the Company's written request, furnish to the Company such information regarding the intended plan of distribution of its Registrable Securities that pursuant to applicable law is required to be included in the Registration Statement or any amendment thereto; (b) upon receipt of any notice &om the Company of the happening of any event of the kind described in Sections 2.1(a) or 2.1(e) hereof, forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Sections 2.1(a) or 2.1(e) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus .covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, and prior to the expiration of the Effectiveness Period Initiating Holders have given the Company a notice pursuant to Section 2.2 of an underwritten offering which is then pending, the Company shall extend the Effectiveness Period by the number of days during the period Gum and including the date of the giving of such notice pursuant to Sections 2.1(a) or 2.1(e) hereof to and including the date when each Holder shall have received the copies of the supplemented or amended prospectus contemplated by Sections 2.1(a) or 2.1(e) hereof, N

(c) not transfer, sell, pledge or otherwise dispose of any Registrable Securities except (i) pursuant to the Registration Statement or another effective registration statement under the Securities Act and in compliance with the prospectus-delivery requirement under the Securities Act; (ii) in accordance with Rule 144 under the Securities Act after the applicable time period specified therein; or (iii) in accordance with another exemption from the registration requirements of the Securities Act; provided that in the case of subsection (iii) above, such Holder will notify the Company or its agent and cooperate with any reasonable request to cause certificates evidencing such Registrable Securities to bear a legend in substantially the following form:

Ni3538

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT, (2) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT OR (3) IN ACCORDANCE WITH ANOTHER APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

(d) notify the Company promptly after the event of the completion of the sale by such Holder of all Registrable Securities to be sold by such Holder pursuant to the Registmtion Statement.

4. EXPENSES All expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, all registration, qualification and filing fees, fees and expenses of underwriters ifsuch offering is underwritten (other than underwriting discounts and commissions relating to the sale of Registrable Securities for the account of Holders), fees and expenses of compliance with securities or "blue sky" laws (including fees and disbursements of counsel in connection with "blue sky" qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties), travel, presentation forum and entertauunent expenses incidental to a roadshow, fees and expenses incurred in connection with the listing of the Registrable Securities on the .

NYSE or any other securities exchange on which similar securities issued by the Company are then listed, fees and disbursements of counsel for the Company and its independent certified public accountants (including the expenses of any special audit or "comfort" letters required by or incident to such performance), fees and expenses of the IPPs'pecial Counsel, securities acts liability insurance (ifthe Company elects to obtain such insurance), and fees and expenses of any special experts retained by the Company in connection with such registration and fees and expenses of other persons retained by the Company. will be borne by the Company.

5. INDEMNXFICATION 5.1 Indemnification b the Com . The Company agrees to indemnify and hold harmless, to the full extent permitted by law, each Holder, its officers, directors, partners, members, legal counsel, accountants and agents and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses, joint and several (including reasonable counsel fees)

(collectively, "Losses" ) suffered or incurred by any third party purchaser of Registrable Securities which arise out of or are based upon by any untrue or alleged untrue statement of N [3538 l0

material fact contained in any Registration Statement, prospectus or preliminary prospectu or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in case of a prospectus or a preliminary prospectus, in light of the circuinstances under which they were made) not misleading, except insofar as the same Mc caused by, contained in, or with respect to any material omission, omitted from any information with respect to such Holder furnished in writing to the Company by such Holder expressly for use therein or by such Holder's failure to deliver a copy of the Registration Statement or prospectus or any amendments or supplements thereto after the Company has furnished such Holder with a sufficient number of copies of the same. The Company will also indemnify any underwriters and each person who controls such underwriter (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders.

5.2 Indemnification b the Holders. In connection with the Registration Statement, each Holder (severa1ly and not jointly) agrees to indemnify and hold harmless, to the same extent and in the same manner set forth in Section 5.1, the Company and each other Holder, their respective oKcers, directors, partners, members, legal- counsel, accountants and agents and each person who controls the Company (within the meaning of the Securities Act) against any Losses swered or incurred by any third party purchaser of Registrable Securities which arise out of or are based upon any untrue or alleged untrue statement of a material fact or any omission or alleged omission of a material fact required to be stated in the Registration Statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein (in case of a prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in, or with respect to any material omission, omitted Gom any information with respect to such Holder so furnished in writing by such Holder expressly for use therein. In no event shall the liability of any Holder hereunder be gieater in amount than the dollar amount of the process received by such Holder upon the sale of such Holder's Registrable Securities in connection with any Registration Statement giving rise to such indemnification obligation.

5.3 Conduct of Indemnification Proceedin s. Any persons entitled to indemnification hereunder (each, an "Indemnified Party" ) agrees to give prompt written notice to the indemnifying party (each, an ".Indemnifying Party" ) afier the receipt by such person of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof for which such person will claim indemnification or contribution pursuant to this Agreement (but the failure to give such notice will not aKect the right to indemnification or contribution hereunder unless the Indemnifying Party is niaterially prejudiced by such failure) and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party and payment of all reasonable fees and expenses (regardless of whether it is ultimately determined that an Indemnified Party is entitled to indemnification hereunder).

Such Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be 113538

at the expense of such Indemnified Party unless (i) the employment of such counsel shall have been specifically authorized in writing by the Indemnifying party, (ii) the Indemnifying Party shall have failed to assume the defense and employ counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action (including any'impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying Party (in which case, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood', however, that the Indemnifying Party shaH not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such Indemnified Parties, which firm shall be designated in writing by the Indemnified Parties and that aH such reasonable fees and expenses shall be reimbursed as they are incurred). An Indemnifying Party shall not settle, compromise or consent to the entry of any judgment in any proceeding without the Indemnified Party's prior written consent, unless the terms of such settlement, compromise or consent include an unconditional release of each Indemnified Party Gom all liability or loss arising out of such proceeding.

5.4 Contribution. If for any reason the indemnity provided for in this Section 5 is unavailable to, or is insuf5cient to hold harmless, an Indemnified Party, then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such Losses in such proportion as is appropriate to reQect the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other.

The relative fault of such Indemnifying Party and Indemnified Party shall be deteanined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying

.Party or IndemniQed Party, and the parties'elative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses referred to above shall be deemed to include subject to the limitations set forth in Section 5.3, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of Gaudulent misrepresentation (within the meaning of 11(f) of the Securities Act) shall be entitled to contribution Gom any person who was not guilty of such Gaudulent misrepresentation.

Ifindemnification is available under this Section 5, the Indemnifying Parties shall indemnify each indemnified party to the full extent provided in Sections 5.1 and 5.2 Ni3538 12

without regard to the relative fault of said Indemnifying Party or Indemnified Party or any other equitable consideration provided for in this Section 5.4.

6. REMEDIES The Company recognizes and agrees that the Holders of Registrable Securities shall not have an adequate remedy if the Company fails to comply with the provisions of this Agreement, and that damages will not be readily ascertainable, and the Company expressly agrees that in the event of such failure any Holder of Registrable Securities shall be entitled to seek specific performance of the Company's obligations hereunder and that the Company will not oppose an application seeking such specific performance.

7. NOTICES Unless otherwise provided, any notice, consent, approval, authorization, waiver or other communication required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the Party to be notified, on the next business day after deliveiy to a nationally recognized, overnight courier service, upon confirmation of receipt of a facsimile transmission or five days after deposit with the United States Post Office, by registeied or certified mail, postage prepaid, and addressed to the Party to be notified at the address or facsimile number indicated below for such Party, or at such other address as such Party may designate upon written notice to the

'other Parties (except that notice of change of address shall be deemed given upon receipt).

(a) In the case of the Company:

Niagara Mohawk Power Corporation 300 Erie Boulevard West Syracus, NY 13202 Facsimile: (315) 428-.3406 Attn: William F. Edwards with a copy to:

Donaldson Lufkin & Jenrette Securities Corporation 277 ParkAvenue New York, NY 10172 Facsimile; (212) 892-7272 Attn: Michael Ranger NI3S38 l3

and with a copy to:

Sullivan & Cromwell 1701 Pennsylvania Avenue, N.W.

Washington, DC 20006 Facsimile: (202) 293-6330 Attn: Janet T. Geldzahler (b) In the case of the IPPs, at the addresses set forth on Schedule A

hereto, with a copy to:

Wasserstein Perella & Co., Inc.

31 West S2~ Street New York, NY 10019 Facsimile: (212) 969-7971 Attn: Kenneth A. Buckfire and with a copy to:

Akin, Gump, Strauss, Hauer & Feld, L,L.P.

590 Madison Avenue New York, NY 10022 Facsimile: (212) 872-1002 Attn: Steven H. Scheinman

8. MISCELLANEOUS 8.1 Entire A ment. This Agreement, together with the Master Restructuring Agreement, constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, written or oral, between the parties with respect thereto.

8.2 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only by an instrument in writing and signed by the Party against whom such amendment or waiver is sought to be enforced.

8.3 Successors and Assi s. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties. Each Holder may assign all or any portion of its rights herein to any transferee of Registrable Securities 4l3538 ]4

which is eligible to be a "Holder" as that term is used herein. Nothing in this Agreement, express or implied, is intended to confer upon any person or entity other than the Parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as may be expressly provided in this Agreement.

4.4 A~i ~ L . 7M Ag***.g Id'g&* egvh I and the rights and obligations of the parties hereunder, and all amendments and supplements hereof and all waivers and consents hereunder, shall be construed in accordance with and governed by the domestic substantive laws of the State of New York without giving effect to any choice of law or conflicts of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

8.5 Seve~bilite, Ifany provisions of this Agreement as applied to any part or to any circumstance or any Party shall be adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other provision of this Agreement, the application of such provision in any other circumstances or to any other Party, or the validity or enforceability of this Agreement.

8.6 ~Ca tions. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

Ly C * . TA'g ** 7 I *d I counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

8.8 Several Obli ations. The obligations of the Holders herein are several and not joint. No Holder shall be responsible for the performance or failure on the part of any other Holder to perform its obligations.

gI353S

N WITNESS WHEREOF, the Parties hereto have entered into this Registration Rights Agreement as of the date first above ~mitten.

Niagara Mohawk Power Corporation By:

Its

[IPPs/IPP Designees]

By:

Its:

By:

Its By:

Its By:

Its:

l i 3538 16

EXHIBIT3.7 Form of Shareholder's Agreement

¹l2704

Exhbit 3.7 SHARBHOLDBR'S AGRBBMB!ff,dated as of by and between.

(the "Shareholder" ), an'd Niagara Mohawk power'Corporation (the

'Compan~.

WHEREAS, simultaneously with the execution hereof the Shareholder or a member(s) of the Sponsor Group (as hereinaiier deQned) is acquYiing shams of the Company's Common Stock, par value Si 00 per sluue (the "Common S tace),

pursuant to a Master Restructuring Agreement, dated as of 3uly 9,1997 (the "MRA");

WHEREAS, [insert names ofother sponsor entities Ested on Schedule 3.7 ofthe MRA] (collectively with their respective Subsidiaries, the "Other Sponsor Group+ are simultaneously entering into Shareholder's Agreements; NOW, THEREFORE, in consideration of the premises aad agreements herein set forth, the parties do hereby agree as follows SECTION 1.

~

1.1 As of the date hereof, foIlowing the aequi'sition of Common Stock to the MRA, the Shareholder and its Subsidiaries (coHectively, the "Sponsor 'ursuant Group") do not owa, in thc aggregate, in excess of4.9/o [9.9/o for desigaees] ofthe outstanding Common Stock ofthe Company(assuming for these purposes that thc outstanding Common Stock of thc Company is not less than 190,390,600 shares as ofthe date hereof). As used in this Agreement, the term "Subsidiary" means, with respect to any person, any other person, whether incorporated or unincorporated, ofwhich at least a majority ofthe securities or ownership interests haying by their terms or(HID voting power to elect a majority ofthe board of directors or other persons paformiag sunilar functions is directly or indirectly owned or controlled by such person. To the Knowledge of Shareholder, [parent entity or entities sec attached schedule] and its or their afBliates (as that tern is deflaed in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) who'are not members ofthe Sponsor Group (collectiveIy, "Excluded Afmiates") do aot own any shares ofCommon Stock as ofthe date hereof. [modify as appropriate, subject to Section 6.14 ofMRA] As used in this Agreement, the term "Knowledge" shall be the knowledge of the senior corporate ofBcers, or comparable executive personnel, of a persoa, and shall not imply any duty of inquiry.

Following the acquisition of shares of Common Stock pursuant to the MRA, the Stuueholder agrees the Sponsor Group will not, directly or indirectly, alone or in concert arith others, acquire, offer to acquire or agree to acquire, by purchase, giR or otherwise, beneflcial ownership (as hereinafter deflaed) of any additional shares of the Company's then outstanding Common Stock or beneflcial ownership of any other Voting Securities DC LAML'70194 l0

(as hereina6er defincd) of the Company. Notwithstanding thc foregoing, thc Sponsor Group may acquire up to an additional 5% [% lowered to a maximum of 9.9/o, including any Common Stock acquired pursuant to the MRA for IPP designee with greater than 4.9 lo at closing] of the then outstanding Voting Securities ymH'dad that such percentage shaH be reduced by the percentage of shares of Voting Securities held, to the Knowledge of Shareholder, by thc Excluded Af6liates at the time of any proposed acquisition.

Participation in a rights offering, receipt of stock dividends, and similar corporate events not initiated by any member'of the Sponsor Group shall be excluded Rom the foregoing Icstzlcflons.

1.2 No violation of Section 1.1. shall be deemed to occur as a result of the acquisition by the Sponsor Group of beneficial ownership of Voting Securities as the result of any acquisition ofvoting securities of another person (a) whose voting securities are registered under thc Exchange Act or (b) with respect to whom thc Voting Securities held is an immaterial asset of such person, in either case by a member ofthe Sponsor Group which results in such member ofthe Sponsor Gmup indirectly becoming the beneficial owner of additional Voting Securities of the Company, gazing@ that ifsuch member ofthe Sponsor Group acquires control of such other person or is otherwise able to direct the voting or disposition ofthe additional Voting Securities, such member of the Sponsor Group shall vote such Voting Securities in the manner set forth in Section 1.4.

1.3 The Shareholder agrees the Sponsor Group wiH not, directly or indirectly, alone or in concert with others (including the Excluded Aaiates), (a) make, or in any way participate in, any solicitation" of"proxies" (as such tams are defined in Rulc 14a-1 ofRegulation 14A promulgated by the Securities and Exchange Commission-pursuant to Section 14 of the Exchange Act, disregarding clause (iv) ofRule 14a-1((1)2) and including any exempt solicitation pursuant to Rule 14a-2(b)(l)) relating to the Voting Securities (except as to any proxies that may be given pursuant to Section 1.4); call, or in any way participate in a call for, any special meeting of shareholders'of the Company; request, or take any action to obtain or retain any list ofholders ofany securities ofthe Company; initiate or propose any shareholder proposal or participate in the malCing of, or solicit shmholders for the approval of, onc or morc shareholder proposals re1ating to the Company; (b) deposit any Voting Securities in a voting trust or subject them to any voting agreement or anangements, except as provided herein and except as among the members ofthe Sponsor Group; (c) form, join or in any way participate in a group with respect to any Voting Securities (or any securities the ownership of which would make the owner thereof a beneficia owner of Voting Securities) (except as among thc members ofthe Sponsor Group); (d) othenmse act to control thc Company or the nuuegement, board of directors, poHcies or afMrs of the Company including, without limitation, Oi making any o'er or proposal to acquire any securities or assets ofthe Company or any of its af6Hates or soliciting or proposing to.effect or negotiate any form of merger, consolidation or share exchange (a "business combination" ), restructuring, recapitalization or other extraordinary transaction involving, or any change in control of, the Company, its a6iliates or any of DC LhNOl: 70194.10

their respective securities or assets (except for a proposal for the acquisition of any of thc non-nuclear generating assets of the Company or its afBliates ("Generating Assets" ) which would not require the Company or any of its afBHates to make any public disclosure thereof) or (ii) except as expressly provided in the MRA, seeking board representation or the removal of any directors or management or a change in the composition or size of the board of directors of the Company, or (iii) making any request to amend or waive any provision of this Agreement that would require thc Company to make public disclosure thereoF, (c) disclose any intent, purpose, plan or proposal with respect to this Agreement or the Company, its af61iates or the board of directors, management, policies or affairs or securities or assets of the Company or its afBHates that is conditioned on, or would require, waiver, amendment, nulHfication or invalidation of any provision ofthis

. Agreement, or take any action that could require the Company or any of its afBHates to make any public disclosure relating to any such intent, purpose, plan, proposal or condition; or (Q assist, advise or encourage any person with respect to, or seek to do, any of the foregoing. Notwithstanding the foregoing, Qi ifany person, alone or in concert with others (other than thc Excluded AfBHates), (A) makes an unsolicited hug 5h tender or exchange ofFer to acquirc Voting Securities that would result in bencficial ownership by outstanding Voting Securities, (B) makes an unsolicited ~~

such person, alone or in concert with others, of at least 2P/o of thc Company's proposal to acquirc at least a majority ofthe Voting Securities or substantially all of the assets ofthe Company, in either case either directly or through a business combination, and in conjunction therewith, mails a proxy statement to shareholders ofthe Company seeking a change in the composition ofthc board of directors of the Company or (C) at a time when the Company and its afBHates own substantially all ofthe Generating Assets, enters into an agreement with the Company for thc sale of substantially all assets ofthe Company or a .

business combination in which (x) the shareholders ofthe Company prior to thc consummation of such business combination (excluding the person mrdang the Offer and its afBHates) wi11, immediately following such consurnnmtion, own less than a majority of the Voting Securities ofthe resulting entity or (y) the directors of the Company prior to such consummation will, immediately following su'ch consummation, constitute less than a majority of the board of directors of the resulting entity (any of (A), (B) or (C), an "OfFer"), the restrictions contained in Sections 1.1, 1.2 and 1.3 of this Agreement shall not apply to the extent necessary to allow any member ofthe Sponsor Group or any Excluded AfBliate thereof, ifapplicable, to make a proposal to the board of directors to acquire the Company on the terms set forth below or to acquire all or substantially all of the assets of the Company, and to disclose such proposal, and/or to make, and consummate, a tender or exchange offer to acquire thc Company, as the case may be, ifsuch proposal or offer (x) is (ifapplicable) for at least the same percentage of Voting Securities as the Offer (including any second step transaction proposed in the OfFer) and (y) is, in the written opinion of a nationally recogrCized investment banking firm, taking into account any second step transactions in the respective offers, the equal or more favorable, from a

'inancial point ofview, to the holders of Common Stock than the Offer, (ii) nothing contained herein shall prohibit the sale of Voting Securities, without any actions to solicit, DC LANOl:70194.l0

induce or encourage an attempted change of control of thc Company, by the Sponsor Group or prohibit the purchase of Common Stock as contemplated by Section 1.1 and (iii) nothing contained herein shall prevent any member of the Sponsor Group f'rom bidding on and a'cquiYing any Generating Assets of the Company (including the stock of any afBliates) which the Company puts up for sale in a competitive process ifsuch bids are made in accordance with the terms of such process. Nothing in the foregoing subsections (d), (e) or (f) is intended to restrict the actions of the Sponsor Group in a capacity other than as holder or potential acquirer of Common Stock in a matter which is unrelated to a potential change of control ofthe Company.

1A Thc Shareholder agrees the Sponsor Group shall take such action as may be required so that all Voting Securities bcneGcially owned directly or indirectly by the Sponsor Group shaH bc present for quorum purposes, in person or represented by proxy at cvciy meeting ofholders of Common Stock, and the Sponsor Group (a) shaH vote its Voting Securities for thc election of aH nominees for directors at each shateho!der meeting ofthe Company in the same proportion as aH other Voting Securities are voted (other than the Voting Securities held by thc Sponsor Group and thc Other Sponsor

'Groups which remain a party to a Shareholder Agreement, as weH as any Voting Securities transferred by the Sponsor Group or such Other Sponsor Groups to any of their respective Excluded Af5liatcs) (the "Disinterested Shares" ) present, in person or by proxy, at such meeting and voting with respect to the election of directors, except that ifsuch election for directors shall occur while there is pending an Offer made by any person (other than an Excluded AfBliate), the Sponsor Group may vote in its discretion, and (b} may vote on aH other matters in its discretion, 1zgzidg, that with respect to any matters other than sales of securities or assets, business combinations, restructurings, recapitaEzations and other extraordinary traiisactions, the percentage of Voting Secuntics voted on aH matters by the Sponsor Group in accordance with the recommendation of the Company's board shall be no less than the percentage ofDisinterested Shares so voted.

Notwithstanding the foregoing, ifa member ofthe Sponsor Group makes a proposal or offer in response to an Offer described under (i)(C)'ofthe second sentence of Section 1.3, all Voting Securities held by the Sponsor Group shall be voted, both with respect to the 06er and the proposal or offer made by the member of the Sponsor Group, in the same proportion as the Disinterested Shares.

SECTION 2.

2.1 So long as the shares of Common Stock held by the Other Sponsor Group or its respective Excluded Af5liates remain subject to the provisions oftheir respective Shareholder's Agreement (or would be subject by virtue of such transfer), the Shareholder agrees the Sponsor Group will not, directly or indirectly, alone or in concert with others, sell or otherwise transfer in any manner any Voting Securities to any member of an Other Sponsor croup, or to a person which is, to the Knowledge of the selling shareholder, an Excluded A6iliate of any member of an Other Sponsor Group. In any Dc LhNOl f0194.i0

privat sale of Voting Securitie which is subject to the precagng sentence, the selling member of the Sponsor Group shall obtain the representation ofthe buyer that it is not an Excluded AfBIiatc of any member of an Other Sponsor Group. Subject to thc limitations if of Section 1.1, thc Shareholder, it holds any Voting Securities, may sell or otherwise Voting Securities to members ofthe Sponsor Group, provided that such members 'ransfer agree in writing to be bound by the provisions hereof.

2.2 FoHowing any transfer of Voting Sccurities by the Sponsor Group to any Excluded A6iliate of the Sponsor Group, thc restrictions contained in Sections 1.1, 1.2, 1.3 and 1.4 shaH no longer be applicable to such tauLsfencd Voting Securities, except that thc restrictions contained in Section 1A shaH continue to apply to such transferred Voting Securities while held by an Excluded AfBliate with respect to any action initiated by any member of thc Sponsor Gmup or any of its Excluded AGiliatcs and except that if Uoting Securities arc transferred to an Excluded Af61iatc during the pendency of a proxy solicitation with respect to Uoting Securities by any person other than the Company's board of directors (including an announcement by such person that it intends to engage in a proxy solicitation), aH restrictions contained in Section 1A shall be appHcable to such Voting Securities during the pendency of such proxy solicitation.

2.3 Except as set forth in Sections 2.1 and 2.2, nothing contained in this Agreement shaH in any way limit or restrict any sale or transfer of Voting Securities by any member of the Sponsor Group and, except as set forth in Sections 2.1 and 22, nothing contained in this Agreement shall impose any restrictions on any Uoting Securities sold or transferred outside of the Sponsor Group.

- SECTION3.

3.1 Each ofthe parties hereto represents and warrants with respect to itself that such party is duly authorized to execute, deliver and perform this Agreement, that this Agreement has been duly executed by such party and that this Agreement is a valid and binding agreement of such party.

SECTION 4.

4.1 This Agreement shaH terminate Gve years &om the date'ereof or on such earlier date (the "Reduced Ownership Date" ) as the aggregate beneficial ownership of the Company's outstanding Voting Securities by the Sponsor Group, in addition to any Uoting Securities transferred by the Sponsor Group to its Excluded AfBliates (up to the number of such Uoting Securities still held by aH Excluded Af61iates), is less than 2%, so long as such persons do not reacquire aggregate beneficial ownership of 2% or more of the Company's outstanding Voting Securities within onc year ofthe Reduced Ownership Date. If the aggregate beneficial ownership of such persons shall exceed 2% within one year of the Reduced Ownership Date, this Agreement shall at the time such ownership DC LANO1: VOL94.10

exceeds such limit again bc in full force and effect for the balance of the original term. If the Shareholder seeks to teraunate this Agreement as a result of such reduced ownership, it shall promptly upon request by the Company confirm in writing the beneficial ownership ofthe Company's Voting Securities by thc Sponsor Group, as well as any Voting Securities transferred by thc Sponsor Group to an Excluded AfBliate. Following any such if termination as a result of reduced ownership thc Shareholder shall, requested by the Company in writing, confirm such beneficial ownership, until one year following the Reduced Ownership Date, ¹twithst'anding anything to the contraiy contained in this Agreement (a) this Agreanent shall teraunate at such time as any person, alone or in concert with others (other than thc Sponsor Group, its Excluded AfBliates, or any Other Sponsor Group or its respective Excluded A6iliatcs), beneficially owns 25% or more of the Voting Securities and (b) this Agreement shall ternunatc in the event the Company makes a gena31 assignment or any general anangemcnt or compromise for thc bencfit of creditors, files a petition under the Bankruptcy Code (Title 11 of the United States Code) or otherwise commences, authorizes or acquiesces in the commencement of a proceeding under any bankruptcy or similar law for the protection of creditors, or has a petition commenced against it 4.2 For purposes of this Agreement, ni a "person" shall mean any individual, firm, partnership, association, corporation or other entity or gmup of such persons; (ii) a person shall have beneficial ownership" of any securities as to which such person may be deemed the bcneficial owner pursuant to Rule 13d-3 under the Exchange Act and shaH include, without Hmitation, any securities such person has the right to become the beneficial owner of(whether or not such right is immediately exercisable) pursuant to any agreement, amuigcment or understanding or upon the exercise of any exchange right, conversion right, option, w urant or other right; and (iii)"Voting Securities" shall mean securities that are generally entitled to vote in the election of directors of the Company (or, where reference is made to the voting securitie of another entity such term shall mean securities that are generally entitled to vote in the election of directors, or comparable persons, of such other entity),

4.3 The Shareholder acknowledges and agrees that irreparable damage to the Company would occur in the event. any of the provisions ofthis Agreement were not performed in accordance with their specific terms or were otherwise breached and that such damage would not be compensable in money damages. It is accordingly agreed that the Company shall be entitled to, and the Shareholder agrees the Sponsor Group will not take action, directly or indirectly, in opposition to the Company s seeking, specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof, in addition to any other remedy or reHef available at law or'n equity.

4.4 The Common Stock issued to any member of the Sponsor Group pursuant to the MRAwillcontain a legend in substantially the following form:

DC LANOi: 70 I&4.10

"The shares of capital stock represented by this certi6cate are subject to a Shareholder's Agreement which, among other things, (a) restricts the sale or transfer of such shares to [any member of an Other Sponsor Group or, ifknown to the selling shareholder, any Excluded AfBliate of an Other Sponsor Group-to be completed upon execution], or certain oftheir afBliates, and (b) restricts the voting of such shares except in accordance therewith.".

Upon the teoauetion of this Agreement, or upon any transfer of Voting Securities to any person (other than a mender ofthe Sponsor Group or any Excluded AKiate or as prohibited by the Grst sentence of Section 2. 1), the Company agrees, ifso requested, to cause the Company's transfer agent to remove the legend. Upon any transfer of Voting Securities to any Excluded Af61iate prior to termination of this Agreement, the Company agrees, ifso requested, to replace the legend to reQect solely the voting restrictions set forth in Section 2,2.

4.5 The Shareholder wiH cause each member of the Sponsor Group to observe the provisions ofthis Agreement.

4.6 All notices, requests and other communications to any person named hereunder shall be in writing (including wire, telecopy or sunilar writing) and shall be given to such person at its address or telecopy number set forth below or such address or telecopy number as such person may hereafter specify for the purpose by notice to the other person:

Ifto the Company:

Telecopy:

With a copy to:

Telecopy:

Ifto the Shareholder.

Telecopy:

With a copy to:

Telecopy:

DC LAHOl:70194.10

Each such notice, request or other communication shall be effective (a) ifgiven by telecopy, when such telecopy is transmitted to the telecopy number speci6ed in this subsection and the appropriate confirmation is received or (b) ifgiven by any other means, when actually received at the address specified in this subsection, gmziNi a notice given other than during normal business hours or on a day other than a business day at the place of receipt shall not be efFective until the opening of business on the next business day.

4.7 This Agreement shall be construed in accordance with and governed by the laws ofthe State ofNew York (without regard to the principles ofconQict of laws thereof).

4.8 This Agreement may be amended, modified or supplemented only by written agreement ofthe parties hereto.

4.9 Any faBure of any party to comply with any obligation, covenant, agreement or condition haein may be waived by the party entitled to the benefit of such obligation, covenant, agreement or condition only by a written instrument signed by such party, but such waiver or Mure to insist upon strict compliance with such obligation,

. covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent

~

by or on behalf of any party hereto, such consent shall be effective only ifgiven in writing in a manner consistent with the requirements for a waiver of compHance as set forth in this Section.

4.10 This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors by merger or otherwise by operation of law. In the event of an NMPC Restructuring (as defined in the MRA), the terms ofthis Agreement shall be appHcable to any Voting Securities received by the Sponsor Group in the NMPC Restructuring, other than Voting Securities of any entity which holds all or substantially all of the Generating Assets.

4.11 This Agreement may be executed in two or more counterparts, each ofwhich shall be deemed an original, but all ofwhich together shall constitute one and the same instrument.

4.12 This Agreement embodies the entire agreement and understanding of the parties hereto in respect ofthe subject matter contained herein. There are no other restrictions, promises, representations, warranties, covenants or undertalangs with respect to the subject matter hereof; other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

DC LhNO l: 70194.l0

4.13 Ifany provision of this Agreement shall be deemed or declared to be unenforceablc, invalid or void, the same shall not impair any of the other provisions of this Agreement.

4.14 The parties hereto hereby irrevocably submit to the jurisdiction of the United States District Court, Southern District ofNcw York (or, ifthere is no subject matter jurisdiction before such court, the Suprcmc Court of the State of New York, New York County) over any legal action or proceeding arising out of or relating to this Agreement and hereby irrevocably agree that all claims in respect of any such action may be heard and determined in such court. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such court or any defense of inconvenient forum for the maintenance of such action. Each of the parties hereto agrees that a judgment in any such action or proceoHng may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

4.15 Ifany Excluded AGiliate received Common Stock as a designee upon thc consummation ofthe h6~ for the purposes of this Agreement, such Common Stock shall be treated as 8'it was transferred to the Excluded AfBliate following the execution hereof.

IN WITNESS %HEREOP, the parties hereto have caused this Agreement to be duly executed as of the day and year Grst above written.

[Shareholder)

[Company]

DC LAHORE: 70 194.10

The undersigned agree to be bound hereby as members of the Sponsor Group [ifthey are to receive shares of Common Stock pursuant to the MRA]:

DC LANOl:70l9410

Exhibit 3.7 DC LhNOI: 70194.10 -ll-

EXHIBIT5.7 Blank Forms of Allocation, Contracts Allocation and Contract Adjustment Allocation (attached)

Nl2704

ALLOCATIONOF ALLOCABLECONSIDERATION

<<Developer>>.'Project>> ($

'000s)'ighly Governor's Roundtable Discussions Confidential Allocation Company Shares Cash ($l¹ of shares)

<<D>> <<E>>'"/ r F)

<<Company>>

By: Kenneth A. Buckfire

Title:

Director, Vfasserstein Perella & Co.

<<Close>>

'n)e purpose of this page is to enable WphCo. to n present that all Ihc Ipps agnx lo their individual alhxations of upfrunt payment, and to allow WpACo. to state that the value alluvial to ca h prupxt in aggn:gate equals to the total upfmnt consideration payablc by Niagara Mohawk Power Corporation pursuant to the Terms of the Master Restructuring Agteetawt. Thc Depository will ntaLe linal distributions to thc project on the Consutnntation Date equal to thc an)ounts shown above. fhc attentions will not bc binding until thc Master kesttueturing Agnwment has!xnan signedby all partiia.

Pro rata share of 46 million shares assuming an aggn:gate value of $ 4(X) million.

tIVassr.'rstein Pere lla Zc Co.

II 'O'A'IAl.unhtlAkAulNAII)X.ll~

INDEPENDENT POVKR PRODUCERS l CONTRACTS ALLOCATION HIGHLYCONFIDENTIAL Amended PPA /Restated Contract Governor's Roundtable Discussions

<cIPP>>

<cProject>>

Contract Year Contract MWh Contrac< Price ($/MWh)

Contr,'. t Value ($ '000s)

Hct Ave age Annual Capacity (MW)

<<FP>> Kenneth A. Buckfite Director, Wasserstein Petella 4 Co.

By:

lVasserstein Perella dc Co.

I INDEPENDENT POWER PRODUCERS I CONTRACTS ALLOCATION HIGHLYCONFIDENTIAL Amerded PPA /Restated Contract (Contract Adjustment) Governor's Roundtable Discussions

<<IPP.>

<<Pr eject>>

Contru t Year Contract MWh Contract Price ($/MWh)

Con6.fact Value ($ '000s)

Contra'; Year Contract MWh Contract Price ($/MWh)

Contract Value ($ '000s)

Contract Adjustment

<<IPP>> Kenneth A. Buckfire Director, Wassetstein Perella 4 Co.

By:

Title:

(1) Tl.e ContractAdjustmentiscalculatedbeforegivingeffect tothe$ 5/MWhreduction inyears3through9

.~ad the $ 2.5/MWh reduction in year 10 for both the Original and the Adjusted Contract Schedules.

Wasserstein Perella dc Co.

EXHIBIT8.3A Form of NMPC Representation Letter N12704

Exhibit 8.3A P.ETTERHEAD OF NMPC]

[Consummation Date]

Independent Power Producers listed on Schedule A hereto Re: Master Restructurin A cement dated Jul 9 1 7 Ladies and Gentlemen:

In connection with the consummation on this date of the transactions contemplated by the Master Restructuring Agreement dated July 9, 1997 (the "Agreement" )

between Niagara Mohawk Power Corporation (the "Company" ) and the IPPs listed on Schedule A hereto (the "IPPs"), the Company hereby represents and warrants to each IPP, as of the Consummation Date, that the following statements are true in all material respects (all capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement):

1. The Company is a corporation duly organized, validly existing and in

'ood standing under the laws of the State of New York, and has all requisite corporate power and authority to own its properties and assets and to carry on its business in the manner now.

conducted and as proposed to be conducted in accordance with the Agreement and the Contracts.

The Company is duly qualified to transact business and is in good standing in each jurisdiction except where the failure so to qualify would have not have a Material Adverse Effect on the Company.

2. The Company has all requisite corporate power and authority to execute and deliver the Agreement and all other agreements executed or to be executed by it pursuant thereto, and to carry out the provisions of the Agreement in accordance with the terms thereof, and all other agreements executed or to be executed by it pursuant thereto, including, but not limited to, the power and authority to issue and sell the Company Shares and Short-Term Notes, and to enter into and perform the Contracts; all corporate action on the part of the Company, its officers, directors and shareholders necessary for the authorization, execution and delivery of the Agreement in accordance with the terms thereof, and all other agreements executed or to be executed by the Company pursuant thereto, the performance. of all obligations of the Company thereunder, and the authorization, issuance, sale and delivery by the Company of the Company Shares and Short-Term Notes (ifapplicable) pursuant thereto, has been taken; the Agreement and all other agreements executed by the Company pursuant thereto have been duly and validly executed and delivered by the Company; and the Agreement and all other agreements executed or to be executed by the Company pursuant thereto constitute or will constitute valid and leeallv .

l430l v07

binding obligations of the Company, enforceable against the Company in accordance with their respective terms.

3. Except for (i) those Regulatory Approvals which have been obtained, made or given on or before the date hereof and (ii) any filings made by the Company under the Hart-Scott-Rodino Act, no consent, approval, qualification, order, or authorization or other action of, or filing or registration with, any Governmental Authority is required on the part of the Company in connection with the Company's valid execution, delivery or performance of the Agreement, or any of the other agreements executed or to be executed by the Company pursuant thereto, or the authorization, issuance, sale and delivery by the Company of the Company Shares and Short-Term Notes (ifapplicable), which, ifnot obtained, made or given, could reasonably be expected to have a Material Adverse Effect on the Company.

4. The execution, delivery and performance by the Company of the Agreement, any other agreements executed or to be executed by the Company pursuant thereto, and the consummation of the transactions contemplated thereby (a) is not in violation or default of any provision of its Certificate of Incorporation or By-Laws, and (b) is not in conflict with and does not constitute, with or without the passage of time or giving of notice, a material violation or default, or give rise to any material obligation, under (i) any material mortgage, indenture, agreement, instrument or contract to which the Company is a party or by which it or any of its material assets is bound or (ii) any local, state or federal judgment, order, writ, decree, statute, rule or regulation applicable to the Company or any of its material assets.

5. Schedule B hereto sets forth (i) the authorized capital of the Company, (ii) the number of shares of Common Stock issued and outstanding and (iii)the number of shares. of Common Stock issuable upon the exercise of any options, warrants or rights, or upon conversion or exchange of any other securities outstanding, as of {not earlier than ten Business Days prior to the date hereof].

6. The Company Shares acquired by the IPP pursuant to the Agreement, if any, have been duly and validly issued, fully paid, and are nonassessable, are Bee of restrictions on transfer other than restrictions on transfer required by federal securities laws, and, if applicable, the Shareholder's Agreement and are duly listed on the New York Stock Exchange.

The Company Shares are not subject to any preemptive rights or rights of first refusal. Assuming the truth and accuracy of each IPP's representations set forth in Section 5.6 of the Agreement (or,

'with respect to any designee of an IPP, such designee's representations set forth in a representation letter containing substantially the same representations set forth in Section 5.6 of the Agreement), the offer, sale and issuance of the Company Shares pursuant to this Agreement (i) will not require registration under the Securities Act and (ii) will not require registration or qualification under such of the "blue sky" or securities laws of the jurisdictions in the United States (or will be in compliance therewith) as shall be applicable to the offer, sale and issuance of the Company Shares (subject to the limitation that the Company makes no representation or warranty with respect to any oQer by any IPP to any designee of such IPP as contemplated by l430I v07

Sections 3.3 and 5.6 of the MRA), and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would require such registration.

7. Since January 1, 1995, the Company has made all filings required to be made by it under the Exchange Act and any other securities laws applicable to the Company and is otherwise eligible to file a registration statement on Form S-3 covering the offering and sale of if the Company Shares and the Debt Securities. As of their respective dates, or, amended, as of the date of such amendment, the SEC Reports complied in all material respects with the requirements of the Exchange Act, and the rules and regulations of the SEC thereunder. As of if their respective dates, or, amended, as of the date of such amendment, the SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997, and in any subsequent SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles as stated in such financial statements applied on a consistent basis during the period covered and fairly present, in all material respects, the financial position of the Company as of the date thereof and the results of operations and changes in financial position of the Company for the period then ended subject, in the case of unaudited statements, to notes and normal yearwnd audit adjustments, none of which shall be material in amount or effect.

8. The Company has disclosed to the IPPs all material plans and proposals concerning the NMPC Restructuring which have been disclosed to any Governmental Authority or approved by the Board of Directors of the Company and which could reasonably have a material adverse effect on any IPP or the Restructuring, including but not limited to the Contracts or any of the consideration to be received by the IPPs hereunder. The Company has not been authorized by its Board of Directors, nor is the Company seeking such authorization, to file a

,petition under the Bankruptcy Code or otherwise to commence, authorize or acquiesce in the commencement of a proceeding under any bankruptcy or similar law for the protection of creditors, or to make a general assignment or any general arrangement or compromise for the benefit of creditors, nor has the Company made, commenced, authorized or acquiesced in the commencement of any such proceeding or assignment or had any such petition, proceeding or assignment commenced against it.

9. The Company hereby certifies that the conditions specified in Section 8.2 of the Agreement have been satisfied (unless waived by the IPP in writing).

l0. The foregoing representations and warranties assume that no person taking Common Stock pursuant to the Agreement will own, together with its Affiliates, 10% or more of l430l v07

the outstanding Common Stock following Consummation, and the Company shall have no liability hereunder in the event such assumption is untrue.

11. The representations and warranties of the Company contained herein shall survive the Consummation Date for a period of two (2) years.

Niagara Mohawk Power Corporation By:

Name:

Title:

l430l v07

EXHIBIT8.3C Form of Opinion of NMPC's Counsel NI2704

Exhibit 8 3C P.ETTERHEAD OF NMPC'S COUNSEL]

[Consummation Date]

To the Independent Power Producers listed on Schedule A hereto

Dear Sirs:

We have acted as corporate counsel to Niagara Mohawk Power Corporation, a New York corporation ("NMPC"), in connection with the execution and delivery of the Master Restructuring Agreement, dated as of July 9 1997 (th "Agreement'), by and among NMPC and the independent power producers listed on Schedule A hereto, the Shareholder's Agreements, the Registration Rights Agreement, the Short-Term Notes, the Amended PPA, the Restated Contracts and the Fixed Price Swap Contracts (collectively, the Specified Restructuring Documents" ). This opinion is elivered to you pursuant to Section 8.3(c) of the Agreement. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Agreement.

In connection therewith, we have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, it our opinion that:

1. NMPC has been duly incorporated and is an existing corporation in good standing under the laws of the State of New York, and has all requisite corporate power and authority to own its properties and assets and to carry on its business in the manner now conducted.

2. NMPC has all requisite corporate power and authority to execute and deliver the Specified Restructuring Documents and perform the obligations of NMPC thereunder, all corporate action on the part of NMFC, its of5cers, directors

and shareholders necessary for the authorization, execution and delivery of the Specified Restructuring Documents and the perfomiance of the obligations of NMPC thereunder has been taken; the Specified Restructuring Documents have been duly executed and delivered by NMPC; and the Specified Restructuring Documents constitute valid and,legally binding obligations of NMPC enforceable against NMPC in accordance with the their respective terms, subject to bankruptcy, insolvency, &audulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors'ights, to general equity principles and to limitations on rights to indemnification and contribution thereunder which may be imposed by applicable law.

3. The Company Shares have been duly authorized and validly issued and are fully paid and nonassessable. The certificates representing the Company Shares are in due and proper form and have been validly executed.

4. No registration of the Company Shares under the Securities Act is required in connection with the issuance of the Common Shares pursu mt to the Agreement and such issuance will not result in a violation of the registration requirements of the blue sky or state securities laws of the State of New York.

The foregoing opinions are limited to the laws of the State of New York and, in the case of the opinion expressed in (4) above, the Federal laws of the United States, and we are expressing no opinion as to the effect of the laws of any other Jurisdiction.

In rendering the opinion expressed in (4) above, we have, with your approval, assumed the accuracy of the representations and warranties and compliance with the covenants of the Company, the IPPs and other initial acquirors of the Company Shares contained in the Agreement and the [insert reference to letters which will be delivered by the initial acquirors, as required by the Agreement). We note, with respect to such opinion, that we are expressing no opinion as to when and under what circunistances the Company Shares may be reoffered and resold by the initial acquirors thereof.

In rendering the foregoing opinions, we have also, with your approval, relied as to certain matters on information obtained from the public oQicials, oKcers of

NMPC and other sources believed by us to be responsible, and we have assumed that (a) the parties to each of the Specified Restructuring Agreements, each of the other agreements referred to therein and each other agreement required to be executed pursuant to any of the foregoing agreements (collectively, the "Restructuring Agreements" ) have received all Regulatory Approvals, IPPfThird Party Consents, NMPCfIMrd Party Consents and NMPCffhird Party Releases required to be obtained by them in connection with the execution, delivery and performance of the Restructuring Agreements, (b) the execution, delivery and performance of the Restructuring Agreements will not contravene 419533

any law, rule or regulation applicable as a result of the status of any party to the Restructuring Agreements as a utility, an owner or operator of nuclear power generating facilities or any other form or regulated entity, (c) the Specified Restructuring Agreements have been duly authorized, executed and delivered by the parties thereto other than NMPC, (d) the certificates for the Company Shares conform to the specimen thereof examined by us and have been duly countersigned and registered by the transfer agent and registrar for the Common Stock and (e) the signatures on all documents examined by us are genuine, assumptions which we have not independently verified.

A The opinions expressed herein are solely for the benefit of the IPPs and, without our express written consent, neither our opinion nor this opinion letter may be circulated or furnished to or relied upon by any other person or entity.

Uery truly yours, fThis form will be subject to modification to reflect customary and reasonable assumptions, qualiTications and limitations required by the individual opining counseL) 4 I9533

EXHIBIT9.3A Form of IPP Representation I.etter Pl2704

Exhibit 9.3A

[LETTERHEAD OF IPP]

[Consummation Date]

Niagara Mohawk Power Corporation 300 Erie Boulevard Vest Syracuse, NY 13202 Re: Master Restructurin A reement dated Jul 9 1997 Ladies and Gentlemen:

In connection with the consummation on this date of the transactions contemplated by the Master Restructuring Agreement dated July 9, 1997 (the "Agreement" )

between Niagara Mohawk Power Corporation (the "Company" ), the undersigned IPP (the "IPP")

and the other IPPs who are parties thereto, the IPP hereby represents and wamints to the Company, as of the Consummation Date, that the following statements are true in all material respects (all capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement):

1. The IPP is a [corporation] [partnership] duly organized, validly existing and in good standing under the laws of its state of incorporation or formation, and has all, requisite power and authority, corporate or other, to own its properties and assets and to carry on its business in the manner now conducted and as proposed to be conducted in accordance with this Agreement and the Contracts.

2. The IPP has all requisite [corporate] [partnership] power and authority to execute and deliver the Agreement and all other agreements executed or to be executed by it pursuant thereto, and to cany out the provisions of the Agreement in accordance with the terms thereof, and all other agreements executed or to be executed by it pursuant thereto, including, but not limited to, the power'and authority to enter into and perform the Contracts to which it is a party; all [corporate] [partnership] action on the part of the IPP, its officers, directors, stockholders and partners, as applicable, necessary for the authorization, execution and delivery of the Agreement, all other agreements executed or to be executed by the IPP pursuant thereto, and the performance of all obligations of the IPP thereunder, has been taken; the Agreement and all other agreements executed by the IPP pursuant thereto have been duly and validly executed and delivered by the IPP; and the Agreement and all other agreements executed or to be executed by the IPP pursuant thereto constitute or will constitute valid and legally binding obligations of the IPP, enforceable against the IPP in accordance with their respective terms.

Nl430X

3. Except for (i} those Regulatory Approvals which have been obtained, made or given on or before the date hereof and (ii) any filings made by the IPP under the Hart-Scott-Rodino Act, no consent, approval, qualification, order, or authorization or other action of, or filing or registration with, any Governmental Authority is required on the part of the IPP in connection with the IPP's valid execution, delivery or performance of the Agreement, or any of the other agreements executed or to be executed by the IPP pursuant thereto, which, if not obtained, made or given, could reasonably be expected to have a material adverse effect on the IPP's ability to enter into and perform its obligations under this Agreement or any other agreements to be executed by the IPP pursuant hereto. Any applicable waiting period with respect to any filing by the IPP under the Hart-Scott-Rodino Act has expired on or before the date hereof.

4. The execution, delivery and performance by the IPP of the Agreement, any other agreements executed or to be executed by the IPP pursuant thereto, and the consummation of the transactions contemplated thereby (a) is not in violation or default of any provision of its Certificate of Incorporation or By-Laws or partnership agreement, as applicable, and (b) is not in confiict with and does not constitute, with or without the passage of time or giving of notice, a material violation or default, or give rise to any material obligation, under (i) any material mortgage, indenture, agreement, instrument or contract to which the IPP is a party or by which it or any of its material assets is bound or (ii) any local, state or federal judgment, order, writ, decree, statute, rule or regulation applicable to the IPP or any of its material assets.

5. Ifthe IPP has acquired any Company Shares pursuant to the Agreement:

(a) the Company Shares acquired by the IPP have been acquired for its own account without a view to the resale or distribution thereof, provided, however, that the foregoing shall not preclude the IPP &om selling the Company Shares acquired by it in the manner described in clauses (c)(i),

(ii), or (iii) below; (b) the IPP is either (x) an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities Act or (y) ifnot an "accredited investor", either alone or with its purchaser representative, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Company Shares, within the meaning of Rule 506(b)(2)(ii) of Regulation D under the Securities Act; and (c) the IPP understands that the sale of the Company Shares to the IPP has not been registered under the Securities Act or any applicable state securities laws and, therefore, the Company Shares cannot be transferred, sold, pledged or otherwise disposed of, except (i) pursuant to the Shelf Registration Statement or another effective registration statement under the Securities Act and in compliance with the prospectus-delivery requirement under the Securities Act, (ii) in accordance with Rule 144 under the Securities Act after the applicable time period specified therein or (iii) in accordance with another exemption'om the registration requirements of the Securities Act.

6. The IPP hereby certifies that the conditions specified in Section 9.2 of the Agreement have been satisfied (unless waived by the Company in writing).

NI430Z

7. The representations and warranties of the IPP contained herein shall survive the Consummation Date for a period of two (2) years.

tlPP]

By:

Name:

Title; 0 I4302

EXHIBIT9.3C Form of Opinion of IPP's Counsel NI2704

Exhibit 9.3C

[LETTERHEAD OF IPP'S COUNSEL]

[Consummation Date]

Niagara Mohawk Power Corporation 300 Erie Boulevard West Syracuse, NY 13202 Re: Master Restructuring Agreement dated 3uly 9, 1997 Ladies and Gentlemen:

Vfe have acted as counsel to 1 (th 44IPPtt) in connection with the execution and delivery of the Master Restructuring Agreement, dated as of 3uly 9, 1997 (the "Agreement" ), by and among Niagara Mohawk Power Corporation Power Corporation, a New York corporation ("NhG<"), the lPP and the other independent power producers listed on Schedule A thereto, the Shareholder's Agreemeats, the Registration Rights Agreement, the Amended PPA, the Restated Contracts and the Fixed Price Swap Contracts (collectively, the "Specified Restructuring Documents" ). This opinion is delivered to you pursuant to Section 9.3(c) of the Agreement. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Agreement.

In connection with the opinions expressed below, we have examined aad are familiar with originals or copies, certified or otherwise identifie to our satisfaction, of the pecified Restructuring Documents aad such other agreements, certificates of public officials, certificates of officers or representatives of the IPP [and its general partner] aad others, and such other documents, certificates and corporate or other records as we have deemed necessary or appropriate as a basis for the opinions set forth herein.

Based on the foregoing and subject to the qualifications set forth herein, it is our opinion that:

1. The IPP is a [corporation] [partnership] duly organized, validly existing and in good standing under the laws of its state of incorporation or formation, and has all requisite [corporate] [partnership] power aad authority to own its properties aad NI4097

Niagara Mohawk Power Corporation Page 2 assets and to cany on its business in the manner now conducted and as proposed to be conducted in accordance with the Specified Restructuring Documents.

2. The IPP has all requisite [corporate] [partnership] power and authority to execute and deliver the Specified Restructuring Documents, and perform the obligations of the IPP thereunder; all [corporate] [partnership] action on the part of the IPP, its officers, directors, stockholders and partners, as applicable, necessary for the authorization, execution and delivery of the Specified Restructuriag Documents and the performatice of the obligations of the IPP thereunder has been taken; the Specified Restructuring Documents have been duly and validly executed aad delivered by the IPP; aad the Specified Restructuring Documents constitute valid and legally binding obligations of the IPP, enforceable against the IPP in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors'ights aad remedies generally, and subject to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether eaforcemeat is sought in a proceeding at law or ia equity) aad except that rights to indemnification and contribution thereunder may be limited by public policy relating thereto.

The foregoing opinion relates only to the laws of the State of New York [and, if otherwise, the state of incorporation or formation of the IPP]. Vfe express ao opinion of the law of any other jurisdiction.

In rendering the foregoiag opinions, we have also, with your approval, relied as to certain matters on information obtained from public officials, officers of the IPP and other sources believed by us to be responsible, and we have assuiaed that (a) the parties to each of the Specified Restructuring Docutaents, each of the other agreements referred to therein and each other agreement required to be executed pursuant to any of the Specified Restructuring Documents have received all Regulatory Approvals, IPP/Third Party Coaseats, NMPC/Third Party Coasents and NMPC/Third Party Releases required to be obtained by them in connection with the execution, delivery and performaiice of the Specified Restructuring Documents, (b) all parties (other than the IPP) to the Specified Restructuring Documents have the legal right and power to enter into the Specified Restructuring Documents and perfona their obligations thereunder, all such parties have been duly authorized to eater into the Specified Restructuring Docuinents and perform their obligations thereunder, and that all such parties have duly executed and delivered the Specified Restructuring Documents, and (c) the signatures on all documents exaniined by us are genuine, assumptions which we have not independently verified.

Nl4097

Niagara Mohawk Power Corporation Page 3 This opinion is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated. We assume herein no obligation, and hereby disclaim any obligation, to make any inquiry after the date hereof or to advise you of any future changes in the foregoing or of any facts or circumstances that may hereafter come to our attention.

The opinions expressed herein are solely for the benefit of NMPC and, without our express written consent, neither our opinion nor this opinion letter may be circulated or furnished to or relied upon by any other person or entity.

Very truly yours, P'his form will be subject to modification to reflect customary and reasonable assumptions, qualifications and limitations required by the individual opining counsel.]

ai409i

0 EXHIBIT 14.14 Form oI'Third Party Non-Disclosure Agreement 012704

Exhibit 14 14 THIRD PARTY NON-DISCI OSURE AGREEMENT The Parties to the Master Restructuring Agreement dated July 9, 1997 (the "MRA") between Niagara Mohawk Power Corporation ("NMPC") and certain independent power producers which are signatories thereto (the "IPPs") have agreed that the undersigned recipient ("Third Party Recipient" ) shall be allowed access to certain confidential and proprietary information of the Parties or pertaining to the transactions contemplated by the MRA for the limited purpose of assisting the undersigned Disclosing Party to obtain a consent, approval, release or other action contemplated by the MRA, subject, however, to the terms and conditions set forth herein. As a condition of, and in consideration for, the granting and receipt of such access the undersigned agree as follows:

1. The undersigned Party under the MRA (the "Disclosing Party" ) represents that the Third Party Recipient (which, for purposes hereof, shall mean such person or entity, its af5liates, and their respective of5cers, directors, partners, shareholder and employees) is a person or entity Rom whom a consent, approval, release or other action is or may be required to be o tained in connection with the MRA, or is a financial advisor, attorney, accountant or other consultant (collectively, "Representatives" ) of such person or entity retained for purposes of assisting such person or entity with respect thereto, and that disclosure to the Third Party Recipient is necessary or desirable to advance the purposes of the MRA. All information, whether written or oral (including any information furnished prior to the execution of the MRA),

d including, without limitation, any information concerning the terms or conditions of the MRA, any other agreement, document or instrument relating thereto or any of the transactions contemplated thereby, or the progress, status or schedule of any discussions or negotiations relating thereto, furnished to the Third Party Recipient by the Disclosing Party or any of the Disclosing Party's directors, o6icers, partners, employees, agents or representatives, including, without limitation, financial advisors, attorneys, accountants, experts and consultants, and all reports, analyses, compilations, forecasts, data, studies or other documents prepared by the Third Party Recipient containing or based, in whole or in part, on any such furnished information, are collectively referred to herein as the "Information".

2. The undersigned Third Party Recipient covenants and agrees that all Information wiB be kept strictly confidential and shall not, without the prior written consent of the Disclosing Party, be disclosed or revealed, in any manner whatsoever, directly or indirectly, in whole or in part, and shall not be used by the Third Party Recipient, directly or indirectly, in any way other than for purposes of evaluating whether to provide the consent, approval, release or other third party action requested by the Disclosing Party. The Third Party Recipient agrees to transmit the Information only to those of its Representatives who need to know the Information for such purposes, who are informed by the Third Party Recipient of the confidential nature of the Information and who shall execute a counterpart of this Agreement to indicate their agreement to be bound by anti io act only in accordance, with the terms and cod,".itions e-. tlu".

Agreement. The Third Party Recipient shall be responsible for any failui'e to comply with the terms of this Agreement by any such Representatives.

3.  %'ithout limiting in any manner the foregoing provisions of this Agreement, if (i) the Third Party Recipient is, with respect to any IPP which is a Party to the MRA, an affiliate of such IPP or one of such IPP's or its afIiliates'espective directors, officers, shareholders or partners (at any tier), or one of their respective employees, financial advisors, attorneys, accountants or consultants ("IPP Participants" ) and (ii) such IPP Participant is a financial institution, steam host, fuel supplier or fuel transporter which is or has a material interest in a person or entity (or affiliate of such person or entity) Rom whom any IPP is iequired to obtain a consent, approval, release or other action contemplated by the MRA, then such Third Party Recipient acknowledges and agrees that (x) it shall not be permitted to participate in the negotiation or performance of any agreement, document or instrument relating to the MRA or any of the transactions contemplated by the MRA, (y) all files, work papers, reports, analyses, data or other documents based, in whole or in part, on any confidential or proprietary information of any other IPP .or af5liate of any other IPP regarding the MRA, any other agreement, document or instrument relating thereto, or the transactions contemplated thereby, which was or is obtained at, any time, including prior to the date of the MRA, during the course of or as a result of the negotiation, execution or performance of the MRA, any other'greement, document or instrument relating thereto, or any of the transactions contemplated thereby (collectively, "Confidential IPP Information") shall be segregated and the Third Party Recipient shall not be allowed to have access thereto, and (z) that the IPP shall not communicate or exchange any Confidential IPP Information to or with the Third Party Recipient, except, with respect to each of (x), (y) and (z) above, to the extent necessary for such IPP to obtain its own consent, approval, release or other action contemplated by the MRA Rom the Third Party Recipient.'.

The provisions of this Agreement shall be inoperative as to any Information which (i) is or becomes generally available to the public other than as a result of any breach of these provisions by the Third Party Recipient or any of its Representatives, (ii) becomes available to the Third Party Recipient on a nonconfidential basis and not in contravention of applicable law &om a source (other than its Representatives) which has represented to the Third Party Recipient that such source is not bound by a confidentiality or other similar agreement or confidential relationship and is entitled to disclose it or (iii) was known to the Third Party Recipient on a nonconfidential basis and not in contravention of applicable law prior to its disclosure to the Third Party Recipient by the disclosing party.

5. In the event that the Third Party Recipient or any person to whom the Third Party Recipient furnishes any Information is requested or becomes legally compelled (by oral questions, interrogatories, request for information or documents, subpoena, criminal or civil investigative demand or similar process) to disclose any Information, the Third Party Recipient will provide the Disclosing Party with prompt written notice so that the Disclosing Party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions hereof, and the Third Party Recipient will cooperate with the Disclosing Party in any effort the Delctc paragraph 3 ifnot applicable.

N 20093

Disclosing Party undertakes to obtain a protective order or other remedy. In the event that such protective order or remedy is not obtained, or that the Disclosing Party, in its sole discretion,

~

waives compliance with the provisions hereof, the Third Party Recipient will furnish only that portion of the Information which is legally required and will use reasonable best eKorts to obtain reliable assurance that confidential treatment will be accorded the Information, provided, however, ifsuch eForts involve any expense the Disclosing Party, ifit has received prior notice thereof, willreimburse the Third Party Recipient for same.

6. The Third Party Recipient acknowledges that unauthorized disclosure of Information may result in liability for judicial judgments including, but not limited to, monetary damages, and that the Disclosing Party shall be entitled to pursue any legal and equitable remedies in the event of an unauthorized disclosure. The Third Party Recipient hereby waives any objections to the immediate issuance by a court of competent jurisdiction of injunctive or other equitable relief barring the further disclosure or use of any Information in the event of an unauthorized disclosure.

7. This Agreement shall survive the consummation of the transactions contemplated by the MRA and/or any termination of the MRA with respect to the Disclosing Party.

Disclosing Party:

By:

Name:

Title:

Date:

Third Party Recipient:

By:

Name:

Title:

Date:

N 20093

APPENDIX B RECOVERY OF COSTS ASSOCIATED WITH TERMINATION OF GAS TRANSPORTATION AND PEAK SHAVING AGREEMENTS

APPENDIX B RECOVERY OF COSTS ASSOCIATED WITH TERMINATION OF GAS TRANSPORTATION AND PEAK SHAVING AGREEMENTS Each of the gas fired projects will terminate its existing gas peak shaving agreement with Niagara Mohawk. In addition, each of the gas fired projects which will not have a restructured electric contract will terminate its gas transportation agreement with Niagara Mohawk. If desired by the IPP, these projects may negotiate a new transportation agreement that reflects the planned use of the specific project. For gas fired projects which will have restructured electric contracts, the parties to the Master Restructuring Agreement have agreed to work in good faith to re-negotiate new peak shaving and, if requested by the IPP, transportation agreements as appropriate to align the operating characteristics of the IPP projects with the interests of the Company's gas delivery system. To the extent that the Company loses gas transportation revenues or incurs additional costs to replicate the existing peak shaving agreements, the Company will recover the lost revenues or additional costs in accordance with the terms and conditions specified in the Stipulation and Agreement between the parties in Niagara Mohawk's Gas Rate Case Nos. 95-G-1095 and 95-G-0091.

The Stipulation and Agreement defines the cost recovery mechanisms for lost gas transportation revenues in Section I REVENUE REQUIREMENT and for additional

~

peak shaving costs in Section Vl. RECOVERY OF COSTS RELATED TO UNREGULATED GENERATION.

Section I. REVENUE REQUIREMENT stipulates that ratepayers and shareholders will share any annual revenue shortfall below that projected on an 80%/20% basis.

Therefore for those projects which retain a transportation contract, Niagara Mohawk will recover annually through its Commodity Cost Adjustment (CCAC) 80% of the difference between the projected revenue and the actual revenue. For those projects that terminate their transportation contract, Niagara Mohawk will recover annually through the CCAC, 80% of the projected revenue. If the CCAC is not extended at the end of the Gas Rate Case Settlement term, or otherwise terminated, these costs will be collected through a mechanism such as a re-instituted Gas Adjustment Clause (GAC) or through base rates.

Section Vl RECOVERY OF COSTS RELATED TO UNREGULATED GENERATION

~

states that peak shaving replacement costs incurred will be deferred to the Confidential Settlement Document

Contingency Reserve Account up to the actual costs or the cost of 75,000 dt, whichever is less. Any of these costs not offset by non-base rate reductions at the end of the settlement will be collected from ratepayers beginning on November 1, 1999.

Confidential Settlement Document

APPENDIXC NIAGARAMOHAWKPOWER CORPORATION FIVE-YEAR FINANCIALFORECAST

Niagara Mohawk Power Corporation October 10, 1997 PowerChoice Filing Financial Forecast SchedulaKumhez Summary financial statements Electric sales & revenues Electric fuel expense & purchased power Gas sales, revenues & purchases Departmental expenses Non-departmental expenses Operating taxes Income taxes

NIAGARAMOHAWKPOWER CORPORATION FINANCIALSTATEMENTS POWERCHOICE FILING INCOME STATEMENT Electric Revenues $ 3,267,372 $ 3,256,451 $ 3,270,632 $ 3,411,476 $ 3.549,419 Gas Revenues 845 345 819 731 633 099 847 254 662 438 Total Revenues 3912 1 38 S 182 3903 31 4 30 4211 7 Fuel and Purchased Povvar 838,237 e?o,356 890,118 923,580 964,130 Gas Purchases 308,085 311,290 314,533 320,135 Departmental Expenses 821,372 e22.'002 855,137 858.690 Norvdepanmentaf Expenses 43,513 40,389 37,052 38,842 36,672 Taxes Other Than bvcome Taxes 478,277 482,468 479,706 488,842 498,952 Nudaar Decommissioning 28 003 28 003 28 003 28 003 28 003 Total Operating Expenses 2 488 281 2 550 675 2 588 171 2 646 937 Total EBITDA 1,426,436 1~ 1, .560 1,411, 93 1,,27 Deprecbtion and Amciezaticn 337,987 348,324 351,714 359,528 369,121 Deferred Gss Cost (3.320) (1,411) 378 (110)

Nudear Fuel Amortizabcn 32,378 29,497 2S,?82 28,769 28,889 Amortizabon of Regubtory Asset 411,300 411,300 4'l1,300 411,300 411,300 Regubtory Oeferrats and Amorttzaeons (3,028) (8,787) (4,91 6) 18,540 23,687 AFUDC (1 0,032) (9,604) (7,242) (8,178) (1 0,947)

Deferred Carrying Charge (305) (282) (3)

Other gncome)lDeductions 3,860 (21~ (1 3,027) (1$,930) (24,844)

Amortization of Debt Expense 1e 971 12 682 11 884 11 145 Operating Income , 01 4 interest Expense 528 727 528 293 467 792 426 352 385 275 Pra-tax Income e.eog 181,1 311 ~

Currant Income taxes 10,430 11,690 13,490 18,3&4 fTC Amortization (8,01 6) (8,016) (8,016) (8,016) (8,016)

Deferred Income taxes 42 13S 15 933 66 607 108 265 Net income Before Preferred Stock Dividend 44, 16,018 4,978 1,091 1,128 Preferred Stock diVidend 50 039 50 039 50 039 50 039 50 039 Net Income 2 061 $ 145 087 Return on Average Equity 1 Oyv BALANCESHEET Cash $ 220.01 2 $ 201,350 $ 343,790 $ 553,548 Other Current Assets 367,14$ 374,551 389,629 399,192 Existing Defened Debiits 1,838,449 1,693,280 1,605,085 1,525,777 1,442,073 Regubtory Asset from IPP Buyout 3,715,700 3,304,400 2,893,1 00 2,4S1,800 2,070,500 Net WilityPbnt 7 503 732 7 455 793 7 423 119 7 345 908 7 335 705 Total Assets $ 137 $ 13 8 038 $ 12 508 159 $ 12 904 $ 11 1 018 Current LbbiMies $ 711,907 $ 718,038 $ 720,613 $ 724,747 $ 732,659 Exiisting Deferred Uabilities 2,737,998 2,747,120 2,698,481 2,709,399 2,763,472 FMBs 3.493,279 3.499~4 3,505,487 3,51 2,1 05 3.519,144 Senior Sub. Notes 3~,000 2,500,000 2,000,000 1,500,000 1,000,000 Preferred Stock 526,804 528,804 528,804 Common Stock 2.310,728 2,31 0,728 2,31 0,728 2,31 0,728 2,310,728 Retained Earnings 778 142 748 124 744 066 803 121 948 211 Total UabiMies and Capital $ 13 $ 13 048 038 $ 12 506 159 $ 12 086 904 $ 11 801 018 CASH FLOW Operating ActMSm Net Income $ 44,889 $ 18,018 $ 47,978 $ 109,091 $ 195,128 Depreciation 365,970 374,327 379,717 387,529 397,124 Amoiezations 18,971 12,682 11,884 11,145 Nuclear Fuel 32,3?S 29,497 28,782 28,769 28,889 Deferred Gas Cost 28,725 (3,320) (1,411) 378 (110)

AFUDC (10,032) (9,604) (7,242) (8,1?8) (1 0,947)

Deferred Income Taxes 42,138 15,933 3S,257 66,607 108,2SS ITC Amoitizaeon (8,016) (8,016) (8,016) (S,01 6) (8,016)

Deferred Carrying Charges (305) (282) (3)

Deci in sects pay. due to knver IPP purchases (48,200)

Inocme Tax Refund 138,118 Amortization of Regubtory Asset 411,3(0 411,300 411.300 411,300 411,300 Regubtcry Amortizaeons (3,026) (8,787) (4,916) 18,540 23,687 Payment of cash to IPPs (3.665,000)

Financing Costs (1 00,000)

Other 378 14 101 18 35 18 43 Subtotal Cssheovv from Operabons eye 1 140026 Investing Activities:

Construction (298,804) (269,41 3) (264,1 58) (273,957) (301,151)

Nuclear Fuel (28,992) (28,420) (53,270) (5,091) (51,078)

Nuclear Decommbsbru 8,003 8,003 e'003 8,003 8 003 Subtotal Cash Used for Investing Frnandng Activities:

Preferred Dividends Issuance of Sr Subordinated Debt Retirement of Sr. Subordinated Debt Subtotal Cash from Financing 3 149 964 Change in Cash arxl TCLs (128,561) (113,820) (18,662) 142,440 209,758 Beginning Cash and TCfs 482 393 333 832 220 012 ?01 350 343 790 Ending Cash and TCfs $ 220 012 $ 201 350 $ 343 790 10roglg? 1058 AM W IFPLOTUSIACUPLANICONSOL9?IFINFORF.WK4

Niagara Mohawk Power Corporation Electric Sales 8 Revenues Electric Sales (Mwhrs) 1998 1999 2000 2001 2002 SC1 10,067,816 10,117,607 10,167,398 10,241,090 10,316,772 SC2 4,484,825 4,558,132 4,599,776 4,631,933 4,657,148 SC3 6,519,069 6,636,790 6,696,925 6,737,777 6,773,377 SC3N4/5/7/1 1 7386689 7548603 7615651 7646559 7684217 Industrial Special 4,385,188 4,385,188 4,385,188 4,385,188 4,385,188 Economic Devel Power (EDP) 293,027 293,027 293,027 293,027 293,027 Special Lighting (PAL) 29,706 30,157 30,436 30,656 30,824 Municipal Revenues 207,655 207,655 207,655 207,655 207,655 Unreg Generators 24,009 24,402 24,624 24,798 24,798 Total Retail Sales 33 397 984 33 801 561 34 020 680 34 198 683 34 373 006 Electric Revenues ($ 000) 1998 1999 2000 2001 2002 SC1 $ 1,254,716 $ 1,260,921 $ 1,267,127 $ 1,276,310 $ 1,285,742 SC2 563,346 572,558 577,787 581,827 584,996 SC3 687,560 699,949 706,291 7'I 0,620 714,375 SC3N4/5/7/11 582,870 595,621 600,915 603,373 606,338 Industrial Special 60,029 60,029 60,029 60,029 60,029 Economic Devel Power (EDP) 14,394 14,394 14,394 14,394 14,394 Special Lighting (PAL) 5,065 5,139 5,187 5,223 5,253 Municipal Revenues 50,670 50,670 50,670 50,670 50,670 Unreg Generators 3,253 3,307 3,340 3,364 3,364 Subtotal (98-07 PwrChoice Frz) 3,221,903 3,262,588 3,285,740 3,305,810 3,325,161 Discounts (118,664) (122,068) (123,269) (125,621) (125,621)

Pricing Goals (incl. Parity Move) (49,625) (81,546) (101,416) (101,341) (101,266)

DSM Rebate Recovery 200 200 Settlement Adjustments (6,000) (16,000) (26,000) 5,000 4,000 Regco Price Increase 24,241 45,167 Price Change for Genco 15,100 46,300 Sub-Total Retail Revenue 3,047,814 3,043,174 3,035,055 3,123,189 3,193,741 Borderline 1,903 1,903 1,903 1,903 1,903 Distribution Misc Revenues 30,055 30,674 31,345 32,054 32,790 Transmission Revenues 88,500 88,500 88,529 88,530 88,485 Total Regco Electric Revenues 3,168,272 3,164,251 3,156,832 3,245,676 3,316,919 Wholesale sales 99,100 92,200 113,800 165,800 232,500 Total Electric Revenues 3 267 372 3 256 451 3 270 632 3 411 476 3 549 419 10/09/97 w:)fplotushacuplanhprodcostholdstufflRATRV1 01.WK4

0 Niagara Mohawk Power Corporation Electric Fuel & Purchased Power 1998 1999 2001 2002 GWHRS Fossil 8 190.7 7 886.4 7 808.2 7 747.7 8 445.6 Nine Mile 1 4,564.4 4,027.2 4,576.9 4,027.2 4,564.4 Nine Mile 2 3,078.7 3,489.4 3,088.8 3,489.4 3,078.7 Total Nuclear 7 643.1 7 516.6 7 665.7 7 516.6 7 643.1 Hydro 2,949.1 2,949.1 2,949.1 2,949.1 2,949.1 Total NMPC 18,782.9 18,352.1 18,423.0 18,213.4 19,037.8 IPP Purchases 13,162.6 13,534.1 14,429.9 16,013.5 16,256.5 Niagara 6,047.9 6,047.9 6,047.9 6,047.9 6,047.9 St Lawrence 666.6 666.6 666.6 666.6 666.6 Fitzpatrick 224.3 229.5 230.2 229.5 229.5 Gilboa 0.0 0.0 0.0 0.0 0.0 Total NYPA Purchases 6,938.8 6,944.0 6.944.7 6,944.0 6,944.0 NYPP Purchases 1,257.5 1,325.4 1,080.3 808.8 345.0 OH Purchases 1,193.9 1,192.1 930.0 927.4 1,329.5 All Other Purchases 562.7 547.2 519.0 388.8 387.3 Total Other Purchases 3,014.1 3,064.7 2,529.3 2,125.0 2,061.8 Total Purchases 23,115.5 23,542.8 23,903.9 25,082.5 25,262.3 Total Fuel 8 Purchases 41 898.4 41 894.9 42 326.9 43 295.9 44 300.1

$ Thousands Fossil $ 130,407 $ 126,815 $ 133,918 $ 138,286 $ 157,493 Nine Mite 1 24,924 19,248 21,554 19,016 21,343 Nine Mile 2 14 317 17 008 14 111 16,512 14 409 Total Nuclear 39,241 36 256 35 528 35 752 Hydro 0 0 Total NMPC 169 648 163 071 169 583 173,814 193 245 IPP Purchases 561,148 584,042 603,045 641,652 659,866 Niagara 57,092 58,431 59,963 61,472 63,189 St Lawrence 5,105 5,225 5,359 5,497 5,650 Fitzpatrick 9,348 9,567 9,842 10,081 10,373 Gitboa 7,887 8,072 8,295 8,492 8,729 Total NYPA Purchases 79,432 81,295 83,459 85,542 87,941 NYPP Purchases 27,921 33,975 28,035 21,587 10,558 OH Purchases 20/27 1 22,592 19,392 21,148 32,447 All Other Purchases 12,196 14,881 15 387 8,606 8,962 Total Other Purchases 71,448 62,814 51,341 51,967 Total Purchases 736,784 749 317 778 535 799 774 Total Fuel & Purchases 870,615 899,855 918,900 952,349 993,019 Less: Nuc fuel amort (Note 1) 32,378 29,49 28,782 28,769 28,889 Regco Fuel 8 Purchased Power $ 838 237 $ 870358 $ 890 118 $ 923 580 $ 964 130 Note 1: Nuclear fuel amortization is shown on Regco's income statement below EBITDA.

The remaining cash nuclear fuel is spent fuel expense.

w:tfptotushcuptantprodcost$ 997051 B.WK4 Page 1 10/0987

Niagara Mohawk Power Corporation Gas Sales, Revenues and Purchases 998 999 000 gkOD. ~00 SC1 54,904,780 55,098,549 55,237,729 55,355,734 55,449,591 SC2 22,176,382 22,395,921 22,612,911 22,827,207 23,039,440 SC3 886,891 886,891 886,891 886,891 886,891 Transportation 32,706,555 32,719,897 32,719,897 32,520,599 32,252,385 Special Contracts 108,473,600 108,473,600 108,473,600 112,619,770 112,619,770 Total 219 148 208 219 574 858 219 931 028 224 210 201 224 248 077 s e e es 000 SC1 $ 420,727 $ 400,465 $ 403,141 $ 407,762 $ 414,411 SC2 148,049 140,170 141,668 144,018 147,284 SC3 4,572 4,199 4,206 4,247 4,318 Transportation 31,081 31,311 31,448 31,314 30,950 Special Contracts 25,067 25,028 22,664 22,351 22,351 Other 4,901 4,790 3,033 3,072 3,121 SSG 10,948 10,498 10,498 10,498 10,498 Total revs before rate relief 645,345 6'I6,461 616,658 623,262 632,933 Cumulative Rate Relief 3,270 16,441 23,992 29,505 Total Gas Revenues 645,345 619,731 633,099 647,254 662,438 Gas Purchases 326,023 304,765 309,879 314,911 320,025 GRT 30,228 28,870 29,493 29,804 30,798 Margin $ 289 094 $ 286 096 $ 293 727 $ 302 539 $ 311 615 Assumptions Settlement Settlement Solve for Index Margin Index Margin 12% ROE @ 3% @3%

10/09/97 w:hfplotusMcuplankconsol97<GASSALE.WK4

NIAGARAMOHAWK POWER CORPORATION DEPARTMENTAL EXPENSES 1998 1999 2000 2001 2002 Fossil $ 72,433 $ 74,739 $ 74,465 $ 77,141 $ 79,384 Hydro 23,549 24,175 24,888 25,580 26,398 Disco 355,451 361,967 368,922 375,317 382,520 Transco 97,389 99,172 101,075 102,808 104,757 Nine Mile 1 86,164 101,769 79,012 107,783 84,129 Nine Mile 2 55,265 45,770 57,861 48,904 61,779 Gas 110,702 113,780 115,779 117,604 119,723 Total $ 800 953 $ 821 372 $ 822 002 $ 855 137 $ 858 690

NIAGARAMOHAWK POWER CORPORATION NON-DEPARTMENTALEXPENSES CASH 1998 1999 2000 2001 2002 BANK FACILITYAGREEMENT ELECTRIC 5,222 $ 2,610 BANK FACILITYAGREEMENT GAS 647 324 NM2 A&G COTENANT CREDIT (5,985) (6,167) (6,364) (6,567) (6,731)

OSWEGO 6 COTENANT CREDIT (201) (208) (214) (221) (227)

SIR COSTS ELECTRIC 12,750 12,750 12,750 12,750 12,750 SIR COSTS GAS 2,250 2,250 2,250 2,250 2,250 SBC PROGRAMS 15,000 15,000 15,000 15,000 15,000 DEMAND SIDEIVIANAGEMENT 200 200 COSTS OF ACC REC SALE ELECTRIC 11,300 11,300 11,300 11,300 11,300 COSTS OF ACC REC SALE GAS 2,330 2,330 2,330 2,330 2,330

$ 43,513 $ 40,389 37,052 $ 36,842 $ 36,672 NIAGARAMOHAWKPOWER CORPORATION

'REGULATORY DEFERRALS AND AMORTIZATIONS NON-CASH 1998 1999 2000 2001 2002 OPEB REGULATORY ASSET ELECTRIC $ 2,837 $ 2,837 $ 2,837 $ 2,837 $ 2,837 OPEB REGULATORY ASSET GAS 580 580 580 580 580 FAS 112 GAS 238 238 VERP COSTS GAS 2,296 2,296 496 SIR INSURANCE PROCEEDS - ELECTRIC (2,550) (2,550) (2,550) (2,550) (2,550)

SIR INSURANCE PROCEEDS GAS (480) (480) (480) (480) (480)

NUCLEAR OUTAGE COST DEFERRALS 4,500 (4,500) 4,500 (4,500) 4,500 REPLACEMENT POWER LEVELIZATION 3,037 1,015 NM SUBURBAN GAS 38 38 PENSION TRUE UP - GAS 422 422 PENSION GAIN AMORTIZATIONELECTRIC (7,365)

PENSION GAIN AMORTIZATIONGAS (1,242) (1,345) (952) 53RD LABOR WEEK ELECTRIC 676 676 676 676 53RD LABOR WEEK GAS 187 186 177 177 ADDITIONALIPP BUYOUT COST AMORTIZATION 2,800 2,800 2,800 2,800 2,800 SETTLEMENT DEFERRAUAMORTIZATION (9,000) (11,000 13,000 17,000 16,000

$ (3,026) $ (8,787) $ (4,916 $ 16,540 $ 23,687

NIAGARAMOHAWKPOWER CORPORATION TAXES OTHER THAN INCOME TAXES 1998 1999 2000 2001 2002 Revenue Taxes Electric $ 148,442 $ 149,920 $ 151,140 $ 152,375 $ 153,809 Gas 30,228 28,870 29,493 29,804 30,798 Total Revenue Taxes 178,670 178,790 180,633 .

182,179 184,607 Real estate taxes 258,410 263,188 257,249 263,456 269,818 Payroll taxes 31,233 32,264 33,327 34,428 35,481 Sales Tax 7,964 8,226 8,497 8,779 9,046

$ 476 277 $ 482 468 $ 479 706 $ 488 842 $ 498 952 BUDFOREC.WK4 10I09I97

NIAGARAMOHAWKPOWER CORPORATION FEDERAL INCOME TAX CALCULATION 1998 1999 2000 2001 2002 Regular Tax Net income before tax $ 78,809 $ 36,365 $ 89,909 $ 181,172 $ 311,759 Regulatory Asset Amortization 414,100 414,100 414,100 414,100 414,100 Schedule M additions 697,817 697,182 708,929 711,932 738,084 Total Schedule M additions 1,111,917 1,111,282 1,123,029 1,126,032 1,149,955 IPP Buyout 4,127,000 Schedule M deductions 652,551 646,394 643,252 642,836 651,695 Total Schedule M deductions 4,779,551 646,394 643,252 642,836 651,695 Taxable income (3,588,825) 501,253 569,686 664,368 810,0'I 9 Net operating loss carryforward 501,253 569,686 664,368 810,019 Net taxable income Regular tax rate Regular Tax Alternative Minimum Tax Taxable Income before NOL $ (3,588,825) $ 501,253 $ 569,686 $ 664,368 $ 810,019 AMT Depreciation Adjustment 60,124 66,842 68,634 72,229 75,756 ACE Adjustment I AMTI before ACE Adjustment AMTI before AMT NOL 75%

(3,528,701) 35,243 (3,563,944) 568,095 46,600 521,495 638,320 53,810 584,510 736,597 62,118 674,479 885,775 66,576 819,199 AMT NOL 3,207,550 469,346 526,059 607,031 737,279 AMTI (356,394) 52,149 58,451 67,448 81,920 AMT Rate 20% 20% 20% 20% 20% 20%

Alternative Minimum Tax 10,430 11,690 13,490 16,384 Regular Tax Additional Minimum Tax $ 10,430 $ 11,690 $ 13,490 $ 16,384 Deferred Taxes Deferred Tax on NOL $ (1,256,089) $ 175,439 $ 199,390 $ 232,529 $ 283,507 Deferred Tax on Amt (10,430) (11,690) (13,490) (16,384)

Deferred Tax on Regulatory Asset 1,444,450 Deferred Tax on Regulatory Asset Reversal (144,935) (144,935) (144,935) (144,935) (144,935)

All other 1,290 4,141 4,508 7,497 13,923 Total Deferred Taxes $ 42,136 $ 15,933 $ 38,257 $ 66,607 $ 108,265

APPENDIX D ELECTRIC PRICES

Appendix D Page 1 of 43 SC1 RATE DESIGNS FOR THE 3 YEAR PERIOD ENDING DECEMBER 31,2000 RATE DESIGN(1998)

CURRENT 1998 1998 RATES UNITS REVENUE RATES REVENUE CUSTOMER 9.67 16,945,453 $ 163,862,531 11.96 $ 202,667,618 PER KWH 0-600 0.10314 6,896,107,853 $ 711,264,564 0.09741 $ 671,749,866 OVER 0.10314 2,222,626,689 $ 229,241,717 0.09741 $ 216,506,066 TOTAL $ 1,104,368,812 $ 1,090,923,550 RATE DESIGN(1999)

CURRENT 1999 1999 RATES UNITS REVENUE RATES REVENUE CUSTOMER 11.96 17,029,259 $ 203,669,938 14.8 $ 252,033,033 PER KWH 0-600 0.09741 6,930,213,690 $ 675,072,116 0.09122 $ 632,174,093 OVER 0.09741 2,233,618,453 $ 217,576,774 0.09122 $ 203,750,675 TOTAL $ 1,096,318,828 $ 1,087,957,801 RATE DESIGN(2000)

CURRENT 2000 2000 RATES UNITS REVENUE RATES REVENUE CUSTOMER 14.8 17,088,507 $ 252,909,904 17.44 $ 298,023,562 PER KWH 0-600 0.09122 6,959,066,521 $ 634,806,048 0.08544 $ 594,582,644 OVER 0.09122 ',249,863,206 $ 205,232,522 0.08544 $ 192,228,312 TOTAL $ 1,092,948,474 $ 1,084,834,518 SC1FINAL.WK4

Appendix D Page 2 of 43 SC1-RESIDENTIAL 1997 1998 PERCENT BLOCK REVENUE REVENUE DIFFERENCE INCREASE 0 $ 10.16 $ 12.56 $ 2.40 23 62%

100 $ 20.99 $ 22.85 $ 1.86 8.86%

200 $ 31.84 $ 33.14 $ 1.30 408 300 $ 42.67 $ 43.43 $ 0.76 1 78%

400 $ 53.51 $ 53.73 $ 0.22 0.41%

500 $ 64.35 $ 64.03 ($ 0.32) -0.50%

600 $ 75.18 $ 74.32 ($ 0.86) 1 14%

700 $ 86.03 $ 84.61 ($ 1A2) 1 65%

800 $ 96.86 $ 94.90 ($ 1.96) -2.02%

900 $ 107.70 $ 105.19 ($ 2.51) 2.33%

1000 $ 118.54 $ 115A8 ($ 3.06) 2.58%

1100 $ 129.37 $ 125.78 ($ 3.59) 2.77%

1200 $ 140.21 $ 136.07 ($ 4.14) 2.95 1300 $ 151.05 $ 146.36 ($ 4.69) -3.10%

1400 $ 161.89 $ 156.65 ($ 5.24) 3 24' 1500 $ 172.72 $ 166.95 ($ 5.77) 34%

1600 $ 183.56 $ 177.24 ($ 6.32) 3.44%

1700 $ 194.40 $ 187.53 ($ 6.87) -3.53%

1800 $ 205.23 $ 197.83 ($ 7.40) -3.61%

1900 $ 216.08 $ 208.12 ($ 7.96) 3.68%

2000 $ 226.91 $ 218.41 ($ 8.50) -3.75%

2200 $ 248.59 $ 238.99 ($ 9.60) 3 86%

2400 $ 270.26 $ 259.57 ($ 10.69) 3 96%

2600 $ 291.93 $ 280.17 ($ 11.76) 4 03%

2800 $ 313.61 $ 300.75 ($ 12.86) -4 10%

3000 $ 335.28 $ 321.33 ($ 13.95) -4.16%

3200 $ 356.96 $ 341.90 ($ 15.06) 3400 $ 378.64 $ 362.49 ($ 16.15) -4.27%

3600 $ 400.30 $ 383.08 ($ 17.22) -4.30%

3800 $ 421.98 $ 403.66 ($ 18.32) -4 34%

4000 $ 443.66 $ 424.25 ($ 19A1) -4.37%

SC1 FINAL.WK4

Appendix D Page 3 of 43 SC't-RESl DENTIAL 1998 1999 PERCENT

~BLO K REVENUE REVENUE DIFFERENCE INCREASE 0 $ 12.56 $ 15.51 $ 2.95 23.49%

100 $ 22.85 $ 25.13 $ 2.28 gg8 200 $ 33.14 $ 34.75 $ 1.61 4.86%

300 $ 43.43 $ 44.38 $ 0.95 2.19%

400 $ 53.73 $ 54.01 $ 0.28 0 52%

500 $ 64.03 $ 63.63 ($ 0.40) 0.62%

600 $ 74.32 $ 73.26 ($ 1.06) 1.43%

700 $ 84.61 $ 82.88 ($ 1.73) 2 04%

800 $ 94.90 $ 92.51 ($ 2.39) 2 52%

900 $ 105.19 $ 102.13 ($ 3.06) -2.91%

1000 $ 115.48 $ 111.75 ($ 3.73) 3 23%

1100 $ 125.78 $ 121.38 ($ 4.40) 3 50%

1200 $ 136.07 $ 131.00 ($ 5.07) -3.73%

1300 $ 146.36 $ 140.63 ($ 5.73) 3 92%

1400 $ 156.65 $ 150.25 ($ 6.40) -4 0g 1500 $ 166.95 $ 159.87 ($ 7.08) 4 24%

1600 $ 177.24 $ 169.49 ($ 7.75) 37%

1700 $ 187.53 $ 179.11 ($ 8.42) -4 49%

1800 $ 197.83 $ 188.75 ($ 9.08) -4.59%

1900 $ 208.12 $ 198.38 ($ 9.74) -4.68%

2000 $ 218.41 $ 208.00 ($ 10.41) 7%

2200 $ 238.99 $ 227.24 ($ 11.75) -4 92%

2400 $ 259.57 $ 246 49 ($ 13.08) -5 04%

2600 $ 280.17 $ 265.74 ($ 14.43) 5 15%

2800 $ 300.75 $ 284.99 ($ 15.76) 5 24%

3000 $ 321.33 $ 304.23 ($ 17.10) 5 32%

3200 $ 341.90 $ 323.48 ($ 18.42) 5 39%

3400 $ 362.49 $ 342.74 ($ 19.75) 545 3600 $ 383.08 $ 361.98 ($ 21.10) -5 51%

3800 $ 403.66 $ 381.23 ($ 22.43) -5 56%

4000 $ 424.25 $ 400.48 ($ 23.77) -5 60%

SC1F INAL.WK4

Appendix D Page 4 of 43 SC't-RES I DENTlAL 1999 '000 PERCENT

~BLOC REVENUE REVENUE DIFFERENCE INCREASE 0 $ 15.51 $ 18.13 $ 2.62 16.89%

100 $ 25.13 $ 27.08 $ 1.95 7 76%

200 $ 34.75 $ 36.03 $ 1.28 3 68%

300 $ 44.38 $ 44.97 $ 0.59 1.33%

400 $ 54.01 $ 53.94 ($ 0.07) 0.13%

500 $ 63.63 $ 62.88 ($ 0.75) -1.18%

600 $ 73.26 $ 71.82 ($ 1 44) 1 97%

700 $ 82.88 $ 80.77 ($ 2.11) 2 55%

800 $ 92.51 $ 89.72 ($ 2.79) 3.02%

900 $ 102.13 $ 98.67 ($ 3.46) 3.39%

1000 $ 111.75 $ 107.61 ($ 4.14) 3.70%

1100 $ 121.38 $ 116.56 ($ 4.82) 3 97%

1200 $ 131.00 $ 125.52 ($ 5.48) -4.18%

1300 $ 140.63 $ 134.46 ($ 6.17) -4 39%

1400 $ 'I 50.25 $ 143.41 ($ 6.84) -4 55%

1500 $ 159.87 $ 152.36 ($ 7.51) ~70 1600 $ 169.49 $ 161.30 ($ 8.19) -4.83%

1700 $ 179.11 $ 170.25 ($ 8.86) -4.95%

1800 $ 188.75 $ 179.20 ($ 9.55) 5 06 1900 $ 'I 98.38 $ 188.16 ($ 10.22) 5 15%

2000 $ 208.00 $ 197.10 ($ 10.90) 5 24%

2200 $ 227.24 $ 214.99 ($ 12.25) 5 39%

2400 $ 246.49 $ 232.89 ($ 13.60) 5 52%

2600 $ 265.74 $ 250.79 ($ 14.95) -5.63%

2800 $ 284.99 $ 268.68 ($ 16.31) 5.72%

3000 $ 304.23 $ 286.58 ($ 17.65) 5 80 3200 $ 323 48 $ 304.47 ($ 19.01) -5.88%

3400 $ 342.74 $ 322.38 ($ 20.36) -5 94%

3600 $ 361.98 $ 340.26 ($ 21.72) -6 00%

3800 $ 381.23 $ 358.16 ($ 23.07) -6 05%

4000 $ 400.48 $ 376.06 ($ 24.42) -6.10%

SC1F INAL.WK4

Appendix D Page 5 of 43 SC2ND RATE DESIGNS FOR THE 3 YEAR PERIOD ENDING DECEMBER 31,2000 RATE DESIGN(1998)

CURRENT 1998 1998 RATES UNITS REVENUE RATES REVENUE CUSTOMER 14.65 1,189,283 $ 17,422,996 17.75 $ 21,109,773 PER KWH 0-500 0.'I278 346,900,627 $ 44,.333,900 0.12 $ 41,628,075 OVER 0.1278 253,192,664 $ 32,358,022 0.12 $ 30,383,120 TOTAL $ 94,114,918 $ 93,120,968 RATE DESIGN(1999)

CURRENT 1999 1999 RATES UNITS REVENUE RATES REVENUE CUSTOMER 17.75 1,208,452 $ 21,450,023 35.5 $ 42,900,046 PER KWH 0.12 352,498,021 $ 42,299,763 '.1'I276 $ 39,747,677 OVER 0.12 257,298,398 $ 30,875,808 0.11276 $ 29,012,967 TOTAL $ 94,625,594 $ 111,660,690 RATE DESIGN(2000)

CURRENT 2000 2000 RATES UNITS REVENUE RATES REVENUE CUSTOMER 35.5 1,219,491 $ 43,291,931 53.25 $ 64,937,896 PER KWH 0-500 0.11276 355,719,042 $ 40,'I 10,879 0.10535 $ 37,475,001 OVER 0.11276 259,651,088 $ 29,278,257 0.10535 $ 27,354,242 TOTAL $ 112,681,067 $ 129,767,139 SC2FINAL. WK4

Appendix D Page 6 of43 SC2-NON-DEMAND METERED 1997 1998 PERCENT BL(~K REVENUE REVENUE DIFFERENCE INCREASE 0 $ 15.39 $ 18.64 $ 3.25 21.12%

100 $ 28.82 $ 31.30 $ 2.48 861 200 $ 42.25 $ 43.96 $ 1.71 4 P5%

300 $ 55.68 $ 56.63 $ 0.95 1 71%

400 $ 69.11 $ 69.30 $ 0.19 0.27%

500 $ 82.54 $ 81.96 ($ 0.58) -0 70%

600 $ 95.97 $ 94.62 ($ 1.35) 1 41%

700 $ 109.39 $ 107.29 ($ 2.10) -1.92%

800 $ 122.82 $ 119.95 ($ 2.87) 2.34%

900 $ 136.25 $ 132.61 ($ 3.64) -2.67%

1000 $ 149.68 $ 145.28 ($ 4.40) -2.94%

1100 $ 163.11 $ 157.95 ($ 5.16) -3.16%

1200 $ 176.54 $ 170.61 ($ 5.93) -3.36%

1300 $ 189.97 $ 183.27 ($ 6.70) 3 53%

1400 $ 203.39 $ 195.94 ($ 7.45) 3 66o/o 1500 $ 216.82 $ 208.60 ($ 8.22) -3.79%

1600 $ 230.25 $ 221.26 ($ 8.99) -3.90%

1700 $ 243.68 $ 233.92 ($ 9.76) A 01 1800 $ 257.11 $ 246.60 ($ 10.51) -4 pg 1900 $ 270.54 $ 259.26 ($ 11.28) -4 17%

2000 $ 283.97 $ 271.92 ($ 12.05) 4.24%

2200 $ 310.82 $ 297.25 ($ 13.57) -4.37%

2400 $ 337.68 $ 322.57 ($ 15.11) -4.47%

2600 $ 364.54 $ 347.91 ($ 16.63) -4 56 2800 $ 391.39 $ 373.24 ($ 18.15) 64%

3000 $ 418.25 $ 398.56 ($ 19.69) -4.71%

3200 $ 445.11 $ 423.89 ($ 21.22) -4.77%

3400 $ 471.97 $ 4a9.22 ($ 22.75) -4.82%

3600 $ 498.82 $ 474.55 ($ 24.27) <.87'4 3800 $ 525.68 $ 499.87 ($ 25.81) 91%

4000 $ 552.54 $ 525.21 ($ 27.33) -4 g5 SC2F INAL.WK4

Appendix D Page 7 of 43 SC2-NON-DEMAND METERED 1998 1999 PERCENT

~BL )~ REVENUE REVENUE DIFFERENCE INCREASE 0 $ 18.64 $ 21.85 $ 3.21 17.22%

100 $ 31.30 $ 33.74 $ 2.44 7.80%

200 $ 43.96 $ 45.61 $ 1.65 3.75%

300 $ 56.63 $ 57.49 $ 0.86 1.52%

400 $ 69.30 $ 69.38 $ 0.08 0.12%

500 $ 81.96 $ 81.26 ($ 0.70) -0 85 600 $ 94.62 $ 93.15 'I 55%

($ 1 47) 700 $ 107.29 $ 105.02 ($ 2.27) -2.12%

800 $ 119.95 $ 116.90 ($ 3.05) 2.54%

900 $ 132.61 $ 128.78 ($ 3.83) -2.89%

1000 $ 145.28 $ 140.66 ($ 4.62) -3.18%

1100 $ 157.95 $ 152.56 ($ 5.39) 3.41%

1200 $ 170.61 $ 164 43 ($ 6.18) 3 62%

1300 $ 183.27 $ 176.32 ($ 6.95) 3 79%

1400 $ 195.94 $ 188.19 ($ 7.75) 3.96%

1500 $ 208.60 $ 200.07 ($ 8.53) -4 P9 1600 $ 221.26 $ 211.96 ($ 9.30) -4.20%

1700 $ 233.92 $ 223.83 ($ 10.09) -4.31%

1800 $ 246.60 $ 235.73 ($ 10.87) -4 41%

1900 $ 259.26 $ 247.60 ($ 11.66) -4 5p 2000 $ 271.92 $ 259.48 ($ 12.44) <.57%

2200 $ 297.25 $ 283.24 ($ 14.01) -4.71%

2400 $ 322.57 $ 307.00 ($ 15.57) -4.83%

2600 $ 347.91 $ 330.78 ($ 17.13) -4.92%

2800 $ 373.24 $ 354.54 ($ 18.70) 5 01%

3000 $ 398.56 $ 378.30 ($ 20.26) 5.08%

3200 $ 423.89 $ 402.05 ($ 21.84) 15%

3400 $ 449.22 $ 425.82 ($ 23.40) 5.21%

3600 $ 474.55 $ 449.59 ($ 24.96) -5.26%

3800 $ 499.87 $ 473.35 ($ 26.52) 5 31%

4000 $ 525.21 $ 497.12 ($ 28.09) 5.35%

SC2FINAL.WK4

Appendix D Page 8 of 43 SC2-NON-DEMAND METERED 1999 2000 PERCENT BL CK REVENUE REVENUE DIFFERENCE INCREASE 0 $ 21.85 $ 24.90 $ 3.05 13.96%

100 $ 33.74 $ 35.93 $ 2.19 649 200 $ 45.61 $ 46.94 $ 1.33 2.92%

300 $ 57.49 $ 57.96 $ 0.47 0.82%

400 $ 69.38 $ 68.98 ($ 0.40) -0.58%

500 $ 81.26 $ 80.00 ($ 1.26) -1.55%

600 $ 93.15 $ 91.02 ($ 2.13) 2 29%

700 $ 105.02 $ 102.04 ($ 2.98) 2.84%

800 $ 116.90 $ 113.05 ($ 3.85) 3.29%

900 $ 128.78 $ 124.07 ($ 4.71) 3 66%

1000 $ 140.66 $ 135.08 ($ 5.58) 3.97%

1100 $ 152.56 $ 146.12 ($ 6.44) A.22%

1200 $ 164.43 $ 157.13 ($ 7.30) 1300 $ 176.32 $ 168.15 ($ 8.17) 63%

1400 $ 188.19 $ 179.16 ($ 9.03) -4.80%

1500 $ 200.07 $ 190.18 ($ 9.89) -4.94%

1600 $ 211.96 $ 201.20 ($ 10.76) -5.08%

1700 $ 223.83 $ 212.22 ($ 11.61) 19%

1800 $ 235.73 $ 223.24 ($ 12.49) -5.30%

1900 $ 247.60 $ 234.26 ($ 13.34) 5.39%

2000 $ 259.48 $ 245.27 ($ 14.21) 5 48%

2200 $ 283.24 $ 267.31 ($ 15.93) -5.62%

2400 $ 307.00 $ 289.34 ($ 17.66) 5.75%

2600 $ 330.78 $ 311.39 ($ 19.39) -5 86%

2800 $ 354.54 $ 333.42 ($ 21.12) -5 96%

3000 $ 378.30 $ 355.45 ($ 22.85) .04%

3200 $ 402.05 $ 377.49 ($ 24.56) -6 '11%

3400 $ 425.82 $ 399.53 ($ 26.29) -6 17%

3600 $ 449.59 $ 421.57 ($ 28.02) -6.23%

3800 $ 473.35 $ 443.60 ($ 29.75) -6.28%

4000 $ 497.12 $ 465.64 ($ 31 48) .33%

S C2F INAL.WK4

Appendix D Page 9 of 43 SC2D RATE DESIGNS FOR THE 3 YEAR PERIOD ENDING DECEMBER 31,2000 1998 PRESENT PRESENT PROPOSED PROPOSED UNITS RATES REVENUE RATES REVENUE BILLS 558,910 27.22 15,213,530 39.31 21,970,752 KW 14,812,322.7 8.49 125,756,620 8.49 125,756,620 KWH 3,828,804,544 0.07691 294,473,357 0.0738 282,565,775 TRANS FORME 266,062.3 -0.9 (239,456) -0.9 (239,456)

SUBTOTAL 435,204,051 430,053,691 1999 PRESENT PRESENT PROPOSED PROPOSED UNITS RATES REVENUE RATES REVENUE BILLS 568,006 39.31 22,328,316 51.4 29,195,508 KW 15,055,772.6 8.49 127,823,509 8.49 127,823,509 KWH 3,891,494,041 0.0738 287,192,260 0.07125 277,268,950 TRANSFORM E 270,719.6 -0.9 (243,648) -0.9 (243,648)'34,044,319 SUBTOTAL 437,100,437 2000 PRESENT PRESENT PROPOSED PROPOSED UNITS RATES REVENUE RATES REVENUE BILLS 573,201 51.4 29,462,531 63.49 36,392,531 KW 15,193,257.1 8.49 128,990,753 8.49 128,990,753 KWH 3,927,043,647 0.07125 279,801,860 0.06856 269,238,112 TRANSFORME 273,179.6 -0.9 (245,862) -0.9 (245,862)

SUBTOTAL 438,009,282 434,375,534

Appendix D Page 10 of 43 SC-2 Demand Kw% Vsage 1997 1998 30 Days KW Bill Bill 1,008 $ 172.51 $ 182.43 $ 992 5.75%

1,512 $ 213.24 $ 221.82 $ 8.58 4.02%

2,016 $ 253.97 $ 261.19 $ 7.22 2.84%

2,520 $ 294.69 S300.58 $ 5.89 ,2.00%

2,160 15 $ 336.98 $ 343.76 $ 6.78 2.01%

3+40 15 $ 424.25 $ 428.14 $ 3.89 0.92%

4320 15 $ 511.53 $ 512.53 v

$ 100 0.20%

5,400 15 $ 598.80 $ 596.91 ($ 1.89) 432%

3,600 25 $ 542.56 $ 545.41 $ 2.85 0.53%

5,400 25 $ 688.01 $ 686.06 ($ 1.95) 4.NYo 7+00 25 $ 833.48 $ 826.69 (8&79) 4.81%

9,000 25 S978.94 $ 96734 ($ 11.60) -1.18%

5,760 40 $ 850.92 $ 847.90 ($ 3.02) 435%

8,640 40 $ 1,083.66 $ 1,072.91 ($ 10.75) 4.99%

11,520 40 $ 1316.40 $ 1+97.94 ($ 18.46) -1 40 14,400 40 $ 1,549.14 $ 1,522.96 ($ 26.18) 1.69%

8,640 60 $ 1362.0$ $ 1351.20 ($ 10.8$ ) 4.86%

12/60 60 $ 1.611.19 $ 1,58S.74 ($ 22.45) -139%

17+80 60 $ 196030 SI+2 6.27 ($ 34.03) -1.74%

21.600 60 $ 2309.43 $ 2363.81 ($ 45.62) -1.9$ /o 11,520 80 $ 1.673.24 $ 1,654.51 ($ 18.73) -1.12%

17,280 80 $ 2,13S.72 S2,104.56 ($ 34.16) -1.60%

23,040 $0 $ 2,604.21 $ 2,554.61 ($ 49.60) -1.90%

28,800 $0 $ 3,069.70 $ 3,004.65 ($ 65.05) -2.12%

14,400 100 $ 2,084.40 S2,057.82 (S26.58) -1.28%

21,600 $ 2,666.26 $ 2,620.3$ ($ 45.88) -1.72%

28,800 100 $ 3348.11 $ 3,182.94 ($65.17) -2.01%

36,000 100 $ 3,829.97 $ 3,745.50 ($ 84.47) -2.21%

Appendix D Page 11 of 43 SC-2 Demand K~% Usage 1998 1999 30 Days KW Bill Bill 1,008 $ 182.43 $ 192.07 5.28%

1,512 $ 221.82 $ 230.03 $ 8.21 3.70%

2,016 $ 261.19 $ 267.98 $ 6.79 2.60%

2/20 $ 300.58 $ 305.94 $ 526 1.78%

2,160 15 $ 343.76 $ 350.01 $ 6.25 1.82%

3+40 15 $ 428.14 $ 43135 $ 3.21 0 75%

4/20 15 S5 1233 $ 512.68 $ 0.15 0.03%

5,400 15 $ 59691 $ 594.03 ($ 2.88) <.48/o 3,600 $ 545.41 $ 547.43 S2.02 5,400 25 $ 686.06 $ 683.00 ($ 3.06) %.45%

25 $ 826.69 $ 818.56 ($ 8.13) <.98%o 9,000 25 $96734 $ 954.13 ($ 13.21) -1.37%

5,760 40 $ 847.90 $ 843.58 ($ 432) 51%

8,640 40 $ 1,072.91 $ 1,060.47 ($ 12.44) -1.16%

11,520 40 $ 1,297.94 $ 1,27797 ($ 20.57) -1.58%o 14,400 40 $ 1,522.96 $ 1,494.28 ($ 28.68) -1.88%

8,640 60 $ 1451.20 $ 1~ 8A2 ($ 12.78) 1.02%

12+60 60 $ 1488.74 $ 1,563.78 ($ 24.96) -1.57%

17/80 60 SIP26.27 $ 1,889.13 ($ 37.14) -1.93%

21,600 60 $ 2,263.81 S2,214.48 ($ 49.33) -2.18%

11,520 80 $ 1,654.51 $ 1,633.27 ($ 21.24) -1.28%

17,280 80 $ 2,104.56 $ 2,067.08 ($ 37.48) -1.78%

23,040 80 $ 2,554.61 $ 2,500.89 ($ 53.72) 2.10%

28,800 80 $ 3,004.65 $ 2,934.69 ($ 69.96) -2.33%

14,400 100 $ 2,057.82 $ 2,028.13 ($ 29.69) -1.44%

21,600 100 $ 2,620.38 $ 2,57038 ($ 50.00) -1.91%

28,800 100 $ 3,182.94 $3,112.64 ($ 70.30) 2.21%

36,000 100 $ 3,745.50 $3,654.89 ($ 90.61) -2.42%

Appendix D Page 12 of 43 SC-2 Demand Kwh Usage 30 Days

'999 KW Bill 2000 Bill 1,008 $ 192.07 $ 20032 $ 825 430%

1+12 $ 230.03 $ 236.57 $ 6.54 2.84%

2,016 $ 267.98 $ 272.83 $ 4.85 1.81%

2,520 $ 305.94 $ 309.08 $ 3.14 1.03%

2,160 15 $ 350.01 $ 353.81 $ 3.80 3+40 15 $43135 $ 431.49 So.l4 0.03%

4/20 15 $ 512.68 $ 509.17 ($ 3.51) 4.68%

5,400 15 $ 594.03 $ 586.86 (S7.17) 1.21%

3,600 25 $ 547.43 $ 545.67 (S1.76) 432%

25 S683.00 $ 675.14 ($ 7.86) -1.15%

7+00 25 $ 818.56 $ 804.61 ($ 13.95) -1.70%

9,000 25 $ 954.13 $ 934.09 ($ 20.04) -2.10%

5,760 $ 843.58 ($ 10.12) -1.20%

8,640 40 $ 1,060.47 S1,040.61 ($ 19.86) -1.87%

11,520 40 $ 1,27737 $ 1447.76 ($ 29.61) -232%

14,4OO 40 $ 1,494.28 $ 1,454.91 ($ 3937) -2.63%

8,640 60 S1,238.42 $ 1817.17 (S21.25) -1.72%

12,960 60 $ 1,563.78 $ 1,527.91 ($ 35.87) -2.29%

17,280 60 $ 1,889.13 Sl,838.64 ($ 50.49) -2.Pio 2!,600 60 $2+14A8 $ 2,14937 ($ 65.11) -".944 o 11,520 80 $ 1,633.27 $ 1,600.88 ($3239) -1.9F/o 17.280 80 $ 2,067.08 S2,015.20 ($ 51.88) -2.51%

23,040 80 $ 2,500.89 S2,429.51 ,($ 71.38) 2 85%

28,800 80 $ 2,934.69 $ 2,843.82 ($ 90.87) -3.10%

14,400 100 $ 2,028.13 $ 1,984.60 ($ 43.53) 2.15%

21,600 100 $ 2,57038 $ 2,502.50 ($ 67.88) 2.64%

28,800 100 $ 3,112.64 $ 3,020.38 ($ 92.26) -2.96%

36,000 100 $ 3,654.89 $ 3,538.27 ($ 116.62) -3.19%

Final Rates esigns Prepared For PowerCholce Settlement Agreement SCCA & SCP (> 2Mw) Bundled Rates (1)

For the First Three Years of PowerCholce Settlement Agreement Bundled Charges (Customer I Delivery f Commodity and Competitive Transition Charges)

Eoergr charges Block 3 {33 First 250 Next 150 All Remaining 1998 Hours of Use Hours of Use Hours of Use Customer Por Kw (2) On-Pk Off-Pk On-Pk Off-Pk On-Pk Off-Pk Secondary Delivery $ 902.00 $ 11.11 $ 0.06202 $ 0.05215 $ 0.04988 $ 0.04025 $ 0.04988 $ 0.04025 Primary Delivery $ 902.00 $ 9.57 $ 0.06149 $ 0.05208 $ 0.04963 $ 0.04024 $ 0.04963 $ 0.04024 Subtransmission Del. $ 1,400.00 $ 6.90 $ 0.05941 $ 0.04968 $ 0.04867 $ 0.03967 $ 0.04867 $ 0.03967 Transmission Delivery $ 3,172.00 $ 6.19 $ 0.05678 $ 0.04679 $ 0.04746 $ 0.03899 $ 0.04746 $ 0.03899 1999 Secondary Delivery $ 902.00 $ 10.75 $ 0.06202 $ 0.05215 $ 0.04988 $ 0.04025 $ 0.03962 $ 0.03272 Primary Delivery $ 902.00 $ 9.21 $ 0.06149 $ 0.05208 $ 0.04963 $ 0.04024 $ 0.03747 $ 0.03043 Subtransmission Del. $ 1,400.00 $ 6.54 $ 0.05941 $ 0.04968 $ 0.04867 $ 0.03967 $ 0.03696 $ 0.03006 Transmission Delivery $ 3,172.00 $ 5.83 $ 0.05678 $ 0.04679 $ 0.04746 $ 0.03899 $ 0.03550 $ 0.02878 2000 Secondary Delivery $ 902.00 $ 10AQ $ 0.06202 $ 0.05215 $ 0.04988 $ 0.04025 $ 0.03962 $ 0.03272 Primary Delivery $ 902.00 $ 8.86 $ 0.06149 $ 0.05208 $ 0.04963 $ 0.04024 $ 0.03747 $ 0.03043 Subtransmission Del. $ 1,400.00 $ 6.19 $ 0.05941 $ 0.04968 $ 0.04867 $ Q.03967 $ Q.03696 $ 0.03006 Transmission Delivery $ 3,172.00 $ 5.48 $ 0.05678 $ 0.04679 $ 0.04746 $ 0.03899 $ 0.03550 $ 0.02878 Notes: (1) Options For Service will exist Per Settlement Agreement Option 1 Variable Commodity Charges and Fixed CTC Charges Option 2 Fixed Commodity and Fixed CTC Charges Bundled Rates Vary By Year not by Location (2) The Per Kw Charge Includes Distribution Charges & Competitive Transition Charges The Unbundled Distribution Charges will be assessed to the maximum demand occurring in the billing period.

The Competitive Transition Charge will be assessed to the maximum On-Peak demand occurring in the billing period.

(3) The Per Kwh Charge Includes Commodity Charges and Competitive Transition Charges vru{ynesmlPowe{ChEPC IMP2.XLS:Exhibit of Bundled Designs 10/7/97:9:12 AM

1998 Unbundied Prices (Option 1)

SC-3A 8 SC4 (> 2Mw)

Variable Per Kwh Fixed Com etltlve Translllon Charges Commodity Block 1 Block 2 Block 3 Charges First 250 Next150 All Remaining Western Division Per Hours of Use Hours Of Use Hours Of Use Customer Per Kw(1) MC /LBMP On-Pk Off-Pk On-Pk Off.Pk On.Pk Off-Pk Secondary Delivery $ 902.00 $ 11.11 Per Market $ 0.03477 $ 0.02897 $ 0.02263 $ 0.01707 $ 0.02263 $ 0.01707 Primary Delivery $ 902.00 $ 9.57 Per Market $ 0.03607 $ 0.03062 $ 0.02421 $ 0.01878 $ 0.02421 $ 0.01878 Subtransmission Delivery $ 1,400.00 $ 6.90 Per Market $ 0.03416 $ 0.02834 $ 0.02342 $ 0.01833 $ 0.02342 $ 0.01833 Transmission Delivery $ 3,172.00 $ 6.19 Per Market ~ $ 0.03259 $ 0.02639 $ 0.02327 $ 0.01859 $ 0.02327 $ 0.01859 Central Division Secondary Delivery $ 902.00 $ 11.1 1 Per Market $ 0.03406 $ 0.02871 $ 0.02192 $ 0.01681 $ 0.02192 $ 0.01681 Primary Delivery $ 902.00 $ 9.57 Per Market $ 0.03532 $ 0.03036 $ 0.02346 $ 0.01852 $ 0.02346 $ 0.01852 Sublransmission Delivery $ 1,400.00 $ 6.90 Per Market $ 0.03344 $ 0.02808 $ 0.02270 $ 0.01807 $ 0.02270 $ 0.01807 Transmission Delivery . $ 3,172.00 $ 6.19 Per Market $ 0.03190 $ 0.02614 $ 0.02258 $ 0.01834 $ 0.02258 $ 0.01834 Eastern Division Secondary Delivery $ 902.00 $ 11.11 Per Market $ 0.02910 $ 0.02496 $ 0.01696 $ 0.01306 $ 0.01696 $ 0.01306 Primary Delivery $ 902.00 $ 9.57 Per Market $ 0.03035 $ 0.02679 $ 0.01849 $ 0.01495 $ 0.01849 $ 0.01495 Subtransmission Delivery $ 1,400.00 $ 6.90 Per Market $ 0.02869 $ 0.02470 $ 0.01795 $ 0.01469 $ 0.01795 $ 0.01469 Transmission Delivery $ 3,172.00 $ 6.19 Per Market $ 0.02728 $ 0.02287 $ 0.01796 $ 0.01607 $ 0.01796 $ 0.01507 Notes: (1) The Per Kw Charge Includes Distribution Charges & Competitive Transition Charges The Unbundled Distribulion Charges will be assessed to the maximum demand occurring in the billing period.

The Competitive Transition Charge will be assessed to the maximum On-Peak demand occurring in the billing period.

0>U ru G3 co ro

~x'

<<O CP w:thynesmPC IMP2.XLS:Option 1 Hours Use (98) 10/7/97:7:41 AM

1998 Unbttndled Piices (Option 2)

SC-3A 8 SCC (> 2Mw)

Per Kwh Fixed Competitive Transition Charges Fixed Block 1 Block 2 Block 3 Comm. Charges (2) First 260 Next 160 All RemainIng Western Division On Off Hours of Use Hours Of Use Hours Of Use Customer Per Kw (1) Peak Peak On.Pk Off-Pk On.Pk Off.Pk On-Pk Off-Pk Secondary Delivery $ 902.00 $ 11.11 $ 0.02725 $ 0.02318 $ 0.03477 $ 0.02897 $ 0.02263 $ 0.01707 $ 0.02263 $ 0.01707 Primary Delivery $ 902.00 $ 9.57 $ 0.02542 $ 0.02146 $ 0.03607 $ 0.03062 $ 0.02421 $ 0.01878 $ 0.02421 $ 0.01878 Subtransmisslon Deliveiy $ 1,400.00 $ 6.90 $ 0.02525 $ 0.02134 $ 0.03416 $ 0.02834 $ 0.02342 $ 0.01833 $ 0.02342 $ 0.01833 Transmission Delivery $ 3,172.00 $ 6.19 $ 0.02419 $ 0.02040 $ 0.03259 $ 0.02639 $ 0.02327 $ 0.01859 $ 0 02327 $ 0.01859 Central Division Secondary Delivery $ 902.00 $ 11.11 $ 0.02796 $ 0.02344 $ 0.03406 $ 0.02871 $ 0.02192 $ 0.01681 $ 0.02192 $ 0.01661 Primary Delivery $ 902.00 $ 9.57 $ 0.02617 $ 0.02172 $ 0.03532 $ 0.03036 $ 0.02346 $ 0.01852 $ 0.02346 $ 0.01852 Subtransmlsslon Delivery $ 1,4M.OO $ 6.90 $ 0.02597 $ 0.02160 $ 0.03344 $ 0.02808 $ 0.02270 $ 0.01807 $ 0.02270 $ 0.01807 Transmission Delivery $ 3,172.00 $ 6.19 $ 0.02488 $ 0.02065 $ 0.03190 $ 0.02614 $ 0.02258 $ 0.01834 $ 0.02258 $ 0.01834 Eastern Division Secondary Delivery $ 902.00 $ 11.11 $ 0.03292 $ 0.02719 $ 0.02910 $ 0.02496 $ 0.01696 $ 0.01306 $ 0.01696 $ 0.01306 Primaiy Delivery $ 902.00 $ 9.57 $ 0.03114 $ 0.02529 $ 0.03035 $ 0.02679 $ 0.01849 $ 0.01495 $ 0.01849 $ 0.01495 Subtransmlssion Delivery $ 1,400.00 $ 6.90 $ 0.03072 $ 0.02498 $ 0.02869 $ 0.02470 $ 0.01795 $ 0.01469 $ 0.01795 $ 0.01469 Transmission Delivery $ 3,172.00 $ 6.19 $ 0.02950 $ 0.02392 $ 0.02728 $ 0.02287 $ 0.01796 $ 0.01507 $ 0.01796 $ 0.01507 0

Notes: (1) The Per Kw Charge tncludes Distribution Charges & Competitive Transition Charges The Unbundled Distribution Charges will be assessed to the maximum demand occurring ln the billing period.

The Compelllive Transition Charge will be assessed to the maximum On-Peak demand occurring In the billing period.

(2) The Commodity Charges shown above are class average prices.

Each Customer vill have a different fixed commodity charge based on their individual load shape.

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<<0 vrUiynesmPC IMP2.XLS:Modified 7 23 98 Hours Use 10/7/97:7:47 AM

1999 Unbundled Prices (Option 1)

SC-3A8 SCC(>2Mw)

Variable Per Kwh Fixed Com etitive Transillon Charges Commodity Block 1 Block 2 Block 3 Charges First 260 Next 160 All Remaining Western Division Per Hours of Use Hours Of Uso Hours Of Use Customer Per Kw (1) MC/LBMP On Pk Off-Pk On-Pk Off-Pk On-Pk Off-Pk Secondary Delivery $ 902.00 $ 10.75 Per Market $ 0.03188 $ 0.02651 $ 0.01974 $ 0.01461 $ 0.00948 $ 0.00708 Primary Delivery $ 902.00 $ 9.21 Per Market $ 0.03337 $ 0.02835 $ 0.02151 $ 0.01651 $ 0.00936 $ 0.00670 Subtransmlssion Delivery $ 1,400.00 $ 6.54 Per Market $ 0.03148 $ 0.02607 $ 0.02074 $ 0.01606 $ 0.00904 $ 0.00645 Transmission Delivery $ 3,172.00 $ 5.83 Per Market $ 0.03003 $ 0.02423 $ 0.02071 $ 0.01643 $ 0.00875 $ 0.00622 Central Dlvlston Secondary Delivery $ 902.00 $ 10.75 Per Market $ 0.03110 $ 0.02622 $ 0.01896 $ 0.01432 $ 0.00869 $ 0.00679 Primary Delivery $ 902.00 $ 9.21 Per Market $ 0.03255 $ 0.02806 $ 0.02069 $ 0.01622 $ 0.00853 $ 0.00641 Subtransmisslon Delivery $ 1,400.00 $ 6.54 Per Market $ 0.03068 $ 0.02579 $ 0.01994 $ 0.01578 $ 0.00823 $ 0.00617 Transmission Delivery $ 3,172.00 $ 5.83 Per Market $ 0.02926 $ 0.02395 $ 0.01994 $ 0.01615 $ 0.00798 $ 0.00594 Eastern Division Secondary Delivery $ 902.00 $ 10.75 Per Market $ 0.02561 $ 0.02208 $ 0.01347 $ 0.01018 $ 0.00320 $ 0.00265 Primary Delivery $ 902.00 $ 9.21 Per Market $ 0.02705 $ 0.02411 $ 0.01519 $ 0.01227 $ 0.00303 $ 0.00246 Subtransmlsslon Oehvery $ 1,400.00 $ 6.54 Per Market $ 0.02544 $ 0.02205 $ 0.01470 $ 0.01204 $ 0.00299 $ 0.00243 Transmission Delivery $ 3,172.00 $ 5.83 Per Market $ 0.02415 $ 0.02034 $ 0.01483 $ 0.01254 $ 0.00287 $ 0.00233 Notes: (1) The Per Kw Charge Includes Distribution Charges & Competitive Transition Charges The Unbundled Distribution Charges will be assessed to the maximum demand occurring in Ihe billing period.

The Competitive Transillon Charge will be assessed to the maximum On. Peak demand occurring ln the billing period.

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<<O CP w Oynesm'PC IMP2.XLS:Option 1 Hours Use (99) 10/7/97:7:42 AM

1999 Unbundled Prices (Option 2)

SCCA & SC4 (> 2Mw)

Per Kwh Fixed Com etitive Transition Charges Fixed Block 1 Block 2 Block 3 Comm. Charges (2) First 250 Next 150 All Remaining Western Divtslon On Off Hours of Use Hours Of Use Hours Of Use Customer Per Kw (1) Peak Peak On-Pk Off.pk On-Pk Off.Pk On.Pk Off-Pk Secondary Delivery $ 902.00 $ 10.75 $ 0.02793 $ 0.02376 $ 0.03409 $ 0,02839 $ 0.02195 $ 0.01649 $ 0.01168 $ 0.00896 Primary Delivery $ 902.00 $ 9.21 $ 0.02606 $ 0.02199 $ 0.03543 $ 0.03009 $ 0.02357 $ 0.01825 $ 0.01141 $ 0.00844 Subtransmlssion Delivery $ 1,400.00 $ 6.54 $ 0.02588 $ 0.02188 $ 0.03353 $ 0.02780 $ 0.02279 $ 0.01779 $ 0.01108 $ 0.00818 Transmission Delivery $ 3,172.00 $ 5.83 $ 0.02479 $ 0.02091 $ 0.03199 $ 0.02588 $ 0.02267 $ 0.01808 $ 0.01071 $ 0.00787 Central Division Secondary Delivery $ 902.00 $ 10.75 $ 0.02866 $ 0.02403 $ 0.03336 $ 0.02812 $ 0.02122 $ 0.01622 $ 0.01096 $ 0.00869 Primary Delivery $ 902.00 $ 9.21 $ 0.02682 $ 0.02226 $ 0.03467 $ 0.02982 $ 0.02281 $ 0.01798 $ 0.01065 $ 0.00816 Subtransmlsslon Delivery $ 1,400.00 $ 6.54 $ 0.02662 $ 0.02214 $ 0.03279 $ 0.02754 $ 0.02205 $ 0.01753 $ 0.01034 $ 0.00792 Transmission Delivery $ 3,172.00 $ 5.83 $ 0.02551 $ 0.02117 $ 0.03127 $ 0.02562 $ 0.02195 $ 0.01782 $ 0.00999 $ 0.00761 Eastern Dlviston Secondary Delivery $ 902.00 $ 10.75 $ 0.03375 $ 0.02787 $ 0.02827 $ 0.02428 $ 0.01613 $ 0.01238 $ 0.00587 $ 0.00485 Primary Delivery $ 902.00 $ 9.21 $ 0.03192 $ 0.02592 $ 0.02957 $ 0.02616 $ 0.01771 $ 0.01432 $ 0.00555 $ 0.00451 Subtransmlsslon Delivery $ 1,400.00 $ 6.54 $ 0.03149 $ 0.02561 $ 0.02792 $ 0.02407 $ 0.01718 $ 0.01406 $ O.OO548 $ 0.O0445 Transmission Delivery $ 3,172.00 $ 5.83 $ 0.03024 $ 0.02452 $ 0.02654 $ 0.02227 $ 0.01722 $ 0.01447 $ 0.00526 $ 0.00426 Notes: (1) The Per Kw Charge Includes Dlslrlbutlon Charges & Competitive Transition Charges The Unbundled Dlstribugon Charges will be assessed to the maximum demand occurring in the billing period.

The Competitive Transition Charge will be assessed to the maximum On. Peak demand occurring in the billing period.

(2) The Commodity Charges shown above are class average prices.

Each Customer will have a different fixed commodity charge based on their tndivldual load shape.

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4) w:IhynesmPC IMP2.XLS:Modified 7 23 99 Hours Use 10/7/97:7:48 AM

2000 Unbundled Prices (Option 1)

SC-3A & SC4 () 2)IJ)w)

Variable Per Kwh Fixed Com etltlve Transition Charges Commodity Block 1 Block 2 Block 3 Charges First 250 Next 150 All Remaining Western Division Per Hours of Use Hours Of Use Hours Of Use Customer Per Kw(1) MC I LBMP On.Pk Off-Pk On-Pk Off-Pk On-Pk Olf-Pk Secondary Delivery $ 902.00 $ 1040 Per Market $ 0.02923 $ 0.02426 $ 0.01709 $ 0.01236 $ 0.00683 $ 0.00483 Primary Delivery $ 902.00 $ 8.86 Per Market $ 0.03090 $ 0.02626'0.02903

$ 0.01904 $ 0.01442 $ 0.00688 $ 0.00461 Subtransmission Delivery $ 1,400.00 $ 6.19 Per Market $ 0.02400 $ 0.01829 $ 0.01399 $ 0.00658 $ 0.00438 Transmission Delivery $ 3,1?2.00 $ 5.48 Per Market $ 0.02768 $ 0.02224 $ 0.01836 $ 0.01444 $ 0.00640 $ 0.00423 Central Division Secondary Delivery $ 902.00 $ 10 40 Per Market $ 0.02838 $ 0.02394 $ 0.01624 $ 0.01204 $ 0.00597 $ 0.00451 Primary Delivery $ 902.M $ 8.86 Per Market $ 0.03001 $ 0.02594 $ 0.01815 $ 0.01410 $ 0.00599 $ 0.00429 Sublransmission Delivery $ 1,400.00 $ 6.19 Per Market $ 0.02816 $ 0.02369 $ 0.01742 $ 0.01368 $ 0.00571 $ 0.00407 Transmission Delivery $ 3,172.00 $ 548 Per Market $ 0.02684 $ 0.02194 $ 0.01752 $ 0.01414 $ 0.00556 $ 0.00393 Eastern Division Secondary Delivery $ 902.00 $ 10 40 Per Market $ 0.02240 $ 0.01943 $ 0.01026 $ 0.00753 $ 0.00000 $ 0.000M Primary Delivery $ 902.00 $ 8.86 Per Market $ 0.02402 $ 0.02165 $ 0.01216 $ 0.00981 $ 0.00000 $ 0.00000 Subtransmission Delivery $ 1,400.00 $ 6.19 Per Market $ 0.02245 $ 0.01962 $ 0.01171 $ 0.00961 $ 0.00000 $ 0.00000 Tranmission Delivery $ 3,172.M $ 5.48 Per Market $ 0.02128 $ 0.01801 $ 0.01196 $ 0.01021 $ 0.00000 $ 0.00000 Notes: (1) The Per Kw Charge includes Distribution Charges & Competitive Transition Charges The Unbundled Distribution Charges will be assessed to the maximum demand occurring in the billing period.

The Competitive Transition Chargo will be assessed to the maximum On. Peak demand occurring in the billing period.

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wthynesmtPC IMP2.XLS:Option1 Hours Use (00) 10I7/97:7:43 AM

2000 Unbundled Prices (Option 2)

SC-3A 8 SC4 (> 2Mw)

Per Kwh Fixed Com elitive Transilion Charges Fixed Block 1 Block 2 Block 3 Comm. Charges (2) First 260 Next 160 All Remaining Western Division On Off Hours of Use Hours Of Use Hours Of Use Customer Per Kw (1) Peak Peak On-Pk Off.Pk On.Pk Off-Pk On.Pk Off-Pk Secondary Delivery $ 902.00 $ 10AO $ 0.02863 $ 0.02436 $ 0.03339 $ 0.02779 $ 0.02125 $ 0.01589 $ 0.01099 $ 0.00836 Primary Delivery $ 902.00 $ 8.86 $ 0.02671 $ 0.02254 $ 0.03478 $ 0.02954 $ 0.02292 $ 0.01770 $ 0.01076 $ 0.00789 Subtransmlsslon Delivery $ 1,400.00 $ 6.19 $ 0.02653 $ 0.02242 $ 0.03288 $ 0.02726 $ 0.02214 $ 0.01725 $ 0.01043 $ 0.00763 Transmission Delivery $ 3,172.00 $ 5AS $ 0.02541 $ 0.02143 $ 0.03137 $ 0.02536 $ 0.02205 $ 0.01756 $ 0.01009 $ 0.00735 Central Division Secondary Delivery $ 902.00 $ 10.40 $ 0.02937 $ 0.02463 $ 0.03265 $ 0.02752 $ 0.02051 $ 0.01562 $ 0.01024 $ 0.00809 Primary Delivery $ 902.00 $ 8.86 $ 0.02749 $ 0.02282 $ 0.03400 $ 0.02926 $ 0.02214 $ 0.01742 $ 0.00998 $ 0.00761 Subtransmlsslon Delivery $ 1,400.00 $ 6.19 $ 0.02729 $ 0.02269 $ 0.03212 $ 0.02699 $ 0.02138 $ 0.01698 $ 0.00967 $ 0.00736 Transmission Delivery $ 3,172.00 $ 5A8 $ 0.02614 $ 0.02170 $ 0.03064 $ 0.02509 $ 0.02132 $ 0.01729 $ 0.00936 $ 0.0070 S Eastern Division Secondary Delivery $ 902.00 $ 10AO $ 0.03459 $ 0.02857 $ 0.02743 $ 0.02358 $ 0.01529 $ 0.01168 $ 0.00502 $ 0.00415 Primary Delivery $ 902.00 $ 8.86 $ 0.03272 $ 0.02657 $ 0.02877 $ 0.02551 $ 0.01691 $ 0.01367 $ 0.00475 $ 0.00386 Subtransmlss! on Delivery $ 1,400.00 $ 6.19 $ 0.03227 $ 0.02625 $ 0.02714 $ 0.02343 $ 0.01640 $ 0.01342 $ 0.00469 $ 0.00381 Transmission Delivery $ 3,172.00 $ 5AS $ 0.03100 $ 0.02513 $ 0.02578 $ 0.02166 $ 0.0f 646 $ 0.01386 $ 0.00450 $ 0.00365 Notes: (1) The Per Kw Charge Includes Distribution Charges & Competitive Transition Charges The Unbundled Distribution Charges will be assessed to the maximum demand occurring In the billing period.

Tho Competitive Transition Charge will be assessed to the maximum On-Peak demand occurring in the billing period.

(2) The Commodity Charges shown above are cfass average prices.

Each Customer will have a different fixed commodity charge based on their individual load shape.

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CP w:thynesmtPC IMP2.XLS:Modified 7 23 00 Hours Use 10/7/97:7:48 AM

1998 - 2000 Bundled Prices For SC-3 and Qualifying SC-4 Customers ( 100 < NM Kw < 2,000)

Kwh Charges Western Division BASED ON Customer Per Kw Use <= 450 Hours Use > 450 Hours Sec $ 258.00 $ 14.78 $ 0.06224 $ 0.04477 Pri $ 432.41 $ 12.53 $ 0.06086 $ 0.04421 Sub $ 546.97 $ 8.51 $ 0.05842 $ 0.04314 Trans $ 567.61 $ 8.15 $ 0.05782 $ 0.04294 Central Division Sec $ 258.00 $ 14.78 $ 0.06224 $ 0.04477 Pri $ 432.41 $ 12.53 $ 0.06086 $ 0.04421 Sub $ 546.97 $ 8.51 $ 0.05842 $ 0.04314 Trans $ 567.61 $ 8.15 $ 0.05782 $ 0.04294 Eastern Division Sec $ 258.00 $ 14.78 $ 0.06224 $ 0.04477 Pri $ 432.41 $ 12.53 $ 0.06086 $ 0.04421 Sub $ 546.97 $ 8.51 $ 0.05842 $ 0.04314 Trans $ 567.61 $ 8.15 $ 0.05782 $ 0.04294 Notes: The above schedule reflects bundled Retail Prices For SC-3 and Qualifying SC-4s Retail Prices will not be unbundled for classes without Direct Access 0>O IM (O O g

0 X whhynesm)PC IMP2.XLS:Modified 7 23 98 Hours Use 10/7/97:9:08 AM

Appendix D ATTACHMENTO Page 21 of 43 fnAGARAMDHAwKpowER coR poRAfloN DEVELOPMENT OF PSC 207 SCS BUYBACKRATES ENERGY snd CAPACITY Ares 1 ~ PRE IlRA EunnlnfLFnkts Ganersfcn Ttsnfnlsskn Sfasns Onpesk Off.Peak Aversne Jsn95 3 423 035 15.89 17.72 1 596 Fa068 3 423 036 0.64 14A9 15.66 15.17 Mar@8 3 423 ond 0.64 f550 1IA6 1 4.89 AprM 3 423 0.36 0.64 16.79 fM3 17.11 MIP98 $ 0.36 0.64 23.72 19A3 2122 JtnOS $ 423 0.36 0.64 17.44 16 04 16.62 JATOS 3 423 0.36 0.64 16A2 15.87 18.93 Auy98 5 423 0.36 0.6l f838 16.68 17.38 Sep65 3 423 0.36 0.64 22.48 fTJI2 19.76 Dc&8 $ 423 036 0.64 2234 2009 21.03 Nov68 5 IW 038 0.54 1 L58 15.48 16.77 Deo98 3 423 036 0.64 17.18 1 IJI lb.52 Amus/ 3 423 0.36 0.64 15A3 16.79 17AT Onpesk Olf-Peek Average Jsnbd 425 f639 f827 17A9 20.68 18.27 3 1927 Feb.gb 425 flJfl 16.15 15 65 1922 id.ib 5 17.43 Mer46 428 f SJIS 14.91 1 5.36 2026 14.91 5 17.14 Apr46 428 1791 17.87 17.64 21 59 17.87 3 19A2 Msy 95 428 24AS 20.04 21.58 25.74 20.04 3 23.66 An 95 425 f7JIS 16.5l 17.14 2226 1554 3 1L92 Jddb 428 f9/N 16.37 17.46 2327 1537 3 1924 Au965 428 f 693 1 720 1 TJ/2 2321 f7' 3 19.70 Sapnb 428 23.1 d 1L38 2035 27A6 dnb 5 22,16 Ocf68 428 23.04 20.72 21.65 273 f 20.72 3 23AT Nav.gd 428 19.16 f596 1730 23.4l f556 5 19.08 Dao48 4.28 17.72 15.31 16.31 2199 fbnf 3 18.10 Amus/ 428 19.01 17nf 1L02 2328 fTNf $ 1 950 Ganars1on Tfsfnfstkn Srlesns.

Jan 98 4.41 038 1590 f885 1bnf 21.69 15.85 20.0l F~ 4.41 038 15A2 16.66 15.1l f 5dl 2020 2128 16.68 1 snb 15.14 TAI Mv4kf 4,41 ond 16A9 1535 1 Apr4ff 4A1 0.35 fTJI6 1dAI 1520 2265 1L44 20.19 Ms76tb 4A1 0.38 2523 20.67 22.57 30.02 20.67 24.57 An 95 IA1 0.38 16.55 17.06 17.68 2334 17.06 19.68 JJIkf 4A1 038 19.60 16.58 18.01 2435 15.65 20.01 hu965 4A1 035 1 nn3 17.75 16.49 2432 17.75 20AS Sapbd 4A1 0.38 2392 1 896 21.02 28.70 f696 23.02 Ocf68 4A1 0.38 23.77 2fnT 2237 2855 2137 2436 Nav$ 8 IA1 0.38 19.77 iSAT 1 TAI 2455 15A7 1 984 Dao98 4A1 0.38 1828 15.80 1S.83 23.06 1 5.80 1883 Amual 4A1 038 19.61 1 TAS 15.59 2439 17.86 2055 KndffnLQnhJrJf/Mnf Jsrvgb 4AT 0.38 0.68 17.12 19.09 1527 22.6l 19.09 2057 Fazed ~ AT 0.38 0.68 15.61 1L67 1534 21.13 15.87 18.64 M vs 4A7 onb 0.68 15.70 15.58 15 04 2222 fMS 1534 Acr@6 4AT 035 0.68 1LOS 15.67 15.42 23.61 15.67 20.73 May 98 4A7 0.38 0.6S 25.55 2093 22.55 31.07 20Jkf 25.15 4A7 0.38 0.68 18.7d 1 728 fTAlf 2431 17M 2021 AI.95 4A7 0.3S 0.68 19.64 1 TJ6 1824 2535 17.09 20 54 Aun.9S IAT 038 0.68 19.78 1 797 15.72 2530 17.97 21.02 4.47 0.3S 0.65 2421 19.19 2129 29.74 19.19 2359 Ocegb 4AT 0.38 0.68 24.06 21.64 22.65 2959 21.64 2495 N~ 4AT 0.38 0.65 20.01 16.67 18 07 25.54 16.67 2037 Dao4fb IAT a38 0.68 1 850 16.00 17.0l 24.03 16.00 1934 4.47 0.38 0.68 19.65 15.05 f682 25.37 15.05 21.12 Jsn98 456 039 0.69 17A7 19.45 15.65 23.11 19AS Fan gb 4.56 0.39 0.69 15.93 1 722 1L68 2LST 1722 1L03 Mv-98 4.56 0.39 0.69 17.04 15.90 1 835 22.65 15.90 1L73

/vrr rN 4.56 0.39 0.69 18A6 19.08 18 81 24.10 19.06 21.16 Msydd IAS 0.39 0.69 2136 2333 31.72 21 nb Jngb 456 0.39 069 19.1d 17.64 1528 24.61 17.6l 4.56 on9 0.69 17.45 15.62 25/f9 17.45 2097 Au965 4.56 0.39 0.69 20.19 f834 1951 2583 18.34 21.46 Sapdb Ind 0.39 0.69 24.72 f 959 21.73 30.36 f9.QI 24.05 Ocedb 4.58 039 0.69 2456 22.09 23.12 22.09 25.47 Nov 98 4.58 0.39 0.69 20A3 17.02 1L4l 26.07 17.02 20.79 Dec-98 4.56 0.39 0.69 fan 16.33 17.40 2453 16.33 19.74 Amus! 4.56 0.39 0.69 1846 1921 25.90 18A6 21.56 ddl 10/9/97 SCS 1998.XLS

Apped>dix D ATTACHMENTD Page 22 Cf 43 NAGARAMOHAWKPOWER CORPORATlOX DEVELOPMENT OF PSC 207 SCS BUYBACKRATES ENERGY and CAPACIIY Araa2 PRE MRA fhnculla$ '9$ $ 3 Gcncracon Onpesk Jsn88 $ 423 OW aec $ 1L25 1L12 $ 7&

Fc598 $ 423 036 0.64 $ 14.79 $ 598 15.49 Msr-98 $ 423 036 0.6l $ $ 5JIO 14.74 15.19 Apr48 $ 423 036 0.6l $ 17.11 17.67 17A4 May98 $ 423 026 0.64 $ 2537 20.78 22.69 Acv88 $ 423 026 aec 3 $ 7J$ 2 1L39 1L99 A@98 $ 423 036 0.64 $ 18.78 16.18 $ 726 Aup98 $ 423 038 aec $ 18.71 $ 659 17.71 Sepge $ 423 OW 0.64 $ 229$ 1L16 20.14 Odee $ 423 036 aec $ 23.75 2126 2235 Nov4S $ 423 036 0.64 $ 24.76 20.63 22.35 Oeoge $ 423 026 0.64 3 $ 7$ $ $ L$ 4 16.13 Anal $ 423 036 aec 3 $ 950 17.77 18A9

~i Onpcsk CNP ask Average Jsn98 3 428 $ 16.75 18.68 17.88 21 03 18.68 19.66 Feb98 $ 428 $ $ 525 16AS I a97 $ 953 1L48 17.75

$ 428 3 1L30 $ 520 15.66 20ST 1520 17Al Apr~ $ 428 $ 17.65 IL22 $ 788 2193 $ 822 19.76 Ms@98 $ 428 $ 26.16 21A3 23.40 30A4 21AS 25.15 Jmee $ 428 $ 1L38 $ 69$ $ 782 22.66 $ 69$ $ 930

$ 428 3 $ 938 1L68 $ 7AO 23.6l 16.68 $ 958 Auy98 3 428 3 $ 929 $ 752 1826 2387 $ 752 2004 Sep98 $ 428 $ 23.63 18.73 20.77 27JO 18.73 2255 Od88 $ 428 $ 24.49 2202 23.05 28.76 22.02 2483 Novee $ 428 3 2554 2127 23.05 29JII 2127 24 JO Dence $ 428 $ 18.06 15.61 16.63 2233 15.61 18A1

$ 428 8 20.11 18.32 19.07 24.39 18.32 20J$ 5 Gcneracon Jsn98 $ 4.41 038 $ 728 $ 928 1L45 2207 $ 928 20A4 Fetx98 $ 4.41 038 15.73 $ 7AO 1L48 $ 7AO 18AT Mar@8 $ 4A1 038 $ 6J$ $ 15.69 16.16 21.60 15.69 18.15 Apl~ $ 4.41 038 $ 82$ 18.79 1L55 2299 1L79 2054 Msy98 3 4.41 038 2659 22,1$ 24.14 31.77 22.11 2L1l

$ 4AI 038 $ 896 17A4 18.07 23 75 17.44 2007 Al48 $ 4.4$ 038 $ 998 $ 72$ $ 836 24.76 $ 72$ 2026 Auy.98 $ 4A1 a38 $ 990 18.08 18.84 24.69 18.08 2083 Scp98 $ 4.41 038 2437 $ 932 21A3 29.16 $ 932 23.42 Od88 3 4A1 038 2526 22.72 23.78 2272 25.77

$ 4A1 038 2634 2195 23.78 31.13 2U5$ 25.77

$ 4.41 038 $ L63 18.10 17.16 2342 1L10 19.15

$ 4Al 038 20.75 1890 19.67 1L90 2$ $ 7 Gcncraccn Janee $ 4A7 038 0.68 $ 750 $ 952 18.68 23.02 $ 952 2058 Fable $ 4A7 038 0.68 $ 593 $ 722 1L68 21.45 $ 722 1598 Msr8 $ 4.47 038 0.68 17.02 $ 5Jre 1L36 $ 5J$ 8 18.66

$ 4.47 038 0.68 18A3 $ 9A$ 3 18.78 238S $ 9.03 2$ AS Apl'ay.98

$ 4AT 038 aee 27m 2238 24A4 32.85 2238 26.74 AnS8 $ 4.47 038 0.68 $ 920 17.66 1830 24.72 17.66 20.60 JLC98 $ 4.47 038 0.68 2023 17A3 $ 859 25.75 17A3 2089 Auy88 $ 4AT 038 0.68 20.15 $ 820 19.07 25.67 1L30 2137 ecp88 $ 4.47 038 0.68 24.68 $ 956 21.69 $ 956 24.00 Od98 $ 4AT 038 2aee 23.00 24.08 31.10 23.00

$ 4AT 038 0.68 26.67 2222 24.08 32.19 2222 2538 Oeo.98 3 4A7 028 0.68 1LM $ 630 $ 737 2439 1a30 19.67 Annual 3 4A7 038 2$ J$ $ 19.14 $ 982 19.14 2222 e

Gcnctaccn Avcraye Jan&8 $ 456 039 aeg $ 7AS $ 952 $ 9.06 23.50 $ 992 21A1 Fan@ $ 456 039 aeg $ 626 $ 758 $ 7.03 2180 $ 758 $ 938 Msr48 $ 456 039 0.69 $ 7M $ 82$ 16.70 1621 19.05 Apl@8 $ 456 039 0.69 18 Jt2 19A2 19.17 24.46 19A2 2152 Mayye $ 456 039 0.69 27J$ 9 2285 2495 22J$ 5 2730

$ 456 039 0.69 19.60 18.03 18.68 2524 18.03 2$ AO JLI48 $ 456 039 0.69 20.65 17.79 1L98 2628 17.79 2133 Aug-98 $ 456 039 0.69 2057 18.69 19.47 26.21 1L69 2$ JI2 Scpge $ 456 039 0.69 25.$ 9 $ 997 22.15 30.83 19.97 24.50 Od88 $ 456 0cy 0.69 26.11 23A8 24$ S 31.75 23A8 26.93 Now88 $ 456 039 0.69 27m 22.68 2458 3287 22,68 2693 Oea98 $ 456 039 0.69 $ 928 16.64 17.73 24.89 1L6l 20.08 Arnusl $ 456 OM aeg 21A4 19.54 2033 27.08 19.54 22.68 Sdl 10iyl97 SCS 1998.XLS

Appendix D ATTACHMENT0 Page 23 of 43 NAGARAMONAWKPOWER CORPORATION DEVELOPMENT OF PSC 207 SCS BVYBACKRATES ENERGY and CAPACITY Aree4 PRE MRA Q~nlh Generalon Jan98 $ 423 096 0.6l 3125 2L32 2L37 Fcb98 $ 423 096 0.64 30.70 2496 2795 Mar~ $ 423 a36 0.64 29.10 22.62 2532 Apr48 $ 423 096 0.64 249$ 1L01 20.64 Map98 $ 423 096 0.64 2596 2007 2227 JI4X98 $ 423 096 0.64 2290 2a54 21.52 JI448 $ 423 096 0.6l 2495 2098 2253 Au998 S 423 096 a64 2498 2194 22.60

$ 4Z$ 096 0.6l 2399 18.67 2a72 Oo$ 98 $ 423 096 0.64 25.14 20AT 2242 NESS $ 4n a36 28.61 2096 n90 Beo-98 $ 423 096 0.64 3099 2289 2a85 Areaal S 423 096 0.64 26.76 2$ 9$ 2XTO Genera$ on Cnpeak

$ 498 $ 3223 27.14 2926 SESO 27.14 31.04 FebSS $ 428 $ 3196 25.74 2a2$ 3593 25.74 2999

$ 428 5 309$ n93 26.11 3l28 n33 2799 Aprre $ 428 $ 25.07 1 LET 2128 2925 1L57 2206 May98 $ 428 5 26.15 20.70 22.97 30A3 20.70 2LTS Ju$ 48 $ 428 $ 23.61 21.18 2220 2799 21.18 2L98 hi98 $ 428 $ 25.63 2193 n24 2990 2193 25.02 Au998 $ 428 S 25.12 22.01 n.30 29AO 2201 2S.09 SeP98 $ 428 $ 2493 $ 995 2197 28.60 $ 925 2L15 Oc$ 98 5 428 $ 2592 21.11 23 12 3020 21.11 2490

$ 428 S 2990 21.00 2494 33.78 2190 2692

$ 428 $ 3196 24.64 27.69 3623 24.64 29A7

$ 4n S 27.60 ZL18 24A4 3197 22.18 Generaoon Onyeek Jan98 S 4.41 098 5 3325 28.00 30.19 38.03 28.00 32.18 Feb.98 $ 4A1 098 $ 32.66 2695 29.10 37A5 2695 31.09 MerrNI S 4A1 098 $ 3096 24.06 2L94 35.75 24.06 2893 Ay~ $ 4.41 098 S 2288 19.16 2195 30.65 19.16 2395

$ 4A1 098 $ 2698 2195 2270 3$ .77 2195 25.69 An98 $ 4A1 098 $ 2496 2195 2290 29.15 2195 2499 Al98 S L41 098 $ 26A4 2221 n97 3122 n21 2597 Au998 $ 4A1 098 $ 2592 22.70 24.04 30.70 22.70 26.04 Sep98 $ 4A1 098 $ 25.10 19.86 22.04 29.88 19.88 24.0l Oca98 $ 4A1 098 $ 26.75 21.78 2395 3193 21.78 2594

~8 Oeo98 $

$ 4A1 4A1 098 098 S

30.44 3297 2$ .66 25A2 2592 2L56 37.76 21.66 25A2 279$

3096 Annual $ 4.41 098 S 28AT 2288 2521 2288 272$

Rm$ 0$ 5tn!MaSu Onpeek

$ 4.47 $ 098 0.68 S 33.66 2895 3096 39.18 2L35 3286

$ 4.47 $ 098 0.68 $ 33.07 2698 29A6 SLI$ 2a88 3$ .76

$ 4.47 $ 098 0.68 S 3194 2498 2727 36.87 2496 2997

$ 4AT 8 098 0.68 S 26.18 19.40 22n 31.71 19AO 2493 S 4A7 5 098 0.68 S 2792 21.62 n99 328l 21.62 2829 S 4A7 $ 098 0.68 S 24.67 22.12 23 18 30.19 22.12 25A8

$ 4A7 S a68 $ 2427 3229 22A9 2aST

$ 4AT S 098 0.68 $ 2L24 2299 2494 31.76 2299 26.6l

$ 4A7 S 098 0.68 $ 25A1 20.11 2232 3093 20.11 24.62 S 4AT S 098 0.68 $ 27.08 22.05 2l.14 32.60 2205 26A5 S 4AT $ 098 0.68 5 2193 25.63 3L34 2193 2793

$ 4AT $ 098 0.68 $ 3398 25.73 2892 25.n 3122 S 4AT $ 098 a68 S 23.17 2593 3495 23.17 2793 Genealcn Onpeak S 496 099 S 0.69 S 3496 3120 2894 3355

$ 496 099 5 a69 $ 33.76 27.45 30.07 3999 27AS 32A2

$ 496 099 $ 0.69 3 32.00 2497 2794 37.63 2497 30.19

$ 4.56 099 5 0.69 S 26.73 19.80 2269 3237 $ 990 25.04

$ 496 099 S 0.69 S 2798 22.07 24,49 3L52 22.07 26.8l

$ 496 099 $ 0.69 S 2S.18 22M 2%67 30.82 2258 26.02

$ 496 099 S 0.69 $ 2792 2296 24.78 3296 2296 27.13

$ 496 099 S 0.69 $ 26.79 23AS 2495 32,42 23.46 2720

$ 498 099 $ 0.69 $ 259l 2093 22.78 3198 2093 25.13

$ 496 a39 $ 0.69 S 27.64 2251 24.65 2251 27Am

$ 496 099 $ 0.69 $ 31A6 26.17 37.10 2239 2L52

$ 496 099 $ 0.69 $ 34.08 2992 39.71 2a27 3197 5 496 0.39 S 0.69 S 29.42 26.06 3S.06 23.65 28A1 sdl 10/9$ 7 SCB 1998.XLS

ATfACHMENT D Appendix D Page 24 of 43 NAGARAMOHAWKPOWER CORPORAllON DEYELOPMEMTOF PSC 207 SCS BUYBACKRATES ENERGY and CAPACIIY Area 1 - POSt MRA Q~nIn Generafkn Onyeak Off-Peak Average Jrn88 $ 423 096 0.64 $ 2S.10 19.15 21.63 Feb98 $ 423 096 0.64 2390 17.75 20.15 Mere $ 423 aw 0.64 2298 18.43 2029 Agre $ 423 096 0.6l 21.62 20.18 20.78 May@8 $ 423 096 0.64 2$ .19 20$ 0 Jrn98 $ 423 096 0.64 1897 20AT Jfl48 $ 423 096 0.64 24.10 19.45 2199 Au988 $ 423 096 0.64 19.53 21.12 Sep98 S 423 096 0.64 23.14 1997 Od86 $ 423 a36 0.64 24.64 2122 22.6$

Nov88 $ 423 096 0.64 2392 18$ 1 20.72 Dec66 $ 423 096 0.64 2826 19$ 2 23 16 Arnusl $ 423 aM 0.64 24.0l 1999 2123 Generslon Cnpesk OS-Peak Average Jrn86 $ 428 2599 19.75 2231 30.16 19.75 24.09 Feb98 3 428 2423 1890 20.78 28$ 1 1830 2256 Msrrkf $ 428 23.60 1991 2092 2797 19.01 2270 Apr48 3 42S 2229 2091 21A3 2091 2321 Msp98 $ 428 2598 21.14 23.16 21.14 2494 Jfn98 $ 428 23A3 19A6 21.11 $ 27.71 19.46 2290 Jr$ 98 $ 428 2495 2096 22.06 $ 29.13 20.06 23$ 4 Auy88 3 42S 24.07 20.14 21.78 $ 2%34 20.14 2396 Sep98 $ 428 2396 '1997 21$ 9 $ 28.14 1997 2338 OcP98 3 428 25A1 2198 2395 21.88 25.13 Nov 9S 3 428 24$ 6 19.09 2197 19.09 23.15 Deb98 $ 428 29.1 4 20.13 23.88 33.42 20.13 25.67 Annual $ 428 24.79 1999 2199 29.07 1999 23.78 Generafkn Jm98 $ 4.41 098 2L71 2097 23.01 31A9 2097 25.01 Febga $ 4.41 098 25.00 1898 21A4 29.79 1898 23A3 Mar@8 $ 4.41 098 2494 19.61 21$ 8 29.13 19.61 2398 Afr48 $ 4.41 098 23fo 21 AT 2211 27.79 21.47 24.10 May@8 $ 4.41 098 2690 2191 23.89 3199 2191 25.88 Jrn68 $ 4.41 098 24.17 2098 21.78 2896 23.78 AHS $ 4.41 098 25.64 20.69 2LTS 30.43 20.69 24.75 Auy98 $ 4.41 098 2483 20.78 22A7 29.62 20.78 24A6 Sep98 $ 4.41 098 24.62 20.61 2228 29AO 20.61 2427 Od98 $ 4.41 098 2621 2298 24.09 31.00 225S 26.09 Nov98 $ 441 098 2594 1999 2205 30.13 19.69 24.0l Deb98 $ 4.41 098 3ao6 20.77 24.64 34$ $ 20.77 26.6l Arrssrf $ 4A1 098 2598 20.63 22.69 3097 24.68 Gencralcn

$ 4.47 098 0$ 8 27.04 2093 2330 3256 20.63 Feb98 $ 4.47 098 0$ 8 2591 19.12 21.70 3093 19.12 24.00 MarM 8 4AT 098 0.68 24.65 '19$ 5 21$ $ 30.17 19.85 24.15 Apr~ $ 4.47 098 0.68 2329 21.74 2298 2891 21.74 24.68 Map98 $ 4.47 098 0$ 8 27.13 22.08 24.19 32.66 22.08 26A9 Jrn98 $ 4,47 028 24A7 2093 22.05 2999 2093 249$

$ 4AT 098 0.68 2095 ZL04 31A8 2095 2594 Aug.98 $ 4.47 098 0.68 2$ .14 21.04 2275 30.66 21.04 Sep 98 3 4.47 098 0.68 2492 2096 2256 30.45 20.86 24.86 Od98 $ 4A7 098 0.68 2694 2296 2499 32.06 22.86 Nov98 $ 4.47 098 0.68 25.66 1994 2232 31.18 1994 24.62 Deb98 $ 4.47 098 a68 2193 2495 3596 21.03 2725

$ 4.47 098 0.68 2590 2098 22.97 31A2 20$ 8 Generalon Cnpesk Otf.Peak Average

$ 4.56 029 0.69 21.06 2L78 S 3324 21.06 26.13

$ 4.56 099 0.69 19$ 2 22,16 31A8 19$ 2 2ASO

$ 4$ 6 099 0.69 25.1 6 2027 2230 3090 24.65

$ 4.56 099 0$ 9 22.19 2285 29A1 22.19 2520

$ 4.56 099 0.69 27.70 2254 24.69 3394 2254 27.0l

$ 496 099 0.69 24.98 20.75 2251 30.62 20.75 24$ 8

$ 4$ 6 099 0.69 2199 23$ 2 32.14 2199 2597

$ 4$ 6 099 0.69 25.66 21A7 2322 3120 21.47 2597

$ 496 099 0.69 2120 Zk03 3198 2190 2597

$ 4$ 6 099 0.69 2323 2490 u.73 2323 2725

$ 496 099 0.69 26.19 2095 22.79 31$ 3 2095 25.13

$ 4$ 6 099 0$ 9 31.07 21A6 25A7 3LTI 21.46 2792

$ 4$ 6 099 0.69 2192 23AS 3207 2f 92 25.80 Sdf 10/9/97 SC6 1998.XLS

Appendix D ATTACHMENT0 Page 25 of 43 NAGARAMOHAWKPOWER CORPORATION DEVELOPMENT OF PSC 207 SCS BUYBACKRATES ENERGY and CAPACIIY Ares 2- POST MRA QLnnrn~IS Gcnerallcn 7 snsnrsskn asrrrans. Olriaeek Jsn88 $ 423 0.36 0.64 $ 1926 21.76 Feb88 $ 423 0.36 0.64 23A3 3 1720 20.09 Msr4S $ 423 026 0.64 2283 $ 1839 2024 APTS $ 423 026 0.64 2185 3 20AO 21.00 Msy86 $ 423 OM a64 25.66 $ 20JIS 2288 Jun8S $ 423 026 0.64 23AO 3 19.13 20.75 Jal88 $ 423 026 0.64 24.74 3 19rIT 2185 Au988 3 423 026 0.64 n86 5 1996 2159 Scp88 3 423 OM 0.64 23.67 3 1981 21A2 Od88 $ 423 026 0.64 2a37 $ 22.71 2423 Nov88 $ 423 026 2%95 $ 22A9 25.18 Dec-98 $ 423 OM 2a67 $ 1980 2L50 Arrrusl $ 423 028 0.64 2494 $ 20.11 22.12 Gcncralcn Jsn88 $ 428 2604 $ 19JIT 22Al 3022 19JIT 2422 Feb88 3 428 24.1 6 $ 1825 20.72 2L44 1825 Msr4S $ 428 2354 3 1896 20.87 27JI2 1896 22.65 Apr~ $ 428 225l $ 21 AQ 21.66 26JII 21'154 May88 $ 428 26A6 3 2154 n59 30.74 2527 Jaca88 428 n75 S 19.72 21AO 28.02 19.72 23.18 Jal88 $ 428 2551 S 2059 22.64 29.79 2059 24.42 Au988 $ 428 24.60 $ 2059 2226 2a88 2a59 Sep98 $ 428 24A1 S 20.43 22.09 28.69 20.43 23JIT Oc188 $ 428 27.19 $ 23A2 2499 31AT 23.42 26.77 Nov88 $ 428 29.85 $ 2320 2597 34.13 n20 27.75 Deo83 S 428 2956 3 20A2 2423 33JH 20A2 26.01 S 428 25.72 $ 20.74 2281 2999 20.74 2459 nc Generaaan Jsn88 S 4A1 a38 2587 $ 20A9 23.15 31.65 20A9 25.14 Feb88 $ 4.41 028 2493 $ 1a83 21M 29.72 1L83 Maraki $ 4A1 028 2429 $ 1956 2143 29J)7 1956 2353 Apr48 $ 4A1 028 2325 $ 21.70 2235 2804 21.70 2424 May88 $ 4AI 038 2720 $ 2222 2424 32.09 2222 2623

$ 4A1 OM 2450 $ 2a35 22.08 2929 2a35 24.07 JaS88 $ 4A1 028 2L32 3 2124 n36 31.11 2124 2525 Au988 $ 4A1 028 2528 $ 2124 2296 30.17 2124 Sep88 9 4A1 OM 25.18 3 21AS 22.79 2997 21AIS 24.78 OcS98 $ 4A1 a38 2805 $ 24.16 25.78 3284 24.16 27.78 Nov88 3 4A1 a38 30AO $ 2393 26.79 3558 2L93 28.79 Deb88 $ 4.41 a38 3050 $ 21A17 25.00 3529 2UIT 2699

$ 4.41 028 2L53 $ 2129 n53 3122 2129 25.53 EnexShtxJhlmruz Generalcn Onpesk Orriaesk Avera9e Jsn88 S 4AT 028 0.68 27m $ 20.75 23A4 32.73 20.75 25.74 Feb88 $ 4A7 OM 0.68 2524 $ 19.06 21.6l 30.76 19.06 2394 Maraki $ 4A7 0.38 0.68 2459 $ 1981 2120 30.11 19JII 24.10 Apr48 $ 4AT 028 0.68 2354 3 2197 22.62 29.06 2197 2483 May88 $ 4AT OM 0.68 27.6l S 2250 24.64 33.16 2250 2694 Jasa88 $ 4A7 028 0.68 24JO S 20JIO 2235 3a33 20.60 24.65 JaS88 S 4A7 028 0.68 26jr5 $ 2151 23.65 32.17 2141 2595 Au988 $ 4.47 038 0.68 25.70 $ 2150 n25 3122 2150 2555 Sep88 S 4A7 038 0.68 2550 S 2124 23.07 31.02 2124 25.37 Od88 $ 4.47 OM 0.68 28AO $ 24 A6 26.10 3392 24AS 2L40 Nov88 $ 4AT 028 0.68 31.18 $ 2423 27.13 36.70 2423 29.43 Deb98 S 4A7 028 0.68 30AS $ 2123 2521 36AO 2123 27.61

$ 4A7 028 0.68 26AS $ 2156 n83 3238 21.66 26.13 Genera ecn Orf-Peek Jsn88 $ 456 029 0.69 27.77 $ 21.18 n93 33.41 21.18

$ 456 029 0.69 25.76 $ 19A6 22.09 31AO 19A6 24.44 Msrrrs $ 456 029 0.69 25.10 $ 2022 2225 30.74 2022 24.60 AprM $ 456 029 0.69 2403 $ 22A3 23.10 29.67 22.43 25.44 May.98 $ 456 029 0.69 2822 $ 2296 25.15 3286 2296 2750 Jasa88 S 456 028 0.69 2a32 $ 2120 2282 3096 21.03 25.17 JaS88 $ 456 029 0.69 2720 $ 2195 24.14 3284 2195 26A9 Au988 $ 446 AS 0.69 2623 3 2195 23.74 31JIT 2195 26.08 Sep88 S 456 029 0.69 2L03 S 21.79 n55 31.67 21.79 Od88 $ 456 029 0.69 2L99 $ 2487 26.65 34.63 2497 29.00 Ncna98 $ 456 028 0.69 3&3 S 2873 27.69 37AT 24.73 Dec86 $ 456 OM 0.69 3152 $ 21.77 25JM 37.16 21.77 28.18 Arluat $ 456 029 0.69 27A2 $ 22.11 2422 33.06 22.11 26.67 sdl 10887 SC6 1998.XLS

Appendix D ATTACHMENT0 Page 26 of 43 tnAGARA MOHAWKPOWER CORPORATON DEVELOPMENT OF PSC 207 SC6 BIIYBACKRATES ENERGY and CAPACITY Area 4 POST MRA Eunn!~9319 Generaaon Onpeak Jsnge $ 423 tL36 6 31$ 7 26.64 3 28.69 FeM8 $ 423 096 0.64 $ 30.19 2$ A7 S 2?A4 Msr48 $ 423 436 0.64 $ 28.75 23.67 5 25.79 Apr48 $ 423 096 0.64 24$ 3 2020 $ 22.00 Mayge $ 423 026 0.64 2596 2099 $. 22.63 hnS8 $ 423 436 0.64 2296 20$ 8 $ 2197 JrL98 5 423 036 0.64 2496 21A3 5 2286 Aug48 S 423 096 0.64 2196 S 22.12 Sep68 S 423 026 0.64 232l 19$ 8 $ 21.16 OctdtS S 423 096 0.6l 25.75 2267 $ 239$

Nov68 $ 423 4M 28.69 2222 $ 2l92 DeoSS $ 423 IL36 0.6l 30.70 2396 $ 26.77 Annual S 423 436 0.64 2L66 2?97 24.16 Genendm Jsnge S 428 3256 27AT 29$ 9 36$ 3 27.47 3197 Feb'428 31.13 2L27 2L29 35.41 2627 30.07 Mar~ $ 428 29.6S 24.41 26$ 9 3392 24A1 2L37 Apr~ $ 428 2L30 2093 22.69 29$ 7 2043 24A7 Msyge $ 428 25$ l 21$ l 2333 3tL12 21$ l 25.12 Jjnge 8 428 23.68 2122 2225 2795 2122 24.03 Jd68 6 428 25.6l 2?.10 23$ 7 2991 22.10 2L35 Aug68 $ 428 242$ 21.72 2?$ 1 28.62 21.72 24$ 9 ecP68 $ 428 2397 2029 2192 2824 2029 23.61 Od48 6 428 2L55 2L38 24.70 3483 2L38 26.4S Novae 3 428 29$ 9 2291 25$ 9 3396 2291 27A8 Deo48 $ 428 31.66 24.71 27.60 3593 24.71 2929 Arnual 9 428 27A9 23.07 2491 31.77 23.07 26.69 Generatcn Jan@8 $ 4.41 098 33$ 9 2894 3053 3837 2434 3252 F~ 3 4A1 098 32.12 27.10 29.19 3690 27.10 31.18 Mar%6 $ 4A1 438 25.18 27A3 3597 25.18 29A3 Aprrte 5 4A1 098 26.10 21A9 23AI 30.88 21A9 25AO May-98 5 4A1 IL38 26.66 2?22 2497 31A5 2222 26.07 Jrn68 S 4A1 098 24A3 2UI 2921 21A8 2494 AI68 5 4A1 098 26A$ 22.80 2492 3123 22AN 2L31 Aug68 6 lA1 028 25,12 2?AO 23$ 4 2990 22AO 25.53 eep68 $ 4A1 098 24.72 2094 2251 29.51 2094 24.51 Ocuge $ 4.41 098 2729 24.12 25AS 32.18 24.12 2?AS Nov68 $ 4A1 098 3452 23.64 26$ 1 3591 23.64 28 50 Deo68 $ 4.41 0$ 8 25A9 28AS 37A5 25A9 30AT Annual $ 4A1 098 2L36 23.80 2$ .70 33.15 23$ 0 27.69 EmnnLI?nhldnsnt Geeratcn Onpesk OSP oak Average Jan68 $ 4AT 098 aee 28.69 3091 39$ 3 28,69 3321 Fcb45 $ 4A7 098 0$ 8 3?$ 2 27A3 29$ 5 3404 2TA3 3195 Mar48 S 4A7 028 30.97 25$ 0 2L78 36.49 2$ $ 0 Apr48 S 4A7 098 aee 26A2 21.76 23.70 3194 21.76 Mayge $ 447 028 0.68 2699 2250 2427 3?'$2 2250 26.67 Jtn68 $ 4AT 098 ae8 24.73 22.17 2324 3025 22,17 JU68 $ 4AT 098 0.68 26.78 2%08 2492 3230 23.08 2692 Aug68 $ 4A7 4M 0$8 25.43 22.68 23$ 3 3095 2268 26.13 eep68 S 4AT 028 0.68 2120 2280 30$ 5 2120 2$ .10 Ocp98 $ 4A7 438 0$ 8 27.74 24.42 2590 3326 24.42 28.10 No48 S 447 438 0.68 3090 2393 2L84 36.43 2L93 29.14 Deo68 S 447 098 0.68 33.07 25.81 2L83 3L$9 2591 3t.13 Arnuat $ 4AT 098 468 2IL72 24.10 26.02 3424 24.10 Genccaton Average

$ 4$ 6 029 0.69 34.71 2929 31 $ 5 4095 2929 3390 F~ S 4$ 6 029 0$9 3320 2tL01 30.17 3483 28.01 3?$ 2 Msr4S $ 4$ 6 0&i 0.69 31.61 26.03 2L?$ 3725 26.03 3470 AprM S 4$ 6 099 0.69 2697 2221 24.19 32.61 2221 26$ 4

$ 4$ 6 099 0.69 27$ 5 2297 2l$ 8 33.19 2297 2723 Ange $ 4$ 6 029 0.69 2525 22.63 ?L72 30$ 8 22.63 26.07 Jd48 S 4$ 6 099 0.69 2794 2356 25.14 3297 23$ 6 2?A8 Auyge $ 4$ 6 039 0.69 2596 23.16 2493 31.60 23.16 26.67 Sep68 6 4$ 6 IL39 0$ 9 25$ 5 21.6l 2327 31.19 2194 25.62 OcNS S 4$ 6 IL39 2431 2493 2694 3395 2493 28.69 Nov48 S 4$ 6 439 0.69 31$ 5 24A3 27.40 37.18 24.43 29.75 Dax98 $ 4$ 6 099 0.69 33.76 2695 29.43 3999 262$ 31.78 Arnual S 4$ 6 099 0.69 2991 24.60 26$ 6 3495 24.60 2891 ectl 10/9/97 SCB 19983Q.S

Appendix D Page 27 of 43 ORIGINALAPPENDIX D SCHEDULE 7, SHEET 35 FROM 7/23/97 PROPOSAL Unbundled Price Data 1998 1999 2000 Forecast M arket rice of Ele ctri i Western Region SC1 All hours $ 0.02556 $ 0.02686 SG2ND with $ 0.02501 $ 0.02564 $ 0.02628 SC2D losses $ 0.02527 $ 0.02591 $ 0.02655 SC3 Seconda a lied $ 0.02449 $ 0.02510 $ 0.02573 SC3 Prima $ 0.02361 $ 0.02420 $ 0.02480 SC3 Subtransmission $ 0.02324 $ 0.02382 $ 0.02441 SC3 Transmission $ 0.02218 $ 0.02273 $ 0.02330 SC3A Seconda Wn On/Off $ 0.02725 $ 0.02793 $ 0.02863 SC3A Seconda -Off ak $ 0.02318 $ 0.02376 $ 0.02435 SC3A Prima Wn $ 0.02671 SC3A Prima Wff losses $ 0.02145 $ 0.02199 SC3A Subtransmission Wn a lied $ 0.02525 $ 0.02588 SC3A Subtransmission -Off $ 0.02134 $ 0.02188 $ 0.02242 SG3A Transmission Wn $ 0.02419 $ 0.02479 $ 0.02541 SC3A Transmission -Off $ 0.02040 $ 0.02091 $ 0.02143 Central Region SC1 AII hours $ 0.02671 $ 0.02738 SC2ND $ 0.02614 $ 0.02679 SC2D losses SC3 Seconda a lied $ 0.02498 $ 0.02560 $ 0.02624 SC3 Prima $ 0.02407 $ 0.02467 $ 0.0252S SC3 Subtransmission $ 0.02370 $ 0.02430 $ 0.02490 SC3 Transmission $ 0.02261 $ 0.02317 $ 0.02375 SC3A Seconda -On On/Off $ 0.02937 SC3A Seconda -Off ak $ 0.02463 SC3A Prima -On $ 0.02617 SG3A Prima Wff losses $ 0.02172 $ 0.02282 SG3A Subtransmission -On a tied $ 0.02598 $ 0.02729 SC3A Subtransmission -Off $ 0.02214 $ 0.02269 SC3A Transmission Wn $ 0.02550 $ 0.02614 SC3A Transmission -Off $ 0.02117 $ 0.02170 Eastern Region SC1 All hours $ 0.03058 $ 0.03134 $ 0.03213 SC2ND $ 0.03000 $ 0.03075 $ 0.03152 SC2D losses $ 0.03021 $ 0.03097 $ 0.03174 SC3 Seconda a lied $ 0.02924 $0.02997 $ 0.03072 SC3 Prima $ 0.02818 $ 0.02888 $ 0.02961 SC3 Subtransmission $ 0.02770 $ 0.02840 $ 0.02911 SG3 Transmission $ 0.02657 $ 0.02724 $ 0.02792 SC3A Seconda -On On/Off $ 0.03293 $ 0.03375 $ 0.03459 SC3A Seconda -Off ak $ 0.0271 S $ 0.02787 $ 0.02857 SC3A Prtma Wn $ 0.03115 $ 0.03272 SC3A Prima Wff losses $ 0.02529 SC3A Subtransmission -On a lied $ 0.03072 SC3A Subtransmission -Off $ 0.02498 SC3A Transmission -On $ 0.03099 SC3A Transmission -Off $ 0.02513 9/30/97 2:38 PM Conrdential Settlement Document COM$.XLS

Appendix D Page 28 Of 43 REVISED APPENDIX D SCHEDULE 7, SHEET 35 FROM 7/23/97 PROPOSAL WITH REVISED BACKOUT RATES Unbundled Price Data 1998 1999 2000 Forecast Market Price of Elect ici Western Region SC1 All hours $0.02556 $ 0.02827 $ 0.03076 SC2ND $ 0.02501 $ 0.02766 $0.03009 SC2D losses $ 0.02527 $ 0.02795 $ 0.03041 SC3 Seconda a lied $ 0.02449 $ 0.02708 $ 0.02947 SC3 Prima $ 0.02361 $ 0.02611 $ 0.02840 SC3 Subtransmission $0.02324 $ 0.02570 $ 0.02796 SC3 Transmission $ 0.02218 $ 0.02453 $ 0.02668 SC3A Seconda Wn On/Off $0.02725 $ 0.03014 $ 0.03279 SC3A Seconda ~f $0.02318 $ 0.02564 $ 0.02789 SC3A Prima Wn with $0.02543 $ 0.02812 $ 0.03059 SC3A Prima Wff losses $ 0.02145 $ 0.02373 SC3A Subtransmission Wn a plied $0.02525

~f SC3A Subtransmission SC3A Transmission ~

SC3A Transmission Wff

$ 0.02134

$ 0.02419 $ 0.02675

$ 0.02256

$ 0.02910 Central Region SC1 All hours $ 0.02882 $ 0.03136 SC2ND with $0.02550 $ 0.02820 $ 0.03069 SC2D losses $ 0.02578 $ 0.02851 $ 0.03102 SC3 Seconda a lied $0.02498 $ 0.02762 $0.03005 SC3 Prima $ 0.02407 $ 0.02662 $0.02897 SC3 Subtransmission $0.02370 $ 0.02852 SC3 Transmission $ 0.02261 $ 0.02720 SC3A Scconda On/Off $ 0.02796 $ 0.03364 SC3A Seconda ~f $ 0.02821 SC3A Prima $0.02617 $ 0.02894 $0.03149 SC3A Prima Wff losses $ 0.02172 $ 0.02402 $ 0.02613 SC3A Subtransmission Wn applied $ 0.02598 $ 0.02873 $ 0.03126 SC3A Subtransmission ~f SC3A Transmission Wn $ 0.02752 SC3A Transmission ~f $ 0.02284 Eastern Region SC1 AII hours $ 0.03058 $ 0.03382 $ 0.03679 SC2ND $ 0.03000 $ 0.03318 $ 0.03610 SC2D losses $ 0.03021 $ 0.03341 $ 0.03635 SC3 Seconda a lied $ 0.02924 $ 0.03233 $ 0.03518 SC3 Prima $ 0.02818 $ 0.03117 $ 0.03391 SC3 Subtransmission $ 0.02770 $ 0.03064 $ 0.03333 SC3 Transmission $0.02657 $ 0.02939 $0.03197 SC3A Seconda Wn On/Off $ 0.03293 $ 0.03641 SC3A Seconda ~f $0.02719 $ 0.03007 SC3A Prima $ 0.03115 $ 0.03445 SC3A Prima Wff losses $ 0.02529 $ 0.02797 SC3A Subtransmission Wn a lied $ 0.03072 $ 0.03398 SC3A Subtransmission ~f $ 0.02498 $ 0.02763 SC3A Transmission Wn SC3A Transmission Wff $ 0.02878 9/30/97, 2:45 PM Confidential Settiement Document COM$997.XLS

NIAGARAMOHAWK POWER CORPORATION PowerChoice Revenue Components Private Area Li hting S.C. No.1-Full Service Present Structure'owerChoice Structure

~corn oncet Revenue ~corn onenr Revenue Facility $ 2,680,288 Facility Services $ 1,605,598 Energy $ 2,017,413 Energy Services $ 3,092,103 $ 0.105787 Total $ 4,697,701 Total $ 4,697,701 1998 Sales ForecasL 29,229,395 kWh 0>D

'1996 Freeze Rates (D 'z>>

Q ra ro g.

O X

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Appendix D Page 30 of 43 NIAGARA MOHAWK POWER CORPORATION P.S.C. No. 213, S.C. No.1 Private Area Lighting Comparison of Monthly Facility Prices Freeze and PowerChoice LAMPS & LUMINAIRES Freeze Proposed Adjustment

~Dee I ei Charac ~Char e Amount Percent Standard Mercury Vapor 175w $ 8.75 $ 4.34 ($ 4.42) -60 6%

400w $ 10.76 $ 4.87 ($ 5.89) -54.8%

1000w $ 14.72 $ 9.64 ($ 5.08) -34.5%

High Pressure Sodium 70w $ 6.44 $ 4.24 ($ 2.20) 34 2oro 100w $ 6A3 $ 4.23 ($ 2.20) 34 2%

1 Sow $ 9.78 $ 4.30 ($ 5.48) -56.1%

250w $ 6.95 $ 4.82 ($ 2.13) 30 6%

400w $ 11.25 $ 5.06 ($ 6.19) -55 0 1000w $ 19.78 $ 9.87 ($ 9.91) 50 1%

Rood Mercury Vapor 400w $ 11.25 $ 6.64 ($ 5.71) -50.8%

1000w $ 14.89 $ 6.74 ($ 8.15) -54.7%

High Pressure Sodium 250w $ 5.86 $ 5.41 ($ 0.45) -7.7%

400w $ 13.03 $ 5.65 ($ 7.38) -56.7%

1000w $ 16.16 $ 7.03 ($ 9.13) 565 Metal Halide 400w $ 7.07 $ 6.35 ($ 0.72) -10 2%

Shoebox High Pressure Sodium 1 00w $ 9.08 $ 7.18 ($ 1.91) 21.0%

150w $ 8.94 $ 6.52 ($ 2A2) 27 250w $ 8.95 $ 7.12 ($ 1.84) 20 S%

400 w $ 9.03 $ 7.06 ($ 1.97) 21 8%

Metal Halide 400 w $ 9.22 $ 7.21 ($ 2.01) 1 8oro

~P* t Te Colonial High Pressure Sodium 70w $ 6.24 $ 4.61 ($ 1.63) 26 2%

100w $ 6.23 $ 4.62 ($ 1.61) -25.8%

150w $ 6.19 $ 4.72 ($ 1.47) -23 7%

Traditional High Pressure Sodium 70w $ 10.64 $ 8.51 ($ 2.13) 20.0%

100w $ 10.78 $ 8.92 ($ 1.86) -17 2%

150w $ 10.64 $ 8.73 ($ 1.92) 18.0%

Acorn High Pressure Sodium 70w $ 10.39 $ 8.31 ($ 2.08) 20.0%

100w $ 10.38 $ 8.31 ($ 2.07) 19.9%

1 Sow S 10.19 $ 8.31 ($ 1.88) -18.4%

Energy Price per Kwh $ 0.06902 $ 0.10579 $ 0.03677 53.3%

Confidonrlal Serrlerrrenr Doeurrrenr

Appendix D Page 31 of 43 NIAGARA MOHAWKPOWER CORPORATION P.S.C. No. 213, S.C. No.1 Private Area Lighting Comparison of Monthly Facility Prices Freeze and PowerChoice POLES FOUNDATIONS CIRCUITS Freeze Proposed Adjustment

~Deco to Ch~rche Ch~rche Amount Percent POLES Overhead Service Wood $ 5.50 $ 5.45 ($ 0 05) a0 8%

Under round Service-Standard

~Re tees 16'r loss $ 6.50 $ 5.09 ($ 1.41) 21 7%

16'r less, embedded $ 9.10 $ 6.99 ($ 2.11) 23.2%

over 16'-25'-pendant $ 12.20 $ 11.39 ($ 0.81) 6 Aluminum 16'r less, square $ 24.25 $ 22.52 ($ 1.73) -7.1%

over 16'-25'-davit $ 15.10 $ 16e41 $ 1.31 8 7%

over 16'-30', square $ 40.32 $ 36.87 ($ 3.45) 8.6%

FOUNDATIONS Poured Concrete for poles:

16'r loss 16'20.95 $ 14.20 ($ 6.75) .32.2%

over $ 24 25 $ 16 55 ($ 7 70) 31 7%

~Screw.T e all ap plications $ 11.25 $ 8.1 3 ($ 3 12) -27 7%

~Pkin Lot all applications $ 14.75 $ 11.19 ($ 3.57) -24.2%

CIRCUITS Overhead Service (based on 150 tt.)

cable only $ 2.05 $ 2.52 047 227%

Under round Service (based on per ft.)

cable and conduit $ 0.18 $ 0,13 ($ 0.06) 30.6%

cable only $ 0.04 $ 0.03 ($ 0.01) -27.0%

direct buried cable $ 0.15 S0.10 ($ 0.05) -33.3%

Confid 'nrlcl Seulenrenr Doeumenr

NIAGARAMOHAWK POWER CORPORATION PowerChoice Revenue Components Street and Hi hwa Li htin S.C. No. 2-Full Service Contract-Customer Contributory Present Structure'owerChoice Structure

~Com onenr Revenue ~Com onenr Revenue lkwh Facility Facility Services SC2 $ 33,615,147 SC2 $ 27,578,724 Contract f43 790 Contract $ 33 328 Total $ 33,658,937 Total $ 27,612,050 Energy Energy Services SC2 $ 12,030,023 SC2 $ 18,066,446 Contract r1 538 Contract $ 12 002 Total $ 12,031,561 Total $ 18,078,448 $ 0.103784 Total Total SC2 $ 45,645,170 SC2 $ 45,645,170 Contract 345 328 Contract 345 328 Total $ 45,690,498 Total $ 45,690,498 1996 Sales Forecast:

SC2 174,171,474 kWh Contract ~6 kWh 174,193,736 kWh

'1996 Freeze Rates.

dfm-unbundlettr8rteSI revror rdototrt2conl

Appendix D Page 33 of 43 NIAGARA MOHAWK POWER CORPORATION P.S.C. No. 213 Electricity, S.C. No. 2 Street and Highway Lighting-Full Service Comparison of Annual Facility Prices Freeze Prices and PowerChoice STANDARD EQUIPMENT LAMPS LUMINAIRES Freeze Proposed Adjustment Fscili Size 8i T e Charche ~Char e Amount Percent LAMPS Mercury Vapor 100w $ 30.62 $ 5.29 ($ 25.33) 82.7%

175w $ 26.40 $ 5.17 ($ 21.23) -so.a%

400w $ 30.93 $ 5.96 ($ 24.97) -80 7%

1000w $ 38.83 $ 8.89 ($ 29.94) -77.1%

High Pressure Sodium 70w $ 33A3 $ 6.30 ($ 27.13) -81.2%

100w $ 39.96 $ 6.33 ($ 27.13) -81.2%

150w $ 43.35 $ 6.55 ($ 33.63) -Sa.2%

250w $ 44.84 $ 6.61 ($ 36.80) -84 9%

400w $ 45.49 $ 6.62 ($ 38.23) 85 3o/o 1000w $ 85.11 $ 12.90 ($ 38.87) -85 4%

LUMINAIRES Standard 70w $ 57.1 6 $ 44.68 ~

($ 12 48) -21.8%

100w $ 55.17 $ 44.58 ($ 10.59) 19 2%

150w/175w $ 58.81 $ 45.62 ($ 13.19) .22 4%

400w $ 78.05 $ 52.70 ($ 25.35) 32.5%

1000w $ 126.54 $ 107.27 ($ 19.27) 15.2o)o Architectural 100w $ 85.1 1 $ 72.32 ($ 12.79) 15 0%

150w/175w $ 85.11 $ 58.74 ($ 26.37) 31.0%

250w $ 141.85 $ 78.91 ($ 62.94) -aa.4%

400w $ 136.32 $ 78 47 ($ 57.85) 42.4o/

Underpass 70w/100w $ 80.85 $ 80.35 ($ 0.50) ~ 0 6%

150w/175w $ 66.16 $ 81.16 $ 1 5.00 22 7%

Parkway 150w/175w $ 95.55 $ 94.21 ($ 1.34) 1.4%

1000w $ 192.65 $ 189.96 ($ 2.69) 1.4%

Decorative armory square 100w $ 123.17 $ 122.93 ($ 0.24) 0.2%

edgewater 100w $ 126.34 $ 120.95 ($ 5.39) -4.3%

central park 100w $ 133.07 $ 116.16 ($ 1 6.91) -12.7%

mariner 100w $ 237.00 $ 296.00 $ 59.00 24 9%

ed gewater 150w/175w $ 126.43 $ 126.34 ($ 0.09) 01%

central park 150w/175w $ 113.26 $ 107.62 ($ 5.64) -5.0%

Rood 250w $ 60.37 $ 52.89 ($ 7.48) 12.4%

400w $ 61.54 $ 55.73 ($ 5.81) 9.4%

Energy Rate per KWH $ 0.06907 $ 0.10378 $ 0.03471 50.3%

Confidential Serilemenr Daeumenr

Appendix D Page 34 of 43 NIAGARA MOHAWK POWER CORPORATION P.S.C. No. 213 Electricity, S.C. No. 2 Street and Highway Lighting.Full Service Comparison of Annual Facility Prices Freeze Pdces and PowerChoice

'STANDARD EQUIPMENT POLES FOUNDATIONS Freeze Proposed Adjustment Facilit Size & T e Ch~rche ~Char e Amount Percent POLES Overhead Service Wood $ 57.75 $ 95.65 $ 37.90 65.6%

Steel $ 79.10 $ 163.62 $ 84.52 106.9%

Aluminum $ 100.00 $1 67.25 S 67.25 67.3%

Under round Service-Standard Steel 16' under $ 40.05 $ 102.79 $ 62.74 156 7%

16' under, embedded $ 79.95 $ 120.67 $ 40.72 50.9%

over $ 102.90 $ 237.73 $ 134.83 131.0%

16'ver 16', heavy duty $ 127.35 $ 326.37 $ 199.02 156.3%

Al 16' under $ 39.70 $ 121.92 $ 82.22 207.1%

over $ 102.90 $ 231 s48 $ 128.58 125.0%

16'ver 16', heavy duty $ 204.35 $ 273.95 $ 69.60 34.1%

over 16', square $ 31 6.05 $ 470.02 $ 153.97 48 7%

~RGG lass 16' under $ 32.95 $ 61.10 $ 28.15 85.4%

16' under, embedded $ 64.25 $ 83.87 $ 19.62 30.5%

over $ 96.20 $ 156.02 $ 59.82 62 2%

Service-Decorative 16'nderground Al 16' under:

armory square $ 271.90 $ 310.61 $ 38.71 14.2%

C asl*

16' under:

armory square $ 271.90 $ 345.66 $ 73.76 27.1%

Rb*nbla s 16' under:

presidential $ 126.08 $1 62.08 $ 36.00 28.6%

presidential, embedded $ 185.42 $ 214.07 S28.65 15.5%

FOUNDATIONS C G t*

for poles: 16' under S 100.1 5 $ 170.40 $ 70.25 70.1 %

over $ 140.75 $ 198.62 $ 57.87 41.1%

16', heavy duty 16'ver

$ 182.85 $ 217.68 $ 34.83 19 0%

~a* -t all applications $ 62.50 $ 97.60 $ 35.10 56.2%

Confidenria! Seulemenr Doeumenr

Appendix D Page 350f43 NIAGARA MOHAWK POWER CORPORATION P.S.C. No. 213 Electricity, S.C. No. 2 Street and Highway Lighting-Full Service Comparison of Annual Facility Prices Freeze Prices and PowerChoice STANDARD EQUIPMENT CIRCUITS OTHER CHARGES Freeze Proposed Adjustment Facilit Size 8 T e Charche Cher<he Amount Percent CIRCUITS Standard Under round cable and conduit $ 102.80 $ 75.14 ($ 27.66l .26.9%

cable only $ 19.75 S1 7.66 (S2.09) -10.6%

direct buried cable $ 56.35 $ 60.29 $ 3.94 7.0 Residential Under round direct buried cable $ 11.25 $ 12.06 $ 0.81 7.2%

Excess Foota e- er foot cable and conduit $ 2.05 $ 1.50 ($ 0.55) .26.8%

cable only $ 0.34 $ 0.35 $ 0.01 2.9%

direct buried cable $ 1.10 $ 1.20 $ 0.'IO 9.1%

OTHER CHARGES 24 Hour Service-Additional Char e Mercury Vapor 100w $ 9.75 $ 5.29 ($ 4.46) -45.7%

175w $ 9.55 $ 5.17 ($ 4.38) -45.9%

High Pressure Sodium 70w $ 10.90 $ 6.30 ($ 4.60) 42.2%

100w $ 10.65 $ 6.33 ($ 4.32) -40 6%

150w $ 9.55 $ 6.55 ($ 3.00) 31.4%

Convenience Outlets on new metal pole $1 6.90 $ 42.12 $ 25.22 149.2%

on existing metal pole $ 34.30 $ 58.00 $ 23.70 69.1%

on wood pole $ 48.01 $ 52.85 $ 4.84 10.1%

Energy Rate per KWH $ 0.06907 $ 0.10378 $ 0.03471 50.3%

Conjidenrial Sealemenr Docnnrenr

Appendix D Page 36 of 43 NIAGARA MOHAWK POWER CORPORATION P.S.C. No. 213 Electricity, S.C. No. 2 Street and Highway Lighting-Full Service Comparison of Annual Facility Prices Freeze Prices and PowerChoice DISCONTINUED EQUIPMENT LAMP & LUMINAIRE CONVENIENCE OUTLET Freeze Proposed Adjustment Fecilit Size & T e ~Char e Chsrche Amount Percent LAMP & LUMINAIRE

~M6raur V r 100 watt-open $ 74.94 $ 74.94 $ 0.00 p.p 700 watt-enclosed $ 176.12 $ 176.12 $ 0.00 0.0%

Incandescent 2500 lumen-open $ 64.14 $ 64.14 $ 0.00 p.p 2500 lumen. enclosed $ 83.07 $ 83.07 $ 0.00 0.0%

4000 lumen-open $ 79.65 $ 79.65 $ 0.00 0.0%

4000 lumen-enclosed $ 85.71 $ 85.7'I $ 0.00 p.p 6000 lumen-enclosed $ 92.32 $ 92.32 $ 0.00 P 0%

10000 lumen-enclosed $ 140.07 $ 140.07 $ 0.00 p.p Fluorescent underpass-1 lamp $ 144.91 $ 144.91 $ 0.00 0.0%

underpass-1 lamp, 24 hr $ 181.95 $ 181.95 $ 0.00 0.0%

underpass-2 lamp $ 190.81 $ 190.81 $ 0.00 0.0%

CONVENIENCE OUTLET old $ 4.75 $ 4.75 $ 0.00 P P%

Energy Rate per KWH $ 0.06907 $ 0.10378 $ 0.03471 50.3%

Confidenttal Settlement Document

Appendix D Page 37 of 43 N)AGARA MOHAWKPOWER CORPORATlON Contract Ughting-Customer Contributory Comparison of Annual Facility Prices Freeze Prices and PowerChoice Freeze Proposed Ad/ustment Faciht Size 8i T e ~Char e ~Char e Amount Percent LAMPS

~Me ss Vs ss 100W $ 30.62 $ 5.29 ($ 25.33) 82 175W $ 26.40 $ 5.17 21.23) 80.4%

400W $ 30.93 $ 5.96 {$24.97) -80.7%

1000W $ 38.83 $ 8.89 ($ 29.94) 77 1%

Hi h Pressure Sodiuin 70W $ 33.43 $ 6.30 ($ 27.13) 81 2%

100W $ 39.96 $ 6.33 ($ 33.63) -84.2%

150W $ 43.35 $ 6.55 ($ 36.80) -84 9%

250W sa4.84 $ 6.61 i$ 38.23) 85 3 400W $ 45.49 $ 6.62 ($ 38.87) 85 4%

1000W $ 85.11 $ 12.90 ($ 72.21) -84.8%

LUMINAIRES Standard 70W $ 15.03 $ 15.03 $ 0.00 p.p 100W $ 15.21 $ 15.21 $ 0.00 p.p 150W/175W $ 15.36 $ 15.36 $ 0.00 0.0%

250/400W $ 17.46 $ 17A6 $ 0.00 0.0%

1000W $ 46.13 $ 46.1 3 $ 0.00 0.0%

~Ud s 70W/100W $ 23.55 $ 23.55 $ 0.00 0.0%

1 50W/175W $ 20.76 $ 20.76 $ 0.00 0.0%

Architectural 100W $ 19.89 $ 19.89 $ 0.00 0.0%

150W/175W $ 18.49 $ 18A9 $ 0.00 0.0%

400W $ 22.62 $ 22.62 $ 0.00 0.0%

Decorative armory square 100W $ 38.43 $ 38.43 $ 0.00 p.p edgewater 100W $ 34.33 $ 34.33 $ 0.00 P 0%

edgewater 150W $ 34.21 $ 34.21 $ 0.00 P P%

central park 100W $ 32.65 $ 32.65 $ 0.00 p.p central park 175W $ 29.61 $ 29.61 $ 0.00 0.0%

mariner 100W $ 73.99 $ 73.99 $ 0.00 00%

Rood 250W $ 18.10 $ 18.10 $ 0.00 p.p appw $ 18.45 $ 18.45 $ 0.00 00%

Energy Rate per KWH $ 0.06907 $ 0.10378 $ 0.03471 50.3%

Confidential Sea/einenr Document

Appendix D Page 38 of 43 NIAGARA MOHAWKPOWER CORPORATION Contract Lighting-Customer Contributory Comparison of Annual Facility Prices Freeze Prices and PowerChoice Freeze Proposed Adjustment Facili Size 8i T e Ch~rche ~Char e Amount Percent POLES Underoround Service-Standard Steel 16'nd under $ 26.02 $ 26.02 $ 0.00 Oe0%

16'nd under, embedded $ 34.97, S34.97 $ 0.00 0.0%

over $ 53.50 $ 53.50 $ 0.00 0.0%

16'luml um over $ 54.82 $ 54.82 Sp.pp p.p 16'ver 16', heavy duty $ 55.68 $ 55.68 $ 0.00 p.p over 16', square $ 124.72 $ 124.72 $ 0.00 0 0%

~Ree l ss 16'nd under $ 16.53 $ 16.53 $ 0.00 0.0%

16'nd under, embedded $ 25.59 $ 25.59 $ 0.00 P P%

over $ 41.54 $ 41.54 $ 0.00 p.p 16'nder round Service-Decorative Aluminum 16'nd under armory square $ 103.59 $ 103.59 $ 0.00 0.0%

Cast Iron 16'nd under armory square $ 103.59 $ 103.59 $ 0.00 p.p

~Rue le 16'nd under presidential $ 39.22 $ 39.22 Sp.pp 0.0%

presidential, embedded $ 45.68 $ 45.68 $ 0.00 0.0%

FOUNDATIONS Concrete for poles: 16'nd under $ 58.41 $ 58.41 $ 0.00 p.p over $ 66.91 $ 66.91 $ 0.00 0.0%

16'eavy duty 16'ver

$ 73e44 $ 73.44 $ 0.00 p.p

~ee ew-t all applications $ 32.51 $ 32.51 $ 0.00 0 P%

Confidential Settlement Document

Appendix D Page 39 of 43 NIAGARA MOHAWK POWER CORPORATION Contract Lighting-Customer Contributory Comparison of Annual Facility Prices Freeze Prices and PowerChoice Freeze Proposed Adjustment Fscilit Size & T e ~Char e ~Char e Amount Percent CIRCUITS Standard Under round Service cable and conduit $ 25.21 $ 25.21 $ 0.00 0.0%

cable only $ 5.64 $ 5.64 $ 0.00 0 0%

direct buried cable $ 20.43 $ 20e43 SO.OP 0.0%

Residential Under round Service direct buried cable $ 4.08 $ 4.08 $ 0.00 0.0%

Excess Foots e Both Cate pries cable and conduit $ 0.51 $ 0.51 $ 0.00 O.po/o cable only $ 0.11 $ 0.1 1 $ 0.00 p.p direct buried cable $ 0.41 $ 0.41 $ 0.00 0.0%

MISCELLANEOUS 24 Hour Service-Additional Char e

~Me r Ve or 100W $ 9.27 $ 9.27 $ 0.00 0.0%

175W $ 9.08 $ 9.08 "

$ 0.00 0 P%

Hi h Pressure Sodium 70W $ 10.63 $ 10.63 $ 0.00 p.p 100W $ 10.57 $ 10.57 $ 0.00 0.0%

150W $ 10.62 $ 10.62 $ 0.00 p.p Credit for Lsm s Unlit Merc reMVo 100W ($ 30.62) ($ 5.29) $ 25.33 -82.7%

175W ($ 26e40) ($ 5 17) $ 21 23 -80 4%

400W ($ 30.93) ($ 5.96) $ 24.97 -80.7%

1000W ($ 38.83) ($ 8.89) $ 29.94 -77.1%

Hi h Pressure Sodium 84.Boffo 70W ($ 33.43) ($ 6.30) $ 27.13 81 2%

100W ($ 39.96) (S 6.33) $ 33.63 84.2%

150W ($ 43.35) ($ 6.55) $ 36.80 -84 9%

250W ($ 44.84) ($ 6.61) $ 38.23 85.3%

400W ($ 45.49) ($ 6.62) $ 38.87 -85 4%

1000W -($ 85.11) ($ 12.90) $ 72.21 Convenience Outlets new metal pole r

$ 11.52 $ 11.52 $ 0.00 p.p existing metal pole $ 18.29 $ 18.29 $ 0.00 P 0%

Energy Rate per KWH $ 0.06907 $ 0.10378 $ 0.03471 50.3%

Conf) denrlal Serrlemenr Doeumenr

NIAGARAMOHAWK POWER CORPORATION PowerChoice Revenue Components Street and Hi hwa I i htin S.C. No. 3-Energy Only Present Structure'Com PowerChoice Structure

~Com onenl Revenue onenl Revenue IkWh Energy $ 438,773 Energy Services $ 438,773 $ 0.069070 Total $ 438,773 Total $ 438,773 U>

CD 0 tQ C5 CD CD O

1998 Sales ForecasL 6,352,605 kWh <<0 0

CO

'1996 Freeze Rates.

ellm~nbundloSary95(

revroc.xlslelrts

NIAGARAMOHAWK POWER CORPORATION PowerChoice Revenue Components Street and Hi hwa Li htin S.C. No. 6-Company Maint./Customer Equipment Present Structure'owerChoice Structure

~Com anent Revenue ~Com oncet Revenue Ikwh Facility $ 13,100 Facility Services $ 8,913 Energy $ 50,691 Energy Services $ 54,878 $ 0.074777 Total $ 63,791 Total $ 63,791 1998 Sales Forecast: 733,885 Rwh

't996 Freeze Rates.

dtttt.unbundleteaty95I revrot.ttbtebte

Appendix D NIAGARA MOHAWKPOWER CORPORATION Page 42 of 43 P.S.C. No. 213 Electricity, S.C No. 6 Street and Highway Lighting-Co. Maint., Cust. Equip.

Comparison of Annual Facility Prices Freeze Prices and PowerChoice Freeze Proposed Adjustment Faciiit Size & T e Char<he Chsrche Amount Percent LAMP MAINTENANCE MercuneMVa i 100W $ 11.27 $ 6.81 ($ 4.46) 39.6%

175W $ 11.01 $ 6.42 ($ 4.59) 41 7%

250W $ 11.63 $ 7.02 ($ 4.61) 39.6%

400W $ 11.63 $ 7.02 ($ 4.61) 39.6%

1000W $ 17.53 $ 9.27 ($ 8.26) 47 1%

Hi h Pressure Sodium 70W $ 13.11 $ 7.31 ($ 5.80) -44.2%

100W $ 13.09 $ 7.35 ($ 5.74) -43.9%

150W $ 13.10 $ 7.51 ($ 5.59) 42.7%

250W $ 13.48 $ 7.59 ($ 5.89) -43.7%

400W $ 13.64 $ 7.59 ($ 6.05) -44.4%

1000W $ 23.67 $ 12.73 ($ 10.94) 46.2%

CONTINUOUS ILLUMINATION-ADDITIONALLAMP MAINTENANCECHARGE

~MBPCU V 100W $ 10.36 $ 5.82 ($ 4.54) 43.8%

175W $ 10.17 $ 5.48 ($ 4.69) -46 1%

Hi h Pressure Sodium 70W $ 11.72 $ 6.02 ($ 5.70) 48.6%

100W $ 11.66 $ 6.05 ($ 5.61) 48.1%

150W $1 1.71 $ 6.21 ($ 5.50) -47.0%

CREDIT FOR LAMPS UNLIT Me ule¹VB 100W ($ 1 1.27) ($ 6.81) $ 4.46 39.6%

175W ($ 11.01) ($ 6.42) $ 4.59 41.7%

250W ($ 11.63) ($ 7.02) $ 4.61 39.6%

400W ($ 1 1.63) ($ 7.02) $ 4.61 39.6%

1000W ($ 17.53) ($ 9.27) $ 8.26 47 1%

Hi h Pressure Sodium 70W ($ 13.1 1) ($ 7.31) $ 5.80 44.2%

100W ($ 13.09) ($ 7.35) $ 5.74 43.9%

150W ($ 13.10) ($ 7.51) $ 5.59 -42.7%

250W ($ 13.48) ($ 7.59) $ 5.89 43.7%

400W ($ 13.64) ($ 7.59) $ 6.05 -44.4%

1000W ($ 23.67) ($ 12.73) $ 10.94 46.2%

Energy Rate per KWH $ 0.06907 $ 0.07478 $ 0.00571 Confidenttal Settlement Document

NIAGARAMOHAWKPOWER CORPORATION Revenue Components 'owerChoice S.C. No.4 Present Structure'owerChoice Structure

~Com oneni evenue ~Com onent Revenue ISi nal ace Signal Face/Energy $ 1,926,478 Signal Face/Energy Services $ 1,926,478 $ 3.76 Total $ 1,926,478 Total $ 1,926,478 1998 Sales Forecast: 25,618,077 kWh 512,362 Signal Faces U>

OI U lO 'l3

'1996 Freeze Rates CD CD Cp) .

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APPENDIX E BALANCES OF DEFERRED DEBITS AND CREDITS NOT YET REFLECTED IN RATES

0 L5II235GABhJ}IOZKQYIU'QKElUOM5HMX19it RegllJkf~ssClSJNSLRCaM)119lg3 Milt(ties KoxeeastaUa3hcemhet31M2~ujingturnoscs Revised 09-Oct-97 Pu Deferred for Regulatory oses 12/96 Balance Allocated to Electric 1997 Chan e Balance I Est. Electric 12/97 To be Recovered Deferred Debits Not in Rates 141.10 049 NM2 AFUDC Deferred for CWIP 239,880,022 239,880,022 239,880,022 141.10 151 NUG Action Plan Implementation Costs 44,981,724 44,981,724 6,220,000 51,201,724 246.00 063 Pension Expense Deferred - Electric 11,101,282 11,101,282 1,800,000 12,901,282 141.10 184 Storm Restoration Costs Deferred 8,726,000 8,726,000 8,726,000 141.10 187 BFA Line of Credit Fees - Electric 3,199,133 3,199,133 (1,299,000) 1,900,133 141.10 191 NYS Sales Tax Audit Assessment('88-'92) 7,566,520 7,433,785 (2,649,400) 4,784,385 141.10 179 Dunkirk Property Taxes Deferred 1,237,698 1,237,698 1,237,698 246.00 006 Purchase of Emission Credits 48,750 48,750 48,750 141.10 165 Waste Disposal Fees Deferred-NM2 48,252 48,252 48,252 141.10 115 Human Resource Plan Separation Allowance 37,482 32,564 32,564 141.10 117 Interest on IRS Audit Assessment - 1986 (292 470) (255 180) (255 180) 316 534 393 316 434 030 4 071 600 A 320 505 630 Lesahmomts~uslyMpmsuQMtfetL09 246.00 063 Pension Expense Deferred - Electric 1,161,195 141.10 184 Storm Restoration Costs Deferred 8,726,000 141.10 191 N YS Sales Tax Audit Assessment('88-'92) 5,382,075 141.10 187 BFA Line of Credit Fees - Electric 602,397 141.10 179 Dunkirk Property Taxes Deferred 1,237,698 00 006 Purchase of Emission Credits 48,750

.10 115 Human Resource Plan Separation Allowance 3,405 141.10 117 Interest on IRS Audit Assessment - 1986 (48 053) 17,113,467 Net deferred debits A-B 303 392 163 246.00 025 NM2 AFUDC Deferred for CWIP 239,880,022 239,880,022 239,880,022 145.35 SIR Overcollection 6,033,455 6,033,455 16,914,000 22,947,455 246.00 036 Accrued Unbilled Revenue - Electric 11,129,074 11,129,074 11,129,074 246.00 103 MERIT Overcollection 12,144,882 10,592,712 10,592,712 246.00 104 IBM Customer Service Settlement Agreement 7,500,000 6,375,000 6,375,000 246.00 099 Electric Customer Service Penalty 4,222,000 4,222,000 4,222,000 242.05 111 NYS GRT Audit Refund(1987-1990) 6,435,434 5,616,434 (3,648,631) 1,967,803 246.00 042 Pension Settlement Gain Deferred 19,268,578 16,443,804 (5,896,000) 10,547,804 246.00 071 Audit Refund (1983%4) 'RS 973,733 827,673 827,673 246.00 048 NM2 Contractor Litigation 18,090 18,090 18,090 246.00 059 NM2 Construction Spare Parts Deferred 1 687 1 687 1 687 C 308 509 320 Net deferred credits over debits A 0C ~5 11715$

'he Company recognizes there is a tax benefit associated with the amortization of this item, which is not reflected on this schedule.

APPENDIX F GENERAL STRUCTURE OF FINANCIALSWAPS AND SWAPTION

APPENDIX F GENERAL STRUCTURE OF FINANCIALSWAPS AND SWAPTIONS F.1 GENERAL STRUCTURE OF FINANCIALSWAPS Financial Swaps are contracts that require RegCo to pay generators the difference between the contract price and the applicable locational based marginal price (LBMP). More specifically, for each month of each year of the contract term, RegCo will pay generator n:

Net Payment = S, ((P;P,,)*Q,}+ FP - GS (Equation 1.0) where:

P volumetric component of contract price P ~

spot market price (LBMP) for power in hour I at each generator bus Q contract quantity for each hour I I hours per month FP fixed charge paid by RegCo to reflect non-volumetric portion of the Contract price GS market price of payments made by ISO/Power Exchange or RegCo for other generation services The volumetric contract price is the negotiated price between RegCo and each generator and may include environmentally effluent cost changes. The spot price is the hourly wholesale market locational spot price (LBMP) for each of the generators. A proxy market price will be used until the ISO is formed and an LBMP is available. The contract quantity is the hourly amount of energy (kWh) on which the contract is based. For each financial swap an hourly profile (kWh) will be forecast for the contract term. The fixed cost charge is a monthly fixed payment to the generator(s) designed to cover the fixed and unavoidable costs.

The market price of payments made by the RegCo for non-energy generation services include payments for capacity, ancillary services, and other generator services that are reflected in customer prices (all of the non-energy generation services will be referred to as "other generation services" in the remainder of this document).'his adjustment for other generation services reflects the possible existence of separate supply markets for capacity and ancillary services and

'he other generation services include: installed capacity, operating reserves, frequency control, blackstart capability, and voltage support.

separate payments to generators for these other services. These other generation services may be included as uplift in the spot prices charged to customers in the wholesale market. The other generation services are currently provided as part of the generation costs included in retail prices. In general, generators with financial contracts will have the ISO's cost of these other generation services subtracted from their contract payments with quantities not to exceed contracted amounts and prices determined by the market.

F.2 GENERAL STRUCTURE OF FINANCIALSWAPTIONS The swaption contract concept will equal the financial swap described above if RegCo exercises its call option in each hour for exactly the forecasted contract quantity. However, the swaption structure allows RegCo additional flexibilitynot to calI the option in periods of the year where the market price is lower than the variable contract price, resulting in lower prices for customers. The option provides RegCo the flexibilityto shift some contract quantity between hours to adjust to shifts in the hourly demand for electricity.

Swaption quantities for individual generators shall not exceed pre-determined annual limits based on aggregate generator output for RegCo's retail load.

Additionally, these aggregate quantities along with RegCo's other physical and financial power supply hedges may not exceed RegCo's net energy for load requirements in any hour. RegCo must provide swaption quantity notification to generators at the same time as the generators must submit day-ahead forward bids to the ISO.

Page F-2

APPENDIXG CREDIT WORTHINESS EVALUATION

APPENDIX G CREDIT WORTHINESS EVALUATION Establishment of Credit Limit. Niagara Mohawk establishes credit limits for Gas Suppliers (marketers) who act as supply aggregators and customers to whom the Company makes sale of gas for resale by applying on a consistent non-discriminatory basis the same financial evaluation standard. The Company will establish credit limits for ESCos by applying the same consistent financial evaluation standard in determining credit worthiness. Credit limits are reviewed continually. If an entity is assigned a credit limit that is not sufficient to meet the requirements, these requirements may be met by providing security in a form that is acceptable to Niagara Mohawk.

A summary of the criteria and action steps initiated in applying the financial evaluation are as follows:

1. Customer Credit Profile. General credit information is developed based on information from a Commercial Credit Reporting/Rating Organization, Securities and Exchange Commission, customer's audited financial statements and other recognized companies that provide financial information and forecasts. The profile focuses on the following areas:

~ The nature of the business and product.

~ What is the business enterprise and who owns the company?

~ What is the company's history based on trade reports?

~ How many years has the customer been in business?

~ What do you know about the management's integrity?

~ Are bank loans secured unsecured, or secured by current assets?

~ What is the firms'ayment history with Niagara Mohawk?

~ Does the company own their own facilities?

~ Ask the Niagara Mohawk salesperson assigned to the account about the company.

2. Ba I e e e ces. Banking references provided and authorizedby the customer. When references are further checked the following questions are asked of the bank officer handing the account.

~ How long has the bank had the account?

~ Does the company have outstanding loans?

~ What is the highest accommodation the bank would allow?

~ Do you consider the customer a good risk?

~ Does the customer keep loan terms?

~ Are bank loans secured, unsecured, or secured by current assets?

3. Financial information. Financial data is used to analyze a firm's past performance and assess its current financial standing. Financial ratios are used to summarize the data and compare the firm's performance with standard practices. These financial ratios and other indicators are:

~ Liquidity Ratios

~ Current Ratio (measure cash reservoir current assets/current liabilities).

~ Quick Ratio (company's current liabilities are covered by its most current liquid asset; cash, equivalents and trade receivables/current liabilities).

~ Working Capital

~ Positive (check average of past three years).

~ Negative (if negative, check to see if company has strong internal cash-generating capabilities and/or access to ready financing).

~ Debt Ratio

~ Debt Equity (a way to express leverage in terms of the company's debt-equity ratio; long-term debt/equity).

~ Profitability Ratio

~ Sales to total assets (shows how hard the firm's assets are being used; sales/average total assets)..

~ Percent of return on net worth compared to industry standards.

~ Net Worth

~ Check for intangibles (goodwill).

~ Review the increases/decreases in retained earnings for the past three years.

4. Bill Pa me t Performance

~ Review the number of experiences and the terms kept.

~ Highest credit granted and the payment performance over the past 12 months.

~ Check with major trade vendors, if necessary.

~ Number of returned checks.

5. ~PP'*Piti . P dtt d << t dt tt, actions that could impact the firm's financial health.

It 5 t, d td

~ Require customer to provide copy of Court Order of Dismissal if claims satisfied.

~ Check for any indication of bankruptcy filings by parent/subsidiary.

~ Investigate announced takeovers, buyout mergers, and acquisitions.

6. Determine C edit Limit. If no other major negative credit indicators are present, the credit line is derived by taking the smaller of:

~ 4% to 6% of net worth (review retained earnings performance)

~ 10% to 12% of working capital (based on most current audited report).

When checking working capital look at nature of the business. The company may have capacity to generate funds to pay bills promptly.

7. Decrease or Shut Off the Credit Limi . The following indicators may result in a customer's credit limit shutoff or downgraded:

~ Company's credit rating is downgraded by credit reporting agency.

~ Significant decrease in reported earnings and equity position is weakened.

~ Authenticated reports that the company is experiencing serious'ash flow and other financial problems.

~ Reports of liens, attachments or other legal actions that may impair the company's financial health.

~ Bill payment problems with Niagara Mohawk.

8. Increase or Return Securi . The following indicators may result in an increase in the unsecured credit limit and/or return of financial security:

~ The company has been profitable for the last two years and has reinvested profits in the business.

~ Strong improvements in the earning performance.

~ Long-term debt is steadily being reduced.

~ Improved financing arrangements that allows for financial flexibility.

~ Improved credit rating by commercial rating agencies.

In reaching a credit decision regarding granting unsecured credit, the firm's past financial performance and its current financial standing weighs more heavily than other information and credit indicators. If this information is not available and other information is insufficient to determine the credit worthiness of a firm, security is required to collateralize the credit limit.

APPENDIX H LIST OF FACILITIES THAT ARE POTENTIAL CANDIDATES FOR SALE, LEASE OR SALE LEASEBACK TRANSACTIONS

f L~OC E ON 7000 0 E LILCCINNEEIN Common charges to be distributed 7 BOOK VALUE 28,696,488 7001 DEWEY/KENSINGTON COMMON 7002 DEWEY AVE. BLDG. 1 7003 "DEWEY AVE BLDGS. 2,3,6,7" 7004 "DEWEY AVE. BLDGS. 4,5" 7005 KENSINGTON COMPLEX 7101 BUFFALO ELECTRIC BLDG. 13,332,604 7102 AM%ERST C.F. 353,945 7103 SENECA C.F. 539,098 7104 TONAWANDAC.F. 257,117 7105 NIAGARAFALLS S.C. 2,422,366 7106 JAMES ST. RIGGERS BLDG CF 2,068,279 7108 NEWPANE C.P. 33,593 7109 N. AMHERST S.C. 7110 ERIE COUNTY FAIR BLDG 7401 ALBIONC.F. 931,935 7402 E. AVON C.F. 2,809,329 7403 BATAVIAS.C. 5,057,151 7404 MEDINAC.F. 760,254 7405 LEROY C.F.

7702 ANGOLAC.F. 1,161,631 7704 ELLICOTIVILLEC.F. 29,006 7705 FRANIU.GRILLEC.F. 138,373 7706 FREDONIA C.F. 3,715,623 7708 OLEAN C.F. 2,898,650 7709 STOW C.F. 904,141 7710 SHEEGvG&l STOREHOUSE 3,563 8000 Common charges to be distributed 50,008,377 8001 SOC COMMON GRDS.

8002 SOC BLDG. A 8003 SOC BLDG. B 8004 SOC BLDG. C 8005 SOC BLDG. D 8007 SOC BLDG. F 8008 SOC GUARD STATION 8050 Common charges to be distributed 11,181,060 8051 HCB METER 8c TEST BLDG.

8052 HCB BLDG 2 STORES A CF 8053 HCB FACILITYMAINT.BLDG 8054 HCB BLDG. 4 TSD FACILITY 8055 HCB TSD OFFICE TIVJLERS CONFIDENTIALSETTLEMENT DOCUMENT - page 1

8056 HCB METER &; TEST 'IRAILER 8058 HCB COMMON GROUNDS 8076 EMERSON AVE. C.F. 2,816,424 8103 INVESTMENT RECOVERY 6,221,729 8105 BREWERTON C.F. 464,071 8106 CAZENOVIAC.F. 219,951 8107 CORTLAND C.F. 812,535 8109 FULTON C.F. 449,762 8110 FULTON ST. 1,305,389 8112 HIAWATHABLVD. C.F. 28,081 8113 HINSDALE C.F. 755,190 8114 OSWEGO FIRE SCHOOL 2,195,392 8115 OSWEGO C.F. 751,906 8116 PULASKI C.F. 1,991,173 8117 RADISSON C.F. 934,467 8120 TOWPATH I C.F. 1,976,681 8121 TOWPATH II C.F.

8122 TOWPATH III C.F.

8123 TULLYC.F. 621,595 8124 VOLNEY C.F. 1,647,101 8125 JAMES A. O'EILL 10,146,571 8401 CAMDEN C.F.

8402 CAMPION RD. S.C. 8,317,820 8404 HEMQMER S.C. 328,771 8405 ILLIONC.F. 22,958 8406 OLD FORGE C.F. 307,039 8408 ONEIDA C.F. 462,592 8410 TRENTON FALLS C.F. 169,274 8411 W. ROME S.C. 2,889,301 8412 HARBOR POINT C.F. 273,868 8413 HARBOR PT REMEDIATIONFAC 8415 S. WASHINGTON ST HERKIMER 8416 KINGSLEYAVE. S.C.

8701 CLAYTONC.F. 2,142,371 8704 W. CARTHAGE C.F. 831,384 8705 LOWVILLES.C. 331,482 8706 WATERTOWN hVdN AVE. C.F. 4,029,565 8707 MALONE S.C. 624,459 8708 MILLSTREET C.F.

8710 OGDENSBURG S.C. 399,061 8711 POTSDAM C.F. 3,871,959 8712 SARANAC LAKE S.C. 694,171 8713 S. WATERTOWN S.C. 5,651,048 CONFIDENTIALSETTLEMENT DOCUMENT - page 2

8716 MPJKI'. BLDG. WTOWN C.F.* incl in 8706 8717 ENGINE ST. STORAGE AREA 9000 Common charges to be distributed 19,714,544 9001 N. ALBANYCOMMON AREA 9002 N. ALBANYBLDG. 2 9005 N. ALBANYVERSAIRE 01 9006 N. ALBANYTRI-AIRD 2-1 9007 N. ALBANYBLDG. 5 9009 N. ALBANYBLDG. 2-3 9010 N. ALBANYBLDG. 2-4 9103 GLENMONT C.F. 873,878 9104 HUDSON S.C. 1,724,666 9105 OAKWOOD AVE. TROY CZ. 2,771,851 9106 SMITH AVE. C.F. 1,574,788 9107 RENSSELAER'IHI:RD AVE C.F.

9109 SCHENECTADY BROADWAYC.F. 1,837,749 9111 CLIFTON PARK 6,325,438 9113 SENECA STREET C.F. 662,759 9115 EASTERN REG. CTRL. CTR.

9402 AMSTERDAMC.F. 791,955 9410 GLENS FALLS MOHICANST CF 2,721,336 9411 GLOVERSVILLEC.F. 2,029,812 9413 SARATOGA EXCELSIOR AVE CF 1,021,174 9420 NORTH CREEK C.F.

CONFIDENTIALSETTLEMENT DOCUMEYI' page 3

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