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

IAAAIHAWKOlVePOECeSettlement DocumentVolume1-Agreement NiagaraMohawkPowerCorporation PSCCaseNos.94-K-009S and94-K-0099 RevisedMarch19,199S98073f0005 98072fPDRADOCK05000220PPDR'

TNIASARAUMOHAWKNIAGARAMOHAWKPOWERCO1lPORATloN/SOO ERIE80UIEVAROV/EST,

SYRACUSE, NY.l3202fTELEPHONE (315)474.15'IlOctober10,1997Hon.JohnC.Crary,Secretary NYSDepartment ofPublicServiceThreeEmpireStatePlaza19thFloorAlbany,NewYork12223Re:NiagaraMohawkPowerCorporation Casos9+E4098etal.DearSecretary Crary;EnciosodforfilingwiththeCommission, pursuantto16NYCRRQ3.5(f)and3.9,areanoriginalandtwenty-five copesoftheSfipulabon andAgreement settingforththesettlement oftheseproceedlngL NiagaraMohawkisfilingthisSettlement withtheexpectation andunderstanding thatDepartment ofPubRcServiceCommission staff,Muipleintervenors andotherswillsignit,Wewillprovidesignature pagesastheybecomeavailable, Iaskthatyoukindlyacknowledge receiptandfilingoftheenclosures bydate-stamping theenclosedcopyofthisletterandreturning itinthepostag~id envelopeprovidedforyourconvenience.

Asbackground tothisfiling,theCompanynotesthatovertwoyearsago,byitsOctober1995PowelChoice

proposal, NiagaraMohawkbecamethefirstenergycompanyintheStateofNewYorktoproposeacomprehensive restructuring ofitselectricbusiness.

However,becauseoftheneedtoaddressgrowingandcrippling paymentstoindependent PowerProducers whoseoutputtheCompanywasrequiredtopurchaseatgovernment-mandated pricesinexcessofmarketprices,progressonPowerChoice wasdelayed.WiththisSettlement, itisnowtimetofinalizeandlmplemenl PowerChoice.

TheSettlement istheresultofintensive andlengthynegotiations amongnumerouspartieshavingmanydiffering perspectives onindustryrestructuring.

lthasbeenreachedafterextensive

analysis, negotiation, andgiv~take, andtheCompanyisofferingitwiththefollowing fivegoalsinmind:Stabilize theCompany's financial condition throughconsummation oftheMasterRestructuring Agreement withtheSettlingIndependent PowerProducers

('SIPPs").

Provideforthecontinued development ofacompetitive electricgeneration marketthroughauctionofalltheCompany's fossilandhydrogenerating plantstothirdparties.Promotejobsandeconomicdevelopment inCentralNewYorkbyreducingindustrial ratessubstantially andbyproviding choiceforsuchcustomers immediately.

gS1755Wp5.1 win

~Reducepricesandintroduce customerchoiceandcompetition forallothercustomers overthenextthreeyears,vvhllelmprovino customerservice,~Maintainandimprovetheeffectiveness ofessential environmental andotherpublicpolicyprograms.

TheSettlement furtherrequiresthattheCompany's stockholders absorbasIpnlficant portionofitsstrandedcostsoverthenextfiveyears,butaffordstheCompanytheopportunity tocollecttheremaining strandedcoststhroughacompeNive transition chargeandexitfees.lnshort,theCompanybelievesthattheSeNetnant balancestheneedsofallstakeholders and,therefore, shouldbeapproved.

YoyPauJ.Kacc:Hon.WilliamBoutelllar AllPartiesonAttachedServiceLIst~YQ~D

NIAGARAMOHAWKPOWERCORPORATION PSCCASENOS,94-E-0098 94-E-0099 PhaseIIActivePartListSDetofPublicServiceHon.JeflrcyStockholm

¹S054Hon.JaclynBrillingHon.JudithA.LeeThreeEmpireStatePlazaOAH-SwanSt.Albany,NY12223-1350 PH:(518)474-8400FX:(518)473-3263SitheEneriesInc.¹S055Mr.GanyBrown25EagleSt.Albany,NY12207-1901 PH:(518)4624101FX:(518)462-4256Mr.RobertE.Fernandez, Esq.SitheEnergies, Inc.¹S056450Lexington Ave37thFlNewYork,NY10017:(212)450-9049:(212)450-9055PublicUtilitLawPro'ecs¹S062Mr.GeraldNorlander 90StateSt.Suite601Albany,NY12207-2717 PH:(518)449-3375FX:(518)449-1769NYSDetofLaw¹R15Mr.RichardW.Golden120BroadwayNewYork,NY10271PH:(212)416-8340FX:(212)416-6003NYSDetofPublicService¹S059Mr.FrancisHerbertThreeEmpireStatePlazaOAF-6thFl.Albany,NY12223-1350 PH:(518)474A508FX:(518)486-7254NYSConsumerProtection BoardMr.JamesF.Warden¹R165EmpireStatePlazaSuite2101Albany,NY12223-1556 PH:(518)474-5015FX:(518)473-7482NationalPowerLendersForumMr.JohnDax¹R22Cohen,Dax&Koenig90StateSt.Suite1030Albany,NY 12207PH:(518)432-1002FX:(518)432-1028RtailouncilofNewYork¹R22Mr.PaulC.RappCohen,Dax&Koenig90StateSt.Suite1030Albany,NY12207PH:(518)432-1002FX:(518)432-1028MultileIntervenors

¹R07Ms.BarbaraS.BrennerMr.RobertM.LoughneyMr.AlgirdF.WhiteCouch,White,Brenner,Howard&Fcigenbaum P.O.Box22222540BroadwayAlbany,NY12201PH:(518)4264600FX:(518)426-0376NYDefPublicService¹R06Ms.Elizabeth H.Liebschutz Ms.JaneC.AssafThreeEmpireStatePlazaOGC18thFl.Albany,NY12223-1350 PH:(518)486-1895FX:(518)486-5710NYS

DeartmentofEconomicMs.GloriaKavanahOneCommercePlazaAlbany,

NY 12245PH:(518)4744102FX:(518)473-8347NYSitizenilitBord¹S060146Washington AvcAlbany,NY12210PH:(518)4264282FX:(518)432-6178Executive AenciesoftheUnitedStates¹R18Mr.RobertA.GantonDepartment oftheArmyRegulatory LawOffice901N.StuartStSuite713Arlington, VA22203-1837 PH:(703)696-1645FX:(703)696-2960NewYorkPowerAuthorit¹R23Mr.EricJ.SchmalerMs.MariaZazzera1633Broadway, 22ndFlNewYork,NY10019PH:(212)468-6138FX:(212)468-6272IndeendentPowerProducers ofNYInc.¹R04Mr.AaronL.Breidenbaugh 291HudsonAveAlbany,NY 12210PH:(518)436-3749FX:(518)436-0369ENRONCaital&TradeResources

¹S066HowardA.Fromer130Washington Ave.Albany,NY 12210PH:(518)427-0531FX:(518)427-0734NacaggLaaelbl.wpdPageIOcaober9,l997

NIAGARAMOHAWKPOWERCORPORATION PCCASENOS.94-F009894-F0099PhaseIIActivePartListaceEnerProect/NRD(Dialseparately)

Mr.FredZalcmanMollieLampiMr.DavidWooleyPaceUniversity SchoolofLaw78NorthBroadwayWhitePlains,NY10603PH:(914)4224386or:PH:(518)472-1762FX:(914)4224180or:FX:518)472-1544NaturalResources DefenseCouncilMs.Kathcrinc Kennedy¹R14AshokGupta40W20thStNewYork,NY10011PH:(212)7274463FX:(212)727-1773SitheEneies¹S026.CraigIndykeadandLaniado5EagleStAlbany,NY12207-1901 PH:(518)465-9313FX:(518)465-9315Adirondack HdroDeve.CoJohnM.Forester.

Esq.¹S05839HudsonFallsRd.S.GlensFalls,NY12803PH:(518)747-0930FX:(518)747-2409NorthAmericanEnerIncJ.BradfordMorris¹S0678850WestRoute20P.O.Box100Westfield, NY14787-0100 PH:(716)326-4977FX:(716)3264970CoenEnerTechnoloMeanRacine¹S068RobertL.Daileadcr, Jr.,Esq.Nixon,Hargrave, DevanskDoyleSuite700OneThomasCircle,NWWashington, DC20006PH:(202)457-5318FX:(202)457-5355ValerieS.J.Paul¹S081Nixon,Hargrave, DevansRDoyleOneKeyCorpPlaza~Albany,NY12207PH:(518)427-2650FX:(518)427-2666Mean-Racine Associates Inc.¹R03PeterL.Hubbard,Esq.Menter,Rudin2Trivelpiece, P.C.500S.SalinaStSuite500Syracuse, NY13202-3300 PH:(315)474-7541FX:(315)474P040CentralHudsonGas&Electric~CorPS070RobertJ.GlasserGouldkWilkieOneChaseManhattan PlazaNewYork,NY10005-1401 PH:(212)344-5680FX:(212)809-6890NYSEG¹R24Ms.AmyDavisHuber,Lawrence, Abell605ThirdAve.NewYork,NY10158PH:(212)682-6200FX:(212)661-5759or5792NewYorkStateElectric&GasMr.ErnestWalker¹S069Ms.CathyHughto-Delzer 4500VestalParkwayEastBinghamton, NY13903gkk(607)762-7484FX:(607)762-8645rAmericanRef-FuelComan¹S082GlennJ.Berger,Esq.Skadden,Arps,Slate,MeagherkFlom1440NewYorkAveNWWashington, DC20005-2111 PH:(202)371-7920FX:(202)393-5760CitofFulton&Osweo¹R09PaulV.Nolan,Esq5515North17thStArlington, VA22205PH:(703)534-5509FX:(703)538-5257Kamine/Besico

¹S083JackYoskowitz KellyDrye8hWarren101ParkAveNewYork,NY10178PH:(212)808-7800FX:(212)808-7897CoastalGasMarketinComanEmireStatePielineANRPielineCpman¹S084ArthurB.Cohn,Esq.CullenandDykman177MontagueStBrooklyn, NY11201-3611 PH:(718)855-9000FX:(718)855Q282MunicialElectricUtilities

¹S085JeffreyC.GenzerDuncan,Weinberg, Miller4Pembroke1615MStNWSuite800Washington, DC20037PH:(202)467-6370FX:(202)467-6379NMacs~1lsl.wpd Page2Oeseber9,1997

NIAGARAMOHAWKPOWERCORPORATION PSCCASENOS.94-E-0098 94-E-0099 PhaseIIActivePartListillamette Industries PS096MichaelC.DottenAndrewF.BehrendHeller,Ehrman,White&,McAuliffe 200SWMarketSTSuite1750Portland, OR97201PH:(503)227-7400FX:(503)241-0950CitofWatertown QS091FrancesFrancisSpiegel&McDiannid 1350NewYorkAveNW Washington, DC20005A798 PH:(202)8794000FX:(202)393-2866ElectricPowerAssociation PS072LynnChurch1401HStNWSuite760Washington, DC20005PH:(202)789-7200:(202)789-7201LonsdaleEnerPS077BohdanBuchynsky 633W.FiQhStSuite2800LosAngeles,CA90071PH:(213)892-1302FX:(213)892-1332LG&EPowerAS073AnneM.Gleason-Roche

Director, ProjectFinanceLGkEPowerInc.12500FairLakesCircle,Suite350Fairfax,VA22033-3804 PH:(703)968-7200FX:(703)968-5458AmericanAssoc.OfRetiredDouglasH.WardWard,Sommer8hMoore122SouthSwanSt.Albany,NY12210:(518)472-1776J.'518)472-1774IndeckEnrServicesIncPS075SteveDowdy1130LakeCookRdSuite300BuffaloGrove,IL60089PH:(708)520-3212FX:(708)520-9883HudsonRiverPowerTransmission WendyJoRabinowitz, PEPS076TheHudsonRiverPowerTransmission Company455NewKarnerRdAlbany,NY12205PH:(518)456-7712FX:(518)456-8451Consolidated EdisonPS078JohnD.McMahonAsst.GeneralCounsel4IrvingPlaceRoom1815SNcwYork,NY10003PH:(212)460-6330FX:(212)677-5850ReducedEnerSecialists Inc.BruceN.J.Hotz,VPPR117095E.MarketStWarren,OH44484PH:(216)526-9086(Clevcl)FX:(330)856-1806(Warren)CNGProducinComanHS087CNGTransmission CorMichaelWhiteman, csq.PaulC.Rapp,Esq.WhitemanOsterman2HannaOneCommercePlazaAlbany,NY12260PH:(518)487-7600FX:(518)487-7777CNGTransmission CorpHenxyE.Brown,Esp.DrewKovalak,Esq.CNGTransmission Corp445WestMainStClarksburg, WV26302-2450 CoastalCoorationPS088J.GordonPennington 2000MSt.NWSuite300Washington, DC20036PH:(202)331-4615FX:(202)331-4617UtilitWorkersUnionofAmericaSethGoldstein PS074Local1-2386ParkAveS.Suite401NewYork,NY10016-8846 PH:(212)532-7110FX:(212)684-3987CitofNewYorkOS095 DetofBusinessServicesScottButler110WilliamSt2ndFlNewYork,NY10038PH:(212)618-8940FX:(212)618-8898NYPAIndustrial IntervenrPR12DavidM.Kleppinger McNees,Wallace2Nurick100PineStHarrisburg, PA17108-1166 PH:(717)232-8000FX:(717)237-5300NewYorkStateAssemblPS039CarolTaylorNcwYorkStateAssemblyProgramDevelopment GroupRoom547CapitolAlbany,NY 12248PH:(518)455-4386FX:(518)455-5573Mr.GeorgeH.Dali,Jr.37Livingston StWarsaw,NY14569PH:(716)786-2015FX:(716)426-8088NMocs~lhl.wpd Page3Ocuhcr9,1997

NIAGARAMOHAWKPOWERCORPORATION PSCCASENOS.94-E-0098 94-E-0099 PhaseIIActivePartListorTwnofMlnPS045LillianAndersonDuffyAttorneyatLaw55WestMainStMalone,NY12953PH:(518)483-6171FX:(518)481-5003IBEWSS047CharlesT.Conine,Pres.713ErieBlvdWestSyracuse, NY13204PH(315)476-9797FX:(315)4784070WheeledElectricPowero.AlS048T.BrendanWhalen304RitaDrNSyracuseNY13212PH(315)458-3229FX(315)458-6699O'rienCharlesLindbergh Blvd.Suite207Uniondale, NY11553PH:(516)390-7600FX:(516)390-7628MercerComaniesInc.PS097F.MichaelTucker330BroadwayAlbany,NY12207PH(518)434-1311FX(518)434-6157TheCitofCohoesNS071PeterHenner,Esq.P.O.Box326Clarksville, NY12041-0326 PH:(518)768-8332FX:(518)768-8235NiaaraMohawkPowerCoTimShechanPR10Adams,Dayter&,ShcehanorthPearlSt.any,NY12207PH:(518)463-3388FX:(518)463-3440NMocs'yhascllsl.wpd Page4OeIober9,1997StevenAgrcstaPR01Swidlcr&,Berlin3000KSt.NWSuite300Washington DC20007-3841 PH:(202)424-7501FX:(202)424-7692USGcneratin ComanIIS098DanielDuBois111Washington AveSuite701Albany,NY12210PH:(518)432-8725FX:(518)432-0587SecialCounseltotheSettlinIMPSSS099MerrillL.Kramer,Esq.Akin,Gump,Strauss,HauertRFeld,LLP1333NewHampshire AveSuite400Washington DC20036PH:(202)8874000FX:(202)8874288StrateicPowerManaementIncMr.DanielP.DuthiePS00751Greenwich AvcGoshen,NY10924PH:(516)922-6548FX:(516)922-2705Northeast Utilities PS081AndrewGansbergNixon,Hargrave, Devans&,DoyleLLPOneKeyCorpPlazaSuite900Albany,NY 12207PH:(518)427-2650FX:(518)427-2666Rochester Gas&ElectricRichardN.GeorgePS006Nixon,Hargrave, Devans8hDoyleLLPP.O.Box1051Rochester, NY14603-1051 PH:(716)263-1000FX:(716)263-1600AmericanRiversInc.PS002MargaretBowman,Esq.1025VermontAveNWSuite720Washington, DC20005PH:(202)547-6900FX:(202)347-9240LocalReulatoCounseltotheSettlinIPPSPS026SamM.LaniadoReadandLaniado25EagleStAlbany,NY12207-1901 PH:(518)465-9313FX:(518)465-9315TownofBethlehem NYPS003MelvinH.Osterman, Esq.D.ScottBassinson, Esq.WhitemanOsterman&,HannaOneCommercePlazaAlbany,NY12260PH:(518)487-7600FX:(518)487-7777AaEnerServicesInc,NS004UsherFogelRoland,Fogel,Koblenz4CarrLLP1ColumbiaPlaceAlbany,NY12207PH:(518)434-8112FX:(518)434-3232TelerJointVenturePS005TheresaAtkins20Corporate WoodsAlbany,NY12211PH:(518)462-1882FX:(518)463-9937

NIAGARAMOHAWKPOWERCORPORATION PSCCASENOS.94-E-009S 94-E-0099 PhaseIIFinerLakesNYCha terofNECA Inc.PS008JanS.KublickMcMahon,Kublick,McGintyR,Smith,P.C.500S.SalinaSt.Syracuse, NY13202PH:(315)424-1105FX:(315)424-3793NYSCommuniActinAssocSueMontgomery CoreyAS001754FourthAveTroy,NY12182PH:(518)238-1955FX:(518)238-1839TheECubedComanfortheNationalAssociation ofEnerServicesComaniesandtheJointortersinS.BrownPS092201West70thStSuite41ENewYork,NY10023PH:(212)724-1528FX:(212)721-2556GlennCamusCNGEnergyServicesCorpOneParkRidgeCenterP.O.Box15746Pittsburgh, Pa.15244(412)4944222DianGrueneich Grueneich ResourceAdvocates 582MarketSt.Suite407SanFrancisco, CA94104(415)834-2300MaryJaneRudermanTanneryIslandPowerCo30N.MainStCarthage, NY13619PH:(315)493-1472FX:(315)ClJohnSullivanCityAttorneyMuncipalBldg.141S.FirstStFulton,NY13069PH:FX:TimJ.Lawrie1610Woodstead CourtTheWoodlands, TX77380PH:(281)362-9966FX:(281)364-7325NYSSenateCommittee onEner&Telecommunications CarolE.CoyneLegislative OQiceBldg.Room307Albany,NY12247PH:(518)455-3131FX:(518)455-3123NMocs~natwpd Page5Ocacbcr9,l997

NIAGARAMOHAWKPOWERCORPORATION POWERCHOICE SETTLEMENT AGREEMENT TableofContentsPacae1.0BACKGROUND

.2.0RATEPLAN.2.1Introduction/Summary 42.2TermandEffective DateofRates2.3MasterRestructuring Agreement (MRA)2.3.1PrudenceoftheMRA.2.3.2Reasonable Opportunity toRecoverCosts.......2.3.3RecoveryofCostsAssociated withTermination ofRelatedGasTransportation andPeakShavingAgreements

..2.3.4SIPPCostRecovery..56662.4OverallRateandRevenueLevels2.4.1AveragePrices2.4.1.1YearsOneThroughThree.2.4.1.2PriceCapforYearsFourandFive..772.4.2RevenuesandFinancial Forecast..2.4.3RateAdjustment Mechanisms

..24.4GrossReceiptsTax(GRT)Reform.2.4.5Securitization 8810102.5StrandedCostRecovery..102.6Deferrals

..2.6.1CostCategories EligibleforDeferrals

.............

2.6.2NewYorkPowerAuthority Transmission AccessCharge(NTAC)Deferral.2.6.3TaxRefunds/Payments

.2.6.4Additional IPPContractTermination orRestructuring

.111112 2.6.5Disposition ofExistingCostDeferrals NotYetReflected inRates..122.6.5.1Generally

..2.6.5.2SiteInvestigation andRemediation Program..12122.7SFASNo.71Applicability 142.8RateFilingforPeriodAfterTermofThisAgreement

3.0 NIAGARAMOHAWKGENERATION

153.1Introduction andSummary153.1.1Generation OwnedbyNiagaraMohawk..3.1.2Generation Purchased fromIPPs15163.2GuidingPrinciples forFossil/Hydro Generation Auction..163.2.1Agreement toDivestFossil/Hydro Generation

..3.2.2Non-Nuclear Generation SaleIncentive.......

3.2.3LaborIssuesAssociated withDivestiture......

1619203.2.3.1LaborContractIssues.3.2.3.2Retraining andSeverance Costs20213.24UnhedgedEnergyandtheCTCforFossil/Hydro Assets213.3GuidingPrinciples forNuclearAssets..223.3.1StudytoDetermine FutureDisposition...........

3.3.2RecoveryofStrandedCosts3.3.3CostTreatment ifaNuclearPlantisSold,Transferred orDivested3.3.4CostTreatment intheEventofaPlantRetirement

.222223233.4DesignPrinciples forTransition Contracts withGenerators

.3.4.1DesignFeaturesCommontoAllGenerators

.......25253.4.1.1Transition ContractOverview..3.4.1.2PrimaryDesignComponents 25253.4.2NMPCFossilandHydroGeneration Transition Contract(s) 26 3.4.3NuclearGeneration Transition Contracts

~..,...3.4.4SettlingIndependent PowerProducers (SIPPs)..28293.5OtherIndependent PowerProducers (IPPs)304.0ELECTRICPRICES324.1OverviewofBundledandUnbundled Prices324.1.1BundledPrices324.1.1.1Residential andCommercial ClassPriceLevels.........

4.1.1.2Industrial andLargeCommercial PriceLevels....

33344.1.2Methodology forArrivingatBundledPrices..354.1.2.1Calculation of"Base"1997RatesBeforeDecreases....

4.1.2.2Application ofPercentage Decreases forSC1,2,834.1.2.3Calculation ofSC-3ARates............

3536374.1.3Relationship toDairyleaPilot..4.1.4PlannedReductions Associated withGrossReceiptsTaxReform..4.1.5Potential Securitization Savings3738384.2CTCandMarketPriceHedging384.2.1Overview...4.2.2GeneralCalculation andApplication

.........

4.2.3Commodity Adjustment Charge~4.2.4Significance ofHedgedandUnhedgedEnergy.4.2.5CTCOptionsandMarketPriceForecast38383939404.2.5.1ForS.C.No.3AandS.C.No.4(>2IVIW)Customers

..4.2.5.2ForS.C.Nos.1,2,83Customers.....

40424.2.6Adjustments totheCTCinYearsFourandFive4.2.7AlcanandSithe/Independence 42434.3Surcharge andReconciliation Mechanisms 43 4.3.14.3.24.3.34.3.44.3.54.3.6Surcharge Mechanisms ThatWillBeAbolished

.GrossReceiptsTaxSurcharge

..NYPAHydropower BenefitReconciliation

......SystemBenefitsChargeDeferrals

.RecoveryofGeneration SaleIncentive 4344444445454.4Unbundled ServicesandPrices...474.4.14.4.24.4.34.4.4Unbundled EnergyCommodity ChargeUnbundled Transmission ChargesUnbundled Distribution Charges..PriceCapPlanforTransmission andDistribution Services474848494.4.4.1T8DRateIncreases 4.4.4.2CTCOffsetstoIncreased T&DPrices4.4.4.3PriceCapforYears4and5..4949494.4.54.4.64.4.7Availability ofUnbundled PricesforInformational Pui'poses Relationship toGeneration Separation

.........

CustomerServiceBackoutCredit..5050504.5Residential PricingDesigns504.5.1ServiceClassification No.1-StandardResidential Rate.504.5.1.1FlatRateStructure...

4.5.1.2Phased-in Rebalancing ofCustomerandEnergyCharge.4.5.1.3Phased-in DiscountfromInitialPriceLevels5050514.5.24.5.34.5.4ServiceClassification Nos.1Band1C-Residential Time-of-Use Rates.ServiceClassification No.1H-OptionalResidential Rate~.CTC5152524.6Commercial PricingDesigns524.6.1ServiceClassification Nos.2ND-SmallGeneralServiceRates52 4.6.1.1FlatRate.4.6.1.2Phased-in Rebalancing ofCustomer-and EnergyCharges.....4.6.1.3Phased-in DiscountfromInitialPriceLevels52524.6.2ServiceClassification No.2D-SmallGeneralServiceRates534.6.2.1Phased-in Rebalancing ofCustomerandEnergyCharges4.6.2.2Phased-in DiscountfromInitialPriceLevels53534.6.3CTC..544.7LargeGeneralService(S.C.Nos.3,3A,4and5)PricingDesigns544.7.1S.C.No.3(LargeGeneralService<2MW)andSmallerS.C.No.4Customers

(<2MW)~.........

4.7.1.1RateDesign~..4.7.1.2InitialPriceLevels4.7.1.3CTC545454554.7.2S.C.No.3A(LargeGeneralService,Mandatory Time-of-Use,HighDemand)andLargeS.C.No.4Customers

(>2MW)4.7.2.1RateDesign...4.7.2.2InitialPriceLevels4.7.2.3Rebalancing ofDemandCharges4.7.2.4CTC55555556564.7.3S.C.No.5(Combination 258,60CyclePower)....

4.7.4Projected Industrial Prices56564.8Customers withS.C.No.11Contracts andEconomicDevelopment Programs4.9OptionalTariffsfornon-Residential Customers

......57584.10Customers SellingPowertoNiagaraMohawkUnderS.C.No.6584.11ExitFeeforCustomers whoBypasstheCompany's DeliveryServiceandCustomers TakingServiceUnderS.C.No.7(Sale, Backup,Maintenance andSupplemental EnergyandCapacitytoCustomers withOn-SiteGeneration Facilities)...........

4.11.1Rationale

...4.11.2Applicability 4.11.3ExitFee....4.11.4S.C.No.7...59595960624.11.4.1ExistingCustomers

....4.11.4.2NewSubscribers andExistingS.C.No.7Customers Following Divestiture oftheCompany's FossilandHydroAssets.....

4.12EconomicDevelopment ZoneRider(EDZR)4.13PricingDesignsforServiceClassifications UnderPSCNo.214-Electricity

....4.14Application ofUnbundled PricestoNYPAAllocations 4.15AnnualTariffFilings...4.16RateFlexibility

.4.16.1General..4.16.2OptionalRatesandServices.4.17Miscellaneous TariffAmendments 626263646467676768684.17.1Aggregation ofDemandandCustomerCharges4.17.2LowVoltageBypass...

5.0CUSTOMERSERVICEBACKOUTCREDIT6868695.1GrossRevenueExposure5.2DesignPrinciples 5.3Relationship toaGenericProceeding

6.0 CUSTOMERSERVICEINCENTIVE

696970716.1CustomerServicePerformance

.6.1.1PSCComplaint Rate71 6.26.1.2Corporate Residential Transaction Satisfaction Index6.1.3LowIncomeAssistance Program...

~Statement ofIntent7172726.36.4ServiceReliability Incentive 6.3.1SystemInterruption Frequency (SIF).6.3.2CustomerInterruption Duration(CID)6.3.3PowerQuality~Accounting Mechanism 72727373737.0SYSTEMBENEFITSCHARGEPROGRAMS747.17.2SystemBenefitsCharge7.1.1ProgramsandFundingLevels7.1.2State-Wide ThirdPartyAdministrator

.7.1.3LowIncomeCustomerAssistance Program(LICAP)...

Miscellaneous 74747575758.0RETAILACCESS818.1Conditions Necessary ForRetailAccess8.1.1ProperMetering....8.1.2BillingandSettlement Procedures Consistent withMarket8181818.2RetailAccessTimetable 828.38.2.1Farm8FoodProcessor Pilot.8.2.2Group18.2.3Group28.2.4Group38.2.5Group48.2.6Group58.2.7Customers WithSpecialContracts...

8.2.8Monitoring ProgressThroughTime....8.2.9Contingencies..........

RetailAccessSettlement Method..~.82838383848484848585 8.3.1Forecasting andScheduling Requirements 8.3.2MeteringRequirements

..8.3.3ServicesNotCoveredbytheSettlement System..8.3.4Nondiscriminatory Treatment ofCustomers......

8.3.5AuditingoftheSettlement Function..87878888888.4Reciprocity Assurances

.899.0CORPORATE STRUCTURE ANDAFFILIATE RULES929.1ProposedCorporate Structure 929.2RulesGoverning Affiliate Transactions...

939.2.1Organization 939.2.1.1Separation andLocation9.2.1.2BoardofDirectors Membership andFiduciary Duty....9.2.1.3CostAllocation

....9393949.2.2TransferofNon-Generation Assets.9.2.3TransferofServices...

9.2.4SpecialServices9.2.5HumanResources

....949495969.2.5.1Separation ofEmployees andOfficers..9.2.5.2EmployeeTransfers

~...9.2.5.3EmployeeLoansinanEmergency.....

9.2.5.4Compensation forTransfers..........

9.2.5.5EmployeeCompensation andBenefits9.2.5.6LegalRepresentation...

9697979798989.2.6Maintaining Financial Integrity

~...9.2.7AccesstoBooks,RecordsandReports9.2.8Reporting

.9899999.3Standards ofCompetitive Conduct999.3.1UseofCorporate NameandRoyalties........

9.3.2SalesLeads....9.3.3CustomerInquiries...

9.3.4NoAdvantage GainedbyDealingwithAffiliate

.9.3.5NoRateDiscrimination 99100100100100 9.49.3.6FERCJurisdiction.

~9.3.7CustomerInformation

..9.3.8OtherInformation

..9.3.9Complaint Procedures

...Miscellaneous

.1011011011011029.59.4.1Applicability ofSettlement Standards ofConduct.....9.4.2AnnualMeeting9.4.3TrainingandCertification 9.4.4Telergy..MergersandAcquisitions 9.5.1RecoveryofPremium..9.5.2Relationship toDivestiture

....9.5.3Applicability ofthisAgreement PostMerger..9.54Expedited Review10210210210310310310310310310.0SUPPLIEROFLASTRESORTOBLIGATION ANDIMPLEMENTATION...

10410.110.2Obligation toServeImplementation 10.2.1EnergyServiceProviders, Marketers andBrokers10.2.2CustomerOperations Procedures 10.2.3CreditandCollection Matters...

10410410410610810.2.3.1CustomerCreditworthiness 10.2.3.2ESCoCreditworthiness Evaluation 10810910.2.4Termination Decisions

~..10.2.5CostRecovery..11.0REGULATORY CHANGESANDAPPROVALS 11011111211.1Elimination ofCertainRegulatory Requirements 11.1.1Regulatory Reporting Requirements

....11.1.2Treatment ofFutureRefunds...

11211211211.2Regulatory Approvals 11.2.1Commercialization ofProductsandTechnologies 113 Developed asaResultofResearchandDevelopment 11311.2.2PSLSections69and70ApprovaloftheSale,LeasingorFinancing ofBuildingFacilities..........

11311.2.3Conversion of25CycleCustomers

...11512.0LOWINCOMECUSTOMERASSISTANCE PROGRAM(LICAP)..12.1Eligibility Criteria.12.2ProgramDescription 12.3ProgramFunding13.0MISCELLANEOUS 11611611611711813.1ForceMajeure13.2Commission Authority

..13.3Provisions NotSeparable:

EffectofCommission Modification 13.4Provisions NotPrecedent

.13.5DisputeResolution 13.6Withdrawal fromLitigation 13.7Constriction ofTerms13.8SteamHostIssues14.0TERMOFTHISAGREEMENT 118118118119119119119120121 SECTION1.0BACKGROUND InFebruaryof1994,NiagaraMohawkfiledacomprehensive five-year rateproposal, whichopeneddocket94-E-0098.

Following extensive publicstatement andevidentiary

hearings, theproposalwassplitintotwo"phases"forbriefinganddecisionbytheCommission.

TheCommission decidedthefirstphase,setting1995rates,inanApril21,1995"shortorder"andinOpinion95-21.'he multi-year partoftherecordwasneverpresented totheCommission.

Rather,intheApril21Order,theCommission urgedthepartiestoattempttonegotiate acomprehensive long-term solutiontoNiagaraMohawk'sescalating costs.TheCommission orderedtheparties,amongotherthings,"toaddress[theCompany's 1996-1999) ratelevels,NiagaraMohawk'sfinancial

security, theprotection ofcustomerservicequality,andregulatory changesreflecting increased competition....

[and]improvethecompany's competitive

position, withoutanti-competitive effects,byaddressing theexcessive generation costburden."TheCommission alsodirectedthepartiestodevelopamulti-year plan"consistent withpoliciesbeingdeveloped inconnection withthereviewofcompetitive opportunities inCase94-E-0952."

TheCompanyansweredtheCommission's callforacomprehensive solutionandmulti-year planbyfilingitsPowerChoice proposalonOctober6,1995,whichfollowedinformational sessionsamongallpartiesheldJune-September 1995.PowerChoice proposedanelectricity pricefreezeformostcustomerclassesandreductions forothersfortheperiod1996-2000; financial concessions bytheCompanyandtheIPPsinproportion totheircontribution tostrandable costsinordertofinancethepricefreeze;creationofcompetitive wholesale generation marketintheCompany's serviceterritory throughtheformation ofanIndependent SystemOperator(ISO)anddivestiture ofallofNiagaraMohawk'sgeneration, including itsnuclearunits;andintroduction ofcustomerchoiceforallclassesoverathree-year period.InexchangefortheCompany's willingness toundertake theseinitiatives, NiagaraMohawkaskedthattheStatehelpiniaawwe,Cases94-E-0098 and94-E-0099, etal.,OrderSettingElectric, ElectricStreetLightingandGasRates(April21,1995),andOpinionandOrderConcerning RevenueRequirement andRateDesign(December 29,1995.)'IntheMtterofCetitive0rtunitieReardintricSeie,Cases94-E-0952,

~eta.(alsoknownasthe"Competitive Opportunities Proceeding.").

¹11810hVP8.1 Page1

reducingthecostsofabovemarketIPPcontracts; forassurance ofareasonable opportunity torecoverstrandable costsremaining afterconcessions byNiagaraMohawkandtheIPPs;andforpermission toformaholdingcompanywhoseunregulated subsidiaries wouldhaveafairopportunity tocompeteinthenewmarket.Intheninemonthsfollowing thefilingofPowerChoice, theCompanyengagedinextensive negotiations anddiscussions withallparties.Duringthistime,proceedings wereongoingintheCompetitive Opportunities Proceeding.

Thereafter, inOpinion96-12,0inionndOrderReardinComtitive0ortunities forElectricService(issuedMay20,1996),theCommission expressed its"visionforthefutureoftheelectricindustryinlightofcompetitive opportunities

.~.,"andaddedthatutilities andIPPs"...arestronglyencouraged topursueagreements thatreduceratestobenefitratepayers.

Ifpartiesareunwilling, however,torestructure thosecontracts voluntarily, theCommission shallpursuepoliciestomitigatetheimpactofsuchcontracts onrates."TheCommission furtherdirectedtheIPPs"tomoveforwardaggressively inappropriate forumstoseeksolutions suchasabuyoutofcontracts orrenegotiations ofthemsoastoalignthemmorecloselywithacompetitive framework."

Opinion96-12wentontorequireeachutilitytofilearate/restructuring plan"consistent withourpolicyandvisionforincreased competition" byOctober1,1996.NiagaraMohawkwasspecifically excludedfromthatfilingrequirement becauseithadpreviously fileditsPowerChoice plan.ByJune1996,ithadbecomeclearthatnofurtherprogressinNiagaraMohawk'sPowerChoice negotiations couldbemadeuntiltheCompanycouldputforwardadefinitive rateplan,andadefinitive rateplanwouldrequireacomprehensive settlement withtheIPPs.TheCompanysuspended PowerChoice negotiations andfocusedonnegotiations withtheIPPs.OnJuly9,1997,after16monthsofarduousandcontentious negotiations againstthebackdropofmanyyearsofcourtandadministrative litigation andtheveryrealprospectofyearsoffuturelitigation, theCompanyexecutedtheMasterRestructuring Agreement,

("MRA")with29IPPsrepresented by16developers whocollectively represent morethan80%oftheCompany's above-market IPPcosts.TheseIPPs(the"Settling IPPs",or"SIPPs")agreedtorestructure, amendorreplacetheircurrentIPPcontracts inexchangefor:o$3.6billioninnewlyissueddebtorcash;o46millionsharesofcommonstock(slightly lessthan25%oftheCompany's equity);and¹11810/WP6.1 Page2

oaportfolio ofcertainfinancial orphysicaldeliverycontracts.

OnJuly23,1997,theCompanyfiledarevisedsettlement offerforPowerChoice.

Twomonthsofintensive negotiations

followed, withtheCompany,Staffandseveralintervenors reachinganAgreement inPrinciple onSeptember 25,1997.Morethansixtypartieshaveintervened inthisproceeding, withalmost30partiesparticipating activelyinthesettlement negotiations.

UnliketheotherNewYorkelectricutilityrestructuring proceedings, theCompany,Staffandotherpartiesnegotiated withoutwaiveroftheCommission's Settlement regulations.

Administrative LawJudgeStockholm hasmediatedthenegotiations throughout, withJudgesLeeandBrillingjoininghimsincetheCompany's July23,1997Settlement Offerfiling,TheSettlement Agreement (alsotheAgreement orSettlement) thatfollows,liketheMRAuponwhichitrests,resolvesmanycomplexandseemingly insoluble issuesandistheproductofmuchhardbargaining amongthemany,normally-adversarial partiestothisproceeding.

Thesignatories tothisSettlement Agreement stronglyrecommend itsswiftapproval.

011810/WPB.1 Page3

SECTION2.0RATEPLAN

2.1INTRODUCTION

ANDSUMMARYPriceleveltargetsandpricedesignsaredescribed inSection4.0.ThisSectiondescribes theRatePlan,including thedateonwhichtheAgreement becomeseffective, thetreatment ofcostsduringthetermoftheAgreement, andthemechanisms foradjusting pricesovertime.RatePlanforYearsOnethroughThree.DuringyearsonethroughthreeoftheAgreement, priceshavebeensetatthetargetslistedinTable4-1and4-2.Duringthefirstthreeyears,pricesmayonlybeadjustedforalimitednumberofsurcharges whichcouldraiseorlowerprices.Thesesurcharges includetheNewYorkPowerAuthority (NYPA)Hydropower Creditdescribed inSection2.4.3,asurcharge toaccountforvariations fromforecasted costsintheeventanuclearpowerplantisretired(described inSection2.5and3.3.4)andanincreaseinspendinglevelsfortheSystemBenefitsCharge(iforderedbytheCommission, asdescribed inSection2.4.3).However,duringthefirstthreeyears,certaincostsorsavingscanbedeferredforrecoveryorrefundbeginning inyearsfourandfiveoftheAgreement.

Theitemsthatcanbedeferredarelimitedandaredescribed inSection2.6.RatePlanforYearsFourandFive.ForyearsfourandfiveoftheAgreement,

'heCompanycanfileforarateincrease, butthatincreasemustbecappedat1%forallelementsofratesexceptthemarketpriceoftheelectriccommodity itself,andexceptasspecified below.Thedetailsofthispricecapplanaredescribed inSection2.4.1.2.Inaddition, NiagaraMohawkcanbegintorecoverthroughasurcharge, theexpensesthatitwasallowedtodeferinthefirstthreeyearsoftheAgreement.

Surcharges applicable inyearsfourandfivearethesurcharges applicable inthefirstthreeyearsaswellasthegeneration auctionincentive surcharge whichisdescribed inSection2.4.3.Recoveryofdeferrals andthegeneration auctionincentive inyearsfourandfiveislimitedsuchthatthesesurcharges plusanyallowedrateincreaseunderthe1%pricecapcannotexceedtherateofinflation.

Thismechanism isdescribed inmoredetailinSection2.4.3.Finally,thepricecapandtheinflation capfordeferralrecoveryexcludetherecoveryorrefundofthedifference betweentheactualandforecasted costsassociated withcertainapprovedIPPIndexedContracts, whichwillbegininyearfourasdescribed inSection2.4.1.2.011810/WP6.1 Page4

StrandedCostRecovery.

Uponfulfilling certaincommitments described herein,theCompanyshallhaveareasonable opportunity torecoveritsstrandedgeneration costs,including costsassociated withitsowngeneration aswellasthecostsassociated withtheMasterRestructuring Agreement betweentheCompanyandtheSettlingIndependent Powei'roducers (SIPPs)asdescribed inSections2.3,2.5and3.0.2.2TERMANDEFFECTIVE DATEOFRATESTheCompanyproposestoimplement therateplanforaperiodoffiveyears,commencing onthePowerChoice Implementation Date.ThePowerChoice Implementation Dateisdependent uponreceiptofPublicServiceCommission approvalofthisSettlement Agreement, aswellascompletion ofotherstepssubsequent toPSCapproval, including, butnotlimitedto,obtaining variousapprovals toissuedebtandsellequity,SIPPssettlement oftheirthirdpartyobligations andnegotiation betweentheCompanyandtheSIPPsofnewcontractual arrangements.

Newtariffswillnotbecomeeffective untilthesestepsarecompleted.

TheCompanywillfileproposedtariffstoimplement thisagreement assoonasisreasonably possiblefollowing approvalofthisagreement, butinnoeventlaterthan60daysfollowing approvalofthisagreement.

TheCompany's objective istoconsummate thesestepsassoonaspossible.

Manystepsonthecriticalpathtoimplementation arepredicated onreceiving writtenPSCapproval.

Anydelaysinreceiving writtenPSCapprovalwillresultinadelayintheimplementation ofnewrates.Anydelayinthecompletion ofsubsequent stepswouldalsodelaytheeffective date.Forthepurposeofdefiningthefiveyeartermoftherateplan,thefirstrateyearbeginswiththePowerChoice Implementation Dateandeachsubsequent rateyearbeginsontheanniversary thereof.2.3MASTERRESTRUCTURING AGREEMENT (MRA)2.3.1PrudenceofMRATheMRAandthecontracts tobeexecutedpursuanttheretoarefoundtobeprudentandrecoverable totheextentprovidedherein.Thespecificdetailsofdebtandstockissuances requiredtofinancetheMRAwillbesubjecttoseparatereviewandapprovalafterfiling.011810/WP6.1 Page5

2.3.2Reasonable 0ortunitoRecoverCostsTheCompanywillhaveareasonable opportunity torecoverstrandedcostsassociated withtheMRA,including allcostsofthecontracts tobeexecutedpursuanttotheMRA(asdescribed inAppendixAandSection3.4),exceptforthereturnontheregulatory asset,throughtheCompetitive Transition Charge(CTC)or,whereapplicable, exitfees.TheCommission willconsideranyrequestforareturnontheregulatory assetpostyearfiveofthePowerChoice Settlement Agreement.

2.3.3RecoveofCostsAssociated wtTermination ofRelatedGasTransortationandPeakShavinAreementsThePartiesagreethattheCompanywillrecoveringasratescertaincostsassociated withthetermination ofgastransportation andpeakshavingagreements betweentheSIPPsandNiagaraMohawk,asdescribed inAppendixB.2.3.4SIPPCostRecoveThecostsoftheSIPPcontractrestructuring andtermination resulting fromtheMRAandassociated contracts willbedeferredandamortized overaperiodnottoexceedtenyears.Toachievethepricelevelsdescribed inTables4-1and4-2,theCompanyproposesnottosetaspecificrateofreturnontheregulatory asset,althoughitisobviousfromthefinancial forecastinAppendixCthatlittleornoreturnisforecasttobeearnedonthatassetduringthetermofthesettlement agreement.

TheCompanywillbetakingthepositionwiththeInternalRevenueServicegenerally thatthecashandcommonstockportionoftheSIPPsettlement costsarecurrently deductible, creatingaNetOperating LosscarrybackthatwouldentitletheCompanytoarefundofprioryearspaidtaxes.TherefundwouldbeusedtofundaportionofthecashneededfortheSIPPsettlement, andwouldnotbeotherwise deferredforotherratemakingpurposes.

¹11610/WP8.1 Page6

2.4OVERALLRATEANDREVENUELEVELS2.4.1A~Pi2.4.1.1YearsOneThroughThreeTheagreeduponpricesforthemajorserviceclassifications foryearsonethroughthreearesetforthinTables4-1and4-2anddescribed ingreaterdetailinSection4.0.Thestartingpointforestablishing thebundledretailpricesthatwillapplyforthedurationofthisagreement istheretailbaseratesthatbecameeffective April27,1995adjustedtocapture1995surcharges.

Pricesfordistribution andtransmission serviceswillbeincreased duringyearsonethroughthreeasdescribed inSection4.4.4,butoffsetbyanequivalent reduction intheCTCtomeettheoverallpricegoals.2.4.1.2PriceCapForYearsFourAndFivePricesinyearsfourandfivecanbeincreased byanamountnottoexceed1%oftheall-inpriceexceptthecommodity (e.g.inclusive oftransmission, distribution andforecasted CTCcharges)exceptforexclusions notedbelow.Unlessanincreaseissought,theCompanyisnotrequiredtofile.Anyrateincreases totransmission pricesapprovedbyFERCthatwouldbechargedtoretailcustomers wouldcounttowardsthepricecapincrease.

Thepricecapexcludesrecoveryofdeferrals established pursuanttotheSettlement Agreement andanygeneration saleincentive, andvariations intheMRAcontractcostsduetotheindexingprovisions oftheIPPcontracts.

TheCompanywillbeallowedtofilefordeferrals andgeneration saleincentive recoverypursuanttoSection2A.3,withoutafilingforthepricecap.Beginning inyearfour,theCompanywilladjusttheCTCquarterly forchangesintheIPPIndexedContracts throughtheCACasdescribed inSection4.2.6.TheCompanyagreestofiletheamendedorrestatedcontracts withtheCommission foritsreviewandapprovaloftheindexingprovisions.

Thecontracts shallbeapprovedasjustandreasonable iftheindexingprovisions areconsistent withthetermsandconditions foramendedandrestatedcontracts contained inExhibitAoftheMRA.Inparticular, theindexingformula,whencalculated usingtheassumptions setforthinExhibitA,Attachment A-5oftheMRA,willresultinweightedaveragecontractpricesthatdonotexceedtheweighted<<>>eiome.iPage7

averagecontractpricesthatarecontained inAttachment A-3toExhibitAtotheMRA,withsuchweightedaveragecontractpricesbeingsubjecttoadjustment ifoneormoreoftheSIPPsdonotconsummate thecontracts contemplated intheMRA.2.4.2RevenuesandFinanc'al ForecastTheCompany's projection ofthefinancial impactsoftheMRAandthissettlement agreement arepresented inAppendixC.2.4.3RateAdustmentMechanisms Theprojected pricesaresubjecttochangeonlyasspecified inthisAgreement.

Thepartieshaveagreeduponseveralspecificmechanisms thatcouldchangepricesperiodically.

Thesemechanisms includeSystemsBenefitsCharge(SBC)Asdescribed inSection7.0,theSBCwillbeusedtocollectthecostsofpublicpolicyprograms, tobeimposedonalldistribution customers exceptasotherwise providedherein.SpendingforSBC-related programswillbesetat$15millionannuallyforyearsonethroughthree.ThatlevelofspendingisincludedwithinthepricinggoalssetforthinTables4-1and4-2.Additional

spending, ifapprovedbythePSC,wouldbecollected throughasurcharge tocustomers.

NYPAResidential Hydropower CreditInaccordance withcontracts betweenNYPAandtheCompany,residential customers aretoreceivetheactualbenefitsofNYPAhydropower.

Theprocedure toreflectactualbenefitsinresidential pricesisdescribed inSection4.3.3.Generation Saleincentive Section3.2.2describes theCompany's incentive forthesaleoffossilandhydroassets.Tocollectthisincentive, theCompanywillincludeasurcharge inyearsfourandfive.Thesurcharge willbelimitedtoanamountequaltoinflation lessamountsauthorized underthepricecapsfilinganddeferralrecovery.

Unamortized amountsofincentive remaining attheendofyear5willbeamortized overaperiodnottoexceed3years.011810hNP6.1 Page8

Allcustomers whopaytheCTC,or,whereapplicable, exitfees,willpaythegeneration incentive throughasurcharge.

Customers whodonotpaytheCTCorexitfeeswillnotbeobligedtopaythegeneration incentive.

Totheextentthesalespriceoftheassetsissufficiently inexcessofbookvaluetofundsomeoralloftheincentive, theCompanywillretainthatcashandtheincentive surcharge willbereducedoreliminated (bookvalueincludesrelatedcosts,suchaspartsandfuelinventory, allocation ofcommonfacilitycosts,etc.).Totheextentthereisanetbookgain(afterauctioncostsandincentive) onthesaleoftheassets,thenetgainwillbeusedtoreducestrandedcostsforallcustomers thatpaytheCTC.Totheextentthereareunrecovered costsremaining (i.e.,strandedcosts),thesecostswillbedeferredforrecoveryinyearsixoveraperioduptotheremaining lifeoftheassetssold,asprovidedherein.RecoveryofDeferrals TheCompanywillfileforrecoveryofdeferrals fromyearsonethroughthree,beginning inyearfour.Deferrals willincludethosereferredtoherein.Theamountofamortization andrecoverywillbelimitedtoanamountequaltotherateofinflation lesstheamountallowedunderthepricecapsfilingandgeneration saleincentive recoveryifany.Therateofinflation willbethelatestBlueChipindicator forecastofGDPPIatthetimeoftheCommission decision.

Newdeferrals recordedinyearfourwillbefactoredintotheyearfivedeferralfiling.Anyremaining unamortized deferrals attheendofyearfivewillberecovered overaperiodnottoexceedfiveyearsbeginning inyearsix.Deferrals willbecollected throughappropriate ratemechanisms, depending uponthenatureofthecost,i.e.,generation-related deferrals suchaschangesinnuclearcostswillbecollected throughasurcharge toallcustomers whopayaCTC.Customers whodonotpaytheCTCorexitfeewillnotbeobligedtopayforgeneration deferrals.

Distribution-related deferrals willbecollected throughadistribution surcharge.

,Whenavailable, newdeferreddebitswillbenettedagainstnewdeferredcreditsarisingduringthetermofthissettlement agreement.

¹11810hhfP6.1 Page9

2.4.4GrossReceitsTaxGRTReformNewYorkStateenactedlegislation in1997phasingina1%reduction oftheStategrossreceiptstaxby2000.Suchreduction intheGRT,asrealized, willbepassedthroughtocustomers asdescribed inSection4.1.4.2.4.5~SFurtherratereductions couldbeachievediftheStateofNewYorkweretoauthorize "securitization" ofcertaincostsinawaythatreducestheborrowing costoftheCompany.Totheextentthatitisnototherwise prohibited byanylegislation authorizing securitization, thebenefitsofsecuritization shouldbeusedtofurtherreducepricestoSC1,2,and3customers.

TheCompanyandStaffrecommend thattheCommission considerallocating aportionofsuchsavingsforenergyefficiency andcleantechnology.

2.5STRANDEDCOSTRECOVERYNiagaraMohawkwillbeentitledtorecoverallowable strandedcoststhroughanon-bypassable Competitive Transition Charge(CTC)or,insomecircumstances, anexitfee.ThedetailsoftheCTCandtheexitfeearecontained inSection4.0.Asdescribed inSection3.0,NiagaraMohawkwillhaveareasonable opportunity torecoverstrandedcostsassociated withitsfossilandhydrounits,whichwillbequantified throughauctionanddivestiture.

NiagaraMohawkwillhaveareasonable opportunity torecoverstrandedcostsassociated withitsnucleargeneration duringthetermofthisagreement, asdescribed inSection3.0.Recoveryofstrandedcostsassociated withretirement ofanuclearunitduringthetermofthisagreement issubjecttoaseparateCommission reviewprocessdescribed inSection3.0.Asdescribed inSection2.3.2above,NiagaraMohawkwillhaveareasonable opportunity torecoverstrandedcostsassociated withtheMRA,withtheexception ofthereturnontheregulatory assetrelatedtotheMRA.Duringthetermofthisagreement, NiagaraMohawkhaslimiteditsreturnontheregulatory asset,resulting inalowprojected returnonequity,asshowninAppendixC.Theprojected forgonereturnsrepresent NiagaraMohawk'sshareofstrandedcostresponsibility duringthetermofthisagreement.

//11810/WP6.1 Page10

DEFERRALS 2.6.1CostCatepriesElilbleforDeferrals SiteInvestigation andRemediation (SIR)costsareeligiblefortrue-upanddeferral.

Inaddition, thefollowing changesinforecastcostsareeligiblefordeferral:

changesinlaws,regulations, rulesandaccounting thatcanbesubstantiated asincreasing ordecreasing thecostofdoingbusiness(inexcessof$500,000perchange),andnuclearcostsbeyondmanagement's control(including decommissioning, thePriceAndersonActcoveringnuclearaccidents, fuelstorage,disposalofwaste(exclusive ofcostincreases unrelated tochangesinlaws,regulations, etc.),significant NRCactionsandothergovernment agencymandatesandpolicyissues).Changesinregulations willincludefinancial consequences associated withafinaldecisioninCase97-E-0251.

Inaddition, somegrossrevenuelossesassociated withthecustomerservicebackoutcredit(SeeSection5.0)willbedeferred.

Anypenalties accruedundertheCustomerServiceQualityIncentive (SeeSection6.0)willbedeferredtooffsetcostdeferrals.

TheCompanywillbeentitledtopetitionfordeferralandrecoveryofanyotherincremental costsnotspecifically anticipated inthefinancial forecastandnototherwise providedforinthefirstsentenceofthissubparagraph, including incremental costsassociated withtheCompany's roleasprovideroflastresortaswellasincremental businessretention pricediscounts asdescribed inherein.2.6.2NewYorkPowerAuoriTransmission AccessChareNTACDeferralTheCompanyshallbeentitledtodeferannuallytheactualNTACcostsuptoacappedlevelreflecting thetotalof(1)theactualamountofleveraged co-funding andgrantsusedforelectrictechnologies, renewable projectsandmarketing andpromotions relatedtoenergyefficiency orotherprojectsqualifying forfundingundertheSBC,and(2)theactualamountofLowIncomeCustomerAssistance Program(LICAP)programgenerated arrearsforgiveness.

2.6.3axRefundsPaentsTheCompanyissubjecttoongoingexaminations byfederalandstatetax-authorities.

Noamountshavebeenprovidedforinthefinancial forecastforresolution, eitherresulting inarefundorliability, oftheseexaminations.

Totheextentthatrefundsorpayments, including interestandpenalties andnetofanydeferredtaxes,individually exceed$500,000,theCompanywilldefersuchrefundorpaymentfordisposition inratesassetforthinSection2.4.3.¹11810hNP6.1 Page11

2.6.4Additional IPPContractTermination orRestructurin Theremaybeadditional opportunities torestructure orterminate IPPcontracts notincludedinthecurrentMRA.Withrespecttoanysuchopportunities thatarepureIPPbuyouts,theCompanywilldefertheup-frontcostsandamortizethosecostsoverafiveyearperiodfromthedateofthebuyout.Theup-frontcostswillbeaccounted foronanaccrualbasis(including instances wherethebuyoutpaymentisstructured overanumberofyears).TheCompanywillretainthesavingsfromthebuyoutduringthefiveyearperiodofthePowerChoice settlement.

Unamortized costsandsavingsremaining attheendofyearfivewillberecovered orrefundedinsubsequent rateproceedings subjecttoprudencereview.Withrespecttorestructuring ofadditional IPPcontracts, theCompanywillsubmittotheCommission forapprovalandratetreatment eachproposedrestructuring, alongwithacalculation oftheanticipated savingsonbothanominalandNPVbasis.ThepartiesagreethattheCompanyshouldbeentitledtoashareofsavingstoprovideasameaningful incentive topursuerestructuring.

Thesharinglevel,shallbedetermined bytheCommission onacasebycasebasis.2.6.5DisositionOfExistinCostDeferrals NotYetReflected InRates2.6.5.1~Generall DeferreddebitsandcreditsexistingasofthePowerChoice Implementation Dateshallbenettedagainsteachother,andthenetbalanceshallbeadded/subtracted to/fromanydeferrals providedforherein.AppendixEsetsforththeaccountsandestimated balancestobenetted.TheCompanywilldiscontinue true-upaccounting forelectricunbilledservices.

RevenuesrecordedbytheCompanyineachyearofthissettlement agreement willreflectbothbilledandunbilledrevenuesoftheperiod.2.6.5.2.SiteIvesiaoadmda'oProraTheCompanyhasconducted aSiteInvestigation andRemediation program(SIR)thepurposeofwhichhasbeentoefficiently andeffectively manageanumberofenvironmental clean-upactivities overanextendedperiodoftime.Theprincipal activities involveinvestigation and,wherenecessary, remediation andmonitoring ofmanufactured gasplantsitesandindustrial wastesites.TheCompanyexpectstocontinuetheseactivities

¹11810/WP6.1 Page12

throughthetermofthesettlement agreement.

Underpreviouselectricandgasrateorders,theCompanyhasbeenpermitted todefercostdifferences fromamountsprovidedforinrates.Thistreatment continues undertheexistinggasratesettlement through1999.TheCompanywillapplydeferralaccounting asdescribed herein,tocostdifferences fromamountsprovidedforinthefinancial forecastpresented inAppendixCanddescribed below.TheamounttheCompanyproposestoincludeinrateshasbeenaffectedbytworecentevents.First,theCompanyenteredintoanamendedOrderonConsentwiththeNewYorkDepartment ofEnvironmental Conservation (NYDEC)onMay12,1997thatprovidesforanannual"costcap"ofapproximately

$15milliononexpenditures bytheCompanyfor52sitescoveredbytheOrder.ThecostcapisnotanabsolutelimitontheCompany's annualortotalspendingonthesesites,butrepresents anunderstanding betweentheCompanyandtheNYDECthatitisinthebestinterests ofbothpartiestoprovideforefficient management oftheinvestigation andremediation process.However,wheretheNYDECortheCompanybelievesthatpublichealthandsafetyconcernswarrantaccelerated expenditures, thecostcapwillbeexceeded.

Also,totalannualexpenditures maybeinfluenced byrequirements atsitesoverwhichtheCompanyhaslittleornocontrol(forexample,wheretheCompanyisa"potentially responsible party").Theamendedorderalsodoesnotestablish themethodofremediation, whichmayvarysite-by-site, creatinguncertainty astototalrequiredexpenditures.

TheCompanyhasalsobeenactivelypursuinginsurance recoveries forenvironmental remediation activities.

ThroughDecember31,1996,theCompanyhasreachedsettlements withanumberofinsurance

carriers, resulting inpaymentstotheCompanyof$49.8millionbeforecostsincurredinpursuingrecoveries, whichhaveamountedto$13.4million.Thenetproceedshavebeendeferredfordisposition inthissettlement agreement.

Inestablishing anannualallowance fortrue-up,theCompanyproposestoamortizetheproceeds, netofcosts,overatenyearperiod.Theresulting annualelectricnetallowance isapproximately

$10.2million.TheCompanyiscontinuing topursueadditional recoveries, andtotheextentthatadditional proceedsarereceivedbytheCompanyduringthesettlement period,thesewillbedeferred, netofcostsandwillbeusedtooffsetSIRcostsexpectedtobeincurredintheyearsbeyondthissettlement period.¹11810/WP6.1 Page13

TheCompanywillapplytheaccounting andratemaking forcertainnetgainsofproperty, thesaleoftimber,etc.onsuchlandandanyrelatedland/mining leaserevenuesassetforthinSectionIII,A.oftheGasStipulation andAgreement inCase95-G-1095 and95-G-0091.

TheCompanywillbepermitted toconformprospectively theaccounting fortheelectricallocable portionoftheproceedstotheoutcomeofanygasproceeding duringthefirstthreeyearsofthissettlement, orproposedifferent treatment aspartofapricecapsfilingforyearfour.2.7SFASNO.71APPLICABILITY TheCompanysupportsthissettlement agreement inpartbecausetheagreement isconsistent withtheprinciples ofSFASNo.71.Thepartiesagreethatduringthetermsofthissettlement, theCompanyshouldberegulated inawaythatwouldallowittocontinuetheprinciples ofSFASNo.71toitsregulated operations (RegCo).The,partiesfurtheragreethatanymaterialchangeintheallocation ofriskassetforthinthissettlement agreement, whethermadeduringtheapprovalprocessorduringthetermofthesettlement agreement, couldjeopardize theapplication ofSFASNo.71,aswellasthefinancial stabilization andrecoveryoftheCompany.ItistheintentoftheParties,andtheCommission byvirtueofitsapprovalofthisAgreement, thattheAgreement meetstheaccounting requirements ofStatement ofFinancial Accounting Standards No.71,throughout itsterm.2.8RATEFILINGFORPERIODAFTERTERMOFTHISAGREEMENT TheCompanywillbepermitted tofilearatecaseforratestobeeffective beginning immediately aftertheconclusion ofthefifthyearofthissettlement agreement.

IftheCompanyelectsnottofilearatecase,unbundled prices(exclusive ofsurcharges described herein)wouldremainunchanged.

¹11810/WP6,1 Page14

SECTION3.0NIAGARAMOHAWKGENERATION 3.1iNTRODUCTiON ANDSUMMARY3.1.1Generation OwnedbNiaaraMohawkNiagaraMohawkhasagreedtodivestallfossilandhydrogeneration asdescribed below.Untilsuchdivestiture iscompleted, thecompanywillfunctionally separateitsfossilandhydrogeneration fromitsregulated activities.

Divestiture willbeaccomplished eitherbyanauctionprocessor,ifacceptable bidsarenotreceived, bycreatingalegallyseparategeneration companyasdescribed herein.Nucleargeneration willremainpartofRegCo,butwillstayinabusinessunitfunctionally separatefromRegCo'stransmission anddistribution andgasbusinesses.

Itwillbesubjecttofurtherstudyanddisposition asdescribed inSection3.3infra.Theratetreatment ofgeneration ownedbyNiagaraMohawkisgovernedbytheprovisions oftheRatePlandescribed herein.However,forinternalaccounting

purposes, andtodefinethegeneration component ofunbundled prices,RegCowillenterintocertaintransition "contracts" withitsfossilandhydrobusinesses anditsnuclearbusinessunitgoverning quantities andpricesforfossil/hydro andnucleargeneration, respectively.

These"contracts" aredesignedtoachievetheratestowhichNiagaraMohawkiscommitted underthisagreement.

Thefossil/hydro contracts haveaninitialtermof3years,andtheCompanyhasagreedtoexploreanadditional 2yearsthroughtheauctiondesign.Thenuclear"contracts" have5yearterms,consistent withthetermofthissettlement.

Whenthefossilandhydrounitsaresoldorspuntoseparateentities, theRegCocontracts willbesoldwiththem.Inthatevent,thecontracts maygovernthepurchaseofenergybyRegCofromtheseindependently ownedgenerators fortheremainder ofthe3,or,ifextended, 5-yeartermofthecontracts'.

Afterthatpointintime,thepartiesanticipate thatthenewownersoftheformerNMPCgenerating unitswillselltheiroutputatmarket'TheContracts areintendedtobestructured asfinancial instruments allowingcustomers topurchaseenergyfromthemarketimmediately.

Page15

prices,eitherintoaspotmarketorunderbilateral contracts.

Theywillhavenoremaining contractwithorobligation toRegCoforthesaleofenergyorcapacity.

NiagaraMohawkwilldefinethetermsandconditions ofatwoyearextension inthefossil/hydro contractaspartoftheauctionplan,whichissubjecttoseparatePSCapproval.

IfthePSCdetermines thatthe2-yearextension isappropriate, thenthenetauctionproceedsandCTCwillreflecttheincremental/decremental valueofthecontractextension.

Asthegeneration transition contracts expireorareterminated, andifanuclearplantisretired,theenergysubjecttothemwillbecomeunhedged.

Themarketpricesofunhedgedenergywillbeflowedthroughdirectlytocustomers, unlessotherwise specified herein(SeeSection4.0).3.1.2Genera'oPurchased fromIPPsContracts withIPPswhoarenotpartiestotheMRAshallcontinueinforceandeffect,subjecttotheirownterms,exceptthatNiagaraMohawkshallcontinuetopursueopportunities torestructure, auction,orbuyouttheIPPcontracts.

Ratetreatment forsuchadditional restructuring orbuyoutsisdiscussed inSection2.6.4herein.Purchases ofgeneration fromIPPswhoarepartiestotheMRAwillbegovernedbytheMRAandcontracts executedpursuanttotheMRA.SomeIPPswhoaresignatories totheMRAshallhavetheircontracts terminated asaconsequence.

TheseIPPswillhavediscretion toselltheiroutputtoothers,toselltoNiagaraMohawkatmarketprices,ortoclosetheiroperations, amongotheroptions.OtherIPPswhoaresignatories totheMRAshallhavetheircontracts restatedoramendedasdescribed therein.3.2GUIDINGPRINCIPLES FORFOSSIL/HYDRO GENERATION AUCTION3.2.1AreemoDivestFoss'I/HdoGeneration

~DivstiturNiagaraMohawkwillcommittoholdabroad-based auctionofitsnon-nucleargeneration assets(theauction)andatitsdiscretion mayincludesomeIPPPowerPurchaseAgreements (inclusion oftheIPPcontracts willPage16

beconsistent withcontractual rightsorconsentoftheIPPs).Anyhydroprojectsthatarepartofanuclearlicenseandanywindandsolargeneration projectsdescribed elsewhere inthisagreement willbeexcludedfromtheauctionanddivestiture.

Aftertheauctionand/orspinofftransactions described hereinarecomplete, NiagaraMohawkanditssubsidiaries agreenottoownanygeneration assetsinNewYorkState,withtheexception ofanysale/leaseback transactions andreorganizations necessary toclosetheMRAandexceptasotherwise providedforinthisagreement.

Inthecaseofareorganization transaction pursuanttotheMRA,NMPCwilleitherleaseanyprojectfacilities acquiredinthereorganization toathirdpartyoperator, orenterintoamanagement andservicescontractwithsuchathirdpartyapprovedbythePSC,oroperatethefacilityitselfbutonlyforthepurposeofgenerating asource,orabackupsource,ofsupplyforitsownuseandnotforre-sale.Inaddition, neitherHoldConorRegCowillownanygeneration assetsinsideoroutsideofNewYork,exceptasotherwise providedforinthisagreement.

However,anyotheraffiliate ofHoldCoisnotrestricted inanywaybythisagreement fromowninggeneration assetsoutsideNewYork.BecausethePSCwillreviewmergerapplications underthePublicServiceLaw,nothinginthisagreement willlimittheCompany's abilitytomergewithorbeacquiredbyanotherentityowninggeneration.

Moreover, nothinginthisagreement willlimittheCompany's abilitytoformpartnerships oraffiliations withentitieswhoowngeneration inNewYorkState,providedthatthosepartnerships oraffiliations donotinvolveownership ofgeneration assets.Anunregulated affiliate ofHoldComayenterintoarmslengthcontracts withanentityowninggeneration inNewYorkState.Thesale/leaseback transactions, reorganizations, partnerships andaffiliations andarms-length contracts referredtoaboveareallsubjecttotherestriction thattheymustnotcreateaconflictbetweentheinterests ofRegCoratepayers andCompanystockholders bytyingtheprofitability oftheCompanytotheprofitability ofanotherentity'sgeneration business.

Anymaterialviolation'of theaboverestrictions mayresultin,interalia,anaffiliate beingprohibited fromfurthertransacting businesswithenduserswithintheRegCoserviceterritory ordivestiture oftheaffiliate,

provided, however,thattheCompanyshallbegiventheopportunity toexplainwhyaviolation hasnotoccurredandtoremedyanysuchallegedviolation inPage17

accordance withtheprocedures outlinedinSection9.3.9regarding Corporate Structure andAffiliate Transactions.

~uctionNiagaraMohawkcommitstofileadetailedauctionplanwithin30daysofthePSCOrderapproving thePowerChoice Settlement Agreement.

ThedetailedauctionplanwillundergoCommission review,withanopportunity forcommentbyotherparties,andapproval.

Winningbiddersintheauctionwillbeselectedwithin11monthsofplanapproval.

NiagaraMohawkwilluseitsbesteffortstotransfertitlewithin9monthsoftheselection ofwinningbidders,contingent onNiagaraMohawkandthebuyer(s)receiving allnecessary regulatory approvals toeffectuate thetransaction(s)

~Theauctionprocesswillincludeascreening stagetoestablish minimumstandards forqualified bidders,andoneormorebiddingstages.Theauctionfeaturesmayincludethesaleoftheportfolio initsentirety, inanycombination, orasindividual plantsorsites.(Likelysub-groupings are:(a)coalplants,(b)Albany,(c)Oswego,(d)1-3hydroplantcombinations, (e)othergeneration, and(f)anyIPPcontracts includedintheauction)~Aftercompletion ofthetransactions resulting fromtheauctionprocessasdescribed herein,nofossilorhydroassetsincludedintheauctionandreceiving positivebidswillremainpartofNiagaraMohawk.NiagaraMohawkretainstherighttorejectthefollowing typesofbidsforanyassetorgroupofassets:(1)Anbidstatarelessthnzero:.Therejectedbidwillcapthelevelofmitigated strandedcostsforassetswhosebidswererejected.

TheassetswhosebidsarerejectedwillremainpartofRegCo.(2)Bisthtertrthanzerothataredeemedtoolow:

NiagaraMohawkreservestherighttorejectanyandallbidsthatitdeemstoolow.Ifitrejectsallbidsforanassetorgroupofassets,thenitcommitstoformasubsidiary consisting oftheassetswithnon-negativebids,andspintheassetstoalegallyseparategenerating company.Thegreateroftherejectedbid(s)ortheaveragetradingvalueofthestockofthespunentityforthe30tradingdaysafterthestockispubliclytraded,willdetermine themarketvalueoftheassetsforthepurposeofmitigating strandedcosts.Nothinginthisagreement precludes theCommission fromorderinganalternative Page18

totherejectedbidapproachinitsreviewandapprovaloftheCompany's auctionplan.TotheextentthattheIPPcontracts aregroupedwithothergeneration assets,NiagaraMohawkwaivesitsrighttorejectthebidsforthatgroup.3.2.2Non-Nuclea GeneraonSaleIncentive NiagaraMohawkwillreceiveanincentive basedonthenetproceeds(grosssalespricelessauctioncosts(external thirdpartycosts))oftheauctionasanincentive toobtainthemaximumvalueinthesaleofitsgeneration assets,andtooffsetinpartthestrandedcostsbeingabsorbedbyitsshareholders aspartofthissettlement.

Theincentive willberecovered asdescribed inSection2.4.3.NiagaraMohawkwillhavetherighttousetheincentive inanymanneritseesfitsolongasitisconsistent withthisagreement.

Theincentive willnotapplytobidsrejectedasdescribed above.Theincentive willbecalculated asfollows:(a)Forallfossil/hydro assetssold,exceptfortheOswegoSteamStation,theCompanywillreceiveanincentive equaltothefollowing percentage ofnetauctionproceeds:

0%oftheproceedsbetween0and$250million12%oftheproceedsbetween$250and$500million18%oftheproceedsbetween$500and$750million10%oftheproceedsabove$750million(b)FortheOswegoSteamStation:TheCompanywillreceiveanincentive equaltothefollowing percentage ofnetauctionproceeds:

o0%oftheproceedsbetween$0and$100milliono5%oftheproceedsabove$100millionPage19

3.2.3LaborIssuesAssociated wihDivestiture 3.2.3.1LaborContractIssuesThepartiesrecognize thattheCompanyandtheIBEWLocal97,AFL-CIO,areboundbyacollective bargaining agreement effective March1,1996throughMay31,2001,whichincludesaprovision atArticleIIentitled"Territory."

ArticleIIprovidesthat:1.Theterritory coveredbythisagreement shallincludeallthefranchise territory oftheCompany.2.Thisagreement shallbindthesuccessors oftheCompanybymergerorconsolidation astotheprovisions andterritory coveredbythisagreement.

Fortheuroseoreservinandrtectinworkoortunities adobsecuritfrthebaraininunititisareedtht:Anabsoluterecondition tothesaleleasetransferortakeoverbsaletransferleaseassinmentcorortereoraniationreeivershioranktccinofhentirortionoranrttherefisthatnurhasertranseelessassineeetchallareandecomearttoandboundb allthetermsnditinndobl'tiofthiBQMUDnicreseradditional workofcotinirermaeatuordtorincn'unction witthCma'sexistinfcilitiesorfrmatransferofworkcsiondbthloinorrtiallosinofanratinreviosloveedbthisarmtsabePage20

deemedbaraininunitworkandshallbefullcoveredbthetermscnditionsandobliationsofthisareement.(a)NothinginthisSettlement Agreement addsto,subtracts from,orotherwise modifiesanyrights,duties,orobligations setforthinthatcollective bargaining agreement, exceptasotherwise indicated below.(b)TheCompanyagreestoprovideacopyofthecollective bargaining agreement toanypartythatindicates aninteresttobidinanyauctionoftheCompany's generation assets.3.2.3.2Retraining andSeverance CostsTheauctionofgeneration assetscouldhaveanimpactonCompanyemployees.

Toaddressthisprospect, upto$10millionofincremental retraining costsandseverance payment,outplacement, voluntary earlyretirement programandrelatedcosts,ifany,incurredin1999-2002 willbeprovidedforanddeferredbytheCompanyforlaterrecovery.

Theseactivities arelimitedtodirectconsequences ofthedisposition offossil/hydro generation assets,including thebumpingprocessassetforthinthecollective bargaining agreement.

Althoughthedeferralisnotdefinedinreference tospecificlevelsofmanagement orrepresented employees, itistheunderstanding ofthepartiesthatapproximately 75%oftheexistingemployees infossil/hydro generation arecoveredbythecollective bargaining agreement.

Theactualcostsincurred, uptothe$10millioncap,willbepaidforthroughareduction inthenetproceedsoftheauctionthatwilldetermine strandedcoststoberecovered.

3.2.4UnhededEerandheCTCforFoss'IH droAssets Thenetsalesproceedslesstheincentive willbeusedtoretirethecapitalstructure.

Consummation ofthesalepursuanttoanapprovedauctionwillestablish thelevelofstrandedcostrecoveryfortheassetssold.NiagaraMohawkwillbeentitledtoareasonable opportunity tocollect,intheCTC,orwhereapplicable, exitfees,allremaining strandedcostsfromthenon-nuclearassetssoldintheauction.Page21

Whenthefossil/hydro assetsaresoldorspun,andwhenRegCo'scontractwiththefossil/hydro assetsexpires,thequantityofenergythatwaspreviously purchased fromthoseassetswillbecomeunhedged.

Thecontribution totheCTCassociated withthefossil/hydro assetswillbecomeafixedamountreflecting thedifference betweenthebookcostoftheassetsandthemarketproceedsreceivedforthem(asadjusted, whenapplicable, forthegeneration auctionincentive andforretraining andseverance costs).Theriskassociated withthemarketpriceoftheunhedgedenergywillbeshiftedtocustomers exceptasotherwise providedherein.3.3GUIDINGPRINCIPLES FORNUCLEARASSETS3.3.1SudtoDetermine FuureDisositionThenuclearassetsheldbyNiagaraMohawkwillremainpartofRegCoasaseparatebusinessunituntiltheyareeithertransferred ordivested.

NiagaraMohawkwillcontinuetopursueStatewide solutions foritsnuclearassetsthroughdiscussions information ofNYNOCandinanygenericproceedings established bytheCommission.

Statewide solutions fornuclearplantswillbeexploredbeforeotherpotential solutions.

Theproposedsolutions forNiagaraMohawk'snuclearplantsarecontingent onthefollowing:

treatment ofthenuclearplantsmeetsallrequirements oftheNRC,andthereisconsistent regulatory treatment forsaleandcostrecoveryforalltheco-tenants ofNMP2.AbsentaStatewide

solution, NiagaraMohawkcommitstofileadetailedplan,analyzing theproposedsolutions foritsnuclearassets,within24monthsofthisSettlement Agreement.

Theplanwillconsiderthefeasibility ofauction,transfer, and/ordivestiture ofNiagaraMohawk'snuclearassets.Thedetailedplanwillundergoanappropriate levelofCommission reviewandapprovaltobeconcluded onanexpedited basis.3.3.2ecoveofStrandedCostsSubjecttoprice-cap considerations discussed herein,nuclearwillremainsubjecttocost-based regulation including arateofreturnforthefiveyearPage22

termofthisagreement oruntilthenuclearplantsaredivestedoranotherstatewide solutionisdeveloped.

RegCowillbeallowedannualdeferrals duringthetermofthissettlement forchangesincostsforcategories whicharebeyondmanagement's controlasdescribed inSection2.6.1.Customers willnotbeallowedtonegotiate onetimebuyoutsforallnuclearcosts.Subjecttootherprovisions inthissettlement, sunkcapitalcosts,fuelinventory, andmaterialandsuppliesinventory, andalldecommissioning andshutdowncosts(including 08Mrampdown, propertytaxesandinsurance, andfuelandlowlevelwastestorageanddisposal) areconsidered tobeunavoidable.

Totheextentthatsuchcostlevelsaredeemedprudent,theywillberecovered throughanonby-passable competitive transition charge.Accordingly, NiagaraMohawkwillbeentitledtoareasonable opportunity torecoverallnuclearsunkanddecommissioning costsallocable tothefive-year periodofthesettlement agreement (asdescribed inSections3.3.3,3.3.4and3.4.3)throughtheCTCor,whereapplicable, exitfees,duringthefive-year termofthisagreement.

Iftheassetsaredivestedwithinthetermofthisagreement, NiagaraMohawkwillbeallowedtorecoverthefulldecommissioning costsandthereturnofandonthenuclearassetslessthemarketvaluereceivedindivestiture throughtheCTCor,whereapplicable, exitfees.3.3.3CostTreantifaNucearPlantisSoldTransferedorDivestedAspartofitsplananalyzing thefeasibility ofauction,transferordivestiture ofitsnuclearplants(seeSec.3.3.1),theCompanywillproposetreatment forrecoveryofanyremaining strandedcostsconsistent withtheintentthat(a)unhedgedcommodity riskbeshiftedtocustomers, and(b)thattheCTCreflectrevisednuclearcostsfortheCompany(including recoveryofsunkcostsnetofsaleproceeds) andanyremaining costobligations thatstaywiththecompanysuchasdecommissioning costs.3.3.4CostTreatment intheEventofaPlantRetiremen IfNiagaraMohawkdecidestoretireorabandonaplantbeforeasaleorauction,thenitagreestofileaneconomicstudywiththeCommission thatjustifies thedecision.

TheCommission willreviewthestudyonanPage23

expedited basis,anddetermine theprudenceoftheretirement decisionbeforetheplantisretiredorabandoned.

IftheCompanyretiresanuclearplant,thefollowing willapply:~UntiltheCompanyannounces itsintenttoretireaplant,itwillberesponsible forreplacement powercostsasoutlinedinSec.3.4.3.~OnthedatethattheCompanyannounces thatitplanstoretiretheplant,iftheplantisnotthenoperating, theCompanywillbeginpassingthroughtocustomers (throughtheCommodity Adjustment Charge)thedifference betweenthespotmarketpriceofenergyandthenuclearplant'savoidedfuelcosts.Suchpassthrough willbeintheformoftemporary rates,subjecttorefund,asdescribed below.Onthatsamedate,thedifference betweenthelevelofnuclear08Manddecommissioning costsembeddedinratesandtheactuallevelof08Manddecommissioning costsincurredwillbedeferredonamonthlybasisforlaterrecovery.

Inanymonthinwhichsuchdeferralshowsanetcreditandthespotmarketpriceexceedstheplant'savoidedcosts,thecreditwillbeusedtooffsetthepassthrough.

Intheeventtheplantisoperating whentheCompanyannounces itsplanstoretiretheplant,thepassthrough described abovewillcommenceonthedatetheplantispermanently shutdown.~TheCompanywillprepareandfilewiththeCommission astudyassessing theeconomics ofcontinued operation versusretirement, andexplaining whyitbelievesaretirement isprudentandintheratepayers'nterests.

Thestudywillincludeaproposaltoaccountfor,deferandrecoverestimated remaining unfundeddecommissioning costs.Thecostspassedthroughtocustomers abovewillbesubjecttorefundoradjustment, pendingtheCommission's findingthattheretirement wasprudentandthatthecostimpactsarejustified.

~UponPSCapprovaloftheretirement

decision, theCTC(competitive transition charge)forthenuclearplantwillberecalculated consistent withtheintent(a)thatunhedgedcommodity riskbeshiftedtocertaincustomers, and(b)thattheCTCreflectrevisednuclearcosts(sunkcostsanddecommissioning costs(including rampdownandshutdowncosts),andreducedoperation andmaintenance costs(including fuelcostsavings).)

ThePSCapprovalwillalsoaddresstheamortization (inexcessof$500,000perchange)scheduleofanydeferralbalanceascreatedinSection2.6.1.Page24

Intheeventofanuclearplantretirement, replacement powercosts(RPC)(definedhereinasthedifference betweenthecostofcommodity purchased atmarketpricesandthecostofnuclearfuel),offsetbyanyoperations andmaintenance costreductions, shouldbeflowedthroughtoallcustomers thatpayCTCs.Itistheintentofthepartiesthatcostdeviations resulting solelyfromvariations betweenactualandforecastmarketpricesbeflowedthroughonlytocustomers withfloatingCTCs.TheRPCsforcustomers withfixedCTC'swillbedetermined basedonforecasted ratherthanactualmarketprices.Theforecastmarketpricesusedforthispurposewillbebasedontheoptionchosenbythecustomers pursuanttoSection4.2.ForecastRPCs,offsetby08Msavingsinyears1through3,forSC3Acustomers willbedeferredforrecoveryfromSC3Acustomers inyear4andbeyond,subjecttothepricecapssetforthherein.3.4TRANSITION CONTRACTS WITHGENERATORS 3.4.1DesinFeaturesCommontoAlGenerators 3.4.1.1Transition ContractOverviewThetransition contracts utilizefinancial contractstructures (financial swaps-Contracts-For-Differences (CFDs)andfinancial calloptions-swaptions) toallowthecollection ofstrandable costsforafixedtimeperiod,whilerequiring generators toparticipate inthemarket.Thefossil/hydro andnuclearcontracts operateonlyasinternalaccounting deviceswithinNiagaraMohawkuntil,suchassetsaredivested.

Detailsconcerning financial contracts, including ageneraldescription oftheprimarydesigncomponents andthegeneralstructure ofthefinancial contracts, areprovidedinAppendixFandsubsequent sectionsofthisdocument.

3.4.1.2PrimaryDesignComponents Financial contracts havethreeprimarydesigncomponents:

contractprice,contractquantity, andcontractterm.Page25

~Thecontractpricesweredeveloped usingforecasted costs.Contracts willhaveatwopartpricingdesignthatincludesafixedcostchargeandavolumetric price.Fortheswaptions, thefixedcostchargewillbecomethereservation feeinthecontract.

~Thecontractquantities havebeendeveloped primarily throughtheuseofforecasted generator outputtoserveexistingNiagaraMohawkretailloadinPromod.Generator loadsaremeteredatthegenerator busbar.~Thetermforthefinancial contracts havebeenestablished basedonthecontractprice,contractquantity, andtotalstrandable coststobecollected.

Financial contracts thathavebeennegotiated betweenRegCoandgenerators willbeginonthedatethattheexistingPowerPurchaseAgreements ofSettlingIPPsareterminated.

Thegeneralstructure offinancial swapsandswaptions isdescribed inAppendixF.3.4.2NMPCFossiladdroGeneration Transition ContractsTherewillbeseparatefinancial swaptioncontracts foreachNiagaraMohawkfossilunit.Thecontracts areestablished basedontheforecasted revenueforfossilandhydrogeneration thatfitwithinNiagaraMohawk'sretailpricecommitments.

Theforecastofenergyoutputtoserveretailloadservesasthebasisforthecontractquantityofthetransition contracts.

Tables3-1aand3-1bcontaintheaggregate annualcontractquantities andcontractpricesandrevenuesforfossilandhydro.Thecontractquantityforhydrogeneration willbeadjustedannuallytoreflectvariations inactualwaterflow.Theexpectedoutputless650GWH(i.e.,2299GWH)hasavariablepriceofzero.Theactualoutputless2299GWHispricedatthevariablepricedescribed inTable3-1b.Theforecastofwholesale salesmarginshasbeenimputedasacreditagainstthegeneration fixedpaymentinthetransition contractforeachfossilunit.Three-year transition contracts weredeveloped forNiagaraMohawkfossilandhydroassets,whichwillbeginonthePowerChoice implementation date.NiagaraMohawkwillevaluatethecost/benefit ofextending thetransition contracts fortwoadditional yearsintheauctionprocess.Page26

Thequantityavailable undertheswaptionwillbelimitedtothecapacityofgeneration assetssoldorspun(adjusted foravailability, maintenance outagesandunitminimums, responseratesandcyclinglimitations, etc.).NiagaraMohawk'sfossilandhydrogeneration andthetransmission anddistribution facilities weredesignedandconstructed asintegrated facilities withinterdependent controlandprotection functions.

NiagaraMohawkwillprepareaseparation agreement, priortoimplementation ofthecontracts, whichdescribes pointsofdemarcation andanysharedservicesagreements betweenRegCoandtheentitypurchasing generation.

Table3-1aFossilContractQuantities, ContractPrices,andRevenue19981999ContractQuantity(GWH)3,5323,562VariableContractPriceA($/MWH)$14.90$14.62AnnualFixedPayment($million)$139.6$137.8RetailRevenue'$million)$192.2$189.9TotalRevenue~($million)$291.3$282.1Willvarybyunit.Retailrevenuesarethesumof(1)contractual paymentsbyRegCotothegenerators underthecontract, and(2)revenuesreceivedbythegenerators forphysicalsalesintothespotmarketforthecontractquantities.

Totalrevenuesareretailrevenuesplusimputedwholesale marketrevenues.

Page27

Table3-1bHydroContractQuantities, ContractPrices,andRevenue199819992000ContractQuantity(GWH)2,9492,9492,949VariableContractPrice"($/MWH)$10$10$10AnnualFixedPayment($million)$62.4$58.9$60.6RetailRevenue($million)$68.9$65.4$67.1Appliesto650GWHRetailrevenuesarethesumof(1)contractual paymentsbyRegCotothegenerators underthecontract, and(2)revenuesreceivedbythegenerators forphysicalsalesintothespotmarketforthecontractquantities.

3.4.3NuclearGeneration Transition ContracsForthefiveyeartermofthisagreement NiagaraMohawkwillhaveatransition contract(financial swap)foreachofitsnuclearplantsreflecting itsforecastlevelofgoingforwardcosts.Thisforecastwillbeupdatedforyearsfourandfiveaspartoftheratefiling.NiagaraMohawkwillterminate thetransition contractifitretiresaunitduringthetermofthecontract, andtheenergyassociated withtheretiredunitwillbecomeunhedged.

AllforecastcoststooperatethenuclearunitsareincludedwithintherategoalsinTables4-1and4-2.Aftertheinitialfiveyearperiod,RegCowillmakeafilingtotheCommission forcontinued transition costrecoverytreatment forthenuclearunits.Thecontractquantities, contractprices,andrevenuesforeachunitareshownintheTables3-2aand3-2b.Page28

Table3-2aNM1ContractQuantities, ContractPrice,andRevenue1998199920002001ContractQuantity(GWH)4,5644,0274,5774,027VariableContractPrice($/Mwh)$5.46$4.79$4.71$4.73AnnualFixedPayment($1,000)$235,084$239,240$233,994$247,175Revenue($1,000)$260,003$258,529$255,552$266,223Table3-2bNM2ContractQuantities, PriceandRevenue1998199920002001ContractQuantity(GWH)3,0793,4893,0873,489VariableContractPrice($/Mwh)$4.65$4.87$4.57$4.73AnnualFixedPayment($1,000)$231,124$240,721$239,839$239,038Revenue($1,000)$245,441$257,712$253,947$255,541Note:Yeartoyearvariations areduetorefueling andscheduled outages.3.4.4SettlinIndedentPowerProducers SIPPsAdetaileddescription ofthecontracts fortheSettlingIPPsisincludedasExhibitAoftheMasterRestructuring Agreement inAppendixA.Anoutlineofthenegotiated scheduleofaggregate contractquantities, weightedaveragecontractprices,andcontracttermarecontained inTable3-3.Variations incontractcostsduetotheindexingprovisions ofthecontracts willbepassedthroughtocustomers afteryearthree,subjecttotheprovisions described herein.Theformoftheindividual Page29

contracts remaintobenegotiated betweenNiagaraMohawkandtheIPPs.Thedominanttypeofcontracts willbefinancial swapsandswaptions.

However,therewillbesomephysicalbilateral contracts betweenNiagaraMohawkandsomeoftheIPPs.Table3-3SettlingIPPContractQuantities, ContractPrice,andRevenue1998199920002001200220032004200520062007200820092010201120122013ContractQuantity(GWH)4,9934,9935,0435,0835,0897,1088,1189,1319,1399,1518,3538,353353353353353ContractPrice($/Mwh)$45.13$45.56$42.91$44.90$46.17$50.18$52.60$54.51$56.93$60.24$60.99$61.11$40.70$41.90$43.20$44.50TotalRevenue($1,000)$225,357$227,484$216,399$228,215$234,965$356,645$427,012$497,760$520,238$551,219$509,440$510,424$14,367$14,791$15,250$15,7093.5OTHERINDEPENDENT POWERPRODUCERS (IPPs)Table3Pshowsthecurrentforecastofpaymentstothe109IPPcontracts thatarenotpartofthebuyoutgroup.Thecontractquantities andpricesrepresent theforecasted amountsintheexistingPowerPurchaseAgreements (PPAs).Page30

RegCowillupdatetheleveloftransition costrecoveryforapproximately 109IPPPPAsintheratefilingadjusting forratesinyearsfourandfiveofthisAgreement consistent withSection2.6.4ofthisAgreement.

Theforecastcontractquantities, contractprices,andrevenuesinaggregate areshowninTable3-4.Table3QOtherlPPContractQuantities, ContractPrice,andRevenue1998199920002001ContractQuantity(GWH)3,8393,8393,8393,839TotalContractPrice($/Mwh)$64$66$68$64TotalRevenue($1,000)$246,530$255,059$261,913$246,207Page31

SECTION4.0ELECTRICPRICES4.1dOVERVIEWOFBUNDLEDANDUNBUNDLED PRICESInaccordance withtheschedulecontained inSection8,overthelifeofthisagreement allNiagaraMohawkcustomers willcometohavetheoptionofselecting theirownenergysupplier.

Servicesandpriceswillbeunbundled forallcustomers whohavetheoptionofchoosingtheirownretailsuppliereveniftheyelecttocontinuetakingenergyservicefromNiagaraMohawk.Theunbundling ofservicesandpriceswillmakeavailable tocustomers whoareeligibleforretailaccesscostinformation forgeneration, transmission, customerserviceanddistribution services.

Anessential predicate forunbundling istheestablishment ofaCompetitive Transition Charge(CTC).Boththebundledandunbundled pricescalledforunderthisAgreement willbeimplemented throughthefilingoftariffswiththeappropriate regulatory agencies.

TheCompanywillcontinuetoworkwiththepartiesandresolveanyoutstanding issuessoastofileunbundled pricesonaminimumof30dayspriortothePowerChoice Implementation date.1.1.1~BddAppendixD4setsforththeproposedpricesforthemajorserviceclassifications forthetermofthisagreement andshallbecomeeffective onthePowerChoice Implementation Date.4.1.1.1Residential andCommercial ClassPriceLevels'hecalculations contained inAppendixDassumeaPowerChoice implementation dateofJanuary1,1998.IfthePowerChoice implementation islaterthanJanuary1,1998,thenthepricesshowninTables4-1and4-2andAppendixDwillapplytothefirst,secondandthirdyearsofthesettlement agreement, exceptforthetableinAppendixDwhichreflectsthemarketpriceforecast.

Forthosemarketpriceforecasts, thecalendaryearamountswillbeproportionately weightedtoarriveatthemarketpriceforecastforthesplitrateyear(e.g.iftheimplementation dateslipstoApril1,1998,thefirstyear'smarketpricewillbeequalto9/12ofthe1998priceand3/12ofthe1999price).Page32

Table4-1summarizes theprojected class-average pricesforServiceClassifications 1,2and3,including theeffectsoftheSystemBenefitsChargeandcurrently plannedgrossreceiptstaxreductions.

TheCompanyexpectsthat1997priceswillgenerally be'consistent with1995prices.If1997resultsvary,thepercentage reductions maychangebutthepricelevelswillnot.TABLE4-1AVERAGEELECTRICITY PRICESFORTHEYEARS1998-2000 BYCUSTOMERCLASS(C)SC1SC1BSC1CSC2NDSC2DSC3Cents/KWh

%Change(B)Cents/KWh

%ChangeCents/KWh

%ChangeCents/KWh

%ChangeCents/KWh

%ChangeCents/KWh

%Change1997(A)12.7248.5579.62816.49211.94510.43199812.623-0.79%8.5570.00%9.626-0.02%16.37-P74%11.8530.77%10.222-1.99%199912.503174%8.557PPP%9.626-0.02%16.224-1.63%11.747-1.66%10.198-2.22%200012.286-344%8.557PPP%9.626002%15.968-3.18%11.562-3.21%10.103314%(A)Basedon1995FreezePricesappliedtoCompany's 1997SalesForecast.

(B)Percentage reductions areascalculated basedon1997projected prices.Actualpercentage reductions mayvarybasedonactual1997results.(C)Inclusive ofSBCandGRT.Page33

4.1.1.2Industrial andLargeCommercial PriceLevelsTable4-2summarizes theCompany's estimates oftheindividual classratelevelsthatwouldresultfromthissettlement including theeffectsoftheSystemBenefitsChargeandcurrently enactedgrossreceiptstaxreductions.

Table4-2AverageElectricity PricesfortheSC3A/SC4(>2MW)

/EDPrograms/SC11 1997199819992000%ChangeQmhLkSh(A)Qmhl!QMhQmhL~WQmhlkKhfmm~7SC3A/SC4/7.98ERIR/EDRSpecialContracts 7.845.995.7724.95%-26.40%EDZR7.99TotalClass(B)7.936.286.03.005.84-62.44%2638%(A)Valuesarefulltariffbasedon1995FreezePricesandCompany's HoursUseRateDesignappliedtoActual1996BillingData(B)Individual customerreductions mayvaryfromtheclassaverage.IncludesSBCandGRTBytheyear2000,NiagaraMohawkwillsupplyanddeliverpowertolargercommercial andindustrial customers (S.C.No.3A,largeS.C.No.4andS.C.No.11)ataforecasted classweightedaverageprice(including ERIR,EDRandEDZRdiscounts) ofapproximately

$0.0585perKWh(basedoncurrentloadandpriceforecasts) inclusive ofallcurrently enactedNewYorkStategrossreceiptstaxreductions.

Ifthecurrently enactedgrossreceiptstaxreductions arerepealed, thesepriceswill-increaseaccordingly.

Thecompanyhasallocated certainfunds($17.1millionin1998,$17.8millionin1999and$18.3millionin2000)toincremental, uncommitted S.C.No.11andEDZR/EDR/ERIR discounts asameans-ofachieving itspricegoals.Thesefundsareinadditiontothosefundsnecessary toPage34

developthephase-inplanforexistingEDZRcustomers asdescribed inSection4.12.Totheextentthatthepricegoalsarenotmetandtheseincremental uncommitted discounts arenotultimately issued,thecompanyshallflowbackeithertheunuseddiscounts oranamountnecessary toachievethepricegoals,whichever isless,toS.C.No.3Acustomers.

Shouldimplementation ofthisprovision becomenecessary, itwillbeaccomplished viaaonetimepass-back initiated duringthe12-monthperiodimmediately following yearthreeofthisagreement.

Comparisons betweenannualpricegoalsandactualbillingexperience shallberecordedfollowing eachofthefirstthreeyearsofthisagreement, withcarryingchargesappliedtotheequivalent revenuediscrepancies (plusorminus)inderivinganaccumulated threeyearnetdiscrepancy.

Thenetrevenuediscrepancy sodetermined willbecomparedtotheremaining uncommitted incremental discounts (asmayexist).Totheextentthatthepricegoalsarenotmet,thelesserofthesetwoquantities shallbecometheamounttobepassedbacktoS.C.No.3Acustomers.

Thelevelofyear4and5uncommitted incremental discounts willbedetermined intheproceeding settingratesforyears4and5,butinnoeventwilltheCompanyproposeorrecommend uncommitted incremental discountlevelsforyears4and5lessthanthelevelofanyexcessuncommitted incremental discounts sodetermined afteryear3.ShouldtheCompanyforecastthatactualincremental discounts willexceedtheincremental uncommitted discountfundsdiscussed above,theCompanywillnotifytheParties,andtheCompanyoranyPartywillhavetherighttopetitiontheCommission forratemaking treatment tofundadditional discounts thatmaybeneededforbusinessretention andrevitalization purposes.

MhodoloforArrivlnatBundledPrices4.1.2.1.Calculation of"Base"1997RatesBeforeDecreases Thestartingpointforestablishing thebundledretailpricesthatwillapplyforthedurationofthisagreement istheretailbaseratesthatbecameeffective April27,1995adjustedtocapturesurcharges.

Tocapturetheeffectofexternalsurcharge mechanisms thatwereineffectatthattime,NiagaraMohawkrolledintobaseratesallsurcharge balancesthatexistedasofDecember31,1995.Surcharges appliedvolumetrically (e.cC.,FAC,DIRAM,IPPbuyoutsandfuelamortization) weretranslated intoannualratesperKWhandaddedtotheenergycomponents ofbaserates;surcharges appliedonanetbaseraterevenuebasis(e.cC,,NERAM,MERIT,Regulatory DeferralandExtension ofSuspension) weretranslated intoclassspecificfactorsandappliedtothenetbaseraterevenuecomponents ofbaserates.Theresulting prices,whenappliedtoPage35

anindividual customer's 1995usage,wouldproducethesameelectricbillamountsaswouldbeproducedbytheapplication ofbaseratesandindividual surcharges factors.Theadjustedpriceswereappliedto1997salestoproduce1997revenuesand1997class-average prices.4.1.2.2.Application ofPercentage Decreases forSC1,2,&3Giventheclass-average pricesdeveloped above,thepricereductions wereimplemented forresidential (S.C.No.1),smallcommercial (S.C.No.2,andS.C.2Demand(S.C.2D))customers usingthefollowing five-step procedure:

(1)TheCompanywillreducepricesforthesecustomers byapproximately 2.2%overthreeyearsfollowing theeffective dateoftariffsimplementing theSettlement Agreement prices(the"PowerChoice" Implementation Date)'.(2)Class-Average 1997pricesweremultiplied byprojected 1998salestoestimate1998revenuesandclass-average pricesunderthepreceding year'srates.Theseaveragerateswerereducedbyapproximately 0.7%toget1998class-average prices.(3)Class-average 1998pricesweremultiplied bytheforecastsalesfor1999toestimate1999revenuesandclass-average pricesunderthepreceding year'srates.Theseaveragerateswerereducedbyapproximately 0.7%againtoderive1999class-average prices.(4)Classaverage1999pricesweremultiplied bytheforecastsalesfor2000toestimate2000revenuesandclassaveragepricesunderthepreceding year'srates.Theseaveragerateswerereducedbyapproximately 0.8%toderive2000class-average prices.(5)Additional savingsinNewYorkStateGrossReceiptsTaxwillbeapplied,asrealized, pursuanttoSubsection 4.1.4.Smallerlargegeneralservice(S.C.No.3)customers andsmallercustomers takingaportionoftheirelectricrequirements fromNYPA(S.C.No.4customers under2MW)wouldreceiveanapproximate 2.2%phasedinreduction overthreeyears(composed ofapproximately 2.0%in1998,anadditional 0.1%in1999andanadditional 0.1%in2000).Thesecustomers willalsoreceivethephasedinreductions inNewYorkState5Asfurtherdescribed inSection2,tariffsimplementing theSettlement Agreement pricescannotbecomeeffective untilcertainconditions havebeensatisfied.

Page36

grossreceiptstax,astheyarerealized, asspecified inSection4.1.4below.4.1.2.3.Calculation ofSC-3ARatesAsdescribed inSection4.1.1.2andillustrated onTable4-2,S.C.No.3Arateshavebeendesignedtoachievetargetedprices.4.1.3Relations toDaileaPilotNiagaraMohawkisimplementing apilotretailaccessprogramforcommercial farmersandfoodprocessors incompliance withtheCommission's June23,1997OrderEstablishing RetailAccessPilotProgramsandSeptember 18,1997orderconcerning compliance filings(the"PilotProgramOrders").'helostmarginsassociated withtheDairyleapilotprogramwillcounttowardsratedecreases outlinedinSection4.1.2.Suchlostmarginswillbeallocated toparticipating classesaccording totheestimates showninTable4-3.Table4-3Projected CostofDairyleaPilotLostMarinSC1$172,800SC1B$11,600SC1C$490,000SC2ND$11,000SC2D$118,000SC3$395,400SC3A5227~5IO$1,470,300

-'Lostmarginestimateassumeslessthan100%participation.

With100%participation, thelostmarginwouldbeapproximately

$5million.6CaseNo.96-E-0948,

aProamforFarmaFodProceivnEstaiaeciustoeCCPage37

4.1.4PlanedReductions Associated withGrossReceitsTaxReformNewYorkStatehasenactedlegislation toreduceitsgrossreceiptstax(GRT)byaphased-in 1%beginning inOctober1998.TheseGRTreductions willbeappliedasrealized.

4.1.5PotentiaSecuritization SavinsTotheextentthatitisnototherwise prohibited bylegislation, thebenefitsofsecuritization shouldbeusedtofurtherreducepricestoS.C.No.1,S.C.No.2andS.C.No.3customers.

TheCompanyandStaffrecommend thattheCommission considerallocating aportionofsuchsavingsforenergyefficiencies andcleantechnologies.

4.2CTCANDMARKETPRICEHEDGING4.2.1OverviewFormostcustomers, theCTCfloatsinversely withthemarketpriceinordertoguarantee thefixedtotalpricelevelsinYears1-3.TheCommodity Adjustment Charge(CAC)isthemechanism thataccomplishes thisvariation intheCTC.Customers willhavetheoptionofafixedCTC,asdescribed insection4.2.5below.Ingeneral,asmoreofNiagaraMohawk'ssupplyportfolio becomesunhedged, moreofthemarketpriceriskofenergyispassedontocustomers.

4.2.2GeneralCalculation andApplication Exceptasotherwise providedinthisagreement, allcustomers, regardless oftheirenergysupplier, willbeassessedanon-bypassable CTCtocovertheirstrandable costallocation.

Duringthefirstthreeyearsofthisagreement, theCTC.foreachserviceclassification willbederivedbydeducting fromtheCompany's bundledretailprices,i)anEnergyCommodity Charge,ii)atransmission charge,andiii)acustomerserviceanddistribution charge.Duringyears4-5,theCTCmaynotbereducedtototallyoffsetincreases intransmission ordistribution prices.InPage38

addition, theCTCwillbesubjecttocertainadjustment mechanisms, deferrals andincentives asdescribed inSection4.3.Asdescribed inSubsection 4.2.3,theCTCwillbeafunctionofthemarketpriceofelectricity.

Thisapproachwillproducealocation-specific CTC.4.2.3Commodity Adjustment ChargeACommodity Adjustment Chargewillbeimplemented toadjusttheCTCforthosecustomers withfloatingCTCs.Thiswillgenerally includecustomers servedunderS.C.No.1,S.C.No.2Demand(S.C.No.2D),S.C.No.2Non-Demand (S.C.No.2ND),S.C.No.3,andS.C.No4(customers

<2MWonly).TheCTCforeachserviceclassification reflectsalocationspecificestimateofthemarketpriceofelectricenergyandcapacity.

TheCommodity Adjustment Chargewillbeimplemented bylocation, voltagedeliverylevel,loadfactorandserviceclassification inordertoreconcile theactualmarketpricewiththeforecastofmarketpricesuponwhichtheCTCisinitially set.Customers servedonS.C.No.3A,S.C.No.4(greaterth'an2MWonly),S.C.No.11,andcertainothercustomers (described inSection4.2.5)willnotbesubjecttotheCommodity Adjustment Charge.4.2.4.Significance ofHedgedandUnhedgedEnergyTheCompanyhashedgedalargeportionofitstransition coststhroughthecontracts described inSection3.Exceptasotherwise providedinSection4.2.5,theCompanyisbearingtheriskoftheamountofunhedgedenergyintheforecast, exceptforanychangesinpricesassociated withunhedgedenergyresulting fromanuclearplantretirement (whichshallbeaddressed asprovidedinSection3.3.4).Overtime,asdescribed indetailinSection3.2forfossil/hydro assets,andSection3.3fornuclearassets,anincreasing proportion ofenergypurchased byRegCowillbecomeunhedged.

ThepartiesagreethattheCTCinyearsfourandfiveshouldbedesigned:

(1)torecoverallowable strandedcostsand(2)topassthroughtocertaincustomers themarketpriceofunhedgedenergy.Intheeventofanuclearretirement withinthefirstthreeyearsofthisagreement, therelatedunhedgedenergyeffectsontheCTCarediscussed inSection3.3.4.Page39

4.2.5CTCOptionsandMarketPriceForecastTheCompanywillmakeavailable fixedCTCoptionsasdescribed below.Theoptionsdescribed belowdonotprecludeadjustments totheCTCthatmayotherwise beprovidedforinthisagreement.

IftheCompanyshouldretireanuclearunit,energypricesandtheCTCwillbeadjustedinamannerconsistent withSection3.3.4.4.2.5.1ForS.C.No.3AandS.C.No.4(>2MW)customers:

ThirtydayspriortothePowerChoice implementation date,SC¹3AandSC¹4customers greaterthan2MWwillhaveachoiceofthreepricingoptions.Following thisonetimethirtydayselection period,theonlyofferavailable toS.C.¹3Acustomers willbethedefault(option1)programdescribed below.Tariffsforeachoftheseoptionswillbeavailable at,leastsixtydayspriortothePowerChoice Implementation Date,subjecttoCommission approval~ExistingSC¹11customers withexpiringcontracts willhavethechoiceofeithertakingthestandardtarifforextending theirSC¹11contracts onthesametermsandconditions throughthetermofthissettlement agreement.

SuchSC¹11customers choosingthestandardtariffwillonlybeallowedtochooseoption1.Theimplementation oftheseoptionswillbeinconjunction withtheCompany's hoursusedesignandindividual customerloadprofiles.

(1)Option1(Default):

FixedCTCandFloatingCommodity PriceComputeCTCtoreflectthe"revised" marketpriceforecastinAppendixD,page28.Theestimateofthemarketpriceforecastvariesbyregion,serviceclass,loadfactorandvoltagelevel.TheFloatingCommodity PricewillbetheEnergyCommodity Chargediscussed inSection4.4.1.AppendixDcontainsthemarketpriceforecast(alsocalledenergybackoutrate)foreachserviceclassification andvoltagelevel~AppendixDwillbeadjustedforthefinalratePage40

yearasdiscussed inSection4.1.1.Thesepricesaremeasuredatthecustomermeter.Marketpricesforyearsfourandfivewillbereforecasted inyearthree.(2)Option2a:FixedCTCandFixedCommodity ChargeThisoptionwillbedesignedwiththe"original" marketpriceforecast(contained inAppendixDatpage27),suchthatifallSC-3Acustomers choosethisoption,therategoalwillbemet.Customers committocontracttopurchaseforecastquantityofelectricity fromNiagaraMohawkforthefiveyearperiod.(3)Option2b:Customers whoselectOption2acanpurchasetherighttoexitthecontractonsixmonthsnotice.ThepurchasepriceoftheoptiontoexitwillbeprovidedbytheCompanyaspartofitstarifffiling.Thefeewouldbepaidduringthefive-year periodregardless ofwhethertheoptiontoexitthecontractisexercised.

(4)PriortoDecember1,1997,theCompanymustelectoneofthefollowing alternatives.

a)Aftercustomers havechosenoption2aor2b,theCompanywillsolicitandawardbidsfortherightandobligation toprovidethecommodity tocustomers thatchooseOption2aor2b,butonlysubjecttocustomerapproval; orb)TheCompanywilloffera5-yearfixedCTC,FloatingCommodity PriceOption(inadditiontothe3-yearfixedCTCFloatingCommodity PriceOption,above)whichshallbebaseduponthe"original" marketpriceforecastunderlying Options2aand2b,above.(5)Forallcustomers whochooseanalternative supplierandreturn,theyreturntotheFloatingCommodity PriceandthefixedCTCoptionoriginally selectedbythecustomer.

Ifacustomer's SC-11contractexpiresandtheydonotchoosePage41

torenewit,thentheyreturntothedefaultofafloatingcommodity priceandafixedCTC.4.2.5.2ForS.C.Nos.1,2,3customers:

(1)Option1:FixedCTCandFloatingCommodity PriceandFixedCTCAnamountofenergyupto75percentoftheamountofforecasted energynecessary toserveSC-3Acustomers choosingOption2(flixedCTCandfixedcommodity charge)willbemadeavailable forthoseSC-1,2and3customers whohaveretailaccess.Customers whochoosethisoptionwillhavetheirCTCbasedonthe"revised" marketpriceforecast, adjustedforregionandloadshapeasshowninAppendixD,page28.Forcustomers whochooseanalternative supplierandreturn,theyreturntothedefaultofOption2,floatingCTCandfloatingcommodity price.(2)Option2(Default):

FloatingCTCandFloatingCommodity.

TheCTCisadjustedtoreflectthelevelofunhedgedenergyafteradjustments toreflectcustomers choosingthefixedCTCandfloatingcommodity optiondescribed above.(3)Thepartieswillcontinuetopursuemechanisms toincreasetheavailability offixedCTCsforSC1,2,and3customers inYears3andbeyond.Anyfinalresolution ofthisissuewillnotnegatetheCompany's obligation tocoverunhedgedenergyinyearsonethroughthree.4.2.6Adjustments totheCTCinYearsFourandFiveTheCTCwillbeadjustedtoreflectanewmarketpriceforecastforyearsfourandfive.TheCTCmayalsobeadjustedinyearsfourandfiveduetogeneration-related deferrals, recoveryofageneration saleincentive (Section2.4.3),andifanuclearplantisretired,soldordivested(SectionPage42

3.3).Inaddition, variations betweentheactualandforecasted costoftheindexingprovisions ofcertainIPPcontracts, asdescribed inSection2.4,willbepassedthroughthe.Commodity Adjustment Chargebeginning inyearfour.4.2.7AlcanandSithe/Independence Alcanand/orSithe/Independence's strandedcostresponsibility withttservicetoAlcanwillbehandledinaccordance withtheOrderissuedandeffective 11-3-94inCaseNo.94-E-0136.Accorigy,d'nIAlcanand/orSithe/Independence willnotbeassessedaCTCaccessfeeorexitfeeforAlcanloadservedbySithe/independence, exceptasprovidedforinCaseNo.94-E136.TheCompanyreservestherighttopetitiontheCommission forchangesinthoseobligations inaccordance withtheOrderinthatcase.4.3SURCHARGE ANDRECONCILIATION MECHANISMS 4.3.1SurchareMechanisms ThatWillBeAbolished Uponthe/owerChoice Implementation Date,thefollowing surcharge mechanisms willbeabolished:

Rule29:Ad'ustment inAccordance WithChangesinTheCostofFuel(inclusive oftheFAC,fuelamortizations, andDIRAM),excepain,',tthatthedfdFACfuelbalanceatthePowerChoice Implementation Datewillbeflowedthroughtocustomers overthenexttwocompletemonthly'geerreubillincyclesfollowing thePowerChoice Implementation Date.Rule43:Adjustment ofChargesPursuanttotheMeasuredEquityReturnIncentive Term(MERIT)Rule44:Adjustment ofChargesPursuanttotheNiagaraMohawkElectricRevenueAdjustment Mechanism (NERAM)Rule46:Adjustment ofChargesPursuanttotheRegulatory Surcharge Mechanism Rule47:Adjustment ofChargesPursuanttotheExtension ofSuspension PeriodSurcharge Mechanism Page43

4.3.2MunicialGrossecetsTaxSurchareForthetermsofthisAgreement andbeyond,thesurcharge forPSCNo.207Rule32-IncreaseinRatesApplicable inMunicipality WhereServiceisSupplied, morecommonlyreferredtoasGrossReceiptsTax(GRT),willcontinuetobeappliedasasurcharge duetovariances intaxratesbymunicipal taxingauthorities.

4.3.3NYPAHdrooweBenefitReconciliation ANewYorkPowerAuthority (NYPA)Hydropower BenefitReconciliation Mechanism forresidential servicewillbeestablished.

Undercertaincontracts forthesaleoflow-costhydropower toNiagaraMohawk,thepricebenefitsofthatpoweraretobepassedontotheCompany's residential customers.

Asaresultoftheelimination oftheFAC,anewreconciliation mechanism mustbeestablished toensurethatNiagaraMohawkcanfulfillthisrequirement.

Because1995FACsurcharge balanceswererolledinto1995baserates,asdescribed inSubsection 4.1.2,theresulting residential pricesreflectNYPAhydropower benefitsthataccruedin1995.Accordingly, theCompanywillperformanannualreconciliation comparing actualbenefitsreceivedin1998andsubsequent yearswiththosethatwerereceivedin1995.Thevarianceresulting fromthereconciliation (creditordebit)willbeappliedasanannualized reconciliation factorduringthe12monthsfollowing completion ofthereconciliation.

Forresidential customers whoareineligible forretailaccess,areconciliation factorwillbeappliedtotheiroverallbill.Forresidential customers whohaveachoiceofpowersuppliers, areconciliation factorwillbeappliedtotheCTC.Duetoreporting lag,the1998calendaryearreconciliation cannotbeperformed untilFebruary1999,whichwilldelaytheapplication oftheannualized reconciliation factoruntilMarch1999.4.3.4SseBenefitsChaeAsfurtherdescribed inSection7,aSystemBenefitsCharge(SBC)willbeimplemented aspartofcustomerserviceanddistribution charges,althoughstipulated asadistinctly separatecharge,forallcustomerserviceclassifications (withtheexception ofEconomicDevelopment Zonepower,S.C.No.11contracts (exceptasspecifically allowedbycontract) andcertainNYPAallocations) inordertorecovercostsassociated withPage44

publicpolicyprograms.

Table44showstheprojected SBCrecoveries for1998-2000.

Table4-4Projected SBCRecoveries 1998199920001~BasePublicPolicyPrograms($000)15,00015,00015,0002.SalesForecast(Mwh)subjecttoSBCrecoveries 24,174,398 24,472,671 24,650,753 3.SBCCharge(Line1)/(Line2)($/KWh).000620.000613.0006094.3.5Deferrals Thecostcategories eligiblefordeferrals aredescribed inSection2.6.Startinginyearfour,deferrals willbecollected throughappropriate ratemechanisms, depending uponthenatureofthecost,i.e.,generation-relateddeferrals suchaschangesinnuclearcostswillbecollected throughasurcharge toallcustomers whopayaCTC,distribution-related deferrals willbecollected throughadistribution surcharge.

Customers whodonotpaytheCTCwillnotpaygeneration relateddeferrals.

4.3.6RecoveofGeneraioSaleIncentive Asdescribed inSection3.2.2,theCompanywillreceiveanincentive forthesaleoffossilandhydroassets.Allcustomers whopaytheCTCor,whereapplicable, exitfeeswillpaythegeneration incentive throughasurcharge.

Customers whodonotpaytheCTCwillnotpaythegeneration incentive.

Table4-5summarizes alloftheadjustment mechanisms described inSections4.2and4.3andtheirapplicability toserviceclassifications.

Page45

Table4-5Surcharges andReconciliation Mechanisms S.C.No.1/1B/1CS.C.No.2D/2NDS.C.No.3(SmallS.C.No.4)andS.C.No.7S.C.No.3A(Including LargeS.C.No.4)S.C.No.11GrossReceiptsTaxYesYesYesYesYesNYPAHydropower BenefitYesNoNoCommodity Adjustment ChargeYes***Yes***Yes**NoSBCYesYesYes~***Yes*'*~Deferrals"/Generation Incentive YesYesYe~+kktYes*****Contract Specific**Applies toyears4-5only***Assumes defaultoptionischosen***ExceptasprovidedforcertainNYPAcustomers inSection4.14andTable4-6Page46

4.4UNBUNDLED SERVICESANDPRICES4.4.1Unbundled EnerCommodiChareToensurethatcustomers receivecorrectpricesignals,itisimportant toestablish areliableproxyforthegeneration commodity priceembeddedinNiagaraMohawk'sbundledretailrates.PriortothetimetheISOtariffbecomeseffective, theactualmarketpriceofelectricity willbebaseduponNiagaraMohawk'sCommission approvedmethodology fordetermining marginalcost.ThisdocumentisonfilewiththeCommission (entitled Technical Administrative RulesandProcedures

("TARPS"))

andisassociated withS.C.No.11andthenowexpiredS.C.No.8.Thesepriceswillbedelineated byhour,monthandvoltagelevelforeachclass.Inaddition, theCompanywilladjusttheTARPSprices,onarevenueneutralbasis,toreflectdifferences inpricesforthewestern,centraland'astern regions.If,priortotheeffectiveness ofanISOtariff,theNewYorkPowerPool(NYPP)beginstocalculate andpublishlocation-specific marginalpricesofpower,NiagaraMohawkreservestherighttoemploythosepricesinsteadoftheTARPSvalues.IftheTARPspricesareusedintheCompany's unbundled prices,theCompanywill,afterconsulting withtheparties,developrulesand/orprocedures designedtooverseeandaudittheCompany's development oftheTARPprocess..

TheCompanywillsubmittheserulesand/orprocedures totheCommission forreview.OncetheISOtariffbecomeseffective, assumingafullyfunctioning ISOandaviablemarket,thecommodity valuerepresented inretailtariffswillbebaseduponlocational pricespostedbytheISO.TheCTCinherently reflectsaforecastofcommodity prices.Aportionofthedifferential betweenforecasted andactualcommodity priceswillbereconciled andrefundedtoorrecovered fromcustomers withfloatingCTC'sthroughtheCommodity Adjustment Charge.Therewillbenoprudencereviewassociated withRegCo'senergyorcapacitypurchases duringtheperiodofthisrateSettlement Agreement.

Asdescribed above,commodity priceswillbecappedbythespotmarketprice.RegCoisfreetoenterintolongertermcontracts, otherthanthosedescribed inSection3.0,forcapacityandenergy,butwillbearthefullrisksofsuchcontracts (i.e.,willkeepanysavingsorabsorbanylossesPage47

duringthefiveyearperiod).IfRegCoentersintoacontractforenergyandcapacitywhosedurationislongerthanfiveyears(i.e.,whosedurationextendsbeyondthetermofthisSettlement Agreement),

thecostassociated withthatcontractwillbesubjecttothenormalrevenuerequirements reviewthatoccursinthenextratecaseRegCofilesforratesbeyondthefifthyear.IfRegCodoesnotenterintoanylonger-term

contract, therewillbenoprudencereviewassociated withitsnothavingenteredintolonger-term contracts.

4.4.2Unbundled Transmission ChaesNiagaraMohawk'sretailaccesstariffwillbefiledwiththeCommission andtheFERCandcoverallcomponents oftheretailaccesstariffdescribed herein.Thetransmission component ofsuchretailaccesstariffswillbeprovidedunderNiagaraMohawk'sOpenAccessTransmission Tariff("OATT").

NetworkservicechargesundertheOATTarecalculated astheFERCapprovedannualrevenuerequirement multiplied bythecustomer's loadratioshare(the12-monthrollingaverageofthecustomerMWloaddividedbythetotaldemandontheTransmission Systematthetimeofthemonthlytransmission peak).Toeasetheadministrative burdenofapplyingthisformulatocalculate andbillthetransmission chargesapplicable toeachcustomerundertheOATT,anddecreasing thedistribution chargebythatvalue,NiagaraMohawkproposestoimplement aprocedure wherebythetotaldeliverycharge(transmission anddistribution) doesnotrequireanindividual, customer-specific OATTvalue.Thatis,thetotaldeliverychargewillbedesignedtorecoverboththetransmission anddistribution revenuerequirements usingPSCrulesfortheassignment ofcostsevenastransmission serviceisprovidedunderthetermsandconditions oftheOATTapplicable toeachcustomer.

NiagaraMohawkwillseekfromtheFERCawaivertoimplement thisadministrative simplification.

4.4.3Unbundled DlsrlbutionCaresDistribution servicesincludepowerdeliveryservicesotherthantransmission

services, andencompass notonlylocal"wires"servicesbutalsometering, billing,collections, andcustomerservicetelephone.

Distribution pricesarecost-based.

Distribution pricesfor1998wereestimated torecoverfullythecostsassociated withdistribution

services, Page48

andallocated torateclassesandratecomponents basedontheCompany's latestcostofservicestudies.Distribution servicepricesfortheyearstwothroughfivewillbeincreased according tothePriceCapplandescribed inSection4.4.4andthepricegoalsdescribed inSection4.1.4.4.4PriceCaPlanforTransmission andDistribution ServicesApricecapplanfortheCompany's transmission anddistribution serviceswillapplyforyears2through5ofthissettlement.

4.4.4.1T&DRateIncreases TheCompanymayincreaseitspricesfortransmission anddistribution servicesuptoacapineachyearexceptasotherwise providedherein.Thecapwillbebasedontheprojected increaseinthecostofproviding transmission anddistribution servicesassetforthinthefinancial forecastinAppendixC.4.4.4.2CTCOffsetstoIncreased T&DPricesExceptasprovidedinSection4.14,inyears2and3,anyincreaseinT&DpriceswillbeexactlyoffsetbyadecreaseintheCTCchargesforthoseyearsinordertosatisfytheoverallbundledpricetargetsoutlinedinSections4.5through4.8.Inyears4and5,therewillbenoexplicitoffsettotheCTCforincreases inT&Dprices.4.4.4.3PriceGapforYears4and5Asdescribed inSection2.4.1.2,pricesinyearsfourandfivecanbeincreased byanamountnottoexceed1%oftheall-inpriceexcluding thecommodity (e.g.inclusive oftransmission, distribution andforecasted CTCcharges).

Thepricecapexcludesrecoveryofdeferrals andthegeneration saleincentive.

Thepricecapalsoexcludesthevariations incontractcostsduetotheindexingprovisions ofIPPindexedcontracts (SeeSection2).Thefilingtoproposeanincreaseunderthecaportorecoverdeferredcostsortorecoverthegeneration saleincentive willaddressthedesignoftheraterecoverymechanism.

Page49

4.4.5Availabili ofUnbundled PricesforInformational PurosesPriortothetimeacustomerbecomeseligibleforretailaccess,NiagaraMohawk,uponrequest,willprovidethecustomerwithunbundled pricedataforthecustomer's use.4.4.6Relat'onshi toGeneration SearationAreallocation ofcostsbetweenthetransmission/distribution andCTCcomponents ofunbundled pricesmaybenecessary asaresultofasale,spinoffortransferofgeneration assets.Totheextentthisreallocation isnecessary, itwillbedoneonaclass-average revenueneutralbasis.4.4.7GustoerServiceBackuCreditThecustomerservicebackoutcreditisdescribed inSection5.Oncethecreditisdesigned, customers whoselectanalternate supplierwillreceiveanappropriate creditfortheparticular CompanyservicesprovidedbytheESCO,andaminimumcreditregardless oftheservicesoffered.4.5RESIDENTIAL PRICINGDESIGNS4.5.1ServiceClassifica onNo.1-Sandardesidential Rate4.5.1.1FlatRateStructure Thedesignwillremainaflatratestructure consisting ofasingleenergyratewithacustomercharge.4.5.1.2Phased-In Rebalancing.of CustomerandEnergyChargeThecustomerchargewillbephasedintoachievea$17.44levelintheyear2000withadditional changestobeconsidered inyears4and5.TheCompanyandStaffsharetheobjective ofcontinuing tomovevolumetric chargestowardmarginalenergycosts.Theincreaseincustomerchargerevenuewillbeoffsetbyanequalreduction intheenergychargerevenuestoensurethattherebalancing ofPage50

customerandenergychargeisrevenueneutralonaclass-averagebasis.Phased-in DiscountfromInitialPriceLevelsAsdescribed inSection4.1,overthethreeyearsbeginning withthePowerChoice Implementation Date,tariffratereductions willbephased-in soastoultimately produceanapproximate 2.2percentreduction inclassaverageprices.(Asdescribed inSection4.1.4,additional savingsassociated withcurrently plannedreductions inNewYorkgrossreceiptstaxeswillbeappliedasrealized).

Thesereductions willbeappliedtotheenergyrate.Thepricingdesignsandresulting billimpactsareillustrated inAppendixD.4.5.2ServiceClass'ca'onNos.1Bd1C-ResdenialTimeef-Us RatesCurrently theCompanyhastwoTime-of-Use (TOU)offerings forresidential customers.

ServiceClassification No.1Bisavoluntary offering; approximately 3700customers takeserviceunderthisrate.ServiceClassification No.1Cisamandatory rateforallresidential andfarmcustomers whoconsumegreaterthan30,000KWhannually.

Thereareapproximately 12,000customers servedunderS.C.No.1C.AsofthePowerChoice Implementation Date,S.C.No.1Bwillbeclosedtonewsubscribers otherthansubscribers whowillusegeothermal technology.

ExistingS.C.1Bcustomers willhavetheoptionofremaining undertheexistingprogramorchangingtoS.C.No.1service.Nopricereductions willbeappliedtotheS.C.No.1Bclass.AsofthePowerChoice Implementation Date,S.C.No.1Cwillnolongerbemandatory.

S.C.No1CwillbecometheoptionalTOUofferingforresidential customers.

Customers servedunderthisserviceclassification willhavetheoptionofremaining undertheexistingprogramorchangingtoS.C.No.1~Nopricereductions willbeappliedtotheS.C.No.1Cclass.Page51

4.5.3ServiceClassification No.1H-0tionalResidential RateThisoptionconsistsofhighercustomerchargeandalowerflatenergycharge.OnthePowerChoice Implementation Date,S.C.No.1Hwillbeclosedtonewsubscribers.

ExistingS.C.No.1Hcustomers willhavetheoptionofremaining undertheexistingprogramuntilthebeginning ofyear4ofthisagreement atwhichtimetheywillbetransferred toS.C.No.1.Thesecustomers willhavetheoptiontomigratetoS.C.No.1atanytimepriortoyear4ofthisagreement.

Nopricereductions willbeappliedtotheSCNo.1Hrate.4.5.4.CTCTheCTCwillberecovered volumetrically inaccordance withtheactualusageofeachresidential customer.

4.6COMMERCIAL PRICINGDESIGNS4.6.1ServiceClassification No.2ND-SmallGeneralServiceRates4.6.1.1FlatRateUnderS.C.No.2ND,thedesignwillremainaflatratestructure consisting ofasingleenergyratewithacustomercharge.4.6.1.2Phased-in Rebalancing ofCustomerandEnergyChargesThecustomerchargewillbephasedintoachievea$23.95levelintheyear2000withadditional changestobeconsidered inyears4and5.TheCompanyandStaffsharetheobjective ofcontinuing tomovevolumetric chargestowardmarginalenergycosts.Theincreases incustomerchargerevenueswillbeoffsetbyanequalreduction intheenergychargerevenuestoensurethattherebalancing ofcustomerandenergychargeisrevenueneutralonaclass-averagebasis.Page52

4.6.1.3Phased-in DiscountfromInitialPriceLevelsAsdescribed inSection4.1,overthethreeyearsbeginning withthePowerChoice Implementation Date,ratereductions willbephased-in soastoproduceanapproximate 2.2percentreduction inclassaverageprices.(Asdescribed inSection4.1.4,additional savingsassociated withcurrently plannedreductions inNewYorkgrossreceiptstaxeswillbeappliedasrealized).

Thesereductions willbeappliedtotheenergyrates.Thepricingdesignsandresulting billimpactsareillustrated inAppendixD.4.6.2ServiceClassicationNo.2D-SmallGeneralServiceRatesUponthePowerChoice Implementation date,thedesignofNiagaraMohawk'sSmallGeneralDemandService(S.C.2Demand(S.C.No.2D))willbealteredasdescribed below:4.6.2.1Phased-ln Rebalancing ofCustomerandEnergyChargesThecustomerchargeforS.C.No.2Dwillbephased-in toachievea$63.49levelintheyears2000withadditional changestobeconsidered inyears4and5.TheCompanyandStaffsharetheobjective ofcontinuing tomovevolumetric chargestowardmarginalenergycosts.Theincreases incustomerchargerevenueswillbeoffsetbyequalreductions intheenergychargerevenuestoensurethattherebalancing ofcustomerandenergychargesisrevenueneutralonaclass-average basis.TheexistingdemandchargeforS.C.No.2Dwillremainunchanged forthefirstthreeyearsofthisagreement.

4.6.2.2Phased-in DiscountfromInitialPriceLevelsAsdescribed inSection4.1,overthethreeyearsbeginning

,withthePowerChoice Implementation Date,ratereductions willbephased-in soastoproduceanapproximate 2.2percentreduction inclassaverageprices.(Asdescribed inSection4.1.4,additional savingsassociated withcurrently plannedreductions inNewYorkgrossreceiptstaxeswillbePage53

appliedasrealized).

Thesereductions:will beappliedtotheenergyrate.Thepricingdesignsandresulting billimpactsareillustrated inAppendixD.4.6.3CTCTheCTCwillincludeperKW(whereapplicable) andperKWhchargesappliedto100percentofactualdemandandusagequantities ofeachcommercial customerforthebillingperiod.4.7LARGEGENERALSERVICE(S.C.NOS.3,3A,4AND5)PRICINGDESIGNSPricesforNiagaraMohawk'sS.C.No.3,S.C.No.3A,andS.C.No.4(customers whoalsotakepowerfromNYPA),willbestructured asdeclining blockratesasdescribed below.Unbundled priceswillincludeaCTCifapplicable.

4.7.1S.CNo.3LarGeneralSeice<2MWandSmallerS.C.No.4Customers

<2INWPricesforcustomers takingserviceunderS.C.No.3andcustomers takingserviceunderS.C.No.4whosedemand(exclusive oftheportionofdemandservedbyNYPA)islessthan2megawatts willbedeveloped asfollows:4.7.1.1RateDesignPriceswillincludeacustomercharge,ademandcharge,areactivedemandchargeandenergychargesbasedontwoblocks.Theblockswillbeestablished basedontheusageaboveandbelow450hoursofuseofthepeakdemand(61.6%loadfactor).Thisdesignisreferredtoasan"hoursuse"design.Thepricingdesignsandresulting billimpactsareillustrated onAppendixD.4.7.1.2InitialPriceLevelsAsdescribed inSubsection 4.1,theclassaveragepricesforS.C.No.3andsmallerS.C.No.4customers willbereducedbyapproximately 2.2percent.Thereduction willbePage54

reflected inthetailblockenergyprice.(Asdescribed inSection4.].4,additional savingsassociated withcurrently plannedreductions inNewYorkgrossreceiptstaxeswillbeappliedasrealized)

~4.7.1.3CTCTheCTCwillincludeperKWandperKWhchargesappliedto100percentofactualdemandandusagequantities foreachcustomerduringthebillingperiod.4.7.2S.C.No.3ALareGeeralServiceINadatoTmeofUseiDemandandLaeS.C.No.4Customers

~>2MWPricesforcustomers takingserviceunderS.C.No.3Aandcustomers takingserviceunderS.C.No.4whosedemand(exclusive oftheportionofdemandservedbyNYPA)isgreaterthan2megawatts willbedeveloped asfollows:4.7.2.1RateDesignPriceswillincludeacustomercharge,ademandcharge,areactivedemandchargeandenergychargesbasedondeclining blocks.Effective uponthePowerChoice Implementation Date,twoblockswillbeestablished basedontheusageaboveandbelow250hoursofuseatthepeakdemand(34.2%loadfactor).Oneyearlater,athirdblockwillbeestablished at400hoursofuse(54.8%loadfactor).Thisdesignisreferredtoasan"hoursusendesign.Thepricingdesignsandresulting billimpactsareillustrated onAppendixD.4.7.2.2InitialPriceLevelsPricereductions aredesignedtobephased-in duringthethreeyearsfollowing thePowerChoice Implementation Datesuchthattheaverageprice,basedoncurrentforecasts, intheyear2000forallcustomers underS.C.Nos.3A,11,andlargeS.C.No.4(including ERIR,EDR,andEDZRdiscounts) willbe$.0585perKWhinclusive ofallcurrently Page55 0

enactedNewYorkStategrossreceiptstaxreductions.

Ifthecurrently enactedgrossreceiptstaxreductions arerepealed, thepriceswillincreaseaccordingly.

4.7.2.3Rebalancing ofDemandChargesWhilethedemandchargeforS.C.No.4iscurrently basedonthepeakdemandoccurring withinthebillingperiod,thedemandchargeunderS.C.No.3Aisbasedentirelyonthecustomer's maximumdemandduringpeakhours.NiagaraMohawkwillfiletariffrevisions toestablish ademandchargebasedonthecustomer's maximumdemandduringallhourstocovertransmission anddistribution costs.Theon-peakdemandchargehasbeenreducedtooffsettherevenueincreases resulting fromthischange.4.7.2.4CTCTheCTCwillincludeperKW(basedonthemaximumdemandoccurring duringpeakhours)andperKWhchargesappliedto100percentofactualdemandandusagequantities forthebillingperiod.4.7.3S.C.No.5Combiation25&60CclePowerTheCompanycurrently providescombination 25cycleand60cyclepowertoapproximately 7customers.

TheCompanywillfreezetheexisting25cycleS.C.No.5rates(whichwereapprovedinApril1995)andholdthemconstantforthetermofthisAgreement.

TheCompanywillreducetheratesfor60cycleservicetothosecontained inS.C.No.2,S.C.No.3orS.C.No.3A,depending onthesizeofthecustomer.

TheCustomerwillthenbeeligibletoreceiveunbundled 60cycleelectricserviceaccording totheotherwise applicable serviceclassification.

4.7.4Pro'ected nduriaricesTheweightedaveragepricehasbeencomputedbysummingtheforecasted revenuesassociated withtheS.C.No.3A,"large"S.C.No.4,S.C.No.11(thosequalifying forS.C.No.3A)anddividing.

bythePage56

forecasted kilowatt-hours associated withthesameclasses.(Thiswillincludealleconomicdevelopment riderswiththeexception ofrevenuesandsalesassociated withEDPcustomers).

TheCompanyplanstoadminister thephased-in pricereductions inamannersimilartothatcontained inTable4-2.4.8CUSTOMERS WITHS.C.NO.11CONTRACTS ANDECONOMICDEVELOPMENT PROGRAMSTheCompanywillhonorallexistingS.C.No.11contracts throughtheirnormalexpiration.

Uponimplementation oftheISO,theCompanywillrevisethedefinition andcalculation ofmarginalcostundertariffto:1)incorporate theprices,termsandconditions oftheISOtariffand2)calculate andadminister asystem-wide weightedaveragemarginalcostconsistent withtheexistingS.C.No.11tariffforthebillingofS.C.No.11contracts enteredintopriortoJuly23,1997.IntheeventthatanexistingCustomer's S.C.No.11contractexpiresduringthetermofthisagreement, attheCustomer's requestandupon60dayspriornotice,theCompanywillextendtheS.C.No.11contractonthesametermsandconditions fortheremaining termofthisagreement, oruntiltheCompanyfilesforarateincreaseorotherwise petitions theCommission postyearfive,afterwhichsuchcontractshallexpireunlessotherwise specifically agreedtobetweentheCompanyandCustomer.

TheCompanywillofferEDRandERIRcustomers achoiceoftheirexistingrider,theotherwise applicable tariffrate,orifeligible, retailaccess.TheCompanywillnotpetitiontheCommission tomodifyorcancelitscurrentS.C.No.11,ERIRorEDRtariffsuntilanadequatereplacement tariffisdeveloped thatmeetstheeconomicdevelopment objectives oftheexistingtariffs.TheCompanywillcontemporaneously fileitsreplacement tariffwithitspetitiontocancelormodifyitscurrentSC-11,ERIRandEDRtariffs.TheCompanywillcontinuetoworkwiththepartiestodesigntheS.C;No.11replacement tariffwiththeobjective thattherevisedtariffwillbefiledassoonaspossible, butinnoeventlaterthanDecember31,1997.Page57

Undernocircumstances willtheCompanyrequirethatacustomerpurchasethecommodity fromtheCompanyinordertoqualifyforanS.C.No.11contract.

TheCompanywillnotbeprecluded fromproposing otherprogramsofgeneralapplicability toaddresseconomicdevelopment issues.4.9OPTIONALTARIFFSFORNON-RESIDENTIAL CUSTOMERS TheCompanywillceasesigningCustomers totheOptionalTariffSchedules effective withthePowerChoice Implementation Date.Customers currently servedontheOptionalPricingSchedules willbegiventheoptiontocontinuetoreceivetheiroptionalprovisions untilsuchcustomers becomeeligibleforretailaccessafterwhichoptionalpricingschedules willbeeliminated;

provided, however,thattheoptionalrateswillcontinuetobechangedtoreflectchangesinthemarginalcostofelectricity.

Customers whochoosetoretaintheiroptionalprovisions priortotheireligibility forretailaccesswillbesubjecttotheratesineffectonApril27,1995fortheContractLoadportionoftheirbill.4.10CUSTOMERS SELLINGPOWERTONIAGARAMOHAWKUNDERS.C.NO.6(a)SeparateS.C.No.6buybackratesshallbedetermined forLoadAreas1,2,3,and4.NiagaraMohawk'spaymentsfordeliveries fromIndependence Stationshallbetheapplicable rates(assetforthinparagraphs bandcbelow)forArea2.(b)Commencing January1,1998untilthedatetheMasterRestructuring Agreement

("MRA")isconsummated asdefinedinSection10.2ofthatagreement

("Consummation Date"),thebuybackratesshallbethetime-differentiated pricebymonth.Appendix0setsforththepricestobeusedinthetariff.Area3pricesareequaltoArea2pricesplusonemill.(c)Commencing withtheMRAConsummation Date,thebuybackratesforeachLoadAreashallbethetime-differentiated prices,setforthbymonthinAppendixDhereto.TheratessetforthinAppendixDshallremainineffectuntilDecember31,1998.(d)Commencing nolaterthanAugust1,1998,thepartiesshallconvenetechnical conferences to,(i)(assuming thereisanoperating ISO/PEonAugust1,1998)determine theappropriateness ofusingtheISOmarketdatatoset1999SC6buy-backrates,andthespecificmarketdatafromPage58

theISO/PEwhichshouldbeusedtocalculate amarket-based buybackratethatisconsistent withPURPA,or(ii)administratively redetermine theS.C.No.6ratesfortherateyearcommencing January1,1999ifatransition tomarket-based rateswillnotoccuronJanuary1,1999.(e)If,aftersuchtechnical conferences, thepartiesdonotreachaconsensus astotheappropriate ratesormechanism forsettingthe1999S.C.No.6rates,thenonorbeforeOctober1,1998,thepartieswilljointlyrequesttheassistance ofasettlement judgetoresolvetheseissues.Ifafterareasonable periodofintervention bythesettlement judge,anS.C.No.6rateormechanism hasnotbeenreachedbyconsensus oftheaffectedparties,anypartymayrequestevidentiary hearingsfollowedbybriefsandarecommended decisiontotheCommission thatwillenabletheCommission toissueanorderonthe1999S.C.No.6ratespriortoJanuary1,1999.AnyS.C.No.6ratefilingshallbesubjecttodiscovery undertheCommission's RulesandtopubliccommentundertheStateAdministrative Procedures Act.4.11CUSTOMERS TAKINGSERVICEUNDERS.C.NO.7(SALE,BACKUP,MAINTENANCE ANDSUPPLEMENTAL ENERGYANDCAPACITYTOCUSTOMERS WITHON-SITEGENERATION FACILITIES)

ANDEXITFEESFORCUSTOMERS WHOBYPASSTHECOMPANY'S DELIVERYSERVICE.4.11.1Rationale Theintention oftheExitFeeandtheCTCprovisions ofSC¹7istodiscourage uneconomic bypassoftheCompany's servicesandchargesincaseswheresuchbypassisnoteconomicfromsociety's standpoint andwouldtherefore shiftcoststootherstakeholders.

4.11.2AllcabiiThefollowing tablesetsforththeapplicability oftheExitFeeandSC¹7inspecificcircumstances.

Inaddition, applicability ofexitfeesforNYPAallocations willbedetermined inaccordance withSection4.14andTable4-6ofthisSettlement.

Forcircumstances notincludedinthistable,orcontemplated herein,thecompanywillbepermitted topetitiontheCommission toassessanExitFeeorapplySC¹7inaccordance withtheintentions ofthisSection4.11.Page59

ExitFeeandSC7Alicabilit Circumstance

~EitFeeSC7Municipalization, including caseswherethemunicipal disconnects fromtheCompany's deliverysystem.YesNo2.Customerremainsinthesamelocation, disconnects fromtheCompany's deliverysystemandconnectstoanotherutility's deliverysystemsuchasthatofanotherutilityorIPP.YesNo3.Selfgeneration withbackupfromthecompany's deliverysystem.Yes4.Selfgeneration wherethecustomerdisconnects fromtheinterconnected systemorisnotconnected totheinterconnected system.NoNo5.Customers thatreceivedanSC¹11Contractpriorto7/23/97basedonashowingofaviablecogeneration threatuptotheelectriccapacityofthedemonstrated viablecogeneration project.No6.Customers thatrelocateorclosetheiroperation.

NoExitFee(a)ExitFeeCalculation Methodology Page60

TheCompanywillusea"revenues lost"exitfeemethodology similartothatproposedbytheFERCinOrder888.Theexitfeewouldbecalculated onaone-timebasis.However,theCompanyiswillingtoentertain levelized annualpaymentsorotheroptionsthatmaybenegotiated betweentheCompanyandthecustomer, subjecttoadequatesecurity.

The"revenues lost"formulaisequaltothenetpresentvalue(attheCompany's weightedaveragecostofcapital)overYyearsof:(R-E)Where,Rshallequaltheannualestimated revenuefromthecustomerusingthebundledpricedesignscontained inthesettlement agreement.

Therewillbenocreditfortransmission relatedrevenues, asproposedinFERCOrder888,sincethecustomerwillnotbeusingtheCompany's deliverysystem.EistheCompany's estimateoftheannualrevenuesthatitcanreceivebysellingthereleasedcapacityandassociated energy.AsinFERCOrder888,thecustomerwillhavetheoptiontomarketaportionofthereleasedcapacityandassociated energy.YisthenumberofyearsrequiredfortheCompanytorecoveritsfullstrandedcosts.SinceYisdependent uponanumberoffactors,including thetimingofthedeparture, theCompanywilladdressYonacase-by-case basis.Inaddition, theCompanywillchargedeparting customers fortheirallocation ofnucleardecommissioning coststhroughtime.(b)Accounting forExitFeesTheCompanyagreeswiththeconceptthatanyexitfeesreceivedshouldbedeferredtoaffectstrandedcosts.TheCompanywillworkwiththepartiestodevelopthespecificaccounting, andsubsequent amortization, ofthedeferralforexitfees.Totheextentthatexitfeesarereceivedduringthetermofthissettlement thatresultinareduction inrevenuesotherwise expectedtobecollected bytheCompanythroughtheCTC,thepartiesagreethataportionPage61

oftheexitfeecanberecognized duringthetermoftheSettlement toholdtheCompanyharmless.

S.C.No.7Effective withthePowerChoice Implementation Date,S.C.No.7willbeclosedtonewsubscribers.

4.11.4.1ExistingCustomers Existingcustomers shallbesubjecttotheS.C.No.7pricesineffectonJuly23,1997,aswellasanyapplicable surcharges asidentified onTable4-5.AtsuchtimeasallorthemajorityoftheCompany's FossilandHydrounitsaredivestedandthecommodity portionofbackup,supplemental andmaintenance serviceareavailable onacompetitive basis,theratesforexistingS.C.No.7usersshallbechangedtothosedescribed in4.11.4.2below.TheCompanyagreestouseitsbesteffortstoacquireancillary servicesfromthecompetitive marketatthetimeofdivestiture.

TheCompany,however,willnotberequiredtocreatenewsystemstoallowfortheprocurement ofsuchservicesonacompetitive basis.4.11.4.2NewSubscribers andExistingS.C.No.7Customers Following Divestiture oftheCompany's FossilandHydroAssetsNewtariffleavesshallbeaddedwhichwillapplytoallnon-residential customers withon-sitegeneration (exceptasprovidedforundercircumstance no.5ofSection4.11.2)andexistingcustomers withon-sitegeneration whoarenotcurrently servedunderS.C.No.7.Inaddition, thesenewtariffleavesshallapplytoexistingS.C.No.7customers atalaterdateasprovidedinSection4.11.4.1~Thesetariffleavesshallprovideforrateswhichinclude:i)acombination ofanaccesschargeandanenergychargeforthebaselinePage62

customerload("CL")and,ii)theratescontained inthecustomer's otherwise applicable serviceclassification (orS.C.No.11.,ifqualified) foranyloadwhichexceedstheCL,where:TheCLshallbebasedonthecustomer's loadinahistoricperiod.TheaccesschargeforloadatorbelowtheCLshallbeequaltothecustomer's contribution totheCompany's fixedcostsduringthehistoricperiod.Theaccesschargeshallbesubjecttoadjustment forsurcharges asidentified onTable4-5.TheenergychargeforloadatorbelowtheCLshallequalthecommodity costundertheotherwise applicable tariff,ifthecommodity ispurchased fromtheCompany.4.12ECONOMICDEVELOPMENT ZONERIDER(EDZR)ThePartieswillcontinuetoworkondeveloping arateplanthatwillresultincurrenteconomicdevelopment zoneratesthatareequaltofullmarginalcommodity anddistribution cost(excluding theSBC)andfulltransmission costbytheendofthefiveyearsettlement periodforcustomers takingserviceunderthecurrentrider.Therateplanwillbedeveloped assoonaspossiblebutinnoeventlaterthanDecember31,1997.lndeveloping theEDZRrateplanthefollowing principles shallgovern:(a)Non-contestable customers willbephasedintofullmarginalcostsonanaccelerated schedulethattakesintoaccountthelevelofrateimpactsonindividual customers.

(b)Contestable loadswillbephasedinoverthefullfiveyearsofthesettlement period.(c)Foralimitednumberofcustomers thatmayneedspecialeconomicdevelopment considerations, theCompanywillworkwiththepartiestoaddressthesespecialcases.Page63

FornewEDZRcustomers ornewgrowth,the.tariffratewillbeequaltofullmarginalcommodity anddistribution cost(excluding theSBC)andfulltransmission cost.4.13PRICINGDESIGNSFORSERVICECLASSIFICATIONS UNDERPSCNO.214-ELECTRICITY NiagaraMohawk'spricesforoutdoorlightingservicesaresetforthinPSCNo.214-Electricity (formerly PSCNo.213-Electricity).

ServiceClassification Nos.1,2,3and6underPSCNo.214represent privateareaandstreetlighting.

TheCompanyisproposing arebalancing ofthefacility-specific andvolumetric charges.Theproposedfacilitychargeshavebeensetatmarginalcostascalculated underthecurrentlong-runincremental costofservicestudies.Theproposedvolumetric component oftheseserviceclassifications hasbeenincreased tooffsetthedecreaseinfacilityspecificchargestoensurethattherebalancing isrevenueneutral.Thepricesfortheseserviceclassifications areattachedinAppendixD.TheCompanywillphaseinthesepricechangesoverthefirstthreeyearsofthisagreement.

ServiceClassification No.4ofPSCNo.214-TrafficSignals,isenergyanddelivery-only related.ThechargeforthisclassiTication doesnotincludethecostofowningormaintaining facilities andtherefore hasnotbeenchanged.Theresulting volumetric chargesunderPSCNo.214willbeunbundled whencustomers becomeeligibleforretailaccess.4.14APPLICATION OFUNBUNDLED PRICESTONYPAALLOCATIONS (a)NYPAEconomicDevelopment PowerAllocations TheCompanyagreestomaintainforexistingEDPallocations itsexistingtariffratesforthefirstthreeyearsofthesettlement.

Fornewallocations theCompanywilluseitsunbundled rateschedules andthesaleswillbeconducted asadirectsalefromNYPA.(b)NYPARuralandDomestic(R8D)HydroCreditThebenefitsoftheR8Dhydrocreditwillflowthroughtoconsumers inaccordance withthe1990Contract.

NMPCandNYPAagreetoworkinPage64

goodfaithtomodifyasappropriate, the1990Contracttoreflectthechangesinindustrystructure.

(c)Table4-6delineates thetreatment ofNYPAallocations.

A"yes"underacolumnheadingmeansthechargeidentified inthecolumnheadingappliestotheallocation.

A"no"meansthechargesshallnotapply.Table4-6Application ofUnbundled PricestoNYPAAllocations (3)Transmission

&Distribution ExitFeesDistribution SupplyCTCRelatedQp~ltedSBCReplacement Power445MW(4)nonononoExpansion Power(1)250MW(4)nonononoEDP<46MWEDP>46MWHLFF(4)(4)noyesnonoyesyesnoyesScheduleA8First50MWReplacement(2)

(4)nonononoHLFFabove(4)ScheduleA8First50MWReplacement(2) yesyesyesyes(d)NotestoTable4-6:(1)Exceptdeliveries ofEPallocated pursuanttoparagraph 13(b)ofSection1005ofthePublicAuthorities Lawforrevitalization purposeswillbesubjecttotheCTCifandtotheextentthatthePage65

amountofanyallocation whenaddedtothethenexistingEPsalesinNMPCserviceareaexceeds210MW.ScheduleAasprovidedforintheAgreement AmongNiagaraMohawkCorporation, NewYorkPowerAuthority andDepartment ofPublicServiceResolving andSettlingCertainDisputes, datedMay22,1997.Thefirst50MWofreplacement referstoaprovision oftheMay22,1997agreement thatallowsthePowerAuthority toreplacecertainHLFFallocation priortothePowerChoice Implementation Date.Allrightsandresponsibilities contained inthe"May22,1997Agreement" shallremainlegallybindinginaccordance withitsterms,andnothingcontained inthePowerChoice Settlement orthisSectionshallbeconstrued tooverrule, explainorotherwise modifytheMay22,1997Agreement exceptthatintheeventofanyconflictbetweentheprovisions ofparagraph 5oftheMay22,1997Agreement entitled"Delivery ofExpansion andReplacement Power"andtheprovisions ofthisSection4.14andTable4-6relatingtoExpansion andReplacement Power,theprovisions ofthisSection4.14andTable4-6shallprevail.Thefollowing abbreviations applytoTable4-6:Expansion Power("EP");EconomicDevelopment Power("EDP");HighLoadFactorPower("HLF");Replacement Power("RP").DeliveryserviceforallNYPAReplacement, Expansion, EDPandHLFPowertransmitted anddelivered byNMPCaregovernedbyexistingagreements and/orauthorities, providedhoweverthatnothinghereinshallbeconstrued asanadmission oragreement byNMPCorNYPAoranyotherpartythatdeliveryservicesprovidedtonewEP,RPorothercustomers ormodifications ofdeliveryservicesprovidedtoexistingEP,RPorothercustomers shallorshallnotbeprovidedunderNMPC'sOpenAccessTransmission TarifffiledwiththeFederalEnergyRegulatory Commission andaseparateagreement forlocaldistribution

services, andprovidedfurtherthatnothingcontained hereinshallberegardedasa'waiverbyNMPCofitsratechangerightsunderanyexistingagreement betweenNMPCandNYPAexceptasexpressly specified herein.Page66

4.15ANNUALTARIFFFILINGSTheCompanywillfiletariffamendments toimplement theinitialratesandtermsofthisagreement assoonaspracticable aftertheconditions described inSection2havebeensatisfied.

Duringthetermofthisagreement, theCompanymaymakeannualtarifffilingstobeeffective oneachanniversary ofthePowerChoice Implementation Date.Theseannualfilingswillbemadeapproximately 120dayspriortotheireffective dateandwillreflectthetermsofthisagreement including thepricingdesignchanges,deferrals (years4-5only),thegeneration saleincentive (years4-5only)andtransmission/distribution priceescalation.

4.16RATEFLEXIBILITY 4.16.1GeneralDuringthetermofthisAgreement, theCompanywillhavetherighttoseekratechangesthatarerevenue-neutral onaclassaveragebasis.Suchrateproposals willbefiledwiththeCommission andsubjecttoregulatory approval.

Thetypeofchangesthatmaybeproposedinclude:b.C.e.changesinserviceclasssegmentation byconsumption levels,loadfactors,end-usepurposes, oranyotherdistinguishing factors;reallocation ofrevenuewithinclassesbetweendemand,energyandcustomercharges;reallocation ofrevenueamongcustomergroupsbasedoncost-of-service andcompetitive analyses; additions, deletions orotherchangestorateblocksorratingperiods;andchangestoestablish uniformtransmission anddistribution ratesacrossrateclassifications offset,ifnecessary, bychangestotheCTC.ThisAgreement willnotprecludetheCompanyfromproposing pricingchangesinresponsetocompetitive developments.

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4.16.20tlonalRatesandServicesTheinitialservicescontained inthisagreement wouldbeavailable toallqualified customers forthetermofthisagreement.

TheCompanymay,additionally, proposeoptionalratesand/orservicesatanytime.Tariffsforsuchratesand/orserviceswouldbecomeeffective 30daysaftertheyarefiled.4.17MISCELLANEOUS TARIFFAMENDMENTS TheCompanywillmakeamendments toitstarifftoreflectthefollowing issues:4.17.1AreaioofDemandandCustomerCharesSincethepricescontained inthisAgreement forserviceclassifications thatincludedemandandcustomerchargeshavebeencalculated basedonhistorical non-coincident customerdemands,theaggregation ofcustomers inthoseserviceclasseslikelywouldresultintheshiftingofcoststoothercustomers ortotheCompany.ESCosaccordingly willnotbepermitted toaggregate customers'oads andpaydemandandcustomerchargesbasedontheircoincident demands.Thebenefitsofloaddiversity havealreadybeenreflected inthecalculation ofthesecharges.ItisnottheintentofthisSection4.17.1toprohibitESCosfromaggregating thecommodity forcustomers eligibleforretailaccess.4.17.2LwVolaeBassCustomers maybereconnected toadeliverypointatahighervoltagelevelatnoadditional costtothecustomerifintheCompany's solejudgment, suchreconnection willalleviate reliability orsafetyproblems;

provided, however,thattheCompanymaypermitsuchreconnection inothercircumstances ifthecustomeragreestopay1)thedifferential indistribution chargesandCTC,and2)theincremental reconnection costs.Page68

SECTION5.0CUSTOMERSERVICEBACKOUTCREDITThedetailsofacustomerservicebackoutcreditwillbeestablished byDecember31,1997throughcontinued negotiations amongtheparties,basedonagreement onthefollowing generalprinciples:

5.1GROSSREVENUEEXPOSURETheCompany's grossrevenueexposureattributable tothecustomerservicebackoutcreditwillbelimitedasfollows:Year1Year2Year3$6M$10M$14MTheCompanymaydeferforfuturerecoverypursuanttoSection2.4.3and2.6one-halfofeachdollaroflostrevenue.IfthelimitsofCompanyliability anddeferrals outlinedabovearereached,thebackoutcreditwillbecapped,eitherbynumbersofcustomers, amountofload,orothermethod.5.2DESIGNPRINCIPLES (1)Severalcategories ofthebackoutcreditwillbeestablished sothatdifferent amountswillbebackedoutdepending onwhichservicesaretakenoverbytheESCo.However,therewouldbeaminimumcreditthatwillbebackedoutregardless oftheservicesoffered.(2)Thecreditcouldbecalculated volumetrically orpercustomer.

(3)Therewillbedifferent levelsofthebackoutratebyserviceclass.Page69

(4)TheCompanywillprovideastudyofavoidable customerservicecostsbyJune1999.UponpetitionofanypartyaftertheendofYear2ofthisagreement, theCommission canrevisitthecustomerservicebackoutcredit,including theappropriate levelofanycreditoralternate mechanisms forhandlingthemovementofcustomers toothersuppliers (SeeSection8.2.8).Inanyevent,theCompany's grossrevenueexposureinyear3shallnotexceedthecapssetforthabovein5.1.5.3RELATIONSHIP TOAGENERICPROCEEDING IfthereisafinalPSCOrderoranorderwhichhasnotbeenstayedpendingappealinaGenericProceeding regarding customerservicescurrently providedbyregulated utilities whichshouldbemadecompetitive and/orthemethodfordetermining avoidedcostsassociated withthoseservices, thatOrdershallsupersede thisagreement.

WhetherornotthereisaGenericOrderregarding customerservices, theCompany's grossrevenueexposureinyears1-3shallnotexceedthecapsin5.1.InyearsfourandfivethebackoutshallnotexceedtheCompany's avoidedcostsunlesstheincremental exposureisoffsetbyotherrevenuesources(e.g.deferrals).

IfthereisnoGenericOrderregarding competitive customerservices, theCompany's study,including commentsofotherpartiesthereon,willprovidethebasisfordetermining theCompany's avoidedcustomerservicecostsinyears4and5.ThisAgreement doesnotlimitanyParty'srightstochallenge orotherwise petitionforrelieffromanyproposedpolicyintheGenericProceeding.

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SECTION6.0SERVICEQUALITYINCENTIVE Therewillbeaservicequalityincentive whosetotalvalueis30basispointsor$6.6million,where1basispointforbothelectricandgaswillbevaluedat$220,000after-tax,or$338,000before-tax, forthepurposesofthisagreement.

Alloftheamountsreflected belowareafter-tax dollars.6.1CUSTOMERSERVICEPERFORMANCE For1998andbeyond,theCustomerServicePerformance incentive isequaltoamaximumof$3.3millionperyear.Themeasuresofcustomerserviceperformance described inthisSection6.1supersede theprovisions ofSectionVill,CustomerServiceGuarantees setforthintheStipulation andAgreement approvedbytheCommission inNiagaraMohawkCases96-G-1095 and96-G-0091,OpinionNo.96-32(December 19,1996).6.1.1PSCComlaintateThePSCComplaint Rateisthe12-monthcomplaint rate,measuredateachyearend.Thetargetsareaveragemonthlyratesoftotalcomplaints per100,000customers, including collection-related complaints.

Themaximumpenaltyis$1,100K.RateInterval<1010.0-10.911.0-11.912.0andaboveax.PenaltwitinScaledInterval$0$220K$660K$1,100K6.1.2CororateRsdentlalTrasat'onSatisfaction IndexTheCorporate Residential Transaction Satisfaction Indexisthecumulative indexof4quarterly surveysofcustomers whohavehadtransactions withtheCompany.Itexcludescollections transactions.

Themaximumpenaltyis$1,100K.Page71

CSIInterval8005CSI78.0<CSI<80.076.0<CSI<78.0CSI<76.0Max.PenaltwithiScaledInterval-$0$220K$660K$1,100K6.1.3LowIncomeCustomerAssistance ProramALowIncomeCustomerAssistance Program(LICAP)performance incentive mechanism willbenegotiated priortoDecember31,1997.Themechanism willincludeenrollments andenergyservicetargets.Themaximumpenaltyis$1,100K.6.2STATEMENT OFINTENTThereisagreement inprinciple toconsiderwhetheraprogramofindividual customerserviceguarantees mayinpartorwhollyreplacethebroad-based penaltymeasuresadoptedabove,including withinthetimeframeofthisagreement.

TheCompanywillcontinuetoworkwithStaffonthedevelopment ofcustomerserviceguarantees asamechanism forinsuringahighlevelofcustomerservice.Specifically andinitially, theCompanyandStaffhaveamutualinterestinimproving customerconvenience andsatisfaction withscheduling ofappointments.

6.3SERVICERELIABILITY INCENTIVE Themaximumpenaltyforservicereliability performance is$3,300K.6.3.1Sstemlnterrut'oFreuencSIThemaximumpenaltyforSystemInterruption Frequency (SIF)performance is$1,320K.Targetsarethenumberofoutagespercustomer, excluding majorstorms.SIFI0.93<SIFSIF<0.93~Pnalt$1,320K$0Page72

6.3.2GustoerInterrutionDurationCIDThemaximumpenaltyforCIDperformance is$1,320K.Thetargetsaretheaveragehoursperinterruption, excluding majorstorms.CIDInterval2.07<CIDCID<2.07~Penalt$1,320K$06.3.36~6iThemaximumpenaltyforPowerQualityis$660K.Targetswillbeupdatedannuallybasedonmostrecentfouryeardata.Targetsdisplayed belowarefor1997.Inte~glPenalte3~1'IKV294<Momentaries 247<Momentaries

<294Momentaries

<247$220K$110K$023-69KV848<Momentaries 743<Momentaries

<848Momentaries

<743$220K$110K$0~332095<Momentaries 1951<Momentaries

<2095Momentaries

<1951$220K$110K$06.4ACCOUNTING MECHANISM Anypenalties accruedwillbeusedtooffsetcostdeferrals.

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SECTION7.0SYSTEMBENEFITSCHARGEPROGRAMS7.1SYSTEMBENEFITSCHARGE7.1.1ProramsandFundinLevelsThepartiesagreethattheSystemBenefitsCharge(SBC)appliesasfollows:TheSBCcoversprogramsrelatedtodemand-side management (DSM),ResearchandDevelopment (R8D),andlowincomeenergyefficiency.

2.Spendinglevelswillbesetat$15million(approximately 1995spendinglevels)foryears1through3withanequalamountremovedfrombaserates,i.e.,spendinglevelsareincludedwithinthepricing(rate)goalsinTables4-1and4-2.3.Thecontinuation oftheSBCandappropriate fundinglevelswillberevisited inaproceeding foryear4notwithstanding theassumptions inAppendixC.Activities thatareintegraltoRegCobusinessfunctions willnotbefundedthroughtheSBC.Theseinclude,forexample,activities whicharepartofabundledpackageofservicesthatallowRegCotomaintaincustomersatisfaction andserviceincluding

outreach, information, education,

dialogue, andcustomerconsultation programsandotheractivitythatarenotwithinthescopeoftheSystemBenefitChargeassetbytheCommission andthethirdpartyadministrator.

5.Unexpended SBCfundswillbeaccumulated forfutureSBCprogramuse.6.NewprogramsthattheCommission ordersorexpansion ofexistingprogramsthatwouldincreasespendingabovethe$15milliontargetwillbepassedthroughtocustomers outsideofthepricecaps.Page74

7.1.2State-Wide ThirdPaAdministrator TheCompanywillproposetheuseofastate-wide, thirdpartyadministrator forDSMandR&Dprogramspendingconsistent withPSCpolicyontheSBCandtheotherPSCapprovedutilitysettlement agreements.

TheCompanywillworkwiththepartiestoaccomplish thetransition fromtheCompany-administered programstoathirdpartyadministrator asrapidlyaspossible, recognizing thefundingthathasbeencommitted tocertainprojects.

RegCoandunregulated affiliates willbeallowedtobidtoimplement variousDSMandR8Dprojects.

Untilathirdpartyadministrator isestablished, theCompanywillfileaPublicPolicyPlanannuallyforCommission approval.

Indeveloping thePublicPolicyPlan,thecompanywillestablish aPublicPolicyAdvisoryPanel,comprised ofrepresentatives fromvariousconstituencies toprovideadviceandguidancetoprogramdevelopment.

Nothinginthisagreement willprohibittheStatewide administrator fromallocating asignificant portionofthetotalSBCrevenuesderivedfromNiagaraMohawkcustomers tobedisbursed withinNiagaraMohawk'sserviceterritory throughcompetitive standardperformance contracts whichprovideforstipulated pricingforenergyefficiency, consistent withanygenericguidelines forSBCexpenditures separately developed fromthisproceeding bythePSC.7.1.3LowIncomeGustoerAssistance ProramLICAPTheenergyefficiency portionoftheLICAPprogramwillbefundedthroughtheSBC.7.2MISCELLANEOUS:

(i)TheCompanywillcontinuetodevelopdetailedannualforecasts oftransmission anddistribution

("T8D")capitalbudgetrequirements andwillidentifyforeachmajorT8Dproject(i.e.,projectsof$2.5millionormore),thelocation, reasonforproject,scopeofproject,projected capitalcosts,appropriate loadandotherdata.TheCompanywillalsoperformloadmonitoring consisting ofmonitorsatasignificant sampleofthetransmission andareasubstations Page75

scheduled forexpansion/upgrade inthefive-gear T&Dcapitalplan.TheCompanywillevaluateandimplement cost-effective measuresasalternatives tomajorT&DprojectsthatdefermajorT8Dsystemprojectsthroughtheuseoftechnologies orservicesthatcouldreducepeakT&Dloads.Forsuchcost-effective

projects, consideration willbegiventotechnologies orservicesthatminimizetheenvironmental impactsofelectricity usageincluding demandsideandothernewcosteffective technologies (suchaswind,solaranddistributed generation) wherepracticable.

TheCompanywillcontinuetoseektominimizecostsandenvironmental impactsforT8DprojectsthatarenotmajorT8Dprojects.

TheCompanywillincludetestimony initsnextratecasediscussing alternatives totransmission anddistribution capitalspending, including onsitegeneration anddemandsidemanagement programsandtherelationship betweencurrentratestructures, energyefficiency alternatives anddistribution revenuesandprofits.PlumStreetEnterprises oranysuccessor companies shalloffertoallitsretailelectriccommercial andindustrial customers for-profit energyefficiency services; andwillmakeagoodfaithefforttomarketfor-profit energyefficiency servicesorproductsforallofitsresidential andsmallcommercial customers.

PlumStreetEnterprises oranysuccessor companies willofferagreenpricingprogramdesigned, incooperation withinterested parties,asaprofitmakingenterprise toaggregate demandofcustomers interested inreceiving electricpowerfromrenewable energyresources (e.g.wind,solarandbiomass).

NMPCagreestodonate5,000SO,allowances totheAdirondack Councilforretirement.

NiagaraMohawkagreestodonatetotheStateofNewYork,infee,1000+acresofhighintrinsic habitatvaluelandssurrounding DeadCreek,TownofPiercefield withintheAdirondack Parkandcommitstonegotiate ingoodfaithwiththeStateofNewYorkforthesaleofaconservation anddevelopment righteasementfortheremaining 2400+acressurrounding DeadCreek(TownofPiercefield).

TheCompanycommitstonegotiate ingoodfaithwiththeStateofNewYorkforthesaleofaconservation anddevelopment rightPage76

easementfor1000+acresthatareonthewestsideofCarryFallsReservoir.

NMPGagreestooffertotheStateofNewYorkfeeinterestto600+acresontheeastsideofCarryFallsReservoir forasetprice'of$258.00peracrewhichrepresents a50%donationofourappraisal value.(Thisamountstoadonationof$155,000invalue.)TheCompanycommitstoalsomakingtheoffercontained insections7.1(v)through7.1(x)intheRaquetteRiverrelicensing negotiations.

Inconsideration ofreachingamutuallysatisfying settlement oftheRaquetteRiverrelicensing negotiations, theCompanycommitstodonatetoNewYorkStatefeeinterestto600+acresontheeastsideofCarryFallsReservoir.

TheCompanycommitstodonatetotheStateofNewYorkinfeeaportionoflandatthesoutherntipofCarryFallsbeingaparcelorparcelsoflandsofapproximately 200acres+,lessanylandsnecessary forNiagaraMohawk'sFERCProjectpurposes.

(Thisamountstoadonationof$92,000invalue.)NiagaraMohawkcommitstonegotiate ingoodfaithwiththeStateofNewYorkforthesaleofaconservation anddevelopment rightseasementfor2200+acresoflandonthenorthernsideofRainbowFallsReservoir.

NiagaraMohawkcommitstonegotiate ingoodfaithwiththeStateofNewYorkforthesaleoffeeinterestinthe135+acresontheeasterlyandwesterlysidesofStarkReservoir.

NiagaraMohawkcommitstonegotiate ingoodfaithwiththeStateofNewYorkforthesaleofaconservation anddevelopment rightseasementfor1639+acresoflandsurrounding BlakeReservoir.

NiagaraMohawkcommitstonegotiate ingoodfaithwiththeStateofNewYorkforthesaleofaconservation anddevelopment rightseasementfora1943+acresoflandonFiveFallsandSouthColtonReservoir.

TheCompanywilldevelop10MWofwindpowergeneration and1.6MWofphotovoltaic generation thatwillbefundedthroughavailable thirdpartyfunds/grants andtheSBCfundingprovidedforinthisagreement (SeeSection7.1.1).TheSBCfundingwillbebasedonthedebtserviceofthecostofthefacilities inexcessofPage77

thirdpartyfunding,subjecttoanamortization schedulewithinthefiveyearsoftheAgreement.

Anyelectricity producedfromthesefacilities willbesoldtoathirdpartymarketerforresaleunderacompetitive biddingprocessdesignedtoattractpurchasers engagedingreenpricingoffersintheretailmarket.Attheendofthefifthyear,theCompanywillseekbidstosellthesefacilities tothemarket.Anyproceedsfromthesaleoftheelectricity andthesaleofthefacilities willgotofundfutureSBCprojects.

T&Dfacilities constructed toconnecttheseprojectstothesystemwillbeamortized overtheprojected lifeoftheprojectsandrecovered aspartoftheprojectcostduringthefirstfiveyearsofthisAgreement andaspartofT&Drevenuerequirements afterthefirstfiveyears.Nothinginthisparagraph shalllimitthethirdpartyadministrator's abilitytooverridethisprovision.

(xii)AportionoftheSBCwillbeusedtofundexistinglong-term ecological monitoring programssuchastheAdirondack LakeSurvey(ALS).Thepartiesexpectthattheseactivities willbefundedbytheStatewide SBCadministrator inproportion tocontributions fromeachutility.Intheeventthatotherutilities'BC fundsarenotavailable, thenfundingsufficient tocontinuetheALSshallbemadeavailable fromtheSBCestablished inthisagreement (nottoexceed5%ofavailable funds).Nothinginthisparagraph shalllimitthethirdpartyadministrator's abilitytooverridethisprovision.

(xiii)TheCompanywillcontinuetoofferinformation toallcustomers regarding available energyefficiency services(e.g.,billstuffersandreferrals tocompanies offeringenergyauditsandotherservices) andfacilitate customeraccesstoenergyefficiency productsandservicesavailable inthemarketbythirdpartyproductvendorsandserviceproviders (e.g.,byarranging manufacturers'ebates).

Theseactivities shallbecarriedoutinamannerwhichdoesnotgivepreferential treatment toanyenergyserviceprovider.

(xiv)TheCompanywillsupportlegislation orstateagencyrulemaking whichwouldupgradeNewYorkStatebuildingcodestomeetthe1995ModelEnergyCodesandASHRAEStandard90.1.TheCompanybelievesthattheimplementation ofsuchlegislation orstateagencyrulemaking shouldconsidertheeconomicimpacttotheStateofNewYorkofthebuildingcodes.Page78

(xv)TheCompanywillsupporttheinclusion ofenvironmental protection provisions infederalutilityrestructuring legislation, insofarascongressional consideration ofsuchprovisions doesnotundulydelayprogresstowardcreatingaderegulated andopencompetitive marketforelectricity intheUnitedStates.Withregardtosuchenvironmental measures:

a)TheCompanywillsupportestablishment ofanationalsystembenefitstrust(national wirescharge),withtheunderstanding thatsuchatrustwouldnotbeconstituted inamannerwhichwouldcompetitively disadvantage companies inastatethathasestablished aparallel, state-level systembenefitscharge.b)TheCompanywillsupportnationwide "environmental comparability" requirement forfossilgenerating unitsfornitrogenoxides(NOx)emissions (i.e.,auniformgeneration performance standardimplemented incombination withanemissions "capandtrade"program),

withtheunderstanding suchastandardwouldapplyuniformly throughout theentireUnitedStatesandwiththeunderstanding suchastandardwouldbephasedinsothatitsimposition wouldnotunreasonably devaluecurrentfossilgeneration assets.c)TheCompanywillsupportnationalenvironmental disclosure requirements foremissions thatwouldapplytoallenergyretailers, withtheunderstanding suchdisclosure requirements wouldbepractical andnotunreasonably burdensome toadminister.

NiagaraMohawkrecognizes thatinacompetitive market,someretailers maychoosetogobeyondtheminimumrequirements withrespecttocharacterizing theenvironmental aspectsoftheenergytheyprovide.d)TheCompanywillsupportacleanenergyportfolio standardthatrequiresallvendorstohaveaminimumamountofrenewables andothernon-emitting orultralowemitting(e.g.,fuelcells)energysourcesintheirgenerating mixandthatavoidsunintended andundesirable economicincentives; i.e.,theCompanywillsupportastandardthatwouldpreventPage79

anybypassoftherequirement andutilizesarenewable energycreditspurchaseprovision.

(xvi)TheCompanyandStaffagreethatcustomerchoicewouldbeenhancedbytheavailability ofenvironmental information concerning thepowerbeingprovidedtothem.Toeffectuate suchdisclosure, theCompanyandStaffagreetoworkwithloadservingentitiesandotherstodevelopandimplement, wherefeasible, meaningful andcost-effective, anapproachtoproviding customers withfuelmixandemissioncharacteristics ofthegeneration sourcesreliedonbytheloadservingentity.Suchanapproachwouldfacilitate informedcustomerchoice,promoteresourcediversity andimproveenvironmental quality.(xvii)Totheextenttheaccounting forsuchrevenuesisnototherwise providedherein,allrevenuesderivedfromsaleswillbeaccounted forinaccordance withtheUniformSystemofAccounts.

Page80 Clg SECTION8.0RETAILACCESS8.1CONDITIONS NECESSARY FORRETAILACCESSInadditiontootherconditions described inthisagreement, retailchoicedependsuponpropermeteringandappropriate billingandsettlement procedures.

8.1.1~PAsdescribed inSection8.3,itisessential thatpropermetering, meterreadingandbillingbeperformed toinsuretheintegrity ofthenewretailaccesssystem.Inaddition, thepartiesagreethatcustomers willpayallincremental costsassociated withtheserequirements asprovidedbyNiagaraMohawk.8.1.2BilliandSettlement Procedures Consistent withMarkeBillingandsettlement procedures thatareconsistent withthedemandsofthemarketmustbeestablished.

NiagaraMohawkwillprepareitssettlement andbillingsystemtoaccommodate retailaccesswithinawholesale electricity marketandbulkpowertransmission systemoperatedbyanindependent systemoperatorandoneormorepowerexchanges.

Thebillingandsettlement systemdescribed inSection8.3supporting theretailaccessschedulewillbedesignedanddeveloped tofunctionwithinthemarketstructure proposedbythemembersystemsoftheNewYorkPowerPoolintheirJanuary31,1997FERCfiling.'he FERCproceeding toreviewthisfilingisinprogressandthetimingofadecisionistherefore uncertain.

UntiltheISOandtheothernewmarketinstitutions areinoperation, Regcowilldevelopmethodstofacilitate wholesale settlement withmarketers andESCoswithintheframework oftheNewYorkPowerPool.Whenthenewinstitutions areinplace,Regcowillmodifyitssettlement 7~ee,"Comprehensive ProposaltoRestructure theNewYorkWholesale ElectricMarket,"FERCDocketER-97-1523-000.

Page81

approaches toensureconsistency withthenewmarl<etenvironment.

Intheeventthatkeyfeaturesofthemarketstructure aremodifiedsubstantially fromthoseproposedinthefiling,theCompanyreservestherighttopetitiontheCommission forapprovaltoadjustthescheduleforretailaccesstopermitcorresponding changestobeincorporated intothebillingandsettlement systems.Keyfeaturesinclude,butarenotlimitedto,thetwosettlement system,locational basedmarginalpricingandtheISOOpenAccessTransmission Tariff.8.2RETAILACCESSTIMETABLE Retailaccessforcustomers inNiagaraMohawk'sserviceterritory willbeofferedonascheduleshowninTable8-1.Asdescribed below,customers willreceiveaccessinseveralphases.8.2.1Farm&FoodProcessor DleaPIoOnFebruary25,1997thePublicServiceCommission issuedanorder'oNiagaraMohawkandthreeotherutilities todevelopretailaccessprogramsforcommercial farmsandfoodprocessors.

Inresponsetothatorder,onApril11,1997NMPCfileditsproposal',

including adrafttariff.OnJune23,1997,theCommission issuedanorder"toimplement theprogram,requiring atarifffilingbyAugust4,1997andthecommencement ofretaildeliveries byNovember1,1997.OnSeptember 18,1997theCommission issuedanadditional orderdirecting certainchangestotheAugusttarifffiling."TheCompany's plantointroduce retailaccesshasbeendesignedtoaccommodate theFarm8FoodProcessor (F&FP)pilotprogram.Table8-1includestheF8FPprogramforillustrative purposesonly.Ifimplementation oftheF8FPprogramisdelayedduetorehearing, OrderConcerning RetailAccessProposals, PSCcases94-E-0948 and94-E-0385.

'Proposal ofNiagaraMohawkPowerCorporation foraRetailAccessPilotProgramforCommercial FarmsandFoodProcessors, PSCcases94-E-0948 and94-E-0385.

"OrderEstablishing RetailAccessPilotPrograms, case96-E-0948.

"OrderConcerning Compliance Filings,case96-E-0948 Page82

litigation, orothercauses,thetimetable forretailaccessforothercustomers willnotbeaffected.

Reflecting theCommission's desireforexpedited implementation, theF&FPproposalutilizesmethodsthatNiagaraMohawkdoesnotnecessarily proposetousewhenretailaccessisextendedtoitsothercustomers.

TheCompanydoesnotviewthemethodsusedforthepilotasprecedent-setting orbindinginanyway.Customers participating intheF8FPprogramwillbeofferedtheoptiontoberemovedfromthepilotandservedunderthefullretailaccessprogramwhenothercustomers oftheirrateclass,size,andvoltagedeliverybecomeeligibleforretailaccess.ItistheintentofthePartiesthatthisagreement andtheDairyleaPilotfulfillstheobligation oftheCompanyincases94-E-0385 etal.and95-E-0924.8.2.2~Gou1Group1consistsofallcustomers inrateclassSC-3Aservedattransmission voltages(greaterthan60kV),pluscustomers inrateclassSC-4servedattransmission voltageswithdemandsservedbyNiagaraMohawkof2MWormore.Thetimingofretailchoiceforthesecustomers willbenolaterthanonemonthafterthePowerChoice Implementation Date.8.2.3~Gou2Group2consistsofallremaining SC-3AandSC-4customers withpeakdemandsof2MWormore.Thetimingofretailchoiceforthesecustomers willbenolaterthansevenmonthsafterthePowerChoice Implementation Date.8.2.4gi~roi3Group3consistsofallremaining customers servedattransmission andsubtransmission voltagelevels(22kVandabove)~ThisgroupwillbecomeeligiblenolaterthanMay1,1999.Page83

~Grou4Group4consistsofallremaining residential customers notalreadyparticipating intheFarmandFoodProcessor pilotprogram.Retailaccessfortheseresidential customers willbeginnolaterthanApril2,1999,andwillbecompleted nolaterthanDecember31,1999.Allpartiesagreetoworkonagoodfaithbasisduring1998todeveloparesidential phase-inplan,whichincludesprocesses andprocedures thatachieveassmoothandworkableatransition aspossible, takingintoaccountdifferent waystoresolvethePOLRobligation, andthedesiretominimizefinancial impactontheCompany,ensurecustomersatisfaction, andaddresstheneedsofmarketers andESCos.Theplanwillbecompleted byDecember31,1998.Aspartoftheresidential retailaccessphase-inplan,theCompanycommitstodeveloping, inconsultation withotherparties,andimplementing anoutreachandeducation programtohelpresidential customers understand andactupontheirrighttochoosetheirenergysupplier.

TheCompanyreservestherighttoconductapilotofretailaccessinadefinedgeographic area,but,ifitchoosestodoso,thepilotwillnothavetheeffectofdelayingthescheduleforresidential customers, norwillitdelaythepossibility forearlieraccessforresidential customers.

8.2.6~Grou5Group5consistsofallremaining non-residential customers exceptfor25cyclecustomers.

Thesecustomers willreceiveretailaccessnolaterthanAugust1,1999.IftheCompanychoosestoconductanareapilot,thisdatewillnotbeaffected, norwillthepilotdelaythepossibility ofearlieraccessforthisgroupofcustomers.

8.2.7CusoersWithSecialContracts Unlessotherwise providedforintheircontracts, customers withspecialcontracts willbecomeeligibleforretailaccesswhenthelaterofthefollowing occurs:(a)thecustomergroupstowhichtheybelongbecomeeligible(asshowninTable8-1),or(b)theircontracts expire.8.2.8Monitorin ProrssThrouhTieOverthelonger-term, allpartiesagreetoworktogetheronagoodfaithbasisduring1998and1999toevaluatetheresponseofcustomers totPage84

retailaccess,bothhereandinotherareas,todetermine whetherthetransition processisworkingwellorshouldbemodified.

Alternatives thatcouldbeconsidered includebutarenotnecessarily limitedto:(i)alternative waysofsatisfying thePOLRresponsibility, (ii)whetherafixedCTCoptionshouldbeofferedtoalargernumberofcustomers, (and,inparticular, whetherafixedCTCisneededforresidential customers),

(iii)whetheramandatory balloting processshouldbeemployedtorequirecustomers tochoosetheirsupplier, and(iv)themandatory assignment ofcustomers toalternate suppliers.

Thepartieswillalsoconsiderwhetheraviablecompetitive marketexists,including afullyfunctioning ISO.8.2.9C~tiThedatesforinitiating accessforresidential andsmallnon-residential customers arenotformallylinkedtohavinganoperational statewide Independent SystemOperator(ISO).However,theCompanyretainstherighttopetitiontheCommission toalterthescheduleiftheISOthatisultimately implemented differssubstantially fromtheproposalfiledwithFERConJanuary31,1997bythemembersoftheNewYorkPowerPool,andifimplementing therevisedISOproposalonthecurrentschedulewouldlikelycauseseriousimplementation problems(suchasmajorcostshiftingormassconfusion).

Inaddition, thedatesforretailaccessforcustomers ingroups3,4and5arecontingent upontimelyreceiptofregulatory approvals fromthePSC.(Adelayofseveralmonthsshouldnotaffecttheresidential andsmallnon-residential accesstimetable unlesssuchadelayaffectstheabilityoftheCompanytoimplement theMRAandtheoverallsettlement.)

8.3RETAILACCESSSETTLEMENT METHODToenableretailaccesswithinitsserviceterritory, RegCowilldevelopabillingandsettlement systemthatwillprovidethefollowing features.

Thesefeatureswillbemodifiedasnecessary tocomplywithanyCommission ordersregarding billingandmeteringinarestructured marketenvironment butthisAgreement doesnotlimitanyParty'srightstochallenge orotherwise petitionforrelieffromanyproposedpolicyintheGenericProceeding.

oRegCowillbillcustomers takingservicefromitstransmission anddistribution systemsforservicesprovidedbytheCompany.oESCoswillhavetheoptionofbillingtheircustomers directlyfortheservicestheyprovide,orrequesting RegCotoprovidebillingservicesforthemforafee.Page85

ESCoswillbeabletoarrangephysicalbilateral purchases withwholesale suppliers, andRegCowillhandlethescheduling ofthesetransactions withtheNYPPorISO,asthecasemaybeatdifferent pointsintime.ESCoswillbeabletopurchasepowerfromthespotmarkets,asadministered bypowerexchanges and/ortheISO,andRegCowillprovideanyESCointerfaces thatmaynototherwise beaccommodated bytheseinstitutions.

oAllchargesincurredbyRegCoasaconsequence ofitsroleinproviding interfaces forESCoswithpowerexchanges ortheISOshallbepassedalongtotheESCosresponsible forthosecosts.Thisincludesanychargesorcostsforlosses",transmission

services, ancillary

services, balancing, uplift,transmission congestion rents,etc.oRegCowillmeterordetermine throughloadshapemethodsallcustomerloadsbyhour,location, andvoltageforthepurposesofdetermining totalloadforeachESCobythosecategories.

Loadsforcustomers receiving powerdirectlyfromRegCowillbedetermined inthesamemethodtoensurethatnocross-subsidization occurs.oRegCowillbepermitted toincludereasonable chargesfortheservicesitprovidesintheadministration oftheretailaccesssystem.ThesechargeswillbeincludedinthetariffsfiledbytheCompany,implementing thetermsofthisSettlement Agreement.

Figure8-1illustrates theapproachRegCointendstotakeinperforming thesefunctions.

Shouldthestatewide ISOand/orpowerexchanges, whenoperational, providesettlement servicesthatenableESCostointeractdirectlywiththoseinstitutions, RegCowillmodifyordiscontinue useofthosefeaturesofthissettlement systemasappropriate.

8.3.1FoecastiaScheduiReueentsESCosortheiragentswillberequiredtosubmittoRegCoatleastadayinadvance(ormultipledaysinadvanceforweekendsandholidays) hourlybilateral scheduled deliveries including thesourceofgeneration supplyandlocationoftheloadbeingsupplied.

Whenthepowerexchanges andtheISOareoperational, ESCoswillalsoberequiredtoprovidehourlyloadforecasts, andspecifywhatportionoftheirforecasted loadsshouldbeservedfromtheday-ahead energymarket.RegCowill"Lossesincludeadjustments fortransmission anddistribution losses,theAofservice,etc.Page86

accommodate loadmanagement bidsprovidedbyESCostotheextentpossiblewithinthebiddingprovisions ofthepowerexchanges andtheISO.8.3.2eerinReuirentsInordertofacilitate retailaccess,allcustomers inclassesSC-3andabovewillberequiredtohaveameterwhosecapabilities areatleastequivalent toasingledirectional meterwitharecordercapableofregistering hourly(orshorter)integrated readings(interval metering),

whetherornottheychooseanalternate supplier.

Theincremental costsofmeteringwillbebornebythesecustomers.

Allothercustomers willbepermitted tocontinuetoutilizeexistingkWhmeters.Forsettlement

purposes, RegCowilluseloadshapesapplicable tothecustomer's classtoestimatehourlyusage.SinceloadshapeshavenotbeenusedinRegCo'sareaforthispurpose,thecompanyreservestherighttomodifythespecifictechniques asnecessary toattainreasonable andaccurateresults.Customerclassesmaybesubdivided ifdeemednecessary toensurethatrepresentative loadshapesareapplied.Anycustomernototherwise requiredtohaveintervalmeteringmayrequestthatintervalmeteringbeinstalled providedthatthecustomerbearstheincremental costsofsuchmetering.

RegCowilladjustitsmethodology fortheapplication ofloadshapesand/orintervalmetersasnecessary basedonexperience, andinconformance withCommission ordersresulting fromtheongoingmeteringandbillingeffortsintheCompetitive Opportunities Proceeding.

Intheeventthatmeteravailability orinstallation resources resultinsomecustomers intheSC-3classnothavinghourlymeteringatthetimetheyotherwise wouldbecomeeligibleforretailaccess,accesswillbepermitted andloadshapesutilizedonaninterimbasisuntilthemeteringisinplace.8.3.3ServcesNotCoveredbtheSettlement SsteCertainservicesacquiredbyESCoswillnotbeincludedinthesettlement system.RegCowillnotbeinvolvedinpaymentsbetweenESCosandgenerators forbilateral transactions betweenthem.TheISOmayhaveinstalled reserverequirements thatallloadservingentitiesmustfulfill;RegCodoesnotintendtoserveasabrokerfortheacquisition ofinstalled capacityforESCos(although ESCoswillbefreetoseparately negotiate forpurchaseofinstalled capacityfromNiagaraMohawkoritssubsidiaries, ifdesired).

Ingeneral,RegCodoesnotintendtoincludeinitssettlement Page87

systemanyserviceforwhichappropriate billingandpaymentmethodsareavailable directlybetweensupplierandESCo.8.3.4Nondiscriminato Treatment ofCustomers RegCowillimplement thecurtailment procedures ofNYPPortheISO(asapplicable) consistent withitsexistingtransmission arrangements andwillnotdiscriminate betweenthosebilateral transactions servingESCocustomers andthoseservingRegCocustomers.

RegCowillconformtoalloperating criteriaandguidelines established bytheISOandthePSC.RegCowillnotdiscriminate inanywayinproviding reliableservicetocustomers thatreceiveenergysupplyfromRegCoorthosethataresuppliedfromESCos.Customers ofRegCoandcustomers ofESCoswillbesubjecttothesameemergency loadcurtailment provisions.

8.3.5AuditofheSettlemen FnctioToensurethatthesettlement functions performed byRegCotofacilitate retailaccessarebeingperformed inaccordance withappropriate procedures thattreatallmarketparticipants equitably, auditsofthesefunctions maybeperformed underthedirection ofthePSC.Thescopeoftheseauditsshallbelimitedtothosefunctions andprocedures relatedtothedetermination andassessment ofchargestotheESCosobtaining retailaccessthroughRegCo.Allauditsshallbeperformed eitherbytheStaffofthePSC,orbyanindependent auditingfirmwithanationalpracticeselectedbythePSC.Anyincremental costsassociated withtheauditingofthesettlement functions thatareincurredbyRegCoshallbebornebyallESCosservingretailloadthroughRegCo'sretailaccessframework, andRegCoitself,inproportion tothetotalenergyservedbytheseentitiesinthethree-month periodpreceding thecommencement oftheaudit.Incremental costsshallincludeauditorcostsinvoiceddirectlytoRegCo,auditorcostsinvoicedseparately toRegCobythePSC,andanyRegCocostsincurredspecifically inresponsetoauditrequirements.

AlldataprovidedforauditpurposestothePSCortoanotherauditorshallberegardedasconfidential andshallnotbedisclosed toanymarketparticipant, ortothegeneralpublic,unlesssuchdataisalreadyaccessible tothepublicthroughseparately established regulations orprocedures exceptasotherwise decidedbytheCommission oritsrecordsPage88

accessofficer.Auditreportsandfindings, excluding confidential data,shallbemadeavailable toallmarketparticipants andthegeneralpublic.8.4Reciprocity Assurances FullretailaccessinNiagaraMohawk'sserviceterritory mayoccurbeforecomparable accessisavailable inotherelectricutilities'ervice territories.

Otherenergyserviceproviders maygainaccesstocustomers inNiagaraMohawk'sserviceterritory beforeNiagaraMohawkisabletogaincomparable accesstocustomers inotherelectricutilities'ervice territories.

Ifthereissuchadisparity inthecompanies'elative degreesofaccess,NiagaraMohawkisconcerned thatitcouldexperience substantial financial disadvantage.

However,aspartofthissettlement, theCompanyagreestherewillbenorestrictions oncommodity salestoretailcustomers unlesstheCompanypetitions theCommission forreliefandtheCommission approvestherestriction.

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Table8-1RetailAccessPhase-InScheduleandStatistics GroupFarm&FoodProcessor PilotNumberofCustomers TimingofRetailChoiceMillions%ofTotalRevenueMwhSales%ofTotalCumulative

%ofTotalCommercial Farms'ood Processors'&FP PilotTotal22,23758922,82611/1/9741.81.444.01.485.92.8384,025479,000863,0251.31.73.03.0Group1Transmission levelSC-3AandSC4customers'8 t+1mo.348.011.24,590,144 16.019.0Group2Allremaining customers

>2MW158t+7mo.213.76.92,517,270 8.827.8Group3Allremaining transmission andsubtransmissionlevelcustomers4 2295/1/9968.82.2800,8792.830.6Group4Allremaining residential customers Group5Allremaining non-residential customers'otals 1,402,657 149,7061,575,674 Phasedin,4/2/99through12/31/991,200.138.81,179.238.13,095.6100.09,440,920 10,482,296 28,694,534 32.936.5100.063.5100.0100.0Page90

NotesonTable8-1Statistics arebasedon1998forecastdata.Revenueestimates reflectBaseRatefor1998.Customers withspecialcontracts willnotbecomeeligibleuntilexpiration oftheircontracts.

Thetableestimates donotreflectpossibledelayedeligibility duetospecialcontracts.

t=ThePowerChoice Implementation DateRoughestimates basedonfullparticipation ofallcustomers currently showninCompanyrecordsasfarms.Actualparticipation islikelytobelower;however,theCompanydoesnothavesufficient datatomoreaccurately predictactualeligibility orparticipation priortoprogramimplementation.

2.Assumeseligibility andparticipation ofallcustomers withSICcodesof2000to2099;specialcontractrates,economicdevelopment discounts, oroptionalpricingschedules maymakesomecustomers ineligible.

3.SC-4customers mustalsohave2MWofNMPCdemandtoqualify.Transmission levelisabove60kV.4.Subtransmission levelis22kVandabove.5.Excludes25cyclecustomers.

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Figure8-1:RetailSettlement

&BillingOne-ortwo-billsystemwithESColoadaggregation andloadshapesBillingparameters (rates,deliverycharges,etc.)RegCoCustomerBillingSystemIdentifyESCoandRegCocustomers ESCocustomerdataBillforimbalance PaymentGenerators InvoicePaymentStatewide PE/ISO~LBMPpricing~OATI(Transmission ServiceCharge,uplift,congestion rents,etc.)PaymentsRegCoservicetemtogPaymentNewRetailLoadsbAccessProcedure hour.ESColoadaggregation voltageNewRegCoRetailSettlement Procedure ESCocustomer-specific data;Invoicefor:balancing, ESCocustomerhourlyusage,uplift8otherPE/ISOchargesNote:Bilaterals mustbescheduled inadvancewithPE/ISOthroughRegCoInvoicesforenergyanddeliverycharges,asapplicable2 RegCoCustomers PaymentESCoCustomers Invoice'SCo*

PamentHourly,monthly,&bimonthly meterreadingsInvoicesforbilateral transactions RegCo'sESCofunctiontreatedthesameasotherESCosforthispurpose'Foroptionalone-billapproach, RegCohandlescustomerbillingforESCo2Altemative one-billapproaches, withESCoshandlingbillingforRegCo,willbeaccommodated asnecessary tocomplywithanyCommission ordersregarding billingandmeteringinarestructured marketenvironment butthisAgreement doesnotlimitanyParty'srightstochallenge orotherwise petitionforlieffromanyproposedpolicyintheGenericProceeding.

SECTION9.0CORPORATE STRUCTURE ANDAFFILIATE RULES9.1PROPOSEDCORPORATE STRUCTURE NiagaraMohawkshallseparateitsexistingoperations, asindicated beloworasdescribed inanypetitionfiledbyNiagaraMohawkwithinoneyearoftheapprovalofthissettlement proposing theformation ofaholdingcompanyinsubstantially thesamestructure described below:HoldCo:TheHoldComaybe,attheCompany's option,alegallydistinctentitythatdirectlyownsnostateorfederaljurisdictional assetsand,therefore, isunregulated orafunctionally separateunitservingthesamepurposesofaholdingcompany.Receto:RegCoshallbeawhollyownedsubsidiary ofHoldCoorautilityparentowninginwholeorinpartoneormoreregulated and/orunregulated subsidiaries.

TheRegCoshallcarryonthefullrangeofNiagaraMohawk'sregulated transmission andelectricandgasdistribution services.

Totheextentnotcarriedonthroughastatewide nuclearoperating companyandsubjecttotheotherprovisions ofthissettlement regarding nuclearassets,NiagaraMohawk'snuclearoperations mayremainapartofRegCo.PlumStreetEnterrse/UnreItedAffiliates:

NiagaraMohawkmayformunregulated orlightlyregulated affiliates, whichmaybeowned,inwholeorinpart,byHoldCoormaybeasubsidiary ofautilityparentundereitherproposedcorporate structure.

IfNiagaraMohawkseekstoformsubsidiaries ofRegCo,itwillbesubjecttoallapplicable regulatory requirements including Section107and69ofthePublicServiceLaw.TransitinGenCo:NiagaraMohawkmayformallsubsidiaries necessary toeffectuate thefossilandhydroassetauctioncontemplated inthissettlement.

Priortothatauction,NiagaraMohawkmaymaintainitscurrentfunctional unbundling ofitsfossilandhydrogeneration business.

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9.2RULESGOVERNING AFFILIATE TRANSACTIONS 9.2.10~1*ti9.2.1.1Separation andLocationRegCo,HoldCo,andtheHoldCo'sothersubsidiaries willeachbeoperatedasseparateentitiesandwillmaintainseparatebooksandrecordsofaccount.HoldCo'sunregulated subsidiaries andRegCowilloperatefromphysically separatebuildings.

RegCoandHoldComayoccupythesamebuilding.

9.2.1.2BoardofDirectors Membership andFiduciary DutyAmajorityoftheRegCoBoardofDirectors willbeOutsideDirectors (i.e.,neitheranofficernordirectorofHoldCooranyHoldCounregulated affiliate).

InanycalendaryearRegCowilllimitdividends paidtoHoldCoasfollows:Yi'aas1998199920002001200220032004200520062007andbeyond$50million$75million$100million$100million$100million$80million$60million$40million$20million$0DividendLimitation:

NetIncomeAvailable forCommonDiv'dendPlThecalculation ofnetincomewillexcludeanyone-time, non-cashaccounting charges,andthedividendlimitation willexcludeanyone-timedividends toHoldCoattributable tomajortransactions suchasassetsales,thePage93

transferofgenerating assetsassociated withHoldCoandsubsidiary formation asnecessary toimplement thetermsofthissettlement, orsecuritization.

Notwithstanding theabove,iftheCompanyfilesforratesforyears2003,2004,2005,2006,or2007,themeasureforthedividendlimitation willbereassessed inthecontextoftheratefiling.9.2.1.3CostAllocation Appropriate costallocation procedures willbefollowedbyHoldCoanditsaffiliates toassuretheproperallocation onafullydistributed basis,toHoldCo,RegCo,PSEorotheraffiliates ofthecostsofanyHoldCopersonnel, propertyorservicesusedbyRegCoorotheraffiliates orHoldCo.Acompletemanualofcostallocation guidelines willbedeveloped andfiledwiththeDirectoroftheOfficeofAccounting andFinanceoftheDepartment ofPublicService.Allamendments andsupplements totheseguidelines willbefiledthirtydayspriortotheeffective dateofsuchamendments andsupplements.

Thecosttodeveloptheseguidelines, accounting, auditingandmonitoring systemsforaffiliates willbepaidbyshareholders.

9.2.2TransferofNon-Generation AssetsTransfers ofnon-generation assets(orrightstousesuchassets)fromRegCotoanaffiliate willbepricedatthehigherofbookvalueorfairmarketvalue.9.2.3TnsferofServicesRegComayprovidetariffedandcorporate services(suchascorporate governance, administrative, legalandaccounting) toHoldCoandHoldCo'sothersubsidiaries.

Theprovision ofcorporate servicesshallbesubjecttoawrittencontractthat,asapplicable, identifies thepersonnel, assets,andserviceswhichwillbeprovided.

Theserviceswillbeprovidedonafullyloadedcostbasis.SuchservicesmaybeprovidedbyRegCosolongasRegCo'stotalassetsareequaltoorgreaterthan85%oftheconsolidated totalassetsofHoldCo.Page94

AtsuchtimeasRegCo'stotalassetsarelessthan85%oftheconsolidated totalassetsofHoldCo,corporate servicesmaynotbeprovidedbyRegCotoHoldCoanditsothersubsidiaries; however,HoldComayprovidecorporate servicestoRegCoanditsothersubsidiaries atanytimeprovidedthatsuchservicesarepricedatnothigherthanfullyloadedcostandarepursuanttoawrittencontractthat,asapplicable, identifies thepersonnel, assets,andservicestobeprovided.

RegCowillnotpurchaseanyotherproductsorservicesfromHoldCooritsunregulated affiliates unlessthesearepurchased asaresultofafairandopencompetitive biddingprocess.TotheextentthattheCompanydoesnotmovethefunctiontoRegCo,theexistingEnergyServicesandGasServicescontracts withPlumStreetwillbesubjecttoafairandopencompetitive biddingprocessbyDecember31,2000,orattherenewalorexpiration datesofthecurrentagreements, whichever isearlier.AnysuchcontractwillbefiledwiththePublicServiceCommission inaccordance withPublicServiceLawSection110.TheCompanywillmeetwithStafftodetermine which,ifany,functions shouldreturntoRegCo.Furthermore, anygenericorderregarding theprovision oftheseserviceswillsupersede thisagreement.

TheRegCo,theHoldCoandtheunregulated affiliates maybecoveredbycommonproperty/casualty andotherbusinessinsurance policies.

Thecostsofsuchpoliciesshallbeallocated amongtheRegCo,theHoldCoandtheunregulated affiliates inanequitable mannerasdefinedinthecostallocation manual.9.2.4SeclalServicesTheCompanythroughRegCowillnotprovideoroffertoprovideservicestocustomers thatarenormallyprovidedbyEnergyServicesCompanies (ESCos)suchasenergyaudits,energyefficiency equipment, etc.withoutpriorCommission approvalexceptasprovidedforinSection7.2(xiii).TheCompanywillbeallowedtoprovideoperation, maintenance andconstruction servicestocustomer's equipment atacustomer's explicitrequestthatisrelatedtoenergydeliveryservices(Rule28ofP.S.C.207).AnysuchservicesprovidedbytheCompanywillbesubjecttothefollowing:

(1)Undernocircumstances willsuchcustomer-requested servicesprovidedbyRegCotoindividual customers imposeacostonotherutilityratepayers.

Customers willbechargedfullyloadedratesfortheseservices.

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(2)TheCompanywillprovidethesesewicesonafirst-come, first-served basistocustomers whorequestthemonnon-discriminatory termsandconditions, i.e.,similarly situatedcustomers wouldbechargedthesamerates.(3)TheCompanywillmakecustomers awareifthereareotherentitiesthatmaybeabletoprovidetherequested services.

(4)Theutilitywillmaintainrecordsrelativetoallsuchservices, including scopeofwork,copiesofcustomerrequestsincluding acknowledgment thatthecustomerwasawareofalternate suppliers, revenuesreceived, anyprofitsmadeasaresultofproviding theservices, andidentifying anydirectorindirectbenefitstootherratepayers thattheCompanyestimates wasderivedfromtheprovision oftheservice.(5)TheCompanywillprovidetheCommission inYear3ananalysisoftheimpactoftheCompanyproviding suchserviceandtheCommission willthendecideiftheCompanywillbeallowedtocontinuetheprovision ofsuchservices.

(6)RegCowillnothireanyadditional employees orpurchaseadditional equipment inordertoprovidetheseservices.

TotheextenttheCompany's currentorplannedprovision oftheservicesdescribed aboverequiresCommission authorization pursuanttoPublicServiceLawSection107,thatauthorization isinthepublicinterestandinapproving thissettlement, theCommission therebygrantsthatauthorization forthetermofthissettlement.

9.2.5~R9.2.5.1Separation ofEmployees andOfficersRegCoandtheunregulated subsidiaries willhaveseparateoperating employees.

Operating officers(i.e.,thoseofficersproviding otherthancorporate services) ofRegCowillnotbeoperating officersofanyoftheunregulated subsidiaries.

OfficersofHoldComaybeofficersofRegCooranunregulated affiliate, providedthataHoldCoofficermaynotbeanofficerofbothRegCoandanunregulated affiliate.

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9.2.5.2EmployeeTransfers IfaRegCoemployeeacceptsapositionwithanunregulated subsidiary, heorshewillberequiredtoresignfromRegCounlessthereisaconflictwiththecollective bargaining agreement inwhichcasethecollective bargaining agreement wouldcontrol.Anysuchemployeeshallbeprohibited fromcopyingortakinganynon-public customerorcompetitively sensitive marketinformation fromRegCo.Employees maybetransferred fromRegCotoanaffiliate.

Transferred employees maynotbereemployed byRegCoforaminimumofoneyearaftertransfer.

Employees returning toRegComaynotbetransferred againtoanunregulated affiliate foraminimumofoneyear.RegCowillfileannualreportstotheCommission, beginning 45daysaftertheendofthefirstcalendarquarterfollowing formation ofHoldCoshowingtransfers betweenRegCoandunregulated affiliates byemployeename,formercompany,formerposition, newcompany,newposition, andsalaryorannualized basecompensation.

Therewillnotbeanytemporary employeetransfers betweenRegCo,HoldCoandanyHoldCounregulated affiliates.

9.2.5.3EmployeeLoansinanEmergency Theforegoing provisions innowayrestrictanyaffiliate fromloaningemployees toRegCotorespondtoanemergency thatthreatens thesafetyorreliability ofservicetoconsumers.

9.2.5.4Compensation forTransfers Anemployeetransfercreditequalto25%oftheemployee's salarywillbeappliedtoreduceanystrandedcosts.Thisfeewillapplyforalltransfers exceptfor(i)theinitialtransferofRegCoemployees toHoldCoonorwithinthe30daysaftertheformation ofHoldCo,(ii)thetransferofRegCoemployees fromoneregulated subsidiary toanotherregulated subsidiary, (iii)thetransferofRegCoemployees toanaffiliate iftheirfunctionisnolongerregulated, (iv)anyrepresented orotheremployeecoveredbyacollective bargaining agreement targetedbyalayoffintheoneyearfollowing theimplementation dateofPowerChoice, and(v)thetransferofemployees involvedintheperformance ofcorporate servicestoHoldCowhenRegConolongerconstitutes morethan85%ofHoldCo'sassetsaspersection9.2.3.Page97

Transferchargesforemployees transferred taPlumStreettodatearereflected inratelevels.9.2.5.5EmployeeCompensation andBenefitsThecompensation ofRegCoemployees maynotbetiedtotheperformance ofanyoftheunregulated subsidiaries,

provided, however,thatstockoftheHoldComaybeusedasanelementofcompensation andthecompensation ofcommonofficersoftheHoldCoandRegComaybebasedupontheoperations oftheHoldCoandRegCo.Employees ofHoldCo,RegCoandtheunregulated subsidiaries mayparticipate incommonpensionandbenefitplans.9.2.5.6LegalRepresentation Theaffiliates ofHoldCootherthanRegCoandCanadianNiagarashallhavetheirownChiefLegalOfficer/General Counsel,whoshallreporttotheaffiliate's management andnotbeanemployeeorofficerofRegCo.Thesamelawfirmmayrepresent RegCoandanyaffiliate onanymatterotherthantransactions betweenRegCoandthataffiliate.

Onanymatternotinvolving suchanintracorporate transaction inwhichtheinterests ofRegComaybeadversetotheinterests ofanaffiliate, RegCowilltakeappropriate stepstoensurethatRegCo'sinterests arevigorously andindependently protected (suchsteps,bywayofexampleandnotlimitation, couldincludehavingseparateattorneys ifasinglelawfirmisusedandcreatingaChinesewallbetweensuchattorneys)

~Withrespecttoallmattershandledbyoutsidecounsel,HoldCoanditsaffiliates shallinstructoutsidecounseltotakeallreasonable stepstoensurethenon-public customerandcompetitively sensitive information inthepossession ofRegCoisnotcommunicated toanaffiliate.

9.2.6Maintai'nFinancial lnteriNiagaraMohawkwillagreetothefollowing financial restrictions:

(i)RegCoassetswillnotbeusedascollateral foraffiliate debt;and(ii)debtandequityrequirements willbeestablished forRegCothroughtheregulatory process.RegCowillnotprovideanyfinancial assistance toitsaffiliates throughloans,loanguarantees, lettersofcreditorothercommitments.

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Nothingintheserestrictions willpreventNiagaraMohawkfromtransferring fundsfromitsOpinacaffiliate toanyotheraffiliate atanytimewithoutCommission authorization.

9.2.7AccesstoBooksRecordsandReortsStaffwillhavefullaccess,onreasonable notice,andsubjecttoresolution ofconfidentiality andprivilege (e.g.,attorneyclient,attorneyworkproduct,selfcritical) issues,to:1)thebooksandrecordsofHoldCoandtheHoldComajorityownedsubsidiaries; and2)thebooksandrecordsofallotherHoldCosubsidiaries totheextentnecessary toauditandmonitoranytransactions whichhaveoccurredbetweentheRegCoandsuchsubsidiaries.

9.2.8~ReortinAnnually, RegCowillfilereportson:Transfers ofassets,costallocations, employeetransfers andemployees incommonbenefitplans.Quarterly, HoldCowillfilealistofallSECfilingswiththeCommission.

9.3STANDARDS OFCOMPETITIVE CONDUCTThefollowing standards ofcompetitive conductshallgovernRegCo'srelationship withanyunregulated affiliates.

9.3.1UseofCororateNameandRoaltesTherateplaninthissettlement shallbeinlieuofanyandall"royalty" paymentsthatcouldormightbeassertedtobepayablebyanyaffiliate orimputedtotheRegCoorcreditedtoRegCocustomers atanytime,including aftertheexpiration ofthissettlement.

Therearenorestrictions onanyaffiliate usingthesamename,tradenames,trademarks, servicenames,servicemarksoraderivative ofanameoftheHoldCoorRegCo,orinidentifying itselfasbeingaffiliated withtheHoldCoorRegCo.Promotional materialmayidentifytheaffiliate asbeingaffiliated withRegCoorHoldCo.Page99

9.3.2SalesLeadsRegCowillnotprovidesalesleadsinvolving customers initsserviceterritory toanyaffiliate.

9.3.3CustomerInuiresIfacustomerrequestsinformation aboutsecuringanyserviceorproductofferedbyESCos,theRegComayprovidealistofallknownESCosoperating intheareawhichmayincludeitsunregulated affiliate.

9.3.4NoAdvantaeGainedbDealwithAffilaeRegCowillrefrainfromgivinganyappearance thatRegCospeaksonbehalfofanaffiliate orthatanaffiliate speaksonbehalfoftheRegCo.RegCowillnotparticipate inanyjointpromotion ormarketing withitsaffiliates.

TheRegCowillnotrepresent toanycustomer, supplierorthirdpartythatanadvantage mayaccruetosuchcustomer, supplierorthirdpartyintheuseoftheRegCo'sservicesasaresultofthatcustomer, supplierorthirdpartydealingwithanyaffiliate.

RegCo'saffiliates willnotrepresent toanycustomer, supplierorthirdpartythatanadvantage mayaccruetosuchcustomer, supplierorthirdpartyintheuseoftheaffiliate servicesasaresultofthatcustomer, supplierorthirdpartydealingwithRegCo.Theseprovisions donotrestricttheuseofthenameofHoldCoorRegCoassetforthinSection9.3.1.9.3.5NoeDAllsimilarly situatedcustomers, including ESCosandcustomers ofESCos,whetheraffiliated orunaffiliated, willpaythesameratesfortheRegCo'sutilityservices.

Ifthereisdiscretion intheapplication ofanytariffprovision, RegComustnotofferitsaffiliate morefavorable termsandconditions thanithasofferedtoallsimilarly situatedcompetitors oftheaffiliate.

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FERCJurisdiction Transactions subjecttoFERC'sjurisdiction willbegovernedbyFERC'sordersorstandards asapplicable.

CusoerInformation RegCowillprovide24monthsofacustomer's datatothatcustomeroritsauthorized ESCoatnocharge,exceptasprovidedbylawconsistent withtheCommission ordersintheGenericProceeding relatedtoMeteringandBilling(94-E-0952).

Additional customerbillinginformation willbeprovidedtoacustomerforareasonable feetobeestablished pursuanttoatariff.IftheCompanyreleasesotherinformation, itwilldosoforafeeandonanon-discriminatory basis.0erInfomationOthercustomerormarketinformation intheCompany's possession willbereleasedasnecessary, asauthorized orrequiredunderFERCandPSCregulations, subjecttoprotection ofconfidential information andrecoveryofattendant costs.RegCowillnotdisclosetoanyaffiliate anymarketinformation relativetoitsserviceterritory, whichisnototherwise public,thatithasnotdisclosed contemporaneously onanequalbasistoallpotential competitors ofitsaffiliate.

pmateesAnycompetitor orcustomerofRegCoorcompetitor ofanyHoldCosubsidiary whobelievesthatRegCoorHoldCooritssubsidiaries hasviolatedtheseprinciples mayfileacomplaint withthePSCandserveacopyontheCompanywhichshallrespondinwritinginfourteenbusinessdays,withacopytothePSC.Thereafter, thecomplainant andtheCompanyshallmeettoresolvethecomplaint informally.

Ifnoresolution canbereachedwithinthirtydaysafterRegCo'sresponse, eitherpartymaynotifytheSecretary ofthePSC.TheSecretary shallsendacopyofsuchnoticetotheotherparty,andshallpromptlyaddressthecomplaint pursuanttotheCommission's complaint procedures.

IftheCommission determines, pertheprocedure outlinedaboveorasaresultofitsowninvestigation, thattheRegCoorHoldCohasviolatedthesePage101

standards, itshallprovidetheRegCo/HoldCo anopportunity toremedysuchconductorexplainwhysuchconductisnotaviolation.

IftheRegCo/HoldCo failstoremedysuchconductwithinareasonable timeafterreceiving suchnotice,theCommission maytakesuchremedialactionforwhichithasauthority underthePublicServiceLaw.9.4MISCfLLANEOUS9.4.1AIlcabillofSettlement Standards ofConductThestandards ofconductsetforthinthisAgreement willapplyinlieuofanyexistinggenericstandards ofconduct(~e,theinterimgasstandards established inCase93-G-0932) andinlieuofanyfuturegenericstandards ofconductestablished bytheCommission duringthetermofthisAgreement.

BeforetheCommission makesanychangestothesestandards, eitherthroughagenericorspecificCompanyproceeding, itwillconsidertheCompany's specificcircumstances, including itsperformance undertheexistingstandards.

9.4.2k~ltiSeniormanagement ofRegCoandHoldCowillmeetannuallywithseniorCommission StafftodiscusstheCompany's plansrelatedtocapitalattraction andfinancial performance.

9.4.3TraininandCeficatlonHoldCoandRegCoshallconducttrainingontheseprinciples forofficers, directors andseniormanagers.

Theofficers, directors andseniormanagersofHoldCo,RegCo,andunregulated affiliates shallcertifyfamiliarity withtheseprinciples withinforty-five daysofPSCapproval.

Newofficers, directors andseniormanagement shouldsimilarly certifyfamiliarity within45daysaftertakingtheirpositions.

Onanannualbasis,designated officersshouldprovidecertification tothePSCofthecompanies'dherence tothesestandards.

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9.4.4TelerqlrTherateplanandstandards ofconductinthissettlement shallconstitute settlement oftheissuesthathavearisenwithregardtoorresulting fromtheso-called "Telergy" venture,including thoseidentified inCaseNo.96-M-0138 pertaining toadequatecompensation fortheuseofNiagaraMohawk'srights-of-way,anduseof"Telergy" CallingCards.9.5MERGERSANDACQUISITIONS 9.5.1RecoveofPremumPursuanttoapetitionfiledjointlyorindividually bytheCompany,NiagaraMohawkshallhavetheflexibility toretain,onacumulative basis,allsavingsassociated withtheacquisition ormergerwithanotherutilityforaperiodoffiveyearsfromthedateofclosingofanysuchmergeroracquisition uptotheamountofacquisition premiumpaidoverthelesserofbookvalueorfairmarketvalueofassetsmergedoracquired.

SavingsinexcessofthatrecoverywillbedisposedofbyorderoftheCommission.

9.552Relationshi toDivestiureBecausethePSCwillreviewmergerapplications underthePublicServiceLaw,nothinginthisagreement willlimittheCompany's abilitytomergewithorbeacquiredbyanotherentityowninggeneration.

9.5.3AlicabiliofthisAreementPostMererTheprovisions ofthisagreement shallcontinueinanymergedentity.9.5.4~B*dlld9StaffandtheCommission willgiveexpedited reviewandtreatment toanypetitionbyRegCoorHoldCoinconnection withamergerwithanotherutility.Page103

SECTION10.0SUPPLIEROFLASTRESORTOBLIGATION ANDIMPLEMENTATION 10.1OBLIGATION TOSERVEThePublicServiceLawrequiresregulated utilities toprovidesafeandadequateelectricserviceatjustandreasonable rates.RegCowillmaintainanobligation toprovidetheelectricity commodity toallcustomers duringthetermofthissettlement, asfurtherdescribed inSection4.0.TheCompanyagreestoworkwithotherparties,inthecontinuing proceedings inCase94-E-0952 andotherforumsasappropriate, todevelopadefinition oftheobligation toservethatisconsistent withacompetitive generation marketandacompetitive energyservicesmarket.10.2IMPLEMENTATION 10.2.1EnerServiceProviders Marketers andBroesNiagaraMohawkwillacceptfinancial riskfortheperformance ofenergyservicecompanies iftheCompanyisallowedtoemployreasonable standards ofoperational conductandacceptable standards ofcommercial creditworthiness.

TotheextentthatNiagaraMohawkhasincurredcoststoprovideenergytobalanceanESCo'scustomers loads,itwillcollectitscostsfordoingsofromthatESCoand/orfromcustomers asprovidedforbelow.NiagaraMohawk'sESCowillhavethesamerequirements asotherESCos.Asdiscussed inSection8.3RegCowillbillcustomers directlyfortransmission anddistribution services.

AnESCOwillhavetheoptionofbillingcustomers foritsservicesdirectly(twobillmodel)orhavingRegCobillonitsbehalf(onebillmodel).Undertheonebillmodel,issuesconcerning operational conductandcreditworthiness canbeaddressed inthecommercial termsestablished underservicelevelcontracts withtheESCos.Therefore, noadditional creditorsecurityrequirements shallapply.Page104

Withrespecttothetwobillmodel,theCompanyhasagreaterlevelofbusinessriskfrombalancing services.

Thisbusinessriskcanbemitigated byestablishment ofreasonable standards ofoperational performance andcreditworthiness.

Thefollowing procedures addresstheseoperational businessrisks:ESCosarerequiredtomaintainacreditrequirement withtheCompanyorprovideadequatesecurityinlieuofsuchcreditrequirement, inanamountthatisequaltoorgreaterthanthesummation ofthekilowatthours ofallcustomers undereachESCo'sservice,multiplied bytheCompany's highestmonthlyaverageonpeakenergybuybackrateduringthepreceding twelvemonthperiod(thecurrentrateunderS.C,6is$.02333perkilowatthour).

TheCompanyreservestherighttorevisetherateasappropriate toreflectchangesintariffprovisions.

Thiscreditrequirement willbeupdatedonacontinuous basis.Acustomer's kilowatthour summation forcreditrequirement purposesonly,willbedetermined bycomputing thetwohighestmonthlybillingcyclekilowatthour consumptions orthehighestbi-monthly billingcyclekilowatthour consumptions overthepriortwelve-month periodfortheeligiblecustomers.

Ifapriortwelve-monthperioddoesnotexist,thekilowatthour summation willbedetermined bycomputing thetwohighestkilowatthour consumptions orthehighestbi-monthly kilowatthour consumptions overthepriortwelve-month periodforan"averagecustomer" ofthesamerateclassandvoltageleveloftheeligiblecustomer.

Theapplication oftheseESCocreditworthiness standards willbeaccomplished byperforming theevaluation asdescribed morefullyinSection10.2.3.2ofthissettlement.

Aninterimimbalance billingmaybepresented totheESCowithpaymentduewithin21daysofreceiptofthebillingwhenactualdeliveries fallbelow75%oftherequiredscheduled deliveries duringasevendayperiod.IfpaymentfromtheESCoisnotreceived, theCompanymayinstitute anexpedited proceeding withthePSCtorevokeorsuspendtheESCo'seligibility, andtoproposeatransition plantoconverttheESCo'scustomers toanPage105

alternative supplier.

TheCompanyexpectsadecisiononthispetitiontobecompleted within23daysofsuchfiling.TotheextentthatthePSCdoesnotrespondtothepetitionrequestoralterstheconversion dateoftheESCo'scustomers, beyondsixtydaysfromthebeginning oftheperiodthatgenerated theinterimimbalance billor23daysfromthefilingofthepetitionwiththePSC,whichever isgreater,theCompanywillnotbeatriskoflossassociated withimbalance servicesforthosecustomers fromthisdatethroughtheconversion datesetforthinthePSCdecision.

TheCompanywouldseektorecoversuch'losses first,fromanyremaining securityfromtheESCo,secondthroughthetransition planfortheESCo'scustomers asapprovedbythePSC,andlastlyfromratepayers ingeneral,consistent withdeferralprovisions contained inSection2.0RatePlanofthissettlement.

TheCompanywillcontinuetouseitsbesteffortstopursuerecoveryofalllossesfromtheESCoandtotheextentadditional recoveries areachieved, suchrecoveries willbeoffsetagainstdeferrals.

Theseprocedures willberevisedasnecessary upontheestablishment ofafullyoperational ISOandPowerExchange.

10.2.2Gustoer0eratlonsProcedures Tofacilitate theCompany's operations undertherateplan,provisions ofPart11,Part13,Part140andPart273of16NYCRRandtherequirements foraplainlanguagebillformatadoptedinCase28080,OrdrReirinGasandElectricUtilities toF'eviseBilinFormt(Oct.31,1985),arewaivedtotheextentthatanysuchprovisions areinconsistent withtheCompany's abilityto:institute non-discriminatory procedures whichrequireanapplicant toprovidereasonable proofoftheapplicant's identityasacondition ofservice;b.modifyitsbillcontentandformatinresponsetoindustryrestructuring;

provided, however,theCompany's billswillcontainthefollowing:

Page106

anexplanation ofhowbillsmaybe.'paidtotalchargesdueduedateunitpriceofenergyconsumedorotherappropriate itemization ofcharges(including salestaxesandotherinformative taxitemization) completenameandaddressofcustomeruniqueaccountnumberorcustomernumberassignedtothecustomermeterreadingsperiodoftimeassociated witheachproductorservicenameofentityrendering billlocalortoll-free telephone numbercustomers maycallwithinquiries plainlanguagebasisofcalculations ofbilledamountslatepaymentchargesthatapplyestimated reads,ifapplicable postingofcashreceiptstopreviousbalancec.includenon-tariffed itemsinabill;provided, however,thatcustomerpaymentsarecreditedfirsttotariffeditemsandservicecannotbeterminated forfailuretopaynon-tariffed items.NiagaraMohawkwillbepermitted todisclosetootherserviceproviders:

whetherornotadepositcouldberequested fromthecustomers byNiagaraMohawkduetodelinquency, asdefinedin16NYCRRSection11.12(d)(2) orin16NYCRRSection13.1(b)(13),

orforanyreasonprovidedin16NYCRRSection13.7(a)(1);

whetherornotacustomercouldbedeniedservicebyNiagaraMohawkduetounpaidbillsonanexistingorprioraccount;or,whetheracustomer's servicecouldbeterminated byNiagaraMohawkprovidedthat:suchinformation istobeusedbyotherserviceproviders onlyforthepurposesofdetermining whetherunregulated energyserviceswillbeprovidedtothecustomer, whetheradepositwillbecollected fromsuchcustomer, orforotherpurposesapprovedbytheCommission; and,Page107

suchinformation requestismadebyaserviceproviderinresponsetoabonafiderequestfromthecustomertotheserviceproviderforelectricserviceorwithothercustomerconsent.TheCompanywillbepermitted toacceptcreditcardpaymentsforutilityservice,provided, however,thatanycostsimposedonNiagaraMohawkassociated withthereceiptofpaymentbycreditcardaretobeconsidered amongthegeneralcostsofdoingbusinessandwillnotbeaseparateadditional chargetothecustomers whosepaymentsaremadebycreditcard.10.2.3CreditandCollectonMaers10.2.3.1CustomerCreditworthiness ChangetoParts11and13oftheCommission's Regulations areexpectedtobemadeandnecessary fortheCompanytomitigateitsrisksofbeingthesupplieroflastresort.InCase96-M-0706, forexample,theCompanyproposeschangestotheRegulations, including (1)requiring paymentinfullofsecuritydepositspriortoinitiation ofserviceforsomecustomers; (2)requiring alternate paymentplansforcertainapplicants andforcustomers whohavedefaulted ondeferredpaymentagreements (DPA);(3)requiring completed applications forservice;(4)increasing minimumDPApaymentsanddownpayments; (5)revisingthestandards fordetermining financial need;(6)allowingutilities todenyserviceundercertaincircumstances tothosewhohavebreachedDPAs;and(7)reducingthedurationofDPAs.TheCompanyplanstopursuechangesasdescribed aboveaspartofthegenericproceeding coveringtheseissues,however,itreservestherighttopetitionforfurtherwaiverofsuchrulesasnecessary.

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ESCoCreditworthiness Evaluation NiagaraMohawkwillestablish creditlimitsorsecurityrequirements forallenergysuppliers priortotheirservingcustomers onNiagaraMohawk'ssystembyapplying, onaconsistent, non-discriminatory basis,thesamefinancial evaluation standards itcurrently employsindetermining creditworthiness ofenergysuppliers providing supplyservicestoitsgastransportation customers (SeeAppendixG).Energysuppliers willbenotifiedoftheestablished creditlimitwithintwoweeksofreceiptofacompleted creditapplication accompanied bythetwomostcurrentyearsofauditedfinancial statements.

Creditlimitsmustbemaintained andwillbereviewedcontinually.

Ifanentityisassignedacreditlimitthatisnotsufficient tomeettherequirements ofthissection,itmaymeettherequirements bypayinganyoutstanding balancesduetoNiagaraMohawkandproviding securityintheformof(1)anadvancedeposit;(2)anirrevocable letterofcreditinsuchform,anddrawnuponsuchbank,asaresatisfactory toNiagaraMohawk;(3)asecurityinterestincollateral satisfactory toNiagaraMohawk;or(4)aguarantee, informacceptable toNiagaraMohawk,byanotherentitywhichisassignedacreditlimitadequatetomeettherequirements ofthissection(e.g.,parentalguarantee)

~Suchsecuritymustbeinanamountatleastsufficient tocoverthedifference betweenthecreditlimitassignedtotheentitybyNiagaraMohawkandthecreditlimitrequiredbythissection.Intheeventthelevelofcreditindicates securityisnolongerrequired, andinconjunction withacreditworthiness evaluation, suchsecuritywillbereturnedinkind,withintwoweeksofsuchdetermination.

SecuritydepositsheldbyNiagaraMohawkPowerCorporation forenergysuppliers willaccrueinterestattheCommission's "OtherCustomerCapitalRate."IfNiagaraMohawkisunabletoestablish acreditlimitbasedoninformation available Page109

fromacceptable financial reporting agenciesorcommercial creditreporting organizations, andthefinancial statements notedabove,anenergysuppliermustprovidesuchsupplemental financial andcreditinformation asNiagaraMohawkmaydeemnecessary.

Thismayincludeinformation astotheenergysupplier's legalstructure; itsofficers,

partners, orproprietors; tradereferences; recentfinancial statements; andsuchothercreditinformation asmightreasonably berequiredintheexerciseofduediligence byapotential creditoroftheenergysupplier.

10.2.4TerinationDecislosRegCowillserveasthesupplieroflastresort,thusitwillmakeallservicetermination decisions associated withnon-payment ofamountsowedtotheCompany.Itstermination decisions willcontinuetobeguidedbyregulation.

RegCowillnotchargeforacustomer's initialswitchfromRegCotoanalternative energysupplier.

Ifacompetitive ESCowantstodiscontinue electricservice,itwillnotifythecustomerandRegCoofthetermination inwritingatleast21daysbeforethecustomer' nextcyclemeterreadingdate.Ifacustomerwantstodiscontinue servicefromanESCo,itwillnotifytheESCoandRegCoofthetermination inwritingatleast21daysbeforethecustomer's nextmeterreadingdate.If,afterreceiving theESCo'swrittentermination notice,orsendingitsownwrittentermination notice,thecustomerhasnotcontacted RegCoorsomeotherESCoduringthe21dayperiod,servicewouldthereafter beprovidedbyRegCo.RegCowillchargecustomers aswitching chargethatfullyreflectsallincremental costsasprovidedundertariffs.RegCoalsowillchargecustomers whoreturntoRegCoforcommodity serviceratesforenergysupplyaccording totheratesfortheirapplicable rateclass.Anyotherchargesassociated withthediscontinuance and/orreconnection ofservicewillbebornebytheESCo.RegComayrecoverthosechargesfromtheESCobyacquiring acommensurate amountoftheESCo'ssecurityandreceiving areplacement amountofsecurityfromtheESCo.Page110

RegCo'srevenuesourcesmaybeinjeopardytotheextentwelfarereformonthestateandfederallevelslimitspublicassistance andHomeEnergyAssistance Programbenefitsthatcustomers nowusetopaytheirutilitybills.RegComayincurarevenueshortfall fromthosesourcesthatisnotcurrently beingmitigated.

Tomitigatethatshortfall, RegCohastherighttopetitionforrecoveryoflossesconsistent withthetreatment ofdeferrals asdescribed inSection2.0,RatePlanofthissettlement.

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SECTION11.0REGULATORY CHANGESANDAPPROVALS 11.1ELIMINATION OFCERTAINREGULATORY REQUIREMENTS 11.1~1ReulatoReortinReuirements NiagaraMohawkwillcontinueitsparticipation intheReporting Requirements WorkingGroupofCase94-E-0952

-Competitive Opportunities Proceeding

-PhaseII.Thereporting requirements thatmaybeestablished inCase94-E-0952byafinal,Commission orderoranorderwhichhasnotbeenstayedpendingappealwillapplyduringthetermofthisAgreement.

11.1.2TreatmetofutureRefundsTheCompanyissubjecttoongoingexaminations byfederalandstatetaxauthorities.

Noamountshavebeenprovidedforinthefinancial forecastforresolution, eitherresulting inarefundorliability, oftheseexaminations.

Totheextentthatrefundsorpayments, including interestandpenalties andnetofanydeferredtaxes,individually exceed$500,000,theCompanywilldefersuchrefundorpaymentfordisposition inratesafterthetermofthesettlement agreement.

Whenavailable, newdeferreddebitswillbenettedagainstnewdeferredcreditsarisingduringthetermofthissettlement agreement.

Inaddition, theCompanyexpectstoreceiveataxbenefitresulting fromtheoffsetofthecommonstock,equity,andcashitwillprovideundertheMRAagainsttaxamountspaidinpastandfuture'years, asdescribed inSection2.3.4.Duringthetermofthissettlement, thetreatment described abovecoversallrefundsandtaxbenefitsthatmightotherwise havebeenpassedbacktocustomers.

Thus,inapproving thissettlement, theCommission therebyapprovesthetreatment ofallsuchrefundsandthetotalamountofthetaxbenefitdescribed Page112

above.TheCompanywillnotberequiredtofileanyformalnoticeoftaxrefundsunder.Section89.3oftheCommission's Regulations (16NYCRRSection89.3).NohearingswillbeheldpursuanttoSection113(2).However,theCompanywillprovideStaffwithdocumentation andsupporting workpapers ofanysuchtaxrefundsonatimelybasis.Thissettlement constitutes fullcompliance withtheprovisions ofSection113(2)andtheCommission's Regulations.

11.2REGULATORY APPROVALS 11.2.1Commercialization ofPoductsandTechnoloiesDeveloedasaResultofResearchadDevelomenDuringthetermofthisAgreement, NiagaraMohawkwillnotdeferandtrueupitscostofinvestment inresearchanddevelopment (R&D)activities.

NorwilltheCompanydeferandtrueupanyroyaltyrevenueitreceivesfromcommercialization ofproductsandtechnologies thatemergefromsuchR8Dactivities.

TheCompany's affiliates mayinvestincommercialization ofR8Dproductsandtechnologies developed byRegCoconsistent withaffiliate rulesgenerally andwithSec.9.2.2specifically.

Ifanaffiliate electstoinvest,itwillfairlycompensate RegCo,assumethebusinessrisk(s)andwillbeentitledtothebenefitsassociated withthatinvestment.

11.2.2PSLSectio s69ad0royaloftheSaleLeasinorFinancinofBuildiFcilitesNiagaraMohawkintendstoimplement anOccupancy CostReduction Initiative

("OCRI").

Thepurposeofthisinitiative istoreducethetotaloccupancy costto,andrevenuerequirements of,NiagaraMohawk,whileincreasing corporate flexibility andenhancing operational efficiency.

Onekeyobjective ofOCRIwillbetorealigntheCompany's assetbasetomaximizeflexibility andminimizecapitalcommitment astheneedsoftheCompanychange.NiagaraMohawkwishestoachievethisobjective bydisposing ofleastcost-effective space;bringingallfacilities tofully-utilized status;andextracting capitalfromsurplusassets.Page113

AnnexedheretoasAppendixHisalistofNiagaraMohawkfacilities thathavebeenidentified aspotential candidates forsale,leasing,orsaleleaseback transactions.

Foreachfacility, AppendixHsetsforthitsassociated netbookvalue.DuringthetermofthisAgreement, NiagaraMohawkwillobservethefollowing procedures inconnection withthesale,leasing,orsale-leaseback ofitsAppendixHfacilities:

Ifandwhenafacilityisnolongerneededtoprovideelectricandgasservices, theCompanywillevaluatethebestutilization ordisposition ofthefacility, including, butnotlimitedto,saletoNMHoldingsorsaleorleasetoathirdparty.11.2.2.2IntheeventNiagaraMohawkdecidestosellorleaseafacility, theCompanymayutilizebrokersorotherserviceproviders toidentifyprospective buyersortenants.NiagaraMohawkwilluseeveryefforttoobtainthehighestmarketvalueforthefacilitybaseduponindependent appraisals andmarketconditions.

AnysalewillrequirethepriorapprovalofNiagaraMohawk'sBoardofDirectors.

AnyleasewillrequiretheapprovalofaNiagaraMohawkofficer.11.2.2.3Undernocircumstances willthesaleorleaseofafacilitypreventNiagaraMohawkfromproviding electricandgasservicestoitscustomers, orfromotherwise beingabletodischarge itspublicserviceresponsibilities andtomeetitselectricandgasloadrequirements.-

11.2.2.4Totheextenttheaccounting forsuchrevenuesisnototherwise providedforherein,allrevenuesderivedfromsaleswillbeaccounted forinaccordance withtheUniformSystemofAccounts.

11.2.2.5Allcontractdocuments willincludeprovisions limitingNiagaraMohawk'sliabilities, suchasenvironmental liabilities.

Inthecaseofleasetransactions, tenantswillalsoberequired,

~intrJaa,tomaintaininsurance Page114

coverage, protectNiagaraMohawkproperty, andobserveallNiagaraMohawkrulesandregulations regarding theuseofthepremises.

Anyinitialleasetermshallnotexceedfive(5)years.11.2.2.6Anysale-leaseback transaction willberevenueneutralorwillreducerevenuerequirements.

Totheextentimplementation oftheOCRIrequiresCommission authorization underPublicServiceLawSections69and70,thatauthorization isinthepublicinterestforthesale,leaseorfinancing offacilities of$3millionorless.Inapproving thissettlement, theCommission therebygrantsthatauthorization forthetermofthissettlement.

Sale,leaseorfinancing offacilities inexcessof$3millionwillbesubjecttoaseparatepetition.

11.2.3Conversion of25CcleCustomers InitsWesternRegion,severaloftheCompany's customers maintainequipment thatrequires25cycleelectricity ratherthanthe60cyclepowertheCompanyprovideselsewhere onitssystem.TheCompanywilleliminate 25cycleservicetoallsuchcustomers onDecember31,2007.Priortothattime,intheeventoffailureofsignificant 25cycleequipment, e.g.,transformers, frequency

changers, theCompanywillnotrepairorreplacesuchequipment unlessitsecuresagreements fromtheaffectedcustomer(s) topaythecostofsuchrepairorreplacement.

Page115

SECTION12.0LOWINCOMECUSTOMERASSISTANCE PROGRAM(LICAP)RegCowillseek,atthelowestpossiblecost,toassistlow-income customers whoareunabletopayfullyfortheirelectricandgasusage,andtotherebyminimizeuncollectible accountsexpense.Aspartofitsprovideroflastresortresponsibilities, RegCowillpursuetheseobjectives byexpanding theavailability ofNiagaraMohawk'sLowIncomeCustomerAssistance Afford/Ability Plantoalllow-income customers whodonotreceivepublicassistance andwho,onthebasisofobjective

criteria, areunabletopaytheirfullenergybills.Basedonresearchconducted intheFallof1995,itisestimated thatapproximately 29,000customers willbeeligibleforservicesundertheexpandedAfford/Ability Plan.RegCoexpectstohaveenrolledapproximately 9,000customers bytheendof1997andtohaveenrolledalleligiblecustomers by2002withtheprogramcontinuing throughtheendofthisAgreement.

RegCowillalsoofferAfford/Ability Planservicesonapilotbasistoanumberofcustomers whoreceivepublicassistance andhaveaccountsthatareinarrears,butwhoseaccountsarenotpaiddirectlybycountydepartments ofsocialservices.

IftheresultsindicatethatAfford/Ability Planservicesaremorecosteffective thancurrentprocedures forobtaining directcountypaymentofutilitybills,RegCowillfurtherexpandtheAfford/Ability Plantoincludepublicassistance customers.

12.1ELIGIBILITY CRITERIACurrenteligibility criteriafortheAfford/Ability PlanincludereceiptofFederalHomeEnergyAssistance Program("HEAP")grants,anegativecashflow(asdetermined usingDepartment ofSocialServicesForm3596),andahistoryofbrokenpaymentagreements.

Giventhefutureuncertainty oftheHEAPprogram,RegComayberequiredtoimplement alternative methodsofidentifying andverifying eligiblecandidates forAfford/Ability Planservices.

12.2PROGRAMDESCRIPTION TheAfford/Ability Planinvolvesthreesteps.First,basedonthecustomer's financial circumstances asmeasuredbyobjective standards, theutilitywillagreetoacceptpartialpaymentforfutureenergyuse.Second,thecustomermustagreetoparticipate inanenergyusemanagement programdesignedtoreduceoverallusage.ProgramPage116

servicesincludeweatherization, attendance atanenergyservicesworkshop, anelectricappliance retrofitanalysis(including, whereappropriate, refrigerator replacement) andanin-homeenergyserviceeducation packet.Toensurecost-effectiveness, specificenergyusemanagement serviceswillbeprovidedtocustomers onthebasisofthecustomer's previoususageandlocation; Whiletheinvestment percustomerwillvaryaccording tothepackageofservicesprovided, thetotalannualprogramcostforenergyusemanagement serviceswillapproximate NiagaraMohawk'sexpenditure fortheformerUtilityLowIncomeEnergyEfficiency Program.Third,attheendofeachyear,theutilitywillforgiveapercentage ofarrearages forthoseAfford/Ability Plancustomers whohavemadealltheiragreedmonthlypayments.

Continued participation intheAfford/Ability Planwillrequireannualrecertification.

Itisacondition ofrecertification thatthecustomerhasmadeallagreedpartialpaymentsduringthepreviousyear.12.3PROGRAMFVNDINGThecostoftheenergyefficiency servicesoutlinedabovewillbefundedthroughtheSBC.Thecostsassociated witharrearsforgiveness foryearsonethroughthreeundertheprogramwillbeabsorbedbytheCompanyexceptasotherwise providedforunderSection2.6.2.Thecostsofanyotherlowincomeprogramsthatmayberequiredbyanynewlegislation orregulation orofadditional Afford/Ability PlanservicesthatmaybeofferedasaresultofthepilotstudywillalsobefundedthroughSBC.TheAfford/Ability Planwillbeevaluated onanongoingbasistoensurethattheprogramremainscosteffective.

TheCompanywillbudgetexpenditures undertheLICAPProgramtobe$4.377millionin1998,$4.952millionin1999and$5.598millionin2000.Yearfourandfivebudgetswillbeestablished intheproceedings thatwillsetratesforyearsfourandfive.Page117

SECTION13.0MISCELLANEOUS 13.1FORCEMAJEUREIfacircumstance occurswhich,inthejudgmentoftheCompany,threatens theCompany's economicviability, including itsabilitytoaccesscapitalmarketsatreasonable rates,oritsabilitytomaintainsafeandadequateservice,theCompanywillbepermitted topetitiontheCommission forrelieffromthetermsofthisAgreement, including filingforanincreaseinitsprices.13.2COMMISSION AUTHORITY NothinginthisAgreement shallbeconstrued tolimittheCommission's authority toreducetheCompany's ratesshoulditdetermine, inaccordance withtheprovisions ofthePublicServiceLaw,thattheestablished ratesareinexcessofjustandreasonable ratesfortheCompany's electricservice.13.3PROVISIONS NOTSEPARABLE:

EFFECTOFCOMMISSION MODIFICATION Thepartieshavenegotiated andacceptedthisagreement

~totowitheachprovision inconsideration for,insupportof,anddependent ontheothers.IftheCommission doesnotapprovethisagreement initsentirety, withoutmodification, anysignatory maywithdrawitsacceptance ofthisagreement byservingwrittennoticeontheotherparties,andshallbefreetopursueitspositioninthisproceeding withoutprejudice.

IftheCommission approvesthisSettlement Agreement ormodifiesitinamanneracceptable totheparties,thepartiesintendthatthissettlement thereafter beimplemented inaccordance withitsterms.Ifamaterialmodification isthereafter authorized orrequiredbytheCommission thatisunacceptable toanypartytothisSettlement Agreement adversely affectedbysuchmodification, then,inadditiontoanyotherremediesapartymayhave,suchpartymaywithdrawfromtheagreement andwillnotbeboundthereafter toitsprovisions.

Page118

13.4PROVISIONS NOTPRECEDENT Thetermsandprovisions ofthisAgreement applysolelytoandarebindingonlyinthecontextofthepurposesandresultsofthisAgreement.

Noneofthetermsandprovisions ofthisAgreement andnoneofthepositions hereinbyanypartymaybereferredto,citedorrelieduponbyanyotherpartyinanyfashionasprecedent inanyotherproceeding beforethisCommission oranyotherregulatory agencyorbeforeanycourtoflawexceptinfurtherance ofthepurposesandresultsofthisAgreement.

13.5DISPUTERESOLUTION Intheeventofanydisagreement overtheinterpretation ofthisSettlement ortheimplementation ofanyoftheprovisions ofthisSettlement, whichcannotberesolvedinformally amongtheParties,suchdisagreement shallberesolvedinthefollowing mannerunlessotherwise providedherein:ThePartiesshallpromptlyconveneaconference andingoodfaithshallattempttoresolvesuchdisagreement.

Ifanysuchdisagreement cannotberesolvedbytheParties,anyPartymaypetitiontheCommission forreliefonadisputedmatter.13.6WITHDRAWAL FROMLITIGATION Inconsideration fortheforegoing, theCompany,uponfinalapprovalofthisSettlement bytheCommission, agreestopetitiontheAppellate DivisionoftheSupremeCourtforpermission towithdrawasapartytotheappealintheArticle78proceeding broughttochallenge Opinion96-12,EnercCyAssociation v.PuliServiceCommision(Sup.Ct.AlbanyCo.IndexNo.5830-96).

TheCompany's withdrawal asapartytotheEnerAsoiationcaseshallbeeffectedthroughStipulations ofWithdrawal, mutuallyagreedtobytheCompanyandtheCommission.

Untiltheaforementioned petitionwithrespecttotheErAociat'oncaseisgranted,theCompanywilldiscontinue itslitigation activities totheextentthatitisabletodosowithoutprejudicing itsrightsintheArticle78proceeding.

13.7CONSTRUCTION OFTERMSThisSettlement Agreement waswrittentoreflectformation ofalegallyseparateHoldCo.IntheeventthattheHoldCoisnotalegallyseparatePage119

entity,thetermsandconditions ofthisSettlement shallbereadtogivefulleffecttotheirmeaningandintent.13.8STEAMHOSTISSUESThepartiestothisAgreement recognize theneedforcertainoftheSIPPsandcompanies

("theSteamHostsActionGroup"or"SHAG")thathavecontracts withthoseSIPPSregarding steam/thermal arrangements inthepost-MRAperiodtoconductnegotiations toreachasatisfactory settlement ofissuesrelatedtochangesinSIPPoperations asaresultoftheMRA.ThepartiestothisAgreement acknowledge, amongotherpriorities, theimportance totheeconomyoftheStateofNewYorkofaddressing steam/thermal issuesasexpeditiously aspossible.

Thefollowing parties-EmpireStateDevelopment bytheDepartment ofEconomicDevelopment, theJobDevelopment Authority andtheEmpireStateDevelopment Corporation (UrbanDevelopment Corp.),NiagaraMohawkPowerCorporation, NewYorkPowerAuthority, MultipleIntervenors, theSHAG,andtheSIPPS,JointSupporters andtheNationalAssociation ofEnergyServiceCompanies

-specifically agree,inagoodfaitheffort,topursuediligently waystominimizeanyeconomicoroperational difficulties duetochangesinSIPPsteamproduction whichcouldoccurasaresultoftheMRAandtootherwise reachamutuallysatisfactory settlement oftheissues.NopartytothisAgreement shallbedeemedtowaive(including, butnotlimitedto,inconnection withtheCommission's review'of thisAgreement),

anyrighttorecommend totheCommission, ortoopposeanysuchrecommendation ortotakeanyotherposition(including, butnotlimitedto,withrespecttoCommission jurisdiction),

thattheCommission undertake anyspecificcourseofactionregarding theresolution ofthesenegotiations betweensuchSIPPsandSHAG,exceptthatallpartiesspecifically waiveanyrighttochallenge theprudenceoftheMRA,andthecontracts executedpursuantthereto.Page120

SECTION14.0TERMOFTHISAGREEMENT Exceptasotherwise providedherein,thetermofthisAgreement shallbefiveyearsfromthePowerChoice Implementation Date.Page121

raMohaarorporation StaffoftheOepartment ofPublicService(Signatures continued onthefollowing pages)

g/,~C.~i/~'BEWLocaI97gg.4$

NewYorkStateCmmnityActionAssociation fd/y~/cg

JointSupporters byTheECubedCompany

NationalAssociation ofEnergyServiceCompanies by

PnergyPrectNaturalResourcDefenseCounIAdirondack Coun'ssociation forEnergyAffordability NewYorkRiversUnited

NiagaraMohawkPowerCorporation CaseNos.94-'E-009S and94-E-0099 StoftheDepartment ofPuervice

NiagaraMohawkPowerCorporation CaseNos.94-2-0098 and94-E-0099 SettlingIndependent PowerProducers

1P/14/9710:11~518405q015READANDLANIADO~~~IPPNYQOO0NiagaraMohawkPowerCorporation CaseNos.94-E-0098 and94-E-0099 lnependentPowerProdrsNY,Inc.

NiagaraMohawkPowerCorporation CaseNos.94-E-0098 and94-E-0099 Sithe/Independence PowerPaers,L.P.

NiagaraMohawkPowerCorporation CaseNos.94.-E-0098 and94-E-0099 MultipleIntervnors

NiagaraMohawkPowerCorporation CaseNos.94-E-0098 and94-E-0099 SteamHostActinGro

WOBKAUTHORITY

/5;l.,NewkStateDepartment ofEconomicDevelopment yu/~EpireStateDevelopment orporation

/d/'dF7JobDevelopment Authority

16/13/1997 15:58518-473-8347 PAGE83NewYozStateDepartment oEconomic'Development EmpireStateDeveopmentCorpozati on8'o.Development Coxity

0%VII'2C8 Settlement DocumentVolume2-Appendices NiagaraMohawkPowerCorporation PSCCaseNos.94-E-0098 and94-E-0099 Qctober10,1997

POWERCHOICE SETTLEMENT PROPOSALOctober6,1997APPENDICES A-MasterRestructuring Agreement B-RecoveryofCostsAssociated withTermination ofGasTransportation andPeakShavingAgreements C-NiagaraMohawkPowerCorporation Five-Year Financial ForecastD-ElectricPricesE-BalancesofDeferredDebitsandCreditsNotYetReflected inRatesF-GeneralStructure ofFinancial SwapsandSwaptionG-CreditWorthiness Evaluation H-ListofFacilities ThatArePotential Candidates forSale,LeaseorSaleLeaseback Transactions

APPENDIXAMASTERRESTRUCTURING AGRKKMKNT BYANDBETWEENNIAGARAMOHAWKPOWERCORPORATION ANDINDEPENDENT POWERPRODUCERS

MASTERRESTRUCTURING AGREElVG<

NTBYANDBETWEENM[AGARAMOHAWKPOWERCORPORATION ANDINDEPENDENT POWERPRODUCERS JULY9,1997

MASTERRESTRUCTURING AGREEMENT TABLEOFCONTENTSPageCITALSootwwtttotwwwttwttwwwowww wewtNwNN~+tttttwow ttwwtwowttwwotwtwwwwtwtwtottwttwtwtwtowowowwwtttoooool REEFINITIONSwtw woowweoootNowwtNwtltN1oooewtwNwooooowtweoeooowoowoootooowow wowwwtwwtww\w wttwtttww Dwoooool2.RUCTURING oowooowtooooooooo oooowwoowwowwooowowwooooooooootowwowooooooto REST~wtoottotttt

~eoeoooooooeooo 82.l.TERMINATING PPAS22.AMENDEDPPAs.2.3.REsrATEDCONIRAcrs 2.4.FIXEDPRICESWAPCONTRACTS 2.5.NORCON.2.6.OxBow2.7.NEGOTIATIONS 2.&.DELIVERYOFCONTRACTS TOESCROWAGENT.2.9.CONIACTADIUSIMENT..........

~eoeoe8~ooto~10~o~~.1013.143.ALLOCABLE CONSIDERATION; SHORT-TERM NOTES;ALLOCATION

...........,..............15 3.1.ALLOCABLE CONSIDERATION.

3.2.SHORT-TERM NOTES>ADDITIONAL CASHPAYMENT.3.3.DEUVERYOFALLOCABLE CONSIDERATION, SHORT-TERM NOTESANDADDmoNALCAsHPAYMENTToDEPoslTARY.

34.AUOCAIION.3.5.NON-DILUTION.

3.6.PRIVATEPLACEMENT; REGISTRATION OFCOMPANYSHARES.3.7.SHAREHOLDER'S AGREEMENT 3.8.BOARDoFDIREcroas.

15.15......15.16.1920224.REPRESENTATIONS ANDWARRANTIES OFTHECOMPANY......................................23 4.l.ORGANIZATION; STANDING.

4.2.EXECUIION; AUTHORITY; ENFORCEABILITY.

4.3.NoCONFUCTS..4.4.LITIGATION.

4.5.CAPITALIZAIION.

4.6.VALlDISSUANCEOFCOMPANYSHARES..4.7.SECREPORTSANDFINANCIAL STATEMENTS

........-.

4.8.ABSENCEOFCERTAINCHANGESOREVENTS............

4.9.NMPCRESTRUCTURING..

e~oe..26..26.....2424~eeeooe24255.REPRESENTATIONS ANDWARI~I'IES OFEACHIPP..........................,.....................27 5.1.ORGANIZATlON; STANDING.

5.2.EXECUnoN; AUTHORITY; ENFORCEABILITY....

5.3.NoCONFLICTS

.....5.4.LmGAIION...............

5.5.CERTAINTRANSFERS.

5.6.ACQUISITION OfCOMPANYSHARES..5.7.FORMOFALLOCATION, CONTRACTS ALLOCATION.

2727..27.272828.......29 6.CONDUCTANDTRANSACTIONS PRIORTOTHECONSUMMATION DATE......,.................29 6.1.DEBTSECURITIES.

6.2.SALE/LEASEBACK; TAX-FREEEXCHANGES.

6.3.PROXYSTATEMENT.

6.4.NMPCRESTRUCIURING.

6.5.HART-SCOTT-RODlNO ACTNOTlFICATION.

6.6.REGULATORY APPROVALS...

6.7.COOPERATION WITHRESPECTToREGULATORY APPROVALS.

6.8.COOPERATION WITHRESPECTTOIPPffNRDPARTYCONSENTSANDNMPCfhaRD PARTYRELEASES..

6.9.PERFGRMANcE UNDERExlsTINGPPAs6.10.STAYOFLITIGATION.

6.11.CONDUCTOFBUSINESS.

6.12.PUBUcDISCLOSURE.

6.13.FURTHERASSURANCES.

6.14.NOACCUMULATION.

6.15.TAxRULINGS........................................

2930.3131.3333343636383939..40..40..407.INTENTIONALLY LEFTBLANK.~tHO1~OIHHOWIIHttott

~0tHIIOHH\WOOO10i1004tt I~~10&A4I8.CONDITIONS TOEACHIPP'SOBLIGATIONS ONTHECONSUMMATION DATE.............

41S.l.REPRESENTATIONS ANDWARRANIIES.

82.PERFORMANCE.

8.3.REPRESENTATION LEVIER;SECRErARY'S CERTIFICATE; OPINIONOFTHECOMPANY'S COUNSEL8.4.REGlJLATORY APPROVALS.

8.5.NoININCIION, ACTIONORPROCEEDING..

8.6.NOMATERIALADVERSEEVENT.8.7.CONTRACTS 8.8.GENERALRELEASE;WITHDRAWALOF LITIGATION.

8.9.INTENIIONALLY LEFTBLANK.8.10.THIRDPARTYCONTRACTS; IPPAPPROVALS.

8.11.GASMmGA11ON.

8.12.REGISTRATION OFCOMPANYSHARES.8.13.PAYMENTOFFEES...41...4141414242..4242..4343449.CONDITIONS TOTHECOMPANY'S OBLIGATIONS ONTHECONSUMMATION DATE....44 9.1.REPRESENTATIONS ANDWARRANIIES..

9.2.PERFORMANCE.

9.3.REPRESENTATION LETTER;SECRETARY'S CERTIFICATE; OPINIONOFIPP'SCOUNSEL.9.4.REGULATORY APPROVALS.

9.5.NoINJUNCHON, ACTIONORPROCEEDING.

9.6.CONTRACTS..

9.7.NMPC/AQRD PARTYCONSENTSANDNMPC/THIRD PARTYRELEASES..9.8.GENERALRELEASE;WIIHDRAWAL OFLITIGATION....

9.9.BOARDANDSHAREHOLDER APPROVALS.

9.10.NMPCFINANCING.

10.SATISFACTION OFCONDITIONS; CONSUMMATION..

10.1.NOTlCEOFSATISFACTION ORWAIVEROFCONDITloNS 10.2.CONSUMMA11ON DATE....45..45...45..45..45..46.......46

........46

..47.47~NHH@ON01%41%&147....47.49Il7440 10.3.DELIVERIES BYTHECOMPANY..................................

10.4.DELIVERIES BYTHEIPPS10.5.DELIVERIES BYTHEDEPOSITARY ANDTHEESCROWAGENT.~~..49.....50501IREGULATORY ANDOTHERMA7fERStttoootot<<ooototttooooottt<<ooottoo<<tattoo+<<toootoo<<o<<ootttoo<<o<<tt<<ot<<ot<<t

.5011.1.MAINTENANCE OFQFSTATUS112.COMPETITIVE TRANSITION CHARGE;RETAILBYPASS11.3.CONSISTENT TAXREPORTING....,......

~~to~50~~~o525212.TERMINATION OFAGREEMENT

..~<<ooo<<tttooo<<<<ottto<<o<<too<<o<<<<otottttooootttoo<<ooooto<<oo53 12.1.EVENTSOFTERMINATlON OFTHEAGREEMENT INITSENTIREIY.

122.EVENTSOFTERMINATION WITHRESPECTToONEORMOREOFTHEIPPS12.3.EXPIRATION..

12.4.EFFECTOFTERMINATION.

12.5.EFFEcroNExlslINGPPAs.12.6.BANKRUPTCY TERMINATION..

...53...54~~t55.56.57.5813.NOTICES~tttttttttt ttttttttttttt t<<tttt<<<<ttttt<<o<<\<<t

<<<<<<toooooootttto ototttooootott58 14.MISCELLANEOUS

<<ttttt<<tt<<<<t<<<<ttttttt<<<<t<<

t<<<<t<<t<<ttt14.1.ENIIREAGREEMENT.

14.2.AMENDMENTS ANDWAIVERS..............,

............

14.3.SUCCESSORS ANDASSIGNS14A.GOVERNING LAW.14.5.SEVERABILIIY.

14.6.CAFIIONS14.7.COUNTERPARTS.........................................................

14.8.FEES.14.9.EXPENSES.

14.10.ATTORNEYS'EES..

14.11.REMEDIES.

14.12.SURVIVAL.

14.13.SEVERALOBLIGATIONS....................................

14.14.CONFIDENTVLLfIY....

14.15.NOPREJUDICE

...~ottttt~~oo60.60...........,

.....60.60..~,60.61.61~~~~~~~~~6I...............6 I...........62 62..............

............62

.............................62

..........

...........63.......................63

..........65 SCHEDULES SCHEDULEASCHEDULE2.1SCHEDULE2.2SCHEDULE2.3SCHEDULE3.5SCHEDULE3.7SCHEDULE4.5SCHEDULE4.8SCHEDULE5.4SCHEDULE6.6CSCHEDULE6.10ASCHEDULE6.10BSCHEDULE6.11NAMESANDNOIICEADDRESSES OFIPPSEXISIINGPPASToBETERMINATED PURSUANTToSECIION2.1EXISIINGPPAToBEAMENDEDPURSUANTToSECIION22EXISTINGPPASTOBEAMENDEDANDfORRESTATEDPURSL'AVT TOSECIION2.3CERTAINEXCLUSIONS FROMANTI-DILUTION PROVISIONS IPPSPONSORENTHlESTOENTERINTOSHAREHOLDER'S AGREEMENT NMPCCAPITALIZATION CERTAINCHANGESOREVENTSCERTAINDISCLOSED LmGATIONMATIERSToBEINCLUDEDINPSCAPPROVALLITIGATION ANDREGULATORY PROCEEDINGS ToBESTAYEDBYTHEPARTIESCERTAINLITIGATION ANDREGULATORY PROCEEDINGS (INVOLVING 6tCENTISSUES)CERTAINPERMITTED CONDUCTII7440 SCHEDULE8.8SCHEDULE9.10LIIIGA1ION ANDPROCEEDINGS TOBEWlTHDRAWN BYTHEPARTIESNMPCFINANCING EXHIBITSEXHIBITAEXHIBIT2.1 EXHIBIT3.6EXHIBIT3.7EXHIBIT5.7EXHIBIT8.3AEXHIBIT83CEXHIBIT9.3AEXHIBIT93CEXHIBIT14.14TERMSANDCONDITIONS OFAMENDEDPPAANDRESTATEDCONTRACTS FORMOFTERMINATION AGREEMENT FORMOFREGISTRATION RIGHTSAGREEMENT FORMOFSHAREHOLDER'S AGREEMENT BLANKFORMSOFALLOCATION, CONTRACTS ALLOCATION ANDCONTRACTADJUSlMENT ALLOCATION FORMOFNMPCREPRESENTATION LETTERFORMOFOPIMONOFNMI'CSCOUNSELFORMOfIPPREPRESENTA11ON LETIERFORMOFOPINIONOFIPP'SCOUNSELFORMOfTHIRDPARTY'ON-DISCLOSIJRE AGREEMENT II7440 MASTERRESTRUCTURING AGREEMENT THISMASTERRESTRUCTURING AGREEMENT isenteredintoonJuly9,1997(the"Agreement"

)byandbetweenNIAGARAMOHAWKPOWERCORPORATION, aNewYorkcorporation

("NMPC"orthe"Company"

),andtheseveralindependent powerproducers identified assuchonthesignature pagesandonScheduleAhereto(the"Independent PowerProducers" or"IPPs").RECITALS(A)TheCompany,amongotherthings,isaregulated utilityengagedinthebusinessofgenerating, transmitting anddistributing electricpowertocustomers intheStateofNewYork;(B)TheIndependent PowerProducers areownersandoperators ofco-generation andsmallpowerproduction facilities; (C)TheCompanypreviously hasenteredintotwenty-nine (29)separatepowerpurchaseagreements withtheIPPs(referred tohereinas"Existing PPAs");(D)TheCompanyhasoveredtoamend,amendandrestateorterminate theExistingPPAs,uponandsubjecttothetermsandconditions contained herein;and(E)TheIPPsarenotwillingtoamend,amendandrestateorterminate eachoftheExistingPPAs,exceptuponandsubjecttothetermsandconditions contained herein.NOW,THEREFORE, inconsideration oftheforegoing premisesandforothergoodandvaluableconsideration, thereceiptandadequacyofwhichisherebyacknowledged, thePartiesherebyagreeasfollows:1.DEFINITIONS ForpurposesofthisAgreement (including anyExhibitorSchedulehereto,unlessotherwise definedtherein),

thetermssetforthbelowshallhavethefollowing meanings:

"Additional CashPament"shallhavethemeaningsetforthinSection3.2."Affiliate" shallmean,withrespecttoanyParty,anyotherpersonorentitywhichcontrols, iscontrolled by,orisundercommoncontrolwith,suchParty,whereintheterm"control" shallmeanthepowertodirectthemanagement andpoliciesbyorofsuchPartythroughownership ofvotingsecurities, bycontractorotherwise.

"Afliliate IPPs"shallmean,withrespecttoanyIPP,anyotherIPPwhichisanAffiliate ofsuchIPP.n~Areemento or"MasterRestrnctnrin Areement"shallmeanthisMasterRestructuring Agreement, including theExhibitsandSchedules hereto,asamendedandineffectfromtimetotime."Allocable Consideration" shallhavethemeaningsetforthinSection3.1."Allocation" shallhavethemeaningsetforthinSection3.4."AmendedPPA"shallhavethemeaningsetforthinSection2.2.Cd*"hdlyll*llI'U*C'*dd*C&,dd."BaseSharePrice"shallhavethemeaningsetforthinSection3.5(a).hdlydyd*g3d,gdUdwhichbanksintheStateofNewYorkareauthorized orrequiredtobeclosed.nigh~*'dlh*3'fhl3*I3.1(3."ClassAPPAs"shallmeanthoseExistingPPAswithrespecttowhichanIPPwillreceiveaportionoftheAllocable Consideration, butnottheAmendedPPAoraRestatedContract.

"ClassBPPAs"shallmeanthoseExistingPPAswithrespecttowhichanIPPwillreceiveaRestatedContract(s)

(butnottheAmendedPPA),whetherornotsuchIPPwillreceiveaportionoftheAllocable Consideration.

"ClassDPPA"shallmeantheExistingPPAwithrespecttowhichthe!PPpartytheretowillreceiveaportionoftheAllocable Consideration andwillreceivetheAmendedPPA.share."Code"shallmeantheInternalRevenueCodeof1986,asamended."CommonStock"shallmeantheCompany's commonstock,$1.00parvalueperR~Coman"or"NMPC"shallmeanNiagaraMohawkPowerCorporation, aNewYorkcorporation.

"C~hh"Illh*&**Igfhi3*I3.1(33.

"CorntitiveTransition Chare"shallmeanacharge,howeverdesignated, forrecoveryofstrandable costs."Conditions Determination Date"shallmeanthedatewhichisthelatertooccurof(i)December1,1997and(ii)ninety(90)daysafterthePSCApprovalDate,exceptasotherwise providedinSection2.7(b)."Consummation" shallhavethemeaningsetforthinSection10.2."Consummation Date"shallhavethemeaningsetforthinSection10.2."Contract Ad'ustment" shallhavethemeaningsetforthinSection2.9.3.4(a)."Contract Ad'ustment Allocation" shallhavethemeaiungsetforthinSection"Contract Year"shallhavethemeaningsetforthinExhibitA."Contracts" shallhavethemeaningsetforthinSection2.8."Contracts Allocation" shallhavethemeaningsetforthinSection3.4(a)."Curtailment" shallmeananycurtailment ofelectricity undertheprovisions of18C.F.R.$292.304(f)

(1997),oranysubsequent orsimilarruleorregulation adoptedbythePSCortheFERC,oranyruleororderofthePSC,theFERC,oranyotherGovernmental Authority interpreting orapplyingthoseprovisions orauthorizing theCompanytoreserveanyrightsunderthoseprovisions.

"DebtReistration Statement" shallhavethemeaningsetforthinSection6.1(b)."DebtSecurities" shallhavethemeaningsetforthinSection6.1."DesitAreement"shallhavethemeaningsetforthinSection3.3."~Deosits"shallmeansuchbankortrustcompanyasmaybeselectedbythePartiestoactastheDepositary hereunder.

"DLJ"shallmeanDonaldson, Lufkin&JenretteSecurities Corporation.

"DRIPPlan"shallmeantheCompany's DividendReinvestment andStockPurchasePlan.

"Effective Time"shallmean11:59:59p.m.ontheConsummation Date."EI'IIA&.Gp,S.H*&9*Id.L.L.P.

"EscrowAcement"shallhavethemeaningsetforthinSection2.8,"~&h**"IIIU*p**'IEI9A93939,dd.hdt&*&*9h*d**'*Hlp*dateofthisAgreement betweentheCompanyandtheseveralIPPs,aslistedonSchedules 2.1,2.2and2.3hereto."E'G*"hUIAp'Il,3998,***9 Ud*dlSections2.7(b)and12.3(b)."EWG"shallhavethemeaningsetforthinSection11.1(b)."FERC"shallmeantheFederalEnergyRegulatory Commission.

"FixedPriceSwaContracts" shallhavethemeaningsetforthinSection2.4."GasIPPs"shallmeanthoseIPPswhichproducepowerusingprimarily natural"GasMitiationThirdP"shallmeananaturalgassupplierornaturalgastransporter withwhomanyGasIPPhasacontractoragreement asofthedateofthisAgreement andanycounterparty underanyhedgingorotherfinancial instrument existingasofthedateofthisAgreement withrespecttothesupplyortransportation ofnaturalgasunderanysuchcontractoragreement, withrespecttowhichanyGasIPPdesiresthatitsobligations thereunder bereleased, satisfied oramendedinconnection withthetransactions contemplated bythisAgreement.

"Governmental Authori"shallmeananyfederal,state,municipal orlocalgovernmental authority, department, commission, board,agency,bodyorofficial, whetherexecutive, legislative, administrative, regulatory orjudicial, including butnotlimitedtotheFERCandthePSC."Hart-Scott-Rodino Act"shallmeantheHart-Scott-Rodino Antitrust Improvements Actof1976,asamended."IndendentPowerProducers" or"IPPs"shallmeantheseveralindependent powerproducers identified assuchonthesignature pagesandonScheduleAhereto.IfthisAgreement shallbeterminated inaccordance withthetermshereofwithrespectto oneormorebutlessthanalloftheIPPs,then,exceptwithrespecttoanyprovisions hereofwhichexpressly orbytheirtermssurviveanytermination ofthisAgreement, uponanysuchtermination suchterminated IPPshallceasetobean"IPP"forpurposesofthisAgreement.

"IndexedSwaContracts" shallhavethemeaningsetforthinExhibitA."~iPPi"idii*&*ig*ihiSiiiii."IPPReulatoAroyal"shallhavethemeaningsetforthinSection6.6(b)."IPPReresentatives" shallmeanWP&Co.,theIPPs'pecial Counseland'theIPPs'ocal Regulatory Counsel."IPPStatusNotice"shallhavethemeaningsetforthinSection10.1(c)."IPP/Third PConsent"shallhavethemeaningsetforthinSection8.10."IPPs'ocal ReulatoCounsel"shallmeanReadandLaniado,LLP."IPPs'ocal ReulatoCounselFeeLetter"shallhavethemeaningsetforthinSection14.9."IPPs'ialCounsel"shallmeanAkin,Gump,St'rauss,'Hauer

&Feld,L.L.P.14.9."IPPs'cialCounselFeeLetter"shallhavethemeaningsetforthinSection"Material AdverseEffect"shallmean,withrespecttoanyParty,either(i)amaterialandadverseeQectonthebusiness, properties, operations orcondition (financial orotherwise) ofsuchPartyanditssubsidiaries, takenasawhole,or(ii)amaterialandadverseeffectonsuchParty'sabilitytoenterintoandperformitsobligations underthisAgreement oranyotheragreements tobeexecutedbysuchPartypursuanthereto."NMPCReulatoAroyal"shallhavethemeaningsetforthinSection6.6(a)."NMPCRestructurin "shallhavethemeaningsetforthinSection6.4."NMPCStatusNotice"shallhavethemeaningsetforthinSection10.1(b).6.8(b)."NMPC/Third PAreement"shallhavethemeaningsetforthinSection "NMPC/Third PartConsent"shallhavethemeaningsetforthinSection4.2."NMPC/Third PRelease"shallhavethemeaningsetforthinSection6.8(b).uNorCon"shallmeanNorConPowerPartners, L.P."NorConAeernent"shallhavethemeaningsetforthinSection2.5."NYPSL"shallmeantheNewYorkPublicServiceLaw,asamended."NYSE"shallmeantheNewYorkStockExchange.

"Oxbow"shallmeanOxbowPowerofNorthTonawanda, NewYork,Inc."OxbowAreement"shallhavethemeaningsetforthinSection2.6."Party~ies "shallmeantheCompanyandtheseveralIPPs.IfthisAgreement shallbeterminated inaccordance withthetermshereofwithrespecttooneormorebutlessthanalloftheIPPs,then,exceptwithrespecttoanyprovisions hereofwhichexpressly surviveanytermination ofthisAgreement, uponanysuchtermination suchterminated IPPshallceasetobea"Party"hereunder.

"PowerPutContract" shallhavethemeaningsetforthinExhibitA."~pro'ect" shallmeaneachlPP'sgeneration andproduction facilities, including theproperty, plantandequipment andassociated realpropertyandfixtures.

S**uhllh*6*S**SCi~6**)63."PSC"shallmeantheNewYorkStatePublicServiceCommission.

"PpscpI"hllh*6*g**6hl6**I66))."PSCAroyalDate"shallmeanthedateonwhichthePSCissuestheordercontaining thePSCApproval.

"~hgCh'*'hglh*6*'*Ihl6*I6)."PVHCA"shallmeanthePublicUtilityHoldingCompanyActof1935,asamended."PURPA"shaBmeanthePublicUtilityRegulatory PoliciesActoft97g,asamended.

"QF"shallhavethemeaningsetforthinSection11.1.FMonitorin Proram"shallmeananyprogramoftheCompany,whetherauthorized, implemented orproposed, designedtomonitoranyIPP'sstatusunderPURPAasaqualifying cogeneration orsmallpowerproduction facilityorunderNYPSLasaco-generation

facility, including anyrighttodemandorreceiveinformation fromanyIPP,thirdpartyorGovernmental Authority.

"Reasonable BestERorts"shallmean,withrespecttoanyParty,suchParty'diligentpursuance ofthecourseofactionorresultstatedasdetermined bysuchPartyitselfingoodfaith,butshallnotrequiresuchPartytopayanysumorotherconsideration orincurorassumeanyliability orobligation thatisnototherwise expressly requiredtobe.paid,incurredorassumedpursuanttothisAgreement, excluding (i)normalandcustomary incidental outwf-pocket costsandexpensesand(ii)attorneys'ees (except,withrespecttoanyIPP,attorneys'ees requiredtobepaidbytheCompanypursuanttotheIPPs'pecial CounselFeeLetterortheIPPs'ocal Regulatory CounselFeeLetter).3.6(b)."Reistiation RihtsAement"shallhavethemeaningsetforthinSection"RelatoArovals"shallmeanthePSCApprovalandallotherconsents, approvals, qualifications, orders,authorizations, extensions, waivers,exemptions andotheractionsorinactions oftheFERC,thePSCoranyotherGovernmental Authority (including expirations ofapplicable waitingperiodsundertheHart-Scott-Rodino Act)asmayberequiredbyapplicable lawordesiredbyanyPartywithrespecttothisAgreement andtheconsummation ofthisAgreement andthetransactions contemplated hereunder, including butnotlimitedtotheexecution, deliveryandperformance oftheContracts.

Forpurposeshereof"Regulatory Approvals" shallnotincludeanySECapprovals whichmayberequiredinconnection withtheShelfRegistration Statement, DebtRegistration Statement orProxyStatement.

"Restated Contract" shallhavethemeaningsetforthinExhibitA."R~"hllh*R*'g*fhlg*I2."SEC"shallmeantheSecurities andExchangeCommission.

'R~ECR*"hllflfgCp2'IRpPIh.gfthefiscalyearendedDecember31,1996,asamendedbyForm10-KAfiledwiththeSEConMay1,1997,(ii)theCompany's CurrentReportonForm8-KdatedMarch10,1997,(iii)theCompany's ProxyStatement filedwiththeSEConApril7,1997,(iv)theCompany's FormU-3A-2filedpursuanttoPUHCAonApril2,1997,(v)theCompany's Quarterly ReportonForm10-QforthefiscalquarterendedMarch31,1997,and(vi)allsubsequent filings,uptotheConsummation Date,requiredtobemadebytheCompanyundertheExchangeActoranyothersecurities lawsapplicable totheCompany."Securities Act"shallmeantheSecurities Actof1933,asamended."Scheduled Date"shallhavethemeaningsetforthinSection10.2."Shareholders Areement"shallhavethemeaningsetforthinSection3.7."ShelfReistration Statement" shallhavethemeaningsetforthinSection3.6."Short-Term Notes"shallhavethemeaningsetforthinSection3.2,"SolidFuelIPPs"shallmeanthoseIPPswhichproducepowerusingprimarily coalorwastefuels."Terminatin PPAs"shallhavethemeaningsetforthinSection2.1."Termination Aement"shallhavethemeaningsetforthinSection2.1."Underwriters" shallhavetheineaningsetforthinSection6.1(c)."WP&Co."shallmeanWasserstein Perella&Co.,Inc."WP&Co.FeeLetter"shallhavethemeaningsetforthinSection14.8.2.RESTRUCTURING Subjecttothetermsandconditions ofthisAgreement, effective asoftheConsummation Date,thePartiesshallenterintothefollowing transactions (referred tohereincollectively asthe"Restructuring"

):2.1.Terminatin PPAs.TheCompanyandeachIPPwhichisapartytoanExistingPPAlistedonSchedule2.1hereto(a"Terminating PPA")shallenterintoanagreement, substantially intheformannexedasExhibit2.1(a"Termination Agreement"

),pursuanttowhich,effective asoftheEffective Time,allrights,dutiesandobligations oftheCompanyandsuchIPPundereachsuchTerminating PPAandunderanyassociated gastransportation andpeakshavingagreement and,iftheIPPsoelects,interconnection agreement andexistinginterconnection arrangements, betweentheCompany(oranyAffiliate oftheCompany)andsuchIPPshallbeterminated, released anddischarged, andcontaining suchothertermsandconditions astheCompanyandeachsuchIPPinaymutuallyagree.2.2.AmendedPPAs.TheCompanyandtheIPPwhichisapartytotheExistingPPAlistedonSchedule2.2heretoshallenterintoanamendment tosuchExistingPPA(the"AmendedPPA"),asdescribed inExhibitAhereto,including therelatedAttachments toExhibitA,eG'ective asoftheEffective Time,2.3.RestatedContracts.

TheCompanyandeachIPPwhichisapartytoanExistingPPAlistedonSchedule2.3heretoshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstoenterintoaRestatedContract, asdefinedinExhibitAhereto.EachRestatedContractshallbeanamendment and/orrestatement ofeachsuchExistingFPA,shallbedatedasofthedateofeachsuchExistingPPAandthetermsofsuchamendment and/orrestateinent shallbeeffective asoftheEffective Time.Asapartofsuchprocess,theIPPswhicharepartiestotheExistingPPAslistedonSchedule2.3heretoshallusetheirReasonable BestEffortstoenterintoRestatedContracts whichwillincludeoptionprovisions withrespecttoanaggregate of500GWhofelectricity perannumoveratermofuptosixContractYearsforperiodswithineachyearthataremutuallyagreedupon;providedsuchoptionprovisions includeaterm,periods,contractquantities, contractpricesandothertermsandconditions whichareacceptable totheapplicable IPF,andprovided, further,thatnoIPPwillbeobligated toincludesuchoptionprovisions ifsuchprovisions, insuchIPP'sjudgment, arenoteconomically neutralincomparison totheContractAllocation ofsuchapplicable IPPbeforegivingeffecttosuchoptionprovisions.

WithrespecttoeachIPPenteringintoaRestatedContract, asapplicable, (a)theCompanyshallcontinuetoprovidelocalgastransportation underitsexistingagreements withsuchIPP(and,ifrequested bysuchIPP,theCompanyshallconductgoodfaithnegotiations concerning theamendment ofsuchgastransportation agreements, and,ifrequested bytheCompany,theIPPshallconductgoodfaithnegotiations toamendsuchexistingagreements toinsurethattheCompanyhasareasonable abilitytointerrupt suchtransportation duetosystememergencies),

(b)peakshavingobligations onthepartofsuchIPPshallbeeliminated, effective asoftheConsummation Date,withoutpenaltytotheIPPorcompensation totheCompanyandwithoutreducingthevalueoftheAllocable Consideration orinanywayaffecting theRestatedContracts, (c)minimumtakeanddemandchargesinexistinggastransportation agreements betweentheCompanyandsuchIPPshallremaininfullforceandeffect(subjecttothegoodfaithnegotiations described inclause(a)above)and(d)ifsuchIPPhaseliminated itspeakshavinganangements withtheCompanyandwillhavegassupplyandtransportation arrangements aftertheConsummation Date,itshalluseReasonable BestEffortstoassisttheCompanytoarrangeforreplacement ofpeakshavingservices.

2.4.FixedPriceSwaContracts.

TheCompanyalsoshallexecuteanddelivertotheEscrowAgent,forthebenefitofandatthedirection ofalloftheIPPsortheirrespective designees, aseriesofFixedPriceSwapContracts asdefinedinandin accordance withthetermsandconditions setforthinExhibitAhereto,including therelatedAttachments toExhibitA(the"FixedPriceSwapContracts"

).TheFixedPriceSwapContracts shallbeinsuchdenominations andwithsuchcounterparties astheIPPsshalldesignate totheCompanynotlaterthaneight(8)BusinessDayspriortotheConsummation Date,providedthateachsuchcounterparty shall(i)beanIPP,(ii)beaGasMitigation ThirdPartyor(iii)meettherequirements foran"Approved Assignee" (assuchtennisdefinedinSection2ofthetermsheet attachedasAttachment A-11toExhibitA)ofanIPPoraGasMitigation ThirdParty.2.5.NorCon.TheCompanyandNorConshallconductseparategoodfaithnegotiations toenterintoanagreement (the"NorConAgreement"

)regarding theamendment, amendment andrestatement, otherrestructuring ortermination ofNorCon'sExistingPPA.TheCompanyandNorConagreetocommencesuchnegotiations, atainiitually agreeable location(s),

promptlyfollowing thedateofthisAgreement andtomeetnotlessfrequently thanweeklyduringthefirstmonthfollowing thedateofthisAgreement andthereafter astheCompanyandNoiConmaymutuallyagree.Althoughthereisnoobligation ontheCompany's parttoagreetoanyfurtherconsideration toNorCon,shouldtheCompanyandNorConmutuallysodetermine, NorConmayreceiveconsideration pursuanttotheNorConAgreement whichisinadditiontotheportionoftheAllocable Consideration andtheRestatedContracts allocated toNorConintheAllocation (the"NorConAllocation"

).Anysuchadditional consideration shallnotaffecttheAllocation, increaseorreducetheAllocable Consideration payabletoanyotherIPP(i.e.,theAllocable Consideration lesstheNorConAllocation),

norinanywayaffecttheShort-Term NotesorAdditional CashPayment,asapplicable, orthetermsoftheAmendedPPAsorRestatedContracts tobereceivedbyanyotherIPPortheFixedPriceSwapContracts.

IntheeventthattheCompanyandNorConshouldagreethatNorCon'sExistingPPAshallbeaTerminating PPA,thenthecontractquantityandtheinstalled capacityundertheRestatedContracts eachshallbereducedbythecontractquantityandtheinstalled capacityundertheRestatedContracts allocated toNorConpursuanttotheoriginalAllocation, andtheaggregate contractadjustment identified onAttachment A-3toExhibitAshallbereducedbytheportionoftheContractAdjustment allocated toNorConpursuanttotheoriginalAllocation, ifany,andinsucheventsuchreduction shallnotaffectthetermsandconditions, including contractprice,ofanyoftheRestatedContracts tobeenteredintobyanyotherIPPs.IntheeventtheCompanyandNorConareunabletoagreeinwritingontheadditional consideration, ifany,tobereceivedbyNorConwithinseventy-five (75)daysafterthedateofthisAgreement (whichdatemaybeextendedwiththemutualagreement oftheCompanyandNorCon),then(i)thisAgreement shallterminate withrespecttoNorCon,withtheeffectdescribed inSection12.4(b),andexceptasotherwise providedinSection6.9(d),and(ii)theprovisions ofSection12.5shallapplywithrespecttoNorCon'sExistingPPA.2.6.Oxbow.TheCompanyandOxbowshallconductseparategoodfaithnegotiations toenterintoanagreement (theOxbowAgreement"

)regarding the10 termination ofOxbow'sExistingPPApursuanttoSection2,1~Althoughthereisnoobligation ontheCompany's parttoagreetomodifytheformofconsideration toOxbow,shouldtheCompanyandOxbowmutuallysodetermine, Oxbowmayreceiveconsideration pursuanttotheOxbowAgreement whichisinlieuoftheportionoftheRestatedContracts allocated toOxbowintheAllocation (the"OxbowAllocation"

).Anysuchsubstitute consideration shallnotaffecttheAllocation, increaseorreducetheAllocable Consideration payabletoanyotherIPP(i.e.,theAllocable Consideration lesstheOxbowAllocation),

norinanywayaffecttheShort-Term NotesorAdditional CashPayment,asapplicable, orthetermsoftheAmendedPPAsorRestatedContracts tobereceivedbyanyotherIPPortheFixedPriceSwapContracts.

IntheeventthattheCompanyandOxbowshouldagreethatOxbow'sExistingPPAshallbeaTerminating PPA,thenthecontractquantityandtheinstalled capacityundertheRestatedContracts shallbereducedbyofthecontractquantityandtheinstalled capacityundertheRestatedContracts allocated toOxbowpursuanttotheoriginalAllocation, andtheaggregate contractadjustment identified onAttachment A-3toExhibitAshallbereducedbytheportionoftheContractAdjustment allocated toOxbowpursuanttotheoriginalAllocation, ifany,andinsucheventsuchreduction shallnotaffectthetermsandconditions, including contractprice,ofanyoftheRestatedContracts tobeenteredintobyanyotherIPPs.IntheeventtheCompanyandOxbowareunabletoconcludenegotiations andagreeonthesubstitute consideration, ifany,tobereceivedbyOxbow,withinseventy-five (75)daysafterthedateofthisAgreement (whichdatemaybeextendedwiththemutualagreement oftheCompanyandOxbow),then(i)thisAgreement shallterminate withrespecttoOxbow,withtheeffectdescribed inSection12.4(b)and(ii)theprovisions ofSection12.5shallapplywithrespecttoOxbow'sExistingPPA.OxbowagreestoprovideitsContracts Allocation totheCompanywithinfifteen(15)daysafterthedateofthisAgreement.

2.7.N~eotietions.

(a)Allnegotiations tobeconducted bytheCompanyandanyIPPpursuanttothisArticle2shallbecomnenced notlaterthanimmediately following thePSCApprovalDate.Notwithstanding theforegoing, anyIPPmayelectinitssolediscretion tocommenceitsownnegotiations withtheCompanypriortothePSCApprovalDate.IfanIPPsoelects,thedatesforthenegotiation meetingsshallbescheduled bytheCompanyandsuchIPPwithinseven(7)daysafterthedateofsuchrequest.IfanIPPmakesarequesttherefor, arepresentative ofDLJandlorarepresentative ofWP&Co.shallattendandparticipate inanyorallnegotiations betweentheCompanyandsuchIPP.IftheCompanyandanyIPPshallconcludenegotiations andagreeonafinalformoftherespective Termination Agreement, AmendedPPA,RestatedContract(s),

NorConAgreement orOxbowAgreement, asthecasemaybe,thentheCompanyandsuchIPPshalleachinitialandexchangecounterparts ofsuchfinalformandgivenoticethereoftotheIPPs'pecial Counsel,butnoPartyshallbeboundtheretoorobligated therebyexceptasprovidedinSection2.8.Inaddition, theCompanyanda committee ofIPPsdesignated bynoticetotheCompanywithinfourteen(14)daysafterthedateofthisAgreement shalluseReasonable BestEffortstocommenceandconcludenegotiations andagreeonafinalformoftheFixedPriceSwapContracts aspromptlyaspossible, andtheCompanyandthechairmanofsuchcommittee ofIPPsshallinitialsuchfinalformtoindicatethatsuchformhasbeenagreeduponbytheCompanyandonbehalfofallIPPsandshallgivenoticethereoftotheIPPs'pecial CounselonorbeforetheConditions Determination Date,butnoPartyshallbeboundtheretoorobligated therebyexceptwithrespecttotheCompanyasprovidedinSection2.8.(b)IftheCompanyandanyIPPshallnothavesooneragreedonthefinalformoftheirrespective Contract(s)

(excluding forthesepurposestheFixedPriceSwapContracts and,ifthisAgreement isterminated withrespecttoNorConorOxbowpursuanttoSections2.5or2.6,respectively, theNorConAgreement andOxbowAgreement, respectively),

theCompanyshallgiveallIPPsnoticeofsuchfact(including theidentityoftheIPPswhichhavenotagreedonthefinalformoftheirrespective Contract(s))

notlaterthanthedatewhichisten(10)BusinessDayspriortotheConditions Determination Date(a"CompanyNotice").TheCompanyNoticeshallincludetheCompany's determination ofwhether(x)theCompanyintendstoterminate thisAgreement pursuanttoSection12.1(d)intheeventtheCompanyandallsuchIPPsidentified insuchnoticeareunabletoagreeonthefinalformoftheirrespective Contract(s) onorbeforetheConditions Determination Date,(y)theCompanyiswillingtoconsummate thetransactions contemplated hereby(subjecttotheotherconditions totheCompany's obligations contained inthisAgreement) withouttheinclusion.

ofthoseIPPswhichareunabletoagreeonthefinalformoftheirrespective Contract(s) onorbeforetheConditions Determination Date,or(z)theCompanyelectstoextendtheConditions Determination DateandtheExpiration Dateforaperiodofthirty(30)days.(i)IftheCompanyshallnotifytheIPPsthatitwillterminate thisAgreement pursuanttoSection12.1(d)ontheConditions Determination DateintheeventtheCompanyandallsuchIPPsideritified insuchnoticeareunabletoagreeonthefinalformoftheirrespective Contract(s) onorbeforetheConditions Determination Date(a"sub-clause (x)notice")andtheCompanyandallsuchIPPsidentified insuchnoticeareunabletoagreeonthefinalformoftheirrespective Contract(s) onorbeforetheConditions Determination Date,thenthisAgreement shallterminate initsentiretyontheConditions Determination DatepursuanttoSection12.1(d).IftheCompanyshallnotifytheIPPsthatitiswillingtoconsummate thetransactions contemplated hereby(subjecttotheotherconditions totheCompany's obligations contained inthisAgreement) withouttheinclusion ofthoseIPPswhichhavenotagreedonthefinalformoftheirrespective Contract(s) asofthedateofsuchnotice(a"sub-clause (y)notice"),

thentheprovisions ofclause(ii)belowshallbeapplicable.

IftheCompanyelectstoextendtheConditions Determination DateandtheExpiration Dateforaperiodofthirty(30)days(a"sub-clause (z)notice"),

oriftheIPPsshallelecttoextendthe12 Conditions Determination DateandtheExpiration Datepursuanttoclause(ii)below,thennotlaterthanten(10)BusinessDayspriortotheextendedConditions Determination DatetheCompanyshallgiveallIPPsafurtherCompanyNoticepursuanttosub-clause (x),(y)or(z)above,providedthattheCompany's righttoextendtheConditions Determination Datepursuanttoasub-clause (z)noticeshallbelimitedsuchthattheaggregate numberofdaysbywhichtheConditions Determination DateandtheExpiration DatemaybeextendedbytheCompanypursuanttosub-clause (z)andbytheIPPspursuanttoclause(ii)belowshallbesixty(60)days(the"maximumextension period").

Notwithstanding theforegoing, iftheCompanyshallgiveasu&clause (x)noticeandpriortotheConditions Determination DatetheCoinpanyshallnotifytheIPPsthatithasagreedonthefinalformoftheirrespective Contract(s)'with oneormoreoftheIPPswithwhichitpreviously wasunabletoagree,thentheCompanyshallhavetherighttoconvertitssub-clause (x)noticetoeitherasubclause (y)noticeorasub-clause (z)notice;intheeventtheCoinpanygivesasub-clause (y)noticepursuanttothissentence, theConditions Determination Dateautomatically shallbeextendeduntilthefifth(5)BusinessDayfollowing thegivingofsuchnotice,subjecttofurtherextension pursuanttoclause(ii)below(and,further,insuchevent,the604aymaximumextension perioddescribed aboveshallbeincreased byanysuchfive(5)BusinessDayPeriod).(ii)IftheCompanyshallatanytimegivetheIPPsasubclause (y)noticepursuanttothisSection2.7(b)thatitiswillingtoproceedtoconsummate thetransactions contemplated hereby(subjecttotheotherconditions totheCompany's obligations contained inthisAgreement) withouttheinclusion ofthoseIPPswhichareunabletoagreeonthefinalformoftheirrespective Contract(s) ifsuchIPPshavenotagreedonthefinalformoftheirrespective Contract(s) onorbeforetheConditions Determination Date,asthesamemaybeextendedfromtimetotimepursuanttoclause(i)above,then,withinfive(5)BusinessDaysfollowing thereceiptofsuchnotice,allIPPsshalldetermine whethertheIPPsdesiretoextendforaperiodofthirty(30)days(subjecttothemaximumextension period)theConditions Determination DateandtheExpiration Date.Ifeightypercent(80%)oftheIPPsdonotsoelecttoextendtheConditions Determination DateandtheExpiration DatepursuanttothisSection2.7(b)(ii) onorbeforeten(10)BusinessDaysaherreceiptoftheCompany's sub-clause(y)notice(orifnosuchextension maybeelectedbecauseofthemaximumextension period),thenthisAgreement shallterminate ontheConditions Determination DatewithrespecttoanyIPPsidentified insuchnoticewhichareunabletoagreeonthefinalformoftheirrespective Contract(s) onorbeforetheConditions Determination Date.2.8.DeliveofContracts toEscrowAeent.OntheConditions Determination Date,theCompanyandeachIPPshallexecutetheagreedfinalformoftherespective Termination Agreement, AmendedPPA,RestatedContract(s),

NorConAgreement orOxbowAgreement, asthecasemaybe,andtheCompanyshallexecutetheFixedPriceSwapContracts (allsuchagreements andcontracts, collectively, the"Contracts"

),andthepartiestheretoshalldeliverallexecutedcounterparts oftheContracts totheEscrowAgent.Oncedelivered totheEscrowAgent,theContracts maynotthereafter beamended,exceptbyawrittenamendment executedbythepartiestheretoanddeposited withtheEscrowAgent.ThedeliveryoftheContracts totheEscrowAgentshallbeirrevocable, subjectonlytothesatisfaction orwaiveroftheconditions setforthinSections8and9hereofinaccordance withthetermsthereof,andtotheprovisions ofSection12.4.Uponthesatisfaction orwaiverofsuchconditions, ontheConsummation Date,theEscrowAgentshallbeauthorized andinstructed todelivercounterparts oftheContracts toeachoftherespective partiesthereto,whereupon theContracts (subjecttoanyconditions asmaybecontained therein)shallbeinfullforceandeffectasoftheEffective Time.Uponanytermination ofthisAgreement initsentiretyinaccordance withthetermshereof,oranytermination ofthisAgreement withrespecttoanyindividual IPP(s)inaccordance withthetermshereof,anyContracts theretofore delivered totheEscrowAgentbyanyoftheParties,orbytheCompanyandanyterminated IPP(s),asthecasemaybe,shallbevoidabinitioandshallbedestroyed bytheEscrowAgent.EachofthePartiesagreestoexecuteanddeliver,aspromptlyaspossiblefollowing thedateofthisAgreement, suchescrowagreement asmaybereasonably requested bytheEscrowAgentoranyotherPartyheretosettingforththerightsandobligations ofthePartiesandtheEscrowAgent,consistent ariththetermsandconditions ofthisAgreement, withrespecttotheContracts tobedelivered totheEscrowAgentpursuanttothisSection2.8,andtheagreements andotherdocuments tobedelivered totheEscrowAgentpursuanttoSections10.3and10.4(the"EscrowAgreement"

).TheEscrowAgreement shallcontaincustomary provisions, including customary exculpatory andindemnification provisions infavoroftheEscrowAgent.2.9.ContractAd'ustment.

Notlaterthanthirty(30)dayspriortotheanticipated Conditions Determination Date,theIPPsshalldemonstrate totheCompanythattheannualaggregate ContractAdjustment setforthonAttachment A-3toExhibitA("ContractAdjustment"

),asthesamemaybeadjustedpursuanttoSections2.5,2.6,2.7or12.4(b),willberealizedbytheCompanyupontheconsummation ofthetransactions contemplated hereby,whetherbyreduction oftheaggregate contractpriceundertheRestatedContracts orFixedPriceSwapContracts, byreduction oftheAllocable Consideration, Short-Term NotesorAdditional CashPayment(asapplicable),

oranycombination thereof,or,ifmutuallyagreedtobytheParties,inanyothermanner.14 3.ALLOCABLE CONSIDERATION; SHORT-TERM NOTES;ALLOCATION 3.1.Allocable Consideration.

TheCompanyshall,ontheConsummation Date,payand/ordelivertotheDepositary onbehalfoftheIPPsortheirrespective designees, thefollowing (referred tohereinasthe"Allocable Consideration"

):(a)Threebillionfivehundredfifty-five milliondollars($3,555,000,000) inimmediately available funds(the"CashPayment");and(b)Forty-six million(46,000,000) newly-issued, fully-paid andnonassessable shares("CompanyShares")ofCommonStockoftheCompany,whichnumberofCompanySharesshallbesubjecttoadjustment inaccordance withSection3.5hereof.3.2.Short-Term NotesAdditional CashPament.TheCompany,ontheConsummation Date,shallalsodelivertotheDepositary, forthebenefitofandatthedirection ofalloftheIPPsortheirrespective designees, either,attheCompanysoption,(i)noteobligations issuedbytheCompanyintheaggregate principal amountoffiftymilliondollars($50,000,000)

(the"Short-Term Notes")or(ii)thesumoffiftymilliondollars($50,000,000) inimmediately available funds(the"Additional CashPayment").TheCompanyshallgivetheIPPsnoticeifitelectstodelivertheAdditional CashPaymentinlieuoftheShort-Term Notes,notlaterthantheConditions Determination Date.TheShort-Term Notes,ifapplicable, shallmatureninety(90)daysaftertheConsummation Dateandshallhaveayieldwhichisatleastequivalent tocommercial paperissuedbycomparable issuersatthetimeoftheConsummation DateandsuchothertermsasmaybeagreedamongthePartiesnotlaterthantheConditions Determination Date.TheShort-Term Notesshallnotbesubjecttoanyrestrictions ontransfer.

3.3.DeliveofAllocable Consideration Short-Term NotesandAdditional CashPaenttoDesi.TheCashPayment,CompanySharesandShort-Term NotesorAdditional CashPayment,asapplicable, eachshallbeirrevocably delivered bytheCompanyontheConsummation DatetotheDepositary, whichshallholdtheCashPaymentandCompanySharesforthebenefitofandatthedirection oftheseveralIPPswhoarepartiestothisAgreement asoftheConsummation Dateintherespective amountssetforthintheAllocation andshallholdtheShort-Term NotesorAdditional CashPayment,asapplicable, forthebenefitofandatthedirection oftheIPPswhoarepartiestothisAgreement asoftheConsummation Date.TheCashPayment,CompanySharesandShort-Term NotesorAdditional CashPayment,asapplicable, shallbepaidordelivered withoutanysetoff,deduction orclaimwhatsoever.

TheCashPaymentand,ifapplicable, theAdditional CashPaymentshallbepaidbywiretransferoffederalfundstotheaccountoftheDepositary, whichaccountshallbesetforthinanoticetotheCompanygivennotlaterthanfive(5)BusinessDayspriortotheConsummation Date.The15 CompanySharesshallbeissuedincertificated form(withtherestrictive legenddescribed inSection3.6and,ifapplicable, therestrictive legenddescribed intheShareholder's Agreement) inthenamesoftheIPPsintherespective amountssetforthintheAllocation, orinthenamesoftherespective designees ofsuchIPPsinsuchamountsordenominations astherespective IPPsmaydetermine, ineachcaseasshallbesetforthinanoticetotheCompanygivennotlessthaneight(8)BusinessDayspriortotheConsummation Date;anydesigneeoftheIPPwhichshallreceiveanyCompanySharespursuanttothisAgreement shall,simultaneously withthegivingofsuchnotice,providetheCompanywitharepresentation lettercontaining substantially thesamerepresentations setforthinSection5.6ofthisAgreement.

Unlessotherwise setforthinanoticetotheCompanygivennotlaterthanfive(5)BusinessDayspriortotheConsummation Date,theShort-Term Notes(ifapplicable) shallberegistered toandissuedinthenameoftheDepositary, asagentfortheIPPs,subjecttosubsequent re-registration andre-issuance totheseveralIPPsortheirrespective designees insuchdenominations astheDepositary mayrequestandwhichtheCompanyshallexecute,attheCompany's expense,withinthree(3)BusinessDaysafterreceiptofanysuchrequest.EachofthePartiesagreestoexecuteanddeliver,aspromptlyaspossiblefollowing thedateofthisAgreement, suchdeposit,escroworsimilaragreement asmaybereasonably requested bytheDepositary oranyotherPartyheretosettingforththerightsandobligations ofthePartiesandtheDepositary, consistent withthetermsandconditions ofthisAgreement, withrespectto(a)theAllocable Consideration andShort-Term NotesorAdditional CashPayment,asapplicable, tobedelivered totheDepositary pursuanttothisSection3.3and(b)theAllocation andthecertifications ofinformation contained intheAllocation requiredtobegivenbytheDepositary pursuanttotheprovisions ofthisAgreement (the"DepositAgreement"

).TheDepositAgreement shallcontaincustomary provisions, including customary exculpatory andindemnification provisions infavoroftheDepositary.

3A.Allocation.

(a)Eachof(i)theAllocable Consideration, (ii)thecontractquantityandcontractpriceundertheAmendedPPA,(iii)theaggregate contractquantities ofelectricity andaggregate capacityforatermoftenContractYearsandweightedaveragecontractpricesforthefirsttwoContractYearsundertheRestatedContracts and(iv)theContractAdjustment havebeenallocated byandamongtheseveralIPPsinaccordance withanallocation separately agreedtobytheIPPsanddeposited bytheIPPswithWP&Co.andinasealedenvelopewiththeEscrowAgentonorbeforethedateofthisAgreement (clauses(i),(ii),(iii)and(iv)arereferredtohereinasthe"Allocation",

clauses(ii)and(iii)onlyarereferredtohereinasthe"Contracts Allocation" andclause(iv)onlyisreferredtohereinasthe"Contract Adjustment Allocation"

).Promptlyfollowing theexecution oftheDepositAgreement, theEscrowAgentshalldelivertheAllocation totheDepositary.

IftheDepositAgreement isnotexecutedbythePartiesandtheDepositary withinthirty(30)daysafterthedateofthisAgreement, theEscrowAgent16 rshall,unlessotherwise directedinwritingbythePartiestodelivertheAllocation toasuccessor escrowagent,destroytheAllocation.

UponsuchdeliverytotheDepositary orsuccessor escrowagentordestruction oftheAllocation, asthecasemaybe,theEscrowAgentshallhavenofurtherobligation withrespecttotheAllocation, andtheEscrowAgentshallhavenoobligation withrespecttotheAllocation exceptassetforthinthisSection3.4(a).Subjecttothefollowing

sentence, theCompanyagreesthattheAllocation shallnotbesubjecttochallenge ormodification bytheCompany,andthattheCompanyshallnotinitiate, encourage orsupportanysuchchallenge orattempted modification byanyGovernmental Authority orotherthirdparty.TheIPPsmaymodifytheAllocation onlywiththepriorwrittenconsentofallIPPs;exceptthat(i)theCompanyandanyIPPmaymutuallyagreetoincreaseorreducetheAllocable Consideration orcontractquantityandcontractpriceundertheAmendedPPAoraRestatedContracttobepaidtoorreceivedbysuchIPPand(ii)anyIPPmay,initssolediscretion, adjustthecomponents oftheAllocable Consideration allocated collectively tosuchIPPanditsAf51iateIPPsasamongsuchIPP'sandAQiliateIPP'sExistingPPAs;provided, however,inanysuchcasesuchadjustment (x)shallnotaffectanyothernon-Affiliate IPP'sallocation oftheAllocable Consideration orcontractquantityandcontractpriceundertheAmendedPPAoraRestatedContractand(y)shallnotreducetheCashPaymentandCompanySharespayablewithrespecttoClassAPPAstolessthantwobilliondollars($2,000,000,000)

(excepttotheextentthatsuchamountisreducedasaresultofthetermination ofthisAgreement withrespecttoanyIPPswhicharepartiestoClassAPPAs).Forpurposesoftheforegoing determination ofwhethertheCashPaymentandCompanySharespayablewithrespecttoClassAPPAsisatleast$2,000,000,000 pursuanttoanyprovision ofthisAgreement, theCompanySharesshallbevaluedattheBaseSharePrice.TheaffectedIPPshallnotifytheDepositary andWP&Co.ofanysuchpermitted adjustment, whereupon theAllocation shallbeamendedaccordingly.

TheDepositary shallmaintainascheduleofallsuchadjustments totheAllocation.

(b)NeithertheAllocation, noranyportionthereofnoranyinformation contained thereinshallbefurnished ordisclosed totheCompanyoranyGovernmental Authority, exceptthat:(i)anyindividual IPPshallbe&eetodiscloseitsownportionoftheAllocation (x)totheCompany,(y)toanyGovernmental Authority or(z)toanythirdparty;andNorConandanyotherindividual IPPwhichelectstocominence itsownnegotiations withtheCompanypriortothePSCApprovalDateshalldisclosetotheCompanyitsownportionoftheContracts Allocation notlaterthanfive(5)BusinessDayspriortothecommencement ofsuchnegotiations, providedthattheCompanyiswillingtocommencenegotiations regarding non-economic termswithanyIPPpriortoreceiving theContracts Allocation.

17 (ii)theIPPsshallcauseWP&Co.tofurnishinwritingtotheCompany(andeachIPP)immediately following theexecution ofthisAgreement:

(x)aschedulesettingforth(A)thenumberofIPPs(considered onanaggregate basiswithanyIPPswhichareAftiliates ofsuchIPPs)which,pursuantto,theAllocation, willacquirepursuanttoSection3.1(b)lessthan1,903,906 CompanyShares;1,903,906 ormorebutlessthan3,807,812 CompanyShares;3,807,812 ormorebutlessthan5,711,718 CompanyShares;5,711,718 ormorebutlessthan7,615,624 CompanyShares;7,615,624 ormorebutlessthan9,519,531 CompanyShares;and9/19,531ormorebutlessthan10,650,000 CompanyShares,respectively, asofthedateofthisAgreernen, whichtogethershallconstitute alloftheIPPsacquiring CompanySharespursuanttoSection3.1(b),and(B)theaggregate amount,ifany,oftheAllocable Consideration allocated toClassAPPAsandcollectively toClass8PPAsandtheClassDPPA,respectively, asofthedateofthisAgreement (itbeingagreedthattheportionoftheCashPaymentandCompanySharesallocated toClassAPPAspursuanttotheAllocation asofthedateofthisAgreement shallnotbelessthantwobilliondollars($2,000,000,000));

(y)acertification thatthecontractquantityofelectricity andcapacityforatermoftenContractYearsundertheRestatedContracts allocated toeachClassBPPAontheContracts Allocation whenaddedtogetherwillequaltheaggregate quantityofelectricity (roundedtothenearestGWh)andcapacityundertheRestatedContracts onAttachment A-3toExhibitAandthatthecontractpriceforatermoftenContractYearsundertheRestatedContracts allocated toeachClassBPPAontheContracts Allocation whenweightaveragedwillyieldtheweightedaverageprice(roundedtothenearestpennyperMWh)undertheRestatedContracts underthecolumns"weighted averageprice"and"exampleofweightedaverageprice"onAttachment A-3toExhibitA;and(z)acertification thattheContractAdjustment allocated toeachClassBPPAontheContractAdjustment Allocation whenaddedtogetherwillequaltheamountsunderthecolumn"aggregate contractadjustment" (roundedtothenearest$1,000)setforthonAttachment A-3toExhibitA.(iii)theIPPsshallcauseWP&Co.tofurnishinwritingtotheCompanywithinthree(3)BusinessDaysafterthePSCApprovalDateaschedulesettingforththeContracts Allocation; and18 (iv)theIPPsshallcauseWP&Co.tofurnishinwritingtotheCompany,ontheConsummation Date,aschedulesettingforththeaggregate amount,ifany,oftheCashPaymentandCompanySharesallocated toClassAPPAs,ClassBPPAsandClassDPPA,respectively, asoftheConsummation Date(itbeingagreedthattheportionoftheCashPaymentandCompanySharesallocated toClassAPPAsshallnotbelessthan$2,000,000,000, excepttotheextentthatsuchamountisreducedasaresultofthetermination ofthisAgreement withrespecttoanyIPPswhicharepartiestoClassAPPAs).TheCompanymay,incoordination withsuchIPPorWP&Co.,confirmwiththeDepositary anyinformation disclosed byanyIPPor%P&Co.,respectively, totheCompanypursuanttothisclause(b).Anyinformation disclosed totheCompanypursuanttothisSection3.4(b)shallbesubjecttotheconfidentiality provisions ofSection14.14.(c)SubjecttoSection6.2,theinformation contained intheAllocation whichisfurnished totheCompanypursuanttoSection3.4(b)shallbeutilizedbythePartiesforalltaxreporting purposes(subjecttoanyadjustments mutuallyagreedbetweentheCompanyandanyindividual IPPintheAmendedPPA,anyRestatedContract, orotherwise).

3.5.Non-Dilution.

Itisunderstood thatthenumberofCompanySharestobeissuedanddelivered bytheCompanypursuanttoSection3.1(b)represents approximately 24.16%oftheCompany's fully-diluted CommonStockoutstanding asofSeptember 30,1996,aftergivingeffecttotheissuanceoftheCompanySharespursuanttoSection3.1(b).Accordingly, ifatanytimebetweenSeptember 30,1996andtheConsummation Datethereshallhaveoccurredanyofthefollowing (itbeingunderstood thatthereshallbesequential adjustments foreachtransaction described below):(a)any(i)issuanceofsharesofCommonStockforaconsideration persharewhichislessthan$8.70(the"BaseSharePrice"),thenthenumberofCompanySharestobeacquiredbytheIPPspursuanttoSection3.1(b)shallbeincreased bytheamountequaltothenumberofsharesofCommonStockissuedforaconsideration lessthantheBaseSharePrice,multiplied bythedifference betweentheBaseSharePriceandtheissueprice,andthendividingtheproductbytheBaseSharePrice;or(ii)issuanceofoptions,wiuTantsorrightstopurchasesharesofCommonStockforaconsideration pershareofCommonStockwhichislessthantheBaseSharePrice,ortheissuanceofothersecurities oftheCompany(oranysubsidiary oftheCompany)convertible intoCommonStockataconversion pricepershareofCommonStockwhichislessthantheBaseSharePrice,thenthenumberofCompanySharestobeacquiredbytheIPPspursuanttoSection3.1(b)shallbeincreased bytheamountequaltothenumberofsharesofCommonStockdeliverable upontheexerciseorconversion ofsuchoptions,warrants, rightsorother securities, multiplied bythedifference betweentheBaseSharePriceandtheexerciseorconversion price,andthendividingtheproductbytheBaseSharePrice;(b}anychangeinthenumberofsharesofCommonStock(oroptions,warrantsorrights,orothersecurities oftheCompanyexercisable, exchangeable orconvertible intoCommonStock)asaresultofareclassification, combination,

exchange, subdivision, stocksplit(including areversestocksplit),stockdividendordistribution, recapitalization, merger,issuertenderorexchangeoffer,orothersimilartransaction, thenthenumberofCompanySharestobeacquiredbytheIPPspursuanttoSection3.1(b)shallbeappropriately andequitably adjusted; or(c)any(i)reorganization (otherthanasprovidedinsubsection (b)above),(ii)inergerorconsolidation oftheCompanywithorintoanothercorporation inwhichtheCompanyisnotthesurviving entity,orareversetriangular mergerinwhichtheCompanyisthesurviving entitybutthesharesoftheCompany's capitalstockoutstanding immediately priortothemergerareconverted byvirtueofthemergerintootherpiaperty, whetherintheformofsecurities, cashorotherwise or(iii)saleortransferoftheCompany's properties andassetsas,orsubstantially as,anentiretytoanyotherperson,then,asapartofsuchreorganization, merger,consolidation, saleortransfer, lawfulprovision shallbemadesothattheIPPsshallthereafter beentitledtoreceivethenumberofsharesofstockorothersecurities orpropertyofthesuccessor corporation orcorporations resulting

&omsuchreorganization, merger,consolidation, saleortransferthattheIPPsmouldhavebeenentitledtoreceiveinsuchreorganization, consolidation, merger,saleortransferiftheConsummation DatehadoccurredandtheCompanyShareshadbeenacquiredbytheIPPsimmediately beforesuchreorganization, merger,consolidation, saleortransfer.

Notwithstanding theforegoing, thereshallbenoadjustment pursuanttothisSection3.5foranysharesofCommonStockissuedwithrespecttoanyofthetransactions described onSchedule3.5hereto.Anyadditional sharesofCommonStockdelivered bytheCompanypursuanttothisSection3.5shallbereceivedbytheIPPs,prorata,basedontheCompanySharesallocated toeachoftheIPPspursuanttotheAllocation.

3.6.PrivatePlacement'e istration ofComanShares.(a)TheissuanceoftheCompanySharestotheIPPshereunder shallbeeffectedasaprivateplacement pursuanttoSection4(2)oftheSecurities Act.Thecertificates evidencing theCompanySharesshallbearalegendinsubstantially thefollowing form:THESECURITIES EVIDENCED HEREBYHAVENOTBEENREGISTERED UNDERTHEUNITEDSTATESSECURITIES ACTOF1933,ASAMENDED("SECURITIES ACT"),ANDMAYNOTBE20 OFFERED,SOLD,PLEDGEDOROTHERWISE TRANSFERRED EXCEPT(1)PURSUANTTOANEFFECTIVE REGISTRATION UNDERTHESECURITIES ACT,(2)INACCORDANCE WITHRULE144UNDERTHESECURITIES ACTOR(3)INACCORDANCE WITHANOTHERAPPLICABLE EXEMPTION FROMTHEREGISTRATION REQUIREMENTS OFTHESECURITIES ACT.Uponissuance, theCompanySharesshallnotbesubjecttoanyrestrictions ontransferotherthanasmayberequiredbythefederalsecurities lawsand,ifapplicable, asmaybesetforthintheShareholder's Agreement.

TheCompanyshalluseitsReasonable BestEffortstocausetheCompanySharestoberegistered forsale&omtimetotimebytheIPPs(ortheirassigns)onashelfregistration statement onFormS-3(the"ShelfRegistration Statement"

),whichShelfRegistration Statement shall(i)bedeclaredeffective bytheSEConorpriortotheConsummation Date,(ii)remaineffective foraperiodoftwo(2)yearsfollowing theConsummation Dateand(iii)permitasanintendedmethodofdistribution oftheCompanyShares(amongothers)anunderwritten offeringbyanunderwriter selectedbytheholdersoftheCompanySharesthatisreasonably satisfactory totheCompany.TheCompanycovenants andagreesthat,asofitseffective dateandasoftheConsummation Date,noneoftheShelfRegistration Statement, anydocumentincorporated byreference therein,anyprospectus includedthereinorfiledwiththeSEC,oranyamendment thereoforsupplement thereto,shallcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading.

(b)Inconnection withthepreparation andfilingoftheShelfRegistration Statement undertheSecurities Act,theCompanyshallgivetheIPPs'pecial Counseltheopportunity toparticipate inthepreparation of(including, butnotlimitedto,reviewing, commenting onandattending allmeetingswithunderwriters, ifany,wiithrespectto)theShelfRegistration Statement, eachprospectus includedthereinorfiledwiththeSEC,eachamendment thereoforsupplement thereto,andwillprovidetheIPP'sSpecialCounseltheopportunity tocommentonthedescription ofthetransactions contemplated hereunder tobecontained inthecurrent,quarterly orannualreportfiledbytheCompanyinconnection withtheconsummation ofthetransactions contemplated hereunder, andwillmakeavailable forinspection bytheIPPs'pecial Counselandanyattorney, accountant orotheragentretainedbyanyIPP,alldocuments incorporated byreference therein,allpertinent financial andotherrecords,pertinent corporate documents andproperties oftheCompany,asshallbereasonably necessary toenableeachIPPtoconductareasonable investigation withinthemeaningoftheSecurities Act,andshallcausetheCompany's

officers, directors andemployees tosupplyallinformation whichanyIPPmayreasonably requestforpurposesofsuchinvestigation; providedthatanyrecords,information ordocuments thataredesignated bytheCompanyinwritingasconfidential (andwhicharenotgenerally available tothepublic,havenotbecomeavailable tosuchpersononanonconfidential basis&omasourcewhichhasrepresented 21 tosuchpersonthatsuchsourceisentitledtodisclosesameorwhichwasknowntosuchpersononanonconfidential basispriortoitsdisclosure bytheCompany)shallbekeptconfidential bysuchpersonunlessdisclosure ofsuchrecords,information ordocuments isrequiredbycourtoradministrative orderoranyGovernmental Authority havingjurisdiction.

TheCompanyshaBpermittheIPPs'pecial CounseltoreviewandcommentontheShelfRegistration Statement andeachsuchprospectus, amendment orsupplement, asthecasemaybe,areasonable periodoftimepriortothefilingofsamewiththeSEC,shallnotfilesameinaformtowhichsuchcounselreasonably objectswithinfive(5)BusinessDaysofthereceiptthereof,andshallprovidetheIPPs'pecial Counselwithcopiesofallcorrespondence fromorwiththeSECincidental totheShelfRegistration Statement oranysuchprospectus, amendment orsupplement.

Allexpensesincidenttotheregistmtion oftheCompanySharesincluding, withoutlimitation, allregistration, qualification andfilingfees,"bluesky"feesandexpenses, printingandrelatedexpenses, feesandexpensesoflistingtheCompanySharesontheNYSE,feesandexpensesofcounselandindependent certified publicaccountants oftheCompanyandfeesandexpensesoftheIPPs'pecial CounselshallbebornebytheCompany.Inaddition, ontheConsummation Date,theCompanyandeachIPPreceiving CompanySharespursuanttotheAllocation (oritsdesignee) shallenterintoaregistration rightsagreement intheformannexedasExhibit3.6hereto("Registration RightsAgreement"

).3.7.Shareholder's Ament.OntheConsummation Date,eachIPPlistedonSchedule3.7hereto(unless,asaresultofanyreallocation ofCompanySharespriortotheConsummation Dateorasaresultofanydesignation ofthirdpartiespursuanttoSections3.3.and5.6toreceiveCompanySharesontheConsummation Date,suchIPP,togetherwithitsAffiliate IPPs,membersofitsSponsorGroupanditsExcludedAffiliates (assaidlattertwocapitalized termsaredefinedintheShareholder"s Agreement),

shallacquireontheConsummation DateCompanySharesrepresenting lessthantwopercent(2%)oftheoutstanding CommonStockoftheCompany)shallcausethecorresponding entityorentitieslistedonSchedule3.7toenterintoashareholder's agreement withtheCompanyintheformannexedasExhibit3.7hereto(each,a"Shareholder's Agreement"

).IfanyIPPnotlistedonSchedule3.7,asaresultofanyreallocation ofCompanySharespriortotheConsummation Date,shallreceive,togetherwithitsAffiliates, CompanySharesrepresenting twopercent(2%)ormoreoftheoutstanding CommonStockoftheCompany,thensuchIPPshallnotifytheCompanyandshallidentifysuchsponsor.entitiesasmaybeappropriate (consistent withthesponsorentitieslistedonSchedule3.7)toenterinto,andsuchIPPandsponsorentitiesshallenterinto,aShareholder's Agreeinent withtheCompanyontheConsummation Date.IfanydesigneeofoneormoreIPPswithrespecttotheCompanySharesinaccordance withSections3.3and5.6shallreceiveCompanySharesrepresenting morethanfourandnine-tenths percent(4.9%)oftheoutstanding CommonStockoftheCompany,thensuchdesigneeshallenterintoaShareholder's Agreement withtheCompanyontheConsummation Date,unlesstheCompanyshallotherwise agree.TheIPPshallcauseanysuchdesigneewithrespecttoCompanySharesinaccordance withSections3.3and5.6(ifnotanAffiliate oftheIPP)22 toprovidearepresentation lettertotheCompany(whichshallsurvivetheConsummation Date)representing that,togetherwithitsAffiliates, suchdesigneeshallnot,immediately following theConsummation, bethebeneficial owner(withinthemeaningofRule13d-3undertheExchangeAct)ofmorethannineandnine-tenths percent(9.9%)oftheoutstanding CommonStockoftheCompany.IfanyExcludedAffiliate (asdefinedintheShareholder's Agreement) receivesCompanySharespursuanttothisAgreement ontheConsummation Datethen,forpurposesoftheShareholder's Agreement, suchCompanySharesshallbetreatedasiftheyweretransferred totheExcludedAffiliate following theConsummation Date.3.8.BoardofDirectors.

PromptlyaAerthedateofthisAgreement, theCompanyandtheIPPsshalljointlyselectanationally recognized executive searchfirm,whosefeesandexpenseswillbepaidbytheCompany,todevelopalistofindividuals unaffiliated withtheCompanyoranyIPPwhoarequalified toserveasdirectors oftheCompany.BoththeCompanyandtheIPPsmayproposepotential directors tothesearchfirm,butthesearchfirmshalldecidewhichindividuals willbeincludedonthesearch6rm'slist.Oncethesearchfirm'slisthasbeenpreparedandpresented simultaneously totheCompanyandtheIPPs,theCompanyandtheIPPsshallmutuallyagreeuponafinallistoften(10)individuals whoaremutuallyacceptable totheCompanyandtheIPPs.TheCompanyshallselecttwo(2)individuals

&omthefinallisttoserveontheBoardofDirectors oftheCompany,effective immediately following theConsummation Date.Eachsuchindividual shallstandforreelection forathree(3)yeartermattheCompany's nextannualmeetingofshareholders.

Eachsuchindividual shallbeproposedandsupported bytheCompanyforelectiontotheBoard.Intheeventeithersuchindividual shallbeunabletoserveorcontinuetoserveontheBoard,suchindividual's replacement shallbeselectedbytheCompanyRomthefinallist.Theprovisions ofthisSection3.8shallsurvivetheConsummation Dateuntilfullyperformed.

4.REPRESENTATIONS ANDWARI~TIES OFTHECOMPANYTheCompanyherebyrepresents andwarrantstoeachIPP,asfollows:4.1.Oranization.

Standin.TheCompanyisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsoftheStateofNewYork,andhasallrequisite corporate powerandauthority toownitsproperties andassetsandtocarryonitsbusinessinthemannernowconducted and,subjecttoreceiptoftheNMPCRegulatory Approvals, asproposedtobeconducted inaccordance withthisAgreement andtheContracts.

TheCompanyisdulyqualified totransactbusinessandisingoodstandingineachjurisdiction exceptwherethefailuresotoqualifywouldnothaveaMaterialAdverseEffectontheCompany.23 4.2.Execution AuthoritEnforceabili

.Subjectineachcaseto(i)receiptoftheNMPCRegulatory Approvals andapplicable federalandstatesecurities lawsandtherulesoftheNYSE,(ii)receiptofrequiredconsentstothetransactions contemplated bythisAgreement bythethirdpartieswhosenamesaredisclosed inanoticegivenbytheCompanytoallIPPswithinthirty(30)daysafterthedateofthisAgreement, whichnoticeshallnotincludeNMPC/Third PartyReleases(each,an"NMPCffhird PartyConsent"),(iii)receiptoftheNMPC/Third PartyReleasesand(iv)approvalofthisAgreement andthetransactions contemplated herebybytheCompany's BoardofDirectors and,totheextentrequired, bytheCompany's shareholders, (a)theCompanyhasallrequisite corporate powerandauthority toexecuteanddeliverthisAgreement andallotheragreements tobeexecutedbyitpursuanthereto,andtocarryouttheprovisions ofthisAgreement inaccordance withthetermshereof,andallotheragreements tobeexecutedbyitpursuanthereto,including, butnotlimitedto,thepowerandauthority toissueandselltheCompanySharesandShort-Term Notes,andtoenterintoandperformtheContracts; (b)thisAgreement hasbeenandallotheragreements tobeexecutedbytheCompanypursuantheretowillbe,dulyandvalidlyexecutedanddelivered bytheCompany;and(c)thisAgreement constitutes, andallotheragreements tobeexecutedbytheCompanypursuantheretowillconstitute, validandlegallybindingobligations oftheCompany,enforceable againsttheCompanyinaccordance withtheirrespective terms,4.3.NoConflicts.

Subjectto(i)receiptoftheNMPCRegulatory Approvals, (ii)receiptoftheNMPCfThird PartyConsents, (iii)receiptoftheNMPCfIMrd PartyReleasesand(iv)approvalofthisAgreement andthetransactions contemplated herebybytheCompany's BoardofDirectors and,totheextentrequired, bytheCompany's shareholders, theexecution,

delivery, andperformance bytheCompanyofthisAgreement, anyotheragreements tobeexecutedbytheCompanypursuanthereto,andtheconsummation ofthetransactions contemplated herebyandthereby,willnotresultinaviolation ordefaultofanyprovision ofitsCertificate ofIncorporation orBy-Laws.4.4.~Littation.ExceptassetforthinSchedules 6.10Aand6.10BorintheSECReports,asofthedateofthisAgreement thereisnoaction,suit,arbitration, orotherlegaloradministrative proceeding pendingor,tothebestknowledge oftheCompany,anyinvestigation pendingoranyaction,suit,arbitration, orotherlegaloradministrative proceeding orinvestigation threatened againsttheCompanyoranyofitssubsidiaries which(a)questions thevalidityofthisAgreement, theagreements tobeexecutedbytheCompanypursuantheretoortherightoftheCompanytoenterintothisAgreement orsuchotheragreements, ortoconsummate thetransactions contemplated herebyortherebyor(b)ifadversely determined, wouldbelikelytohaveaMaterialAdverseEAectontheCompany.TheCompanyisnotapartytoorsubjecttoanyorder,writ,injunction, decree,judgmentorotherrestriction ofanyGovernmental Authority whichhasorisreasonably likelytohaveamaterialadverseeffectontheCompany's abilitytoenterintoandperformitsobligations underthisAgreement oranyotheragreements tobeenteredintobytheCompanypursuanthereto.24 45.55ll5.hhdl*45*5hfi)5h'dlI'fd*Company,(ii)thenumberofsharesofCommonStockissuedandoutstanding and(iii)thenumberofsharesofCommonStockissuableupontheexerciseofanyoptions,warrantsorrights,oruponconversion orexchangeofanyothersecurities outstanding, ineachcaseasof(x)September 30,1996and(y)June27,1997.TheCompanyisnotobligated torepurchase, redeemorotherwise acquireanysharesofitscapitalstock,otherthanassetforthinSchedule4.8.4.6.ValidIssuanceofComanShares.TheCompanySharestobeacquiredbytheIPPshereunder, whenissued,soldanddelivered inaccordance withthetermsofthisAgreement fortheconsideration expressed herein,willbedulyandvalidlyissued,fullypaid,andnonassessable, willbe&eeofrestrictions ontransferotherthanrestrictions ontransferrequiredbyfederalsecurities lawsand,ifapplicable, asmaybesetforthintheShareholder's Agreement, andwillbedulylistedontheNYSE.TheCompanySharestobeacquiredbytheIPPshereunder arenotandwillnotbesubjecttoanypreemptive rightsorrightsoffirstrefusal,AssumingthetruthandaccuracyofeachIPP'srepresentations setforthinSection5.6(or,withrespecttoanydesigneeofanIPP,suchdesignee's representations setforthinarepresentation lettercontaining substantially thesamerepresentations setforthinSection5.6),theoffer,saleandissuanceoftheCompanySharespursuanttothisAgreement (i)willnotrequireregistration undertheSecurities Actand(ii)willnotrequireregistration orqualification undersuchofthe"bluesky"orsecurities lawsofthejurisdictions intheUnitedStates(orwillbeincompliance therewith) asshallbeapplicable totheoffer,saleandissuanceoftheCompanyShares(subjecttothelasttwosentences ofSection5.6andsubjectfurthertothelimitation thattheCompanymakesnorepresentation orwarrantywithrespecttoanyofferbyanyIPPtoanydesigneeofsuchIPPascontemplated bySections3.3and5.6),andneithertheCompanynoranyauthorized agentactingonitsbehalfwilltakeanyactionhereafter thatwouldrequiresuchregistration.

4.7.SECRertsandFinancial Statements.

SinceJanuary1,1995,theCompanyhasmadeallfilingsrequiredtobemadebyitundertheExchangeActandanyothersecurities lawsapplicable totheCompanyandi'sotherwise eligibletofilearegistration statement onFormS-3coveringtheofferingandsaleoftheCompanySharesandtheDebtSecurities.

Asoftheirrespective datesor,ifamended,asofthedateofsuchamendinent, theSECReportscompliedinallmaterialrespectswiththerequirements oftheExchangeAct,andtherulesandregulations oftheSECthereunder.

Asoftheirrespective datesor,ifamended,asofthedateofsuchamendment, theSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances underwhichtheyweremade,notmisleading.

Thefinancial statements oftheCompanyincludedintheCompany's AnnualReportonForm10-KforthefiscalyearendedDecember31,1996andtheCompany's Quarterly ReportonForm10-QforthefiscalquarterendedMarch31,1997complyastoforminallmaterialrespectswith25 applicable accounting requirements andthepublished rulesandregulations oftheSECwithrespectthereto,havebeenpreparedinaccordance withgenerally acceptedaccounting principles asstatedinsuchfinancial statements appliedonaconsistent basisduringtheperiodcoveredandfairlypresent,inallmaterialrespects, thefinancial positionoftheCompanyasofthedatethereofandtheresultsofoperations andchangesinfinancial positionoftheCompanyfortheperiodthenendedsubject,inthecaseofunaudited statements, tonotesandnormalyear-endauditadjustments, noneofwhichshallbematerialinamountoreffect.4.8.AbsenceofCertainChanesorEvents.ExceptassetforthintheSECReportsorinSchedule4.8,betweenDecember31,1996andthedateofthisAgreement therehasnotbeennorhastheCompanyincurred:

(a)anydamage,destruction orloss,whetherornotcoveredbyinsurance, materially andadversely affecting anymaterialportionofitsassets;(b)anysatisfaction ordischarge ofanymateriallien,claimorencumbrance orpaymentofanymaterialobligation bytheCompany,exceptintheordinarycourseofbusiness; (c)anymaterialchangeto,orcancellation of,amaterialcontract, agreement, leaseorcommitment bywhichtheCompanyoranyofitsmaterialassetsisboundorsubject;(d)otherthanintheordinarycourseofbusiness, anymaterialchangeorincreaseinanycompensation arrangement oragreement withanyofficer,directororexecutive employeeoftheCompany,including anygrantofstockappreciation rights;(e)anysaleorotherdisposition ofanymaterialportionoftheCompany's assets;(f)anymortgage, pledge,securityinterestorliencreatedbytheCompany,withrespecttoanymaterialportionofitsassets;(g)anymaterialchangeinthemannerofkeepingtheCompany's books,accountsorrecordsortheaccounting practices thereinreflected; (h)asofthedateofthisAgreement, anymergerorconsolidation oftheCompanywithorintoanyotherentity,oranyissuance, saleorotherdisposition ofanysharesoftheCompany's capitalstock;or(i)anydeclaration, settingaside,orpaymentorotherdistribution incashorpropertyinrespectofanyoftheCompany's capitalstock,oranydirectorindirectredemption,

purchase, orotheracquisition ofanyofsuchstockbytheCompany,otherthanpursuanttotheoperation oftheDRIPPlanorasrequiredbythetermsoftheCompany's preferred stock.I4.9.NMPCRestructurin

.AsofthedateofthisAgreement, theCompanyhasdisclosed totheIPPsallmaterialplansandproposals concerning theNMPCRestructuring whichhavebeendisclosed toanyGovernmental Authority orapprovedbytheBoardofDirectors oftheCompanyandwhichcouldreasonably haveamaterialadverseeffectonanyIPPortheRestructuring, including butnotlimitedtotheContracts oranyoftheconsideration tobereceivedbytheIPPshereunder.

AsofthedateofthisAgreement, theCompanyhasnotbeenauthorized byitsBoardofDirectors, noristheCompanyseekingsuchauthorization, tofileapetitionundertheBankruptcy Codeorotherwise tocommence, authorize oracquiesce inthecommencement ofaproceeding underanybankruptcy orsimilarlawfortheprotection ofcreditors, ortomakeageneralassignment oranygeneralarrangement orcompromise forthebenefitofcreditors, nor76 hastheCompanymade,commenced, authorized oracquiesced inthecommencement ofanysuchproceeding orassignment orhadanysuchpetition, proceeding orassignment conunenced againstit.5.REPRESENTATIONS AND%AEG~TIES OFEACHIPPEachIPP(severally andnotjointly)herebyrepresents andwarrantstotheCompany,asfollows:5.1.Oranization Standin.TheIPPisacorporation, partnership orotherentitydulyorganized, validlyexistingandingoodstandingunderthelawsofitsstateofincorporation orformation, and,subjecttoreceiptoftheIPPRegulatory Approvals, hasallrequisite corporate orpartnership powerandauthority, asthecasemaybe,toownitsproperties andassetsandtocarryonitsbusinessinthemanner-now conducted andasproposedtobeconducted inaccordance withthisAgreement andtheContracts.

5.2.Execution Authori.Enforceabili

.Subjectineachcasetoreceiptof(i)theIPPRegulatory Approvals, (ii)theIPPffhird PartyConsentsand(iii)theIPPApprovals, (a)theIPPhasallrequisite corporate orpartnership powerandauthority, asthecasemaybe,toexecuteanddeliverthisAgreement andallotheragreements tobeexecutedbyitpursuanthereto,andtocarryouttheprovisions ofthisAgreement inaccordance withthetermshereof,andallotheragreements tobeexecutedbyitpursuanthereto,including, butnotlimitedto,thepowerandauthority toenterintoandperformtheContracts towhichitisaparty;(b)thisAgreement hasbeen,andallotheragreements tobeexecutedbytheIPPpursuantheretowillbe,dulyandvalidlyexecutedanddelivered bytheIPP;and(c)thisAgreement constitutes, andallotheragreements tobeexecutedbytheIPPpursuantheretowillconstitute, validandlegallybindingobligations oftheIPP,enforceable againsttheIPPinaccordance withtheirrespective terms.5.3.NoConflicts.

Subjecttoreceiptof(i)theIPPRegulatory Approvals, (ii)theIPP/Third PartyConsentsand(iii)theIPPApprovals, theexecution,

delivery, andperformance bytheIPPofthisAgreement, anyotheragreements tobeexecutedbytheIPPpursuanthereto,andtheconsummation ofthetransactions contemplated herebyandthereby,willnotresultinaviolation ordefaultofanyprovision ofitsCertificate ofIncorporation orBy-Lawsorpartnership agreement, asapplicable.

5.4.'Liti ation.ExceptassetforthinSchedules 5.4,6.iOAand6.10B,asofthedateofthisAgreement thereisnoaction,suit,arbitration, orotherlegaloradministrative proceeding pendingor,tothebestknowledge oftheIPP,anyinvestigation pendingoranyaction,suit,arbitration, orotherlegaloradministrative proceeding orinvestigation threatened againsttheIPPwhich(a)questions thevalidityofthisAgreement, theagreements tobeexecutedbytheIPPpursuantheretoortherightofthe27 IPPtoenterintothisAgreement orsuchotheragreements, ortoconsummate thetransactions contemplated herebyortherebyor(b)ifadversely determined, wouldbelikelytohaveamaterialandadverseeffectontheIPP'sabilitytoenterintoandperformitsobligations underthisAgreement oranyotheragreements tobeexecutedbytheIPPpursuanthereto.TheIPPisnotapartytoorsubjecttoanyorder,writ,injunction, decree,judgmentorotherrestriction ofanyGovernmental Authority whichhasorisreasonably likelytohaveamaterialandadverseeffectontheIPP'sabilitytoenterintoandperformitsobligations underthisAgreement oranyotheragreements tobeexecutedbytheIPPpursuanthereto.5.5.CertainTransfers; AsofthedateofthisAgreement, theIPPdoesnothaveanyagreement orunderstanding withanyotherIPPto(i)re-allocate ortransfertosuchotherIPP(excluding forthesepurposesanyAQiliateIPPofsuchIPP),whetherbeforeoraftertheConsummation Date,anyportionoftheCashPaymentorCompanySharesallocated totheIPPpursuanttotheAllocation or(ii)assignortransferaRestatedContractorAmendedPPAtoanyIPPwhoseExistingPPAisaClassAPPA.5.6.AcuisitionofComanShares.IftheIPP,pursuanttotheAllocation, willacquireanyCompanySharespursuanttoSection3.1(b):(a)theCompanySharestobeacquiredbysuchIPPshallbeacquiredforitsownaccountandwithoutaviewtotheresaleordistribution thereoforshallbeissued(inwholeorinpart)todesignees ofsuchIPP,consisting ofpartnersandshareholders (atanytier),Affiliates, lenders,steamhostsorGasMitigation ThirdParties(provided anysuchdesigneeshallprovidetheCompanywithalettercontaining substantially thesamerepresentations setforthinthisSection5.6and,ifapplicable, designating asuitablepurchaser representative, whichlettershallbereasonably satisfactory totheCompanyanditscounsel);

provided, however,thattheforegoing shallnotprecludetheIPPfromtransferring orsellingtheCompanySharestobeacquiredbyitinthemannerdescribed inclauses(c)(i),(ii)or(iii)below;(b)suchIPPiseither(x)an"accredited investor" assuchtermisdefinedinRule501(a)ofRegulation DundertheSecurities Actor(y)ifnotan"accredited investor",

eitheraloneorwithitspurchaser representative, hassuchknowledge andexperience infinancial andbusinessmattersthatitiscapableofevaluating themeritsandrisksofitsinvestment intheCompanyShares,withinthemeaningofRule506(b)(2)(ii) ofRegulation DundertheSecurities Act;and(c)suchIPPunderstands thatthesaleoftheCompanySharestosuchIPPhasnotbeenregistered undertheSecurities Actoranyapplicable statesecurities lawsand,therefore, theCompanySharescannotbetransferred, sold,pledgedorotherwise disposedof,except(i)pursuanttotheShelfRegistration Statement oranothereffective registration statement undertheSecurities Actandincompliance withtheprospectusAelivery requirement undertheSecurities Act,(ii)inaccordance withRule144undertheSecurities Actaftertheapplicable timeperiodspecified thereinor(iii)inaccordance withanotherexemption

&orntheregistration requirements oftheSecurities Act.Forpurposeshereof,theIPPs'urchaser representative, ifany,isWP&Co.oranotherequivalent investment banker.Notlaterthanten(10)BusinessDayspriortothe28 Consummation Date,theIPPshallgiveanoticetoWP&Co.statingthenumberofnon-accredited investors towhichsuchIPPshalldesignate thatanypartoftheCompanySharestobeacquiredbysuchIPPpursuanttoSection3.1(b)shallbeissuedontheConsummation Date.TheIPPacknowledges thatsuchnumberofnon-accredited investors, togetherwiththenumberofnon-accredited investors towhichanyotherIPPshalldesignate thatanypartofitsCompanySharestobeacquiredbyanysuchotherIPPpursuanttoSection3.1(b)shallbeissuedontheConsummation Date,shallnotexceedthirty-five (35).Notwithstanding theforegoing, withouttheCompany's consent,nopersonmaybeadesigneeofanIPPwithrespecttoanyCompanySharesiftheacquisition ofCompanySharesbysuchpersonwould(i)requiretheCompanytoqualifyasaforeigncorporation orasadealerinsecurities inanyjurisdiction inwhichitisnotsoqualiGed, (ii)subjecttheCompanytotaxationinrespectofdoingbusinessinanyjurisdiction inwhichitisnotsosubjector(iii)requiretheCompanytomakefilingswithanystatesecurities commissioners otherthannoticefilings.TheIPPagreestogivetheCompanynoticeoftheidentityofanyproposeddesigneeassoonaspracticable inordertopermittheCompanytomakeadetermination pursuanttothepreceding sentence.

5.7.FormofAllocation Contracts Allocation.

AnnexedasExhibit5.7areblankformsoftheAllocation, Contracts Allocation andContractAdjustment Allocation deposited withtheEscrowAgentand%P&Co.priortothedateofthisAgreement, whichforms,asdelivered totheEscrowAgentandWP&Co.,donotandwillnotincludeanyformulas, notations, conditions orotherqualifications withrespecttothedetermination oftherespective amounts,quantities orpricesallocated totheIPP(withtheexception oftheNorConAllocation, acopyofwhichhasbeendelivered totheCompanysimultaneously withtheexecution ofthisAgreement).

6.CONDUCTANDTRANSACTIONS PRIORTOTHECONSUMMATION DATE6.1.DebtSecurities.

(a)TheCompanyhasadvisedtheIPPsofitsintention tofinancethepaymentofuptothreebilliontwohundredmillion($3,200,000,000) dollarsoftheCashPaymentbyissuingdebtsecurities oftheCompany("DebtSecurities"

)inanunderwritten publicofferingregistered withtheSECtobeconsummated onorpriortotheConsummation Date(the"PublicOffering"

).ThePartiesagreethatthesuccessful consummation ofthePublicOfferingisofmaterialimportance tothesuccessful consummation oftheRestructuring pursuanttothisAgreement andthatthetermsandconditions oftheDebtSecurities issuedthereinareofmaterialimportance totheIPPsintheircapacities asholdersofCompanySharesand/orShort-Term Notes,andaspartiestotheContracts.

Thetermsandconditions oftheDebtSecurities shallbedeveloped bytheCompanyinconjunction withtheUnderwriters.

TheCompanyagreesthatthematerial29 termsandconditions oftheDebtSecurities shallbesubjecttotheapprovalofamajorityofacommittee consisting equallyofrepresentatives oftheCompany,SterlingPowerPartners, Ltd.andEastSyracuseGenerating Company,L.P.providedthat(i)suchcommittee shallnotbeentitledtodemandspecifictermsandconditions and(ii)theapprovalofsuchcommittee, ifunanimously recommended bytheUnderwriters, shallnotbeunreasonably withheld.

TheCompanyagreesthat(x)theaggregate principal amountoftheDebtSecurities issuedinconnection withthePublicOfferingshallnotexceedthreebilliontwohundredmillion($3,200,000,000) dollars,(y)theDebtSecurities shallbepricedtotradeinitially atparand(z)unlessapplicable securitization legislation isenactedintheStateofNewYorkandtheDebtSecurities aresecuritized pursuantthereto,theDebtSecurities shallbegeneralunsecured obligations oftheCompany.(b)TheCompanycovenants andagreesthat,asofitseffective dateandasoftheConsummation Date,noneoftheregistration statement preparedbytheCompanyinconnection withtheofferingoftheDebtSecurities (the"DebtRegistration Statement"

),anydocumentincorporated byreference therein,anyprospectus includedthereinorfiledwiththeSEC,oranyamendment thereoforsupplement thereto,shallcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading.

TheCompanyshallprovidetheIPPs'pecial CounselwithalldraftsoftheDebtRegistration Statement andanysuchprospectus, amendment orsupplement, asthecasemaybe,whichareprovidedtotheUnderwriters areasonable periodoftimepriortothefilingofsamewiththeSEC,'andshallprovidetheIPPs'pecial Counselwithcopiesofallcorrespondence

&omorwiththeSECincidental totheDebtRegistration Statement oranysuchprospectus, amendment orsupplement.

(c)IftheDebtSecurities aretoreceiveacreditratingoflessthaninvestment grade,theDebtSecurities shallbeunderwritten by(i)DLJ,actingasleadmanager,(ii)WP&Co.,actingasaco-manager, and(iii)bysuchadditional investment bankingfirmsselectedbytheCompany,actingasco-managers (collectively, the"Underwriters"

).ThePublicOfferingshallbeartheusualandcustomary feesandexpenses, consistent withhigh-yield financings ofsimilartype,whichfeesandexpensesshallbebornesolelybytheCompany.DLJandWP&Co.shallhavetherighttoattendallmaterialpresentations toratingagenciesandinvestors inconnection withthePublicOffering.

6.2.Sale/Leaseback Tax-FreeExchanes.UpontherequestofanyIPPmadewithinsixty(60)daysaAerthedateofthisAgreement containing aspecificproposalbysuchIPPwithrespectthereto,theCompanyshallconductgoodfaithnegotiations anduseitsReasonable BestEffortstomodifythetransactions contemplated bythisAgreement withrespecttosuchIPPinamutuallyacceptable mannerinordertoeffecttheRestructuring through(a)saleandleaseback arrangements oftheProjectfacilities ofsuchIPPor(b)atransaction thatqualifies asa"reorganization" underSection368(a)ofthe30 Code(andanycorresponding provision ofapplicable stateorlocallaw),provided, however,thattheCompanywillnotbeobligated tomodifythetransactions contemplated bythisAgreement withrespecttosuchIPPif(i)intheCompany's reasonable

judgment, suchmodification wouldhaveamaterialadverseeffectonthetimingoftheRestructuring contemplated bythisAgreement, theanticipated taxeffectontheCompanyoftheRestructuring, theimplementation oftheNMPCRestructuring, ortheCompany's abilitytocompletethesaleoftheDebtSecurities ontermsreasonably satisfactory toit,orwouldrequiretheCompanytoincuradditional costsorliabilities, including contingent liabilities (netofthevalueofanyassetassumed),

otherthannormalandcustomary incidental out-of-pocket costsandexpensesandattorneys'ees or(ii)asaresultthereof,IPPswouldreceive(intheaggregate),

withrespecttoClassAPPAs,aportionoftheCashPaymentandCompanySharesoflessthan$2,000,000,000 (excepttotheextentthatsuchamountisreducedasaresultofthetermination ofthisAgreement withrespecttoanyIPPswhicharepartiestoClassAPPAs).6.3.~PS*.I*i'UU*p*pidfl'gf6*proxystatement tobedistributed inconnection withthespecialmeetingoftheCompany's shareholders tobecalledtoconsiderforapprovalcertainofthetransactions contemplated bythisAgreement undertheExchangeAct(the"ProxyStatement"

),theCompanyshallprovidetheIPPs'pecial CounselvrithalldraftsoftheProxyStatement andeachamendment oftheProxyStatement, ineachcasewhichareprovidedtotheUnderwriters, areasonable periodoftimepriortothefilingofsamewiththeSEC,andshallprovidetheIPPs'pecial Counselwithcopiesofallcorrespondence fromorwiththeSECincidental totheProxyStatement andanysuchamendment.

TheCompanycovenants andagreesthat,asofitsdistribution date,noneoftheProxyStatement oranyamendment thereof,oranydocumentincorporated byreference therein,shallcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading.

Subjecttoapplicable fiduciary duties,theProxyStatement shallcontainastatement oftheCompany's BoardofDirectors recommending approvalofthisAgreement andthetransactions contemplated hereunder totheCompany's shareholders.

6.4.NMPCRestructurin (a)ThePartiesacknowledge theexistence oftheCompany's proposedcorporate restructuring anddisaggregation inconnection withitsPo~erChoice proposal(the"NMPCRestructuring"

)andagreethattheRestructuring contemplated bythisAgreement isanintegralandsubstantial partoftheNMPCRestructuring.

TheCompanyshalldisclosetotheIPPsallmaterialplansandproposals concerning theNMPCRestructuring whicharedisclosed toanyGovernmental Authority (including butnotlimitedtoPSCstaff)orapprovedbytheBoardofDirectors oftheCompany,andwhichcouldreasonably haveamaterialadverseeffectonanyIPPortheRestructuring, including butnotlimitedtotheContracts oranyoftheconsideration tobereceivedby31 theIPPshereunder.

Exceptasexpressly setforthinthisAgreement, eachIPPshallbefreetoopposeorchallenge anyaspectoftheNMPCRestructuring whichsuchIPPdeemstobeadversetotheinterests ofsuchIPPoritsAffiliates.

(b)Ifatanytime,whetherbeforeoraftertheConsummation Date,theCompanyrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, theninnoeventshalltheIPPsortheirassigns,intheirrespective capacities asholdersofCommonStockorShort-Term NotesoraspartiestotheContracts, betreatedlessfavorably inanymaterialrespectthanothersimilarly-situated holdersofCommonStockorShort-Term Notesorpartiestocomparable agreements (including comparable agreements betweentheCompanyand/oritsAf5liates) aretreatedintheircapacities assuch.Inaddition, intheeventofanysuchrestructuring, eachoftheContracts willbeassignedtoandassumedbytheentityorentitiesowningallorsubstantially alloftheCompany's electrictransmission anddistribution assetsor,ifseparated

&omtheCompany's electrictransmission assetspursuanttotherestructuring, theCompany's electricdistribution assets,providedthat,upontheeffective dateoftherestructuring, (i)theassumingentity'sperformance undertheContracts shallbeunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory totheIPP(oritsassign)underanysuchContract, byeachoftheotherentitiesarisingoutoftherestructuring, including anyentity(ies) spun-offtotheCompany's shareholders oranyAffiliate oftheCompanyholdingsignificant assetsheldbytheCompany(oranysubsidiary oftheCompany)priortotherestructuring, unlesstheassumingentity'slong-tenn unsecured debtcreditratingissuedbyMoody'sInvestors Service,Standard&Poor'sCorporation oranothernationally recognized ratingagencyisatleastasfavorable astheCompany's long-term unsecured debtcreditratingimmediately priortotheeffective dateoftherestructuring, and(ii)iftheassumingentityisnottheentitywhichwillcollect6omcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval, theassumingentity'sperformance undertheContracts shallbeunconditionally guaranteed, pursuanttoaguanuitee informandsubstance reasonably satisfactory totheIPP(oritsassign)underanysuchContract, bytheeiitity(ies) whichwillcollectfromcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval.

Intheeventofanysuchrestructuring, theIPP(oritsassign)underanysuchContract(s) shallhavetherighttoreplaceitsContract(s),

asapplicable, withpowerpurchaseand/orhedgingcontractual arrangements substantially equivalent tothosethatareenteredintobetweentheentity(ies) holdingthetransmission and/ordistribution assetsoftheCompanyorwhichwillcollectfromcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApprovalandtheentity(ies) holdingthenon-nuclear generating assetsoftheCompany,whetherornotsuchassetsarespunwfftotheCompany's shareholders (a"GencoContract"

),providedthattheterm,priceandquantityundersuchIPP'sContract(s) shallnotbealteredthereby,unlessanyofsuchtermsarematerially and32 expressly conditioned bycertainprovisions intheGencoContract, inwhichcaseappropriate andequitable adjustments insuchtermsshallbemutuallyagreedupon.6.5.Hart-Scott-Rodino ActNotification.

EachIPPoritsdesigneewithrespecttoCompanySharesshallmakeitsowndetermination ofwhetherit(oranyofitsAffiliates) isrequiredtofiletheNotification andReportFormforCertainMergersandAcquisitions pursuanttotheHart-Scott-Rodino Actinconnection withthetransactions contemplated bythisAgreement.

AnyIPPordesigneethatdetermines it(oranyofitsAffiliates) issorequiredshallfilesuchNotification andReportForminatimelymanner,andshallgivenoticethereoftotheCompany.ThePartiesshallmakeallrequiredfilingsandshallcooperate witheachotherinconnection withsuchfilingsandanyresponses thereto.TheCompanyshallpayallfilingfeesrequiredtobepaidundertheHart-Scott-RodinoActinconnection withtheacquisition oftheCompanyShareshereunder, asandwhentheapplicable filingsaremade;theCompany's obligation topayanysuchfeeincurredbyanIPPpriortheretoshallsurvivetheConsummation Dateoranytermination ofthisAgreement (eitherinitsentiretyorwithrespecttosuchIPP).6.6.ReulatoArovals.(a)TheCompanyshalluseReasonable BestEffortstoseekandobtain,onorbeforetheExpiration Date,eachRegulatory ApprovalwhichissetforthinanoticegiventotheIPPs'pecial Counselpromptlyafteritdetermines thatsuchRegulatory Approvalisdesiredorrequired, specifying theneedthereforandthenaturethereofinreasonable detail(collectively, the"NMPCRegulatory Approvals"

).AllNMPCRegulatory Approvals shallbesoughtintheorderandinthemannerwhichtheCompany,afterconsultation withtheIPPRepresentatives, believeswillbemostlikelytoresultinreceiptoftheNMPCRegulatory Approvals priortotheExpiration Date.(b)EachIPPshalluseReasonable BestEffortstoseekandobtain,onorbeforetheExpiration Date,eachRegulatory Approvalapplicable tosuchIPPwhichissetforthinanoticegiventotheCompanypromptlyafteritdetermines thatsuchRegulatory Approvalisdesiredorrequired, specifying theneedthereforandthenaturethereofinreasonable detail(collectively, the"IPPRegulatory Approvals"

).AllIPPRegulatory Approvals shallbesoughtintheorderandinthemannerwhicheachIPP,,afterconsultation withtheIPPRepresentatives and,withrespecttoanyfilingstobemadetothePSCortheFERC(excluding anyfilingspertaining toanIPP'sstatus,rightsorobligations asaQForEWGoranyofsuchIPP'srightsorobligations pursuanttoPURPA),afterconsultation withtheCompany,believeswillbemostlikelytoresultinreceiptoftheIPPRegulatory Approvals priortotheExpiration Date.(c)Notwithstanding anythingtothecontrarycontained inSections6.6(a)or6.6(b),theCompanyshalluseitsReasonable BestEffortstosubmitthisAgreement, togetherwithallotherrequisite docuinents andinstruments, tothePSC33 withinfourteen(14)daysfollowing thedateofthisAgreement, forpurposesofobtaining thePSC'sapprovalandordersolelywithrespecttothematterssetforthinSchedule6.6Chereto(suchapprovalandorderbeingreferredtohereinasthe"PSCApproval"

).(d)IntheeventthatthisAgreement and/oranyofthetransactions contemplated herebycouldreasonably subjectanyIPP,itspartnersorAftiliates, individually orcollectively, tobecomesubjecttoanyregulation orjurisdiction ofanyGovernmental Authority fromwhichtheywerepreviously exempt(including butnotlimitedtoSECorFERCregulation underPUHCA,PSCregulation underNYPSL,andFERCregulation undertheFederalPowerAct),then(i)suchIPPandtheCompanyshallusetheirReasonable BestEffortstoseekandobtainappropriate exemptions orwaiverspriortotheConsununation Date(provided theCompanyshallnotberequiredtouseitsReasonable BestEffortstoassistanIPPinobtaining anexemption

&omPUHCAwithrespecttosuchIPP'sand/orsuchIPP'sAf5liates'wnership of10%ormoreoftheCommonStockoftheCompany,ifapplicable),

(ii)ifsuchexemptions orwaiverscannotbeobtained, suchIPPandtheCompanyshallusetheirReasonable BestEffortstoconformthisAgreement and/orthetransactions contemplated herebypriortotheConsummation Dateinamannermutuallysatisfactory tosuchIPPandtheCompanyandtheotherPartiesheretoasmaybenecessary inorderforsuchIPP,itspartnersorAffiliates, toavoidbecomingsubjecttosuchregulation orjurisdiction and(iii)ifsuchexemptions orwaiverscannotbeobtainedandifthisAgreement and/orthetransactions contemplated herebycannotbesoconformed, theprovisions ofSection12.2(c)(iii) shallbeapplicable.

6.7.CoorationwithrescttoReulatoArovals.(a)FromthedateofthisAgreement untiltheearliertooccurof(x)theEffective Time,(y)thetermination ofthisAgreement initsentiretyor(z)withrespecttoanyindividual IPP,thetermination ofthisAgreement withrespecttosuchIPP,thePartiesshallcooperate witheachotherinpreparing andfilinganyandaHsubmissions totheFERC,PSC,SECandotherGovernmental Authorities inordertoobtainanyRegulatory Approvals.

TheParties,inconjunction withtheIPPRepresentatives andDLI,shaHformacommittee toprepareandmakeajointpresentation tothePSCand/orthePSCstaff(ifthePSCsopermits)inconnection withthesubmission ofthisAgreement tothePSCpursuanttoSection6.6(c).TheCompanyshallconsultwiththeIPPRepresentatives onaregularbasisindeveloping overallregulatory strategies, andshallprovidetheIPPRepresentatives withadraftcopyofeachfilingforNMPCRegulatory Approvals tobemadebytheCompanywiththePSC,FERC,SECoranyotherGovernmental Authority inconnection withtheRestructuring, areasonable periodoftimepriortotheanticipated filingofsame,andshallinformtheIPPRepresentatives ofanymaterialchangestherein.TheCompanyshallatalltimeskeeptheIPPRepresentatives fullyapprisedofthestatusofallapplications forNMPCRegulatory Approvals, including withrespecttoallmaterialdiscussions withGovernmental 34 Authorities (including PSCstafI),andshallprovidetheIPPswithcopiesofallcorrespondence giventoorreceivedfromanyGovernmental Authority inconnection therewith.

EachIPPshallprovidetheCompanywithadraftcopyofeachfilingtobemadebysuchIPPconcerning NMPCRegulatory Approvals areasonable periodoftimepriortotheanticipated filingofsame,shallinformtheCompanyofanymaterialchangestherein,andshallatalltimeskeeptheCompanyfullyapprisedofallapplications madebysuchIPPconcerning NMPCRegulatory Approvals, including withrespecttoallmaterialdiscussions withGovernmental Authorities (including PSCstaff)concerning NMPCRegulatory Approvals.

Exceptasexpressly setforthinthisAgreement, nothingcontained hereinshalllimitorrestrictanyIPPfromopposingorchallenging anyapplication foranNMPCRegulatory ApprovalwhichsuchIPPdeemstobeadversetotheinterests ofsuchIPPoritsAffiliates, andnothingcontained hereinshalllimitorrestricttheCompany&omopposingorchallenging anyapplication foranIPPRegulatory ApprovalwhichtheCompanydeemstobeadversetoitsinterests.

Nothingcontained inthisAgreement shallrequireanyIPPtodisclosetheAllocation, anyportionthereoforanyinformation contained thereintoanyGovernmental Authority exceptassetforthinSection3.4.(b)TheCompany,uponrequestandattheexpenseofanyrequesting IPP,andeachIPP,uponrequestandattheexpenseoftheCompany,shalluseReasonable BestEffortstoassisttheotherPartytoobtainanyRegulatory Approvalthatisrequiredtobeobtained,

provided, however,that(i)aPartythatisexemptfromregulation orjurisdiction ofanyGovernmental Authority asofthedateofthisAgreement shallnotberequiredtotakeanystepsinassistance toanotherPartythatcouldreasonably subjectit,itspartnersorAffiliates totheregulation orjurisdiction ofanyGovernmental Authority

&omwhichitortheywerepreviously exempt,(ii)noPartyshallberequiredpursuanttothisSection6.7tosupportanypositiontakenbyanyotherPartyexceptasmayotherwise beexpressly setforthinthisAgreement and(iii)theCompanyshallnotberequiredtouseitsReasonable BestEffortstoassistanIPPinobtaining anexemption RomPUHCAwithrespecttosuchIPP'sand/orsuchIPP'sAffiliates'wnership of10%ormoreoftheCommonStockoftheCompany,ifapplicable.

(c)ThePartiesshallendeavortomaintaintheconfidentiality ofanyinformation thatoneormorePartiesdeemcommercially sensitive (whichthePartiesagreeshallinclude,withoutlimitation, thedesignation ofwhichExistingPPAsaresetforthonSchedules 2.1,2.2and2.3hereof,respectively),

andshallcooperate inseekingtradesecretprotection orotherappropriate confidential treatment forcommercially sensitive information thatissubmitted toanyGovernmental Authority inthecourseofobtaining anyRegulatory Approval.

AnyPartyseekingtomaintainconfidentiality ofsuchinformation shallnotifytheotherPartiesofsuchdesireupondeliveryofsuchinformation.

35 6.8.CoorationwithrescttoIPP/Third PartConsentsandNMPCfThird

~PltI(a)UponanIPP'srequest,theCompanyagreestouseitsReasonable BestEfforts,inatimelymanner,toassisttheIPP(including, withoutlimitation, byproviding relevantconsents, representations andwarranties) toamend,restructure, assignorterminate itsexistingthirdpartyagreements, including butnotlimitedtofuelsupply,transportation, financing, lease,operations andsteamsupplyagreements, relatingtoorarisingoutofsuchIPPsProjectorExistingPPAorthetermination, amendment oramendment andrestatement, asthecasemaybe,ofsuchIPP'sExistingPPA,ineachcaseinamannerthat(i)willenablesuchIPPtoobtaintheIPP/Third PartyConsentsrequiredordesiredtobeobtainedbysuchIPPand(ii)willaccommodate thetermsofthisAgreement withoutreducingitseconomicvaluetosuchIPPandotherwise inamannerreasonably satisfactoiy tosuchIPP.(b)UpontheCompany's request,eachIPPagreestouseitsReasonable BestEfforts,inatimelymanner,toassisttheCompany(including, withoutlimitation, byproviding relevantconsents, representations andwarranties) inconnection withtheCompany's effortstoobtainawaiver,release,amendment ortermination oftheCoinpany's obligations underexistingthirdpartyagreements withlenders,suppliers andotherthirdpartieswhichtheCompanypreviously hasenteredintoattherequestoronbehalfofanyIPPandwhichrelatetoorariseoutofsuchIPP'sProjectorExistingPPA(each,an"NMPCfH6rd PartyAgreement"

)andwhichwaiver,release,amendment ortermination isdesiredbytheCompanytobeobtainedinconnection withthetermination, amendment oramendment andrestatement, asthecasemaybe,ofsuchIPP'sExistingPPAascontemplated bythisAgreement.

EachIPPagreestoperformadiligentreviewofitsfilesandprovidetotheCompany,withinthirty(30)daysafterthedateofthisAgreement, ascheduleofallNMPCfMrdPartyAgreements disclosed bysuchreview,buttheIPPshallhavenoliability totheCompanyoranythirdpartyintheeventsuchreviewdoesnotdiscloseallNMPC/Third PartyAgreements withrespecttowhichtheCompanymaydesiretoobtainawaiver,release,amendment ortermination asaresultofthetransactions contemplated hereby.Anywaiver,release,amendment ortermination requiredtobeobtainedwithrespecttoanyNMPC/Third PartyAgreement isreferredtohereinasan"NMPCfChird PartyRelease."

6.9.Performance underExistinPPAs.(a)FromthedateofthisAgreement untiltheearliertooccurof(x)theEffective Time,(y)thetermination ofthisAgreement initsentiretyor(z)withrespecttoanyindividual IPP,thetermination ofthisAgreement withrespecttosuchIPP,thePartiesagreeandstipulate thattheExistingPPAsshallcontinuewiththesameforceandeffectasifthisAgreement hadnotbeenexecutedbyanyParty,andtheParties(respectively) shallcontinuetoperformallobligations, covenants andagreements requiredtobeperformed bythempursuanttothetermsoftheExistingPPAs,providedthatnoIPP,regardless ofthetermsofitsExistingPPA,shallbesubjectto(i)anyCurtailment or(ii)anyclaimthatelectricity producedanddelivered totheCompanybysuchIPPexceedstheestimates ofenergyinmegawatt-hours andcapacityinmegawatts setforthinitsExistingPPA.(b)FromthedateofthisAgreement untiltheearliertooccurof(x)theEffective Time,(y)thetermination ofthisAgreement initsentiretyor(z)withrespecttoanyindividual IPP,thetermination ofthisAgreement withrespecttosuchIPP,theCompany(i)shallnotinitiateorcontinueanyrequestforregulatory authorization oranyregulatory proceeding withrespectto,andifauthorized todoso(whetherbeforeorafterthedateofthisAgreement) willnotimplement orenforce,anyCurtailment, adequateassurances (including firmsecurity) orotherregulatory initiative whichisreasonably likelytohaveamaterialadverseeffectonanyIPPortheRestructuring, including butnotlimitedto-theContracts oranyoftheconsideration tobereceivedbyanyIPPhereunder and(ii)shallnotimplement orcontinuetoimplement anyQFMonitoring ProgramastoanyIPP.(c)Notwithstanding theprovisions ofSection6.9(a)and(b),intheeventthatthePSCrnandates thattheCompanyimplement orenforceanyCurtailment withrespecttoanyIPPthatisaPartytothisAgreement, theCompanyagreesthatitshalljointlyseek,withanysuchaffectedIPP,aPSCand,ifnecessary, judicialstayofsuchCurtailment, onthegroundsthattheCurtailment wouldresultinsubstantial injurytotheIPPand,totheextentitcouldaffecttheconsummation of'thetransactions contemplated bythisAgreement, theParties.Inaddition, eachoftheCompanyandanysuchaffectedIPPshallbe&eetoassertanyothergroundsitdeemsappropriate inordertoopposetheCurtailment.

TheCompanyshallopposeanyeffortofthePSCtomandateCurtailments withrespecttoanyIPPwhichisaPartytothisAgreement.

If,notwithstanding theCompany's andsuchIPP'sjointefforts,thePSCoracourtofcompetent jurisdiction rnandates suchCurtailment, thennothingcontained inthisAgreement shallprohibittheCompany&omimplementing orenforcing suchCurtailment totheminimumextentrequiredbysuchmandate,providedthattheforegoing shallnotbedeemedtowaiveanyrightssuchIPPmayhaveunderthisAgreement, pursuanttolaworotherwise torestrict, limitoropposetheimplementation orenforcement ofsuchCurtailment.

Nothingcontained inthisSection6.9(c)shallbedeemedtoauthorize theCompanytoimplement orenforceanyCurtailment withrespecttoanyExistingPPAtotheextentsuchExistingPPAprohibits orlimitstheCompanyIromimplementing orenforcing suchCurtailment.

(d)Notwithstanding theprovisions ofsub-clause (z)ineachofSection6.9(a)and(b)andinSection6.10(b),ifthisAgreement shallterminate withrespecttoNorConpursuanttoSection2.5,theprovisions ofSections6.9(a)and(b)shallcontinuetoapplytoNorCon(subjecttosuMlauses (x)and(y)thereof)untilDecemberI,1997,andtheprovisions ofSection6.10(b),insofarastheymaypertaintoCurtailment, shall37 continuetoapplytoNorCon(subjecttosub-clauses (x)and(y)thereof)untilDecember1,1997.6.l0.S~fLii(a)Promptlyfollowing thedateofthisAgreement, eachPartyshalluseReasonable BestEffortstostaythependinglitigation andregulatory proceedings listedinSchedules 6.10Aand6.10B,ifapplicable tosuchParty,withsuchstaystoremainineffectuntiltheearliertooccurof(x)theEffective Time,(y)thetermination of.thisAgreement initsentiretyor(z)withrespecttoanyindividual IPP,thetermination ofthisAgreement withrespecttosuchIPP.Withrespecttothoseproceedings listedinSchedule6.10B,eachPartyshall(i)useReasonable BestEffortstostaythependingproceedings and(ii)whetherornotsuchstayisgranted,ifanyPartydesirestocontinueitsparticipation insuchproceeding asaresultofthelastsentenceofthisSection6.10(a),eachPartyshalluseReasonable BestEfFortstoobtainanorderfromthecourtineachsuchproceeding statingthatthedisposition ofsuchproceeding willnothaveanymaterialadverseimpactontheExistingPPAsorontheclaimsassertedbytheCompanywithrespecttotheExistingPPAsinsuchproceedings.

TheParties,aspromptlyaspracticable aQerthedateofthisAgreement, shalldetermine theappropriate judicialorregulatory bodiestowhichtoapply,andthetextofthenecessary notices,motionsorapplications tobefiled,inordertoeffectuate thestaysand/orobtaintheorderscontemplated bytheprovisions ofthisSection,andpromptly, shallfilethesamewithsuchbodies.Notwithstanding whetheranysuchlitigation orproceedings shallbestayed,therightsandobligations ofthePartiespursuanttothisAgreement shallnotbeaffectedbyanyjudgment, ruling,order,decisionorotheractionwhichmaybeissuedorrenderedinanysuchlitigation orproceeding betweenthedateofthisAgreement andtheConsummation Dateexceptasotherwise providedinSections8.5and9.5,andnoPartyshallseektoenforcesuchjudgment, ruling,order,decisionorotheractionagainstanyotherParty.Theobligations ofthePartiespursuanttothisSection6.10(a)shallbesubjecttothecondition thatnoPartyshallberequiredtotakeanyactionorsufferanyinaction, thatwouldleadtoforfeiture, lossofrights,imposition ofsanctions orpenalties, orotherwise causeamaterialadverseimpactonitsprospects forsuccesswithrespecttoanysuchlitigation orregulatory proceeding withrespecttoitselforthirdparties;butanyactionnecessary toavoidanysuchresultshalltothemaximumextentpossibleavoidanymaterialadverseimpact(including theincurrence ofanycostorexpense)uponanyotherParty.(b)FromthedateofthisAgreement untiltheearliertooccurof(x)theEffective Time,(y)thetermination ofthisAgreement initsentiretyor(z)withrespecttoanyindividual IPP,thetermination ofthisAgreement withrespecttosuchIPP(i)theCompanyshallrefrainfromcommencing anynewlitigation orregulatory proceeding theoutcomeofwhichcouldhaveamaterialadverseeffectonanyIPPoranyIPP'srightsorobligations underitsExistingPPA,including thepurchaseofpowerthereunder, (ii)each38 IPPshallrefrainfromcommencing anynewlitigation orregulatory proceeding potentially adversely affecting theCompanyortheCompany's rightsorobligations undertheExistingPPAs,including thepurchaseofpowerthereunder, exceptthatanIPPmaycommenceanysuchlitigation orproceeding, orassertanyclaim,inresponsetoanyactionorproceeding, including butnotlimitedtoanyproceeding withrespecttoCurtailment, initiated (whetherbeforeorafterthedateofthisAgreement) bytheCompanyoranyGovernmental Authority andexcept,further,thateachPartymaycommenceanylitigation orproceeding, orassertanyclaim,arisingoutofanybreachofthisAgreement orofanyExistingPPAorotheragreement relatingtothedeliveryofpowerunderanExistingPPA,and(iii)eachPartyaccordingly agreestowaiveanystatuteoflimitations forsuchperiodthatwouldotherwise barsuchproceedings unlesscommenced duringsuchperiod.(c)TheParties,withinthirty-five (35)daysafterthedateofthisAgreement, alsoshalldetermine theappropriate judicialandregulatory bodiestowhichtoapply,andthetextofthenecessary notices,motionsorapplications tobefiled,inordertoeffectuate thedismissals andwithdrawals contemplated bytheprovisions ofSections8.8(b)and9.8(b),whicharetobedelivered andsubsequently filedpursuanttosuchSectionsasoftheConsumnation Date.6.11.ConductofBusiness.

Exceptasexpressly permitted bythisAgreement orsetforthinSchedule6.11,&omthedateofthisAgreement untiltheConsuinmation Date,theCompany(a)shallconductthebusinessandoperations oftheCompanyinaccordance withpastpracticeandintheordinarycourseofbusiness; (b)shallnotenterintoanytransaction orperform(orfailtoperform)anyactwhichwouldconstitute amaterialbreachoftherepresentations, wairanties, covenants andagreements oftheCompanycontained herein,whetherasofthedateofthisAgreement orasoftheConsummation Date;(c)shallnotmakeanyamendment ormodification oftheCertificate ofIncorporation orBy-LawsoftheCompanywhichwouldbereasonably likelytohaveamaterialandadverseeffectonanyrightsoftheIPPspursuanttothisAgreement oranyagreement tobeenteredintopursuanthereto;(d)shallnoteffectanyissuance, saleorotherdisposition ofanysharesoftheCompany's capitalstock;(e)shallnotmakeanydeclaration, settingaside,orpaymentorotherdistribution incashorpropertyinrespectofanyoftheCompany's capitalstock,oranydirectorindirectredemption,

purchase, orotheracquisition ofanyofsuchstockbytheCompany;and(f)shallnotmakeanymaterialchangeorincreaseinanycompensation anangement oragreement (including butnotlimitedtoanygrantofstockappreciation rights)withanyofficer,directororexecutive employeeoftheCompanyoutsidetheordinarycourseofbusiness.

Inaddition, theCompanyshallpromptlynotifytheIPPsofanyhappening oreventwhichhas,orwhichisreasonably likelytoresultin,aMaterialAdverseEffectontheCompany.6.12.PublicDisclosure.

Exceptasotherwise providedinthisAgreement, fromthedateofthisAgreement untiltheConsummation Dateorsoonertermination ofthis39 Agreement initsentirety, noPartytothisAgreement shalldirectlyorindirectly makeorcausetobemadeanypublicannouncement orissueanypublicnoticeinanyformwithrespecttothisAgreement orthetransactions contemplated hereby,withouttheconsentoftheotherPartiesexceptifintheopinionofsuchParty'scounselitisrequiredbythesecurities lawsoftheUnitedStatesortherulesoftheNYSEoranyothersecurities exchangeormarketonwhichthesecurities ofsuchPartyoritsAffiliates arequotedortradedtomakesuchdisclosure.

ThePartiesagree,totheextentpracticable, toconsultwitheachotherregarding anysuchpublicannouncement inadvancethereof.6.13.FurtherAssurances.

Subjecttothetermsandconditions hereinprovided, eachofthePartiesheretoagreestouseitsReasonable BestEffortstotakepromptly, orcausetobetakenpromptly, allactionsandtodopromptly, orcausetobedonepromptly, allthingsnecesmy,properoradvisable underapplicable lawstoconsummate andmakeeffective thetransactions contemplated bythisAgreement, andtosatisfyalloftheconditions totheconsummation ofthetransactions contemplated bythisAgreement tobesatisfied bysuchParty,including usingitsReasonable BestEffortstoobtainallnecessary

consents, approvals, qualifications, orders,authorizations, extensions, waivers,exemptions andotheractionsorinactions

&omallapplicable Governmental Authorities, thirdparties,boardsofdirectors, shareholders andpartners, andeffecting allnecessary registrations andfilings.6.14.s**li.mtiPP*dI**VfUd*fthisAgreement untiltheearliertooccurof(x)theEffective Time,(y)thetermination ofthisAgreement initsentiretyor(z)thetermination ofthisAgreement withrespecttosuchIPP,itshallnot,directlyorindirectly, aloneorinconcertwithothers,exceptfortheacquisition oftheCompanySharespursuanttothisAgreement, acquire,oftertoacquireoragreetoacquire,bypurchase, giftorotherwise, beneficial ownership (withinthemeaningofRule13d-3undertheExchangeAct)ofanyoftheCompany's outstanding CommonStock.EachIPPcovenants andagreesthatsuchIPP,togetherwithanyAffiliates ofsuchIPP(totheknowledge ofsuchIPP,~thout anydutyofinquiry,withrespecttoanyAffiliates ofsuchIPP),shallnot,ontheConsummation Date,bethebeneficial owner(withinthemeaningofRule13d-3undertheExchangeAct)ofmorethanfivepercent(5%)ofthethenoutstanding CommonStockoftheCompany(assuming thenumberofsharesofCommonStockoutstanding asoftheConsummation Dateisnotlessthan190,390,600 shares)exceptforacertaingroupofAffiliate IPPswhoshallbethebeneficial ownersofnotmorethanfiveandsix-tenths percent(5.6%)ofthethenoutstanding CommonStockoftheCompany.6.15.T~axRulins.TheCompanyagreestopermittheIPPs'pecial Counsel,andeachIPPagreestopermittheCompany's taxcounsel,toreviewMdcommentonallrequestsforfederal,stateorlocaltaxrulingstobemadeinconnection withtheRestructuring, andtoprovidetosuchotherParty'scounselcopiesofalltaxrulingrequestsareasonable periodoftimepriortothesubmission ofsame.TheCompany40 herebyconsentstotheIPPsseekingsuchtaxrulingswithinthemeaningof,andagreestopaythefees'andexpensesoftheIPPs'pecial Counselinconnection withanysuchtaxrulingrequestspursuantto,theIPPs'pecial CounselFeeLetter.7.INTENTIONALLY LEFTBLANKS.CONDITIONS TOEACHIPP'SOBLIGATIONS ONTHECONSUMMATION DATETheobligations ofeachIPP(severally andnotjointly)toconsummate theRestructuring andmakethedeliveries specified inSection10tobemadebyitontheConsummation Datearesubjecttothesatisfaction onorbeforetheConsummation Date(or,ifotherwise setforthinSection10.1(c),theConditions Determination Date)ofeachofthefollowing conditions, thewaiverofwhichshallnotbeeffective againstanyIPPunlesssuchIPPgivesitsconsentinwritingtheretoorsuchwaiverisdeemedtobegivenpursuanttoSection10.1(c):8.1.Reresentations andWarranties.

Therepresentations andwaixanties oftheCompanycontained inSection4shallbetrueinallmaterialrespectsonandasofthe'onsummation Datewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheConsummation Date(oronthedatewhenmadeinthecaseofanyrepresentation orwarrantywhichexpressly relatestoanearlierdate).8.2.Performance, TheCompanyshallhaveperformed andcompliedinallmaterialrespectswithallagreements, obligations, covenants andconditions contained inthisAgreement thatarerequiredtobeperformed orcompliedwithbyitonorbeforetheConsummation Date.8.3.Reresentation Letter'ecre

'sCertificate' inionoftheComan'sCounsel.TheIPPshallhavereceivedontheConsummation Date(a)arepresentation letterexecutedbytheCompanyinsubstantially theformannexedasExhibit8.3A,(b)acertificate oftheSecretary oftheCompanycertifying (i)theCertificate ofIncorporation andBy-LawsoftheCompany,(ii)theresolutions oftheBoardofDirectors andshareholders oftheCompanyauthorizing thetransactions contemplated bythisAgreement and(iii)theincumbency ofanyofficersoftheCompanyexecuting thisAgreement oranyagreements tobeexecutedbytheCompanypursuanthereto,informandsubstance reasonably satisfactory tosuchIPP,and(c)anopinion,fromSullivan&CromwellandlorSwidler&Berlin,outsidecounselfortheCompany,datedtheConsummation Date,insubstantially theformannexedasExhibit8.3C.8.4.ReulatoArovals.TheIPPshallhavereceivedonorbeforetheConsummation DateeachIPPRegulatory Approvaland,iftheIPPwillbenefittherefrom orbeaffectedthereby,anyNMPCRegulatory ApprovalsetforthintheNMPCStatusNotice,inaformreasonably acceptable totheIPP,andeachsuchRegulatory Approvalshallbeinfullforceandeffectandeither(i)shallbefinalandnon-appealable or(ii)ifnotfinalandnon-appealable, shallnotbesubjecttothepossibility ofappeal,revieworreconsideration which,intheopinionoftheIPP,isreasonably likelytobesuccessful and,ifsuccessful, wouldhaveaMaterialAdverseEffectonsuchIPP.8.5.NoIn'unction ActionorProceedin

.(a)NocourtorGovernmental Authority ofcompetent jurisdiction shallhaveenacted,issued,promulgated, enforcedorenteredanylaw,statute,ordinance, rule,regulation,

judgment, decree,injunction orotherorder(whethertemporary, preliminary orpermanent) thatisineffectontheConsummation Dateandwhichrestrains, enjoinsorotherwise prohibits consummation ofthetransactions contemplated herebyand(b)noclaim,action,suit,investigation orotherproceeding broughtbyaGovernmental Authority orthirdpartyconcerning thetransactions contemplated bythisAgreement shallbependingwhichintheopinionofsuchIPPisreasonably likelytobesuccessful andwhich,ifadversely determined, wouldgrantrelieffromoragainstsuchIPPwhichisreasonably likelytohaveaMaterialAdverseEffectonsuchIPP.8.6.NoMaterialAdverseEvent.BetweenSeptember 30,1996andtheConsutntnation Date,thereshallnothaveoccurredanyeventorcondition (including butnotlimitedtoanyactionorinactionofanyGovernmental Authority) whichhashadormayreasonably beexpectedtohaveaMaterial'AdverseEffectontheCompany(provided, however,thatneither(i)theimpactoftheExistingPPAsnor(ii)thetransactions contemplated bythisAgreement shallconstitute aMaterialAdverseEQectontheCompany).

8.7.Contracts.

TheCompanyandtheIPPshallhaveexecutedanddelivered totheEscrowAgenttherespective Terinination Agreement, AmendedPPA,RestatedContract(s),

NorConAgreement orOxbowAgreement, asapplicable, inaccordance withSection2.8,onorbeforetheConditions Determination Date.8.8.GeneralReleaseWithdrawal ofLitiation.(a)TheIPPshallhavereceivedfromtheCompanyontheConsummation Dateageneralrelease,informandsubstance reasonably satisfactory totheIPP,ofallclaims,liabilities orobligations oforagainsttheIPPwhichtheCompanyhad,hasormayhavewithrespecttofacts,circumstances oroccurrences existingonorarisingatanytimethroughandincluding theEffective Timearisingoutoforinconnection withsuchIPP'sExistingPPA,exceptclaims,liabilities orobligations (i)arisingoutoforinconnection withthisAgreement, (ii)arisingoutoforinconnection withanylitigation, regulatory proceedings orpleadings whicharenottobedismissed andwithdrawn (oreffectively withdrawn) bytheCompanypursuanttoSection8.8(b)and(iii)42 unlessdismissed orwithdrawn pursuanttoSection8.8(b),arisingoutoforinconnection withanypaymentduetotheCompany,whetherornotdisputed, foranyservicesprovidedbytheCompanypursuanttotheExistingPPAoranyrelatedgastransportation, peakshaving,interconnection orotherrelatedagreement betweentheCompanyandtheIPP,providedthatifsuchpaymentrelatestoanyperiodmorethansixty(60)dayspriortothedateofthisAgreement theCompany's entitlement tosuchpaymentshallhavebeensetforthinawritinggiventotheIPPonorbeforeJune1S,1997.ThePartiesacknowledge andagreethatailclaims,liabilities andobligations relatingtotracking, adjustment oradvancepaymentaccountprovisions underanyExistingPPAshallbeextinguished asoftheEffective Time(andsuchextinguishment shallbereflected inthegeneralrelease).

(b)Inaddition, theIPPshallhavereceived&omtheCompany(i)anoriginalcounterpart ofastipulation orotherappropriate document(s),

informandsubstance reasonably satisfactory totheIPP,suf5cient todismissorwithdrawastotheIPP(exceptasotherwise providedinthefootnotes thereto)thelitigation, proceedings andpleadings, asthecasemaybe,listedonSchedule8.8withrespecttosuchIPPand(ii)withrespecttotheproceedings listedonSchedule6.10B,anoriginalcounterpart ofastipulation orotherappropriate document(s),

informandsubstance reasonably

~satisfactory totheIPP,suf5cient toeffectively withdrawsuchproceedings astotheIPP,ineachcasebytheCompany,withprejudice andwithnocostsawarded,asoftheConsummation Date.Following theConsummation DatetheCompanyshalltakepromptly, orcausetobetakenpromptly, allactionsandtodopromptly, orcausetobedonepromptly, allthingsnecessary, properoradvisable asmayberequested bytheIPPtofileallsuchdocuments andfullyeffectuate allsuchdismissals andwithdrawals.

8.9.Intentionally LeftBlank.8.10.ThirdPContracts IPPArovals.TheIPP(a)(i)shallhaveobtainedasatisfactory amendment, restructuring, assignment ortermination of,orconsentsorapprovals withrespectto,orreleasesfrom,itsexistingthirdpartyagreements, including butnotlimitedtofuelsupply,transportation,

6nancing, lease,operations andsteamsupplyagreements, relatingtoorarisingoutofsuchIPP'sExistingPPAorthetermination, amendment oramendment andrestatement, asthecasemaybe,ofsuchIPP'sExistingPPAand(ii)withrespecttoanyIPPwhichisnotenteringintoaTermination Agreement, shallhaveenteredintonewthirdpartyagreements withfuelsuppliers, transporters, lenders,lessors,powerandfuelmarketers andotherthirdparties,inthecaseofboth(i)and(ii)inamannerthat(x)willenablesuchIPPtorestructure itsProjectonaneconomicbasisreasonably satisfactory tosuchIPPand(y)willaccommodate thetermsofthisAgreement withoutreducingtheeconomicvalueofthetransactions contemplated bythisAgreement tosuchIPPandotherwise inamannerreasonably satisfactory tosuchIPP(each,an"IPPffhird PartyConsent")and(b)shallhaveobtainedallothernecessary orappropriate approvals, including corporate andpartnership 43 approvals oftheIPPanditspartnersofthetransactions contemplated bythisAgreement (each,an"IPPApproval"

).8.ll.~G88'iI.Th*IPPIdlhhlfI8dddl8hilll*andobligations ofallGasIPPstoallGasMitigation ThirdPartieshavebeenreleased, satisfied oramendedorwillbereleased, satisfied oramendedasoftheConsummation Date,inamannerthat(x)willenablesuchIPPtorestructure itsProjectonaneconomicbasisreasonably satisfactory tosuchIPPand(y)willaccommodate thetermsofthisAgreement withoutreducingitseconomicvaluetosuchIPPandotherwise inamannerreasonably satisfactory tosuchIPP.8.12.ReistrationofCom anShares.VithrespecttotheCompanyShares,(a) theShelfRegistration Statement (inaccordance withthetermssetforthinSection3.6)shallhavebeendeclaredeffective bytheSEC,shallbeeffective asoftheConsummation Date,nostoporderorsimilarproceeding relatingtotheShelfRegistration Statement shallbependingorthreatened, andthereshallbenohappening oreventwhichrequirestheCompanytoamendorsupplement theShelfRegistration Statement (unlesssuchamendment orsupplement hasbeenfiled)orwhichotherwise preventsthesalebytheIPPofanyCompanySharespursuanttotheShelfRegistration Statement asofandaftertheConsummation Date(and,infurtherance thereof,theCompanyshallfilenotlaterthanthenextBusinessDayfollowing theConsuinmation DateitsCurrentReportonForm8-Kdisclosing theconsummation oftheRestructuring),

(b)theCompanyshallhavetakensuchactionasshallbenecessary toqualify,ortoobtainanexemption for,thesaletotheIPPspursmmttothisAgreement oftheCompanySharesundersuchofthesecurities lawsofjurisdictions intheUnitedStatesasshallbeapplicable tothesaleoftheCompanySharespursuanttotheShelfRegistration Statement and(c)theCoinpanySharesshallhavebeendulylistedontheNYSE.8.33.~PIP.Th*f**d*pfWP&G.,&*IPP'pIGCounselandtheIPPs'ocal Regulatory Counselincurredthroughandincluding theConsummation DatethattheCompanyhasagreedtopaypursuanttotheWP&Co.FeeLetter,theIPPs'pecial CounselFeeLetterandtheIPPs'ocal Regulatory CounselFeeLetter,respectively, andthefeesandexpensesoftheDepositary incurredthroughandincluding theConsummation Date,shallhavebeenpaidinfu11atorpriortotheConsummation Date.9.CONDITIONS TOTHECOMPANY'S OBLIGATIONS ONTHECONSUMMATION DATETheobligations oftheCompanytoconsummate theRestructuring andmakethedeliveries specified inSection10tobemadebyitontheConsummation DatewithrespecttoeachIPP(severally butnotjointly)aresubjecttothesatisfaction onorbefore44 theConsummation Date(or,ifotherwise setforthinSection10.1(b),theConditions Determination Date)ofeachofthefollowing conditions, thewaiverofwhichshallnotbeeffective againsttheCompanyunlesstheCompanygivesitsconsentinwritingtheretoorsuchwaiverisdeemedtobegivenpursuanttoSection10.1(b):9.1.Reresentations andWarranties.

Therepresentations andwarranties ofsuchIPPcontained inSection5shallbetrueinallmaterialrespectsonandasoftheConsummation Datewiththesameeffectasthoughsuchrepresentations andwananties hadbeenmadeonandasofthedateoftheConsummation Date(oronthedatewhenmadeinthecaseofanyrepresentation orwarnuitywhichexpressly relatestoanearlierdate).92.Performance.

SuchIPPshallhaveperformed andcompliedinallmaterialrespectswithallagreements, obligations, covenants andconditions contained inthisAgreement thatarerequiredtobeperformed orcompliedwithbyitonorbeforetheConsummation Date.9.3.Reresentation LetterSecre'sCertificate 0inionofIPP'sCounsel.TheCompanyshallhavereceivedontheConsummation Date(a)arepresentation letterexecutedbysuchIPPinsubstantially theformannexedasExhibit9.3A,(b)acertificate oftheSecretary ofsuchIPP(orthemanaginggeneralpartnerofsuchIPP)certifying (i)theresolutions oftheBoardofDirectors andshareholders ofsuchIPP(orsuchmanaginggeneralpartner)orpartnersofsuchIPPauthorizing thetransactions contemplated bythisAgreement and(ii)theincumbency oftheofficersofsuchIPPexecuting thisAgreement oranyagreements tobeexecutedbysuchIPPpursuanthereto,informandsubstance reasonably satisfactory totheCompany,and(c)anopinionoropinionsfromcounselforsuchIPP(whichmaybesuchIPP'sin-housecounsel),

datedtheConsummation Date,insubstantially theformannexedasExhibit9.3C.9.4.ReulatoArovals.TheCompanyshallhavereceivedonorbeforetheConsummation DateeachNMPCRegulatory Approvaland,iftheCompanywillbenefittherefrom orbeaffectedthereby,anyIPPApprovalsetforthinanyIPPStatusNotice,inaformreasonably acceptable totheCompany,andeachsuchRegulatory Approvalshallbeinfullforceandeffectandeither(i)shallbefinalandnon-appealable or(ii)ifnotfinalandnon-appealable, shallnotbesubjecttothepossibility ofappeal,reviewor'reconsideration which,intheopinionoftheCompany,isreasonably likelytobesuccessful and,ifsuccessful, wouldhaveaMaterialAdverseEffectontheCompany.9.5.NoInunction ActionorProceedin

.(a)NocourtorGovernmental Authority ofcompetent jurisdiction shallhaveenacted,issued,promulgated, enforcedorenteredanylaw,statute,ordinance, rule,regulation,

judgment, decree,injunction orotherorder(whethertemporary, preliminary orpermanent) thatisineffectontheConsummation Dateandwhichrestrains, enjoinsorotherwise prohibits consummation of thetransactions contemplated herebyand(b)noclaim,action,suit,investigation orotherproceeding broughtbyaGovernmental Authority orathirdpartyconcerning thetransactions contemplated bythisAgreement shallbependingwhichintheopinionoftheCompanyisreasonably likelytobesuccessful andwhich,ifadversely determined, wouldgrantrelieffromoragainsttheCompanywhichisreasonably likelytohaveaMaterialAdverseEffectontheCompany.9.6.Contracts.

TheCompanyandsuchIPPshallhaveexecutedanddelivered totheEscrowAgenttherespective Termination Agreement, AmendedPPA,RestatedContract(s),

NorConAgreement orOxbowAgreement, asapplicable, inaccordance withSection2.8,onorbeforetheConditions Determination Date.9.7.NMPCfMrdPConsentsandNMPC/Third PReleases.

TheCompanyshallhavereceived(a)theNMPCfIMrd PartyConsents, informandsubstance reasonably satisfactory totheCompanyand(b)theNMPC/Third PartyReleaseswithrespecttosuchIPP,informandsubstance reasonably satisfactory totheCompany,provided, however,thatanNMPCfAurd PartyReleaseshallbedeemedtohavebeenreceivedbytheCompanyintheeventsuchIPPshallelect,initssolediscretion, toprovidetheCompanywithanindemnity, informandsubstance reasonably satisfactory totheCompany,againstanyclaimsofthethirdpartyundertheNMPCffhird P'artyAgreement resulting Gomthetermination, amendment oramendment andrestatement, asthecasemaybe,ofsuchIPP'sExistingPPA.9.8.GeneralReleaseWithdrawaI ofLitiation.(a)TheCompanyshallhavereceived&omtheIPPontheConsummation Dateageneralrelease,informandsubstance reasonably satisfactory totheCompany,ofallclaims,liabilities orobligations oforagainsttheCompanywhichtheIPPhad,hasormayhavewithrespecttofacts,circumstances oroccurrences existingonorarisingatanytimethroughandincluding theEffective Time,arisingoutoforinconnection withsuchIPP'sExistingPPA,exceptclaims,liabilities orobligations (i)arisingoutoforinconnection withthisAgreement, (ii)arisingoutoforinconnection withanylitigation orregulatory proceedings whicharenottobedismissed andwithdrawn bytheIPPpursuanttoSection9.8(b)and(iii)unlessdismissed orwithdrawn pursuanttoSection9.8(b),arisingoutoforinconnection withanypaymentduetotheIPP,whetherornotdisputed, foranypowerorservicespurchased bytheCompanypursuanttotheExistingPPAoranyrelatedgastransportation, peakshaving,interconnection orotherrelatedagreement betweentheCompanyandtheIPP,providedthatifsuchpaymentrelatestoanyperiodmorethansixty(60)dayspriortothedateofthisAgreement, theIPP'sentitlement tosuchpaymentshallhavebeensetforthinawritinggiventotheCompanyonorbeforeJune15,1997.ThePartiesacknowledge andagreethatallclaims,liabilities andobligations relatingtotracking, adjustment oradvance paymentaccountprovisions underanyExistingPPAshallbeextinguished asoftheEffective Time(andsuchextinguishment shallbereflected inthegeneralrelease).

(b)Inaddition, theCompanyshallhavereceivedfromtheIPPanoriginalcounterpart ofastipulation orotherappropriate document(s),

informandsubstance reasonably satisfactory totheCompany,sufficient todismissorwithdrawastotheCompanybytheIPP(exceptasotherwise providedinthefootnotes thereto)the.litigation, proceedings andpleadings, ifany,asthecasemaybe,listedonSchedule8.8withrespecttosuchIPP,withprejudice andwithnocostsawarded,asoftheConsummation Date.Following theConsummation DatetheIPPshalltakepromptly, orcausetobetakenpromptly, allactionsandtodopromptly, orcausetobedonepromptly, aHthingsnecessary, properoradvisable asmayberequested bytheCompanytofileallsuchdocuments andfullyeffectuate allsuchdismissals andwithdrawals.

9.9,BoardandShareholder Arovals.ThisAgreement andthetransactions contemplated herebyshallhavebeenapprovedby(a)theCompany's BoardofDirectors and,(b)totheextentrequired, bytheCompany's shareholders.

9.10.NMPCFinancin.TheCompanyshallhaveconsummated (a)thePublicOfferingoftheDebtSecurities and(b)theotherfinancing transactions setforthonSchedule9.10hereto,ontermsreasonably satisfactory totheCompany.10.SATISFACTION OFCONMTIONS; CONSUMMATION 10.1.NoticeofSatisfaction orWaiverofConditions.

(a)TheCompanyshallnotifytheIPPs'pecial Counsel,andeachIPPshallnotifytheCompanyandtheIPPs'pecial Counsel,(i)notlessfrequently thanmonthly,ofthesatisfaction ofanyoftheconditions'to theobhgations ofsuchPartypursuanttoSections8or9ofthisAgreement and/or(ii)promptly, intheeventsuchPartyshallreceivenoticeorinformation

&omanyGovernmental Authority orthirdpartyindicating thattheconditions totheobligations ofsuchPartypursuanttoSections8or9ofthisAgreement cannotbe,orarenotreasonably likelytobe,satisfied onorbeforetheExpiration Date.(b)Onorwithinthree(3)BusinessDaysbeforetheConditions Determination Date,theCompanyshallgiveanoticetoeachIPP(the"NMPCStatusNotice")settingforth:(i)adescription ofeachNMPCRegulatory ApprovalwhichtheCompanyhasobtainedorisseekingtoobtainpursuanttotheprovisions ofSection6.6(a)or(c),including thenameoftheGovernmental Authority, the47 specificfindings, approvals andauthorizations obtainedorsoughttobeobtained, allnoticesgivenorreceivedandallactionstakeninconnection therewith, andthestatusthereof,togetherwitharepresentation andwarrantyoftheCompanythattothebestknowledge oftheCompanytheNMPCRegulatory Approvals described thereinaretheonlyRegulatory Approvals requiredasofsuchdatewithrespecttotheconsummation oftheCompany's obligations hereunder; (ii)whethertheconditions totheCompany's obligations setforthinSections9.7(NMPCffhird PartyConsentsandNMPC/Third PartyReleases) havebeensatisfied.

Intheeventanycondition setforthinSection9.7hasnotbeensatisfied bytheConditions Determination Date,thentheCompany,pursuanttotheNMPCStatusNotice,either(x)shallbedeemedtohavewaivedanysuchcondition (exceptthatanysuchwaivershallnotbedeemedawaiverofanycondition inSection9.9(b)orSection9.10)or(y)shallelecttoterminate thisAgreement pursuanttoSection12.1(e);(iii)thestatusof(x)theShelfRegistration Statement withrespecttotheCompanyShares,(y)theDebtRegistration Statement withrespecttothePublicOQeringoftheDebtSecurities andtheotherfinancing transactions setforthonSchedule9.10and(z)theProxyStatement andtheshareholder approvaltobeobtainedthereby;and(iv)whether,tothebestoftheCompany's knowledge, thereisanyreasonwhyanyothercondition toeithertheCompany's oranyIPP'sobligations pursuanttoSections8or9willnotbesatisfied onorbeforetheExpiration Date(excluding anycondition thesatisfaction ofwhichissolelywithinthecontrolofanyIPP).(c)Onorwithinthree(3)BusinessDaysbeforetheConditions Determination Date,eachIPPshallgiveanoticetotheCompanyandtheIPPs'pecial Counsel(an"IPPStatusNotice")settingforth:(i)adescription ofeachIPPRegulatory ApprovalwhichtheIPPhasobtainedorisseekingtoobtainpursuanttotheprovisions ofSection6.6(b),including thenameoftheGovernmental Authority, thespecificfindings, approvals andauthorizations obtainedorsoughttobeobtained, allnoticesgivenorreceivedandallactionstakeninconnection therewith, andthestatusthereof,togetherwitharepresentation andwarrantybytheIPPthattothebestknowledge ofsuchIPPtheIPPRegulatory Approvals described thereinand,atsuchIPP'soption,intheNMPCStatusNoticearetheonlyRegulatory Approvals requiredasofsuchdatewithrespecttotheconsummation oftheIPP'sobligations hereunder; 48 (ii)whethertheconditions totheIPP'sobligations setforthinSections8.l0(IPP/Third PartyConsents; IPPApprovals) and8.11(GasMitigation) havebeensatisfied.

Intheeventanycondition setforthinSection8.10or8.11hasnotbeensatisfied bytheConditions Determination Date,thentheIPP,pursuanttotheIPPStatusNotice,either(x)shallbedeemedtohavewaivedanysuchcondition or(y)shallelecttoterminate thisAgreement pursuanttoSection12.2(c)asoftheConditions Determination Date;(iii)whether,tothebestoftheIPP'sknowledge, thereisanyreasonwhyanyothercondition toeithertheCompany's orsuchIPP'sobligations pursuanttoSections8or9willnotbesatisfied onorbeforetheExpiration Date(excluding anycondition thesatisfaction ofwhichissolelywithinthecontroloftheCompanyoranyotherIPP).(d)Withinten(10)daysaAertheConditions Determination Date,theCompanyeither(x)shallbedeemedtohavewaivedthecondition setforthinSection9.9(a)or(y)bynoticegivenonorbeforesuchdateshallelecttoterminate thisAgreement pursuanttoSection12.1(e),effective asofthedateofsuchnotice.10.2.Consummation Date.Theconsummation oftheRestructuring andotherthtransactions contemplated bythisAgreement (the"Consummation"

)shalltakeplactepaceaeofficesofAkin,Gump,Strauss,Hauer&Feld,L.L.P.,590MadisonAvenue,NewYork,NewYork.Withinfifteen(15)daysaAertheConditions Determination Date,thePartiesshallmutuallyagreeonascheduletoachievetheConsummation byadatecertain(the"Scheduled Date")andthereafter thePartiesshallusetheirReasonable BestEffortstoachievetheConsummation bytheScheduled Date.TheConsummation shalloccuronthelatertooccurof(i)theScheduled Dateand(ii)thethird(3")BusinessDayfollowing thesatisfaction orwaiverofalloftheParties'onditions setforthinSections8and9,orshalltakeplaceatsuchotherplaceoronsuchotherdateasthePartiesmaymutuallYagree.InnoeventshalltheConsummation occursoonerthanDecember31,1997orlaterthantheExpiration Date.ThedateonwhichtheRestructuring andothertransactions contemplated bythisAgreement actuallyareconsummated isreferredtohereinasthe"Consummation Date."10.3.Deliveries btheComan.(a)OntheConsummation Date,theCompanyshalldelivertotheDepositary, onbehalfoftheIPPs,(i)theCashPayment,inthemannerdescribed inSection3.3;(ii)theCompanyShares,inthemannerdescribed inSections3.3and3.6;and(iii)theShort-Term NotesorAdditional CashPayment,asapplicable, inthemannerdescribed inSection3.3.

(b)OntheConsummation Date,theCompanyshalldelivertotheEscrowAgent,onbehalfoftheIPPs,allotheragreements, instruments, certificates, resolutions, opinionsandotherdocuments (including butnotlimitedtothegeneralreleasesandthedismissals andwithdrawals oflitigations, regulatory proceedings andpleadings contemplated bySection8.8(b))requiredtobedelivered bytheCompanyonorbeforetheConsummation DatepursuanttothisAgreement, eitherintherespective formannexedasanExhibittothisAgreement, ifapplicable, orinformandsubstance reasonably satisfactory toeachIPPandtheIPPs'pecial Counsel.10.4.Deliveries btheIPPs.OntheConsummation Date,eachIPP{asapplicable) shalldelivertotheEscrowAgent,onbehalfoftheCompany,allotheragreements, instruments, certificates, resolutions, opinionsandotherdocuments

"(including butnotlimitedtothegeneralreleasesandthedismissals andwithdrawals oflitigations andregulatory proceedings contemplated bySection9.8(b))requiredtobedelivered bysuchIPPonorbeforetheConsummation DatepursuanttothisAgreement, eitherintherespective formannexedasanExhibittothisAgreement, ifapplicable, orinfomiandsubstance reasonably satisfactory totheCompanyanditscounsel.10,5.Deliveries btheDesiandtheEscrowAent.QntheConsummation Date,thePartiesshallexecuteanddelivertotheDepositary andtheEscrowAgentsuchauthorizations andinstructions asmayberequiredtocausetheDepositary andtheEscrowAgenttodeliver(i)counterparts oftheContracts, the.Shareholder's Agreement, theRegistration RightsAgrccmcnt andall.other agreements, instruments, certificates, resolutions, opinionsandotherdocuments delivered bythePartiestotheEscrowAgentpursuanttothisAgreeinent (excluding theAllocation) tothe.Companyandtherespective IPPs,asapplicable, and(ii)theCashPayment,CompanyShares,Short-Term Notesand/orAdditional CashPayment,asapplicable, delivered bytheCompanytotheDepositary pursuanttothisAgreement, totherespective IPPsortheirdesignecs.

11.REGULATORY ANDOTHERMATTERS11.1.Maintenance ofFStatus.(a)EachIPP(whetherornotitistoenterintotheAmendedPPAorRestatedContract) shallhavetheright,butnottheobligation, toobtainand/ormaintainitsstatusasastateand/orfederalqualifying facility("QF")underNewYorklaw(including compliance withNYPSL$2(2-a))and/orPURPA,respectively, buttheCompany's obligations undereachContractshallcontinueasamatterofcontractrightregardless ofwhethertheIPPmaintains itsstateorfederalQFstatus.Following theConsummation Date,theCompanyshallnotimplement orcontinuetoimplement anyQFMonitoring ProgramwithrespecttoanyIPP.Notwithstanding theforegoing, failureto50 complywiththerequirements applicable tostateand/orfederalQFstatusunderNewYorklaw(including compliance withNYPSL$2(2-a))shallhavenoadverseeffectonthelPFortheCompany's continuing performance underanyContract.

(b)IntheeventanIPP(whetherornotitistoenterintotheAmendedPPAorRestatedContract) wishestoqualifyorperformasanExemptWholesale Generator

("EWG")underSection32ofPUHCAandtheFERC'sregulations promulgated thereunder, asthesamemaybeamended,modifiedorrestatedfromtimetotime,whetherbeforeoraftertheConsuinmation Date,theCompanyshallcooperate with(including, withoutlimitation, byproviding consentsandaffidavits),

andshallnottakeanyactiontooppose,impedeorsubvert,suchIPP'seffortstoobtainappropriate regulatory exemptions andapprovals, including market-based rateapproval.

(c)EachIPPshallhavetherighttohavetheCompanywheeltheoutputofitsProjecttothirdpartiespursuanttoapplicable law,ortheCompany's, orothercompanies',

dulyfiledtransmission anddistribution tariffsorschedules.

(d)ExcepttotheextentthatthecontractpriceundertheAmendedPPAorRestatedContractisormaybebasedthereon,fromandaftertheConsummation Date(i)eachIPPshallwaiveany'statutory rightitmayhaveunderSection66mofNYPSLpursuanttowhichsuchIPPmaydemanda6gperKWhminimumpowerpurchaseratefromtheCompanyand(ii)eachIPPshallwaive,foritselfandforthesuccessors andassignsofitsrespective Project,withrespecttoitsProject,anystatutory rightitmayhaveunderPURPAorNYPSLtorequiretheCompanytoenterintoapowerpurchasecontractorotherwise taketheoutputofsuchIPP'sProject,provided, however,thatpriortotheendoftheProxy-Market PricePeriodtheCompanyagrees,attheIPP'srequest,toactasagentforeachIPP(or,ifnecessary toeffectuate suchsalestotheNewYorkPowerPool,bypurchaseandresaleofeachIPP'scapacityandenergy,atnocosttotheCompany),

forthesaleonuptoamonthlybasis,ofeachsuchProject's capacityandenergytotheNewYorkPowerPooloranythirdparty,ineachcaseonanondiscriminatory basiswithrespecttotheCompany's oranythirdparty'scapacityandenergy,atnocosttosuchIPP.TheCompanyagreestouseitsReasonable BestEffortstoeffectsuchsalesonthemostfavorable terms,including price,totheIPP,givingconsideration tothequantity, termandmarketconditions prevailing atthetimeofsale.ForpurposesofthisSection11.1(d),theProxy-Market PricePeriodshallhavethemeaningsetforthinExhibitA,exceptthattheProxy-Market PricePeriodshallcommenceasoftheEffective Time,thelastsentenceofthedefinition contained inExhibitAshallnotbeapplicable, andthisprovision shallapplywhetherornotsuchIPPistoenterintotheAmendedPPAoraRestatedContract.

Further,nothinghereinshallbeconstrued toconstitute awaiverbyanyIPPofanyotherrightsitmayhaveunderPURPA,NYPSLorapplicable law,including rightswithrespecttoback-upservices, interconnection, reactivepowerorsimilarrights,whetherornotacontractisrequiredordesirable.

51 11.2.ComtitiveTransition Chare'etailBass.(a)EachIPPcovenants nottotakeanyactiontooppose,impedeorsubverttheCompany's entitlement torecoverCompetitive Transition ChargesfromanypartyotherthananIPPanditsAffiliates (exceptintheircapacities asretailcustomers),

including thelevel,designordurationofsuchcharges,andtheimposition ofsuchchargesonbackuppowerservices(including servicestoself-generators);

provided, however,thateachIPPreservestherighttochallenge anyproposalthatdiscriminates againstonesourceofgeneration relativetoanotherorplacesanyIPPoritsAffiliates atacompetitive disadvantage ascomparedtoothergenerators orsuppliers.

EachIPPagreesnottosupportinanyregulatory orjudicialproceeding anyeffortbyacustomeroftheCompanytoavoidpaymentofaCompetitive Transition Charge.Theprovisions ofthisSectionshallnotapplytoanyIPPfollowing (x)thetermination ofthisAgreement initsentiretyor(y)thetermination ofthisAgreement withrespecttosuchIPP.(b)EachIPPagreesthat,betweenthedateofthisAgreement andtheearliertooccurof(x)theEffective Time,(y)thetermination ofthisAgreement initsentiretyor(z)theteimination ofthisAgreement withrespecttosuchIPP,itwillnot(otherthantotheCompanyoranyAffiliate oftheCompany)provideelectricpowerdirectlyorindiiectly toanexistingretailcustomeroftheCompanylocatedintheCompany's retailserviceterritory ortoapersonorentitywhichdirectlyorindirectly provides'electric powertoanysuchretailcustomer, unlesspursuanttoanagreement approvedbythePSC.Theprovisions ofthisSection11.2(b)shallnotapplyto(i)salesbyanyIPPpermitted asofthedateofthisAgreement, (ii)thesaleofelectricity byanyIPPtoautility,including theCompany,(iii)theprovision byanyIPPofitsinternalauxiliary loador(iv)anysalesbyanypowermarketing orretailenergyservicesAQiliateofanyIPP.11.3.Consistent TaxRertin.TheCompanyandeachapplicable IPPagreethatthetermsandconditions tobecontained ineachRestatedContractandFixedPriceSwapContractareandshallbetheresultofarms-length negotiations.

TheCompanywillnottreattheRestatedContracts orFixedPriceSwapContracts inamannerthatisinconsistent withthecharacter ofsuchRestatedContracts orFixedPriceSwapContracts, asthecasemaybe,forincometaxandreporting purposesasbonafidehedgingordeliveryagreements andwillnotclaimadeduction orlossforincometaxpurposesinrespectofsuchRestatedContracts orFixedPriceSwapContracts priortoataxableyearinwhich(i)paymentspursuanttosuchRestatedContracts orFixedPriceSwapContracts arepaidoraccruepursuanttothetermsthereofor(ii)suchRestatedContracts orFixedPriceSwapContracts lapse,terminate orarecanceled, unlessrequiredtodosopursuanttoa"determination" withinthemeaningofSection1313(a)oftheCode.52 12.TERMINATION OFAGggEMKNT 12.1.EventsofTermination oftheAreementinitsEntire.ThisAgreement maybeterminated, andthetransactions contemplated herebymaybeabandoned, atanytimepriortotheConsummation Date:(a)bythemutualwrittenconsentofalltheParties,orpursuanttoSection2.7(b);(b}bytheIPPs,actingunanimously, iftheCompanybreachesinanymaterialrespectanyofitscovenants oragreements contained inthisAgreement, oranyofitsrepresentations orwaminties contained inthisAgreement isinaccurate inanymaterialrespectwhenmade,andsuchbreachormisrepresentation isnotcuredtothereasonable satisfaction oftheIPPs,actingunanimously, withinten(10)daysaherthedatenoticeofsuchbreachormisrepresentation isgiventotheCompany(or,ifsuchbreachormisrepresentation isnotreasonably capableofcurewithinsuchten(10)dayperiodbutiscapableofcure,suchlongerperiodasmaybereasonably necessary toeffectsuchcure,nottoexceedthirty(30}daysintheaggregate, providedthatduringtheperiodofsuchextension theCompanyusesReasonable BestEffortstoeffectsuchcure);(c)bytheCompany,ifalloftheIPPsbreachinanymaterialrespectanyoftheirrespective covenants oragreements contained inthisAgreement, oranyofeirrespective representations orwarranties contained inthisAgreement isinaccurate inanymaterialrespectwhenmade,andsuchbreachormisrepresentation isnotcuredtothereasonable satisfaction oftheCompanyformorethanten(10)daysafterthedatenoticeofsuchbreachormisrepresentation isgiventoallIPPs(or,ifsuchbreachormisrepresentation isnotreasonably capableofcurewithinsuchten(10)dayperiodbutiscapableofcure,suchlongerperiodasmaybereasonably necessary toeffectsuchcure,nottoexceedthirty(30)daysintheaggregate, providedthatduringtheperiodofsuchextension, theIPPsuseReasonable BestEffortstoeffectsuchcure);(d)bytheCompany,iftheCompanydetermines, initssolediscretion, that,asaresultofthetermination ofthisAgreement withrespecttooneormorebutnotnecessarily alloftheIPPs,thebenefitsanticipated tobereceivedbytheCompanyasaresultofthetransactions contemplated bythisAgreement havebeenmaterially andadversely affected(provided thatanynoticeoftermination solelyasaresultofthetermination ofthisAgreement withrespecttoNorConand/orOxbowpursuanttoSections2.5or2.6,respectively, shallbemadenotlaterthanten(10)BusinessDaysafterreceiptoftheDepositary's certification pursuanttoSection12.4(b)following thetermination ofthisAgreement withrespecttoNorConand/orOxbow,asthecasemabeandprovided, further,thattheCompanymaynotterminate thisAgreement pursuanttoecasemaythisSection12.1(d)following deliverybytheCompanyofasub-clause (y)noticepursuanttoSection2.7(b),unlessanyoftheIPPswhicharenotidentified insuchsuh-53 clause(y)noticeshallthereafter havebeenterminated fromthisAgreement priortotheConsummation Date;or(e)bytheCompany,iftheCompanydetermines, intheCompany's solediscretion, thatanyoftheconditions (whichhavenotpreviously beenwaived)totheCompany's obligations setforthinSection9arenotreasonably likelytobesatisfied (andtheCompanyisnotwillingtowaivesame)onorbeforetheExpiration Date,providedthattheCompanymaynotterminate thisAgreement pursuanttothisSection12.1(e)priortotheConditions Determination Date,exceptthattheCompanymayterminate thisAgreement priortotheConditions Determination DateifthePSCApprovalhasbeendeniedorifnoPSCactionhasbeentakenasofadateatwhichitisnolongerpossiblefortheConsummation tooccurbytheExpiration Date.12,2.EventsofTermination withrescttoOneorMreoftheIPPs.ThisAgreement maybeterminated byorwithrespecttoanyoneormorebutnotnecessarily alloftheIPPs,andthetransactions contemplated herebymaybeabandoned byorwithrespecttoanyoneormorebutnotnecessarily alloftheIPPs,atanytimepriortotheConsummation Date:(a)bythemutualwrittenconsentoftheCompanyandanyoneormoreIPPsorpursuanttoSections2.5,2.6or2.7(b)hereof;provided, however,thatinthecaseofanytermination pursuanttothisSection12.2(a),thisAgreement shallbeterminated withrespecttosuchterminating orterminated IPP(s)only;(b)byanyoneormoreIPPs,actingsingly,iftheCompanybreachesinanymaterialrespectanyofitscovenants oragreements contained inthisAgreement oranyofitsrepresentations orwarranties contained inthisAgreement isinaccurate inanymaterialrespectwhenmade,andsuchbreachormisrepresentation isnotcuredtothereasonable satisfaction ofsuchIPP(s)withinten(10)daysaAerthedatenoticeofsuchbreachormisrepresentation isgiventotheCompany(or,ifsuchbreachormisrepresentation isnotreasonably capableofcurewithinsuchten(10)dayperiodbutiscapableofcure,suchlongerperiodasmaybereasonably necessary toeffectsuchcure,nottoexceedthirty(30)daysintheaggregate, providedthatduringtheperiodofsuchextension theCompanyusesReasonable BestEffortstoeffectsuchcure);provided, however,thatinthecaseofanytermination pursuanttothisSection12.2(b),thisAgreement shallterminate withrespecttosuchterminating IPP(s)only;(c)byanyoneormoreIPPs,actingsingly,ifanysuchIPPdetermines, insuchIPP'ssolediscretion, (i)thatanyoftheconditions (whichhavenotpreviously beenwaived)tosuchIPP'sobligations setforthinSections8arenotreasonably likelytobesatisfied (andsuchIPPisnotwillingtowaivesame)onorbeforetheExpiration Date,(ii)thattheNMPCRestructuring, asimplemented orproposedtobeimplemented bytheCompanyatanytime,hashadorisreasonably likelytohaveamaterialadverseeffecton5a suchIPPwithrespecttothetransactions contemplated hereby,(iii)thatappropriate exemptions orwaiversfromtheregulation orjurisdiction ofanyGovernmental Authority resulting fromthisAgreement oranyofthetransactions contemplated herebywithrespecttosuchIPP,itspartnersorAffiliates, individually orcollectively, fromwhichitortheywerepreviously exempt,including butnotlimitedtoSECorFERCregulation underPUHCA,PSCregulation undertheNYPSL,andFERCregulation undertheFederalPowerAct,arenotreasonably likelytobeobtainedonorbeforetheExpiration Date,andthisAgreement isnotconformed priortotheConsummation Dateinamannermutuallysatisfactory tothePartiesasmaybenecessary inorderfortheIPP,itspartnersorAffiliates, toavoidbecomingsubjecttosuchregulation orjurisdiction, (iv)thatsuchIPPis,orisreasonably likelytobe,subjecttoanyCurtailment withrespecttoitsExistingPPA(whetherauthorized todosobeforeorafterthedateofthisAgreement),

or(v)thatsuchIPPisunabletoeffecttheRestructuring inamannercontemplated bySection6.2;oruponanymergerorconsolidation oftheCompanywithorintoanyotherentity(exceptaspermitted bySchedule6.11);provided, however,thatinthecaseofanytermination pursuanttothisSection12.2(c),thisAgreement shallterminate withrespecttosuchteiminating IPP(s)only;or(d)bytheCompany,ifanyIPPbreachesinanymaterialrespectanyofitscovenants oragreements contained inthisAgreement oranyofitsrepresentations orwammtiescontained inthisAgreement isinaccurate inanymaterialrespectwhenmade,andsuchbreachormisrepresentation isnotcuredtothereasonable satisfaction oftheCompanyformorethantcn(10)daysafternoticeofsuchbreachormisrepresentation isgiventoallIPPs(or,ifsuchbreachormisrepresentation isriotreasonably capableofcurewithinsuchten(10)dayperiodbutiscapableofcure,suchlongerperiodasmaybereasonably necessary toeffectsuchcure,nottoexceedthirty(30)daysintheaggregate, providedthatduringtheperiodofsuchextension theIPPusesReasonable BestEffortstoeffectsuchcure);provided, however,thatinthecaseofanyuncuredbreachbylessthanalloftheIPPs,theCompanymayterminate thisAgreement withrespecttoanysuchbreaching IPP(s)only.12.3.~Exiration.(a)ThisAgreement shallbeterminated, andthetransactions

.contemplated herebyshallbeabandoned, withoutfurthernoticeorconsent,ifforany'eason(including butnotlimitedtothenon-satisfaction andnon-waiver ofanyoftheconditions setforthinSections8and9hereof)theConsummation DatehasnotoccurredonorpriortotheExpiration Dateunless,bymutualwrittenconsentofalltheParties,thePartieselecttoextendtheExpiration Date.(b)Notwithstanding theprovisions ofSection12.3(a),iftheCompanyandlessthanalltheIPPsdesiretoextendtheExpiration Date(otherthanasprovidedinSection2.7(b),whichshallgovernanyextension pursuanttothatSection),

this55 Agreement shallnotbeterminated andshallinsteadbeextendedbythemutualwritten.consentofsuchParties;insuchevent,thisAgreement shallbedeemedtobeterminated (withtheeKectdescribed inSection12.4(b))withrespecttoanyIPPwhichdoesnotdesiretoextendtheExpiration Date.12.4.EAectofTermination.

(a)IntheeventthatthisAgreement shallterminate initsentiretypursuanttoSection12.1,12.2or12.3(a),then(i)thisAgrecmcnt shallforthwith terminate andhavenofurthereffect,(ii)anyContracts theretofore executedbytheCompanyandanyIPPsshallbevoidabinitioand,iftheretofore delivered totheEscrowAgent,shallbedestroyed bytheEscrowAgentand(iii)noPartyshallhaveanyfurtherobligation orliability hereunder (exceptwithrespecttoanyprovisions hereofwhichbytheirtermsexpressly surviveanytermination ofthisAgreemcnt).

(b)IntheeventthatthisAgreement shallterminate withrespecttooneormorcbutlessthanalloftheIPPspursuanttoSection2.5,2.6,2.7(b),12.2or12.3(b),then(i)thisAgreement shallterminate forthwith andhavenofurthereffectwithrespecttoanysuchIPP(cxceptwithrespecttoanyprovisions hereofwhichexpressly surviveanytermination ofthisAgreement),

(ii)theAllocable Consideration andthecontractquantityundertheAmendedPPA'hallbereducedbytheportionoftheAllocable Consideration andthecontractquantityundertheAmendedPPAallocated tosuchIPPpursuanttotheoriginalAllocation, (iii)theAllocable Consideration, thecontractquantityofenergyandthecontractquantityofinstalled capacityundertheRestatedContracts shallbcreducedbytheportionoftheAllocable Consideration, thecontractquantityofenergyandthecontractquantityofinstalled capacityundertheRestatedContracts allocated tosuchIPPpursuanttotheoriginalAllocation, (iv)theaggregate ContractAdjustment shallbereducedbytheportionoftheContractAdjustment allocated tosuchIPPpursuanttotheoriginalAllocation, ifany,(v)anyContracts theretofore executedbysuchIPPshallbevoidabinitioand,iftheretofore delivered totheEscrowAgent,shallbedestroyed bytheEscrowAgentand(vi)theCompanyshallnothaveanyfurtherobligation orliability tosuchIPPhereunder andsuchIPPshallnothaveanyfurtherobligation orliability totheCompanyoranyotherIPPhereunder (exceptwithrespecttoanyprovisions hereofwhichexpressly surviveanytermination ofthisAgreement).

Insuchevent,theDepositary shallcertifytotheCompanyandtheotherIPPstheportionoftheAllocable Consideration, thecontractquantity, theinstalled capacityandthecontractadjustment, asapplicable, undertheAmendedPPAortheRestatedContracts whichpursuanttotheoriginalAllocation (withoutregardtoanyamendment thereof,ifany)hadbeenallocated totheIPPsoterminated.

Forpurposeshereof,anyreduction intheAllocable Consideration duetothetermination ofthisAgreement withrespecttoanindividual IPPshallmeanareduction inboththeCashPaymentandCompanySharesallocated tosuchindividual IPPpursuanttotheAllocation.

Exceptasexpressly setforthinthisSection12.4(b),thetermination ofthisAgreement withrespecttooneormorebut56 lessthanalloftheIPPsshallnotincreaseorreducetheportionoftheAllocable Consideration payabletotheremaining IPPs,norinanywayaffecttheShort-Term NotesorAdditional CashPayment,asapplicable, orthetermsandconditions, including contractprice,oftheContracts, norinanywayaffectanyothertermsofthisAgreement withrespecttoanyotherIPP,allofwhichtermssbaHcontinueinfullforceandeffect.(c)Thetermination ofthisAgreement initsentiretypursuanttoSection12.1,12.2or12.3(a),orthetermination ofthisAgreement pursuanttoSection2.5,2.6,2.7(b),12.2or12.3(b)withrespecttooneormorebutlessthanalloftheIPPs,shallnotrelievetheCompanyofanyliability toany!PP,oranyIPPofanyliability totheCompany,fordamagesdirectlyresulting fromthebreachinanymaterialrespectofanycovenantorobligation ofsuchParty,oranyinaccuracy inanymaterialrespectofanyrepresentation orwarnmtyofsuchParty,ineachcaseoccurring priortosuchtermination; andanysuchtermination shaHnotbedeemedtobeawaiverofanyavailable remedyforanysuchbreachormisrepresentation.

Notwithstanding anyotherprovision contained inthisAgreement tothecontrary, providedsuchPartyusesitsReasonable BestEffortswithrespecttothepursuance ofanycourseofactionorresultstatedhereinasrequiring theuseofReasonable BestEffortsbysuchParty,suchPartyshallnothaveanyliability toanyotherPartyforanyfailuretoachievesuchcourseofactionorresult.Innoeventshall(i)anyIPPhaveanyliability toanyotherIPPhereunder or(ii)anyPartyhaveanyliability forconsequential, specialorotherindirectdamagesresulting fromanybreachormisrepresentation.

Theprovisions ofthisSection12.4(c)shallsurviveanytermination ofthisAgreement (eitherinitsentiretyorwithrespecttolessthanalloftheIPPs).12.5.EfFectonExistinPPAs.Intheeventoftermination ofthisAgreement astoanyIPPforanyreasononorpriortotheConsummation Date,notwithstanding anyotherprovision ofthisAgreement, thePartiesagreeandstipulate thattheExistingPPAofsuchIPPshallcontinuewiththesameforceandeffectasifthisAgreement hadnotbeenexecutedbysuchIPP,andthatnothingcontained hereinshallinanywayreduce,mitigateormodifytheamountortypesofclaims,whetherassertedorunasserted onthedateofthisAgreement, thatsuchIPPmayhavewhichariseoutoforarerelatedtoitsExistingPPA,andallrightsandobligations ofthePartieswithrespecttosuchExistingPPAshallinnomannerbeaffectedorcompromised bythetermsofthisAgreement.

Withoutlimitingtheforegoing, thePartiesacknowledge andagreethatnoneof(i)theexecution anddeliveryofthisAgreement oranyagreement executedortobeexecutedpursuant'eretobytheParties,(ii)thesubmission ofthisAgreement oranyagreement executedortobeexecutedpursuantheretotoanyGovernmental Authority foritsreviewand/orapprovalor(iii)anyoftheParties'iscussions, negotiations oractionsoccurring inanticipation of,orsubsequent to,theexecution ofthisAgreement oranyagreement executedortobeexecutedpursuantheretoshall(excepting, withrespecttoanyindividual IPP,theactualconsummation oftheRestructuring andothertransactions contemplated bythisAgreement pertaining tosuchIPP'sExistingPPA),constitute orbedeemedorassertedtoconstitute anamendment ormodification to,oratermination, cancellation, rejection, invalidation, suspension orwaiverof,anyprovision, term,condition, right,obligation orrequirement contained inorapplicable toanyExistingPPAoranyothercontract, instrument ordocumentrelatingthereto.12.6.BankrutcTermination.

IntheeventthattheCompany,atanytimeonorbeforetheConsumnation Date,makesageneralassignment oranygeneralarrangement orcompromise forthebenefitofcreditors, filesapetitionundertheBankruptcy Codeorotherwise commences, authorizes oracquiesces inthecommencement ofaproceeding underanybankruptcy orsimilarlawfortheprotection ofcreditors, orhasapetitioncommenced againstit,then(i)thisAgreeinent shallterminate forthwith, withtheeffectdescribed inSection12A(a),and(ii)theprovisions ofSection12.5shallapplywithrespecttotheExistingPPAsThePartiesagreeandstipulate thatthisAgreement isacontractto(i)extenddebtfinancing toorforthebenefitoftheCompany,(ii)extendfinancial accommodations toorforthebenefitoftheCompanyand(iii)issueoneormoresecurities oftheCompany.Asaconsequence, thePartiesfurtheragreeandstipulate thattheprovisions ofSections365(c)(2) and(e)(2)(B) oftheBankruptcy Code,amongothers,wouldbeapplicable andbindingonthePartiesintheeventtheCompanybecomesadebtorundertheBankruptcy Code.13.NOTICESUnlessotherwise

provided, anynotice,consent,approval, authorization, waiverorothercommunication requiredorpermitted under'this Agreement shallbegiveninwritingandshallbedeemedeffectively givenuponpersonaldeliverytothePartytobenotified, onthenextBusinessDayaAerdeliverytoanationally recognized overnight courierservice,uponconfirmation ofreceiptofafacsimile transmission orfivedaysafterdepositwiththeUnitedStatesPostOffice,byregistered orcertified mail,postageprepaid,andaddressed tothePartytobenotifiedattheaddressorfacsimile numberindicated belowforsuchParty,oratsuchotheraddressassuchPartymaydesignate uponwrittennoticetotheotherParties(exceptthatnoticeofchangeofaddressshallbedeemedgivenuponreceipt).

NoticesmaybegiventotheCompanyonbehalfofanyorallIPPsbytheIPPs'pecial Counsel.(a)InthecaseoftheCompany:NiagaraMohawkPowerCorporation 300ErieBoulevard WestSyracuse, NY13202Facsimile:

(315)428-3406Attn:WilliamF.Edwards58 withacopyto:Donaldson Lufkin&JenretteSecurities Corporation 272ParkAvenueNewYork,NY10172Facsimile:

(212)892-7272Attn:MichaelRangerandwithacopyto:Sullivan&Cromwell1701Pennsylvania Avenue,N.W.Washington, DC20006Facsimile:

(202)293-6330Attn:JanetT.Geldzahler Swidler&Berlin3000KStreet,N.W.,Suite300Washington, DC20007Facsimile:

(202)424-7643Attn:StevenJ.Agresta(b)InthecaseoftheIPPs,attheaddresses setforthonScheduleAwithacopyto:Wasserstein Perella&CoInc.31West52~StreetNewYork,NY10019Facsimile:

(212)969-7971Attn:KennethA.Buckfireandwithacopyto:Akin,Gump,Strauss,Hauer&Feld,L.L.P.590MadisonAvenueNewYork,NY10022Facsimile:

(212)872-1002Attn:StevenH.Scheinman 59 14.MISCELLANEOUS 14.1.EntireAreement.ThisAgreement, theExhibitsandSchedules annexedhereto,andthedocuments andagreements referredtohereinortobeexecutedanddelivered pursuanthereto,constitute theentireagreement amongthePartieswithrespecttothesubjectmatterhereof,supersede allprioragreements andunderstandings, writtenororal,amongthePartieswithrespectthereto,andnoPartyshallbeliableorboundtoanyotherPartyinanymannerbyanypromises, conditions, warranties, representations, orcovenants exceptasspecifically setforthhereinortherein.Notwithstanding theforegoing, neitherthisAgreement, theExhibitsandSchedules hereto,northedocuments andagreements referredtohereinortobeexecutedanddelivered pursuantheretoshallbe'eemedtosupersede, terminate, amendormodifyanyexistingwrittenagreement betweentheCompany(oranyAffiliate oftheCompany)andanyIPP,unlesssuchexistingwrittenagreement isexpressly superseded, terminated, amendedormodifiedpursuanttothetermsofthisAgreement.

Theprovisions ofthisSection14.1notwithstanding, thetermsofthatcertainAgreement toProtectConfidential Information andDiscussions executedby,amongothers,theCompany,onJune10,1996shallsurviveinaccordance withtheirtermswithrespecttoallinformation disclosed thereunder priortothedateofthisAgreement.

14.2.Amendments andWaivers,AnytermofthisAgreement maybeamendedandtheobservance ofanytermofthisAgreement maybewaived(eithergenerally orinaparticular instanceandeitherretroactively orprospectively),

onlybyaninstrument inwritingandsignedbythePartyagainstwhomsuchamendment orwaiverissoughttobeenforced; providedthattheprovisions ofSection14.14(c)maybeamendedbytheIPPswithouttheconsentoftheCompany.14.3.Successors andAssins.Exceptasotherwise expressly providedherein,thetermsandconditions ofthisAgreement shallinuretothebenefitofandbebindingupontherespective successors andpermitted assignsoftheParties.Exceptasotherwise expressly providedherein,therightsandobligations ofthePartiespursuanttothisAgreement maynotbeassigned(otherthanbyoperation oflaw).NothinginthisAgreement, expressorimplied,isintendedtoconferuponanypersonorentityotherthanthePartiesheretoortheirrespective successors andassignsanyrights,remedies, obligations, orliabilities underorbyreasonofthisAgreement, exceptasmaybeexpressly providedinthisAgreement.

144.G~iL.LG*AA*.IIdfgg*dfdfgdIdgrightsandobligations ofthepartieshereunder, andallamendments andsupplements hereofandallwaiversandconsentshereunder, shallbeconstrued inaccordance withandgovernedbythedomesticsubstantive lawsoftheStateofNewYorkvrithoutgiving60 effecttoanychoiceoflaworconflicts oflawprovision orrulethatwouldcausetheapplication ofthedomesticsubstantive lawsofanyotherjurisdiction.

14.5.S~everabiiit

.ifanyprovisions ofthisAgreement asappliedtoanypartortoanycircumstance ortoanyPartyshallbeadjudgedbyacourttobeinvalidorunenforceable, thesameshallinnowayaffectanyotherprovision ofthisAgreement, theapplication ofsuchprovision inanyothercircumstances ortoanyotherPartyorthevalidityorenforceability ofthisAgreement, andthePartiesaffectedtherebyshalluseReasonable BestEffortstonegotiate ingoodfaithtomakesuchequitable adjustments tothisAgreement asmaybeappropriate, soastoeffecttheoriginalintentofsuchPartiesascloselyaspossibleinamutuallyacceptable manner.14.6.~Cations.Thetableofcontents, headingsandcaptionsusedinthisAgreement areusedforconvenience onlyandarenottobeconsidered inconstruing orinterpreting thisAgreement.

Unlessotherwise specified, allreferences hereinto"Sections" refertoSectionsinthisAgreement.

14.7.Co~teretarts.

ThisAgreement maybeexecutedinnvoormorecounterparts, each-ofwhichshallbedeemedanoriginal, butallofwhichtogethershallconstitute oneandthesameinstrument.

14.8.Fees.Exceptfor(i)DLJ,thefeesandexpensesofwhichtheCompanyhasagreedtopay,pursuanttoaseparateagreement, and(ii)WP&Co.,thefeesandexpensesofwhichtheCompanyhasagreedtopaypursuanttoaseparateagreement datedMay15,1996,asamendedasofthedatehereof(asamended,the"WP&Co.FeeLetter"),eachPartyrepresents thatitneitherisnorwillbeobligated foranyinvestment bankingfee,commission orsimilarfeeinconnection withthetransactions contemplated bythisAgreement.

TheCompanyagreestoindemnify andholdharmlesseachIPPfromanyliability foranycommission orcompensation inthenatureofaninvestment bankingfee,commission or,similarfee,andassociated expenses(andthecostsandexpensesofdefending againstsuchliability orassertedliability) whichis(x)payabletoDLJ,(y)payabletoWP&Co.pursuanttotheWP&Co.FeeLetteror(z)forwhichtheCompanyoranyoftheCompany's

officers, employees orrepresentatives otherwise is'responsible.

EachIPP(severally andnotjointly)agreestoindemnify andholdharmlesstheCompany6omanyliability foranycommission orcompensation inthenatureofaninvestment

~bankingfee,commission orsimilarfee,andassociated expenses(andthecostsandexpensesofdefending againstsuchliability ofassertedliability) for,whichsuchIPPoranyofsuchIPP'srespective

officers, employees orrepresentatives isresponsible, otherthananysuchfeeorexpensewhichis(x)payabletoDLJ,(y)payabletoWP&Co.pursuanttotheWP&Co.FeeLetteror(z)forwhichtheCompanyoranyoftheCompany's

officers, employees orrepresentatives otherwise isresponsible.

Theprovisions ofthisSection14.8shallsurvivetheConsummation Dateandanytermination ofthisAgreement (eitherinitsentiretyorwithrespecttolessthanalloftheIPPs).Byits execution hereof,eachIPPherebyagreestothetermsoftheamendment totheWP&Co.FeeLetterdatedasofthedatehereof.14.9.~Exnses.Irrespective ofwhethertheConsummation DateshalloccurorwhetheranyRegulatory Approvalisobtained, andexceptasotherwise expressly providedhereinortherein,eachPartyshallpayallcostsandexpenses(including, butnotlimitedto,legalandaccounting feesandexpenses) thatitincurswithrespecttothenegotiation andexecution ofthisAgre.'ment andanyotheragreements tobeexecutedpursuanthereto,andtheperformance ofanycovenants tobeperformed bysuchPartyandsatisfaction ofanyconditions tobesatisfied bysuchPartywhicharecontained hereinortherein.Notwithstanding theforegoing, (i)pursuanttoanagreement datedJanuary31,1997(the"IPPs'pecial CounselFeeLetter"),theCompanyshallpaycertainfeesandexpensesoftheIPPs'pecial Counsel,(ii)pursuanttoanagreement datedJune30,1997(the"IPPs'ocal Regulatory CounselFeeLetter"),theCompanyshallpaycertainfeesandexpensesoftheIPPs'ocal Regulatory Counseland(iii)theCompanyshallpayallfeesandexpensesoftheDepositary withrespecttothetransactions contemplated bythisAgreement.

Theprovisions ofthisSection14.9shallsurvivetheConsuinmation Dateandanytermination ofthisAgreement (eitherinitsentiretyorwithrespecttolessthanalloftheIPPs).I4.LO.*'I.Fyiyi~*d'nterpret thetermsofthisAgreement oranyotheragreement ordocumenttobeexecutedordelivered pursuanthereto,theprevailing Partyshallbeentitledtoreasonable attorneys'ees, costsanddisbursements inadditiontoanyotherrelieftowhichsuchPartymay'beentitled.

14.11.Remedies.

Incaseanyoneormoreofthecovenants and/oragreements setforthinthisAgreement shallhavebeenbreachedbyanyPartyhereto,thePartyorPartiesentitledtothebenefitofsuchcovenants oragreements may,exceptasmayotherwise beexpressly providedinthisAgreement, proceedtoprotectandenforcetheirrightseitherbysuitinequityand/orbyactionatlaw,including, butnotlimitedto,anactionfordamagesasaresultofanysuchbreachand/oranactionforspecificperformance ofanysuchcovenant.

oragreement contained inthisAgreement.

Exceptasotherwise providedherein,therights,powersandremediesofthePartiesunderthisAgreement arecumulative andnotexclusive ofanyotherright,powerorremedywhichsuchPartiesmay.haveunderanyotheragreement orlaw.Nosingleorpartialassertion orexerciseofanyright,powerorremedyofaPartyhereunder shallprecludeanyotherorfurtherassertion orexercisethereof.14.12.Survival.

Exceptassetforthintherepresentation letterstobedelivered bythePartiespursuanttoSections8.3(a)and9.3(a},andexceptasmaybesetforthinanyoftheContracts, therepresentations andwarranties oftheCompanycontained inSection4,andtherepresentations andwarranties ofeachIPPcontained inSection5,shallnot62 survivetheConsummation Date,providedthatanyrights,obligations orhabilities existingpursuanttolaw(including, withoutlimitation, pursuanttotheSecurities Act)shallsurviveuntiltheexpiration ofanyapplicable statuteoflimitations.

%ithoutlimitingthesurvivalofanyotherprovision ofthisAgreement whichmayexpressly orbyitstermssurvivetheConsummation Date,theprovisions ofSections3.8,6.4,6.7(c),8.8,9.8,11and14ofthisAgreement shallsurvivetheConsummation Dateuntilfullyperformed.

14.13.SeveralObliations.Theobligations oftheIPPscontained inthisAgreement areseveralandnotjoint.NoIPPshallberesponsible fortheperformance orfailureonthepartofanyotherIPPtoperformitsobligations contained inthisAgreement.

14,14.C~ad(a)EachPartyagreesthatitwillnot,atanytimebeforeoraftertheConsummation Date,divulge,disclose, use,publishorinanyothermannerreveal,directlyorindirectly, byanymeanswhatsoever, toanyperson,firmorcorpomtion (i)anyconfidential orproprietary information ofanyotherPartyobtainedbysuchParty&omtheotherParty,whetherorallyorinwriting,atanytime,including priortothedateofthisAgreement, duringthecourseoforasaresultofthenegotiation, execution orperformance ofthisAgreement, anyotheragreement, documentorinstrument relating'eretooranyofthetransactions contemplated herebyortherebyandknownbysuchPartytobeconfidential orproprietary information or(ii)anyofthetermsorconditions ofthisAgreement, anyotheragreement, documentorinstrument.

relatingheretooranyofthetransactions contemplated herebyorthereby,ortheprogress, statusorscheduleofanydiscussions ornegotiations relatingheretoorthereto.IntheeventthatanyPartyisrequested orbecomeslegallycompelled (byoralquestions, interrogatories, requestforinformation ordocuments,

subpoena, criniinal orcivilinvestigative demandorsimilarprocess)todiscloseanysuchconfidential orproprietary information, suchPartywillprovidetheotherPartywithpromptwrittennoticesothattheotherPartymayseekaprotective orderorotherappropriate remedyand/orwaivecompliance withtheprovisions ofthisSection,andsuchPartywillcooperate withtheotherPartyinanyefforttheotherPartyundertakes toobtainaprotective orderorotherremedy.Intheeventthatsuchprotective orderorotherremedyisnotobtained, orthattheotherPartywaivescompliance withtheprovisions ofthisSection,suchPartywillfurnishonlythatportionoftheinformation whichislegallyrequiredandwilluseReasonable BestEffortstoobtainreliableassurance thatconfidential treatment willbeaccordedtheinformation,

provided, however,ifsucheffortsinvolveanyexpensetheotherParty,ifithasreceivedpriornoticethereof,willreimburse suchPartyforsame.Theprovisions ofthisSectionshallnotprecludeanyPartyfrommakingadisclosure ofanyinformation ifintheopinionofsuchParty'scounselsuchdisclosure isrequiredbythesecurities lawsoftheUnitedStatesortherulesoftheNYSEoranyothersecurities exchangeormarketonwhichthesecurities ofsuchParty(oritsAffiliates) arequotedortraded,providedthatsuchParty63 shalldiscloseonlythatportionoftheinformation whichisrequiredtobedisclosed and,totheextentpracticable, thedisclosing PartyshallconsultwiththePartywhichprovidedsuchinformation inadvanceofmakinganysuchdisclosure.

(b)Notwithstanding theprovisions ofSection14.14(a),

noPartyheretoorrepresentative thereofshallbeprecluded

&om,andeachPartyagreesthatitshallnotassertanybreachorviolation ofthisAgreement withrespecttoorasaresultof,thefurnishing ofanyconfidential orproprietary information to(i)anyconsultant, advisororotherthirdpartyretainedbyanyPartytopreparereports,studies,analysesormemoranda or(ii)anyfuelsupplier, transporter, lender,steamhostorotherthirdparty,ineachcaseinconnection withsuchParty'seffortstoobtainanyIPPfIMrdPartyConsent,NMPC/fhird PartyConsentorNMPClMrdPartyRelease.EachPartyshall,priortothedisclosure ofanyinformation toanypersonpursuanttothisSection14.14(b),

executeandcausesuchpersontoexecuteaThirdPartyNon-Disclosure Agreement substantially intheformannexedheretoasExhibit14.14.(c)Withoutlimitinginanymannertheforegoing provisions ofthisSection14.14,eachIPPagreeswitheachotherIPPthatsuchIPPwillonlydivulge,disclose, useorinanyothermannerrevealanyconfidential orproprietary information ofanyotherIPPor.Affiliate ofanyotherIPPregarding thisAgreement, anyotheragreement, documentorinstrument relatinghereto,orthetransactions contemplated herebyorthereby,whichwasorisobtainedatanytime,including priortothedateofthisAgreement, duringthecourseoforasaresultof.thenegotiation, execution orperformance ofthisAgreement, anyotheragreement, documentorinstrument relatinghereto,oranyofthetransactions contemplated herebyorthereby(collectively, "Confidential 1PPInformation"

),toitsAffiliates andtothoseofitsanditsAffiliates'espective directors,

officers, shareholders andpartners(atanytier),andtheirrespective employees, financial

advisors, attorneys, accountants andconsultants

("IPPParticipants"

),whoneedtoknowtheConfidential IPPInformation forpurposesofparticipating inthetransactions contemplated bythisAgreement oranyotheragreement, documentorinstniment relatinghereto,andwhoareinformedbysuchIPPoftheconfidential natureoftheConfidential IPPInformation andwhoshallagreetobeboundbyandtoactonlyinaccordance withthetermsandconditions ofthisSection14.14(c).

Notwithstanding theforegoing, intheeventthatanyIPP'sIPPParticipant isaConflicted Person(ashereinaAer defined),

suchIPPshall(x)notpermitsuchConflicted Personto.participate inthenegotiation orperformance ofanyagreement, documentorinstrument relatingheretooranyofthetransactions contemplated herebyorthereby,(y)segregate allfiles,workpapers,reports,analyses, dataorotherdocuments based,inwholeorinpart,onanyConfidential IPPInformation andshallnotallowanyConflicted Persontohaveaccessthereto,and(z)notcommunicate orexchangeanyConfidential IPPInformation toorwithanysuchConflicted Person,except,withrespecttoeachof(x),(y)and(z)above,totheextentnecessary forsuchlPPtoobtainitsownIPPfIMrdPartyConsentsorIPPApprovals, ifany,fromsuchConflicted Person.A"Conflicted Person"shallmean,64 collectively, anyIPPParticipant thatisafinancial institution, steamhost,fuelsupplierorfueltransporter andwhichisorhasamaterialinterestinaperson(orAffiliate ofsuchperson)RomwhomanyIPPisrequiredtoobtainanIPP/Third PartyConsentorIPPApproval&omsuchIPPParticipant.

EachIPPshallberesponsible foranyfailurebysuchIPP'sIPPParticipant tocomplywiththetermsofthisSection14.l4(c).(d)'Reprovisions ofthisSection14.14shallbeinoperative astoanyinformation which(i)isorbecomesgenerally available tothepublicotherthanasaresultofanybreachofthisSectionbyanypersonsubjectheretooritsrepresentatives, (ii)becomesavailable toapersonsubjectheretoonanonconfidential basis&omasource(otherthananyotherpersonsubjectheretooritsrepresentatives) whichhasrepresented tosuchpersonsubjectheretothatsuchsourceisentitledtodiscloseitor(iii)wasknowntosuchpersonsubjectheretoonanonconfidential basispriortoitsdisclosure tosuchpersonsubjectheretobyanyotherpersonsubjectheretooritsrepresentatives.

(e)EachPartyacknowledges thatunauthorized disclosure ofinformation mayresultinliability forjudicialjudgments including, butnotlimitedto,monetarydamages,andthatanyPartyharmedbysuchdisclosure isentitledtopursueanylegalandequitable remediesintheeventofanunauthorized disclosure.

EachPartyherebywaivesanyobjections totheimmediate issuancebyacourtofcompetent jurisdiction ofinjunctive orotherequitable reliefbarringthefurtherdisclosure oruseofanyinformation intheeventofanunauthorized disclosure.

(f}Theprovisions ofthisSection.14.14shallsurvivetheConsummation Dateandanytermination ofthisAgreement (eitherinitsentiretyorwithrespecttolessthanalloftheIPPs):l4.15.NP*'h.Th*P8*U'*U'g***hb*d'nthecontextoflitigation settlement negotiations.

Allevidentiary rules,whetherfederalorstate,applicable totherightsandclaimsoftheParties,including butnotlimitedtoRule408oftheFederalRulesofEvidence, shallbeapplicable.

ThePartiesagreeandstipulate thatthisAgreement andanywrittenororalstatement madeinconnection withthisAgreement byaPartyoritsrepresentatives weremadeincompromise negotiations, andifassertedtobeevidenceof(i)furnishing orofferingorpromising tofurnishor(ii)accepting oroFeringorpromising toaccept,avaluableconsideration incompromising orattempting tocompromise aclaimwhichwasdisputedastoeithervalidityoramount,arenotadmissible toproveliability fororinvalidity ofsuchclaimsortheiramounts.fSIGNATURES APPEARONFOLLOWING SIGNATURE PAGESl65

MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESINWITNESSWHEREOF,thepartiesheretohaveenteredintothisMasterRestructuring Agreement asofthedatefirstabovewritten.NiagaraMohawkPowerCorporation By:Name:w1Title:ChairmanoftheBoardandChiefExecutive OfficerAmericanRef-FuelCompanyofNiagara,L.P.By:Name:RichardOliverTitle:VicePresident

-Development OnondagaCogeneration LimitedPartnership By:GeddesCogeneration Corporation, ItsGeneralPartnerBy:Name:DavidC.BrauerTitle:VicePresident MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESINWITNESSWHEREOF,thepartiesheretohaveenteredintothisMasterRestructuring Agreement asofthedatefirstabovewritten.NiagaraMohawkPowerCorporation By:Name:Title:AmericanRef-FuelCompanyofNiagara,L.P.By:Name:RichardOliverTitle:VicePresident

-Development OnondagaCogeneration LimitedPartnership By:GeddesCogeneration Corporation, ItsGeneralPartnerBy:Name:DavidC.BrauerTitle:VicePresident MASTERRESTRUCTURING AGREEMENT SICNATURE PAGESINWITNESSWHEREOF,thepartiesheretohaveenteredintothisMasterRestructuring Agreement asofthedatefirstabovewritten.NiagaraMohawkPowerCorporation By:Name:Title:AmericanRef-FuelCompanyofNiagara,L.P.By:Name:RichardOliverTitle:VicePresident

-Development OnondagaCogeneration LimitedPartnership By:GeddesCogeneration Corporation, ItsGeneralPartnerBy:Name:DavidC.BrauerTitle:VicePresident MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESProjectOrangeAssociates, L.P.By:NCPSyracuse, Inc.,ItsGeneralPartnerBy:NCPEnergy,Inc.,ItsAttorney-in-Fact Name:DavidC.BrauerTitle:VicePresident FultonCogeneration Associates, aNewYorklimitedpartnership By:ANRVentureFultonCompany,ItsManagingGeneralPartnerBy:Name:MarkP.BarryTitle:VicePresident CogenEnergy.Technology L.P,By:CogenEnergyTechnology, Inc.,ItsGeneralPartnerBy:Name:JohnE.GuinnessTitle:President MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESProjectOrangeAssociates, L.P.By:NCPSyracuse, Inc.,ItsGeneralPartnerBy:NCPEnergy,Inc.,ItsAttorney-in-Fact By:Name:DavidC.BrauerTitle:VicePresident FultonCogeneration Associates, aNewYorklimitedpartnership By:ANRVentureFultonCompany,ItsManagingGeneralPartnerName:MarkP.BarryTitle:VicePresident (ORE~a~a~~CogenEnergyTechnology L.P.By:CogenEnergyTechnology, Inc.,ItsGeneralPartnerBy:Name:JohnE.GuinnessTitle:President bZASTERRESTRUCYUggqo AGREEMEgy SIGNAYURZ PAGESProjectOrangeAssociates, L.P.By:NCPSyracuse, Inc.,ItsGeneralPartnerBy:NCPEnergy,Inc.,ItsAttorney-in-Fact By:Name:DavidC.BrauerTitle:VicePresident FultonCogeneration Associates, aNewYorklimitedpartnership By:ANRVentureFultonCompany,ItsManagingGeneralPartnerBy:Name:MarkP.BarryTitle:VicePresident CogenEnergyTechnology L.P.By:CogenEnergyTechnology, inc.,ItsGeneralPartnerzA6BF'ame:

JohnE.GumnessTitle:President MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESLyonsdale EnergyLimitedPartnership, aDelawareLimitedPartnership By:MooseRiverEnergy,Inc.,ItsManagingGeneralPartnerName:Mr.YojiroOkazakiTitle:President EncogenFourPartners, L.P.By:EDCFourInc.,ItsGeneralPartnerBy:Name:MelvinE.WentzTitle:President NorConPowerPartners, L.P.By:NorthernConsolidated Power,IncItsGeneralPartnerBy:Name:J.DouglasDivineTitle:VicePresident

-Strategic Planning MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESLyonsdale EnergyLimitedPartnership, aDelawareLimitedPartnership By:MooseRiverEnergy,Inc.,ItsManagingGeneralPartnerBy:Name:Mr.YojiroOkazakiTitle:President EncogenFourPartners, L.P.By:EDCFourInc.,ItsGeneralPartner~Z.WName:MelvinE.%entzTitle:President NorConPowerPartners, L.P.By:NorthernConsolidated Power,Inc.,ItsGeneralPartnerBy:Name:J.DouglasDivineTitle:UicePresident

-Strategic Planning MASTERRESTRVCTVRING AGREEMENT SIGNATURE PAGESLyonsdale EnergyLimitedPartnership, aDelawareLimitedPartnership By:MooseRiverEnergy,Inc.,ItsManagingGeneralPartnerBy:Name:Mr.YojiroOkazakiTitle:President EncogenFourPartners, L.P.By:EDCFourInc.,ItsGeneralPartnerBy:Name:MelvinE.WentzTitle:President NorConPowerPartners, L.P.By:NorthernConsolidated Power,Inc.,ItsGeneralPartnerBy:Name:.DouasDivineTitle:VicePresident

-Strategic Planning MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESIndeck-Ilion LimitedPartnership By:IndeckEnergyServicesofIlion,Inc.,ItsGeneralPartnerBy:Name:ThomasM.CamponeTitle:President Indeck-Yerkes LimitedPartnership By:IndeckEnergyServicesofYerkes,Inc.,ItsGeneralPartnerBy:Name:ThomasM.CamponeTitle:President Indeck-Olean LimitedPartnership By:IndeckEnergyServicesofOleon,Inc.,ItsGeneralPartnerBy:Name:ThomasM.CamponeTitle:President MASTERRESTRUCTUMNG AGREEMENT SIGNATURE PAGESIndeck-Oswego LimitedPartnership By:lndeckEnergyServicesofOswego,IncItsGeneralPartnerBy:Name:ThomasM.CamponeTitle:President BlackRiverLimitedPartnership By:JonesBlackRiverServices, Inc.,ItsManagingGeneralPartnerBy:Name:WilliamA.GarnettTitle:President LG&EWestmoreland Rensselaer, aCalifornia generalpartnership By:LG&EPowerISIncorporated, AGeneralPartnerBy:Name:Title:

MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESIndeck-Oswego LimitedPartnership By:IndeckEnergyServicesofOswego,Inc.,ItsGeneralPartnerBy:Name:ThomasM.CamponeTitle:President BlackRiverLimitedPartnership By:JonesBlackRiverServices, Inc.,ItsManagingGeneralPartnerBy.Name:WilliamA.GarnettTitle:President LG&EWestmoreland Rensselaer, aCalifornia generalpartnership By:LG&EPower15Incorporated, AGeneralPartnerBy:Name:Title:

MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESIndeck-Oswego LimitedPartnership By:IndeckEnergyServicesofOswego,Inc.,ItsGeneralPartnerBy:Name:ThomasM.CamponeTitle:President BlackRiverLimitedPartnership By:JonesBlackRiverServices, Inc.,ItsManagingGeneralPartner"By:Name:WilliamA.GarnettTitle:President LG&EWestmoreland Rensselaer, aCalifornia generalpartnership By:LG&EPower15Incorporated, AGeneerBy:Name:Title:PxNCHg MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESBy:Westmoreland-Rensselaer, L.P.,AGeneralPartnerBy:WEI-Rensselaer, Inc.AGeneralPartnerBy:Name:Title:OxbowPowerofNorthTonawanda, NewYork,Inc.By:Name:BernardH.CherryTitle:President SaltCityEnergyVenture,L.P.By:SaltCityEnergy,LLC,ItsGeneralPartnerBy:Name:EdwardBarnoTitle:Member MASTERRESTRUCXUIGNG AGRIMMENT SIGNATURE PAGESBy:Westmoreland-Rensselaer, L.P.,AGeneralPartnerBy:WEI-Rensselaer, Inc.AGeneralPannerBy:Name:Title:ItOxbowPowerofNorthTopawanda, NewYork,Inc.iName.BernardH.CherryTitle:President SaltCityEnergyVenture,L;P.By:SaltCityEnergy,LLC,ItsGeneralPartnerBy:Name:EdwardBaxnoTitle:Member MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESBy:Westmoreland-Rensselaer, L.P.,AGeneralPartnerBy:WEI-Rensselaer, Inc.AGeneralPartnerBy:Name:Title:OxbowPowerofNorthTonawanda, NewYork,Inc.By:Name:BernardH.CherryTitle:President SaltCityEnergyVenture,L.P.By:SaltCityEnergy,LLC,ItsGeneralPartners:8Name:EdwardBarnoTitle:Member MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESAG-Energy, L.P.By:AG-Energy, lnc.,ItsGeneralPartnerName:tevenD.BurtonTitle:Secretary>General CounselSenecaPowerPartners, L.P.By:SenecaPowerCorporation, ItsGeneralPartnerByName:StevenD.BurtonTitle:Secretary<General CounselSterlingPowerPartners, L.P.By:SterlingPower,Ltd.,ItsGeneralPartnerBy:Name:StevenD.BurtonTitle:Secretary<General Counsel MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESPowerCityPartners, L.P.By:PowerCityGenerating, Inc.,ItsGeneralPartner8Name:StevenD.BurtonTitle:SecretaryhGeneral CounselPEANPartners, L.P.By:P&NEnergySystems,Inc.,ItsGeneralPartnerB:tevenD.BurtonTitle:SecretaryhGeneral CounselSelkirkCogenPartners, L.P.By:JMCSelkirk,Inc.,ManagingGeneralPartnerBy:Name:GeorgeJ.GrunbeckTitle:VicePresident MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESPowerCityPartners, L.P.By:PowerCityGenerating, Inc.,ItsGeneralPartnerBy:Name:StevenD.BurtonTitle:SecretaryhGeneral CounselP&NPartners, L.P.By:P&NEnergySystems,Inc.,ItsGeneralPartnerBy:Name:StevenD.BurtonTitle:SecretaryhGeneral CounselSelkirkCogenPartners, L.P.By:JMCSelkirk,Inc.,ManagingGeneralPartnerBy:Name:George.GbeckTitle:VicePresident lgASTERRE<STRUCTURING AGREEMENT SIGNATURE PAGESEastSyracuseGenerating Company,L.P.By:Name:GeorgeJ.GnbTitle:VicePresident Kamine/Besicorp CarthageL.P.By:KamineCarthageCogenCo.,Inc.,ItsGeneralPartnerBy:Name:HaroldN.KamineTitle:President By:BetaCarthage, Inc.,ItsGeneralPartnerBy:Name:MichaelJ.DaleyTitle:VicePresidenthSecretaryhTreasurer Kamine/Besicorp SouthGlensFallsL.P.By:KamineSouthGlensFallsCogenCo.,Inc.,ItsGeneralPartnerBy:Name:HaroldN.KamineTitle:President MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESEastSyracuseGenerating Company,L.P.By:Name:GeorgeJ.GrunbeckTitle:VicePresident Kamine/Besicorp CarthageL.P.By:KamineCarthageCogenCo.,Inc.,GeneralPerBy.Name:HaroldN.KamineTitle:President

,By:BetaCarthage, Inc.,ItsGeneralPartnerBy:v',HName:MichaelJ.DalyTitle:VicePresidenthSecretaryhTreasurer Kamine/Besicorp SouthGlensFallsL.P.By:KamineSouthGlensFallsCogenCo.,Inc.,ItsGeneralPartnerBy:Name:HaroldN.KamineTitle:President MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESBy:BetaSouthGlensFalls,Inc.,ItsGeneralPartnerBy:Name:MichaelJ.DaleTitle:VicePresident<SecretaryhTreasurer Kamine/Besicorp NaturalDamL.P.By:KamineNaturalDamCogenCo.,Inc.,ItsGeneralPartnerBy:N.aroldN.KamineTitle:President By:BetaNaturalDam,Inc.,ItsGeneralPartnerBy:Name:MichaelJ.DaleyTitle:VicePresident>Secretary)Treasurer Kamine/Besicorp

Syracuse, L.P.By:KamineSyracuseCogenCo.,Inc.,ItsGeneralPartnerBy:Name:HaroldN.KamineTitle:President MASTERRESTRUCTURING AGREEMENT SIGNATURE PAGESBy:BetaSyracuse, Inc.,ItsGeneralPartnerByiName:MichaelJ.DaleyTitle:VicePresidenthSecretary>Treasurer Kamine/Besicorp BeaverFalls,L.P.By:KamineBeaverFallsCogenCo.,Inc.,ItsralPartnerBy:Name:HaroldN.KamineTitle:President By:BetaBeaverFalls,Inc.,ItsGeneralPartnerBy:UPName:MichaelJ.DaleyTitle:VicePresident)Secretary(Treasurer UnitedDevelopment Group-Niagara,L.P.'By:UnitedDevelopment Group-Niagara,Inc.,ItsGeneralPartnerBy:Name:%.JohnFairTitle:President tMASTERRESTRUCTVRING AGREEMENT SIGNATURE PAGESBy:BetaSyracuse, Inc.,ItsGeneralPartnerBy:Name:MichaelJ.DaleyTitle:VicePresident>Secretary<Treasurer Kamine/Besicorp BeaverFalls,L.P.By:KamineBeaverFallsCogenCo.,Inc.,ItsGeneralPartnerBy:Name:HaroldN.KamineTitle:President By:BetaBeaverFalls,Inc.,ItsGeneralPartnerBy:Name:MichaelJ.DaleyTitle:VicePresident>SecretaryhTreasurer UnitedDevelopment Group-Niagara,L.P,By:UnitedDevelopment Group-Niagara,Inc.,ItsGeneralPartnerBy:Name:W.JohnFairTitle:President SCHEDULEANamesandNoticeAddresses ofIPPsIPPNoticeAddressAmericanRef-FuelCompanyofNiagara,L.P.AirProducts&Chemicals 7201HamiltonBoulevard Allentown, PA18195Facsimile:

610-706-6765 Attn:JimButzAmericanRef-FuelCompany777N.EldridgeHouston,TX77079Facsimile:

713-584-8626 Attn:TylerScofieldOnondagaCogeneration LimitedPartnership ProjectOrangeAssociates, L.P.doGPUInternational, Inc.OneUpperPondRoadParsippany, NJ07054Facsimile:

201-2634977 Attn:WendyGreengrove FultonCogeneration Associates doANRVentureFultonCompanyNineGreenwayPlaza,16FloorHouston,TX77046Facsimile:

713-297-1556 Attn:MarkBarryCogenEnergyTechnology L.P.1902RiverRoadCastleton-on-Hudson, NY12033Facsimile:

518-732-4006 Attn:FrankLymanTowerEast,Suite30320600ChagrinBoulevard ShakerHeights,OH44122Facsimile:

216-921-2558 Attn:JohnGuinness fPPNoticeAddressLyonsdale EnergyLimitedPartnership c/oDiamondEnergy633West5StreetSuite2800LosAngeles,CA90071Facsimile:

213-892-1332 Attn:BoBuchynsky EncogenFourPartners, L.P.c/oEnserchDevelopment Corporation 1817WoodStreetSuite550WestDallas,TX75201Facsimile:

214670-2974 Attn:TimothyO.CurleyNorConPowerPartners, L.P.c/oCalEnergy Company302S.36StreetOmaha,NE68131Facsimile:

402-231-1668 Attn:DouglasDivineIndeck-Ilion LimitedPartnership indeck-gerkes LimitedPartnership Indeck-Olean LimitedPartnership Indeck-Oswego LimitedPartnership IndeckEnergyServices, Inc.1130LakeCookRoadFacsimile:

847-520-9883 BuffaloGrove,IL60089Attn:StevenDowdyBlackRiverLimitedPartnership c/oJonesCapitalCorporation J.A.JonesDriveCharlotte, NC28287Facsimile:

704-553-3037 Attn:JohnWoodcockLG&EWestmoreland Rensselaer c/oLG&EPower,Inc.12500FairLakeCircle,N350Fairfax,VA22033-3804 Facsimile:

703-968-5458 Attn:AnneGleason-Roche NI7ll3 IPPNoticeAddressOxbowPowerofNorthTonawanda, NewYork,Inc.1601ForumPlaceWestPalmBeach,FL33401Facsimile:

561-640-8847 Attn:BernardH.CherrySaltCityEnergyVenture,L.P.56Industrial DriveSyracuse, NY13204Facsimile:

315487M77 Attn:EdwardBarnoAG-Energy, L.P.SenecaPowerPartners, LP.SterlingPowerPartners, L.P.PowerCityPartners, LJ.P&NPartners, L.P.c/oSitheEnergies, Inc.450Lexington Avenue37FloorNewYork,NY10017Facsimile:

212450-9025 Attn:StevenBurtonSelkirkCogenPartners, L.P.EastSyracuseGenerating Company,L.P.c/oUSGenerating Co.7500OldGeorgetown RoadBethesda, MD2081M161Facsimile:

301-7184906 Attn:JeFMcParland SteveHermanc/oUSGenerating Co.OneBowdoinSquareBoston,MA02114-2910 Attn:GeorgeGrunbeckPeterMeier~Kamine/Besicorp CarthageL.P.Kamine/Besicorp SouthGlensFallsL.P.Kamine/Besicorp NaturalDamL.P.Kanune/Besicorp SyracuseL.P.Katnine/Besicorp BeaverFallsL.P.c/oK:unineDevelopment Corp.1545Rt.206Suite300Bedminster, NJ07921-2567 Facsimile:

908-719-8774 Attn:MarkSlifkinNI7Il3 IPPNoticeAddressdoBesicorpGroup,Inc.1151FlatbushRoadKingston, NY12401Facsimile:

914-336-7172 Attn:MichaelJ.DaleyUnitedDevelopment Group-Niagara,L.P.1401MainStreetSuite1115Columbia, SC29211Facsimile:

803-799-8039 Attn:W.JohnFairNl7ll3 SCHEDULE2.1ExistingPPAstobeTerminated pursuanttoSection2.lCONFIOENTlhL

SCHEDULE2.2ExistingPPAtobeAmendedpursuanttoSection2.2CONFlOENTNL

SCHEDULE2.3ExistingPPAstobeAmendedand/orRestatedpursuanttoSection2.3CONFIOENTIAL

SCHEDULE3.5CertainExclusions fromAnti-Dilution Provisions CommonStockmaybeissuedpursuantto:theCompany's DividendReinvestment andStockPurchasePlantheAmendedandRestatedMergerAgreement betweenSyracuseSuburbanGasCompany,Inc.andtheCompanydatedMarch13,1992theEmployeeSavingsFundPlanforRepresented Employees ofNiagaraMohawkPowerCotporation theEmployeeSavingsFundPlanforNon-Represented Employees ofNiagaraMohawkPowerCorporation theCompany's 1992StockOptionPlanN20073

SCHEDULE3.7IPPSponsorEntitiestoEnterIntoShareholder's Agreement IPPIndeck-Ilion LimitedPartnership Indeck-YerkesLimitedPartnership Indeck-Olean LimitedPartnership Indeck-Oswego LimitedPartnership

~~SE~IndeckEnergyServices, Inc.AG-Energy, L.P.SenecaPowerPartners, L.P.SterlingPowerPartners, L,P.PowerCityPartners, L.P.P&NPartners, L.P.-SitheEnergies, Inc,EastSyracuseGenerating Company,I..P.U.S.Generating Co.Kamine/Besicorp CarthageL.P..Kamine/Besicorp SouthGlensFallsL,P.Kamine/Besicorp NaturalDamL.P.Kamine/Besicorp SyracuseL.P.Kamine/Besicorp BeaverFallsL.P.KamineDevelopment Corp.andBesicorpGroup,Inc.¹12704

Schedule4.5NiagaraMohawkPowerCorporation Capitalization 4Sg)Authorized capital:CommonStock,Slparvalue,Cumulative Preferred Stock,S1'00parvalueCumulative Preferred Stock,$25parvalueCurnulativc Prefcrcncc Stock,$25parvalue185,000,000 shares3,400,000 shares19,600,000 shares8,000,000 shares4$(ti)CommonStockIssuedandOutstanding:

AsofSeptember 30,1996AsofJune27,1997144/65+14 shares144/90,619 shares4Egii)CommonStockIssuable:

Issuablcinconnection withtheacquisition ofSyracuseSuburbanGasCorporation-AsofSeptember 30,1996AsofJune27,199754,137shares28,732sharesIssuableunderthe1992StockOptionPlan-AsofSeptember 30,1996AsofJune27,1997322,875shares322,875shares

SCHEDULE4.8CERTAINCHANGESOREVENTS(d)TheCompanyhas:authorized thefundingofarabbitrustintheeventofprospecfive changesofcontrolchangedperiodforvestingoflifetimemedicalbenefitfromtenyearstoeightyearsforseniorofficersprovidedcertainseniorofficerswithlifeinsurance providing deathbeneflttwoandone-halftimesannualsalaryagreedtopurchaseoneseniorofficer's houseatappraised value(h)CommonStockhasbeenissuedpursuantto:theCompany's DividendReinvestment andStockPurchasePlantheAmendedandRestatedMergerAgreement BetweenSyracuseSuburbanGasCompany,Inc.andtheCompanydatedMarch13,1992theEmployeeSavingsFundPlanforRepresented Employees ofNiagaraMohawkPowerCorporation theEmployeeSavingsFundPlanforNon-Represented Employees ofNiagaraMohawkPowerCorporation (i)CommonStockhasbeenpurchased bytheCompanypursuantto:theAmendedandRestatedMergerAgreement BetweenSyracuseSuburbanGasCompany,Inc.andtheCompanydatedMarch13,1992theEmployeeSavingsFundPlanforRepresented Employees ofNiagaraMohawkPowerCorporation theEmployeeSavingsFundPlanforNon-Represented Employees ofNiagaraMohawkPowerCorporation

SCHEDULE5.4CertainDisclosed Litigation Westmoreland CoalCompanyandWestmoreland Energy,Inc.,Affiliates ofWestmoreland Rensselaer L.P.,ageneralpartnerofLG&EWestmoreland Rensselaer, aCalifornia generalpartnership andoneoftheIPPshereunder, aredebtorsinpossession inaproceeding underChapter11oftheBankruptcy Code(JointCaseNo.96-26092MSK,etal.)intheUnitedStatesBankruptcy CourtfortheDistrictofColorado, andassuchtheapprovaloftheBankruptcy CourtmayberequiredforofLG&EWestmor'eland Rensselaer toconsummate thetransactions contemplated bythisAgreement, N20415

SCHEDULEggCMatterstobeIncludedinPSCApprovalThePSCApprovalshall:(i)findtheRestructuring andtheAgreement andtheobligations incurredbyNMPCthereunder tobeprudent;(ii)authorize theissuanceofsharesofstock,bonds,andanyothersecurities requiredtobeissuedpUrsuanttotheAgreement; (iii)approveNMPC'sfullrecoveryinratesofallcoststhatNMPCwillincurinconnection withtheRestructuring andasaresultofperformance ofitsobligations undertheAgreement, including adetermination thatsuchcostswereprudently incuned;(iv)authorize NMPCtoestablish aregulatory assetforthefullamountoftheunamortized costsassociated withimplementation oftheAgreement; (v)authorize NMPCtoestablish anon-bypassable Competitive Transition Charge,which,togetherwithcostsrecovered inbaserates,willprovideforthefullrecoveryofallcosts,including strandable costs,thatareincurredoverthetermofthedebtanticipated tobeincurredinconnection withthisAgreement; and(vi)authorize NMPCtoperformanyotheractrequiredto'beperformed pursuanttotheAgreement forwhichPSCapprovalisrequiredorauthorize anyotheractastowhichPSCapprovalisrequired.

Ol2704

SCHEDULE610ALitigation andRegulatory proceedings tobeStayedbythePartiesFederalCourtCases1.EncogenFourPartnersL.P.v.NiagaraMohawkPowerCorp.,DocketNo.96-9642(2dCir.)2.Indeck-lllion LP.&PowerCityPartnersv.AVPSC&NiagaraMohawkPowerCorp.,No.95-CV-0143 (N.D.N.Y.)

3.NiagaraMohawkPowerCorp.v.UnitedStatesDep'tofEnergy,CaseNo.95-CV-952 (D.D.C.;motionforsummaryjudgmentgrantedFeb.23,1996),appealdocketed, No.96-5246(D.C.Cir.Aug.6,1996)4.¹iagaraMohawkPowerCorp.v.UnitedStatesDep'tofEnergyv.SterlingPowerPartners, etal.,CaseNo.96-5082(D.C.Cir.)-consolidated withcaseNo.96-5246(caseP1above)intheD.C.Circuit5.NorConPowerPartners, LP.v.NiagaraMohawkPowerCorp.,CaseNo.96Civ.2947(S.D.N.Y.)

6.NorConPo~erPartners, LP.v.NiagaraMohawkPowerCorp.,DocketNo,96-7283(2dCir.)NewYorkStateCourtCases7.NiagaraMohawkPowerCorp.v.SterlingPower,Ltd.,IndexNo.95-29818.Ag-Energy, LP.,PowerCityPartners, L.P.,SenecaPowerPartners, LP.&SterlingPowerPartners, LP.v.¹ragaraMohawkPowerCorp.,IndexNo.111207/95"

'.BlackRiverLP.v.¹iagaraMohawkPowerCorp.,DocketNos.CA97-0036&CA97-0087(4thDep't)10.SterlingPowerPartners, LP.v.NiagaraMohawkPowerCorp.,IndexNo.94-110354"

'hisproceeding waswithdrawn onApril14,1997,butissubjecttoreinstatement aAeradecisioninthcNorConproceeding (case¹3above).ThepartiesagrccthattheEncogencasecanbcreinstated byNMPCsolelyastoEncogeninthccvcntthatEncogenisnotaPartytotheAgreement ontheConsummation Date."Astothiscase,thcpartiestheretoagreetousctheirReasonable BestEffortstoamveataconsented settlement bcforctheConsummation Date.Inthceventasettlement isnotreached,thcpartiestheretoagreethatthestayistobeliftedasoftheConsummation Dateandthecasewillresume.Intheeventasettlement isreached,thepartiestheretoshalldismissandwithdrawthiscaseasoftheConsummation Date."'stothiscase,thepartiesthereto.agrcetousctheirReasonable BestEffortstoanivcataconsented settlement beforethcConsummation Date.Intheeventasettlement isnotreached,thcpartiestheretoagreethatthestayisto¹l2704

11.SterlingPowerPartners, LP.,SenecaPowerPartners, L.p.,powerCityPartners, L.P.CkAg-Energy, L.P.v.NiagaraMohawkPowerCorp.,IndexNo.106895/94 (1stDep't)NYPSCProceedings 12.NiagaraMohawkPowerCorp.-PetitionforApprovalofCurtailment Procedures, NYPSCCaseNo.92-E-0814 (combined withProceeding onMotionoftheCommission toEstablish Conditions Governing Curtailment ClausesinContracts forOn-SiteGeneration, NYPSCCaseNo.88-E481)13.NiagaraMohawkPowerCorp.-PetitionforClarification ofCertainAspectsoftheMonitoring andCompliance Requirements oftheCommission

's80M8'Output Limitation, NYPSCCaseNo.96-E-1020 14.¹iagaraMohawkPowerCorp.-PetitionforanOrderRequiring FirmSecurityforCertainPowerSupplyContracts, or,Alternatively, Canceling SuchContracts, NYPSCCaseNo.95-E-116215.NiagaraMohawkPowerCorp.-PetitionforClarification oftheConditions SetForthintheCommission's OrderdatedDecember9,1987Approving ContractNo.514withLyonsdale PowerLimitedPartnership (20MWDocket),NYPSCCaseNo.95-E-1177 beIIRedasoftheConsummation Dateandthccasewillresume.lnthceventasettlement isreached,thcpartiestheretoshalldismissandwithdrawthiscaseasoftheConsummation Date.tel2104

SCHEDULE6.lOBCertainLitigation andRegulatory Proceedings (Involving 6wentIssues)FederalCourtCases1.NiagaraMohawkPowerCorp.v.FERC,CaseNos.95-1222,etal.(D.C.Cir.)2.NiagaraMohawkPowerCorp.v.FERC,CivilActionNo.95-CV-634 (N.D.N.Y.)

012704

SCHEDULE6.11CERTAINPERMITTED CONDUCITheCompanymaymergeorconsolidate withanyofitsaffiliates oranyotherentity.TheCompanymayamenditsCertificate ofIncorporation toauthorize additional commonstockandmakeanyamendments necessary torestructure oramendthetermsoftheCompany's preferred stockTheCompanymayissue,sellorotherwise distribute itscapitalstockpursuantto:theCompany's DividendReinvestment andStockPurchasePlan;theAmendedandRestatedMergerAgreement BetweenSyracuseSuburbanGasCompany,Inc.andtheCompanydatedMarch13,1992;theEmployeeSavingsFundPlanforRepresented Employees ofNiagaraMohawkPowerCorporation; theEmployeeSavingsFundPlanforNon-Represented Employees ofNiagaraMohawkPowerCorporation; theCompany's 1992StockOptionPlan;anytransactions undertaken aspartofaplantorestructure, oramendthetermsof,theCompany's preferred stock;andtheCompanyshallbepermitted toissueuptoafurther1,000,000 sharesofCommonStockintheordinarycourseofbusiness.

TheCompanymaydeclare,setaside,payormakeanyotherdistribution incashorpropertyinrespectofanyoftheCompany's capitalstock,oranydirectorindirectredemption,

purchase, orotheracquisition ofanyofsuchstockpursuantto:theCompany's DividendReinvestment andStockPurchasePlan;theAmendedandRestatedMergerAgreement BetweenSyracuseSuburbanGasCompany,Inc.andtheCompanydatedMarch13,1992;theEmployeeSavingsFundPlanforRepresented Employees ofNiagaraMohawkPowerCorporation; theEmployeeSavingsFundPlanforNon-Represented Employees ofNiagaraMohawkPowerCorporation; theCompany's 1992StockOptionPlan;

thetermsoftheCompany's Preferred Stock;andanytransactions undertaken aspartofap1antorestructure, oramendthetermsof,theCompany's preferred stock.

SCHEDULE8.8Litigation andProceedings tobeWithdrawn bythePartiesFederalCourtCasesl.EncogenFourPartnersLP.v.NiagaraMohawkPowerCorp.(Encogen),

DocketNo.96-9642(2dCir.)'.Indeck-Illion LP,&PowerCityPartnersv.NYPSC&NiagaraMohawkPowerCorp.,No.95-CV4143 (N.D.N.Y.)

3.NiagaraMohawkPowerCorp.v.UnitedStatesDep'tofEnergy,CaseNo.95-CV-952 (D.D.C.;motionforsummaryjudgmentgrantedFeb.23,1996),appealdocketed, No.96-5246(D.C.Cir.Aug.6,1996)4.NiagaraMohawkPowerCorp.v.UnitedStatesDep'tofEnergyv.SterlingPowerPartners, etal.,CaseNo.96-5082(D.C.Cir.)-consolidated withcaseNo.96-5246(caseQlabove)intheD.C.Circuit.5.NorConPowerPartners, LP.v.NiagaraMohawkPowerCorp.,CaseNo.96Civ.2947(S.D.N.Y.)

6.NorConPowerPartners, LP.v.¹iagaraMohawkPowerCorp.,DocketNo.96-7283(2dCir.)NewYorkStateCourtCases7.NiagaraMohawkPowerCorp.v.SterlingPower,Ltd.,IndexNo.95-29818.Ag-Energy, LP.,PowerCityPartners, L.P.,SenecaPowerPartners, LP.&SterlingPowerPartners, L.P.v.NiagaraMohawkPowerCorp.,IndexNo.111207/95" 9.BlackRiverL.P.v.NiagaraMohawkPowerCorp.,DocketNos.CA97-0036&CA97-0087(4thDep't)10.SterlingPowerPartners, LP.v.NiagaraMohawkPowerCorp.,IndexNo.94-110354 Thisproceeding waswithdrawn onApril14,1997,butissubjecttoreinstatement afteradecisionintheNorConproceeding (caseQ3above).Thepartiestheretoagreethatthe&cogencasecanbereinstated byNMPCsolelyastoEncogenintheeventthatEncogenisnotaPartytotheAgreement ontheConsummation Date.Astothiscase,thepartiestheretoagreetousetheirReasonable BestEffortstoamveataconsented settlement beforetheConsummation Date.Inthceventasettlement isnotreached,thepartiestheretoagreethatthcstayistobeliRedasoftheConsummation Dateandthecasewillresume.Intheeventasettlement isreached,thepartiestheretoshalldismissandwithdrawthiscaseasoftheConsummation Date.AstothLscase,thepartiestheretoagreetousetheirReasonable BestEffortstoarriveataconsented settlement beforethcConsummation Date.Inthceventasettlement isnotreached,thepartiestheretoagreethatthestayistoN12704

11.SterlingPowerPartners, L.P.,SenecaPowerPartners, L.p.,powerCityPartners, L.P.dcAg-Energy, L.P.v.NiagaraMohawkPowerCorp.,[ndexNo.10689SI94 (1stDep't)FERCProceedings 12.¹ragaraMohawkPowerCorp.,FERCDocketNos.EL95-45-0000, QF90-154-005 NYPSCProceedings 13.NiagaraMohawkPowerCorp.-PetitionforApprovalofCurtailment Procedures, NYPSCCaseNo.92-E-0814 (combined withProceeding onMotionoftheCommission toEstablish Conditions Governing Curtailment ClausesinContracts forOnCiteGeneration, NYPSCCaseNo.88-E-081) 14.NiagaraMohawkPowerCorp.-PetitionforClarification ofCertainAspectsoftheMonitoring andCompliance Requirements oftheCommission

's80M8'Output Limitation, NYPSCCaseNo.96-E-1020 15.NiagaraMohawkPowerCorp.-PetitionforanOrderRequiring FirmSecurityforCertainPowerSupplyContracts, or,Alternatively, Canceling SuchContracts, NYPSCCaseNo.95-E-116216.NiagaraMohawkPowerCorp.-PetitionforClarification oftheConditions SetForthintheCommission's OrderdatedDecember9,1987Approving ContractNo.514withLyonsdale PowerLimitedPartnership (20MWDocket),NYPSCCaseNo.95-E-1177 Pleadings 17.Allpleadings filedbyNMPCinIndeck-Olean LP.-OleanCogeneration

Facility, FERCDocketNos.EL95-11-0000, QF90-[54-004 beliAedasofthcConsummation Dateandthccasewillresume.lntheeventasettlement isreached,thepartiestheretoshalldismissandwithdrawthiscaseasoftheConsummation Date.012704

SCHEDULE9.10NMPCFINANCING Financing transactions necessary totheCompany's consummation ofthetransactions contemplated intheMasterRestructuring Agreement (the"Company's Consummation"

)mayinclude:obtaining amendments, waiversorconsentswithrespectto,orthereplacement of:the$125,000,000 Revolving CreditAgreement, the$255,000,000 TermLoanAgreement, theAmendedandRestatedLetterofCreditandReimbursement Agreement withMorganGuarantee TrustCompanyofNewYork,theAmendedandRestatedLetterofCreditandReimbursement Agreement withToronto-Dominion Bank,theAmendedandRestatedLetterofCreditandReimbursement Agreement withCanadianImperialBankofCommerce, theMasterCreditorAgreement; andtheFirstMortgageBondIndenture, eachdatedasofMarch20,1996,togetherwithallInterestRate.CapAgreements, LettersofCreditandotheragreements ofevendatetherewith thattogetherconstitute theCompany's seniorbankfinancing.

theCompany's'trade receivables financing facilitywithNMReceivables Corp.,Corporate Receivables Corporation,

Citibank, NA.andCiticorpNorthAmerica,Inc.obtaining financing foralltransaction costspayablebytheCompanyarising&omtheCompany's Consurxunation oranyconditions precedent thereto,including, butnotlimitedto,feesandexpensesarisinginconnection withthePublicOfferingoftheDebtSecurities, theissuanceoftheCommonStock,andtherestructuring oramendment ofthetermsofthepreferred stock.obtaining arestructuring of,oramendment ofthetermsof,theCompany's preferred stock.obtaining allotherfinancing, including bridgefinancing (including butnotlimitedtoborrowing theamountofanytaxrefundsdueasaresultoftheCompany's Consummation),

necessary, intheCompany's reasonable

judgment, toeffecttheCompany's Consummation oranyconditions precedent thereto.

EXHIBITATERMSOFAMENDEDPOWERPURCHASEAGREEMENTS, RESTATEDCONTRACTS ANDFIXEDPRICESWAPCONTRACTS NMPCandtheIPPswhicharepartiestotheExistingPPAslistedonSchedule2,2totheMastering Restructuring Agreement haveagreedtoamendtheirExistingPPAsandNMPCandtheIPPswhicharepartiestotheExistingPPAslistedonSchedule2.3totheMasterRestructuring Agreement haveagreedtoconductgoodfaithnegotiations andusetheirReasonable BestEffortstoenterintoRestatedContracts (assuchtermisdefinedbelow),allinaccordance withthematerialtermsandconditions setforthbelow.NMPChasalsoagreedtoenterintocertainfixedpriceswapcontracts (the"FixedPriceSwapContracts"

),whicharedescribed below.Capitalized termsusedherein,including theAttachments hereto,whicharenototherwise definedhereinshallhavethemeaningsgiventosuchtermsintheMasterRestructuring Agreement.

GeneralThisExhibitAincludesthefollowing Attachments heretowhichsetforthspecificmattersrelatingtothegeneraldescription contained herein:Att'achment A-IAttachment A-2Attachment A-3Attachment A-4Attachment A-5Attachment AWAuachment A-7Attachment A-8Auachment A-9Attachment A-10Attachment A-11Attachment A-12-Pntcntionally Omitted]AmcndcdPPAwiththeSolidFuelIPP(quantities andprices)IndexedSwapContracts withGasIPPs(quantities andprices)Calculation ofPaymentsunderIndexedSwapContracts NnthGasIPPsPricingAssumptions forIndexedSwapContmctswithGasIPPsTermshect forIndexedSwapContracts withGasIPPsPowerPutContracts withGasIPPs(quantities andprices)Termsheet forPowerPutContracts withGasIPPsOptionProvisions forRestatedContracts withGasIPPsFixedPriceSwapContracts (quantities andprices)Termsheet forFixedPriceSwapContracts Additional Terms,Conditions andProvisions forAmendedPPAandRestatedContracts SolidFuelIPPNMPCandtheSolidFuelIPPpartytotheExistingPPAlistedonSchedule2.2totheMasterRestructuring Agreement shall'amendsuchExistingPPAeffective asoftheEffective Timetoreflectthequantityofelectricity ingigawatthours("GWh")whichNMPCshallpurchaseundersuchAmendedPPAandthepricewhichNMPCshallpaythereforindollarspermegawatthour("$/MWh")foreachContractYear(assuchtermisdefinedbelow)oftheAmendedPPAasissetforthinAttachment A-2hereto.The'.~'.",ti'-."

PVA:-hÃ-L:!;"~.i~<<""i>"."i:"'".'.oftheadditional terms',editions andsl90!4 provisions setforthinAttachment A-12hereto,unlesstheSolidFuel[ppandNMpC.otherwise mutuallyagree.ForpurposesofthisExhibitA,"Contract Year"shallmeantheperiodcommencing at11:59:59p.m.ontheConsummation Date(the"Effective Time"),andendingat11:59:59p.m.onthefirstanniversary ofthelastdayofthemonthinwhichtheConsummation Dateoccursandeachsuccessive 12-monthperiodthereafter totheextentapplicable.

GasIPPsNMPCandeachGasIPPwhichisapartytoanExistingPPAlistedonSchedule2.3totheMasterRestructuring Agreement shallconductgoodfaithnegotiations andusetheirReasonable BestEffortstoenterintoaRestatedContract(s) whichamendsand/orrestateseachsuchGasIPP'sExistingPPA.SuchRestatedContracts shallbedatedasofthedateofeachsuchGasIPP'sExistingPPAandthetermsofsuchamendment and/orrestatement shallbeeffective asoftheEffective Timeandshallbeintheformofanindexedswapcontract(the"IndexedSwapContract"

)andapowerputcontract(the"PowerPutContract"

),oracash-settled forwardorswapcontract, anoptioncash-settled forwardorswapcontract, apowersupplyagreement, anenergycontractoratollingcontract, orothercontractoranycombination thereof,whichmaybesimultaneous orsequential andshallcontainsuchtermsandconditions asaremutuallyagreed(collectively, the"Restated Contracts"

).AnysuchRestatedContract(otherthantheIndexedSwapContracts (whichshallbeforatermoftenContractYears)andthePowerPutContracts (whichshallbeforthetermspecified inAttachment A-8))maybeforaternofuptotenContractYears.EachRestatedContract,.regardless oftheformofsuchRestatedContract(otherthantheIndexedSwapContracts orthePowerPutContracts) shallincludealloftheadditional terms,conditions andprovisions setforthinAttachment A-12hereto,unlesstheapplicable GasIPPandNMPCotherwise mutuallyagree.Setforthbelowisageneraldescription ofthetermsandconditions oftheIndexedSwapContractandthePowerPutContract.

Thefollowing Attachments arerelevanttotheseagreements:

Attachment A-3(quantities andpricesforIndexedSwapContracts);

Attachment A-4(formulaforpaymentsunderIndexedSwapContracts);

Attachment A-5(pricingassumptions forIndexedSwapContracts);

Attachment A-6(termsheet forIndexedSwapContracts);

Attachment A-7(quantities andpricesforPowerPutContracts);

Attachment A-8(termsheet forPowerPutContracts);

Attachment A-9(optionprovisions forRestatedContracts);

andAttachment A-12(additional termsforRestatedContracts).

IndexedSwaContract.

ThisformofRestatedContractwillgenerally bebasedonthetermsandconditions setforthinAttachment A-6hereto.EachIndexedSwapContractshallbecomeeffective asoftheEffective Timeandmatureperiodically (each,a"Settlement Date")eachcalendarmonth(each,a"Settlement Period")throughout atermoftenContractYears.TheIndexedSwapContractwillprovideforaseriesofmonthlypayments(i.e.actualphysicalsalesorpurchases ofelectricity shallnotberequired) whichshallbecalculated byreference to(i)aproxymarketprice(the"Proxy-Market Price",assuchtermisdefinedinAttachment A-6,andwhichpriceshallbeidentical forallIndexedSwapContracts andPowerPutContracts) duringtheperiod(the"Proxy-Market PricePeriod",assuchtermisdefinedinAttachment A4)priortotheestablishment ofacompetitive marketpricethroughtheimplementation ofaNewYorkIndependent SystemOperatorandPowerExchange(the"ISO/PE"),

and(ii)amarketprice(the"MarketPrice",assuchtermisdefinedinAttachment Aupontheestablishment oftheISO/PE.Accordingly, oneachSettlement Date(x)ifandtotheextentthecontractpriceexceededtheProxy-Market PriceortheMarketPriceplus,ifapplicable theMarketCapacityPrice(assuchtermisdefinedinAttachment A+,asthecasemaybe,duringanyapplicable timeintervalforwhichtheGasIPPandNMPCwerecontractually committed (an"Interval",

assuchtermisdefinedinAttachment A-6),NMPCshallowetheGasIPPthedifference between(A)thecontractpricemultiplied bythecontractquantityofelectricity inmegawatthours("MWh")foreachIntervaloccurring duringtheSettlement Period,and(B)suchProxy-Market PriceorMarketPrice,.'s thecasemaybe,multiplied bythecontractquantityofelectricity inMWhforeachIntervaloccumngduringtheSettlement Periodpluscommencing upontheestablishment oftheISO/PEandonlyiftherethenexistsaseparatemarketforcapacity, theMarketCapacityPricein$/MWfortheSettlement Periodmultiplied bytheweightaveragedcapacityassociated withthecontractquantityofelectricity foreachIntervaloccumngduringsuchSettlement Peiiod,and(y)ifandtotheextenttheProxy-Market PriceortheMarketPrice,asthecasemaybe,exceededthecontractpriceduringanyapplicable

Interval, theGasIPPshalloweNMPCthedifference between(A)suchProxy-Market PriceorMarketPrice,asthecasemaybe,multiplied bythecontractquantityofelectricity inMWhforeachIntervaloccurring duringtheSettlement Periodpluscommencing upontheestablishment oftheISO/PEandonlyiftherethenexistsaseparatemarketforcapacity, theMarketCapacityPricein$/MWfortheSettlement Periodmultiplied bytheweightaveragedcapacityassociated withthecontractquantityofelectricity foreachIntervaloccumngduringsuchSettlement Period,and(B)thecontractpricemultiplied bythecontractquantityofelectricity inMWhforeachIntervaloccumngduringtheSettlement Period.OneachSettlement Date,thepaymentobligations dueundertheIndexedSwapContractforeachIntervaloccurring duringtheSetter.m~".<

Period.:sha!l.

h.,~en~Wa~~i"it"-

<l90I4 eachother,andthepartyowingthegreateramountshallmakeanetpaymenttotheotherparty.~Theformulaforcalculating theamountofpaymentstobemadeundertheIndexedSwapContractissetforthonAttachment A4hereto.~ThecontractpricesundertheIndexedSmpContracts shallbefixedduringthefirsttwoContractYearsofthetennoftheIndexedSwapContracts.

Thereafter, thecontractpricesshallbe.indexedandcalculated inaccordance withanindexingformulasimilartoeitherofthosesetforthinAppendix6-3toAttachment A-6hereto.Duringthenegotiation ofeachIndexedSwapContract, eachGasIPPshallproposeacontractpriceindexingformula.IftheGasIPPdemonstrates to%P8cCo.andDLJthatsuchpricingformula,whencalculated usingtheassumptions setforthinAttachment A-5hereto,resultsinacontractpriceforeachofthethirdthroughthetenthContractYearswhichisequaltotheannualcontractpricessetforthintheallocation forsuchGasIPPintheContractAllocation, suchpricingformulashallbedeemedacceptable toNMPC.~Subjecttoadjustment inaccordance withSections12.4(b),2.5and2.6,asapplicable, oftheMasterRestructuring Agreement, theaggregate quantityofelectricity.

inGWh,the.aggregate installed capacityinmegawatts

("MW")andtheweightedaveragecontractpricein$/MVhforthefirsttwoContractYearsoftheIndexedSwapContracts aresetforthinAttachment A-3hereto.Subjecttoadjustment inaccordance withSections12.4(b),2.5and2.6,asapplicable, oftheMasterRestructuring Agreement, Attachment A-3alsosetsforththeaggregate quantityofelectricity, theaggregate installed capacityandanexample,basedontheassumptions setforthinAttachment A-5hereto,oftheweightedaverageindexedcontractpricesforContractYearstheethroughtenoftheIndexedSwapContracts.

~ForpurposesoftheIndexedSwapContracts (i)priortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists,thepricefortheapplicable capacityshallequalzero,and(ii)following theProxy-Market PricePeriodandonlyiftherethenexistsaseparatemarketforcapacity, theapplicable capacitywillbeadjustedonabasisconsistent withthestructure ofsuchseparatemarket.Nl90l4 partiestoAgreement wiii'nciud NI90I4PowerPutContract.

ThisformofRestatedContractwillgenerally bebasedonthetermsandconditions setforthinAttachment A-8.EachPowerPutContractshallbecomeeffective asoftheEffective Timeandshallprovideforaseriesofputoptionswhichshallexpireperiodically onamonthlybasis(each,a"Settlement Period")throughout atermequaltotheProxy-Market PricePeriod(assuchtermisdefinedinAttachment A-8).AttheoptionoftheGasIPP,theGasIFPshallhavetherighttoput(i)energytoNMPCuptothecontractquantityofelectricity (including energysubjecttoovergeneration provisions),

and(ii)capacityassociated withthecontractquantityofelectricity, ineachcase,foreachapplicable timeintervalforwhichtheGasIPPandNMPCwerecontractually committed (an"Interval",

assuchtermisdefinedinAttachment A-8)duringtheSettlement Period,andNMPCshallbeobligated totakeandpayforsuchenergyandcapacityfromtheGasIPP,attheProxy-Market Price(assuchtermisdefinedinAttachment A-8,andwhichshallbeidentical forallPowerPutContracts andIndexedSwapContracts) priortotheestablishment oftheISO/PEandattheMarketPriceand,ifapplicable, theMarketCapacityPrice,upontheestablishment oftheISO/PE.IftheGasIPPdetermines nottoexerciseitsrightstoputenergyandcapacitytoNMPC,suchGasIPPmaysellitsenergyorcapacitytothirdparties,providedsuchGasIPPhasfirstofferedtosellenergyandassociated capacityuptothecontmctquantityofelectricity toNMPCatthePioxy-MarketPriceortheMarketPrice(assuchtermisdefinedinAttachment A-8),and,ifapplicable, theMarketCapacityPrice(assuchtermisdefinedinAttachment A-8),asthecasemaybe,andNMPChasdeclinedtheopportunity topurchasesuchenergyandcapacity.

Energyand.associated capacityinexcessofthecontractquantityofelectricity foranyIntervalshallnotbesubjecttothePowerPutContractand,attheoptionoftheGasIPP,maybesoldtothirdparties.Subjecttoadjustment inaccordance withSections12.4(b),2.5and2.6,asapplicable, oftheMasterRestructuring Agreement, themaximumaggregate quantity(subjecttooveigeneration provisions andoptionprovisions (asdescribed below),ifany)ofelectricity inGWhandthemaximumaggregate installed

capacity, inMWunderthePowerPutContracts duringtheProxy-Market PricePeriodforeachoftenContractYears(orsuchlesserperiodoftimeiftheProxy-Market PricePeriodendspriorthereto)aresetforthinAttachment A-7hereto.Priortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists,thepricefortheapplicable capacityunderthePowerPutContracts shallequalzero,excepttotheextentincludedintheProxy-Market Price.Duringthenegotiation oftheRestatedContracts, theGasIPPswhicharetheExistingPPAslistedonSchedule2.3totheMasterRestructuring shallusetheirReasonable BestEffortstoenterintoRestatedContracts whiche'optioii p'rvv'isions with'i'expect ioana'ggregate of500GWhofelectricity per5 annumoveratermofuptosixContractYearsforperiodswithineachyearthataremutuallyagreedupon;providedsuchoptionprovisions includeaterm,periods,contractquantities, contractpricesandsuchothertermsandconditions whichareacceptable totheapplicable GasIPPandprovided, further,thatnoGasIPPwillbeobligated toincludesuchoptionprovisions initsRestatedContract(s) ifsuchprovisions, insuchGasIPP'sjudgment, arenoteconomically neutralincomparison totheContractAllocation ofsuchapplicable GasIPPbeforegivingeffecttosuchoptionprovisions.

Attachment A-9heretosetsforthcertaininformation relatingtotheseoptionprovisions.

FixedPriceSwaContracts NMPCshallalsonegotiate, executeanddelivertotheDepositary anumberofFixedPriceSwapContracts, whichshallbesubstantially similartotheIndexedSwapContracts, exceptthattheFixedPriceSwapContracts willbebasedonfixedpricesforelectricity andfixedquantities ofelectricity.

TheFixedPriceSwapContracts shallbecomeeffective asoftheEffective Time,withpaymentstooccurthereunder duringtheperiodcommencing January1,2003andendingDecember31,2009.PaymentsundertheFixedPriceSwapContracts shallbecalculated basedonthedifference betweenthecontractpriceandtheProxy-Market Price(assuchtermisdefinedinAttachment A-11)ortheMarketPriceand,ifapplicable, theMarketCapacityPrice(assuchtermsaredefinedinAttachment A-ll),asthecasemaybe,multiplied bythecontractquantityofelectricity foreachInterval.

TheFixedPriceSwapContracts willbebasedonthetermsandconditions setforthinAttachment A-11hereto.Theaggregate quantityofelectricity inGWh,theaggregate capacityinMWandthecontractpricein$/MWhapplicable theretoforeachapplicable yearoftheFixedPriceSwapContracts aresetforthinAttachment A-'10heieto.ForpurposesoftheFixedPriceSwapContracts (i)priortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists,thepricefortheapplicable capacityshallequalzero,and(ii)following theProxy-Market PricePeriodandonlyiftherethenexistsaseparatemarketforcapacity, theapplicable capacitywillbeadjustedonabasisconsistent withthestructure ofsuchseparatemarket.AttherequestoftheIPPs,NMPCandtheIPPsshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstoenterintophysicaldelivery.contracts basedontheannualquantities ofelectricity inGWh,theaggregate capacityinMWandtheannualcontractpricesin$MWhsetforthinAttachment A-10hereto,inlieuofalloraportionoftheFixedPriceSwapContracts, providedthatinnoeventshallanIPPpartytoanExistingPPAlistedonSchedule2.1totheMasterRestructuring Agreement (a"Terminating PPA"),beacounterparty toanysuchphysicaldeliverycontract.

lI90l4 ATTACHMENT A-1)Intentionally Omitted]0l90l4 ATTACHMENT A-2AMENDEDPPAWITHSOLIDFUELIPP'ONTRACT YEAR210121314151617QUANTITY(GWh)353353'53353353353353353353353353353353353353353176PRICE'$/MWh)28.5029.4030.3031.2032.1033.1034.1035.1036.1037.2038.3039.5040.7041.9043.2044.5045.84ITheAmendedPPAwillcontainprovisions withrespecttocapacitythatareconsistent withthecapacityprovisions contained intheExistingPPAbetweenNMPCandthcSolidFuelIPP.2Suchpricesshallreplaceandbesubstituted forthepricesreflected inAttachment 1tothcExistingPPA.,between NMPCandtheSolidFuelIPP.sl90I4s ATTACHMENT A-3SWAPCONTRACTS WITHGASIPPSDUEUNGCONTRACTYEARS1AND2CONTRACTYEARAGGREGATE INSTALLED CAPACITY(MW)i606.15606.85AGGREGATE QUANTITY(GWh)4,640WEIGHTEDAVERAGEPRICE($/MWh)'8.55 4&,83AGGREGATE CONTRACTADJUSTMENT

($000s)'9,981)

(9,448)WEIGHTEDAVERAGEPRICEAFTERADJUSTMENT (S/MWh)'6.40 46.79SWAPCON'I%ACTS WITHGASIPPSUIUNGCONTRACTYEARS3THROUGH10AGGREGATE INSTALLED AGGREGATE CONTRACTCAPACITYQUANTITYEXAMPLEOFWEIGHTEDAVERAGEPRICE($/MWh)'GGREGATE CONTACTADJUSTMENT

($000s)'XAMPLE OFWEIGHTEDAVERAGEPRICEAFARADJUSTMENT

($/MWh)'0611.85616.75'16.95619.55620.45621.75623.05624.454,6904,7304,7364,7554,7654,7784,7864,798.45.8247.4050.5352.7254.5555.955&.3362.93(9,199)(6,975)(15,665)(14,903)(14,474)(13,992)(13,574)(13,050)43.8645.9247.2249.5951.5153.0255.4960.21ISuchiastalled capacityissubjecttobothseasonalvariations aaddegradation andrepresents theaggregate installed capacitywhichNMPCisentitledtoclaimfromtheGasIPPsthatarepartiestoRestatedContracts duringtheProxy-Market PricePeriodforpurposesofreporting totheNearYorkPowerPool.Priortothcestablishmeat ofthcISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists,thepricefortheapplicable capacityshallequalzero.Following theProxy-Market PricePeriodandonlyiftherethenexistsaseparatemarketforcapacity, thcapplicable capacitywillbeadjustedonabasisconsistent withthcstructure ofsuchscparatcmarket.2Rcprcsents afixedpricebcforcgivingeffecttotheaggregate contractadjustment.

3Rcflcctstheaggregate contractadjustment agreedto.4Rcprescnts thecontractpriceafterapplyinganindexingformulaandbeforegivingeffecttotheaggregate contractadjustment.

SReflectstheeconomicimpactoftheaggrcgatc contractadjustmcnt onthcweightedaverageprice(itbeingunderstood thattheaggregate contractadjustment maybeprovidedtoNMPCasanannualadju.mc"<

as.sn.~4jpsltn:at tr;itr,.reatracr..p~c~

i"rvPA1ualGasIPPRestatedContracts oras."-"-'thctwisc mutuallyagreed).ai9oi49 ATTACHMENT A4CALCULATION OFPAYMENTSUNDERINDEXEDSWAPCONTRACTS WITHGASIPPSOneachSettlement Date,thepaymentsowingwithrespecttothepreceding calendarmonthshallbebasedonthedifference between(a)thecontractpriceduringeachIntervalmultiplied bythecontractquantityofelectricity forsuchInterval, and(b)(i)theProxy-Market PriceorMarketPrice,asapplicable, duringeachIntervalmultiplied bythecontractquantityofelectricity forsuchInterval, plus(ii)upontheestablishment oftheISO/PEandonlyiftherethenexistsaseparatemarketforcapacity, theMarketCapacityPricein$/MWfortheapplicable Settlement Periodmultiplied bytheweightaveragedcapacityassociated withthecontractquantityofelectricity foreachIntervaloccurring duringsuchSettlement Period.OntheSettlement Date,NMPCshallbeobligated topaysuchdifference totheGasIPPiftheamountdescribed inclause(a)aboveisgreaterthantheamountdescribed inclause(b)above,andtheGasIPPshallbeobligated topaytheabsolutevalueofsuchdifference toNMPCiftheamountdescribed inclause(b)aboveisgreaterthantheamountdescribed inclause(a)above.Suchpaymentsshallbecalculated inaccordance withthefollowing formula:Payment=Z(Pc'Qi)-(Z(Psi~Qi)+Ci~Zi hi%here:Pc-contractpriceQi-contractquantityofelectricity perIntervalfortheSettlement PeriodPsttheProxy-Market PriceorMarketPrice,asapplicable, perIntervalC-MarketCapacity Pricein8/MWforthe SettlementPeriod'i numberofhoursperIntervalmultiplied bythenumberofIntervals intheSettlement PeriodICshallbczeropriortotheestablishment ofthcISO/PEandthercaf'ter atanytimewhennoscparatcmarketforcapacityexists.Following thcProxy-Market PricePeriodandonlyiftherethenexistsa~s"~uRe'.ot".<~t:i;2e

'::..yp44e"ofthis.formula:will beadjusted-on a'basisconsistent withthesuueturcofsuchseparatemarket.0t90I4IO

~~iI~~~II'~~~~~~I~~I~~'I~~~'~~I~'~~~~~II'~II~':I~I~~I~~~I'~~~r~~~~~~II~~~~~~~~~~~~I~II~~~~~~~~~I~I~I ATTACHMENT A4TERMSHEET FORINDEXEDSWAPCONTRACTS WITHGASIPPSSetforthbelowisatermsheet foraSchedulewhichwillbeattachedtoandbemadeapartofaMasterAgreement forIndexedSwapContracts.

TheMasterAgreement fortheIndexedSwapContracts willbebasedonanISDAstandardformofMasterAgreement, whichisaformthatisfrequently usedforswapcontracts.

InthecaseofRestatedContracts thatareforwardcontracts contemphting bothphysicaldeliveries andfinancial cash-settlement

payments, theMasterAgreement tobeusedwillbebasedonastandardformwhichisfrequently usedforforwardcontracts intheelectricindustryorsuchotherfoanofagreement thatismutuallyacceptable totheparties.AllMasterAgreements willsetforthgeneraltermsandconditions, including representations andwarranties audeventsofdefault.

TERMSHEET FORSCHEDULEtotheMasterAgreement forIndexedSwapContracts betweenNiagaraMohawkPowerCorporation

("NMPC").and (uIPPn)1.(a)PaymentonSettlement Date.ITHEOBLIGATIONS INCUIGtED PURSUANTTOTHISSCHEDULESHALLREQUIRECASHPAYMENTSANDSHALLINNOEVENTBEINTERPRETED TOREQUIRETHEPURCHASEORSAKE.OFELECTRICITY.

(i)SubjecttoSection1(a)(ii)ofthisSchedule, ontheSettlement Date,NMPCshallbeobligated topaytoIPPtheFixedPaymentandIPPshallbeobligated topaytoNMPCtheFloatingPayment.Suchpaymentobligations shallbepaidonanetbasispursuanttoSectionofthisAgreement onthePaymentDate.Hl90l4(ii)PaentDiuteMechanism:

IfIPP,ingoodfaith,disputesanypartofanyNoticeofanetpayinentobligation, IPPshallprovideawrittenexplanation ofthebasisforsuchdisputeandtheundisputed portionofthenetpaymentobligations setforthinsuchNoticeshallbepaidbythepartyobligated topaysuchamountsnolaterthantheapplicable PaymentDate.Anyadjustment underthisSection1(a)(ii)shallbearinterestattheprimerateforU.S.currencyaspublished

&omtimetotimeunder"MoneyRates"in77re8'allStreetJournal,fromandincluding thePaymentDateanysuchunderpayment oroverpayment wasoriginally duetobutexcluding thedateonwhichsuchunderpayment oroverpayment isfinallysettledbythepartieshereto,orintheeventthepartiesheretoareunabletosettlesuchmatter,suchmattershallbes."tl>el..~v CPi.49~ep"..".4",g'~tieaallv

~~n:..~-.-..~.;

publicaccounting firmmutuallyselectedbytheparties,whosedetermination shallbefinalandbindingonthepartiesheretoandwhosefeesandexpensesshallbebornebythepartyfoundtobeatsubstantial faultbysuchindependent publicaccounting firm.NoNotice(orpaymentobligation thereunder) shallbesubjecttothisSection1(alii)unlessanoticeofdisputeisgivenwithrespecttheretowithintwoyearsofthePaymentDateapplicable tosuchNotice.(b)RelatedDefinitions andProvisions.

P~D*:yhPy*D*hdlt2IItltth*yl dyIdcalendarmonth,providedsuchdayisaBusinessDay,andifsuchdayisnotaBusinessDayonthefirstBusinessDayfollowing such25day,or(ii)the15~dayafterthereceiptbyIPPofNotice&omNMPC,providedsuchdayisaBusinessDay,andifsuchisnotaBusinessDay,ontheGistBusinessDayfollowing such15~day.Notwithstanding theforegoing, intheeventthatfollowing theProxy-Market PricePeriodISO/PEprocedures requirealternate datesforpayments, suchalternate paymentdatesshallautomatically bedeemedtobeincorporated in,andshallsupersede, thepaymentdatessetforthherein..ISO/PE:ShallmeanaNewYorkIndependent SystemOperatorandPowerExchange.

NMPCPaentObliation:NMPCshallbeobligated topaytoIPPanamountequaltotheproductoftheNotionalQ'uantity ofelectricity duringtheapplicable Intervalmultiplied bytheContractPriceortheIndexedContractPrice,asthecase.maybe,applicable tosuchInterval(the"NMPCPaymentObligation"

).D~dy*yh*y'Dyy*ID**I*dhdltequaltothesumof(i)theFixedPaymentforthepriorInterval(whichshallbezerofortheInitialInterval),

and(ii)theNMPCPaymentObligation forthecurrentInterval.

IPPPaentObliation:IPPshallbeobligated topaytoNMPCanamountequaltotheproductoftheNotionalQuantityofelectricity.

duringtheapplicable Intervalmultiplied bytheProxy-Market PriceortheMaiketPrice,asthecasemaybe,applicable tosuchInterval(the"IPPPaymentObligation"

).FloatinPat:TheFloatingPaymentforthecurrentIntervalshallbeanamountequaltothesumof(i)theFloatingPaymentforthepriorInterval(whichshallbezerofortheInitialInterval),

(ii)theIPPPaymentObligation forthecurrentInterval, and(iii)ifapplicable, theMarketCapacityPricein$/MWfortheperiod&omtheInitialIntervaltotheSettlement Datemultiplied bytheweightaveragedcapacityassociated withtheNotionalQuantityofelectricity foreachIntervalRomtheInitialIntervaltotheSettlement Date.ContractPrice:ShallmeanforthefirsttwoContractYearsoftheTermofthisAgreement$

/MWhand$/MWh,respectively.

<l90l4 IndexedContractPrice.Shallmeanbeginning onthefirstdayofthethirdContractYearoftheTermofthisAgreement andcontinuing thereafter, thepricecalculated inaccordance withanindexingformulasimilartothosesctforthin~AL)cndix 6-3tothisSchedule(thc"IndexedContractPrice").ContractYear:Shallmeantheperiodcommencing atI1:59:59p.m.ontheConsummation Dateandendingat11:59:59p.m.onthefirstanniversary ofthelastdayofthemonthinwhichtheConsummation Dateoccursandeachsuccessive 12-monthperiodthereafter totheextentapplicable.

Settlement Date:Shallbethelastdayofthecalendarmonthspecified intheConfirmation delivered inaccordance withthetermsoftheMasterAgreement.

interval:

Shallbe(i)Ihour,pmvidedthatintheeventthatfollowing thePmxy-MarketPricePeriodiSO/PEpmcedures requiretheuseofanalternate timeperiod,suchalternate timeperiodshaQautomaticaHy bedeemedtobeincorporated in,andshallsupersede, the1hourperiodsetforthherein,or(ii)suchtimeperi(4asNMPCandIPPshallmutuallyagreeupon;providedthatsuchmutuallyagreedupontimeperiodmayonlybemodifieduponthepriorwrittenconsentofNMPCandIPP.InitialInterval:

ShallbetheIntervalspecificd intheConfirmation delivered inaccordance withthetermsoftheMasterAgreement.

Notice:AfternettingtheFixedPaymentandtheFloatingPayment,NMPCshallpmvide)PPwithnotice(each,a"Notice")ofsnynetpaymentobligation resulting therefrom onorbeforethe10dayofthefirstcalendarmonthfollowing theSettlement Date;providedthatintheeventthatfollowing thcProxy-Maiket PricePeriodISO/PEprocedures requireanalternate dateforpaymentnotices,suchalternate noticedateshallautomatically bedeemedtobeincorporated in,andshallsupersede, thenoticedatesetf6I*'.6AN'UII6'Uly'*ffaUUU'.16'greement.

N~Wi:UANII6*2'yf*l'ly2'qqt6whichIPPandNMPCarecontractually committed, assetforthonthetablecontained in~A'2UAUPro-MarketPrice:Shallmean(i)priortotheestablishment oftheISO/PE,NMPC'sshort-tenn avoidedenergyandcapacitycostsatthevoltageleveloftheIPP'sProject's busbar,asstatedinitstariffapprovedbythePSCproviding forthepurchaseofpowerfromPURPAqualifying facilities, whichtariffiscurrently designated asS.C.-6,asthesamemaybeineffectfromtimetotime,oranysuccessor tarifftheretoorsuchotherpriceasmaybeagreeduponbyNMPCandIPPduringtheindividual negotiations, and(ii)onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished, theMarketPriceand,ifapplicable, theMarketCapacityPrice;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferenced inclatisc.ci) aW+c,ft,awsitiinilv p~up.e~~!tional periodof.time.~The.Proxy---*

MarketPriceshallnotbereducedoroffsetbyanycoststhatNMPCmayincur,including, gl90I4l4 witIioutlimitation, costsforancillaiy

services, transmission servicesortransitioii (orstranded) costs.Prox-MarketPricePeriod:Shallmeantheperiodcommencing onthedateofthisAgreement andendingonthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEhasbeenfullyestablished andsuccessfully functioning, providedthefollowing conditions havebeensatisfied foreachoftheprevioussixmonths:(i)aminimumof65%(whichpercentage shallincludetheaggregate contractquantities ofenergyduringsuchperiodunderallphysicaldeliveryRestatedContracts withGasIPPsandallphysicaldeliveryContracts betweenNMPCandanyIPPpartytotheMasterRestructuring Agreement enteredintoinlieuofFixedPriceSwapContracts, regardless ofwhethertheIPPspartiestheretoactuallyeffectedsuchsalesandallsalesonuptoamonthlybasisofenergy(otherthansalesthroughtheISO/PE)bytheIPPspartiestotheMasterRestructuring Agreement whichareeffectuated byNMPCactingasagentforanysuchIPP)oftheenergysalesandpurchases withintheUpstateMarkethavebeentransacted throughtheISO/PEinthedayaheadmarketbaseduponthedayaheadpricingmechanism adoptedbytheFERCfortheISO/PEintheUpstateMarket;and(ii)onlyifaseparatemarketforcapacitythenexists,amitiimumofSO'/o(whichpercentage shallincludetheaggregate capacityassociated withtheaggregate contractquantities ofenergyduringsuchperiodunderallphysicaldeliveiyRestatedContracts withGasIPPsandallphysicaldelivnyContracts betweenNMPCandanyIPPpartytotheMasterRestructuring Agreement enteredintoinlieuofFixedPriceSwapContracts, tegardless ofwhethertheIPPspartiestheretoactuallyeffectedsuchsalesandallsalesonuptoamonthlybasisofcapacity(otherthansalesthroughtheISO/PE)bytheIPPspartiestotheMasterRestructuring Agreement whichareeffectuated byNMPCactingasagentforanysuchIPP)ofthecapacitysalesandpurchases within"the UpstateMarkethavebeentransacted throughtheISO/PEcapacityauction.Notwithstanding theforegoing, ifNMPCandIPPmutuallyagree,theProxy-Market PricePeriodmaybeextendedorterminated eveniftheconditions setforthintheimmediately preceding sentencehavenotbeensatis6ed.

tl*Mk:ShdlIt'y(AH*Ibdih*regionscurrently servedbyNMPC,NewYorkStateElectric&GasCorporation, Rochester Gas&ElectricCorporation andCentralHudsonGas&ElectricCorporation (collectively, the"Utilities"

),and(ii)wholesale salestransactions byanyoftheUtilities tothirdpartiesoutsidetheregionscunentlyservedbysuchUtility,excluding anysuchsaleswhichareeffectuated pursuanttocontracts havingatermofatleastoneyearexistingasofthedateoftheMasterRestructuring Agreement totheextentsuchcontracts areineffectthereafter.

MarketPrice:Shallmeancommencing onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished, thedayaheadlocational basedmarketprice("LBMP")paidtosellersforenergy,attheIPP'sProject's busbarortheregioninwhichtheIPP'sProject's busbarislocated,specified andpublished bytheISO/PE;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whetherto continuethepricingreferredtoinclause(i)ofthedefinition ofProxy-Market Priceforamutuallyagreeduponadditional periodoftime.MarketCaaciPrice:Shallequalzeropriortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexits.Commencing onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished andonlyiftherethenexistsaseparatemarketforcapacity, theMarketCapacityPriceshallmeanthemarketpricepaidtosellersforcapacity, attheregioninwhichtheIPP'sProject's busbarislocated,established bytheISO/PEcapacityauction;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEFortstomutuallydetermine whethertocontinue'he pricingreferredtoinclause(i)ofthedefinition ofProxy-Market Priceforamutuallyagreeduponadditional periodoftime.Following theProxy-Market PricePeriodandonlyiftherethenexistsaseparatemarketforcapacity, thepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstoadjusttheapplicable capacityonabasisconsistent withthestructure ofsuchseparatemarket.Term:ThetermofthisAgreement shallcommenceat11;59:59p.m.ontheConsummation Dateandendat11:59:59p.m.onthetenthanniversary ofthelastdayofthemonthinwhichtheConsununation Dateoccurs.2.~i.UWNMPC.tPPyaf*thisAgreement inwholeorinpart,withouttheconsentofNMPC(a)ascollateral securityforpurposesofsecuringindebtedness, or(b)toanyapprovedassigneeortransferee (an"Approved Assignee"

).AnApprovedAssigneeshallbe(i)anypersonhavingalong-tenn unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency;(ii)anyAffiliate ofIPP;provided(x)suchAf61iatehasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency,or(y)suchAf61iatehasanetworthcalculated inaccordance withgenerally acceptedaccounting principles

("NetWorth"),thatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment

,ortransfer, or(z)IPPunconditionally guarantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchAffiliate inconnection withsuchassignment ortransfer; (iii)anyoftheotherGasIPPspartytoaRestatedContractwithNMPCortheirrespective Affiliates; provided(x)suchotherGasIPPorsuchAffiliate hasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency,or(y)suchotherGasIPPorsuchAffiliate hasaNetWorththatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, or(z)IPP(inthecaseofanassignment ortransfertoanother'Gas IPP)orsuchotherGasIPP(inthecaseofanassignment ortransfertoanyofit~Affiliates) unconditionally guarantees, pursuant'o apuarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchotherCiasIPPor'l90I4l6 suchAffiliate, asthecasemaybe,inconnection withsuchassignment ortransfer; or(iv)anyotherpersonwhohasaNetWorththatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, providedthatevidenceofsuchqualifying NetWorthisreasonably demonstiated toNMPC.IPPmaysplitandassigntheNotionalQuantities ofelectricity andIntervals toApprovedAssignees, eachinrespectofalesserNotionalQuantityand/or!ntervals thanthefullamountsthereofhereunder, providedthat(a)eachsuchassignment isfor50,000MWhofelectricity peryearoranyintegralmultiples thereofandtotheextentthattheremaining unassigned balanceoftheNotionalQuantityofelectricity hereunder foranysuchyearislessthan50,000MWh,thenforsuchremaining balance,(b)eachsuchassignment isforaperiodofatleastoneyear,and(c)thesumofallassignedandretainedNotionalQuantities ofelectricity andIntervals doesnotexceedthetotalNotionalQuantities ofelectricity andIntervals hereunder.

AttherequestoftheIPFduringtheindividual negotiations andduringthetermofthisAgreement, NMPCandtheIPPshallusetheirReasonable BestEffortstomutuallyagreeuponreasonable alternatives totheassignment qualifications contained intheimmediately preceding sentence.

Excepttotheextentexpressly providedinanyapplicable guarantee, uponanysuchassignment ortransfer, IPPshallbereleasedandhavenofurtherobligations toNMPGhereunder withrespecttotheassignedortransferred NotionalQuantities and/orIntervals.

3.AssiamentbNMPC.NMPC.shallnotassignitsrightsandobligations hereunder exceptasexpressly authorized underthisSection3.I\(a)NMPCRestructurin

.IntheeventthatNMPC.restructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsigni6cant assets,whetherinconnection withtheNMPCRestructuring orotherwise, uponnoticetotheIPP(oritsassigneehereunder) thisAgreement willbeassignedtoandassumedbytheentityorentitiesowningallorsubstantially allofNMPC'selectrictransmission anddistribution assetsor,ifseparated RomNMPC'selectrictransmission assetspursuanttosucharestructuring, NMPC'selectricdistribution assets,providedthat,upontheeffective dateoftherestructuring (i)suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguaaintee informandsubstance reasonably satisfactory toIPP(oritsassigneehereunder),

byeachoftheotherentitiesarisingoutoftherestructuring, including anyentityspunwfftoNMPC'sshareholders oranyAf51iateofNMPCholdingsigniGcant assetsthatwereheldbyNMPC(oranysubsidiary ofNMPC)priortotherestxuctuxing, unlesssuchassigneehasalong-term unsecured debt+editratingissuedbyMoody'sInvestors Service,Standard&Poor'sCorporation oranothernationally recoyuzed ratingagencythatisatleastasfavorable asNMPC'slong-termunsecured debtcreditratingimmediately priortotheeffective dateoftherestructuring, and(ii)ifsuchassigneeisnottheentitywhichwillcollectBorncustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval, suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory totheIPP(oritsll90l4 assigneehereunder),

byeachoftheentitieswhichwillcollectfromcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval.

(b)ThirdPAssiament.UponnoticetotheIPP(oritsassigneehereunder),

NMPCmayassignitsrightsandobligations underthisAgreement.

toanythirdparty("NMPCAssignee"

)(exceptthosepartiesreferenced inSection3(a)above)providedthattheNMPCAssigneehas(i)receivedalong-term unsecured debtcreditratingbyMoodysInvestors ServiceorStandard8cPoor'sCorporation ofatleastinvestment gradeortheequivalent ofsuchratingfromanotherpationally recognized ratingagency,asofthedateofconsummation oftheassignment; or(ii)furnished IPPwithsuchcollateral securityasmaybereasonably acceptable totheIPPinordertolimittheIPP'screditriskinconnection withsuchassignment.

4.FurtherAssurances.

Subjecttothetermsandconditions contained herein,upontherequestfromtimetotimeofeitherpartyhereto,theotherpartyshallpromptlyexecuteanddeliveroruseitsReasonable BestEffortstocausetobeexecutedanddelivered, suchconsents, approvals andotherinstruments, including, withoutlimitation, assignments ofthisAgreement ascollateral, estoppelcertificates andutilitycertificates, informandsubstance reasonably satisfactory tobothpartiesandtheirrespective counseltoimplement anyfinancing orothermaterialbusinesstransaction undertaken bytherequesting party.5,ualiinFaciliMonitorin andStatus.(a)NMPCshallhavenocontractual rightandshallwaiveanyotherrightwhichitmighthaveunderstateorfederallawtodemandinformation fromtheIPP,oranyotherperson,including butnotlimitedtoanyGovernmental Authority, withrespecttosuchIPP'sstatus:asastateand/orfederalqualifying facility("QFStatus").(b)NMPCacknowledges andagreesthattheIPPisnotrequiredtomaintainagenerating facilitypursuanttothetermshereof.fortheperformance ofitsobligations hereunder.

Notwithstanding theforegoing, theIPPshallhavetheright,butnottheobligation, initssolediscretion toobtainand/ormaintainitsQFStatusunderNewYorklaw(including compliance withNYPSLg2(2-a))andlorPURPA,respectively.

NMPC'srightsandobligations hereunder shallcontinueasamatterofcontractual rightregardless ofwhethertheIPPmaintains itsQFStatus.AnyfailurebytheIPPtocomplywiththerequirements applicable toQFStatusunderNewYorklaw(including compliance withNYPSLg2(2-a))shallhavenoadverseimpactontheIPPunderthisAgreement.

IntheeventtheIPPwishestoqualifyorperformasanExemptWholesale Generator underSection32ofPUHCAandFERC'sregulations promulgated thereunder, asthesamemaybeamended,modifiedorrestated&omtimetotime,NMPCshallcooperate with(including, withoutlimitation, byproviding consentsandaffidavits),

andshallnottakeanyactiontooppose,impedeorsubvert,theIPP'seffortstoobtainappropriate regulatory exemptions andapprovals, including market-based rateapproval.

ExcepttotheextentthatthecontractpricesunderthisAgreement areormaybebasedthereon,duringthetermofthisAgreement theIPP(i)shallwaiveanystatutory rightitmayhaveunderSection66-cofNYPSLpursuanttowhichtheIPPmavdemanda,6)perKWhminimumpowerpurchaserateRomHlvo.'t',and(ii)shallwaive,foritselfandforthesuccessors NI90I4IS andassignsofitsProject,withrespectto suchProject,anystatutory rightitmayhaveunderPURPAorNYPSLtorequireNMPCtoenterintoapowerpurchasecontractorotherwise taketheoutputoftheIPP'sProject;provided, however,thatuntiltheendoftheProxy-Market PricePeriodNMPCagrees,attheIPP'srequest,toactasagentfortheIPP(or,ifnecessary toeffectuate suchsalestotheNewYorkPowerPool,bypurchaseandresaleoftheIPP'scapacityandenergy,atnocosttoNMPC),forthesaleonuptoamonthlybasis,oftheIPP'sProject's capacityandenergytotheNewYorkPowerPooloranythirdparty,ineachcaseonanondiscriminatory basiswithrespecttoNMPC'soranythirdparty'scapacityandenergy,atnocosttotheIPP.NMFCagreestouseitsReasonable BestEfforttoeffectsuchsalesonthemostfavorable terms,including price,totheIPPgivingconsideration tothequantity, termandmarketconditions prevailing atthetimeofsale,Nothingcontained hereinshallbeconstrued toconstitute awaiverbytheIPPofanyotherrightsitmayhaveunderPURPA,NYPSLorapplicable law,including rightswithrespecttoback-upservices, interconnection, reactivepowerorothersimilarrights,whetherornotacontractisrequitedordesirable.

6.CertaiaAmendments.

IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, IPP(oritsassigneehereunder) shallhavetherighttoreplacethisAgreement, asapplicable, withpowerpurchaseand/orhedgingcontractual arrangements substantially equivalent tothosethatareenteredintobetweentheentity(ies) holdingthetransmission and/ordistribution assetsofNMPCorwhichwillcoHect&omcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApprovalandtheentity(ies) holdingthenon-nuclear generating assetsofNMPC,whetherornotsuchassetsarespun-offtoNMPC'sshareholders (a"GencoContract"

),providedthattheterm,priceandquantityunderthisAgreement shallnotbealteredthereby,unlessanyofsuchtermsarematerially andexpressly conditioned bycertainprovisions intheGencoContract, inwhichcaseappropriate andequitable adjustments insuchtermsshallbemutuallyagreeduponbyNMPCoritsassignee, asthecasemaybe,andtheIPP.Nl90I4l9 APPENDIX6-1FORMOFNOTICEftobesupplied]

~~41901420 APPENDIX6-2ContractQuantityContractYearPeriodh(KWh)Period8(KWh)PeriodC(Kwh)PeriodD(KWh)PeriodN(KWb)ContractPrice(SMWb}10PeriodstobedividedinIntervals.

)~so~'De>a~<<l90I4 APPENDIX6-3INDEXINGFORMULAETheindexingformulaesetforthbelowareindicative ofanindexingformulathatshallbeusedoneachSettlement Datetoadjustthecontractpriceforthepreceding monthbeginning onthefirstdayofthethirdContractYearofeachIndexedSwapContract:

~Toown"ContractPriceFormulaICP=CP~[(x%'(GClGco))

+(y%'(INFIINFo))

+(z/o'(TBD/TBDo))]-$

5/MWh'here:

ICP=indexedcontractpriceCP=thecontractpriceinthereference yearx=weighting factorassignedtopriceofgasGC=averagepriceofgasfortheapplicable periodGco=reference priceofgasy=weighting factor.assignedtoinflation INF=averageinflation fortheapplicable periodINFQ=reference inflation factorz=weighting factorassigned toadditional factorTBD=averageoftheotherfactor[tobedetermined

-examplecouldbeelectricity poolprice]TBDo=reference otherfactorTheaveragepriceofgas(GC)usedintheaboveformulashall,attheoptionoftheGasIPP,bedetermined byoneofthefollowing gaspriceindices:(i)theNYMEKGasPriceIndexatHenryHub;(ii)theCNGsouthpoolAppalachian Indexpublished byInsideFERCandNaturalGasJYeelc(iii)theWeightedAverageCommodity CostofGas("WACCOG")

published byNaturalFuelGasDistribution Corporation (iv)theIThe"-$5/MWh"sh~;'m..i:J'gv.

t:"-4-':".<".";+.";."'r'~~i

'"."~'.";~t~y oftheteachContract"'.~~

YearofeachIndexedSwapContract.

NI90I422 NiagaraBorderSpotPricefornaturalgas(Delivered toPipeU.S.I)published by.NaturalGasWeekinitsCanadianPriceReport;or(v)anotherregularly published gaspriceindex,provided, ineachcase,suchgaspriceindexmeetsthefollowing requirements:

(a)suchgaspriceindexshallbeatradableandliquidmarketindex;and(b)suchgaspriceindexshallpresentbasisdifferential riskstotheGasIPPwhichareacceptable tosuchGasIPP,ifcomparedwiththeactualgaspurchasepricesforsuchGasIPPatthelocaldistribution companydeliverypointortheGasIPP'splantburnertip,asthecasemaybe.Thereference inflation factor(INFO)andtheaverageinflation fortheapplicable period(INF)usedintheaboveformulashall,attheoptionoftheGasIPP,bebasedonorgenerally consistent with(i)ProducerPriceIndicespublished bytheU.S.Department ofLabor,BureauofStatistics, (ii)ConsumerPriceIndicespublished bytheU.S.Department ofLabor,BureauofStatistics, (iii)inflation forecastindicespublished byDataResources Incorporated/McGraw-Hill, or(iv)suchotherregularly published indicesrelatingtoinflation, "Bottom-u "ContractPriceFormulaThebottom-up formulation isbasedonrecognizable fixedandvariablecostsandmargins,withwhichsuchGasIPPandNMPCmanagersarealreadyfamiliar.

Thisformulation alsoallowstheinclusion ofafixedscheduleofcostincreases ordecreases, forexampleinconnection withascheduleoffuturefixedpaymentswhichanticipate amajoroverhaulandthendecline,orstepwiseincreases, for'xample, inpropertytaxes,orinaccordance withaPILOTagreement oranabaternent agreement etc.Thisformulation isbasedonatraditional build-upoffixedandvariablecostsandmarginsincluding:

Fixedcosts:FixedOperations andMaintenance Costs~DebtService(ifany)~GEcAincluding insurance andtaxesotherthanincometaxes~Auxiliary boilercosts~MarginIl901423 VariableCosts:~Variableoperations andmaintenance

~Start-upandshutdowncosts~Heatrateandfuelcost~MarginItisnotintendedthatGasIPPwillberequiredtoprovideNMPCwithsuchlineitemsofcostormargin.TheintentisthattheGasIPPwillprovidefactorswhicharecomposedofsuchlincitemsorpartsofsuchlineitemsorgroupings ofthesameasmaybeselectedbyeachGasIPP.ThefactorsselectedbyeachGasIPPshallbeindexedusingtheformulation below.OneachSettlement Date,thecontractpriceshallbeadjustedforthepreceding month,usingthefollowing formula:Price/MWh=

(CPAX~II+(CPBX~JI

+(CPCX~Kl

+-(CPXXLl)+Cl+C2+-CN-$5/Mls'OJO.KOLOCPA,CPB,CPGandCPX,aredefinedportionsoftheabovefixedandvariablecostsandmargin's, astheGasIPPmayelect,andwhicharebase-year costsexpressed inS/MWh.IO,JO,KO,LOare.base-year valuesoftheindicesselectedbysuchGasIPPAndI1,Jl,KlandLlaretheapplicable inflatedvaluesofthoseindices,usedincalculating theadjustments inthecontractprice.AndCl,C2,CNareafixedscheduleofcostvaluesexpressed in$/MWh,whichmayincreaseand/ordecrease, whicharedisplayed andfixedatthetimeofenteringintotheIndexedSwapContract.

=5.;r-"'"tlat'.:

'~-.imagedto"-$2.50MWh"beginning onthefirstday'6t5ttaaCcatrCf YearofeachMexedSwapContract.

ll90t424 ATTACHMENT A-7POWERPUTCONTRACTS WITHGASIPPSCONTRACTYEAR10APPROXIMATE AGGREGATE INSTALLED CAPACITY(M%)'06.15 606.85611.85616.75616.95619.55620A5621.75623.05624.45APPROXIMATE AGGREGATE QUANTITY(G%h)4,6404,6404,6904,7304,7364,7554,7654,7784,7864,798ISuchinstalled capacityissubjecttobothseasonalvariations anddegradation andrcprescnts theaggrcgatc installed capacitywhichNMPCisentitledtoclaimfromtheGasIPPsthatarcpartiestoRestatedContracts duringthcProxy-Market PricePeriodforpurposesofreporting tothcNcwYorkPowerPool.Priortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatedt.t~:.',

-'-..z~:ki"",.rists, theprice.forcapacityshall'equal

'zero',exdepl~tl;'etc'at->ztudM

'..-<-"-=t-rtheProxy-Market Price.25 ATTACHMEYE A-8TERMSHEET FORPOWERPUTCONTRACTS WITHGASIPPSSetforthbelowisatermsheet for.Schedules whichwillbeattachedtoandmadepartofaMasterAgreement forPowerPutContracts.

TheMasterAgreement willbebasedonastandardformofMasterAgreement whichis&equently usedforpowerputcontracts.

TheMasterAgreement willsetforthgeneraltermsandconditions, including representations andwarranties andeventsofdefault.EFFECTIVE DATEANDTERMTheAgreement willtakeeffectasoftheEffective Time.Theeffectiveness oftheprovisions inrespectoftheputoptioncontained inSchedule1belowshallexpireattheendofthe.Proxy-Market PricePeriod,butinnoeventlaterthan10ContractYearsRomtheConsummation Date.Theeffectiveness oftheprovisions contained inSchedule2belowshallexpire10ContractYearsGomtheConsummation Date,unlessotherwise providedinSchedule2below.SCHEDULE1-PUTOPTION.DELIVERYANDACCEPTANCE OFELECTRICITY EnerandCaaciSub'ecttoPut0tions.TherightoftheIPPtoputenergyandcapacitytoNMPChereunder shallbelimitedtoenergyandassociated capacityoftheIPP'sProject,subjecttotheIPP'srightstoassignthisAgreement pursuanttotheassignment provisions contained herein.TheIPPshallnotobjecttoNMPC'sinclusion ofallcapacityassociated withthecontractquantityofelectricity pursuanttotheterms.hereofascapacityavailable toNMPCforregulatory purposes.

dP'i~.AU*p'U*IPPd*tPPIllh*Ih*'RhiHaybasis,toput(i)energytoNMPCuptothespecified contractquantityofelectricity (including energysubjecttotheOvergeneration Amount(assuchtermisdefinedherein)),

and(ii)capacity, whichcapacityissubjecttobothseasonalvariation anddegradation, associated withthecontractquantityofelectricity, ineachcase,foreachInterval(assuchtermisdefinedherein)duringtheimmediately succeeding Settlement Period,andNMPCshallbeobligated totakeandpayforsuchenergyandcapacityfromtheIPPattheProxy-Market PriceortheMarketPriceand,ifapplicable, theMarketCapacityPrice,asthecasemaybe.Energyandassociated capacityinexcessofthecontractquantityofelectricity',fi..<~n, induc~'."'..",h..'!,",r..l

.".~~je~.~.!i:;p~~ntand;.,~NI901426 attheoptionoftheIPP,maybesoldtothirdpartieswithoutanobligation tooffersuchenergyandcapacitytoNMPC.NoticeofFutExerciseandLenthofExercisePeriod.TobeagreeduponbyNMPCandtheIPPduringtheindividual negotiations.

PamentNoticesandPamentDates.TheIPPshallprovideNMPCwithnotice(each,a"Notice")ofanypaymentsdueforenergyand/orcapacityputtoNMPCduringthepreceding calendarmonthonorbeforethe10~dayofthecalendarmonth,unlesstheIPPandNMPCotherwise agreeduringthecourseoftheindividual negotiations.

Paymentsshallbedue(each,a"PaymentDate")onthelaterof(i)the25dayofthecalendarmonthinwhichsuchnoticeisgiven,or(ii)the15dayafterdeliverybytheIPPtoNMPCofsuchnotice.Intheeventsuch25or15dayisaSaturday, Sundayorlegalholiday,thecorresponding paymentshallbedueonorbeforethefirst'business dayfollowing such25~or15~day,asthecasemaybe.PaentDisutes.IfNMPC,ingoodfaith,disputesanypartofanyNoticeofapaymentobligation, NMPCshallprovideawrittenexplanation ofthebasisforsuchdisputeandtheundisputed portionofthenetpaymentobligations setforthinsuchNoticeshallbepaidbythepartyobligated topaysuchamountsnolaterthantheapplicable PaymentDate.Anyadjustment underthisSectionshallbearinterestattheprime'rate forU.S.currencyaspublished

&omtimetotimeunder"MoneyRates"inThe8'allStreetJournal,&omandincluding thePaymentDateanysuchunderpayment oroverpayment wasoriginally duetobutexcluding thedateonwhichsuchunderpayment oroverpayment isfinallysettledbythepartieshereto,orintheeventth'epartiesheretoareunabletosettlesuchmatter,suchmattershallbesettledbyanindependent nationally recognized publicaccounting firmmutuallyselectedbytheparties,whosedetermination shallbefinalandbindingonthepartiesheretoandwhosefeesandexpensesshallbebornebythepartyfoundtobeatsubstantial faultbysuchindependent publicaccounting firm.NoNotice(orpaymentobligation thereunder) shallbesubjecttothisSectionunlessanoticeofdisputeisgivenwithrespecttheretowithintwoyearsofthePaymentDateapplicable tosuchNotice.NMPCRihtofFirstRefusal.IftheIPPdetermines nottoexerciseitsrightstoputenergyandcapacitytoNMPC,suchIPPmaysellanyenergyorcapacity.

associated withthecontractquantityofelectricity tothirdparties,providedsuchIPPhasfirstofferedtosellsuchenergyandcapacitytoNMPCandNMPChasdeclinedtheopportunity topurchasesuchenergyandcapacity.

ThenoticeperiodforsuchoffersandthelengthoftimewhichNMPChastorespondtheretoshallbeagreeduponbytheIPPandNMPCduringtheindividual negotiations.

CERTAINDEFINEDTERlvlSAhfDPROVISIONS Overeneration Amount:Shallmeananamountofenergyinexcessofthecontractquantityofelectricity; providedsuchamountofexcessenergyshallnotexceed5%ofthecontractquantityofelectricity fortheapplicable Interval(the"Overgeneration Amount").TheIPPshallhavetherighttoputtheOvergeneration AmounttoNMPChereunder attheProxy-Market PriceortheMarketPrice,asthecasemaybe.interval:-

ShallmeaniboucorsuchothertimeperiodasNMpcandtheippshallmutuallyagreeupon,providedthatsuchmutuallyagreedupontimeperiodmayonlybemodifieduponthepriorwrittenconsentofNMPCandtheIPP.ContractYear:Shallmeantheperiodcommencing at11:59:59p.m.ontheConsummation Dateandendingat11:59:59p.m.onthefirstanniversary ofthelastdayofthemonthinwhichtheConsummation Dateoccursandeachsuccessive 12-monthperiodthereafter totheextentapphcable.

Pro-MarketPrice:Shallmean(i)priortotheestablishment oftheISO/PE,NMPC'sshort-tean avoidedenergyandcapacitycostsatthevoltageleveloftheIPP'sProject's busbar,asstatedinitstariffapprovedbythePSCproviding forthepurchaseofpowerIromPURPAqualifying facilities, whichtariffiscurrently designated asS,C.-6,asthesamemaybeineffectGomtimetotime,oranysuccessor tarifftheretoorsuchotherpriceasmaybeagreeduponbyNMPCandIPPduriiigtheindividual negotiations, and(ii)ontheGrstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished, theMarketPriceand;ifapplicable, theMarketCapacityPrice;provided, however,thatat'suchtimethepartiesshallconductgood.faithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferenced inclause(i)aboveforamutuallyagreeduponadditional periodoftime.TheProxy-MarketPriceshaHnotbereducedoronsetbyanycoststhatNMPCmayincur,including, withoutlimitation, costsforancillary

services, transmission servicesortransition (orstranded) costs.~~Pro-MarketPricePeriod;Shallmeantheperiodcommencing onthedateofthisAgreement andendingontheQrstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEhasbeenfullyestablished andsuccessfully functioning, providedthefollowing conditions havebeensatisfied foreachoftheprevioussixmonths:(i)aminimumof654/o(whichpercentage shallincludetheaggregate contractquantities ofenergyduringsuchperiodunderallphysicaldeliveryRestatedContracts withGasIPPsandaHphysicaldeliveryContracts betweenNMPCandanyIPPpartytotheMasterRestructuring Agreement enteredintoinlieuofFixedPriceSwapContracts, regardless ofwhethertheIPPspartiestheretoactuallyeffectedsuchsalesandallsalesonuptoamonthlybasisofenergy(otherthansalesthroughtheISO/PE)bytheIPPspartiestotheMasterRestructuring Agreement whichareeffectuated byNMPCactingasagentforanysuchIPP)oftheenergysalesandpurchases withintheUpstateMarkethavebeentransacted throughtheISO/PEinthedayaheadmarketbaseduponthedayaheadpricinggnaw:ig~g i~~.adonteA.by

<be~~R<,~ortheISO/PEintheUpstateMarket;and(ii)~~.'v

',~".separatemarketforcapacitythenexists,aminimumof50'/0(whichpercentage shalltgl90l428 includetheaggregate capacityassociated withtheaggregate contractquantities ofenergyduringsuchperiodunderallphysicaldeliveryRestatedContracts withGasIPPsandallphysicaldeliveryContracts betweenNMPCandanylpPpartytotheMasterRestructuring Agreement enteredintoinlieuofFixedPriceSwapContracts, regardless ofwhethertheIPPspartiestheretoactuallyeffectedsuchsalesandallsalesonuptoamonthlybasisofcapacity(otherthansalesthroughtheISO/PE)bytheIPPspartiestotheMasterRestructuring Agreement whichareeffectuated byNMPCactingasagentforanysuchIPP)ofthecapacitysalesandpurchases withintheUpstateMarkethavebeentransacted throughtheISO/PEcapacityauction.Notwithstanding theforegoing, ifNMPCandIPPmutuallyagree,theProxy-Market PricePeriodmaybeextendedorterminated eveniftheconditions setforthintheimmediately preceding sentencehavenotbeensatisfied.

IJ*Mk*:ShdlII'*lyte)U*

i**'*'lldtheregionscurrently servedbyNMPC,NewYorkStateElectric&GasCorporation, Rochester,Gas

&ElectricCorporation andCentralHudsonGas&ElectricCorporation (collectively, the"Utilities"

),apd(ii)wholesale salestransactions byanyoftheUtilities tothirdpartiesoutsidetheregionscurrently servedbysuchUtility,excluding anysuchsaleswhichareeffectuated pure~ittocontracts havingatermofatleastoneyearexistingasofthedateoftheMasterRestructuring Agreement totheextentsuchcontracts areineffectthereafter.

MarketPrice:Shallmeancommencing onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished, thedayaheadlocational basedmarketprice("LBMP")paidtosellersforenergy,attheIPP'sProject's busbarortheregioninwhichtheIPP'sProject's busbarislocated,specified andpublished bytheISO/PE;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferredtoinclause(i)ofthedefinition ofProxy-Market Priceforamutuallyagreeduponadditional periodoftime.MarketCaaciPrice:Shallequalzeropriortheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists.Commencing onthefirstdayofthemonthfollowing thecalendarmonthinwhichthe'ISO/PEisestablished andonlyiftherethenexistsaseparatemarketforcapacity, theMarketCapacityPriceshallmeanthemarketpricepaidtosellersforcapacity, attheregioninwhichtheIPP'sPmject'sbusbarislocated,established bytheISO/PEcapacityauction;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferredtoinclause(i)ofthedefinition ofProxy-Market Priceforamutuallyagreeduponadditional periodoftime.~~NI90l429 SCHEDULE2,-ADDITIONAL AGREEMENTS REUIREDPAYMENTSFORCHANGESINCOSTSReuiredNettinPamentsforCostChanes.OneachSettlement Date,NMPCshallbeobligated topaytotheIPP(totheextentthatsuchnumberispositive) andtheIPPshallbeobligated topayNMPC(totheextentthatsuchnumberisnegative'and insuchcasetheabsolutevalueofsuchnumber)(x)thedifference between(A)anyincreaseascomparedtothecostsundertheIPP'scontractual anangements withNMPCasofJanuary1,1997duringtheassociated Settlement Periodin(i)NMPClocaldistribution systemgastransportation andfixedandvariablechargesandretainages actuallyincurredbytheIPP,and(ii)electrical interconnection costsandcostsassociated withindustryreliability standards actuallyincurredbytheIPP,and(B)anydecreases ascomparedtothecostsundertheIPP'scontractual arrangements withNMPCasofJanuary1,1997duringtheassociated Settlement Periodinthosecostslistedin(i)and(ii)above,and(y)anyincreaseascomparedtothecostsundertheIPP'scontractual arrangements withNMPCasofJanuary1,1997duringtheassociated Settlement PeriodincostsincurredbytheIPPcausedbychangesinfederal,stateorlocallaws,rulesorregulations; providedthatthisclause(y)shallonlybeeffective duringtheProxy-Market PricePeriodandanyperiodsthereafter duringwhichlikeadjustments incostsarealsorecovered byanyentitythatownsanyofNMPC'snon-nuclear generating assets.CertainOtherCostAdditions.

OneachSettlement Date,NMPCshallbeobligated topaytotheIPPanyincreaseascomparedtothecostsundertheIPP'scontractual arrangements withNMPCasofJanuary1,1997inelectrical transmission costsoraccessorothercharges,whichareactuallyincurredbytheIPPduringtheassociated Settlement Periodwhilephysically delivering electricity to(x)NMPCduringtheProxy-Market PricePeriodor(y)anISO/PEfollowing theProxy-Market PricePeriod;providedthatthisclause(y)shallonlybeeffective duringtheperiodswhenlikeincreases incostsorchargesarethenalsorecovered byanyentitythatownsanyofNMPC'snon-nuclear generating assets.ReactivePowerUoltaeSurtServicesandLine-Loss Chares.NMPCandtheIPPacknowledge thatthecontractpricesundertheIndexedSwapContractrelatingtotheAgreement donotincludechargesforreactivepower,voltagesupportservicesorlinelosses.IntheeventNMPCtariffsrequiretheIPPtopayNMPCforreactivepowerorline-losses duringperiodswhentheIPP'sgenerating facilities aregenerating electricity, thecontractpricesundertherelatedIndexedSwapContractoneachapplicable Settlement Datewillbeequitably increased inanamountequaltoallreactivepowerchargesand/orline-loss chargesorcostsactuallyincurredbysuchIPPduringtheassociated Settlement Period.Inaddition, intheevent(i)underanyISOtariffanIPPisrequiredtoprovidevoltagesupportservices, asdefinedbysuchISOtariff,NMPCshallpaytotheIPPoneachSettlement DateanyandallvoltagesupportservicepaymentsmadebytheISOtoNMPCintheassociated Settlement Periodwhichareattributable tothevoltagesupportservicesprovidedbytheIPP,and(ii)theISOchargestheIPPforanyline-losses, thecontractpricesunder~h.r.I~tedIrdexed...~r-..~.

C"rtract"."<>~~'ably.>>-,<<l90I430 increased inanamountequaltoallsuchline-loss chargesactuallyincurredbysuchIPPduringtheassociated Settlement Period.PamentNoticesandPamentDates.Afternettingtheamountsowingpursuanttothepaymentprovisions ofthisSchedule2,theIPPshallprovideNMPCwithnotice(each,a"Notice")ofanynetpaymentsobligation resulting therefrom onorbeforethe10dayofthefirstcalendarmonthfollowing theSettlement Date.Paymentsinconnection withsuchNoticeshallbedue(each,a"PaymentDate"),onthelaterof(i)the25dayofthecalendarmonthinwhichsuchNoticeisgiven,or(ii)the15dayafterdelivetybytheIPPtoNMPCofsuchNotice.Intheeventsuch25~or15dayisaSaturday, Sundayorlegalholiday,thecorresponding paymentshallbedueonorbeforethefirstbusinessdayfollowing such25or15*day,asthecasemaybe.Thepartyowinganysuchpaymentassoindicated insuchNoticeshallmakesuchpaymenttotheotherparty,subjecttothepaymentdisputeprovision setforthbelow.PaentDisuteMechanism:

IfNMPC,ingoodfaith,disputesanypartofanyNoticeofanetpaymentobligation, NMPCshallprovideawrittenexplanation ofthebasisforsuchdisputeandtheundisputed portionofthenetpaymentobligations setforthinsuchNoticeshallbepaidbythepartyobligated topaysuchamountsnolaterthantheapplicable PaymentDate.Anyadjustinent underthisSectionshallbearinterestattheprimerateforU.S.currencyaspublished

&omtimetotimeunder"MoneyRates"inThe8'allStreetJournal,Romandincluding thePaymentDateanysuchunderpayment oroverpayment wasoriginally duetobutexcluding thedateonwhichsuchunderpayment oroverpayment isfinallysettledbythepartieshereto,orintheeventthepartiesheretoareunabletosettlesuchmatter,suchmattershallbesettledbyanindependent nationally recognized publicaccounting firmmutuallyselectedbytheparties,whosedetermination shallbefinalandbindingonthepartiesheretoandwhosefeesandexpensesshallbebornebythepartyfoundtobeatsubstantial faultbysuchindependent publicaccounting firm.NoNotice(orpaymentobligation thereunder) shallbesubjecttothisSectionunlessanoticeofdisputeisgiven'withrespecttheretowithintwoyearsofthePaymentDateapplicable tosuchNotice.OTHERPROVISIONS D~li*P'.NMtC1llpI'ly6devp'hipelectricity pursuanttosuchIPP'sExistingPPAorsuchIPP'sexistinginterconnection agreement withNMPCoratanyotherinterconnection onNMPC'ssystem.Allocation ofCertainResnsibilities.

Allocations ofresponsibility andotherarrangements madeundersuchIPP'sExistingPPAand/orexistinginterconnection agreements formaintaining serviceandequipment oneachsideofthedeliverypointandforresponsibility tothirdpartiesshallcontinueineQect.Technical Reuirements.

Provisions ofExistingPPAsand/orexistinginterconnection agreements establishing operating parameter limitswithrespecttosuchmattersasvoltage,frequency, phase,relayset-pnints.

etc.,shallrema!qipygect.,4l90l4

~Meterin.Electricity shallhe'measured asprovidedundertheExistingPPAs.ExistingPPAprovisions withrespecttosuchmattersaslocation, access,ownership, costresponsibility, metermaintenance, inspection andtesting,financial adjustment forfaultymeters,useofduplicate meters,etceashallcontinuetoapply.AssinmentbIPP.UponnoticetoNMPC,IPPmayassignortransfertheAgreement inwholeorinpart,withouttheconsentofNMPC(a)ascollateral securityforpurposesofsecuringindebtedness, or(b)toanyapprovedassigneeortransferee (an"Approved Assignee"

).AnApprovedAssigneeshallbe(i)anypersonwho(x)(A)acquirestheIPP'splant,or(B)hasaplantwithtechnical capability thatisequaltoorgreaterthanthetechnical capability oftheIPP'splant,and(y)has(A)along-tenn unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating6omanothernationally recognized ratingagency,or(B)anetworthcalculated inaccordance withgenerally acceptedaccounting principles

("NetWorth"),thatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, providedthatevidenceofsuchqualifying NetWorthisreasonably demonstrated toNMPC;or(ii)anyAffiliate oftheIPP;provided(x)suchAffiliate hasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchratingGomanothernationally recognized ratingagency,or(y)suchAffiliate hasaNetWorththatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, or(z)IPPunconditionally guarantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchAf5liateinconnection withsuchassignment ortransfer.'PP maysplitandassignthequantities ofelectricity andIntervals toApprovedAssignees, eachirirespectofalesserquantityand/orIntervals thanthefullamountsthereofhereunder, providedthat(a)eachsuchassignment isfor50,000MWhofelectricity peryearoranyintegralmultiples thereofandtotheextentthattheremaining unassigned balanceofthequantityofelectricity hereunder foranysuchyearislessthanS0,000MWh,thenforsuchremaining balance,(b)eachsuchassignment isforaperiodofatleastoneyear,and(c)thesumofallassignedandretainedquantities ofelectricity andIntervals doesnotexceedthetotalquantities ofelectricity andIntervals hereunder.

AttherequestoftheIPPduringtheindividual negotiations andduringthetermoftheAgreement, NMPCandtheIPPshallusetheirReasonable BestEffortstomutuallyagreeuponreasonable alternatives totheassignment qualifications contained intheimmediately preceding sentence.

Excepttotheextentexpressly providedinanyapplicable guarantee, uponanysuchassignment ortransfer, IPPshallbereleasedandhavenofurtherobligations toNMPChereunder withrespecttotheassignedortransferred quantities and/orIntervals.

AssinmentbNMPC.NMPCshallnotassignitsrightsandobligations hereunder exceptasexpressly authorized underthisSection(a)NMPCRestructurin

.IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,."hi.,'."er..'.n tLo;inc;.i;

-.:'.-',i-2':.'-.?a=st;~ngorotherwise, uponneolicee'to theIPP"'NI90l432 (oritsassigneehereunder) theAgreement willbeassignedtoandassumedbytheentityoi'ntities owningallorsubstantially allofNMPC'selectrictransmission anddistribution assetsor,ifseparated fromNMFC'selectrictransmission assetspursuanttosucharestructuring, NMPC'selectricdistribution assets,providedthat,upontheeffective dateoftherestructuring (i)suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory totheIPF(oritsassigneehereunder),

byeachoftheotherentitiesarisingoutoftherestructuring, including anyentityspunwfftoNMPC'sshareholders oranyAffiliate ofNMFCholdingsignificant assetsthatwereheldbyNMPCprior(oranysubsidiary ofNMPC)totherestructuring, unlesssuchassigneehasalong-term unsecured debtcreditratingissuedbyMoody'sInvestors Service,Standard&Poor'sCorporation oranothernationally recognized ratingagencythatisatleastasfavorable asNMPC'slong-term unsecured debtcreditratingimmediately priortotheeffective dateoftherestructuring, and(ii)ifsuchassigneeisnottheentitywhichwillcollectfromcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval, suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory totheIPP(oritsassigneehereunder),

byeachoftheentitieswhichwillcollectfromcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval.

(b)ThirdPAssient.UponnoticetotheIPP(oritsassigneehereunder),

NMPCmayassignitsrightsandobligations underthisAgreement toanythirdparty("NMPCAssignee"

)(exceptthosepartiesreferenced inSectionU(a)above)providedthattheNMPCAssigneehas(i)receivedalong-term unsecured debtcreditratingbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ofatleastinvestment gradeortheequivalent ofsuchrating&omanothernationally recognized ratingagency,asofthedateofconsummation oftheassignment; or(ii)furnished theIPPwithsuchcollateral securityasmaybereasonably acceptable totheIPPinordertolimittheIPP'screditriskinconnection withsuchassignment.

FurtherAssurances.

Subjecttothetermsandconditions contained herein,upontherequestkomtimetotimeofeitherpartyhereto,theotherpartyshallpromptlyexecuteanddeliveroruseitsReasonable BestEffortstocausetobeexecutedanddelivered, suchconsents, approvals andotherinstruments, including, withoutlimitation, assignments oftheAgreement ascollateral, estoppelcertificates andutilitycertificates, informandsubstance reasonably satisfactory tobothpartiesandtheirrespective counseltoimplement anyfinancing orothermaterialbusinesstransaction undertaken bytherequesting party.0l90I433 Curtailment.

(a)NMPCagreesthatitsobligation toacceptandpayforelectricity asprovidedhereinshallinnoeventbesubjecttoanycurtailment ofelectricity undertheprovisions ofl8C.F.R.g292.304(f)

(1997),oranysubsequent orsimilarruleorregulation adoptedbythePSCortheFERC,oranyruleororderofthePSC,theFERC,oranyotherGovernmental Authority interpreting orapplyingthoseprovisions orauthorizing NMPCtoreserveanyrightsunderthoseprovisions.

(b)NMPC'sacceptance ofandobligation topayforelectricity producedbytheIPPmayfromtimetotimebesuspended foranyperiodsoftimeduringwhich,forreasonsofnecessary maintenance, repair,systememergency, safetyorsimilaractions,NMPC'stransmission systemistemporarily physically unabletoacceptsuchelectricity.

NMPCshallgivereasonable noticeunderthecircumstances oftheneedforsuchdisconnection totheIPP,uponreceiptofwhichtheIPPshallcarryouttherequiredactionwithoutdelay.Duringanysuchperiodofsuspension, NMPCshalluseitsbesteffortstorestoreNMPC'scapability toacceptdeliveryofelectricity aspromptlyaspossible.

NMPCwilluseitsbesteffortstoscheduleanyplannedoutagesuponconsultation withtheIPFandcommensurate withtheIPP'sscheduleforplannedmaintenance orotheroutages.NMPCshallbearanycostsincurredbyitinconnection withanysuchdisconnection orreconnection.

Alldeliveries ofpowerwhicharesubjecttoanysuchsuspension mayberescheduled attheoptionoftheIPP.CertainAmendments.

IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, theIPP(or-itsassigneehereunder) shallhavetherighttoreplacetheAgreement, asapplicable, withpowerpurchaseand/orhedgingcontractual arrangements substantially equivalent tothosethatareenteredintobetweentheentity(ies) holdingthetransmission and/ordistribution assetsofNMPCorwhichwillcollectRomcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApprovalandtheentity(ies) holdingthenon-nucleargenerating assetsofNMPC,whetherornot'suchassetsarespun-offtoNMPC'sshareholders (a"GencoContract"

),providedthattheterm,priceandquantityundertheAgreement shaHnotbealteredthereby,unlessanyofsuchtermsarematerially andexpressly conditioned bycertainprovisions intheGencoContract, inwhichcaseappropriate andequitable adjustments insuchtermsshallbemutuallyagreeduponbyNMPCoritsassignee, asthecasemaybe,andtheIPP.ualiinFaciliMonitorin andStatus.(a)NMPCshallhavenocontractual rightandshallwaiveanyotherrightwhichitmighthaveunderstateorfederallawtodemandinformation GomtheIPP,oranyotherperson,including butnotlimitedtoanyGovernmental Authority, withrespecttosuchIPP'sstatusasastateand/orfederalqualifying facility("QFStatus").NI9014 (b)TheIPPshallhavetheright,butnottheobligation, initssolediscretion toobtainand/ormaintainitsQFStatusunderNewYorklaw(including compliance withNYPSLg2(2-a))and/orPURPA,respectively.

NMPC'srightsandobligations, including withoutlimitation itsobligation topayforelectricity producedbytheIPPassetforthhereunder, shallcontinueasamatterofcontractual rightregardless ofwhethertheIPPmaintains itsQFStatus.AnyfailurebytheIPPtocomplywiththerequirements applicable toQFStatusunderNewYorklaw(including compliance withNYPSLg2(2-a))shallhavenoadverseimpactontheIPPunderthisAgreement.

IntheeventtheIPPwishestoqualifyorperformasanExemptWholesale Generator underSection-32 ofPUHCAandFERC'sregulations promulgated thereunder, asthesamemaybeamended,modiftedorrestatedfromtimetotime,NMPCshallcooperate with(including, withoutlimitation, byproviding consentsandaQidavits),

andshallnottakeanyactiontooppose,impedeorsubvert,theIPP'seffortstoobtainappropriate regulatory exemptions andapprovals, including market-based rateapproval.

ExcepttotheextentthatthecontractpricesunderthisAgreement areormaybebasedthereon,duringthetermoftheAgreement theIPP(i)shallwaiveanystatutory rightitmayhaveunderSection66-cofNYPSLpursuanttowhichtheIPPmaydemanda6gperKWhminimump'owerpurchaserateGomNMPC,and(ii)shallwaive,foritselfandforthesuccessors andassignsofitsProject,withrespecttosuchProject,anystatutory rightitmayhaveunderPURPAorNYPSLtorequireNMPCtoenterintoapowerpurchasecontractorotherwise taketheoutputoftheIPP'sProject;provided, however,thatuntiltheendoftheProxy-Market PricePeriodNMPCagrees,attheIPP'srequest,toactasagentfortheIPP(or,ifnecessary toeffectuate suchsalestotheNewYorkPowerPool,bypurchaseandresaleoftheIPP'scapacityandenergy,atnocosttoNMPC),forthesaleonuptoamonthlybasis,oftheIPP'sProject's capacityandenergytotheNewYorkPowerPooloranythirdparty,'ineachcaseonanondiscriminatory basiswithrespecttoNMPC'soianythirdparty'scapacityandenergy,atnocosttotheIPP.NMPCagreestouseitsReasonable BestEffortstoeffectsuchsalesonthemostfavorable terms,including price,totheIPPgivingconsideration tothequantity, termandmarketconditions prevailing atthetimeofsale.Nothingcontained hereinshallbeconstrued toconstitute awaiverbytheIPPofanyotherrightsitmayhaveunderPURPA,NYPSLorapplicable law,including rightswithrespecttoback-upservices, interconnection, reactivepowerorothersimilarrights,whetherornotacontractisrequiredordesirable.

Relocation ofPowerLines.Intheeventitbecomesnecessary

-forNMPCtorelocateorrearmngeitstransmission systemtowhichtheIPPisconnected, NMPCshalladvisetheIPPatleastoneyearinadvanceinwriting.Ifsuchrelocation orrearrangement isorderedorrequiredbyaGovernmental Authority, NMPCshallgivepriorwrittennoticetotheIPPequalintimetothenoticegiventoNMPCbysuchGovernmental Authority.

NMPCshallconsultwiththeIPPonthenewfacilities thatNMPCshallproposetoreestablish theconnection.

Suchnewfacilities shallbereasonably satisfactory totheIPPand,ataminimum,shallprovidetheIPPwithatleastasmuchoutputcapacityaswiththepriorconnection facilities.

NMPCshallbearthefullcostandexpenseofreestablishing theconnection totheIPP.NMPCshalluseitsbesteffortstominimizethedurationofanydisruption totheIPP'sserviceduringtherelocation orrearrangement ofNMPC'slNl90I435 transmission facilities.

Notwitbstanding anythingtothecontrarycontained herein,theprovisions ofthisSectionshallnotapplytotheabandonment ofpowerlines.~~ling.TheIPPshallhavetherighttohaveNMPCwheelsomeoralloftheoutputofitsProjecttothirdpartiespursuanttoapplicable law,orNMPC's,orothercompanies',

dulyfiledtransmission anddistribution tariffsorschedules.

• • hh'*(a)lntheeventeitherpartyheretoisrenderedunable,whollyorinpart,byForceMajeuretocarryoutitsobligations undertheAgreement, otherthantheobligation tomakepaymentsofamountsduehereunder, itisagreedthatuponnotice,withreasonably fullparticulars ofsuchForceMajeuregivenbysuchpartytotheotherpartyinwritingwithinareasonable timekameaftertheoccurrence ofthecausereliedupon,thentheobligation orobligations hereunder ofthepartygivingsuchnotice,sofarastheyareafFectedbysuchForceMajeure,shallbesuspended duringthecontinuance ofaninability socaused.Suchcauseshall,asfaraspossible, beremediedwithallreasonable dispatch.

(b)Theterm"ForceMajeure"asusedhereinmeansactsofGod,strikes,lockouts, actsofpublicenemies,wars,blockades, insurrections, riots,epidemics, landslides, lightning, systememergencies, earthquakes, fires,storms,Goods,washouts, arnis,explosions, breakageoraccidenttomachinery, equipment ortransmission ordistribution lines;providedthatthetermForceMajeuredoesnotmeanorincludeanycausewhichbytheexerciseofreasonable diligence ofthepartyclaimingsuspension couldbeovercome.

PersonsBoundandBenefited.

TheAgreement shallbindandbenefitassignsandothersuccessors.

G*'gh*g**hglh*g*Hhyg*hi*Ifg*Yg,irrespective ofconflicts oflawrules.tl901436 ATTACHMENT A-9OPTIONPROVISIONS FORRESTATEDCONTRACTS WITHGASIPPS'ONTRACT YEARAGGREGATE OPTIONQUANTITY(GWh)500500500500WEIGHTEDAVERAGEAVOIDEDOPTIONPRICE($/MWh)'4.07 23.8524.7126.1927.2928.51lThistablerepresents theaggregate quantities andweightedaverageavoidedpricesfortheoptionpre<<aeons wl'4cd/o<<clijiÃ<<w.'~

-".~~~2Represents cstimatcs proposedbyNMPC.>l90I437 ATTACHMENT A-10FIXEDPRICESWAPCONTRACTS (4)YEAR2003200420052006200720082009AGGREGATE CAPACITY(MW)'28.3.

342.5456.6456.6456.6913.2913.2AGGREGATE QUANTITY(GWh)3,0004,0004,0008,0008,000PRICE(SjMWh)54.5856.5158.0160.4862.3061.9962.06lRepresents theaggregate

~ityduringallperiodswithineachrelevantyearwhichissubjecttotheFixedPriceSwapContracts.

Priortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists,thepricefoi'heapplicable capacityshallequalzero.Following theProxy-Market PricePeriodandonlyifthereexistsaseparatemarketfor.;.;eel.,-.

=appiicabic capacitywillbeadjusted'ca abasist.-is!='.aderiL's'":"s;u.b""b~separatemarket.sl90I438 ATTACHMENT A-11TERNISHEET FORFIXEDPRICESWAPCONTRACTS Setforthbelowisatermsheet foraSchedulewhichwillbeattachedtoandbemadeapartofaMasterAgreement fortheFixedPrice'wap Contracts.

TheMasterAgreement fortheFixedPriceSwapContracts willbebasedonanISDAstandardformofMasterAgreement, whichisaformthatis&equently usedforswapcontracts.

TheMasterAgreement vrillsetforthgeneraltermsandconditions, including representations andwarranties andeventsofdefault.TERMSHEET FORSCHEDULEtotheMasterAgreement forFixedPriceSwapContracts betweenNiagaraMohawkPowerCorporation

("NMPC")and"Counterparty")

(a)PaymentonSettlement Date.THEOBLIGATIONS INCURREDPURSUANTTOTHISSCHEDULESHALLREQUII&CASHPAYMENTSANDSHALLINNOEVENTBEINTERPRETED TOREQUIRETHEPURCHASEORSALEOFELECTRICITY.

(i)SubjecttoSection1(a)(ii)ofthisSchedule, ontheSettlement Date,NMPCshallbeobligated topaytoCounterparty theFixedPaymentandCounterparty shallbeobligated topaytoNMPCtheFloatingPayment.Suchpaymentobligations shallbepaidonanetbasispursuanttoSectionofthisAgreement onthePaymentDate.4I90I4(ii)PamentDisuteMechanism:

IfCounterparty, ingoodfaith,disputesanypartofanyNoticeofanetpaymentobligation, Counterparty shallprovideawrittenexplanation ofthebasisforsuchdisputeandtheundisputed portionofthenetpaymentobligations setforthinsuchNoticeshallbepaidbythepartyobligated topaysuchamountsnolaterthantheapplicable PaymentDate.Anyadjustment underthisSection1(a)(ii)shallbearinterestattheprimerateforU.S.currencyaspublished

&omtimetotimeunder"MoneyRates"inTheFallStreetJournal,fromandincluding thePaymentDateanysuchunderpayment oroverpayment wasoriginally duetobutexcluding thedateonwhichsuchunderpayment oroverpayment isfinallysettledbythepartieshereto,orintheeventthepartiesheretoareunabletosettlesuchmatter,suchmattershallbesettledbyanindependent nationally recognized publicaccounting firmmutuallyselectedbytheparties,whosedetermination shallbefinalandbindingonthepartiesheretoandwhosefeesandexpensesshallbebornebythepartyfoundtobeatsubstantial faultbysuchinde@~heitopal!cac<:o>>niirpe.,f~r>>i.,

No"i~!ic~.~~~."39 paymentobligation thereunder) shallbesubjecttothisSectionl(a)(ii)unlessanoticeofdisputeisgivenwithrespecttheretowithintwoyearsofthePaymentDateapplicable tosuchNotice.(b)RelatedDefinitions andProvisions.

P*2*:PP*Py*DhllhgIfflyg22hyflcalendarmonth,providedsuchdayisaBusinessDay,andifsuchdayisnotaBusinessDayonthefirstBusinessDayfollowing such25~day,or(ii)the15~dayafterthereceiptbyCounterparty ofNoticeGomNMPC,providedsuchdayisaBusinessDay,andifsuchisnotaBusinessDay,onthefirstBusinessDayfollowing such15~day.Notwithstanding theforegoing, intheeventthatfollowing theProxy-Market PricePeriodISO/PEprocedures requirealternate datesforpayments, suchalternate paymentdatesshallautomatically bedeemedtobeincorporated in,andshallsupersede, thepaymentdatessetforthherein.ISO/PE:ShaUmeanaNewYorkIndependent SystemOperatorandPowerExchange.

NMPCPantOblation:NMPCshallbeobligated topaytoCounterparty anamountequaltotheproductoftheNotionalQuantityofelectricity duringtheapplicable Intervalmultiplied bytheContractPriceapplicable tosuchInterval(the"NMPCPaymentObligation"

).PiDPIhy'P*fD*I*Dtglhequaltothesumof(i}theFixedPaymentforthepriorInterval(whichshallbezerofortheInitialInterval),

and(ii)theNMPCPaymentObligation forthecurrentInterval.

CountePaentObliation:Counterparty shallbeobligated topaytoNMPCanamountequaltotheproductoftheNotionalQuantityofelectricity duringtheapplicable Intervalmultiplied bytheProxy-Market PriceortheMarketPrice,asthecasemaybe,applicable tosuchInterval(the"Counterparty PaymentObligation"

).P~l'*:yhPD'Pyfg*IDhglh*amounthequal tothesumof(i)theFloatingPaymentforthepriorInterval(whichshallbezerofortheInitialInterval),

(ii)theFloatingPaymentforthecurrentInterval, and(iii)ifapplicable, theMarketCapacityPricein$/MWfortheperiod&omtheInitialIntervaltotheSettlement Datemultiplied bytheweightaveragedcapacityassociated withtheNotionalQuantityofelectricity foreachInterval&omtheInitialIntervaltotheSettlement Date.ContractPrice:ShallmeanforeachyearoftheTermofthisAgreement commencing withJanuaryI,2003,$/MWh,$/MWh,$/MWh,$/MWh,$/MWh,$/MWhand$/MWh,respectively.

P.yI/l90I440 Settlement Date:Shallbethelastdayofthecalendarmonthspecified intheConfirmation delivered inaccordance withthetermsoftheMasterAgreement.

Interval:

Shallbe(i)Ihour;providedthatintheeventthatfoltoviing theProxy-MarketPricePeriodISOiPEprocedures requiretheuseofanalternate timeperiod,suchalternate timeperiodshallautomatically bedeemedtobeincorporated in,andshallsupersede, the1hourperiodsetforthherein,or(ii)suchtimeperiodasNMPCandCounterparty shallmutuallyagreeupon;providedthatsuchmutuallyagreedupontimeperiodmayonlybemodifieduponthepriorwrittenconsentofNMPCandCounterparty.

InitialInterval:

ShallbetheIntervalspecified intheConfirmation delivered inaccordance withthetermsoftheMasterAgreement.

Notice:AlternettingtheFixedPaymentandtheFloatingPayment,NMPCshallprovideCounterparty withnotice(each,a"Notice")ofanynetpaymentobligation resulting there&omonorbeforethe10dayofthefirstcalendarmonthfollowing theSettlement Date;providedthatintheeventthatfollowing theProxy-Market PricePeriodISO/PEprocedures requirean'alternate dateforpaymentnotices,suchalternate noticedateshallautomatically bedeemedtobeincorporated in,andshallsupersede, thenotice3*fhl**'hN3**hhlh3'dly'*ffashdhthisAgreement.

N~if':Shdlt3y.**'3'33~32dhhh*following contractquantities ofelectricity (inGWh)forwhichCounterparty andNMPCarecontractually committed:

2,000,3,000,4,000,4,000,4,000,8,000and8,000,respectively.

Pro-MarketPrice:Shallmean(i)priortotheestablishment oftheISO/PE,NMPC'sshort-term avoidedenergyandcapacitycostsatthetransmission level,asstatedinitstariffapprovedbythePSCproviding forthepurchaseofpower&omPURPAqualifying facilities, whichtariffiscurrently designated asS.C.-6,asthesamemaybeineffectfromtimetotime,oranysuccessor tarifftheretoorsuchotherpriceasmaybeagreedupon'byNMPCandIPPspriortotheexecution anddeliveryoftheFixedPriceSwapContracts, and(ii)onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished, theMarketPriceand,ifapplicable, theMarketCapacityPrice;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferenced inclause(i)aboveforamutuallyagreeduponadditional periodoftime.TheProxy-Market PriceshallnotbereducedoroffsetbyanycoststhatNMPCmayincur,including, withoutlimitation, costsforancillary

services, transmission servicesortransition (orstranded) costs.Prox-MarketPricePeriod:Shallmeantheperiodcommencing onthedateofthisAgreement andendingonthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEhasbeenfullyestablished andsuccessmly functioning, providedthefollowing conditions havebeensatisfied foreachoftheprevioussixmonths:(i)ami",imue~f.65'yp.<v.lush.ib'""."i)tate

~",.<3'."".",'!>~=..

theaggregate contractquantities of-..--Nr0l90I4 energyduringsuchperiodunderallphysicaldeliveryRestatedContracts withGasIPPsandallphysicaldeliveryContracts betweenNMFCandanyIPPpartytotheMasterRestructuring Agreement enteredintoinlieuofFixedPriceSwapContracts, regardless ofwhethertheIPPspartiestheretoactuaByeffectedsuchsalesandallsalesonuptoamonthlybasisofenergy(otherthansalesthroughtheISO/PE)bytheIPPspartiestotheMasterRestructuring Agreement whichareeffectuated byNMPCactingasagentforanysuchIPP)oftheenergysalesandpurchases withintheUpstateMarkethavebeentransacted throughtheISO/PEinthedayaheadmarketbaseduponthedayaheadpricingmechanism adoptedbytheFERCfortheISO/PEintheUpstateMarket;and(ii)onlyifaseparatemarketforcapacitythenexists,aminimumof50%(whichpercentage shallincludetheaggregate capacityassociated withtheaggregate contractquantities ofenergyduringsuchperiodunderallphysicaldeliveryRestatedContracts withGasIPPsandallphysicaldeliveryContracts betweenNMPCandanyIPPpartytotheMasterRestructuring Agreement enteredintoinlieuofFixedPriceSwapContracts, regardless ofwhethertheIPPspartiestheretoactuallyeffectedsuchsalesandallsalesonuptoamonthlybasisofcapacity(otherthansalesthroughtheISO/PE)bytheIPPspartiestotheMasterRestructuring Agreement whichareeffectuated byNMPCactingas'gentforanysuchIPP)ofthecapacitysalesandpurchases withintheUpstateMarkethavebeentransacted throughtheISO/PEcapacityauction.Notwithstanding theforegoing, ifNMPCandCounterparty mutuallyagree,theProxy-Market PricePeriodmaybeextendedorterminated eveniftheconditions setforthintheimmediately preceding sentencehavenotbeensatisfied.

.IJ*M*:ShelII*'ly(0a*regionscurrently servedbyNMPC,NewYorkStateElectric&GasCorporation, Rochester Gas&ElectricCorporation andCentralHudsonGas&ElectricCorporation (collectively, the"Utilities"

),and(ii)wholesale salestransactions byanyoftheUtilities tothirdpartiesoutsidetheregionscurrently servedbysuchUtility,excluding anysuchsaleswhichareeffectuated pursuanttocontracts havingatermofatleastoneyearexistingasofthedateoftheMasterRestructuring Agreement totheextentsuchcontracts areineffectthereafter.

MarketPrice:Shallmeancommencing onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished, the.dayaheadlocational basedmarketprice("LBMP")paidtosellersforenergy,attheSithe/Independence Project's busbarortheregioninwhichsuchbusbarislocated,specified andpublished bytheISO/PE;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferredtoinclause(i)ofthedefinition ofProxy-Market Priceforamutuallyagreeduponadditional periodoftime.MarketCaaciPrice:Shallequalzeropriortotheestablishment oftheISO/PEandthereafter atanytimewhennoseparatemarketforcapacityexists.Commencing onthefirstdayofthemonthfollowing thecalendarmonthinwhichtheISO/PEisestablished andonlyiftherethenexistsaseparatemarketforcapacity, theMarketCapacityPriceshallmeanmarketpricepaidtosellersforcapacity, at.theregioninwhich'he'.~.~"'ic~-i<<".dence Project's'us barislocated;establish!c~

by"-."iSG/PI-:-'i-"~'caiy"

'-"4l90l442 auction;provided, however,thatatsuchtimethepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstomutuallydetermine whethertocontinuethepricingreferredtoinclause(i)ofthedefinition ofProxy-Market Priceforamutuallyagreeduponadditional periodoftime.Following theProxy-Market PricePeriodandonlyiftherethenexistsaseparatemarketforcapacity, thepartiesshallconductgoodfaithnegotiations andusetheirReasonable BestEffortstoadjusttheapplicable capacityonabasisconsistent withthestructure ofsuchseparatemarket.Term:ThetermofthisAgreement shallcommenceasoftheEffective Timewithpaymentstooccurhereunder duringtheperiodcommencing January1,2003,andendingDecember31,2009.2.AssinmentbCountea.UponnoticetoNMPC,Counterparty mayassignortransferthisAgreement inwholeorinpart,withouttheconsentofNMPC(a)ascollateral securityforpurposesofsecuringindebtedness, or(b)toanyapprovedassigneeortransferee (an"Approved Assignee"

).AnApprovedAssigneeshallbe(i)anypersonhavingalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency;(ii)anyAffiliate ofCounterparty; provided(x)suchAffiliate hasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency,or(y)suchAffiliate hasanetworthcalculated inaccordance withgenerally acceptedaccounting principles

("NetWorth"),thatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, or(z)Counterparty unconditionally guarantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchAffiliate inconnection withsuchassignment ortransfer, (iii)anyoftheGasIPPspartytoaRestatedContractwithNMPCortheirrespective Affiliates; provided(x)suchGasIPPorsuchAf5liatehasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchratingGomanothernationally recognized ratingagency,or(y)suchGasIPPorsuchAffiliate hasaNetWorththatisequaltoor~terthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, or(z)Counterparty (inthecaseofanassignment ortransfertoaGasIPP)orsuchGasIPP(inthecaseofanassignment ortransfertoanyofitsAffiliates) unconditionally guarantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchGasIPPorsuchAffiliate, asthecasemaybe,inconnection withsuchassignment ortransfer; or(iv)anyotherpersonwhohasaNetWorththatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortmnsferonthedateofsuchassignment ortransfer, providedthatevidenceofsuchqualifying NetWorthisreasonably demonstrated toNMPC.Counterparty maysplitandassigntheNotionalQuantities ofelectricity andIntervals toApprovedAssignees, eachinrespectofalesserNotionalQuantityand/orIntervals thanthefullamountsthereofhereunder, providedthat(a)eachsuchassignment isfor50,000MWhofelectricity peryearoranyintegralmultiples thereofandtotheextentthattheremaining unassigned balanceoftheNotionalquantityofelectricity hereunder foranysuchyearislessthar50,000'M'w'h,inenfor"'l90I443 suchremaining balance,(b)eachsuchassignment isforaperiodofatleastoneyear,and(c)thesumofallassignedandretainedNotionalQuantities ofelectricity andIntervals doesnotexceedthetotalNotionalQuantities ofelectricity andIntervals hereunder.

Attherequestof(x)theIPPspriortotheexecution anddeliveryoftheFixedPriceSwapContracts, and(y)attherequestofCounterparty duringthetermofthisAgreement, NMPCandtheIPPsorCounterparty, asthecasemaybe,shallusetheirReasonable BestEffortstomutuallyagreeuponreasonable alternatives totheassignment qualifications contained intheimmediately preceding sentence.

Excepttotheextentexpressly providedinanyapplicable guarantee, giponanysuchassignment ortransfer, Counterparty shallbereleasedandhavenofurtherobligations toNMPChereunder withrespecttotheassignedortransferred NotionalQuantities and/orIntervals.

3.AssimentbNMPC.NMPCshallnotassignitsrightsandobligations hereunder exceptasexpressly authorized underthisSection3.(a)NMPCRestructurin

.IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, uponnoticetoCounterparty (oritsassigneehereunder) thisAgreement willbeassignedtoandassumedbytheentityorentitiesowningallorsubstantially allofNMPC'selectrictransinission anddistribution assetsor,ifseparated RomNMPC'selectrictransmission assetspursuanttosucharestructuring, NMPC'selectricdistribution assets,providedthat,upontheeffective dateoftherestructuring (i)suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory toCounterparty (oritsassigneehereunder),

byeachoftheotherentitiesarisingoutoftherestructuring, including anyentityspunwfftoNMPC'sshareholdes oranyAffiliate ofNMPCholdingsignificant assetsthatwereheldbyNMPC(oranysubsidiary ofNMPC)priortotherestructuring, unlesssuchassigneehasalong-term unsecured debtcreditratingissuedbyMoody'sInvestors Service,Standard&Poor'sCorporation oranothernationally recognized ratingagencythatisatleastasfavorable asNMPC'slong-term unsecured debtcreditratingimmediately priortotheeffective dateoftherestructuring, and(ii)ifsuchassigneeisnot-theentitywhichwillcollect&omcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval, suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory totheCounterparty (oritsassigneehereunder),

byeachoftheentitieswhichwillcollect&omcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval.

(b)ThirdPAssient.UponnoticetoCounterparty (oritsassigneehereunder),

NMPCmayassignitsrightsandobligations underthisAgreement toanythirdparty("NMPCAssignee"

)(exceptthosepartiesreferenced inSection3(a)above)providedthattheNMPCAssigneehas(i)receivedalong-term unsecured debtcreditratingbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ofatleastinvestment gradeortheequivalent ofsuchrating&omanothernationally recognized ratingagency.asofthedateofconsummation oftheassignment; or(ii)furnished Counterparty withsuchcollateral securityasmaybereasonably acceptable tothe4190I444 Counte5arty inordertolimittheCounterparty's creditriskinconnection withsuchassignment.

4.FurtherAssurances.

Subjecttothetermsandconditions contained herein,upontherequestfromtimetotimeofeitherpartyhereto.theotherpartyshallpromptlyexecuteanddeliveroruseitsReasonable BestEffortstocausetobeexecutedanddelivered, suchconsents, approvals andotherinstruments, including, withoutlimitation, assignments ofthisAgreement ascollateral, estoppelcertificates andutilitycertificates, informandsubstance reasonably satisfactory tobothpartiesandtheirrespective counseltoimplement anyfinancing orothermaterialbusinesstransaction undertaken bytherequesting party.5.CertainAmendments.

IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, Counterparty (oritsassigneehereunder) shallhavetherighttoreplacethisAgreement, asapplicable, withpowerpurchaseand/orhedgingcontractual arrangements substantially equivalent tothosethatareenteredintobetweentheentity(ies) holdingthetransmission and/ordistribution assetsofNMPCorwhichwillcollect&omcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApprovalandtheentity(ies) holdingthenon-nucleargenerating assetsofNMPC,whetherornotsuchassetsarespun-offtoNMPC'sshareholders (a"GencoContract"

),providedthattheterm,priceandquantityunderthisAgreement shallnotbealteredthereby,unlessaiiyofsuchtermsarematerially andexpressly conditioned bycertainprovisions intheGencoContract, inwhichcaseappropriate andequitable adjustinents ins'uchtermsshallbemutuallyagreeduponbyNMPCoritsassignee, asthecasemaybe,andCounterparty.

Nl90I445 APPENDIX11-1FORMOFNOTICE[tobesupplied]

N1901446 ATTACHMENT A-12ADDITIONAL TERMS,CONDITIONS ANDPROVISIONS FORTHEAMENDEDPPAANDRESTATEDCONTRACTS Unlesstheapplicable IPPandNMPCmutuallyagreeotherwise, (i)theAmendedPPAshallalsobeamendedtoincludeallofthefollowing provisions, whichshallsupersede andreplaceintheirentirety, theprovisions, ifany,withrespecttothesubjectmatterthereofcontained intheExistingPPA,and(ii)eachRestatedContract(otherthanIndexedSwapContracts andPowerPutContracts) shallincludeallofthefollowing provisions:

tThefollowing provision istobeincludedintheAmendedPPAandinRestatedContracts thatprovideforphysicaldeliveries ofelectricity.]

AssientbIPP.UponnoticetoNMPC,IPPmayassignortransferthisAgreement inwholeorinpart,withouttheconsentofNMPC(a)ascollateral securityforpurposesofsecuringindebtedness, or(b)toanyapprovedassigneeortransferee (an"Approved Assignee"

).AnApprovedAssigneeshaBbe(i)anypersonwho(x)(A)acquirestheIPP'splant,or(B)hasaplantwithtechnical capability thatisequaltoorgreaterthanthetechnical capability oftheIPP'splant,and(y)has(A)along-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchratingRomanothernationally recognized ratingagency,or(B)anetworthcalculated inaccordance withgenerally acceptedaccounting principles

("NetWorth"),.that.isequaltoorgreaterthantheNet%orthoftheentitymako>gsuchassignment ortransferonthedateofsuchassignment ortransfer, providedthatevidenceofsuchqualifying NetWorthisreasonably demonstrated toNMPC;or(ii)anyAf6liateoftheIPP;provided(x)suchAffiliate hasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency,or(y)suchAffiliate hasaNetWorththatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, or(z)IPPunconditionally guarantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchAf61iateinconnection withsuchassignment ortransfer.

IPPmaysplitandassignthequantities ofelectricity andIntervals toApprovedAssignees, eachinrespectofalesserquantityand/orIntervals thanthefullamountsthereofhereunder, providedthat(a)eachsuchassignment isfor50,000MWhofelectricity peryearoranyintegralmultiples thereofandtotheextentthattheremaining unassigned balanceofthequantityofelectricity hereunder foranysuchyearislessthan50,000MWh,thenforsuchremaining balance,(b)eachsuchassignment isforaperiodofatleastoneyear,and(c)thesumofallassignedandretainedquantities ofelectricity andIntervals doesnotexceedthetotalquantities ofelectricity andIntervals hereunder.

AttherequestofthelPPduringtheindividual negotiations andduringthetermofthisAgreement.

NMPCandtheIPPshallusetheirReasonable Be~tFAnrts.tom!ihip'!i~pg~o.puponreasonable alternatives totheassignment qualifications contained inthe0i90I447 immediately preceding sentence.

Excepttotheextentexpressly providedinanyapplicable guarantee, uponanysuchassignment ortransfer, IPPshallbereleasedandhavenofurtherobligations toNMPChereunder withrespecttotheassignedortransferred quantities and/orIntervals.

Phefollowing provision istobeincludedinRestatedContracts thatdonotprovideforphysicaldeliveries ofelectricity.]

AssinmentbIPP.UponnoticetoNMPC,IPPmayassignortransferthisAgreement inwholeorinpart,withouttheconsentofNMPC(a)ascollateral securityforpurposesofsecuringindebtedness, or(b)toanyapprovedassigneeortransferee

("Approved Assignee"

).AnApprovedAssigneeshallbe(i)anypersonhavingalon-ermunsecured debtcreditratmgofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchrating&omanothernationally recognized ratingagency;(ii)anyAf5liateofIPP;provided(x)suchAffiliate hasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchratingRomanothernationally recognized ratingagency,or(y)suchAffiliate hasanetworthcalculated inaccordance withgenerally acceptedaccounting principles

("NetWorth"),thatisequaltoorgreaterthantheNetWorthoftheentitymakingsuch.assignment ortransferonthedateofsuchassignment ortransfer, or(z)IPPunconditionally guarantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchAfniateinconnection withsuchassignment ortransfer; (iii)anyoftheotherGasIPPspartytoaRestatedContractwithNMPCortheirrespective AKliates; provided(x)suchotherGasIPPorsuchAffiliate hasalong-term unsecured debtcreditratingofnolessthaninvestment gradeissuedbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ortheequivalent ofsuchratingRomanothernationally recognized ratingagency,or(y)suchotherGasIPPorsuchAf5liatehasaNetWorththatisequaltoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, or(z)IPP(inthecaseofanassignment ortransfertoanotherGasIPP)orsuchotherGasIPP(inthecaseofanassignment ortransfertoanyofitsAffiliates) unconditionally yuuantees, pursuanttoaguarantee informandsubstance reasonably satisfactory toNMPC,theobligations ofsuchotherGasIPForsuchAf51iate, asthecasemaybe,inconnection withsuchassignment ortransfer; or(iv)anyotherpersonwhohasaNetWorththatualtiseqtoorgreaterthantheNetWorthoftheentitymakingsuchassignment ortransferonthedateofsuchassignment ortransfer, providedthatevidenceofsuchqualifying NetWorthisreasonably demonstrated toNMPC.IPPmaysplit.and assignthecontractquantities ofelectricity andIntervals toApprovedAssignees, eachinrespectofalessercontractquantityand/orIntervals thanthefullamountsthereofhereunder, providedthat(a)eachsuchassignment isfor50,000MWhofelectricity peryearoranyintegralmultiples thereofandtotheextentthattheremaining unassigned balanceofthequantityofelectricity hereunder foranysuchyearislessthan50,000MWh,thenforsuchremaining balance,(b)eachsuchassignment isforaperiodofatleastoneyear,and(c)esumofallassignedandretainedcontractquantities ofelectricity andIntervals doesnotexceedthetotalcontractog~tities.nf.e3e;~ci~,

gad,<rht~~i~!o t.ero.under:

Atth-~-"requestoftheIPPduringtheindividual negotiations andduringthetermofthisgl90l44it Agreement, HMPCandtheIPPshallusetheirReasonable BestEffortstomutuallyagreeuponreasonable alternatives totheassignment qualifications

=contained intheimmediately preceding sentence.

Excepttotheextentexpressly providedinanyapplicable guarantee, uponanysuchassignment ortransfer, IPPshallbereleasedandhavenofurtherobligations toNMPChereunder withrespecttotheassignedortransferred contractquantities and/orIntervals.

AssinmentbNMPC.NMPCshallnotassignitsrightsandobligations hereunder exceptasexpressly authorized underthisSection(a)NMPCRestructurin

.IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, uponnoticetotheIPP(oritsassigneehereunder) thisAgreement willbeassignedtoandassumedbytheentityorentitiesowningallorsubstantially allofNMPC'selectrictransmission anddistribution assetsor,ifseparated GemNMPC'selectrictransmission assetspursuanttosucharestructuring, NMPC'selectricdistribution assets,providedthat,upontheeffective dateoftherestructuring (i)suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory totheIPP(oritsassigneehereunder),

byeachoftheotherentitiesarisingoutoftherestructuring, including anyentityspunwfftoNMPC'sshareholders oranyAffiliate ofNMPCholdingsignificant assetsthatwereheldbyNMPCprior(oranysubsidiary ofNMPC)totherestructuring, unlesssuchassigneehasalong-teiin unsecured debtcreditratingissuedbyMoody'sInvestors Service,Standard&Poor'sCorporation oranothernationally recognized ratingagencythatisatleastasfavorable asNMPC'slong-termunsecured debtcreditratingimmediately priortotheeffective dateoftherestructuring, and(ii)ifsuchassigneeisnottheentitywhichwillcollect&omcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApproval, suchassignee's performance underthisAgreement isunconditionally guaranteed, pursuanttoaguarantee informandsubstance reasonably satisfactory tothe!PP(oritsassigneehereunder),

byeachoftheentitieswhichwillcollect&omcustomers theCompetitive Transition ChargeapprovedbythePSC,pursuant tothePSCApproval.

(b)ThirdPAssient.UponnoticetotheIPP(oritsassigneehereunder),

NMPCmayassignitsrightsandobligations underthisAgreement toanythirdparty("NMPCAssignee"

)(exceptthosepartiesreferenced inSectionQ(a)above)providedthattheNMPCAssigneehas(i)receivedalong-term unsecured debtcreditratingbyMoody'sInvestors ServiceorStandard&Poor'sCorporation ofatleastinvestment gradeortheequivalent ofsuchrating&omanothernationally recognized ratingagency,asofthedateofconsummation oftheassignment; or(ii)furnished theIPPwithsuchcollateral securityasmaybereasonably acceptable totheIPPinordertolimittheIPP'screditriskinconnection withsuchassignment.

UFurtherAssurances.

Subjecttothetermsandconditions contained herein,upontherequestfromtimetotimeofeitherpartyhereto,theotherpartyshallpromptlyexecuteanddeliveroruseitsRe~sollablc BestFPorlst~".a~i~etoi.~va~!!t~d

~nddelivered, such"'onsents, approvals andotherinstruments, including, withoutlimitation, assignments oflll90l449 thisAgreement ascollateral, estoppelcertificates andutilitycertificates, informandsubstance reasonably satisfactory tobothpartiesandtheirrespective counseltoimplement anyfinancing orothermaterialbusinesstransaction undertaken bytherequesting party.Curtailment.

(a)NMPCagreesthatitsobligation toacceptandpayforelectricity asprovidedhereinshallinnoeventbesubjecttoanycurtailment ofelectricity undertheprovisions of18C.F.R.$292.304(f)

(1997),oranysubsequent orsimilarruleorregulation adoptedbythePSCortheFERC,oranyruleororderofthePSC,theFERC,oranyotherGovernmental Authority interpreting orapplyingthoseprovisions orauthorizing NMPCtoreserveanyrightsunderthoseprovisions.

IPP(b)NMPC'sacceptance ofandobligation topayforelectricity producedbthmay&omtunetotimebesuspended foranyperiodsoftimeduringwhich,forereasonsofnecessary maintenance, repair,systememergency, safetyorsimilaractions,MPC'stransmission systemistemporarily physically unabletoacceptsuchelectricity.

NMPCshallgivereasonable noticeunderthecircumstances oftheneedforsuchdisconnection totheIPP,uponreceiptofwhichtheIPPshallcarryouttherequiredactionwithoutdelay.Duringanysuchperiodofsuspension, NMPCshalluseitsbesteffortstorestoreNMPC'scapability toacceptdeliveiyofelectricity aspromptlyaspossible.

Cwilluseitsbesteffortstoscheduleanyplannedoutagesuponconsultation withtheIPPandcommensurate withtheIPP'sscheduleforplannedmaintenance orotheroutages.NMPCshallbearanycosts.incurredbyitinconnection withanysuchisconnection orreconnection.

Alldeliveries ofpower.whicharesubjecttoanysuchsuspension mayberescheduled attheoptionoftheIPP.UCertainAmendments, IntheeventthatNMPCrestructures itscorporate structure orassets,including bycreatinganynewentitiesthatholdsignificant assets,whetherinconnection withtheNMPCRestructuring orotherwise, theIPP(hereunder) shallhavetherighttoreplacethisAgreement, asapplicable, withpowerpurchaseand/orhedgingcontractual arrangements substantially equivalent tothosethatareenteredintobetweentheentity(ies) holdingthetransmission and/ordistribution assetsofNMPCorwhichwillcollectRomcustomers theCompetitive Transition ChargeapprovedbythePSCpursuanttothePSCApprovalandtheentity(ies) holdingthenon-nucleargenerating assetsofNMPC,whetherornotsuchassetsarespunwfftoNMPC'sshareholders (a"GencoContract"

),providedthattheterm,priceandquantityunderthisAgreement shallnotbealteredthereby,unlessanyofsuchtermsarematerially andexpressly conditioned bycertainprovisions intheGencoContract, inwhichcaseappropriate andequitable adjustments insuchtermsshallbemutuallyagreeduponbyNMPCoritsassignee, asthecasemaybe,andtheIPP.Phefollowing provision istobeincludedintheAmendedPPAandinRestatedContracts thatprovideforphysicaldeliveries ofelectricity.]

NI90I450 (J~O'NMPCk1dgthqipfI'p~iyproducedbytheIPPmayvarybasedonfactorsexternaltotheIPP.NMPCshallberequiredtopurchasefromtheIPP,atthesamepricewhichNMPCisthenrequiredtopaypursuanttothetermsofthisAgreement forcontractquantities ofelectricity, anamountofenergyinexcessofthecontractquantityofelectricity; providedsuchamountofexcessenergydoesnotexceed5%ofthecontractquantityofelectricity fortheapplicabIe Interval.

ualiinFaciliMonitorin andStatus.(a)NMPCshallhavenocontractual rightandshallwaiveanyotherrightwhichitmighthaveunderstateorfederallawtodemandinformation GemtheIPP,oranyotherperson,including butnotlimitedtoanyGovernmental Authority, withrespecttosuchIPP'sstatusasastateand/orfederalqualifying facility("QFStatus").(b)TheIPPshallhavetheright,butnottheobligation, initssolediscretion toobtainand/ormaintainitsQF-Status underNewYorklaw(including compliance withNYPSL'$2(2-a))and/orPURPA,respectively.

NMPC'srightsandobligations, including withoutlimitation itsobligation topayforelectricity producedbytheIPPassetforthhereunder, shallcontinueasamatterofcontractual rightregardless ofwhethertheIPPmaintains itsQFStatus.AnyfailurebytheIPPtocomplywiththerequirements applicable toQFStatusunderNewYorklaw(including compliance withNYPSLg2(2-a))shallhavenoadverseimpactontheIPPunderthisAgreement.

IntheeventtheIPPwishestoqualifyorperformasanExemptWholesale Generator underSection32ofPUHCAandFERC'sregulations promulgated thereunder, asthesamemaybeamended,modi6edorrestatedfromtimetotime,NMPCshallcooperate with(including, withoutlimitation, byproviding consentsandafBdavits),

andsha11nottakeanyactiontooppose,impedeorsubvert,theIPP'seffortstoobtainappropriate regulatoty exemptions andapprovals, including market-based rateapproval.

ExcepttotheextentthatthecontractpricesunderthisAgreement areormaybebasedthereon,duringthetermofthisAgreement theIPP(i)shallwaiveanystatutory rightitmayhaveunderSection6&cofNYPSLpursuanttowhichtheIPPmaydemanda6gperKWhminimumpowerpurchaserate&omNMPC,and(ii)shallwaive,foritselfandforthesuccessors andassignsofitsProject,withrespecttosuchProject,anystatutory rightitmayhaveunderPURPAorNYPSLtorequireNMPCtoenterintoapowerpurchasecontractorotherwise taketheoutputoftheIPP'sProject;provided, however,thatuntiltheendoftheProxy-Market PricePeriodNMPCagrees,attheIPP'srequest,toactasagentfortheIPP(or,ifnecessary toeffectuate suchsalestotheNewYorkPowerPool,bypurchaseandresaleoftheIPP'scapacityandenergy,atnocosttoNMPC),forthesaleonuptoamonthlybasis,oftheIPP'sProject's capacityandenergytotheNewYorkPowerPooloranythirdparty,ineachcaseonanondiscriminatory basiswithrespecttoNMPC'soranythirdparty'scapacityandenergy,atnocosttotheIPP.NMPCagreestouseitsReasonable BestEffortstoeffectsuchsalesonthemostfavorable terms,including price,totheIPPgivingconsideration tothequantity, termandmarketconditions prevailing atthetimeofsale.Nothingcontained hereinshallbeconstrued toconstitute awaiverbytheIPPofany.'>".ingb'..='::

'w>.+vunder.PURPA; NYPSLorapplicabld law,A~lbuliig'nghf

'"oui'l90I4SL respecttoback-upservices, interconnection, reactivepowerorothersimilarrightswhetherornotacontractisrequiredordesirable.

Relocation ofPowerLines.lntheeventitbecomesnecessary forNMPCtorelocateorrearrange itstransmission systemtowhichtheIPPisconnected, NMPCshalladvisetheIPPatleastoneyearinadvanceinwriting.Ifsuchrelocation orrearrangement isorderedorrequiredbyaGovernmental Authority, NMPCshallgivepriorwrittennoticetotheIPPequalintimetothenoticegiventoNMPCbysuchGovernmental Authority.

NMPCshallconsultwiththeIPPonthenewfacilities thatNMPCshallproposetoreestablish theconnection.

Suchnewfacilities shallbereasonably satisfactory totheIPPand,ataminimum,shallprovidetheIPPwithatleastasmuchoutputcapacityas'withthepriorconnection facilities.

NMPCshallbearthefullcostandexpenseofreestablishing theconnection totheIPP.NMPCshalluseitsbesteffortstominimizethedurationofanydisruption totheIPP'sserviceduringtherelocation orrearrangement ofNMPC'stransmission facilities.

Notwithstanding anythingtothecontrarycontained herein,theprovisions ofthisSectionshallnotapplytotheabandonment ofpowerlines.~~Wheeho.'theIPPshaBhavetherighttohaveNMPCwheelsomeoraiioftheoutputofitsProjecttothirdpartiespursuanttoapplicable law,orNMPC's,orothercompanies',

dulyfiledtransmission anddistribution tariffsorschedules.

(Jl'hl'*(a)Intheeventeitherpartyheretoisrenderedunable,whollyorinpart,byForceMajeuretocarryoutitsobligations underthisAgreement, otherthantheobligation tooiakepaymentsofamountsduehereunder, itisagreedthatuponnotice,withreasonably fullparticulars ofsuchForceMajeuregivenbysuchpartytotheotherpartyinwritingwithinareasonable timeGameaftertheoccurrence ofthecausereliedupon,thentheobligation orobligations hereunder ofthepartygivingsuchnotice,sofarastheyareaffectedbysuchForceMajeure,shallbesuspended duringthecontinuance ofaninability socaused.Suchcauseshall,asfaraspossible, beremediedwithallreasonable dispatch.

(b)Theterm"ForceMajeure"asusedhereinmeansactsofGod,strikes,ockouts,actsofpublicenemies,wars,blockades, insuirections, riots,epidemics,

'landslides, lightning, systememergencies, earthquakes, fires,storms,floods,washouts, arrests,explosions, breakageoraccidenttomachineiy, equipment ortransmission ordistribution lines;providedthatthetermForceMajeuredoesnotmeanorincludeanycausewhichbytheexerciseofreasonable diligence ofthepartyclaimingsuspension couldbeovercome.

0l901452 EXHIBIT2.1-FormofTermination Agreement 012704

Exhibit2.1TERMINATION AGREEMENT THISTERMINATION AGREEMENT (the"Termination Agreement"

)enteredllltoOn199,byandbetweenNIAGARAMOHAWKPOWERCORPORATION, aNewYorkcorporation

("NMPC"orthe"Company"

),andI(the"IPP")(NMPCandtheIPPeacharereferredtohereinasa"Party"andcollectively asthe"Parties"

).Capitalized teimsusedhereinandnototherwise definedhereinshallhavethemeaningsascribedtosuchtermsintheMasterRestructuring Agreement (ashereinafter defined).

(A)TheCompanyandtheIPParepartiesto,amongotheragreements, acertainpowerpurchaseagreement described onSchedule1hereto(referred tohereinas"Existing PPA")pursuanttowhichtheCompanypurchases powerproducedbytheIPP'sco-generation facilitylocatedin,NewYork(the"Project"

);and(B)TheCompanyandtheIPP,amongothers,haveenteredintoacertainMasterRestructuring Agreement, datedasofJuly9,1997(the"MasterRestructuring Agreement" or"MRA"),pursuanttowhich,amongotherthings,theCompanyandtheIPPhaveagreedtoterminate theExistingPPAandcertainotherrelatedagreements betweentheCompany(oritsAffiliates) andtheIPP.NOW,THEREFORE, inconsideration oftheforegoing premisesandforothergoodandvaluableconsideration, thereceiptandadequacyofwhichisherebyacknowledged, thePartiesherebyagreeasfollows:1.Termination ofthePPADocuments.

EachofthePartiesherebyagreesthateffective asoftheEffective Time,withoutanyfurthernoticeoractiononthepartoftheCompanyortheIPP,andexceptassetforthinSection2hereof,(a)theExistingPPAandeachfgastransportation andpeakshavingagreement and,atIPP'soption,interconnection agreement andinterconnection anangements]

listedonSchedule2hereto(theExistingPPAandsuchotherdocuments, collectively, the"PPADocuments"

)shallbeirrevocably terminated andrescinded; (b)allrightsandprivileges granted,accruingor'nuringtoeachPartypursuanttothePPADocuments shallbeirrevocably relinquished andsurrendered; (c)allobligations anddutiesowedorrequiredbythePPADocuments tobeperformed fororonbehalfofonePartybyanyotherPartytheretoshallbeirrevocably waivedandreleased; and(d)eachPartytothePPADocuments anditsrespective predecessors andsuccessors ininterest, agents,directors,

officers, partners,

trustees, employees andaffiliates, shallbeirrevocably releasedandforeverdischarged fromallmannerofactions,causesofaction,suits,debts,sumsofmoney,accounts, reckonings,

'obcdatedasofConsummation Date.NI3235 bonds,bills,covenants, contracts, controversies, agreements, judgments, claimsanddemandswhatsoever inlaworinequity,knownorunknown,whichanyotherPartyeverhad,nowhasorhereafter can,shallormayhave,baseduponorbyreasonofanymaatte,causeorthingrelatedtoorarisingoutofthePPADocuments.

EachofthePartiesherebyagreesthat(i)anyrequirement fornotice(whetherwrittenororal)withrespecttothetermination ofanyofthePPADocuments isherebyirrevocably waivedbytherespective PartiestothePPADocuments and(ii)anyotherrequirement orcondition precedent tothetermination ofanyofthePPADocuments whichiscontained inanyofthePPADocuments isherebyirrevocably waivedorshallbedeemedtohavebeensatisfied, asthecasemaybe.2.Continuin RihtsandObliations.Notwithstanding theforegoing, thefollowing rightsandobligations shallsurvivethetermination ofthePPADocuments:

(a)TheIPPshallhavetheright,butnottheobligation, toobtainand/ormaintainitsstatusasastateand/orfederalqualifying facility("QF")underNewYorklaw(including compliance withNYPSL52(2-a))and/or-PURPA, respectively.

(b)TheCompanyshallnotimplement anyQFMonitoring ProgramwithrespecttotheIPP.(c)IntheeventtheIPPwishestoqualifyorperformasanExemptWholesale Generator underSection32ofPUHCAandtheFERC'sregulations promulgated thereunder, asthcsamemaybeamended,modifiedorrestatedfromtimetotime,theCompany,uponrequestandattheexpenseoftheIPP,shallcooperate with(including, withoutlimitation, byproviding consentsandaffidavits),

andshallnottakeanyactiontooppose,impedeorsubvert,theIPP'seffortstoobtainappropriate

'egulatory exemptions andapprovals, including market-based rateapproval.

(d)TheIPPshallhavetherighttohavetheCompanywheeltheoutputofitsProjecttothirdpartiespursuanttoapplicable law,ortheCompany's, orothercompanies',

dulyfiledtransmission anddistribution tariffsorschedules.

(e)TheIPPshallwaiveanystatutory rightitmayhaveunderSection~ofNYPSLpursuanttowhichtheIPPmaydemanda6cperKwhminimumpowerpurchaseratefromtheCompanyandtheIPPshallwaive,foritselfanditssuccessors andassignsoftheProject,withrespecttotheProject,anystatutory rightitmayhaveunderPURPAorNYPSLtorequiretheCompanytoenterintoapowerpurchasecontractorotherwise taketheoutputoftheProject,provided, however,thatpriortotheendoftheProxy-Market PricePeriod.(assuchtermisdefinedinExhibitAtotheMRA)theCompanyagrees,attheIPP'srequest,toactasagentfortheIPP(or,ifnecessary toeffectuate suchsalestotheNewYorkPowerPool,bypurchaseandresaleoftheIPP'scapacityandenergy,atnocosttotheCompany),

forthesaleonuptoamonthlybasis,oftheProject's capacityandenergytotheNewYorkPowerPoolorany013235 thirdparty,ineachcaseonanondiscriminatory basiswithrespecttotheCompany's oranythirdparty'scapacityandenergy,atnocosttotheIPP.TheCompanyagreestouseitsReasonable BestEffortstoeffectsuchsalesonthemostfavorable terms,including price,totheIPP,givingconsideration tothequantity, termandmarketconditions prevailing atthetimeofsale.Further,nothinghereinshallbeconstrued toconstitute awaiverbytheIPPofanyotherrightsitmayhaveunderPURPA,NYPSLorapplicable law,including rightswithrespecttoback-upservices, interconnection, reactivepowerorothersimilarrights,whetherornotacontractisrequiredordesirable.

(f)Exceptasexpressly providedherein,theIPPshallhaveallrightsandobligations pursuanttoapplicable law.(g)Nothingcontained hereinshallconstitute awaiverorreleaseofanyclaims,liabilities orobligations (i)arisingoutoforinconnection withthisTermination Agreement, (ii)arisingoutoforinconnection withanylitigation orregulatory proceedings whicharenottobedismissed andwithdrawn (oreffectively withdrawn) bytheCompanyortheIPPpursuanttoSections8.8(b)and9.8(b)oftheMRAand(iii)unlessdismissed orwithdrawn pursuanttotheSection8.8(b)or9.8(b)oftheMRA,arisingoutoforinconnection withanypaymentduetotheIPPwhetherornotdisputed, foranypowerorservicespurchased bytheCompany,oranypaymentduetotheCompanywhetherornotdisputed, foranyservicesprovidedbytheCompany,pursuanttotheExistingPPAoranyrelatedgastransportation, peakshaving,interconnection orotherrelatedagreement betweentheCompanyandtheIPP,providedthatifsuchpaymentrelatestoanyperiodmorethansixty(t30)daysprior,tothedateoftheMRAtheIPP'sortheCompany's, asthecasemaybe,entitlement tosuchpaymentshallhavebeensetforthinawritinggiventotheCompanyortheIPP,asthecasemaybe,onorbeforeJune15,1997.TheCompanyandtheIPPacknowledge andagreethatinaccordance withSection1hereofallclaims,liabilities andobligations relatingtotracking, adjustment oradvancepaymentaccountprovisions underanyExistingPPAshallbeextinguished asoftheEffective Time3.EntireAment.ThisTermination Agreement, togetherwiththeMasterRestructuring Agreement, constitutes theentireagreement betweenthePartieswithrespecttothesubjectmatterhereof,andsupersedes allprioragreements andunderstandings, writtenororal,betweenthePartieswithrespectthereto.4.Amendments andWaivers.AnytermofthisTermination Agreement maybeamendedandtheobservance ofanytermofthisTermination Agreement maybewaived(eithergenerally orinaparticular instanceandeitherretroactively orprospectively),

onlybyaninstrument inwritingandsignedbythePartyagainstwhomsuchamendlnent orwaiverissoughttobeenforced.

Nl3235 5.SuccessrsandAssins.Exceptasotherwise expressly providedherein,Oletermsandconditions ofthisTermination Agreement shallinuretothebenefitofandbebindingupontherespective successors andassignsoftheParties.NothinginthisTermination Agreement, expressorimplied,isintendedtoconferuponanypersonorentityotherthanthePartiesheretoortheirrespective successors andassignsanyrights,remedies, obligations, orliabilities underorbyreasonofthisTermination Agreement, exceptasmaybeexpressly providedinthisTermination Agreement.

6.G~il.TgT'Ag.'gggTGGhereofandtherightsandobligations ofthePartieshereunder, andallamendments andsupplements hereofandallwaiversandconsentshereunder, shallbeconstrued inaccordance withandgovernedbythedomesticsubstantive lawsoftheStateofNewYorkwithoutgivingeffecttoanychoiceoflaworconflicts oflawprovision orrulethatwouldcausetheapplication ofthedomesticsubstantive lawsofanyotherjurisdiction.

7.S~everabili

.Ifanyprovisions ofthisTermination Agreement asappliedtoanypartortoanycirctunstance shallbeadjudgedbyacourttobeinvalidorunenforceable, thesameshallinnowayaffectanyotherprovision ofthisTermination Agreement, theapplication ofsuchprovision inanyothercircumstances orthevalidityorenforceability ofthisTermination Agreement.

6g.~Cations.TheheadingsandcaptionsusedinthisTermination Agreement areusedforconvenience onlyandarenottobeconsidered inconstruing orinterpreting thisTermination Agreement.

9.~C""*.TgAglgmorecounterparts',

eachofwhichshallbedeemedanoriginal, butallofwhichtogethershallconstitute oneandthesameinstrument.

INWITNESSWHEREOF,thepartiesheretohaveenteredintothisTermination Agreement asofthedatefirstabovewritten.NiagaraMohawkPowerCorporation By:Its.PPP)By:Its.ffl3235 EXHIBIT3.6FormofRegistration RightsAgreement 0l2704

Exhibit3.6REGISTRATION RIGHTSAGREEMENT THISREGISTRATION RIGHTSAGREEMENT enteredintoon199(the"Agreement"

)byandbetweenNIAGARAMOHAWKPOWERCORPORATION, aNewYorkcorporation

("NMPC"orthe"Company"

)andtheseveralindependent powerproducers identified assuchonthesignature pagesandonScheduleAhereto(the"IPPs")and("theIPPDesignees")"

(NMPC,theIPPsandtheIPPDesignees areeachreferredtohereinasa"Party"andcollectively asthe"Parties"

).RECXTALS(A)PursuanttoaMasterRestructuring Agreement, datedasofJuly9,1997(the"MasterRestructuring Agreement"

),theCompanyhasissued[forty-six million(46,000,000)"']

shares(the"CompanyShares")ofcommonstock,$1.00parvaluepersharc,oftheCompany("CommonStock"),totheIPPsortheIPPDesignees onthedatehereof;(8)TheCompanyhasfiledwiththeSECaShelfRegistration Statement onFormS-3(asamendedthroughthedatehereof,the"Registration Statement"

)coveringtheresalebytheHolders(ashereinafter defined),

Romtimetotime,oftheRegistrable Securities (ashereinafter defined),

whichRegistration Statement hasbeendeclaredeffective bytheSEConorbeforethedatehereofandiscurrently ineffect;(C)TheIPPsdesiretheCompanytomaintaintheeffectiveness oftheRegistration Statement andcooperate withtheIPPsinconnection withanysaleorofFering, including anyunderwritten publicoffering, oftheCompanyShares,andtheCompanyhasagreedtosame,inaccordance withthetermsandconditions hereof;and(D)Itisacondition totheconsuinmation ofthetransactions contemplated bytheMasterRestructuring Agreement thattheCompanyandtheIPPsshallhaveenteredintothisAgreement.

NO%',THEREFORE, inconsideration oftheforegoing premisesandforother'goodandvaluableconsideration, thereceiptandadequacyofwhichisherebyacknowledged, thePartiesherebyagreeasfollows:TobedatedasofConsummation Date."Adddesignees ofIPPsofCompanySharespursuanttoMRA."'ubjecttoadjustment pursuanttoSection3.5and12.4(b)oftheMRA.4I3538 DEFINITIONS 1.1ForpurposesofthisAgreement, thetermssetforthbelowshallhavethefollowing meanings:

"Afhliate" shallmean,withrespecttoanyParty,anyotherpersonorentitywhichcontrols, iscontrolled by,orisundercommoncontrolwith,suchParty,whereintheterm"control" shallmeanthepowertodirectthemanagement andpoliciesbyorofsuchPartythroughownership ofvotingsecurities, bycontractorotherwise, andanyotherpersonwhichisapartner(generalorlimited)orshareholder ofanyPartyorpartner(generalorlimited)orshareholder ofsuchpartnerorshareholder.

"Blackout Period"shallhavethemeaningsetforthinSection2.1(a).'SHE*d9"hdll*9'2hl[).~H*IIffd*"hdll*9'fH.2().amended.'*~g*h*"hdl9SH*hg*hfldll,"Hoider"shallmeananyiPPoriPPDesigneewhichreceivesanyoftheCompanySharespursuanttotheMasterRestructuring Agreement andanyAfnliateorInstitutional PledgeeofanysuchIPPorIPPDesigneewhichisasubsequent holderofRegistrable Securities whoseRegistrable Securities havenotbeensoldtothepublic.pursuanttoaneffective registration statement orRule144oftheSecurities Actafterthedatehereof.Hld*"IIII9'gfh2(l."Institutional Pledee"shallmeananylendinginstitution towhichanyoftheRegistrable Securities maybepledged."~Reister","~reistered"and"~reistration" shallrefertoaregistration effectedbypreparing andfilingaregistration statement orstatements orsimilardocuments incompliance withtheSecurities ActandpursuanttoRule415underthe'ecurities Actoranysuccessor ruleproviding'for offeringsecurities onacontinuous basis("Rule415")andthedeclaration ororderingofeffectiveness ofsuchregistration statement ordocumentbytheSEC."ReistrableSecurities" shallmean(i)theCompanySharesissuedbytheCompanytoanyIPPordesigneeofanIPPpursuanttotheMasterRestructuring Agreement and(ii)anyothersharesofCommonStockoranyothersecurityconvertible orexchangeable intoorexercisable tosharesofCommonStockissuedinrespectoftheCompanySharesuponorasaresultofanystocksplit,stockdividend, rggnhinatiop trtgl3538 reclassification, orthroughmerger,consolidation, reorganization orrecapitalization, orbyanyothermeans;provided, however,thatRegistrable Securities shallnotincludeanyCompanyShareswhichpreviously havebeensoldtothepublic.pursuanttoaneffective registration statement orRule144oftheSecurities ActaAerthedatehereof."SEC"shallmeantheSecurities andExchangeCommission.

"Securities Act"shallmeantheSecurities Actof1933,asamended.12Capitalized termsusedhereinandnototherwise definedhereinshallhavethemeaningsascribedtosuchtermsintheMasterRestructuring Agreement.

2.OBLIGATIONS OFTHECOMPANY2.1Reistration Statement.

Inconnection withtheregistration oftheRegistrable Securities, oranysaleoftheRegistrable Securities, pursuanttotheRegistration Statement, theCompanyshall:(a)keeptheRegistration Statement effective pursuanttoRule415atalltimesuntiltheearlierof(i)suchtimeasalloftheRegistrable Securities havebeendisposedofinaccordance withtheintendedmethodsofdisposition setforthintheRegistration Statement and(ii)suchdateasistwo.(2)yearsaAerthedatehereof(theperiodendingonsuchtimeordate,theEffectiveness Period");provided, however,thatif,atanytimeaftersixty(60)daysfollowing thedateofthisAgreement, theCompanyanditscounseldetermine ingoodfaiththatmaintaining theeffectiveness oftheRegistxation Statement wouldrequiredisclosure ofnon-public materialinformation notinthebestinterests oftheCompanytodisclose, thentheCompany,onetimeonlyduringanytwelve(12)monthperiod,anduponnoticetotheHolders,mayrequiretheHoldersnottomakeanysaleofRegistrable Securities pursuanttotheRegistration Statement untilsuchdateassuchnon-public materialinformation isdisclosed (theperiodcommencing onthedateofsuchnoticeandendingonthedateofsuchdisclosure, the"Blackout Period"),providedthatinnoeventshallanyBlackoutPeriodexceedsixty(60)daysinanytwelve(12)monthpericxLIftheCompanyprovidestheIPPs'pecial Counselwithaproposedschedulefordisclosure ofitsannouncements ofitsquarterly andyearendresults.atleastthirty(30)dayspriortoanysuchannouncement, anyHolderdesiringtosellRegistrable Securities pursuanttotheRegistration Statement duringthefourteen(14)dayperiodpriortothedateofanysuchscheduled announcement occumngduringtheEffectiveness PeriodshallgivetheCompanytwo(2)BusinessDays'rior noticeofsuchproposedsale.TheCompanyrepresents andvnmantstoeachHolderthat,otherthanduringanyBlackoutPeriod,(x)theRegistration Statement (including anyamendments orsupplements theretoandanyprospectuses orpreliminary prospectuses contained therein),

atthetimeitwasGistfiledwiththeSEC,atthetimeitwasdeclaredeffective bytheSEC,asofthedatehereof,andatalltimesduringwhichitisrequiredtobeeffective hereunder (andeachsuchamendment andsupplement atthetimeitisfiledwiththeSECandatalltimesduringwhichitisavailable foruseinconnection withtheofferandsale oftheRegistrable Securities) doesnotandshallnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading and(y)theprospectus orpreliminary prospectus usedinconnection withtheRegistration Statement andanyamendment orsupplement theretodoesnotandshallnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances inwhichtheyweremade,notmisleading; (b)promptlyprepareandfilewiththeSECsuchamendments (including post~ffective amendments) andsupplements totheRegistration Statement andtheprospectus usedinconnection withtheRegistration Statement asmaybenecessary tokeeptheRegistration Statement effective andtheprospectus current,including anyamendment orsupplement withrespecttoanunderwritten offeringofRegistrable Securitie's andincluding anyamendment orsupplement toreflectanytransferofRegistrable Securities toanyAfBliateorInstitutional PledgeeofaHolderwhichwillhavetherighttobenamedasasellingshMeholder intheRegistration Statement, atalltimesduringtheEffectiveness Period,and,during.suchperiod,complywiththeprovisions oftheSecurities Actapplicable totheCompanyinordertopermitthedisposition bytheHoldersofallRegistrable Securities; (c)furnish.promptly totheIPPs'pecial Counselandleadunderwriter(s),

ifany,(i)onecopyoftheRegistration Statement andanyamendment thereto,eachprospectus andeachamendment orsupplement theretoincluding allfinancial statemeng andschedules, and,totheextentsorequested, alldocuments incorporated byreference therein,andallexhibitsthereto(including thoseincorporated byreference therein),

(ii)eachletterwrittenbyoronbehalfoftheCompanytotheSECorthestaffoftheSECandeachitemofcorrespondence received&omtheSECorthestaffoftheSECrelatingtosuchRegistration Statement and(iii)suchnumberofcopiesofaprospectus andallamendments andsupplements theretoandsuchotherdocuments, astheIPPs'.SpecialCounseloranyHoldermayreasonably requestinordertofacilitate thedisposition oftheRegistrable Securities ownedbysuchHolder,(d)useitsbesteffortsto(i)registerandqualifytheRegistrable Securities underthesecurities or"bluesky"lawsofsuchjurisdictions aseachHoldermayreasonably request,(ii)prepareandfileinthosejurisdictions such,amendments (including post-effective amendments) andsupplements tosuchregistrations andqualifications asmaybenecessary tomaintaintheeffectiveness thereofatalltimesduringtheEffectiveness Period,(iii)takesuchotheractionsasmaybenecessary tomaintainsuchregistrations andqualifications asmaybenecessary tomaintaintheeffectiveness thereofatalltimesduringtheEffectiveness Period,and(iv)takeallotheractionsreasonably necessary oradvisable toqualifytheRegistrable Securities forsalebytheHoldersinsuchjurisdictions (provided thattheCompanyshallnotberequiredinconnection therewith orasacondition theretotoqualifygenerally todobusinessorfileaNI3$3S generalconsenttoserviceofprocessinanyjurisdiction whereitwouldnototherwise berequiredtoqualifybutforthisSection2.1(d));(e)promptlynotifyeachHolderofthehappening ofanyevent,(i)asaresultofwhichtheprospectus includedintheRegistration Statement, asthenineffect,includesanuntruestatement ofamaterialfactoromitstostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading inlightofthecircumstances thenexistingor(ii)whichrequirestheCompanytoamendorsupplement theRegistration Statement duetothereceiptbytheCompanyofneworadditional information aboutaHolderoritsintendedplanofdistribution ofitsRegistrable Securities; and,insuchevent,theCompany,subjecttoSection2.1(a),shaBpromptlysupplement oramendtheRegistration Statement tocorrectsuchuntruestatement oromissionortoreflectsuchneworadditional information, sothat,asthereafter delivered byanyHoldertoanypurchaser ofsuchsecurities, suchprospectus, assupplemented oramended,shaBnotincludeanuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading inthelightofthecircuinstances underwhichtheyweremade;andpromptlyfurnishtoeachHolderandleadunderwriter(s),

ifany,anumberofcopiesofsuchsupplement tooranamendment.

ofsuchprospectus asanyHolderorsuchleadunderwriter(s) mayreasonably request;(f)promptlynotifyeachHolderandtheleadunderwriter(s),

ifany,oftheissuancebytheSECofanystoporderorothersuspension ofeffectiveness oftheRegistration Statement ortheinitiation ofanyproceedings forthatpurpose.TheCompanywiBuseitsbesteffortstopreventtheissuanceofanystoporderand,ifanystoporderisissued,toobtaintheliftingthereofattheearliestpossibletime;(g)permittheIPPs'pecial Counseltoparticipate, totheextentapplicable totheperiodfollowing thedateofthisAgreement, inthepreparation of(including, butnotlimitedto,reviewing, commenting onandattending allmeetingswithunderwriters, ifany,withrespectto)theRegistration Statement, eachprospectus includedthereinorfiledwiththeSEC,andeachamendment thereoforsupplement thereto,andshallpermittheIPPs'pecial CounseltoreviewandcommentonsuchRegistration Statement, prospectus, amendment orsupplement, asthecasemaybe,areasonable periodoftimepriortothefilingofsamewiththeSEC,andshallnot,duringtheEffectiveness Period,fileanysuchdocumentinaformtowhichtheIPPs'pecial Counselreasonably objectswithinthree(3)BusinessDaysofthereceiptthereof;(h)makegenerally available toitssecurityholdersassoonaspmcticable, butnotlaterthanninety(90)daysafterthecloseoftheperiodcoveredthereby,anearningstatement (informcomplying withtheprovisions ofRule158undertheSecurities Act)coveringatwelve(12)monthperiodbeginning notlaterthanthefirstdayoftheCompany's fiscalquarternextfollowing theeffective dateoftheRegistration Statement; 413538 (i)makeavailable (atreasonable timesandplaces)forinspection byanyunderwriter participating inanydisposition oftheRegistrable Securities, andanyattorney, accountant orotheragentretainedbyanyHolderoranysuchunderwriter, including butnotlimitedtotheIPPs'pecial Counse],alldocuments incorporated byreference intheRegistration Statement, eachprospectus includedtherein,andeachamendment thereoforsupplement thereto,allpertinent financial andotherrecords,pertinent corporate documents andproperties oftheCompany,asshallbereasonably necessary toenableeachHolderorunderwriter toconductareasonable investigation withinthemeaningoftheSecurities Act,andcausetheCompany's

officers, directors andemployees tosupplyallinformation whichanysuchHolder,underwriter,

attorney, accountant orotheragentmayreasonably requestforpurposesofsuchinvestigation, providedthatanyrecords,information ordocuments thataredesignated bytheCompanyinwritingasconfidential (andwhicharenotgenerally available tothepublic,havenotbecomeavailable tosuchpersononanonconfiidential basisfromasourcewhichhasrepresented tosuchpersonthatsuchsourceisentitledtodisclosesameorwhichwasknowntosuchpersononanonconfidential basispriortoitsdisclosure bytheCompany)shallbekeptconfidential bysuchpersonunlessdisclosure ofsuchrecords,information ordocuments isrequiredbycourtoradministrative orderoranyGovernmental Authority havingjurisdiction; (j)useitsbesteffortstomaintainthelistingoftheRegistrable Securities ontheNewYorkStockExchange(the"NYSE")andonanyothersecurities exchangeonwhichsimilarsecurities issuedbytheCompanyarethenlisted;(k)cooperate witheachHolderandtheleadunderwriter(s),

ifany,tofacilitate thetimelypreparation anddeliveryofcertificates (notbearingany.restrictive legends)representing Registrable Securities andenablesuchcertificates tobeinsuchdenominations oramountsasanyHolderandtheleadunderwriter(s),

ifany,mayreasonably requestandregistered insuchnamesassuchHolderandtheleadunderwriter(s),

ifany,mayreasonably request.TheCompanyshallgiveappropriate instructions totheCompany's transferagenttocausethetransferagenttodelivercertificates representing theRegistrable Securities withoutanyrestrictive legendsuponreceiptoftheHolder'scertification thatsuchRegistrable Securities havebeensoldpursuanttotheRegistration Statement andshallcausetheCompany's legalcounseltodelivertothetransferagentanopinionincustomary formasrequiredtoremovesuchrestrictive legendsprovidedthatifsuchsaleshaveoccurredotherthanpursuanttoanunderwritten offeringsuchcounselmayreasonably requiresuchcertifications andopinionofcounsel&omHolders;(1)causelegalcounselselectedbytheCompanytodelivertotheHoldersandtheunderwriters, suchopinionsasmaybecustomary inconnection withanyunderwritten saleofRegistrable Securities pursuanttotheRegistration Statement, informandsubstance reasonably acceptable totheHoldersandtheunderwriters, ifany;4!3538 (m)duringtheEffectivkness Period,theCompanyshallnotbidfororpurchaseanyCommonStockoranyrighttopurchaseCommonStockorattempttoinduceanypersontopurchaseanysuchsecurityorrightifsuchbid,purchaseorattemptwouldinanywaylimittherightoftheHolderstosellRegistrable Securities byreasonofthelimitations ofRegulation MundertheExchangeAct;(n)takeallotherreasonable actions(including enteringintocustomary agreements) necessary toexpediteandfacilitate disposition bytheHoldersofRegistrable Securities pursuanttotheRegistration Statement; and(o)useitsbesteffortstocomplywithallapplicable r'ulesandregulations oftheSECinconnection withanyofferorsaleofRegistrable Securities undertheRegistration Statement.

2.2Underwritten Offerin.(a)TheCompanyacknowledges thattheintendedplanofdistribution setforthintheRegistration Statement permitsthesaleofRegistrable Securities intheformofanunderwrittea offering.

TheCompanyandtheIPPsagreethatanysuchunderwritten offeringshallbeeffectuated atanytimeupontherequestofaHoldt;rorHoldersdesignating atleast5,000,000 sharesofRegistrable Securities tobeincludedinsuchunderwritten offering(the"Initiating Holders").Noticeofanysuchrequest(together withacopythereof)simultaneously shallbegivenbytheInitiating Holder(s) toallotherHolders.Insuchevent,anyotherHolderorHoldersshallhavetherighttojoininsuchrequestbydesignating inanoticegivenbytheInitiating Holder(s) totheCompanyandtheInitiating Holderswithintwenty(20)daysaftersuchnotice&omtheInitiating Holderisgiven,thenumberofRegistrable Securities heldbysuchHolderwhichsuchHolderdesirestoincludeinsuchunderwritten offering(theInitialHoldersandsuchadditional Holders,collectively, the"Electing Holders").Amajorityininterest(basedonthenumberofsharesofRegistrable Securities heldbysuchElectingHolders)oftheElectingHoldersshallselectandobtain-an underwriter orunderwriters toadminister theoffering, providedtheleadunderwriter(s) arereasonably satisfactory totheCompany.Inconnection withanyunderwritten

offering, (i)theCompanywilleffectaroadshowwithsuchCompanypersonnel andcoveringsuchlocations andamountoftimeasisreasonably requested bytheleadunderwriter(s) fortheoffering; providedthattheCompanyshallnotbeobligated toeffectaroadshowformorethanthreeseparateunderwritten offerings; (ii)theCompanyandtheElectingHolderswillenterintoanunderwriting agreement withtheleadunderwriter(s) toeffecttheofferandsaleofRegistrable Securities, containing customary provisions including withoutlimitation thoserelatingtoindemnification andcontribution onthepartoftheCompanyoftheunderwriters andtheElectingHolders;and(iii)theCompanywilluseitsbesteffortstoobtainacomfortletterandupdatesthereof6emtheCompany's independent publicaccountants addressed totheElectingHoldersandtheunderwriters andcoveringsuchmattersofthetypecustomarily coveredbycoinfortletterswithrespecttounderwritten

<<I3538 publicoKringsandinformandsubstance reasonably satisfactory totheleadunderwriter(s) andtheIPPs'pecial Counsel.(b)Iftheleadunderwriter(s) advisetheElectingHoldersinwritingthatmarketing factorsrequirealimitation onthenumberofsharesofRegistrable Securities tobeunderwritten inanyunderwritten

offering, thenumberofsharesofRegistrable Securities tobeincludedintheunderwriting shallbeallocated amongtheElectingHoldersprorataonthebasisofthenumberofsharesofRegistrable Securities heldbysuchHolders.IfaHolderwhohaselectedtobeincludedinsuchunderwriting asprovidedabovedoesnotagreetothetermsofanysuchunderwriting, suchHoldershallbeexcludedtherefrom bywrittennotice60mtheleadunderwriter(s) oramajorityininterestoftheremaining ElectingHolders.Ifsharesaresowithdrawn Gomtheunderwriting andifthenumberofsharestobeincludedinsuchunderwriting waspreviously reducedasaresultofmarketing factorspursuanttothisSection22(b),thentheElectingHolderswhowereunabletoincludethemaximumnumberofsharesofRegistrable Securities requested bysuchHolderstobeincludedintheunderwriting shallhavetherighttoincludeadditional Registmble Securities intheunderwriting inanaggregate amountequaltothenumberofsharessowithdrawn, withsuchsharestobeallocated prorataonthebasisofthenumberofshnesofRegistrable SharesheldbysuchHolders.Inadditiontotheforegoing, sothatanysuchallocation shallnotoperatetoreducetheaggregate numberofRegistrable Securities tobeincludedinsuchunderwritten

offering, ifanyElectingHolderdoesnotrequestinclusion ofthemaximumnumberofsharesofRegistrable Securities whichmayberequested byitpursuanttotheabov~ribed procedure, theremaining portionofitsallocation shallbereallocated amongthoseElectingHolderswhoseallocations didnotsatisfytheirrequestsprorataonthebasisofthenumberofsharesofRegistrable Securities heldbysuchHolders,andthisprocedure shallberepeateduntilallofthesharesofRegistrable Securities.

whichmaybeincludedintheunderwritten offeringbytheElectingHoldershavebeensoallocated.

2.3Rule144Rertin.Withaviewtomakingavailable thebenefitsofcertainrulesandregulations oftheSECthatmaypermitthesaleoftheRegistrable

~Securities tothepublicwithoutregistration, theCompanyagreestouseitsbesteffortsto:(a)makeandkeeppublicinformation regarding theCompanyavailable asthosetermsareunderstood anddefinedinRule144undertheSecurities Act;(b)filewiththeSECinatimelymannerallreportsandotherdocuments requiredoftheCompanyundertheSecurities ActandtheExchangeAct;and(c)furnishtoanyHolderforthwith uponwrittenrequestawrittenstatement bytheCompanyastoitscompliance withthereporting provisions contained inRule144(c)undertheSecurities Act,acopyofthemostrecentannualorquarterly reportoftheCompany,andsuchotherreportsanddocuments soGledasanyHoldermayreasonably requestinavailingitselfofanyruleorregulation oftheSECallowingaHoldertosellanyoftheRegistrable Securities withoutregistration.

013538 TheCompanyshallgiveappropriate instructions totheCompany's transferagenttocausethetransferagenttodelivercertificates representing theRegistrable Securities withoutanyrestrictive legendsuponreceiptoftheHolder'scertification thatsuchRegistrable Securities havebeensoldpursuanttoRule144undertheSecurities Act.EachHoldershallcauseitslegalcounseltodelivertothetransferagentfortheRegistrable Securities anopinionincustomary formasmayberequiredtoremovesuchrestrictive legendsfollowing asalepursuanttoRule144.3.OBLIGATIONS OFTHEHOLDERS3.1EachHoldershall:(a)upontheCompany's writtenrequest,furnishtotheCompanysuchinformation regarding theintendedplanofdistribution ofitsRegistrable Securities thatpursuanttoapplicable lawisrequiredtobeincludedintheRegistration Statement oranyamendment thereto;(b)uponreceiptofanynotice&omtheCompanyofthehappening ofanyeventofthekinddescribed inSections2.1(a)or2.1(e)hereof,forthwith discontinue disposition ofRegistrable Securities pursuanttotheRegistration Statement untilsuchHolder'sreceiptofthecopiesofthesupplemented oramendedprospectus contemplated bySections2.1(a)or2.1(e)hereof,and,ifsodirectedbytheCompany,suchHolderwilldelivertotheCompany(attheCompany's expense)allcopies,otherthanpermanent filecopiestheninsuchHolder'spossession, oftheprospectus

.covering suchRegistrable Securities currentatthetimeofreceiptofsuchnotice.IntheeventtheCompanyshallgiveanysuchnotice,andpriortotheexpiration oftheEffectiveness PeriodInitiating HoldershavegiventheCompanyanoticepursuanttoSection2.2ofanunderwritten offeringwhichisthenpending,theCompanyshallextendtheEffectiveness PeriodbythenumberofdaysduringtheperiodGumandincluding thedateofthegivingofsuchnoticepursuanttoSections2.1(a)or2.1(e)hereoftoandincluding thedatewheneachHoldershallhavereceivedthecopiesofthesupplemented oramendedprospectus contemplated bySections2.1(a)or2.1(e)hereof,N(c)nottransfer, sell,pledgeorotherwise disposeofanyRegistrable Securities except(i)pursuanttotheRegistration Statement oranothereffective registration statement undertheSecurities Actandincompliance withtheprospectus-deliveryrequirement undertheSecurities Act;(ii)inaccordance withRule144undertheSecurities Actaftertheapplicable timeperiodspecified therein;or(iii)inaccordance withanotherexemption fromtheregistration requirements oftheSecurities Act;providedthatinthecaseofsubsection (iii)above,suchHolderwillnotifytheCompanyoritsagentandcooperate withanyreasonable requesttocausecertificates evidencing suchRegistrable Securities tobearalegendinsubstantially thefollowing form:Ni3538 THESECURITIES EVIDENCED HEREBYHAVENOTBEENREGISTERED UNDERTHEUNITEDSTATESSECURITIES ACTOF1933,ASAMENDED("SECURITIES ACT"),ANDMAYNOTBEOFFERED,SOLD,PLEDGEDOROTHERWISE TRANSFERRED EXCEPT(I)PURSUANTTOANEFFECTIVE REGISTRATION UNDERTHESECURITIES ACT,(2)INACCORDANCE WITHRULE144UNDERTHESECURITIES ACTOR(3)INACCORDANCE WITHANOTHERAPPLICABLE EXEMPTION FROMTHEREGISTRATION REQUIREMENTS OFTHESECURITIES ACT.(d)notifytheCompanypromptlyaftertheeventofthecompletion ofthesalebysuchHolderofallRegistrable Securities tobesoldbysuchHolderpursuanttotheRegistmtion Statement.

4.EXPENSESAllexpensesincidenttotheCompany's performance oforcompliance withthisAgreement, including, withoutlimitation, allregistration, qualification andfilingfees,feesandexpensesofunderwriters ifsuchofferingisunderwritten (otherthanunderwriting discounts andcommissions relatingtothesaleofRegistrable Securities fortheaccountofHolders),

feesandexpensesofcompliance withsecurities or"bluesky"laws(including feesanddisbursements ofcounselinconnection with"bluesky"qualifications oftheRegistrable Securities),

printingexpenses, messenger anddeliveryexpenses, internalexpenses(including, withoutlimitation, allsalariesandexpensesoftheCompany's officersandemployees performing legaloraccounting duties),travel,presentation forumandentertauunent expensesincidental toaroadshow, feesandexpensesincurredinconnection withthelistingoftheRegistrable Securities onthe.NYSEoranyothersecurities exchangeonwhichsimilarsecurities issuedbytheCompanyarethenlisted,feesanddisbursements ofcounselfortheCompanyanditsindependent certified publicaccountants (including theexpensesofanyspecialauditor"comfort" lettersrequiredbyorincidenttosuchperformance),

feesandexpensesoftheIPPs'pecial Counsel,securities actsliability insurance (iftheCompanyelectstoobtainsuchinsurance),

andfeesandexpensesofanyspecialexpertsretainedbytheCompanyinconnection withsuchregistration andfeesandexpensesofotherpersonsretainedbytheCompany.willbebornebytheCompany.5.INDEMNXFICATION 5.1Indemnification btheCom.TheCompanyagreestoindemnify andholdharmless, tothefullextentpermitted bylaw,eachHolder,itsofficers, directors,

partners, members,legalcounsel,accountants andagentsandeachpersonwhocontrolssuchHolder(withinthemeaningoftheSecurities Act)againstalllosses,claims,damages,liabilities andexpenses, jointandseveral(including reasonable counselfees)(collectively, "Losses")sufferedorincurredbyanythirdpartypurchaser ofRegistrable Securities whichariseoutoforarebaseduponbyanyuntrueorallegeduntruestatement ofN[3538l0 materialfactcontained inanyRegistration Statement, prospectus orpreliminary prospectu oranyomissionorallegedomissiontostatethereinamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein(incaseofaprospectus orapreliminary prospectus, inlightofthecircuinstances underwhichtheyweremade)notmisleading, exceptinsofarasthesameMccausedby,contained in,orwithrespecttoanymaterialomission, omittedfromanyinformation withrespecttosuchHolderfurnished inwritingtotheCompanybysuchHolderexpressly forusethereinorbysuchHolder'sfailuretodeliveracopyoftheRegistration Statement orprospectus oranyamendments orsupplements theretoaftertheCompanyhasfurnished suchHolderwithasufficient numberofcopiesofthesame.TheCompanywillalsoindemnify anyunderwriters andeachpersonwhocontrolssuchunderwriter (withinthemeaningoftheSecurities Act)tothesameextentasprovidedabovewithrespecttotheindemnification oftheHolders.5.2Indemnification btheHolders.Inconnection withtheRegistration Statement, eachHolder(severa1ly andnotjointly)agreestoindemnify andholdharmless, tothesameextentandinthesamemannersetforthinSection5.1,theCompanyandeachotherHolder,theirrespective oKcers,directors,

partners, members,legal-counsel,accountants andagentsandeachpersonwhocontrolstheCompany(withinthemeaningoftheSecurities Act)againstanyLossessweredorincurredbyanythirdpartypurchaser ofRegistrable Securities whichariseoutoforarebaseduponanyuntrueorallegeduntruestatement ofamaterialfactoranyomissionorallegedomissionofamaterialfactrequiredtobestatedintheRegistration Statement, prospectus orpreliminary prospectus oranyamendment thereoforsupplement theretoornecessary tomakethestatements therein(incaseofaprospectus orpreliminary prospectus, inlightofthecircumstances underwhichtheyweremade)notmisleading, totheextent,butonlytotheextent,thatsuchuntruestatement oromissioniscontained in,orwithrespecttoanymaterialomission, omittedGomanyinformation withrespecttosuchHoldersofurnished inwritingbysuchHolderexpressly forusetherein.Innoeventshalltheliability ofanyHolderhereunder begieaterinamountthanthedollaramountoftheprocessreceivedbysuchHolderuponthesaleofsuchHolder'sRegistrable Securities inconnection withanyRegistration Statement givingrisetosuchindemnification obligation.

5.3ConductofIndemnification Proceedin s.Anypersonsentitledtoindemnification hereunder (each,an"Indemnified Party")agreestogivepromptwrittennoticetotheindemnifying party(each,an".Indemnifying Party")afierthereceiptbysuchpersonofanywrittennoticeofthecommencement ofanyaction,suit,proceeding orinvestigation orthreatthereofforwhichsuchpersonwillclaimindemnification orcontribution pursuanttothisAgreement (butthefailuretogivesuchnoticewillnotaKecttherighttoindemnification orcontribution hereunder unlesstheIndemnifying Partyisniaterially prejudiced bysuchfailure)andtheIndemnifying Partyshallassumethedefensethereof,including theemployment ofcounselreasonably satisfactory tosuchIndemnified Partyandpaymentofallreasonable feesandexpenses(regardless ofwhetheritisultimately determined thatanIndemnified Partyisentitledtoindemnification hereunder).

SuchIndemnified Partyshallhavetherighttoemployseparatecounselinanysuchactionandparticipate inthedefensethereof,butthefeesandexpensesofsuchcounselshallbe113538 attheexpenseofsuchIndemnified Partyunless(i)theemployment ofsuchcounselshallhavebeenspecifically authorized inwritingbytheIndemnifying party,(ii)theIndemnifying Partyshallhavefailedtoassumethedefenseandemploycounselreasonably satisfactory totheIndemnified Partyor(iii)thenamedpartiestoanysuchaction(including any'impleaded parties)includebothsuchIndemnified PartyandtheIndemnifying PartyandsuchIndemnified Partyshallhavebeenadvisedbysuchcounselthattheremaybeoneormorelegaldefensesavailable toitwhicharedifferent fromoradditional tothoseavailable totheindemnifying Party(inwhichcase,theIndemnifying PartyshallnothavetherighttoassumethedefenseofsuchactiononbehalfofsuchIndemnified Party,itbeingunderstood',

however,thattheIndemnifying PartyshaHnot,inconnection withanyonesuchactionorseparatebutsubstantially similarorrelatedactionsinthesamejurisdiction arisingoutofthesamegeneralallegations orcircumstances, beliableforthefeesandexpensesofmorethanoneseparatefirmofattorneys (inadditiontoanylocalcounsel)forallsuchIndemnified Parties,whichfirmshallbedesignated inwritingbytheIndemnified PartiesandthataHsuchreasonable feesandexpensesshallbereimbursed astheyareincurred).

AnIndemnifying Partyshallnotsettle,compromise orconsenttotheentryofanyjudgmentinanyproceeding withouttheIndemnified Party'spriorwrittenconsent,unlessthetermsofsuchsettlement, compromise orconsentincludeanunconditional releaseofeachIndemnified PartyGomallliability orlossarisingoutofsuchproceeding.

5.4Contribution.

Ifforanyreasontheindemnity providedforinthisSection5isunavailable to,orisinsuf5cient toholdharmless, anIndemnified Party,thentheIndemnifying Partyshallcontribute totheamountpaidorpayablebytheIndemnified PartyasaresultofsuchLossesinsuchproportion asisappropriate toreQecttherelativefaultoftheIndemnifying PartyontheonehandandtheIndemnified Partyontheother.TherelativefaultofsuchIndemnifying PartyandIndemnified Partyshallbedeteanined byreference to,amongotherthings,whetheranyactioninquestion, including anyuntrueorallegeduntruestatement ofamaterialfactoromissionorallegedomissiontostateamaterialfact,hasbeenmadeby,orrelatestoinformation suppliedby,suchIndemnifying

.PartyorIndemniQed Party,andtheparties'elative intent,knowledge, accesstoinformation andopportunity tocorrectorpreventsuchaction.TheamountpaidorpayablebyapartyasaresultoftheLossesreferredtoaboveshallbedeemedtoincludesubjecttothelimitations setforthinSection5.3,anylegalorotherfeesorexpensesreasonably incurredbysuchpartyinconnection withanyinvestigation orproceeding.

Thepartiesheretoagreethatitwouldnotbejustandequitable ifcontribution pursuanttothisSection5.4weredetermined byprorataallocation orbyanyothermethodofallocation whichdoesnottakeaccountoftheequitable considerations referredtointheimmediately preceding paragraph.

NopersonguiltyofGaudulent misrepresentation (withinthemeaningof11(f)oftheSecurities Act)shallbeentitledtocontribution GomanypersonwhowasnotguiltyofsuchGaudulent misrepresentation.

Ifindemnification isavailable underthisSection5,theIndemnifying Partiesshallindemnify eachindemnified partytothefullextentprovidedinSections5.1and5.2Ni353812 withoutregardtotherelativefaultofsaidIndemnifying PartyorIndemnified Partyoranyotherequitable consideration providedforinthisSection5.4.6.REMEDIESTheCompanyrecognizes andagreesthattheHoldersofRegistrable Securities shallnothaveanadequateremedyiftheCompanyfailstocomplywiththeprovisions ofthisAgreement, andthatdamageswillnotbereadilyascertainable, andtheCompanyexpressly agreesthatintheeventofsuchfailureanyHolderofRegistrable Securities shallbeentitledtoseekspecificperformance oftheCompany's obligations hereunder andthattheCompanywillnotopposeanapplication seekingsuchspecificperformance.

7.NOTICESUnlessotherwise

provided, anynotice,consent,approval, authorization, waiverorothercommunication requiredorpermitted underthisAgreement shallbegiveninwritingandshallbedeemedeffectively givenuponpersonaldeliverytothePartytobenotified, onthenextbusinessdayafterdeliveiytoanationally recognized, overnight courierservice,uponconfirmation ofreceiptofafacsimile transmission orfivedaysafterdepositwiththeUnitedStatesPostOffice,byregisteied orcertified mail,postageprepaid,andaddressed tothePartytobenotifiedattheaddressorfacsimile numberindicated belowforsuchParty,oratsuchotheraddressassuchPartymaydesignate uponwrittennoticetothe'otherParties(exceptthatnoticeofchangeofaddressshallbedeemedgivenuponreceipt).

(a)InthecaseoftheCompany:NiagaraMohawkPowerCorporation 300ErieBoulevard WestSyracus,NY13202Facsimile:

(315)428-.3406 Attn:WilliamF.Edwardswithacopyto:Donaldson Lufkin&JenretteSecurities Corporation 277ParkAvenue NewYork,NY10172Facsimile; (212)892-7272Attn:MichaelRangerNI3S38l3 andwithacopyto:Sullivan&Cromwell1701Pennsylvania Avenue,N.W.Washington, DC20006Facsimile:

(202)293-6330Attn:JanetT.Geldzahler hereto,(b)InthecaseoftheIPPs,attheaddresses setforthonScheduleAwithacopyto:Wasserstein Perella&Co.,Inc.31WestS2~StreetNewYork,NY10019Facsimile:

(212)969-7971Attn:KennethA.Buckfireandwithacopyto:Akin,Gump,Strauss,Hauer&Feld,L,L.P.590MadisonAvenueNewYork,NY10022Facsimile:

(212)872-1002Attn:StevenH.Scheinman 8.MISCELLANEOUS 8.1EntireAment.ThisAgreement, togetherwiththeMasterRestructuring Agreement, constitutes theentireagreement betweenthePartiesheretowithrespecttothesubjectmatterhereof,andsupersedes allprioragreements andunderstandings, writtenororal,betweenthepartieswithrespectthereto.8.2Amendments andWaivers.AnytermofthisAgreement maybeamendedandtheobservance ofanytermofthisAgreement maybewaived(eithergenerally orinaparticular instanceandeitherretroactively orprospectively),

onlybyaninstrument inwritingandsignedbythePartyagainstwhomsuchamendment orwaiverissoughttobeenforced.

8.3Successors andAssis.Exceptasotherwise expressly providedherein,thetermsandconditions ofthisAgreement shallinuretothebenefitofandbebindingupontherespective successors andassignsoftheParties.EachHoldermayassignalloranyportionofitsrightshereintoanytransferee ofRegistrable Securities 4l3538]4 whichiseligibletobea"Holder"asthattermisusedherein.NothinginthisAgreement, expressorimplied,isintendedtoconferuponanypersonorentityotherthanthePartiesheretoortheirrespective successors andassignsanyrights,remedies, obligations, orliabilities underorbyreasonofthisAgreement, exceptasmaybeexpressly providedinthisAgreement.

4.4A~i~L.7MAg***.gId'g&*egvhIandtherightsandobligations ofthepartieshereunder, andallamendments andsupplements hereofandallwaiversandconsentshereunder, shallbeconstrued inaccordance withandgovernedbythedomesticsubstantive lawsoftheStateofNewYorkwithoutgivingeffecttoanychoiceoflaworconflicts oflawprovision orrulethatwouldcausetheapplication ofthedomesticsubstantive lawsofanyotherjurisdiction.

8.5Seve~bilite, Ifanyprovisions ofthisAgreement asappliedtoanypartortoanycircumstance oranyPartyshallbeadjudgedbyacourttobeinvalidorunenforceable, thesameshallinnowayaffectanyotherprovision ofthisAgreement, theapplication ofsuchprovision inanyothercircumstances ortoanyotherParty,orthevalidityorenforceability ofthisAgreement.

8.6~Cations.TheheadingsandcaptionsusedinthisAgreement areusedforconvenience onlyandarenottobeconsidered inconstruing orinterpreting thisAgreement.

LyC*.TA'g**7I*dIcounterparts, eachofwhichshallbedeemedanoriginal, butallofwhichtogethershallconstitute oneandthesameinstrument.

8.8SeveralObliations.Theobligations oftheHoldershereinareseveralandnotjoint.NoHoldershallberesponsible fortheperformance orfailureonthepartofanyotherHoldertoperformitsobligations.

gI353S NWITNESSWHEREOF,thePartiesheretohaveenteredintothisRegistration RightsAgreement asofthedatefirstabove~mitten.NiagaraMohawkPowerCorporation By:Its[IPPs/IPP Designees]

By:Its:By:ItsBy:ItsBy:Its:li353816 EXHIBIT3.7FormofShareholder's Agreement

¹l2704

Exhbit3.7SHARBHOLDBR'S AGRBBMB!ff, datedasofbyandbetween.(the"Shareholder"

),an'dNiagaraMohawkpower'Corporation (the'Compan~.

WHEREAS,simultaneously withtheexecution hereoftheShareholder oramember(s) oftheSponsorGroup(ashereinaiier deQned)isacquYiing shamsoftheCompany's CommonStock,parvalueSi00persluue(the"CommonStace),pursuanttoaMasterRestructuring Agreement, datedasof3uly9,1997(the"MRA");WHEREAS,[insertnamesofothersponsorentitiesEstedonSchedule3.7oftheMRA](collectively withtheirrespective Subsidiaries, the"OtherSponsorGroup+aresimultaneously enteringintoShareholder's Agreements; NOW,THEREFORE, inconsideration ofthepremisesaadagreements hereinsetforth,thepartiesdoherebyagreeasfollowsSECTION1.~1.1Asofthedatehereof,foIlowing theaequi'sition ofCommonStock'ursuanttotheMRA,theShareholder anditsSubsidiaries (coHectively, the"SponsorGroup")donotowa,inthcaggregate, inexcessof4.9/o[9.9/ofordesigaees]

oftheoutstanding CommonStockoftheCompany(assuming forthesepurposesthatthcoutstanding CommonStockofthcCompanyisnotlessthan190,390,600 sharesasofthedatehereof).AsusedinthisAgreement, theterm"Subsidiary" means,withrespecttoanyperson,anyotherperson,whetherincorporated orunincorporated, ofwhichatleastamajorityofthesecurities orownership interests hayingbytheirtermsor(HIDvotingpowertoelectamajorityoftheboardofdirectors orotherpersonspaformiag sunilarfunctions isdirectlyorindirectly ownedorcontrolled bysuchperson.TotheKnowledge ofShareholder,

[parententityorentities-secattachedschedule]

anditsortheirafBliates (asthatternisdeflaedinRule12b-2undertheSecurities ExchangeActof1934,asamended(the"Exchange Act"))who'arenotmembersoftheSponsorGroup(collectiveIy, "Excluded Afmiates")

doaotownanysharesofCommonStockasofthedatehereof.[modifyasappropriate, subjecttoSection6.14ofMRA]AsusedinthisAgreement, theterm"Knowledge" shallbetheknowledge oftheseniorcorporate ofBcers,orcomparable executive personnel, ofapersoa,andshallnotimplyanydutyofinquiry.Following theacquisition ofsharesofCommonStockpursuanttotheMRA,theStuueholder agreestheSponsorGroupwillnot,directlyorindirectly, aloneorinconcertarithothers,acquire,offertoacquireoragreetoacquire,bypurchase, giRorotherwise, beneflcial ownership (ashereinafter deflaed)ofanyadditional sharesoftheCompany's thenoutstanding CommonStockorbeneflcial ownership ofanyotherVotingSecurities DCLAML'70194 l0 (ashereina6er defincd)oftheCompany.Notwithstanding thcforegoing, thcSponsorGroupmayacquireuptoanadditional 5%[%loweredtoamaximumof9.9/o,including anyCommonStockacquiredpursuanttotheMRAforIPPdesigneewithgreaterthan4.9loatclosing]ofthethenoutstanding VotingSecurities ymH'dadthatsuchpercentage shaHbereducedbythepercentage ofsharesofVotingSecurities held,totheKnowledge ofShareholder, bythcExcludedAf6liates atthetimeofanyproposedacquisition.

Participation inarightsoffering, receiptofstockdividends, andsimilarcorporate eventsnotinitiated byanymember'of theSponsorGroupshallbeexcludedRomtheforegoing Icstzlcflons.

1.2Noviolation ofSection1.1.shallbedeemedtooccurasaresultoftheacquisition bytheSponsorGroupofbeneficial ownership ofVotingSecurities astheresultofanyacquisition ofvotingsecurities ofanotherperson(a)whosevotingsecurities areregistered underthcExchangeActor(b)withrespecttowhomthcVotingSecurities heldisanimmaterial assetofsuchperson,ineithercasebyamemberoftheSponsorGroupwhichresultsinsuchmemberoftheSponsorGmupindirectly becomingthebeneficial ownerofadditional VotingSecurities oftheCompany,gazing@thatifsuchmemberoftheSponsorGroupacquirescontrolofsuchotherpersonorisotherwise abletodirectthevotingordisposition oftheadditional VotingSecurities, suchmemberoftheSponsorGroupshallvotesuchVotingSecurities inthemannersetforthinSection1.4.1.3TheShareholder agreestheSponsorGroupwiHnot,directlyorindirectly, aloneorinconcertwithothers(including theExcludedAaiates),

(a)make,orinanywayparticipate in,anysolicitation" of"proxies" (assuchtamsaredefinedinRulc14a-1ofRegulation 14Apromulgated bytheSecurities andExchangeCommission-pursuanttoSection14oftheExchangeAct,disregarding clause(iv)ofRule14a-1((1)2) andincluding anyexemptsolicitation pursuanttoRule14a-2(b)(l))

relatingtotheVotingSecurities (exceptastoanyproxiesthatmaybegivenpursuanttoSection1.4);call,orinanywayparticipate inacallfor,anyspecialmeetingofshareholders'of theCompany;request,ortakeanyactiontoobtainorretainanylistofholdersofanysecurities oftheCompany;initiateorproposeanyshareholder proposalorparticipate inthemalCingof,orsolicitshmholders fortheapprovalof,oncormorcshareholder proposals re1atingtotheCompany;(b)depositanyVotingSecurities inavotingtrustorsubjectthemtoanyvotingagreement oranangements, exceptasprovidedhereinandexceptasamongthemembersoftheSponsorGroup;(c)form,joinorinanywayparticipate inagroupwithrespecttoanyVotingSecurities (oranysecurities theownership ofwhichwouldmaketheownerthereofabeneficia ownerofVotingSecurities)

(exceptasamongthcmembersoftheSponsorGroup);(d)othenmseacttocontrolthcCompanyorthenuuegement, boardofdirectors, poHciesorafMrsoftheCompanyincluding, withoutlimitation, Oimakinganyo'erorproposaltoacquireanysecurities orassetsoftheCompanyoranyofitsaf6Hatesorsoliciting orproposing to.effect ornegotiate anyformofmerger,consolidation orshareexchange(a"business combination"

),restructuring, recapitalization orotherextraordinary transaction involving, oranychangeincontrolof,theCompany,itsa6iliates oranyofDCLhNOl:70194.10 theirrespective securities orassets(exceptforaproposalfortheacquisition ofanyofthcnon-nuclear generating assetsoftheCompanyoritsafBliates

("Generating Assets")whichwouldnotrequiretheCompanyoranyofitsafBHatestomakeanypublicdisclosure thereof)or(ii)exceptasexpressly providedintheMRA,seekingboardrepresentation ortheremovalofanydirectors ormanagement orachangeinthecomposition orsizeoftheboardofdirectors oftheCompany,or(iii)makinganyrequesttoamendorwaiveanyprovision ofthisAgreement thatwouldrequirethcCompanytomakepublicdisclosure thereoF,(c)discloseanyintent,purpose,planorproposalwithrespecttothisAgreement ortheCompany,itsaf61iates ortheboardofdirectors, management, policiesoraffairsorsecurities orassetsoftheCompanyoritsafBHatesthatisconditioned on,orwouldrequire,waiver,amendment, nulHfication orinvalidation ofanyprovision ofthis.Agreement, ortakeanyactionthatcouldrequiretheCompanyoranyofitsafBHatestomakeanypublicdisclosure relatingtoanysuchintent,purpose,plan,proposalorcondition; or(Qassist,adviseorencourage anypersonwithrespectto,orseektodo,anyoftheforegoing.

Notwithstanding theforegoing, Qiifanyperson,aloneorinconcertwithothers(otherthanthcExcludedAfBHates),

(A)makesanunsolicited hug5htenderorexchangeofFertoacquircVotingSecurities thatwouldresultinbencficial ownership bysuchperson,aloneorinconcertwithothers,ofatleast2P/oofthcCompany's outstanding VotingSecurities, (B)makesanunsolicited

~~proposaltoacquircatleastamajorityoftheVotingSecurities orsubstantially alloftheassetsoftheCompany,ineithercaseeitherdirectlyorthroughabusinesscombination, andinconjunction therewith, mailsaproxystatement toshareholders oftheCompanyseekingachangeinthecomposition ofthcboardofdirectors oftheCompanyor(C)atatimewhentheCompanyanditsafBHatesownsubstantially alloftheGenerating Assets,entersintoanagreement withtheCompanyforthcsaleofsubstantially allassetsoftheCompanyora.businesscombination inwhich(x)theshareholders oftheCompanypriortothcconsummation ofsuchbusinesscombination (excluding thepersonmrdangtheOfferanditsafBHates) wi11,immediately following suchconsurnnmtion, ownlessthanamajorityoftheVotingSecurities oftheresulting entityor(y)thedirectors oftheCompanypriortosuchconsummation will,immediately following su'chconsummation, constitute lessthanamajorityoftheboardofdirectors oftheresulting entity(anyof(A),(B)or(C),an"OfFer"),therestrictions contained inSections1.1,1.2and1.3ofthisAgreement shallnotapplytotheextentnecessary toallowanymemberoftheSponsorGrouporanyExcludedAfBliatethereof,ifapplicable, tomakeaproposaltotheboardofdirectors toacquiretheCompanyonthetermssetforthbelowortoacquireallorsubstantially alloftheassetsoftheCompany,andtodisclosesuchproposal, and/ortomake,andconsummate, atenderorexchangeoffertoacquirethcCompany,asthecasemaybe,ifsuchproposaloroffer(x)is(ifapplicable) foratleastthesamepercentage ofVotingSecurities astheOffer(including anysecondsteptransaction proposedintheOfFer)and(y)is,inthewrittenopinionofanationally recogrCized investment bankingfirm,takingintoaccountanysecondsteptransactions intherespective offers,theequalormorefavorable, froma'inancial pointofview,totheholdersofCommonStockthantheOffer,(ii)nothingcontained hereinshallprohibitthesaleofVotingSecurities, withoutanyactionstosolicit,DCLANOl:70194.l0 induceorencourage anattempted changeofcontrolofthcCompany,bytheSponsorGrouporprohibitthepurchaseofCommonStockascontemplated bySection1.1and(iii)nothingcontained hereinshallpreventanymemberoftheSponsorGroupf'rombiddingonanda'cquiYing anyGenerating AssetsoftheCompany(including thestockofanyafBliates) whichtheCompanyputsupforsaleinacompetitive processifsuchbidsaremadeinaccordance withthetermsofsuchprocess.Nothingintheforegoing subsections (d),(e)or(f)isintendedtorestricttheactionsoftheSponsorGroupinacapacityotherthanasholderorpotential acquirerofCommonStockinamatterwhichisunrelated toapotential changeofcontroloftheCompany.1AThcShareholder agreestheSponsorGroupshalltakesuchactionasmayberequiredsothatallVotingSecurities bcneGcially owneddirectlyorindirectly bytheSponsorGroupshaHbcpresentforquorumpurposes, inpersonorrepresented byproxyatcvciymeetingofholdersofCommonStock,andtheSponsorGroup(a)shaHvoteitsVotingSecurities forthcelectionofaHnomineesfordirectors ateachshateho!der meetingoftheCompanyinthesameproportion asaHotherVotingSecurities arevoted(otherthantheVotingSecurities heldbythcSponsorGroupandthcOtherSponsor'GroupswhichremainapartytoaShareholder Agreement, asweHasanyVotingSecurities transferred bytheSponsorGrouporsuchOtherSponsorGroupstoanyoftheirrespective ExcludedAf5liatcs)

(the"Disinterested Shares")present,inpersonorbyproxy,atsuchmeetingandvotingwithrespecttotheelectionofdirectors, exceptthatifsuchelectionfordirectors shalloccurwhilethereispendinganOffermadebyanyperson(otherthananExcludedAfBliate),

theSponsorGroupmayvoteinitsdiscretion, and(b}mayvoteonaHothermattersinitsdiscretion, 1zgzidg,thatwithrespecttoanymattersotherthansalesofsecurities orassets,businesscombinations, restructurings, recapitaEzations andotherextraordinary traiisactions, thepercentage ofVotingSecuntics votedonaHmattersbytheSponsorGroupinaccordance withtherecommendation oftheCompany's boardshallbenolessthanthepercentage ofDisinterested Sharessovoted.Notwithstanding theforegoing, ifamemberoftheSponsorGroupmakesaproposalorofferinresponsetoanOfferdescribed under(i)(C)'of thesecondsentenceofSection1.3,allVotingSecurities heldbytheSponsorGroupshallbevoted,bothwithrespecttothe06erandtheproposaloroffermadebythememberoftheSponsorGroup,inthesameproportion astheDisinterested Shares.SECTION2.2.1SolongasthesharesofCommonStockheldbytheOtherSponsorGrouporitsrespective ExcludedAf5liates remainsubjecttotheprovisions oftheirrespective Shareholder's Agreement (orwouldbesubjectbyvirtueofsuchtransfer),

theShareholder agreestheSponsorGroupwillnot,directlyorindirectly, aloneorinconcertwithothers,sellorotherwise transferinanymanneranyVotingSecurities toanymemberofanOtherSponsorcroup,ortoapersonwhichis,totheKnowledge ofthesellingshareholder, anExcludedA6iliateofanymemberofanOtherSponsorGroup.InanyDcLhNOlf0194.i0 privatsaleofVotingSecuritie whichissubjecttotheprecagngsentence, thesellingmemberoftheSponsorGroupshallobtaintherepresentation ofthebuyerthatitisnotanExcludedAfBIiatcofanymemberofanOtherSponsorGroup.Subjecttothclimitations ofSection1.1,thcShareholder, ifitholdsanyVotingSecurities, maysellorotherwise

'ransferVotingSecurities tomembersoftheSponsorGroup,providedthatsuchmembersagreeinwritingtobeboundbytheprovisions hereof.2.2FoHowinganytransferofVotingSccurities bytheSponsorGrouptoanyExcludedA6iliateoftheSponsorGroup,thcrestrictions contained inSections1.1,1.2,1.3and1.4shaHnolongerbeapplicable tosuchtauLsfencd VotingSecurities, exceptthatthcrestrictions contained inSection1AshaHcontinuetoapplytosuchtransferred VotingSecurities whileheldbyanExcludedAfBliatewithrespecttoanyactioninitiated byanymemberofthcSponsorGmuporanyofitsExcludedAGiliatcs andexceptthatifUotingSecurities arctransferred toanExcludedAf61iatcduringthependencyofaproxysolicitation withrespecttoUotingSecurities byanypersonotherthantheCompany's boardofdirectors (including anannouncement bysuchpersonthatitintendstoengageinaproxysolicitation),

aHrestrictions contained inSection1AshallbeappHcable tosuchVotingSecurities duringthependencyofsuchproxysolicitation.

2.3ExceptassetforthinSections2.1and2.2,nothingcontained inthisAgreement shaHinanywaylimitorrestrictanysaleortransferofVotingSecurities byanymemberoftheSponsorGroupand,exceptassetforthinSections2.1and22,nothingcontained inthisAgreement shallimposeanyrestrictions onanyUotingSecurities soldortransferred outsideoftheSponsorGroup.-SECTION3.

3.1Eachofthepartiesheretorepresents andwarrantswithrespecttoitselfthatsuchpartyisdulyauthorized toexecute,deliverandperformthisAgreement, thatthisAgreement hasbeendulyexecutedbysuchpartyandthatthisAgreement isavalidandbindingagreement ofsuchparty.SECTION4.4.1ThisAgreement shaHterminate Gveyears&omthedate'ereof oronsuchearlierdate(the"ReducedOwnership Date")astheaggregate beneficial ownership oftheCompany's outstanding VotingSecurities bytheSponsorGroup,inadditiontoanyUotingSecurities transferred bytheSponsorGrouptoitsExcludedAfBliates (uptothenumberofsuchUotingSecurities stillheldbyaHExcludedAf61iates),

islessthan2%,solongassuchpersonsdonotreacquire aggregate beneficial ownership of2%ormoreoftheCompany's outstanding VotingSecurities withinoncyearoftheReducedOwnership Date.Iftheaggregate beneficial ownership ofsuchpersonsshallexceed2%withinoneyearoftheReducedOwnership Date,thisAgreement shallatthetimesuchownership DCLANO1:VOL94.10 exceedssuchlimitagainbcinfullforceandeffectforthebalanceoftheoriginalterm.IftheShareholder seekstoteraunate thisAgreement asaresultofsuchreducedownership, itshallpromptlyuponrequestbytheCompanyconfirminwritingthebeneficial ownership oftheCompany's VotingSecurities bythcSponsorGroup,aswellasanyVotingSecurities transferred bythcSponsorGrouptoanExcludedAfBliate.

Following anysuchtermination asaresultofreducedownership thcShareholder shall,ifrequested bytheCompanyinwriting,confirmsuchbeneficial ownership, untiloneyearfollowing theReducedOwnership Date,¹twithst'anding anythingtothecontraiycontained inthisAgreement (a)thisAgreanent shallteraunate atsuchtimeasanyperson,aloneorinconcertwithothers(otherthanthcSponsorGroup,itsExcludedAfBliates, oranyOtherSponsorGrouporitsrespective ExcludedA6iliatcs),

beneficially owns25%ormoreoftheVotingSecurities and(b)thisAgreement shallternunatc intheeventtheCompanymakesagena31assignment oranygeneralanangemcnt orcompromise forthcbencfitofcreditors, filesapetitionundertheBankruptcy Code(Title11oftheUnitedStatesCode)orotherwise commences, authorizes oracquiesces inthecommencement ofaproceeding underanybankruptcy orsimilarlawfortheprotection ofcreditors, orhasapetitioncommenced againstit4.2ForpurposesofthisAgreement, nia"person"shallmeananyindividual, firm,partnership, association, corporation orotherentityorgmupofsuchpersons;(ii)apersonshallhavebeneficial ownership" ofanysecurities astowhichsuchpersonmaybedeemedthebcneficial ownerpursuanttoRule13d-3undertheExchangeActandshaHinclude,withoutHmitation, anysecurities suchpersonhastherighttobecomethebeneficial ownerof(whether ornotsuchrightisimmediately exercisable) pursuanttoanyagreement, amuigcment orunderstanding orupontheexerciseofanyexchangeright,conversion right,option,wurantorotherright;and(iii)"VotingSecurities" shallmeansecurities thataregenerally entitledtovoteintheelectionofdirectors oftheCompany(or,wherereference ismadetothevotingsecuritie ofanotherentitysuchtermshallmeansecurities thataregenerally entitledtovoteintheelectionofdirectors, orcomparable persons,ofsuchotherentity),4.3TheShareholder acknowledges andagreesthatirreparable damagetotheCompanywouldoccurintheevent.anyoftheprovisions ofthisAgreement werenotperformed inaccordance withtheirspecifictermsorwereotherwise breachedandthatsuchdamagewouldnotbecompensable inmoneydamages.Itisaccordingly agreedthattheCompanyshallbeentitledto,andtheShareholder agreestheSponsorGroupwillnottakeaction,directlyorindirectly, inopposition totheCompanysseeking,specificenforcement of,andinjunctive relieftopreventanyviolation of,thetermshereof,inadditiontoanyotherremedyorreHefavailable atlawor'nequity.4.4TheCommonStockissuedtoanymemberoftheSponsorGrouppursuanttotheMRAwillcontainalegendinsubstantially thefollowing form:DCLANOi:70I&4.10 "Thesharesofcapitalstockrepresented bythiscerti6cate aresubjecttoaShareholder's Agreement which,amongotherthings,(a)restricts thesaleortransferofsuchsharesto[anymemberofanOtherSponsorGroupor,ifknowntothesellingshareholder, anyExcludedAfBliateofanOtherSponsorGroup-tobecompleted uponexecution],

orcertainoftheirafBliates, and(b)restricts thevotingofsuchsharesexceptinaccordance therewith.".

Upontheteoauetion ofthisAgreement, oruponanytransferofVotingSecurities toanyperson(otherthanamenderoftheSponsorGrouporanyExcludedAKiateorasprohibited bytheGrstsentenceofSection2.1),theCompanyagrees,ifsorequested, tocausetheCompany's transferagenttoremovethelegend.UponanytransferofVotingSecurities toanyExcludedAf61iatepriortotermination ofthisAgreement, theCompanyagrees,ifsorequested, toreplacethelegendtoreQectsolelythevotingrestrictions setforthinSection2,2.4.5TheShareholder wiHcauseeachmemberoftheSponsorGrouptoobservetheprovisions ofthisAgreement.

4.6Allnotices,requestsandothercommunications toanypersonnamedhereunder shallbeinwriting(including wire,telecopyorsunilarwriting)andshallbegiventosuchpersonatitsaddressortelecopynumbersetforthbeloworsuchaddressortelecopynumberassuchpersonmayhereafter specifyforthepurposebynoticetotheotherperson:IftotheCompany:Telecopy:

Withacopyto:Telecopy:

IftotheShareholder.

Telecopy:

Withacopyto:Telecopy:

DCLAHOl:70194.10 Eachsuchnotice,requestorothercommunication shallbeeffective (a)ifgivenbytelecopy, whensuchtelecopyistransmitted tothetelecopynumberspeci6edinthissubsection andtheappropriate confirmation isreceivedor(b)ifgivenbyanyothermeans,whenactuallyreceivedattheaddressspecified inthissubsection, gmziNianoticegivenotherthanduringnormalbusinesshoursoronadayotherthanabusinessdayattheplaceofreceiptshallnotbeefFective untiltheopeningofbusinessonthenextbusinessday.4.7ThisAgreement shallbeconstrued inaccordance withandgovernedbythelawsoftheStateofNewYork(withoutregardtotheprinciples ofconQictoflawsthereof).

4.8ThisAgreement maybeamended,modifiedorsupplemented onlybywrittenagreement ofthepartieshereto.4.9AnyfaBureofanypartytocomplywithanyobligation,

covenant, agreement orcondition haeinmaybewaivedbythepartyentitledtothebenefitofsuchobligation,

covenant, agreement orcondition onlybyawritteninstrument signedbysuchparty,butsuchwaiverorMuretoinsistuponstrictcompliance withsuchobligation,

.covenant, agreement orcondition shallnotoperateasawaiverof,orestoppelwithrespectto,anysubsequent orotherfailure.WheneverthisAgreement requiresorpermitsconsent~byoronbehalfofanypartyhereto,suchconsentshallbeeffective onlyifgiveninwritinginamannerconsistent withtherequirements forawaiverofcompHance assetforthinthisSection.4.10ThisAgreement andalloftheprovisions hereofshallbebindinguponandinuretothebenefitofthepartiesheretoandtheirrespective successors bymergerorotherwise byoperation oflaw.IntheeventofanNMPCRestructuring (asdefinedintheMRA),thetermsofthisAgreement shallbeappHcable toanyVotingSecurities receivedbytheSponsorGroupintheNMPCRestructuring, otherthanVotingSecurities ofanyentitywhichholdsallorsubstantially alloftheGenerating Assets.4.11ThisAgreement maybeexecutedintwoormorecounterparts, eachofwhichshallbedeemedanoriginal, butallofwhichtogethershallconstitute oneandthesameinstrument.

4.12ThisAgreement embodiestheentireagreement andunderstanding ofthepartiesheretoinrespectofthesubjectmattercontained herein.Therearenootherrestrictions,

promises, representations, warranties, covenants orundertalangs withrespecttothesubjectmatterhereof;otherthanthoseexpressly setforthorreferredtoherein.ThisAgreement supersedes allprioragreements andunderstandings betweenthepartieswithrespecttosuchsubjectmatter.DCLhNOl:70194.l0 4.13Ifanyprovision ofthisAgreement shallbedeemedordeclaredtobeunenforceablc, invalidorvoid,thesameshallnotimpairanyoftheotherprovisions ofthisAgreement.

4.14Thepartiesheretoherebyirrevocably submittothejurisdiction oftheUnitedStatesDistrictCourt,SouthernDistrictofNcwYork(or,ifthereisnosubjectmatterjurisdiction beforesuchcourt,theSuprcmcCourtoftheStateofNewYork,NewYorkCounty)overanylegalactionorproceeding arisingoutoforrelatingtothisAgreement andherebyirrevocably agreethatallclaimsinrespectofanysuchactionmaybeheardanddetermined insuchcourt.Thepartiesherebyirrevocably waive,tothefullestextentpermitted byapplicable law,anyobjection whichtheymaynoworhereafter havetothelayingofvenueofanysuchsuit,actionorproceeding broughtinsuchcourtoranydefenseofinconvenient forumforthemaintenance ofsuchaction.EachofthepartiesheretoagreesthatajudgmentinanysuchactionorproceoHng maybeenforcedinotherjurisdictions bysuitonthejudgmentorinanyothermannerprovidedbylaw.4.15IfanyExcludedAGiliatereceivedCommonStockasadesigneeuponthcconsummation oftheh6~forthepurposesofthisAgreement, suchCommonStockshallbetreatedas8'itwastransferred totheExcludedAfBliatefollowing theexecution hereof.INWITNESS%HEREOP,thepartiesheretohavecausedthisAgreement tobedulyexecutedasofthedayandyearGrstabovewritten.[Shareholder)

[Company]

DCLAHORE:70194.10 Theundersigned agreetobeboundherebyasmembersoftheSponsorGroup[iftheyaretoreceivesharesofCommonStockpursuanttotheMRA]:DCLANOl:70l9410 Exhibit3.7DCLhNOI:70194.10-ll-

EXHIBIT5.7BlankFormsofAllocation, Contracts Allocation andContractAdjustment Allocation (attached)

Nl2704

ALLOCATION OFALLOCABLE CONSIDERATION

<<Developer>>.'Project>>

($'000s)'ighly Confidential Governor's Roundtable Discussions Allocation CashCompanyShares($l¹ofshares)<<D>><<E>>'"/rF)<<Company>>

By:Title:KennethA.BuckfireDirector, Vfasserstein Perella&Co.<<Close>>'n)epurposeofthispageistoenableWphCo.tonpresentthatallIhcIppsagnxlotheirindividual alhxations ofupfruntpayment,andtoallowWpACo.tostatethatthevaluealluvialtocahprupxtinaggn:gate equalstothetotalupfmntconsideration payablcbyNiagaraMohawkPowerCorporation pursuanttotheTermsoftheMasterRestructuring Agteetawt.

ThcDepository willntaLelinaldistributions tothcprojectontheConsutnntation Dateequaltothcan)ountsshownabove.fhcattentions willnotbcbindinguntilthcMasterkesttueturing Agnwmenthas!xnansignedbyallpartiia.Proratashareof46millionsharesassuminganaggn:gate valueof$4(X)million.tIVassr.'rstein PerellaZcCo.II'O'A'IAl.unhtlAkAulNAII)X.ll~

INDEPENDENT POVKRPRODUCERS lCONTRACTS ALLOCATION AmendedPPA/Restated ContractHIGHLYCONFIDENTIAL Governor's Roundtable Discussions

<cIPP>><cProject>>

ContractYearContractMWhContrac<Price($/MWh)Contr,'.tValue($'000s)HctAveageAnnualCapacity(MW)<<FP>>KennethA.BuckfiteDirector, Wasserstein Petella4Co.By:lVasserstein PerelladcCo.

IINDEPENDENT POWERPRODUCERS ICONTRACTS ALLOCATION AmerdedPPA/Restated Contract(Contract Adjustment)

HIGHLYCONFIDENTIAL Governor's Roundtable Discussions

<<IPP.><<Preject>>ContrutYearContractMWhContractPrice($/MWh)Con6.fact Value($'000s)Contra';YearContractMWhContractPrice($/MWh)ContractValue($'000s)ContractAdjustment

<<IPP>>KennethA.BuckfireDirector, Wassetstein Perella4Co.By:Title:(1)Tl.eContractAdjustmentiscalculatedbeforegivingeffect tothe$5/MWhreduction inyears3through9

.~adthe$2.5/MWhreduction inyear10forboththeOriginalandtheAdjustedContractSchedules.

Wasserstein PerelladcCo.

EXHIBIT8.3AFormofNMPCRepresentation LetterN12704

Exhibit8.3AP.ETTERHEAD OFNMPC][Consummation Date]Independent PowerProducers listedonScheduleAheretoRe:MasterRestructurin AcementdatedJul917LadiesandGentlemen:

Inconnection withtheconsummation onthisdateofthetransactions contemplated bytheMasterRestructuring Agreement datedJuly9,1997(the"Agreement"

)betweenNiagaraMohawkPowerCorporation (the"Company"

)andtheIPPslistedonScheduleAhereto(the"IPPs"),theCompanyherebyrepresents andwarrantstoeachIPP,asoftheConsummation Date,thatthefollowing statements aretrueinallmaterialrespects(allcapitalized termsusedandnototherwise definedhereinshallhavethemeaningsascribedtothemintheAgreement):

1.TheCompanyisacorporation dulyorganized, validlyexistingandin'oodstandingunderthelawsoftheStateofNewYork,andhasallrequisite corporate powerandauthority toownitsproperties andassetsandtocarryonitsbusinessinthemannernow.conducted andasproposedtobeconducted inaccordance withtheAgreement andtheContracts.

TheCompanyisdulyqualified totransactbusinessandisingoodstandingineachjurisdiction exceptwherethefailuresotoqualifywouldhavenothaveaMaterialAdverseEffectontheCompany.2.TheCompanyhasallrequisite corporate powerandauthority toexecuteanddelivertheAgreement andallotheragreements executedortobeexecutedbyitpursuantthereto,andtocarryouttheprovisions oftheAgreement inaccordance withthetermsthereof,andallotheragreements executedortobeexecutedbyitpursuantthereto,including, butnotlimitedto,thepowerandauthority toissueandselltheCompanySharesandShort-Term Notes,andtoenterintoandperformtheContracts; allcorporate actiononthepartoftheCompany,itsofficers, directors andshareholders necessary fortheauthorization, execution anddeliveryoftheAgreement inaccordance withthetermsthereof,andallotheragreements executedortobeexecutedbytheCompanypursuantthereto,theperformance.

ofallobligations oftheCompanythereunder, andtheauthorization,

issuance, saleanddeliverybytheCompanyoftheCompanySharesandShort-Term Notes(ifapplicable) pursuantthereto,hasbeentaken;theAgreement andallotheragreements executedbytheCompanypursuanttheretohavebeendulyandvalidlyexecutedanddelivered bytheCompany;andtheAgreement andallotheragreements executedortobeexecutedbytheCompanypursuanttheretoconstitute orwillconstitute validandleeallv.l430lv07 bindingobligations oftheCompany,enforceable againsttheCompanyinaccordance withtheirrespective terms.3.Exceptfor(i)thoseRegulatory Approvals whichhavebeenobtained, madeorgivenonorbeforethedatehereofand(ii)anyfilingsmadebytheCompanyundertheHart-Scott-Rodino Act,noconsent,approval, qualification, order,orauthorization orotheractionof,orfilingorregistration with,anyGovernmental Authority isrequiredonthepartoftheCompanyinconnection withtheCompany's validexecution, deliveryorperformance oftheAgreement, oranyoftheotheragreements executedortobeexecutedbytheCompanypursuantthereto,ortheauthorization,

issuance, saleanddeliverybytheCompanyoftheCompanySharesandShort-Term Notes(ifapplicable),

which,ifnotobtained, madeorgiven,couldreasonably beexpectedtohaveaMaterialAdverseEffectontheCompany.4.Theexecution, deliveryandperformance bytheCompanyoftheAgreement, anyotheragreements executedortobeexecutedbytheCompanypursuantthereto,andtheconsummation ofthetransactions contemplated thereby(a)isnotinviolation ordefaultofanyprovision ofitsCertificate ofIncorporation orBy-Laws,and(b)isnotinconflictwithanddoesnotconstitute, withorwithoutthepassageoftimeorgivingofnotice,amaterialviolation ordefault,orgiverisetoanymaterialobligation, under(i)anymaterialmortgage, indenture, agreement, instrument orcontracttowhichtheCompanyisapartyorbywhichitoranyofitsmaterialassetsisboundor(ii)anylocal,stateorfederaljudgment, order,writ,decree,statute,ruleorregulation applicable totheCompanyoranyofitsmaterialassets.5.ScheduleBheretosetsforth(i)theauthorized capitaloftheCompany,(ii)thenumberofsharesofCommonStockissuedandoutstanding and(iii)thenumberofshares.ofCommonStockissuableupontheexerciseofanyoptions,warrantsorrights,oruponconversion orexchangeofanyothersecurities outstanding, asof{notearlierthantenBusinessDayspriortothedatehereof].6.TheCompanySharesacquiredbytheIPPpursuanttotheAgreement, ifany,havebeendulyandvalidlyissued,fullypaid,andarenonassessable, areBeeofrestrictions ontransferotherthanrestrictions ontransferrequiredbyfederalsecurities laws,and,ifapplicable, theShareholder's Agreement andaredulylistedontheNewYorkStockExchange.

TheCompanySharesarenotsubjecttoanypreemptive rightsorrightsoffirstrefusal.AssumingthetruthandaccuracyofeachIPP'srepresentations setforthinSection5.6oftheAgreement (or,'withrespecttoanydesigneeofanIPP,suchdesignee's representations setforthinarepresentation lettercontaining substantially thesamerepresentations setforthinSection5.6oftheAgreement),

theoffer,saleandissuanceoftheCompanySharespursuanttothisAgreement (i)willnotrequireregistration undertheSecurities Actand(ii)willnotrequireregistration orqualification undersuchofthe"bluesky"orsecurities lawsofthejurisdictions intheUnitedStates(orwillbeincompliance therewith) asshallbeapplicable totheoffer,saleandissuanceoftheCompanyShares(subjecttothelimitation thattheCompanymakesnorepresentation orwarrantywithrespecttoanyoQerbyanyIPPtoanydesigneeofsuchIPPascontemplated byl430Iv07 Sections3.3and5.6oftheMRA),andneithertheCompanynoranyauthorized agentactingonitsbehalfwilltakeanyactionhereafter thatwouldrequiresuchregistration.

7.SinceJanuary1,1995,theCompanyhasmadeallfilingsrequiredtobemadebyitundertheExchangeActandanyothersecurities lawsapplicable totheCompanyandisotherwise eligibletofilearegistration statement onFormS-3coveringtheofferingandsaleoftheCompanySharesandtheDebtSecurities.

Asoftheirrespective dates,or,ifamended,asofthedateofsuchamendment, theSECReportscompliedinallmaterialrespectswiththerequirements oftheExchangeAct,andtherulesandregulations oftheSECthereunder.

Asoftheirrespective dates,or,ifamended,asofthedateofsuchamendment, theSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances underwhichtheyweremade,notmisleading.

Thefinancial statements oftheCompanyincludedintheCompany's AnnualReportonForm10-KforthefiscalyearendedDecember31,1996,theCompany's Quarterly ReportonForm10-QforthefiscalquarterendedMarch31,1997,andinanysubsequent SECReportscomplyastoforminallmaterialrespectswithapplicable accounting requirements andthepublished rulesandregulations oftheSECwithrespectthereto,havebeenpreparedinaccordance withgenerally acceptedaccounting principles asstatedinsuchfinancial statements appliedonaconsistent basisduringtheperiodcoveredandfairlypresent,inallmaterialrespects, thefinancial positionoftheCompanyasofthedatethereofandtheresultsofoperations andchangesinfinancial positionoftheCompanyfortheperiodthenendedsubject,inthecaseofunaudited statements, tonotesandnormalyearwndauditadjustments, noneofwhichshallbematerialinamountoreffect.8.TheCompanyhasdisclosed totheIPPsallmaterialplansandproposals concerning theNMPCRestructuring whichhavebeendisclosed toanyGovernmental Authority orapprovedbytheBoardofDirectors oftheCompanyandwhichcouldreasonably haveamaterialadverseeffectonanyIPPortheRestructuring, including butnotlimitedtotheContracts oranyoftheconsideration tobereceivedbytheIPPshereunder.

TheCompanyhasnotbeenauthorized byitsBoardofDirectors, noristheCompanyseekingsuchauthorization, tofilea,petition undertheBankruptcy Codeorotherwise tocommence, authorize oracquiesce inthecommencement ofaproceeding underanybankruptcy orsimilarlawfortheprotection ofcreditors, ortomakeageneralassignment oranygeneralarrangement orcompromise forthebenefitofcreditors, norhastheCompanymade,commenced, authorized oracquiesced inthecommencement ofanysuchproceeding orassignment orhadanysuchpetition, proceeding orassignment commenced againstit.9.TheCompanyherebycertifies thattheconditions specified inSection8.2oftheAgreement havebeensatisfied (unlesswaivedbytheIPPinwriting).

l0.Theforegoing representations andwarranties assumethatnopersontakingCommonStockpursuanttotheAgreement willown,togetherwithitsAffiliates, 10%ormoreofl430lv07 theoutstanding CommonStockfollowing Consummation, andtheCompanyshallhavenoliability hereunder intheeventsuchassumption isuntrue.11.Therepresentations andwarranties oftheCompanycontained hereinshallsurvivetheConsummation Dateforaperiodoftwo(2)years.NiagaraMohawkPowerCorporation By:Name:Title:"l430lv07 EXHIBIT8.3CFormofOpinionofNMPC'sCounselNI2704

Exhibit83CP.ETTERHEAD OFNMPC'SCOUNSEL][Consummation Date]TotheIndependent PowerProducers listedonScheduleAhereto

DearSirs:

Wehaveactedascorporate counseltoNiagaraMohawkPowerCorporation, aNewYorkcorporation

("NMPC"),

inconnection withtheexecution anddeliveryoftheMasterRestructuring Agreement, datedasofJuly91997(th"Agreement'),

byandamongNMPCandtheindependent powerproducers listedonScheduleAhereto,theShareholder's Agreements, theRegistration RightsAgreement, theShort-Term Notes,theAmendedPPA,theRestatedContracts andtheFixedPriceSwapContracts (collectively, theSpecified Restructuring Documents"

).ThisopinioniseliveredtoyoupursuanttoSection8.3(c)oftheAgreement.

Capitalized termsusedhereinbutnototherwise definedhereinshallhavetherespective meaningsascribedtosuchtermsintheAgreement.

Inconnection therewith, wehaveexaminedsuchcorporate records,certificates andotherdocuments, andsuchquestions oflaw,aswehaveconsidered necessary orappropriate forthepurposesofthisopinion.Uponthebasisofsuchexamination, itouropinionthat:1.NMPChasbeendulyincorporated andisanexistingcorporation ingoodstandingunderthelawsoftheStateofNewYork,andhasallrequisite corporate powerandauthority toownitsproperties andassetsandtocarryonitsbusinessinthemannernowconducted.

2.NMPChasallrequisite corporate powerandauthority toexecuteanddelivertheSpecified Restructuring Documents andperformtheobligations ofNMPCthereunder, allcorporate actiononthepartofNMFC,itsof5cers,directors andshareholders necessary fortheauthorization, execution anddeliveryoftheSpecified Restructuring Documents andtheperfomiance oftheobligations ofNMPCthereunder hasbeentaken;theSpecified Restructuring Documents havebeendulyexecutedanddelivered byNMPC;andtheSpecified Restructuring Documents constitute validand,legally bindingobligations ofNMPCenforceable againstNMPCinaccordance withthetheirrespective terms,subjecttobankruptcy, insolvency,

&audulent

transfer, reorganization, moratorium andsimilarlawsofgeneralapplicability relatingtooraffecting creditors'ights, togeneralequityprinciples andtolimitations onrightstoindemnification andcontribution thereunder whichmaybeimposedbyapplicable law.3.TheCompanyShareshavebeendulyauthorized andvalidlyissuedandarefullypaidandnonassessable.

Thecertificates representing theCompanySharesareindueandproperformandhavebeenvalidlyexecuted.

4.Noregistration oftheCompanySharesundertheSecurities Actisrequiredinconnection withtheissuanceoftheCommonSharespursumttotheAgreement andsuchissuancewillnotresultinaviolation oftheregistration requirements oftheblueskyorstatesecurities lawsoftheStateofNewYork.Theforegoing opinionsarelimitedtothelawsoftheStateofNewYorkand,inthecaseoftheopinionexpressed in(4)above,theFederallawsoftheUnitedStates,andweareexpressing noopinionastotheeffectofthelawsofanyotherJurisdiction.

Inrendering theopinionexpressed in(4)above,wehave,withyourapproval, assumedtheaccuracyoftherepresentations andwarranties andcompliance withthecovenants oftheCompany,theIPPsandotherinitialacquirors oftheCompanySharescontained intheAgreement andthe[insertreference toletterswhichwillbedelivered bytheinitialacquirors, asrequiredbytheAgreement).

Wenote,withrespecttosuchopinion,thatweareexpressing noopinionastowhenandunderwhatcircunistances theCompanySharesmaybereoffered andresoldbytheinitialacquirors thereof.Inrendering theforegoing

opinions, wehavealso,withyourapproval, reliedastocertainmattersoninformation obtainedfromthepublicoQicials, oKcersof:NMPCandothersourcesbelievedbyustoberesponsible, andwehaveassumedthat(a)thepartiestoeachoftheSpecified Restructuring Agreements, eachoftheotheragreements referredtothereinandeachotheragreement requiredtobeexecutedpursuanttoanyoftheforegoing agreements (collectively, the"Restructuring Agreements"

)havereceivedallRegulatory Approvals, IPPfThird PartyConsents, NMPCfIMrd PartyConsentsandNMPCffhird PartyReleasesrequiredtobeobtainedbytheminconnection withtheexecution, deliveryandperformance oftheRestructuring Agreements, (b)theexecution, deliveryandperformance oftheRestructuring Agreements willnotcontravene 419533 anylaw,ruleorregulation applicable asaresultofthestatusofanypartytotheRestructuring Agreements asautility,anowneroroperatorofnuclearpowergenerating facilities oranyotherformorregulated entity,(c)theSpecified Restructuring Agreements havebeendulyauthorized, executedanddelivered bythepartiestheretootherthanNMPC,(d)thecertificates fortheCompanySharesconformtothespecimenthereofexaminedbyusandhavebeendulycountersigned andregistered bythetransferagentandregistrar fortheCommonStockand(e)thesignatures onalldocuments examinedbyusaregenuine,assumptions whichwehavenotindependently verified.

ATheopinionsexpressed hereinaresolelyforthebenefitoftheIPPsand,withoutourexpresswrittenconsent,neitherouropinionnorthisopinionlettermaybecirculated orfurnished toorrelieduponbyanyotherpersonorentity.Uerytrulyyours,fThisformwillbesubjecttomodification toreflectcustomary andreasonable assumptions, qualiTications andlimitations requiredbytheindividual opiningcounseL)4I9533

EXHIBIT9.3AFormofIPPRepresentation I.etterPl2704

Exhibit9.3A[LETTERHEAD OFIPP][Consummation Date]NiagaraMohawkPowerCorporation 300ErieBoulevard VestSyracuse, NY13202Re:MasterRestructurin AreementdatedJul91997LadiesandGentlemen:

Inconnection withtheconsummation onthisdateofthetransactions contemplated bytheMasterRestructuring Agreement datedJuly9,1997(the"Agreement"

)betweenNiagaraMohawkPowerCorporation (the"Company"

),theundersigned IPP(the"IPP")andtheotherIPPswhoarepartiesthereto,theIPPherebyrepresents andwamintstotheCompany,asoftheConsummation Date,thatthefollowing statements aretrueinallmaterialrespects(allcapitalized termsusedandnototherwise definedhereinshallhavethemeaningsascribedtothemintheAgreement):

1.TheIPPisa[corporation]

[partnership]

dulyorganized, validlyexistingandingoodstandingunderthelawsofitsstateofincorporation orformation, andhasall,requisite powerandauthority, corporate orother,toownitsproperties andassetsandtocarryonitsbusinessinthemannernowconducted andasproposedtobeconducted inaccordance withthisAgreement andtheContracts.

2.TheIPPhasallrequisite

[corporate]

[partnership]

powerandauthority toexecuteanddelivertheAgreement andallotheragreements executedortobeexecutedbyitpursuantthereto,andtocanyouttheprovisions oftheAgreement inaccordance withthetermsthereof,andallotheragreements executedortobeexecutedbyitpursuantthereto,including, butnotlimitedto,thepower'and authority toenterintoandperformtheContracts towhichitisaparty;all[corporate]

[partnership]

actiononthepartoftheIPP,itsofficers, directors, stockholders andpartners, asapplicable, necessary fortheauthorization, execution anddeliveryoftheAgreement, allotheragreements executedortobeexecutedbytheIPPpursuantthereto,andtheperformance ofallobligations oftheIPPthereunder, hasbeentaken;theAgreement andallotheragreements executedbytheIPPpursuanttheretohavebeendulyandvalidlyexecutedanddelivered bytheIPP;andtheAgreement andallotheragreements executedortobeexecutedbytheIPPpursuanttheretoconstitute orwillconstitute validandlegallybindingobligations oftheIPP,enforceable againsttheIPPinaccordance withtheirrespective terms.Nl430X 3.Exceptfor(i}thoseRegulatory Approvals whichhavebeenobtained, madeorgivenonorbeforethedatehereofand(ii)anyfilingsmadebytheIPPundertheHart-Scott-Rodino Act,noconsent,approval, qualification, order,orauthorization orotheractionof,orfilingorregistration with,anyGovernmental Authority isrequiredonthepartoftheIPPinconnection withtheIPP'svalidexecution, deliveryorperformance oftheAgreement, oranyoftheotheragreements executedortobeexecutedbytheIPPpursuantthereto,which,ifnotobtained, madeorgiven,couldreasonably beexpectedtohaveamaterialadverseeffectontheIPP'sabilitytoenterintoandperformitsobligations underthisAgreement oranyotheragreements tobeexecutedbytheIPPpursuanthereto.Anyapplicable waitingperiodwithrespecttoanyfilingbytheIPPundertheHart-Scott-Rodino Acthasexpiredonorbeforethedatehereof.4.Theexecution, deliveryandperformance bytheIPPoftheAgreement, anyotheragreements executedortobeexecutedbytheIPPpursuantthereto,andtheconsummation ofthetransactions contemplated thereby(a)isnotinviolation ordefaultofanyprovision ofitsCertificate ofIncorporation orBy-Lawsorpartnership agreement, asapplicable, and(b)isnotinconfiictwithanddoesnotconstitute, withorwithoutthepassageoftimeorgivingofnotice,amaterialviolation ordefault,orgiverisetoanymaterialobligation, under(i)anymaterialmortgage, indenture, agreement, instrument orcontracttowhichtheIPPisapartyorbywhichitoranyofitsmaterialassetsisboundor(ii)anylocal,stateorfederaljudgment, order,writ,decree,statute,ruleorregulation applicable totheIPPoranyofitsmaterialassets.5.IftheIPPhasacquiredanyCompanySharespursuanttotheAgreement:

(a)theCompanySharesacquiredbytheIPPhavebeenacquiredforitsownaccountwithoutaviewtotheresaleordistribution thereof,provided, however,thattheforegoing shallnotprecludetheIPP&omsellingtheCompanySharesacquiredbyitinthemannerdescribed inclauses(c)(i),(ii),or(iii)below;(b)theIPPiseither(x)an"accredited investor" assuchtermisdefinedinRule501(a)ofRegulation DundertheSecurities Actor(y)ifnotan"accredited investor",

eitheraloneorwithitspurchaser representative, hassuchknowledge andexperience infinancial andbusinessmattersthatitiscapableofevaluating themeritsandrisksofitsinvestment intheCompanyShares,withinthemeaningofRule506(b)(2)(ii) ofRegulation DundertheSecurities Act;and(c)theIPPunderstands thatthesaleoftheCompanySharestotheIPPhasnotbeenregistered undertheSecurities Actoranyapplicable statesecurities lawsand,therefore, theCompanySharescannotbetransferred, sold,pledgedorotherwise disposedof,except(i)pursuanttotheShelfRegistration Statement oranothereffective registration statement undertheSecurities Actandincompliance withtheprospectus-delivery requirement undertheSecurities Act,(ii)inaccordance withRule144undertheSecurities Actaftertheapplicable timeperiodspecified thereinor(iii)inaccordance withanotherexemption'om theregistration requirements oftheSecurities Act.6.TheIPPherebycertifies thattheconditions specified inSection9.2oftheAgreement havebeensatisfied (unlesswaivedbytheCompanyinwriting).

NI430Z 7.Therepresentations andwarranties oftheIPPcontained hereinshallsurvivetheConsummation Dateforaperiodoftwo(2)years.tlPP]By:Name:Title;0I4302

EXHIBIT9.3CFormofOpinionofIPP'sCounselNI2704

[LETTERHEAD OFIPP'SCOUNSEL]Exhibit9.3C[Consummation Date]NiagaraMohawkPowerCorporation 300ErieBoulevard WestSyracuse, NY13202Re:MasterRestructuring Agreement dated3uly9,1997LadiesandGentlemen:

Vfehaveactedascounselto1(th44IPPtt)inconnection withtheexecution anddeliveryoftheMasterRestructuring Agreement, datedasof3uly9,1997(the"Agreement"

),byandamongNiagaraMohawkPowerCorporation PowerCorporation, aNewYorkcorporation

("NhG<"),

thelPPandtheotherindependent powerproducers listedonScheduleAthereto,theShareholder's Agreemeats, theRegistration RightsAgreement, theAmendedPPA,theRestatedContracts andtheFixedPriceSwapContracts (collectively, the"Specified Restructuring Documents"

).Thisopinionisdelivered toyoupursuanttoSection9.3(c)oftheAgreement.

Capitalized termsusedhereinbutnototherwise definedhereinshallhavetherespective meaningsascribedtosuchtermsintheAgreement.

Inconnection withtheopinionsexpressed below,wehaveexaminedaadarefamiliarwithoriginals orcopies,certified orotherwise identifie tooursatisfaction, ofthepecifiedRestructuring Documents aadsuchotheragreements, certificates ofpublicofficials, certificates ofofficersorrepresentatives oftheIPP[anditsgeneralpartner]aadothers,andsuchotherdocuments, certificates andcorporate orotherrecordsaswehavedeemednecessary orappropriate asabasisfortheopinionssetforthherein.opinionthat:Basedontheforegoing andsubjecttothequalifications setforthherein,itisour1.TheIPPisa[corporation]

[partnership]

dulyorganized, validlyexistingandingoodstandingunderthelawsofitsstateofincorporation orformation, andhasallrequisite

[corporate]

[partnership]

poweraadauthority toownitsproperties aadNI4097 NiagaraMohawkPowerCorporation Page2assetsandtocanyonitsbusinessinthemannernowconducted andasproposedtobeconducted inaccordance withtheSpecified Restructuring Documents.

2.TheIPPhasallrequisite

[corporate]

[partnership]

powerandauthority toexecuteanddelivertheSpecified Restructuring Documents, andperformtheobligations oftheIPPthereunder; all[corporate]

[partnership]

actiononthepartoftheIPP,itsofficers, directors, stockholders andpartners, asapplicable, necessary fortheauthorization, execution anddeliveryoftheSpecified Restructuriag Documents andtheperformatice oftheobligations oftheIPPthereunder hasbeentaken;theSpecified Restructuring Documents havebeendulyandvalidlyexecutedaaddelivered bytheIPP;aadtheSpecified Restructuring Documents constitute validandlegallybindingobligations oftheIPP,enforceable againsttheIPPinaccordance withtheirrespective terms,subjecttoapplicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium andsimilarlawsaffecting creditors'ights aadremediesgenerally, andsubjecttogeneralprinciples ofequity,including principles ofcommercial reasonableness, goodfaithandfairdealing(regardless ofwhethereaforcemeat issoughtinaproceeding atlaworiaequity)aadexceptthatrightstoindemnification andcontribution thereunder maybelimitedbypublicpolicyrelatingthereto.Theforegoing opinionrelatesonlytothelawsoftheStateofNewYork[and,ifotherwise, thestateofincorporation orformation oftheIPP].Vfeexpressaoopinionofthelawofanyotherjurisdiction.

Inrendering theforegoiag

opinions, wehavealso,withyourapproval, reliedastocertainmattersoninformation obtainedfrompublicofficials, officersoftheIPPandothersourcesbelievedbyustoberesponsible, andwehaveassuiaedthat(a)thepartiestoeachoftheSpecified Restructuring Docutaents, eachoftheotheragreements referredtothereinandeachotheragreement requiredtobeexecutedpursuanttoanyoftheSpecified Restructuring Documents havereceivedallRegulatory Approvals, IPP/Third PartyCoaseats, NMPC/Third PartyCoasentsandNMPC/Third PartyReleasesrequiredtobeobtainedbytheminconnection withtheexecution, deliveryandperformaiice oftheSpecified Restructuring Documents, (b)allparties(otherthantheIPP)totheSpecified Restructuring Documents havethelegalrightandpowertoenterintotheSpecified Restructuring Documents andperfonatheirobligations thereunder, allsuchpartieshavebeendulyauthorized toeaterintotheSpecified Restructuring Docuinents andperformtheirobligations thereunder, andthatallsuchpartieshavedulyexecutedanddelivered theSpecified Restructuring Documents, and(c)thesignatures onalldocuments exaniined byusaregenuine,assumptions whichwehavenotindependently verified.

Nl4097 NiagaraMohawkPowerCorporation Page3Thisopinionislimitedtothemattersstatedherein,andnoopinionisimpliedormaybeinferredbeyondthemattersexpressly stated.Weassumehereinnoobligation, andherebydisclaimanyobligation, tomakeanyinquiryafterthedatehereofortoadviseyouofanyfuturechangesintheforegoing orofanyfactsorcircumstances thatmayhereafter cometoourattention.

Theopinionsexpressed hereinaresolelyforthebenefitofNMPCand,withoutourexpresswrittenconsent,neitherouropinionnorthisopinionlettermaybecirculated orfurnished toorrelieduponbyanyotherpersonorentity.Verytrulyyours,P'hisformwillbesubjecttomodification toreflectcustomary andreasonable assumptions, qualifications andlimitations requiredbytheindividual opiningcounsel.]

ai409i 0

EXHIBIT14.14FormoI'ThirdPartyNon-Disclosure Agreement 012704

Exhibit1414THIRDPARTYNON-DISCI OSUREAGREEMENT ThePartiestotheMasterRestructuring Agreement datedJuly9,1997(the"MRA")betweenNiagaraMohawkPowerCorporation

("NMPC")andcertainindependent powerproducers whicharesignatories thereto(the"IPPs")haveagreedthattheundersigned recipient

("ThirdPartyRecipient"

)shallbeallowedaccesstocertainconfidential andproprietary information ofthePartiesorpertaining tothetransactions contemplated bytheMRAforthelimitedpurposeofassisting theundersigned Disclosing Partytoobtainaconsent,approval, releaseorotheractioncontemplated bytheMRA,subject,however,tothetermsandconditions setforthherein.Asacondition of,andinconsideration for,thegrantingandreceiptofsuchaccesstheundersigned agreeasfollows:1.Theundersigned PartyundertheMRA(the"Disclosing Party")represents thattheThirdPartyRecipient (which,forpurposeshereof,shallmeansuchpersonorentity,itsaf5liates, andtheirrespective of5cers,directors,

partners, shareholder andemployees) isapersonorentityRomwhomaconsent,approval, releaseorotheractionisormayberequiredtobeotainedinconnection withtheMRA,orisafinancial advisor,attorney, accountant orotherconsultant (collectively, "Representatives"

)ofsuchpersonorentityretainedforpurposesofassisting suchpersonorentitywithrespectthereto,andthatdisclosure totheThirdPartyRecipient isnecessary ordesirable toadvancethepurposesoftheMRA.Allinformation, whetherwrittenororal(including anyinformation furnished priortotheexecution oftheMRA),dincluding, withoutlimitation, anyinformation concerning thetermsorconditions oftheMRA,anyotheragreement, documentorinstrument relatingtheretooranyofthetransactions contemplated thereby,ortheprogress, statusorscheduleofanydiscussions ornegotiations relatingthereto,furnished totheThirdPartyRecipient bytheDisclosing PartyoranyoftheDisclosing Party'sdirectors, o6icers,partners, employees, agentsorrepresentatives, including, withoutlimitation, financial

advisors, attorneys, accountants, expertsandconsultants, andallreports,analyses, compilations, forecasts, data,studiesorotherdocuments preparedbytheThirdPartyRecipient containing orbased,inwholeorinpart,onanysuchfurnished information, arecollectively referredtohereinasthe"Information".

2.Theundersigned ThirdPartyRecipient covenants andagreesthatallInformation wiBbekeptstrictlyconfidential andshallnot,withoutthepriorwrittenconsentoftheDisclosing Party,bedisclosed orrevealed, inanymannerwhatsoever, directlyorindirectly, inwholeorinpart,andshallnotbeusedbytheThirdPartyRecipient, directlyorindirectly, inanywayotherthanforpurposesofevaluating whethertoprovidetheconsent,approval, releaseorotherthirdpartyactionrequested bytheDisclosing Party.TheThirdPartyRecipient agreestotransmittheInformation onlytothoseofitsRepresentatives whoneedtoknowtheInformation forsuchpurposes, whoareinformedbytheThirdPartyRecipient oftheconfidential natureoftheInformation andwhoshallexecuteacounterpart ofthisAgreement toindicatetheiragreement tobeboundbyantiioactonlyinaccordance, withthetermsandcod,".itions e-.tlu".

Agreement.

TheThirdPartyRecipient shallberesponsible foranyfailui'etocomplywiththetermsofthisAgreement byanysuchRepresentatives.

3.%'ithoutlimitinginanymannertheforegoing provisions ofthisAgreement, if(i)theThirdPartyRecipient is,withrespecttoanyIPPwhichisaPartytotheMRA,anaffiliate ofsuchIPPoroneofsuchIPP'soritsafIiliates'espective directors,

officers, shareholders orpartners(atanytier),oroneoftheirrespective employees, financial

advisors, attorneys, accountants orconsultants

("IPPParticipants"

)and(ii)suchIPPParticipant isafinancial institution, steamhost,fuelsupplierorfueltransporter whichisorhasamaterialinterestinapersonorentity(oraffiliate ofsuchpersonorentity)RomwhomanyIPPisiequiredtoobtainaconsent,approval, releaseorotheractioncontemplated bytheMRA,thensuchThirdPartyRecipient acknowledges andagreesthat(x)itshallnotbepermitted toparticipate inthenegotiation orperformance ofanyagreement, documentorinstrument relatingtotheMRAoranyofthetransactions contemplated bytheMRA,(y)allfiles,workpapers,reports,analyses, dataorotherdocuments based,inwholeorinpart,onanyconfidential orproprietary information ofanyotherIPP.oraf5liateofanyotherIPPregarding theMRA,anyotheragreement, documentorinstrument relatingthereto,orthetransactions contemplated thereby,whichwasorisobtainedat,anytime,including priortothedateoftheMRA,duringthecourseoforasaresultofthenegotiation, execution orperformance oftheMRA,anyother'greement, documentorinstrument relatingthereto,oranyofthetransactions contemplated thereby(collectively, "Confidential IPPInformation"

)shallbesegregated andtheThirdPartyRecipient shallnotbeallowedtohaveaccessthereto,and(z)thattheIPPshallnotcommunicate orexchangeanyConfidential IPPInformation toorwiththeThirdPartyRecipient, except,withrespecttoeachof(x),(y)and(z)above,totheextentnecessary forsuchIPPtoobtainitsownconsent,approval, releaseorotheractioncontemplated bytheMRARomtheThirdPartyRecipient.'.

Theprovisions ofthisAgreement shallbeinoperative astoanyInformation which(i)isorbecomesgenerally available tothepublicotherthanasaresultofanybreachoftheseprovisions bytheThirdPartyRecipient oranyofitsRepresentatives, (ii)becomesavailable totheThirdPartyRecipient onanonconfidential basisandnotincontravention ofapplicable law&omasource(otherthanitsRepresentatives) whichhasrepresented totheThirdPartyRecipient thatsuchsourceisnotboundbyaconfidentiality orothersimilaragreement orconfidential relationship andisentitledtodiscloseitor(iii)wasknowntotheThirdPartyRecipient onanonconfidential basisandnotincontravention ofapplicable lawpriortoitsdisclosure totheThirdPartyRecipient bythedisclosing party.5.IntheeventthattheThirdPartyRecipient oranypersontowhomtheThirdPartyRecipient furnishes anyInformation isrequested orbecomeslegallycompelled (byoralquestions, interrogatories, requestforinformation ordocuments,

subpoena, criminalorcivilinvestigative demandorsimilarprocess)todiscloseanyInformation, theThirdPartyRecipient willprovidetheDisclosing PartywithpromptwrittennoticesothattheDisclosing Partymayseekaprotective orderorotherappropriate remedyand/orwaivecompliance withtheprovisions hereof,andtheThirdPartyRecipient willcooperate withtheDisclosing PartyinanyefforttheDelctcparagraph 3ifnotapplicable.

N20093 Disclosing Partyundertakes toobtainaprotective orderorotherremedy.Intheeventthatsuchprotective orderorremedyisnotobtained, orthattheDisclosing Party,initssolediscretion,

~waivescompliance withtheprovisions hereof,theThirdPartyRecipient willfurnishonlythatportionoftheInformation whichislegallyrequiredandwillusereasonable besteKortstoobtainreliableassurance thatconfidential treatment willbeaccordedtheInformation,

provided, however,ifsucheFortsinvolveanyexpensetheDisclosing Party,ifithasreceivedpriornoticethereof,willreimburse theThirdPartyRecipient forsame.6.TheThirdPartyRecipient acknowledges thatunauthorized disclosure ofInformation mayresultinliability forjudicialjudgments including, butnotlimitedto,monetarydamages,andthattheDisclosing Partyshallbeentitledtopursueanylegalandequitable remediesintheeventofanunauthorized disclosure.

TheThirdPartyRecipient herebywaivesanyobjections totheimmediate issuancebyacourtofcompetent jurisdiction ofinjunctive orotherequitable reliefbarringthefurtherdisclosure oruseofanyInformation intheeventofanunauthorized disclosure.

7.ThisAgreement shallsurvivetheconsummation ofthetransactions contemplated bytheMRAand/oranytermination oftheMRAwithrespecttotheDisclosing Party.Disclosing Party:By:Name:Title:Date:ThirdPartyRecipient:

By:Name:Title:Date:N20093

APPENDIXBRECOVERYOFCOSTSASSOCIATED WITHTERMINATION OFGASTRANSPORTATION ANDPEAKSHAVINGAGREEMENTS

APPENDIXBRECOVERYOFCOSTSASSOCIATED WITHTERMINATION OFGASTRANSPORTATION ANDPEAKSHAVINGAGREEMENTS Eachofthegasfiredprojectswillterminate itsexistinggaspeakshavingagreement withNiagaraMohawk.Inaddition, eachofthegasfiredprojectswhichwillnothavearestructured electriccontractwillterminate itsgastransportation agreement withNiagaraMohawk.IfdesiredbytheIPP,theseprojectsmaynegotiate anewtransportation agreement thatreflectstheplanneduseofthespecificproject.Forgasfiredprojectswhichwillhaverestructured electriccontracts, thepartiestotheMasterRestructuring Agreement haveagreedtoworkingoodfaithtore-negotiate newpeakshavingand,ifrequested bytheIPP,transportation agreements asappropriate toaligntheoperating characteristics oftheIPPprojectswiththeinterests oftheCompany's gasdeliverysystem.TotheextentthattheCompanylosesgastransportation revenuesorincursadditional coststoreplicate theexistingpeakshavingagreements, theCompanywillrecoverthelostrevenuesoradditional costsinaccordance withthetermsandconditions specified intheStipulation andAgreement betweenthepartiesinNiagaraMohawk'sGasRateCaseNos.95-G-1095 and95-G-0091.TheStipulation andAgreement definesthecostrecoverymechanisms forlostgastransportation revenuesinSectionI~REVENUEREQUIREMENT andforadditional peakshavingcostsinSectionVl.RECOVERYOFCOSTSRELATEDTOUNREGULATED GENERATION.

SectionI.REVENUEREQUIREMENT stipulates thatratepayers andshareholders willshareanyannualrevenueshortfall belowthatprojected onan80%/20%basis.Therefore forthoseprojectswhichretainatransportation

contract, NiagaraMohawkwillrecoverannuallythroughitsCommodity CostAdjustment (CCAC)80%ofthedifference betweentheprojected revenueandtheactualrevenue.Forthoseprojectsthatterminate theirtransportation

contract, NiagaraMohawkwillrecoverannuallythroughtheCCAC,80%oftheprojected revenue.IftheCCACisnotextendedattheendoftheGasRateCaseSettlement term,orotherwise terminated, thesecostswillbecollected throughamechanism suchasare-instituted GasAdjustment Clause(GAC)orthroughbaserates.SectionVl~RECOVERYOFCOSTSRELATEDTOUNREGULATED GENERATION statesthatpeakshavingreplacement costsincurredwillbedeferredtotheConfidential Settlement Document

Contingency ReserveAccountuptotheactualcostsorthecostof75,000dt,whichever isless.Anyofthesecostsnotoffsetbynon-baseratereductions attheendofthesettlement willbecollected fromratepayers beginning onNovember1,1999.Confidential Settlement Document

APPENDIXC NIAGARAMOHAWKPOWERCORPORATION FIVE-YEAR FINANCIAL FORECAST

NiagaraMohawkPowerCorporation October10,1997PowerChoice FilingFinancial ForecastSchedulaKumhez Summaryfinancial statements Electricsales&revenuesElectricfuelexpense&purchased powerGassales,revenues&purchases Departmental expensesNon-departmental expensesOperating taxesIncometaxes

NIAGARAMOHAWKPOWERCORPORATION FINANCIAL STATEMENTS POWERCHOICE FILINGINCOMESTATEMENT ElectricRevenuesGasRevenuesTotalRevenues$3,267,372

$3,256,451

$3,270,632

$3,411,476

$3.549,419 8453458197316330998472546624384211743038S18239033139121FuelandPurchased PovvarGasPurchases Departmental ExpensesNorvdepanmentaf ExpensesTaxesOtherThanbvcomeTaxesNudaarDecommissioning TotalOperating ExpensesTotalEBITDADeprecbtion andAmciezaticn DeferredGssCostNudearFuelAmortizabcn Amortizabon ofRegubtory AssetRegubtory Oeferrats andAmorttzaeons AFUDCDeferredCarryingChargeOthergncome)lDeductions Amortization ofDebtExpenseOperating IncomeinterestExpensePra-taxIncomeCurrantIncometaxesfTCAmortization DeferredIncometaxesNetincomeBeforePreferred StockDividendPreferred StockdiVidendNetIncomeReturnonAverageEquityBALANCESHEET838,23743,513478,2772800324882811,426,436 337,98732,378411,300(3,028)(10,032)(305)3,860528727e.eog(8,016)4213S44,50039e?o,356308,085821,37240,389482,4682800325506751~348,324(3.320)29,497411,300(8,787)(9,604)(282)(21~1e97152829310,430(8,016)1593316,018500391Oyv890,118311,290e22.'00237,052479,7062800325881711,.560351,714(1,411)2S,?824'l1,300(4,916)(7,242)(3)(13,027)12682,0146779211,690(8,016)4,978500392061923,580314,533855,13738,842488,8422800326469371,411,93359,52837828,769411,30018,540(8,178)(1$,930)118844426352181,113,490(8,016)666071,09150039964,130320,135858.69036,672498,952280031,,27369,121(110)28,889411,30023,687(10,947)(24,844)11145385275311~18,3&4(8,016)1082651,12850039$145087CashOtherCurrentAssetsExistingDefenedDebiitsRegubtory AssetfromIPPBuyoutNetWilityPbntTotalAssetsCurrentLbbiMiesExiisting DeferredUabilities FMBsSeniorSub.NotesPreferred StockCommonStockRetainedEarningsTotalUabiMiesandCapital367,14$1,838,449 3,715,700 7503732$137$711,9072,737,998 3.493,279 3~,0002.310,728 778142$13$220.012374,5511,693,280 3,304,400 7455793$201,3501,605,085 2,893,1007423119$343,790389,6291,525,777 2,4S1,800 7345908$553,548399,1921,442,073 2,070,500 7335705$138038$12508159$12904$111018$720,6132,698,481 3,505,487 2,000,000 528,8042,310,728744066$718,0382,747,120 3.499~42,500,000 526,8042,310,728748124$724,7472,709,399 3,512,1051,500,000 2,310,728803121$732,6592,763,472 3.519,144 1,000,000 528,8042,310,728 948211$13048038$12506159$12086904$11801018CASHFLOWOperating ActMSmNetIncomeDepreciation Amoiezations NuclearFuelDeferredGasCostAFUDCDeferredIncomeTaxesITCAmoitizaeon DeferredCarryingChargesDeciinsectspay.duetoknverIPPpurchases InocmeTaxRefundAmortization ofRegubtory AssetRegubtcry Amortizaeons PaymentofcashtoIPPsFinancing CostsOtherSubtotalCssheovvfromOperabons Investing Activities:

Construction NuclearFuelNuclearDecommbsbru SubtotalCashUsedforInvesting FrnandngActivities:

Preferred Dividends IssuanceofSrSubordinated DebtRetirement ofSr.Subordinated DebtSubtotalCashfromFinancing ChangeinCasharxlTCLsBeginning CashandTCfsEndingCashandTCfs$44,889365,97032,3?S28,725(10,032)42,138(8,016)(305)(48,200)411,3(0(3,026)(3.665,000)

(100,000)378(298,804)

(28,992)8,0033149964(128,561) 482393$18,018374,32718,97129,497(3,320)(9,604)15,933(8,016)(282)138,118411,300(8,787)14101(269,413)(28,420)8,003(113,820) 333832$220012$47,978379,71712,68228,782(1,411)(7,242)3S,257(8,016)(3)411.300(4,916)eye(264,158)(53,270)e'003(18,662)220012$201350$109,091387,52911,88428,769378(8,1?8)66,607(S,016)411,30018,5401835(273,957)

(5,091)8,003142,440?01350$343790$195,128397,12411,14528,889(110)(10,947)108,2SS(8,016)411,30023,68718431140026(301,151)

(51,078)8003209,75834379010roglg?1058AMWIFPLOTUSIACUPLANICONSOL9?IFINFORF.WK4

NiagaraMohawkPowerCorporation ElectricSales8RevenuesElectricSales(Mwhrs)19981999200020012002SC1SC2SC3SC3N4/5/7/1 1Industrial SpecialEconomicDevelPower(EDP)SpecialLighting(PAL)Municipal RevenuesUnregGenerators TotalRetailSales10,241,090 4,631,933 6,737,777 76465594,385,188 293,02730,656207,65524,79810,117,607 4,558,132 6,636,790 75486034,385,188 293,02730,157207,65524,40210,067,816 4,484,825 6,519,069 73866894,385,188 293,02729,706207,65524,00910,316,772 4,657,148 6,773,377 76842174,385,188 293,02730,824207,65524,79810,167,398 4,599,776 6,696,925 76156514,385,188 293,02730,436207,65524,6243339798433801561340206803419868334373006ElectricRevenues($000)19981999200020012002SC1SC2SC3SC3N4/5/7/11 Industrial SpecialEconomicDevelPower(EDP)SpecialLighting(PAL)Municipal RevenuesUnregGenerators Subtotal(98-07PwrChoice Frz)Discounts PricingGoals(incl.ParityMove)DSMRebateRecoverySettlement Adjustments RegcoPriceIncreasePriceChangeforGencoSub-Total RetailRevenueBorderline Distribution MiscRevenuesTransmission RevenuesTotalRegcoElectricRevenuesWholesale salesTotalElectricRevenues$1,254,716 563,346687,560582,87060,02914,3945,06550,6703,2533,221,903 (118,664)

(49,625)200(6,000)$1,260,921 572,558699,949595,62160,02914,3945,13950,6703,3073,262,588 (122,068)

(81,546)200(16,000)$1,285,742 584,996714,375606,33860,02914,3945,25350,6703,364$1,267,127 577,787706,291600,91560,02914,3945,18750,6703,340$1,276,310 581,8277'I0,620603,37360,02914,3945,22350,6703,3643,285,740 3,305,810 3,325,161 (123,269)

(125,621)

(125,621)

(101,416)

(101,341)

(101,266)

(26,000)5,00024,24115,1004,00045,16746,3003,193,741 1,90332,79088,4853,316,919 232,50035494193,047,814 3,043,174 3,035,055 3,123,189 1,9031,9031,9031,90330,05530,67431,34532,05488,50088,50088,52988,5303,168,272 3,164,251 3,156,832 3,245,676 99,10092,200113,800165,800326737232564513270632341147610/09/97w:)fplotushacuplanhprodcostholdstufflRATRV1 01.WK4 0

NiagaraMohawkPowerCorporation ElectricFuel&Purchased Power1998199920012002GWHRSFossil8190.77886.47808.27747.78445.6NineMile1NineMile2TotalNuclear4,564.43,078.77643.14,027.23,489.47516.64,576.93,088.87665.74,564.43,078.74,027.23,489.47516.67643.1HydroTotalNMPC2,949.118,782.92,949.118,352.12,949.118,423.02,949.118,213.42,949.119,037.8IPPPurchases NiagaraStLawrenceFitzpatrick GilboaTotalNYPAPurchases NYPPPurchases OHPurchases AllOtherPurchases TotalOtherPurchases TotalPurchases TotalFuel8Purchases 13,162.66,047.9666.6224.30.06,938.81,257.51,193.9562.73,014.123,115.541898.413,534.16,047.9666.6229.50.06,944.01,325.41,192.1547.23,064.723,542.841894.914,429.96,047.9666.6230.20.06.944.71,080.3930.0519.02,529.323,903.942326.96,047.9666.6229.50.06,047.9666.6229.50.06,944.06,944.0808.8345.0927.41,329.5388.8387.32,125.02,061.825,262.325,082.543295.944300.116,013.516,256.5$Thousands Fossil$130,407$126,815$133,918$138,286$157,493NineMite1NineMile2TotalNuclear24,9241431739,24119,248170083625621,5541411121,3431440919,01616,5123552835752HydroTotalNMPC16964816307116958300173,814193245IPPPurchases NiagaraStLawrenceFitzpatrick GitboaTotalNYPAPurchases 561,14857,0925,1059,3487,88779,432584,04258,4315,2259,5678,07281,295603,04559,9635,3599,8428,29583,459641,65261,4725,49710,0818,49285,542659,86663,1895,65010,3738,72987,941NYPPPurchases OHPurchases AllOtherPurchases TotalOtherPurchases TotalPurchases TotalFuel&Purchases Less:Nucfuelamort(Note1)RegcoFuel8Purchased Power27,92120/27112,196870,61532,378$83823733,97522,59214,88171,448736,784899,85529,49$87035828,03519,3921538762,814749317918,90028,782$89011821,58721,1488,60610,55832,4478,962952,34928,769993,01928,889$923580$96413051,34151,967778535799774Note1:Nuclearfuelamortization isshownonRegco'sincomestatement belowEBITDA.Theremaining cashnuclearfuelisspentfuelexpense.w:tfptotushcuptantprodcost$

997051B.WK4Page110/0987

NiagaraMohawkPowerCorporation GasSales,RevenuesandPurchases 998999000gkOD.~00SC1SC2SC3Transportation SpecialContracts Total55,449,591 23,039,440 886,89132,252,385 112,619,770 55,355,734 22,827,207 886,89132,520,599 112,619,770 54,904,780 22,176,382 886,89132,706,555 108,473,600 55,098,549 22,395,921 886,89132,719,897 108,473,600 55,237,729 22,612,911 886,89132,719,897 108,473,600 219148208219574858219931028224210201224248077seees000SC1SC2SC3Transportation SpecialContracts OtherSSGTotalrevsbeforeratereliefCumulative RateReliefTotalGasRevenuesGasPurchases GRT$400,465140,1704,19931,31125,0284,79010,498$420,727148,0494,57231,08125,0674,90110,948$403,141141,6684,20631,44822,6643,03310,498645,345326,023619,731633,099304,765309,87930,22828,87029,493645,3456'I6,461616,6583,27016,441$407,762144,0184,24731,31422,3513,07210,498623,26223,992647,254314,91129,804$414,411147,2844,31830,95022,3513,12110,498632,93329,505662,438320,02530,798MarginAssumptions

$289094$286096$293727$302539$311615Settlement Settlement SolveforIndexMarginIndexMargin12%ROE@3%@3%10/09/97w:hfplotusMcuplankconsol97<GASSALE.WK4

NIAGARAMOHAWKPOWERCORPORATION DEPARTMENTAL EXPENSES19981999200020012002FossilHydroDiscoTranscoNineMile1NineMile2GasTotal$72,433$74,739$74,465$77,141$79,38423,54924,17524,88825,58026,398355,451361,967368,922375,317382,52097,38999,172101,075102,808104,75786,164101,76979,012107,78384,12955,26545,77057,86148,90461,779110,702113,780115,779117,604119,723$800953$821372$822002$855137$858690

NIAGARAMOHAWKPOWERCORPORATION NON-DEPARTMENTAL EXPENSESCASH19981999200020012002BANKFACILITYAGREEMENT ELECTRICBANKFACILITYAGREEMENT GASNM2A&GCOTENANTCREDITOSWEGO6COTENANTCREDITSIRCOSTSELECTRICSIRCOSTSGASSBCPROGRAMSDEMANDSIDEIVIANAGEMENT COSTSOFACCRECSALEELECTRICCOSTSOFACCRECSALEGAS5,222647(5,985)(201)12,7502,25015,00020011,3002,330$2,610324(6,167)(208)12,7502,25015,00020011,3002,330(6,364)(214)12,7502,25015,00011,3002,330(6,567)(221)12,7502,25015,00011,3002,330(6,731)(227)12,7502,25015,00011,3002,330$43,513$40,38937,052$36,842$36,672NIAGARAMOHAWKPOWERCORPORATION

'REGULATORY DEFERRALS ANDAMORTIZATIONS NON-CASH19981999200020012002OPEBREGULATORY ASSETELECTRICOPEBREGULATORY ASSETGASFAS112GASVERPCOSTSGASSIRINSURANCE PROCEEDS-ELECTRICSIRINSURANCE PROCEEDS-GASNUCLEAROUTAGECOSTDEFERRALS REPLACEMENT POWERLEVELIZATION NMSUBURBANGASPENSIONTRUEUP-GASPENSIONGAINAMORTIZATION ELECTRICPENSIONGAINAMORTIZATION GAS53RDLABORWEEKELECTRIC53RDLABORWEEKGASADDITIONAL IPPBUYOUTCOSTAMORTIZATION SETTLEMENT DEFERRAUAMORTIZATION

$2,8375802382,296(2,550)(480)4,5003,03738422(7,365)(1,242)6761872,800(9,000)$2,8375802382,296(2,550)(480)(4,500)1,01538422(1,345)6761862,800(11,000$2,837580496(2,550)(480)4,500(952)6761772,80013,000$2,837580(2,550)(480)(4,500)6761772,80017,000$2,837580(2,550)(480)4,5002,80016,000$(3,026)$(8,787)$(4,916$16,540$23,687

NIAGARAMOHAWKPOWERCORPORATION TAXESOTHERTHANINCOMETAXES19981999200020012002RevenueTaxesElectricGasTotalRevenueTaxesRealestatetaxesPayrolltaxesSalesTax$148,442$149,920$151,140$152,375$153,80930,22828,87029,49329,80430,798178,670178,790180,633.182,179184,607258,410263,188257,249263,456269,81831,23332,26433,32734,42835,4817,9648,2268,4978,7799,046$476277$482468$479706$488842$498952BUDFOREC.WK4 10I09I97

NIAGARAMOHAWKPOWERCORPORATION FEDERALINCOMETAXCALCULATION 19981999200020012002RegularTaxNetincomebeforetaxRegulatory AssetAmortization ScheduleMadditions TotalScheduleMadditions IPPBuyoutScheduleMdeductions TotalScheduleMdeductions TaxableincomeNetoperating losscarryforward NettaxableincomeRegulartaxrateRegularTax414,100697,817414,100697,182414,100708,929414,100711,932414,100738,0841,111,917 1,111,282 1,123,029 1,126,032 1,149,955 4,127,000 652,551646,394643,252642,836651,6954,779,551 646,394643,252642,836651,695(3,588,825) 501,253569,686664,368810,0'I9501,253569,686664,368810,019$78,809$36,365$89,909$181,172$311,759Alternative MinimumTaxTaxableIncomebeforeNOLAMTDepreciation Adjustment AMTIbeforeACEAdjustment ACEAdjustment I75%AMTIbeforeAMTNOLAMTNOLAMTIAMTRate20%Alternative MinimumTaxRegularTaxAdditional MinimumTax(3,528,701) 35,243(3,563,944) 3,207,550 568,09546,600521,495469,346638,32053,810584,510526,059736,59762,118674,479607,031885,77566,576819,199737,279(356,394) 52,14958,45167,44881,92020%20%20%20%20%10,43011,69013,49016,384$10,430$11,690$13,490$16,384$(3,588,825)

$501,253$569,686$664,368$810,01960,12466,84268,63472,22975,756DeferredTaxesDeferredTaxonNOLDeferredTaxonAmtDeferredTaxonRegulatory AssetDeferredTaxonRegulatory AssetReversalAllotherTotalDeferredTaxes232,529$283,507(13,490)(16,384)$(1,256,089)

$1,444,450 (144,935) 1,290175,439$199,390$(10,430)(11,690)(144,935) 13,923(144,935) 7,497(144,935) 4,141(144,935) 4,508$42,136$15,933$38,257$66,607$108,265

APPENDIXDELECTRICPRICES

SC1RATEDESIGNSFORTHE3YEARPERIODENDINGDECEMBER31,2000AppendixDPage1of43RATEDESIGN(1998)

CUSTOMERPERKWH0-600OVER0.103146,896,107,853 0.103142,222,626,689

$711,264,564

$229,241,717 0.097410.09741$671,749,866

$216,506,066 CURRENT19981998RATESUNITSREVENUERATESREVENUE9.6716,945,453

$163,862,531 11.96$202,667,618 TOTALRATEDESIGN(1999)

$1,104,368,812

$1,090,923,550 CUSTOMERPERKWH0-600OVER1999REVENUE14.8$252,033,033 0.097416,930,213,690 0.097412,233,618,453

$675,072,116

$217,576,774 0.091220.09122$632,174,093

$203,750,675 CURRENT1999RATESUNITSREVENUERATES11.9617,029,259

$203,669,938 TOTALRATEDESIGN(2000)

$1,096,318,828

$1,087,957,801 CUSTOMERPERKWH0-600OVER0.091226,959,066,521 0.09122',249,863,206

$634,806,048

$205,232,522 0.085440.08544$594,582,644

$192,228,312 CURRENT20002000RATESUNITSREVENUERATESREVENUE14.817,088,507

$252,909,904 17.44$298,023,562 TOTAL$1,092,948,474

$1,084,834,518 SC1FINAL.WK4

AppendixDPage2of43SC1-RESIDENTIAL BLOCK01002003004005006007008009001000110012001300140015001600170018001900200022002400260028003000320034003600380040001997REVENUE$10.16$20.99$31.84$42.67$53.51$64.35$75.18$86.03$96.86$107.70$118.54$129.37$140.21$151.05$161.89$172.72$183.56$194.40$205.23$216.08$226.91$248.59$270.26$291.93$313.61$335.28$356.96$378.64$400.30$421.98$443.661998REVENUE$12.56$22.85$33.14$43.43$53.73$64.03$74.32$84.61$94.90$105.19$115A8$125.78$136.07$146.36$156.65$166.95$177.24$187.53$197.83$208.12$218.41$238.99$259.57$280.17$300.75$321.33$341.90$362.49$383.08$403.66$424.25DIFFERENCE

$2.40$1.86$1.30$0.76$0.22($0.32)($0.86)($1A2)($1.96)($2.51)($3.06)($3.59)($4.14)($4.69)($5.24)($5.77)($6.32)($6.87)($7.40)($7.96)($8.50)($9.60)($10.69)($11.76)($12.86)($13.95)($15.06)($16.15)($17.22)($18.32)($19A1)PERCENTINCREASE2362%8.86%408178%0.41%-0.50%114%165%-2.02%2.33%2.58%2.77%2.95-3.10%324'34%3.44%-3.53%-3.61%3.68%-3.75%386%396%403%-410%-4.16%-4.27%-4.30%-434%-4.37%SC1FINAL.WK4

AppendixDPage3of43SC't-RESl DENTIAL~BLOK01002003004005006007008009001000110012001300140015001600170018001900200022002400260028003000320034003600380040001998REVENUE$12.56$22.85$33.14$43.43$53.73$64.03$74.32$84.61$94.90$105.19$115.48$125.78$136.07$146.36$156.65$166.95$177.24$187.53$197.83$208.12$218.41$238.99$259.57$280.17$300.75$321.33$341.90$362.49$383.08$403.66$424.251999REVENUE$15.51$25.13$34.75$44.38$54.01$63.63$73.26$82.88$92.51$102.13$111.75$121.38$131.00$140.63$150.25$159.87$169.49$179.11$188.75$198.38$208.00$227.24$24649$265.74$284.99$304.23$323.48$342.74$361.98$381.23$400.48$2.95$2.28$1.61$0.95$0.28($0.40)($1.06)($1.73)($2.39)($3.06)($3.73)($4.40)($5.07)($5.73)($6.40)($7.08)($7.75)($8.42)($9.08)($9.74)($10.41)($11.75)($13.08)($14.43)($15.76)($17.10)($18.42)($19.75)($21.10)($22.43)($23.77)23.49%gg84.86%2.19%052%0.62%1.43%204%252%-2.91%323%350%-3.73%392%-40g424%37%-449%-4.59%-4.68%7%-492%-504%515%524%532%539%545-551%-556%-560%PERCENTDIFFERENCE INCREASESC1FINAL.WK4

AppendixDPage4of43SC't-RESIDENTlAL~BLOC01002003004005006007008009001000110012001300140015001600170018001900200022002400260028003000320034003600380040001999REVENUE$15.51$25.13$34.75$44.38$54.01$63.63$73.26$82.88$92.51$102.13$111.75$121.38$131.00$140.63$'I50.25$159.87$169.49$179.11$188.75$'I98.38$208.00$227.24$246.49$265.74$284.99$304.23$32348$342.74$361.98$381.23$400.48'000REVENUE$18.13$27.08$36.03$44.97$53.94$62.88$71.82$80.77$89.72$98.67$107.61$116.56$125.52$134.46$143.41$152.36$161.30$170.25$179.20$188.16$197.10$214.99$232.89$250.79$268.68$286.58$304.47$322.38$340.26$358.16$376.06DIFFERENCE

$2.62$1.95$1.28$0.59($0.07)($0.75)($144)($2.11)($2.79)($3.46)($4.14)($4.82)($5.48)($6.17)($6.84)($7.51)($8.19)($8.86)($9.55)($10.22)($10.90)($12.25)($13.60)($14.95)($16.31)($17.65)($19.01)($20.36)($21.72)($23.07)($24.42)PERCENTINCREASE16.89%776%368%1.33%0.13%-1.18%197%255%3.02%3.39%3.70%397%-4.18%-439%-455%~70-4.83%-4.95%506515%524%539%552%-5.63%5.72%580-5.88%-594%-600%-605%-6.10%SC1FINAL.WK4

SC2NDRATEDESIGNSFORTHE3YEARPERIODENDINGDECEMBER31,2000AppendixDPage5of43RATEDESIGN(1998)

CUSTOMERPERKWH0-500OVER0.'I278346,900,627 0.1278253,192,664

$44,.333,900

$32,358,022 0.12$41,628,075 0.12$30,383,120 CURRENT19981998RATESUNITSREVENUERATESREVENUE14.651,189,283

$17,422,996 17.75$21,109,773 TOTALRATEDESIGN(1999)

$94,114,918

$93,120,968 CUSTOMERPERKWHOVERCURRENTRATES0.12352,498,021

$42,299,763

'.1'I276$39,747,677 0.12257,298,398

$30,875,808 0.11276$29,012,967 19991999UNITSREVENUERATESREVENUE17.751,208,452

$21,450,023 35.5$42,900,046 TOTALRATEDESIGN(2000)

$94,625,594

$111,660,690 CUSTOMERPERKWH0-500OVER0.11276355,719,042

$40,'I10,8790.11276259,651,088

$29,278,257 0.105350.10535$37,475,001

$27,354,242 CURRENT20002000RATESUNITSREVENUERATESREVENUE35.51,219,491

$43,291,931 53.25$64,937,896 TOTAL$112,681,067

$129,767,139 SC2FINAL.

WK4

AppendixDPage6of43SC2-NON-DEMAND METEREDBL(~K01002003004005006007008009001000110012001300140015001600170018001900200022002400260028003000320034003600380040001997REVENUE$15.39$28.82$42.25$55.68$69.11$82.54$95.97$109.39$122.82$136.25$149.68$163.11$176.54$189.97$203.39$216.82$230.25$243.68$257.11$270.54$283.97$310.82$337.68$364.54$391.39$418.25$445.11$471.97$498.82$525.68$552.541998REVENUE$18.64$31.30$43.96$56.63$69.30$81.96$94.62$107.29$119.95$132.61$145.28$157.95$170.61$183.27$195.94$208.60$221.26$233.92$246.60$259.26$271.92$297.25$322.57$347.91$373.24$398.56$423.89$4a9.22$474.55$499.87$525.21$3.25$2.48$1.71$0.95$0.19($0.58)($1.35)($2.10)($2.87)($3.64)($4.40)($5.16)($5.93)($6.70)($7.45)($8.22)($8.99)($9.76)($10.51)($11.28)($12.05)($13.57)($15.11)($16.63)($18.15)($19.69)($21.22)($22.75)($24.27)($25.81)($27.33)21.12%8614P5%171%0.27%-070%141%-1.92%2.34%-2.67%-2.94%-3.16%-3.36%353%366o/o-3.79%-3.90%A01-4pg-417%4.24%-4.37%-4.47%-45664%-4.71%-4.77%-4.82%<.87'491%-4g5PERCENTDIFFERENCE INCREASESC2FINAL.WK4

AppendixDPage7of43SC2-NON-DEMAND METERED~BL)~01002003004005006007008009001000110012001300140015001600170018001900200022002400260028003000320034003600380040001998REVENUE$18.64$31.30$43.96$56.63$69.30$81.96$94.62$107.29$119.95$132.61$145.28$157.95$170.61$183.27$195.94$208.60$221.26$233.92$246.60$259.26$271.92$297.25$322.57$347.91$373.24$398.56$423.89$449.22$474.55$499.87$525.211999REVENUE$21.85$33.74$45.61$57.49$69.38$81.26$93.15$105.02$116.90$128.78$140.66$152.56$16443$176.32$188.19$200.07$211.96$223.83$235.73$247.60$259.48$283.24$307.00$330.78$354.54$378.30$402.05$425.82$449.59$473.35$497.12$3.21$2.44$1.65$0.86$0.08($0.70)($147)($2.27)($3.05)($3.83)($4.62)($5.39)($6.18)($6.95)($7.75)($8.53)($9.30)($10.09)($10.87)($11.66)($12.44)($14.01)($15.57)($17.13)($18.70)($20.26)($21.84)($23.40)($24.96)($26.52)($28.09)17.22%7.80%3.75%1.52%0.12%-085'I55%-2.12%2.54%-2.89%-3.18%3.41%362%379%3.96%-4P9-4.20%-4.31%-441%-45p<.57%-4.71%-4.83%-4.92%501%5.08%15%5.21%-5.26%531%5.35%PERCENTDIFFERENCE INCREASESC2FINAL.WK4

AppendixDPage8of43SC2-NON-DEMAND METEREDBLCK01002003004005006007008009001000110012001300140015001600170018001900200022002400260028003000320034003600380040001999REVENUE$21.85$33.74$45.61$57.49$69.38$81.26$93.15$105.02$116.90$128.78$140.66$152.56$164.43$176.32$188.19$200.07$211.96$223.83$235.73$247.60$259.48$283.24$307.00$330.78$354.54$378.30$402.05$425.82$449.59$473.35$497.122000REVENUE$24.90$35.93$46.94$57.96$68.98$80.00$91.02$102.04$113.05$124.07$135.08$146.12$157.13$168.15$179.16$190.18$201.20$212.22$223.24$234.26$245.27$267.31$289.34$311.39$333.42$355.45$377.49$399.53$421.57$443.60$465.64$3.05$2.19$1.33$0.47($0.40)($1.26)($2.13)($2.98)($3.85)($4.71)($5.58)($6.44)($7.30)($8.17)($9.03)($9.89)($10.76)($11.61)($12.49)($13.34)($14.21)($15.93)($17.66)($19.39)($21.12)($22.85)($24.56)($26.29)($28.02)($29.75)($3148)13.96%6492.92%0.82%-0.58%-1.55%229%2.84%3.29%366%3.97%A.22%63%-4.80%-4.94%-5.08%19%-5.30%5.39%548%-5.62%5.75%-586%-596%.04%-6'11%-617%-6.23%-6.28%.33%PERCENTDIFFERENCE INCREASESC2FINAL.WK4

SC2DRATEDESIGNSFORTHE3YEARPERIODENDINGDECEMBER31,2000AppendixDPage9of431998UNITSBILLS558,910KW14,812,322.7 KWH3,828,804,544 TRANSFORME266,062.3 SUBTOTALPRESENTRATES27.228.490.07691-0.9PRESENTREVENUE15,213,530 125,756,620 294,473,357 (239,456) 435,204,051 PROPOSEDRATES39.318.490.0738-0.9PROPOSEDREVENUE21,970,752 125,756,620 282,565,775 (239,456) 430,053,691 1999BILLSKWKWHTRANSFORM ESUBTOTAL2000BILLSKWKWHTRANSFORME SUBTOTALUNITS568,00615,055,772.6 3,891,494,041 270,719.6 UNITS573,20115,193,257.1 3,927,043,647 273,179.6 PRESENTRATES39.318.490.0738-0.9PRESENTRATES51.48.490.07125-0.9PRESENTREVENUE22,328,316 127,823,509 287,192,260 (243,648) 437,100,437 PRESENTREVENUE29,462,531 128,990,753 279,801,860 (245,862) 438,009,282 PROPOSEDRATES51.48.490.07125-0.9PROPOSEDRATES63.498.490.06856-0.9PROPOSEDREVENUE29,195,508 127,823,509 277,268,950 (243,648)'34,044,319 PROPOSEDREVENUE36,392,531 128,990,753 269,238,112 (245,862) 434,375,534

AppendixDPage10of43SC-2DemandKw%Vsage30Days1997KWBill1998Bill1,0081,5122,0162,520$172.51$213.24$253.97$294.69$182.43$221.82$261.19S300.58$992$8.58$7.22$5.895.75%4.02%2.84%,2.00%2,1603+4043205,40015151515$336.98$424.25$511.53$598.80$343.76$428.14$512.53$596.91$6.78$3.89v$100($1.89)2.01%0.92%0.20%432%3,6005,4007+009,00025252525$542.56$688.01$833.48S978.94$545.41$686.06$826.69$96734$2.85($1.95)(8&79)($11.60)0.53%4.NYo4.81%-1.18%5,7608,64011,52014,40040404040$850.92$1,083.66$1316.40$1,549.14$847.90$1,072.91$1+97.94$1,522.96($3.02)($10.75)($18.46)($26.18)435%4.99%-1401.69%8,64012/6017+8021.60060606060$1362.0$$1.611.19$196030$2309.43$1351.20$1,58S.74SI+26.27$2363.81($10.8$)($22.45)($34.03)($45.62)4.86%-139%-1.74%-1.9$/o11,52017,28023,04028,8008080$0$0$1.673.24$2,13S.72$2,604.21$3,069.70$1,654.51S2,104.56

$2,554.61$3,004.65($18.73)($34.16)($49.60)($65.05)-1.12%-1.60%-1.90%-2.12%14,40021,60028,80036,000100100100$2,084.40$2,666.26$3348.11$3,829.97S2,057.82

$2,620.3$$3,182.94$3,745.50(S26.58)($45.88)($65.17)($84.47)-1.28%-1.72%-2.01%-2.21%

AppendixDPage11of43SC-2DemandK~%Usage30Days1998KWBill1999Bill1,0081,5122,0162/20$182.43$221.82$261.19$300.58$192.07$230.03$267.98$305.94$8.21$6.79$5265.28%3.70%2.60%1.78%2,1603+404/205,40015151515$343.76$428.14S51233$59691$350.01$43135$512.68$594.03$6.25$3.21$0.15($2.88)1.82%075%0.03%<.48/o3,6005,4009,000252525$545.41$686.06$826.69$96734$547.43$683.00$818.56$954.13S2.02($3.06)($8.13)($13.21)%.45%<.98%o-1.37%5,7608,64011,52014,40040404040$847.90$1,072.91$1,297.94$1,522.96$843.58$1,060.47$1,27797$1,494.28($432)($12.44)($20.57)($28.68)51%-1.16%-1.58%o-1.88%8,64012+6017/8021,60060606060$1451.20$1488.74SIP26.27$2,263.81$1~8A2$1,563.78$1,889.13S2,214.48

($12.78)($24.96)($37.14)($49.33)1.02%-1.57%-1.93%-2.18%11,52017,28023,04028,80080808080$1,654.51$2,104.56$2,554.61$3,004.65$1,633.27$2,067.08$2,500.89$2,934.69($21.24)($37.48)($53.72)($69.96)-1.28%-1.78%2.10%-2.33%14,40021,60028,80036,000100100100100$2,057.82$2,620.38$3,182.94$3,745.50$2,028.13$2,57038$3,112.64$3,654.89($29.69)($50.00)($70.30)($90.61)-1.44%-1.91%2.21%-2.42%

AppendixDPage12of43SC-2DemandKwhUsage30Days'999KWBill2000Bill1,0081+122,0162,520$192.07$230.03$267.98$305.94$20032$236.57$272.83$309.08$825$6.54$4.85$3.14430%2.84%1.81%1.03%2,1603+404/205,40015151515$350.01$43135$512.68$594.03$353.81$431.49$509.17$586.86$3.80So.l4($3.51)(S7.17)0.03%4.68%1.21%3,6007+009,00025252525$547.43S683.00$818.56$954.13$545.67$675.14$804.61$934.09(S1.76)($7.86)($13.95)($20.04)432%-1.15%-1.70%-2.10%5,7608,64011,52014,4OO404040$843.58$1,060.47$1,27737$1,494.28S1,040.61

$1447.76$1,454.91($10.12)($19.86)($29.61)($3937)-1.20%-1.87%-232%-2.63%8,64012,96017,2802!,60060606060S1,238.42

$1,563.78$1,889.13$2+14A8$1817.17$1,527.91Sl,838.64

$2,14937(S21.25)($35.87)($50.49)($65.11)-1.72%-2.29%-2.Pio-".944o11,52017.28023,04028,80080808080$1,633.27$2,067.08$2,500.89$2,934.69$1,600.88S2,015.20 S2,429.51

$2,843.82($3239)($51.88),($71.38)($90.87)-1.9F/o-2.51%285%-3.10%14,40021,60028,80036,000100100100100$2,028.13$2,57038$3,112.64$3,654.89$1,984.60$2,502.50$3,020.38$3,538.27($43.53)($67.88)($92.26)($116.62)2.15%2.64%-2.96%-3.19%

FinalRatesesignsPreparedForPowerCholce Settlement Agreement SCCA&SCP(>2Mw)BundledRates(1)FortheFirstThreeYearsofPowerCholce Settlement Agreement BundledCharges(Customer IDeliveryfCommodity andCompetitive Transition Charges)EoergrchargesBlock3{331998CustomerPorKw(2)First250HoursofUseOn-PkOff-PkNext150HoursofUseOn-PkOff-PkAllRemaining HoursofUseOn-PkOff-PkSecondary Delivery$902.00PrimaryDelivery$902.00Subtransmission Del.$1,400.00Transmission Delivery$3,172.00$11.11$9.57$6.90$6.19$0.06202$0.06149$0.05941$0.05678$0.05215$0.05208$0.04968$0.04679$0.04988$0.04963$0.04867$0.04746$0.04025$0.04024$0.03967$0.03899$0.04988$0.04963$0.04867$0.04746$0.04025$0.04024$0.03967$0.038991999Secondary DeliveryPrimaryDeliverySubtransmission Del.Transmission Delivery2000Secondary DeliveryPrimaryDeliverySubtransmission Del.Transmission Delivery$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$10.75$9.21$6.54$5.83$10AQ$8.86$6.19$5.48$0.06202$0.06149$0.05941$0.05678$0.06202$0.06149$0.05941$0.05678$0.05215$0.05208$0.04968$0.04679$0.05215$0.05208$0.04968$0.04679$0.04988$0.04963$0.04867$0.04746$0.04988$0.04963$0.04867$0.04746$0.04025$0.04024$0.03967$0.03899$0.04025$0.04024$Q.03967$0.03899$0.03962$0.03747$0.03696$0.03550$0.03962$0.03747$Q.03696$0.03550$0.03272$0.03043$0.03006$0.02878$0.03272$0.03043$0.03006$0.02878Notes:(1)OptionsForServicewillexistPerSettlement Agreement Option1-VariableCommodity ChargesandFixedCTCChargesOption2-FixedCommodity andFixedCTCChargesBundledRatesVaryByYearnotbyLocation(2)ThePerKwChargeIncludesDistribution Charges&Competitive Transition ChargesTheUnbundled Distribution Chargeswillbeassessedtothemaximumdemandoccurring inthebillingperiod.TheCompetitive Transition ChargewillbeassessedtothemaximumOn-Peakdemandoccurring inthebillingperiod.(3)ThePerKwhChargeIncludesCommodity ChargesandCompetitive Transition Chargesvru{ynesmlPowe{ChEPC IMP2.XLS:Exhibit ofBundledDesigns10/7/97:9:12 AM

1998Unbundied Prices(Option1)SC-3A8SC4(>2Mw)WesternDivisionCustomerPerKw(1)VariableCommodity ChargesPerMC/LBMPBlock1First250HoursofUseOn-PkOff-PkBlock2Next150HoursOfUseOn-PkOff.PkPerKwhFixedCometltlveTranslllon ChargesBlock3AllRemaining HoursOfUseOn.PkOff-PkSecondary DeliveryPrimaryDeliverySubtransmission DeliveryTransmission DeliveryCentralDivisionSecondary DeliveryPrimaryDeliverySublransmission DeliveryTransmission Delivery.EasternDivisionSecondary DeliveryPrimaryDeliverySubtransmission DeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$11.11$9.57$6.90$6.19$11.11$9.57$6.90$6.19$11.11$9.57$6.90$6.19PerMarketPerMarketPerMarketPerMarket~PerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarket$0.03477$0.02897$0.03607$0.03062$0.03416$0.02834$0.03259$0.02639$0.03406$0.02871$0.03532$0.03036$0.03344$0.02808$0.03190$0.02614$0.02910$0.02496$0.03035$0.02679$0.02869$0.02470$0.02728$0.02287$0.02263$0.01707$0.02421$0.01878$0.02342$0.01833$0.02327$0.01859$0.02192$0.01681$0.02346$0.01852$0.02270$0.01807$0.02258$0.01834$0.01696$0.01306$0.01849$0.01495$0.01795$0.01469$0.01796$0.01607$0.02263$0.01707$0.02421$0.01878$0.02342$0.01833$0.02327$0.01859$0.02192$0.01681$0.02346$0.01852$0.02270$0.01807$0.02258$0.01834$0.01696$0.01306$0.01849$0.01495$0.01795$0.01469$0.01796$0.01507Notes:(1)ThePerKwChargeIncludesDistribution Charges&Competitive Transition ChargesTheUnbundled Distribulion Chargeswillbeassessedtothemaximumdemandoccurring inthebillingperiod.TheCompetitive Transition ChargewillbeassessedtothemaximumOn-Peakdemandoccurring inthebillingperiod.0>ruUG3coro~x'<<OCPw:thynesmPC IMP2.XLS:Option 1HoursUse(98)10/7/97:7:41 AM

1998Unbttndled Piices(Option2)SC-3A8SCC(>2Mw)WesternDivisionFixedComm.Charges(2)OnOffCustomerPerKw(1)PeakPeakBlock2Next160HoursOfUseOn.PkOff.PkBlock1First260HoursofUseOn.PkOff-PkPerKwhFixedCompetitive Transition ChargesBlock3AllRemainIng HoursOfUseOn-PkOff-PkSecondary DeliveryPrimaryDeliverySubtransmisslon DeliveiyTransmission DeliveryCentralDivisionSecondary DeliveryPrimaryDeliverySubtransmlsslon DeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,4M.OO$3,172.00$11.11$9.57$6.90$6.19$11.11$9.57$6.90$6.19$0.02796$0.02344$0.02617$0.02172$0.02597$0.02160$0.02488$0.02065$0.03406$0.02871$0.03532$0.03036$0.03344$0.02808$0.03190$0.02614$0.02725$0.02318$0.03477$0.02897$0.02542$0.02146$0.03607$0.03062$0.02525$0.02134$0.03416$0.02834$0.02419$0.02040$0.03259$0.02639$0.02263$0.01707$0.02421$0.01878$0.02342$0.01833$0.02327$0.01859$0.02192$0.01681$0.02346$0.01852$0.02270$0.01807$0.02258$0.01834$0.02263$0.01707$0.02421$0.01878$0.02342$0.01833$002327$0.01859$0.02192$0.01661$0.02346$0.01852$0.02270$0.01807$0.02258$0.01834EasternDivisionSecondary DeliveryPrimaiyDeliverySubtransmlssion DeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$11.11$9.57$6.90$6.19$0.03292$0.02719$0.03114$0.02529$0.03072$0.02498$0.02950$0.02392$0.02910$0.02496$0.03035$0.02679$0.02869$0.02470$0.02728$0.02287$0.01696$0.01306$0.01849$0.01495$0.01795$0.01469$0.01796$0.01507$0.01696$0.01306$0.01849$0.01495$0.01795$0.01469$0.01796$0.015070Notes:(1)ThePerKwChargetncludesDistribution Charges&Competitive Transition ChargesTheUnbundled Distribution Chargeswillbeassessedtothemaximumdemandoccurring lnthebillingperiod.TheCompelllive Transition ChargewillbeassessedtothemaximumOn-Peakdemandoccurring Inthebillingperiod.(2)TheCommodity Chargesshownaboveareclassaverageprices.EachCustomervillhaveadifferent fixedcommodity chargebasedontheirindividual loadshape.D>QOClM6I~x'<<0vrUiynesmPC IMP2.XLS:Modified 72398HoursUse10/7/97:7:47 AM

1999Unbundled Prices(Option1)SC-3A8SCC(>2Mw)

WesternDivisionCustomerPerKw(1)VariableCommodity ChargesPerMC/LBMPBlock1First260HoursofUseOnPkOff-PkPerKwhFixedCometitiveTransillon ChargesBlock2Next160HoursOfUsoOn-PkOff-PkBlock3AllRemaining HoursOfUseOn-PkOff-PkSecondary DeliveryPrimaryDeliverySubtransmlssion DeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$10.75$9.21$6.54$5.83PerMarketPerMarketPerMarketPerMarket$0.03188$0.02651$0.03337$0.02835$0.03148$0.02607$0.03003$0.02423$0.01974$0.01461$0.02151$0.01651$0.02074$0.01606$0.02071$0.01643$0.00948$0.00708$0.00936$0.00670$0.00904$0.00645$0.00875$0.00622CentralDlvlstonSecondary DeliveryPrimaryDeliverySubtransmisslon DeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$10.75$9.21$6.54$5.83PerMarketPerMarketPerMarketPerMarket$0.03110$0.02622$0.03255$0.02806$0.03068$0.02579$0.02926$0.02395$0.01896$0.01432$0.02069$0.01622$0.01994$0.01578$0.01994$0.01615$0.00869$0.00679$0.00853$0.00641$0.00823$0.00617$0.00798$0.00594EasternDivisionSecondary DeliveryPrimaryDeliverySubtransmlsslon OehveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$10.75$9.21$6.54$5.83PerMarketPerMarketPerMarketPerMarket$0.02561$0.02705$0.02544$0.02415$0.02208$0.02411$0.02205$0.02034$0.01347$0.01018$0.01519$0.01227$0.01470$0.01204$0.01483$0.01254$0.00320$0.00265$0.00303$0.00246$0.00299$0.00243$0.00287$0.00233Notes:(1)ThePerKwChargeIncludesDistribution Charges&Competitive Transition ChargesTheUnbundled Distribution Chargeswillbeassessedtothemaximumdemandoccurring inIhebillingperiod.TheCompetitive Transillon ChargewillbeassessedtothemaximumOn.Peakdemandoccurring lnthebillingperiod.wOynesm'PC IMP2.XLS:Option 1HoursUse(99)10/7/97:7:42 AMD>fuoCQOQroDO<<OCP

1999Unbundled Prices(Option2)SCCA&SC4(>2Mw)PerKwhFixedCometitiveTransition ChargesWesternDivtslonFixedComm.Charges(2)OnOffCustomerPerKw(1)PeakPeakBlock1First250HoursofUseOn-PkOff.pkBlock2Next150HoursOfUseOn-PkOff.PkBlock3AllRemaining HoursOfUseOn.PkOff-PkSecondary DeliveryPrimaryDeliverySubtransmlssion DeliveryTransmission DeliveryCentralDivisionSecondary DeliveryPrimaryDeliverySubtransmlsslon DeliveryTransmission DeliveryEasternDlvistonSecondary DeliveryPrimaryDeliverySubtransmlsslon DeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$10.75$9.21$6.54$5.83$10.75$9.21$6.54$5.83$10.75$9.21$6.54$5.83$0.02793$0.02376$0.02606$0.02199$0.02588$0.02188$0.02479$0.02091$0.02866$0.02403$0.02682$0.02226$0.02662$0.02214$0.02551$0.02117$0.03375$0.02787$0.03192$0.02592$0.03149$0.02561$0.03024$0.02452$0.03409$0,02839$0.03543$0.03009$0.03353$0.02780$0.03199$0.02588$0.03336$0.02812$0.03467$0.02982$0.03279$0.02754$0.03127$0.02562$0.02827$0.02428$0.02957$0.02616$0.02792$0.02407$0.02654$0.02227$0.02195$0.01649$0.02357$0.01825$0.02279$0.01779$0.02267$0.01808$0.02122$0.01622$0.02281$0.01798$0.02205$0.01753$0.02195$0.01782$0.01613$0.01238$0.01771$0.01432$0.01718$0.01406$0.01722$0.01447$0.01168$0.00896$0.01141$0.00844$0.01108$0.00818$0.01071$0.00787$0.01096$0.00869$0.01065$0.00816$0.01034$0.00792$0.00999$0.00761$0.00587$0.00485$0.00555$0.00451$O.OO548$0.O0445$0.00526$0.00426Notes:(1)ThePerKwChargeIncludesDlslrlbutlon Charges&Competitive Transition ChargesTheUnbundled Dlstribugon Chargeswillbeassessedtothemaximumdemandoccurring inthebillingperiod.TheCompetitive Transition ChargewillbeassessedtothemaximumOn.Peakdemandoccurring inthebillingperiod.(2)TheCommodity Chargesshownaboveareclassaverageprices.EachCustomerwillhaveadifferent fixedcommodity chargebasedontheirtndivldual loadshape.D>co13tODero>C0p4)w:IhynesmPC IMP2.XLS:Modified 72399HoursUse10/7/97:7:48 AM

2000Unbundled Prices(Option1)SC-3A&SC4()2)IJ)w)WesternDivisionCustomerPerKw(1)VariableCommodity ChargesPerMCILBMPBlock1First250HoursofUseOn.PkOff-PkBlock2Next150HoursOfUseOn-PkOff-PkPerKwhFixedCometltlveTransition ChargesBlock3AllRemaining HoursOfUseOn-PkOlf-PkSecondary DeliveryPrimaryDeliverySubtransmission DeliveryTransmission DeliveryCentralDivisionSecondary DeliveryPrimaryDeliverySublransmission DeliveryTransmission DeliveryEasternDivisionSecondary DeliveryPrimaryDeliverySubtransmission DeliveryTranmission Delivery$902.00$902.00$1,400.00$3,1?2.00$902.00$902.M$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.M$1040$8.86$6.19$5.48$1040$8.86$6.19$548$1040$8.86$6.19$5.48PerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarketPerMarket$0.02923$0.02426$0.03090$0.02626'0.02903

$0.02400$0.02768$0.02224$0.02838$0.02394$0.03001$0.02594$0.02816$0.02369$0.02684$0.02194$0.02240$0.01943$0.02402$0.02165$0.02245$0.01962$0.02128$0.01801$0.01709$0.01236$0.01904$0.01442$0.01829$0.01399$0.01836$0.01444$0.01624$0.01204$0.01815$0.01410$0.01742$0.01368$0.01752$0.01414$0.01026$0.00753$0.01216$0.00981$0.01171$0.00961$0.01196$0.01021$0.00683$0.00483$0.00688$0.00461$0.00658$0.00438$0.00640$0.00423$0.00597$0.00451$0.00599$0.00429$0.00571$0.00407$0.00556$0.00393$0.00000$0.000M$0.00000$0.00000$0.00000$0.00000$0.00000$0.00000Notes:(1)ThePerKwChargeincludesDistribution Charges&Competitive Transition ChargesTheUnbundled Distribution Chargeswillbeassessedtothemaximumdemandoccurring inthebillingperiod.TheCompetitive Transition ChargowillbeassessedtothemaximumOn.Peakdemandoccurring inthebillingperiod.UWroUCQOrolD~>c'QwthynesmtPC IMP2.XLS:Option1 HoursUse(00)10I7/97:7:43 AM

2000Unbundled Prices(Option2)SC-3A8SC4(>2Mw)WesternDivisionCustomerPerKw(1)FixedComm.Charges(2)OnOffPeakPeakBlock1First260HoursofUseOn-PkOff.PkBlock2Next160HoursOfUseOn.PkOff-PkPerKwhFixedComelitiveTransilion ChargesBlock3AllRemaining HoursOfUseOn.PkOff-PkSecondary DeliveryPrimaryDeliverySubtransmlsslon DeliveryTransmission DeliveryCentralDivisionSecondary DeliveryPrimaryDeliverySubtransmlsslon DeliveryTransmission DeliveryEasternDivisionSecondary DeliveryPrimaryDeliverySubtransmlss!

onDeliveryTransmission Delivery$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$902.00$902.00$1,400.00$3,172.00$10AO$8.86$6.19$5AS$10.40$8.86$6.19$5A8$10AO$8.86$6.19$5AS$0.02863$0.02436$0.02671$0.02254$0.02653$0.02242$0.02541$0.02143$0.02937$0.02463$0.02749$0.02282$0.02729$0.02269$0.02614$0.02170$0.03459$0.02857$0.03272$0.02657$0.03227$0.02625$0.03100$0.02513$0.03339$0.02779$0.03478$0.02954$0.03288$0.02726$0.03137$0.02536$0.03265$0.02752$0.03400$0.02926$0.03212$0.02699$0.03064$0.02509$0.02743$0.02358$0.02877$0.02551$0.02714$0.02343$0.02578$0.02166$0.02125$0.01589$0.02292$0.01770$0.02214$0.01725$0.02205$0.01756$0.02051$0.01562$0.02214$0.01742$0.02138$0.01698$0.02132$0.01729$0.01529$0.01168$0.01691$0.01367$0.01640$0.01342$0.0f646$0.01386$0.01099$0.00836$0.01076$0.00789$0.01043$0.00763$0.01009$0.00735$0.01024$0.00809$0.00998$0.00761$0.00967$0.00736$0.00936$0.0070S$0.00502$0.00415$0.00475$0.00386$0.00469$0.00381$0.00450$0.00365Notes:(1)ThePerKwChargeIncludesDistribution Charges&Competitive Transition ChargesTheUnbundled Distribution Chargeswillbeassessedtothemaximumdemandoccurring Inthebillingperiod.ThoCompetitive Transition ChargewillbeassessedtothemaximumOn-Peakdemandoccurring inthebillingperiod.(2)TheCommodity Chargesshownabovearecfassaverageprices.EachCustomerwillhaveadifferent fixedcommodity chargebasedontheirindividual loadshape.0>ruo(QO(oco~x.0QCPw:thynesmtPC IMP2.XLS:Modified 72300HoursUse10/7/97:7:48 AM

1998-2000BundledPricesForSC-3andQualifying SC-4Customers (100<NMKw<2,000)WesternDivisionCustomerPerKwKwhChargesBASEDONUse<=450HoursUse>450HoursSecPriSubTrans$258.00$432.41$546.97$567.61$14.78$12.53$8.51$8.15$0.06224$0.06086$0.05842$0.05782$0.04477$0.04421$0.04314$0.04294CentralDivisionSecPriSubTrans$258.00$432.41$546.97$567.61$14.78$12.53$8.51$8.15$0.06224$0.06086$0.05842$0.05782$0.04477$0.04421$0.04314$0.04294EasternDivisionSecPriSubTrans$258.00$432.41$546.97$567.61$14.78$12.53$8.51$8.15$0.06224$0.06086$0.05842$0.05782$0.04477$0.04421$0.04314$0.04294Notes:TheaboveschedulereflectsbundledRetailPricesForSC-3andQualifying SC-4sRetailPriceswillnotbeunbundled forclasseswithoutDirectAccess0>O(OOIMgX0whhynesm)PC IMP2.XLS:Modified 72398HoursUse10/7/97:9:08 AM

fnAGARAMDHAwKpowERcoRpoRAfloNDEVELOPMENT OFPSC207SCSBUYBACKRATESENERGYsndCAPACITYAres1~PREIlRAATTACHMENT OAppendixDPage21of43EunnlnfLFnkts Ganersfcn Ttsnfnlsskn SfasnsOnpeskOff.PeakAversneJsn953Fa0683Mar@83AprM3MIP98$JtnOS$JATOS3Auy985Sep653Dc&8$Nov685Deo983Amus/3423423423423423423423423423IW423423035036ond0.360.360.360.360.360.360360380360.360.640.640.640.640.640.640.6l0.640.640.540.640.6415.8914A9f55016.7923.7217.4416A2f83822.4822341L5817.1815A317.7215.661IA6fM319A3160415.8716.68fTJI2200915.481IJI16.79159615.1714.8917.11212216.6218.9317.3819.7621.0316.77lb.5217ATOnpeskOlf-PeekAverageJsnbdFeb.gbMer46Apr46Msy95An95JddbAu965SapnbOcf68Nav.gdDao48Amus/4254254284284284254284284284284284.28428f639flJflfSJIS179124ASf7JISf9/Nf69323.1d23.0419.1617.7219.01f82716.1514.9117.8720.0416.5l16.3717201L3820.72f59615.3117nf17A9156515.3617.6421.5817.1417.461TJ/2203521.65173016.311L0220.6819222026215925.7422262327232127A6273f23.4l2199232818.27id.ib14.9117.8720.0415541537f7'dnb20.72f556fbnffTNf355333335353$192717.4317.1419A223.661L92192419.7022,1623AT19.0818.101950Ganars1on Tfsfnfstkn Srlesns.Jan98F~Mv4kfApr4ffMs76tbAn95JJIkfhu965SapbdOcf68Nav$8Dao98Amual4.414.414,414A14A1IA14A14A14A14A1IA14A14A1038038ond0.350.380.380380350.380.380.380.38038159015A216A9fTJI6252316.5519.601nn3239223.7719.77182819.61f88516.6615351dAI20.6717.0616.5817.7518962fnTiSAT15.801TAS1bnf15.1lf5dl152022.5717.6818.0116.4921.0222371TAI1S.8315.5921.6920202128226530.0223342435243228.702855245523.06243915.8516.681snb1L4420.6717.0615.6517.75f696213715A715.8017.8620.0l15.141TAI20.1924.5719.6820.0120AS23.022436198418832055KndffnLQnhJrJf/Mnf JsrvgbFazedMvsAcr@6May98AI.95Aun.9SOcegbN~Dao4fb4AT~AT4A74AT4A74A74A7IAT4.474AT4ATIAT4.470.380.38onb0350.380.380.3S0380.3S0.380.38a380.380.680.680.680.680.6S0.680.680.680.650.680.650.680.6817.1215.6115.701LOS25.5518.7d19.6419.78242124.0620.01185019.6519.091L6715.5815.67209317281TJ6179719.1921.6416.6716.0015.0515271534150415.4222.55fTAlf182415.72212922.65180717.0lf68222.6l21.13222223.6131.0724312535253029.74295925.5424.0325.3719.0915.87fMS15.6720Jkf17M17.0917.9719.1921.6416.6716.0015.05205718.64153420.7325.152021205421.02235924952037193421.12Jsn98FangbMv-98/vrrrNMsyddJngbAu965SapdbOcedbNov98Dec-98Amus!4564.564.564.56IAS4564.564.56Ind4.584.584.564.560390.390.390.390.390.39on90.390.390390.390.390.390.690.690.690.690.690690.690.690.690.690.690.690.6917A715.9317.0418A619.1d20.1924.72245620A3fan19.45172215.9019.08213617.6417.45f834f95922.0917.0216.33184615.651L68183518812333152815.62195121.7323.121L4l17.40192123.112LST22.6524.1031.7224.6125/f9258330.3626.07245325.9019AS172215.9019.0621nb17.6l17.4518.34f9.QI22.0917.0216.3318A61L031L7321.16209721.4624.0525.4720.7919.7421.56ddl10/9/97SCS1998.XLS

NAGARAMOHAWKPOWERCORPORATlOX DEVELOPMENT OFPSC207SCSBUYBACKRATESENERGYandCAPACIIYAraa2PREMRAATTACHMENT DApped>dix DPage22Cf43fhnculla$

'9$$3Gcncracon Jsn88$423Fc598$423Msr-98$423Apr48$423May98$423Acv88$423A@98$423Aup98$423Sepge$423Odee$423Nov4S$423Oeoge$423Anal$423OW036036036026026036038OW036036026036aec0.640.6l0.6l0.64aec0.64aec0.64aec0.640.64aecOnpesk$1L25$14.79$$5JIO$17.11$25373$7J$2$18.78$18.71$229$$23.75$24.763$7$$3$9501L12$59814.7417.6720.781L3916.18$6591L16212620.63$L$417.77$7&15.4915.1917A422.691L99$72617.7120.14223522.3516.1318A9Jsn98Feb98Apr~Ms@98JmeeAuy98Sep98Od88NoveeDence3428$428$428$428$428$428$4283428$428$428$428$428$428Onpcsk$16.75$$52531L30$17.65$26.16$1L383$9383$929$23.63$24.4932554$18.06820.11CNPask18.6816AS$520IL2221A3$69$1L68$75218.732202212715.6118.32~iAverage17.88Ia9715.66$78823.40$782$7AO182620.7723.0523.0516.6319.072103$95320ST219330A422.6623.6l238727JO28.7629JII223324.3918.681L481520$82221AS$69$16.68$75218.7322.02212715.6118.3219.6617.7517Al19.7625.15$930$95820042255248324JO18A120J$5Jsn98Fetx98Mar@8Apl~Msy98Al48Auy.98Scp98Od88Gcneracon

$4.41$4.41$4A1$4.4134.41$4AI$4.4$$4A1$4.4134A1$4A1$4.41$4Al038038038038038038038a38038038038038038$72815.73$6J$$$82$2659$896$998$990243725262634$L6320.75$928$7AO15.6918.7922,1$17A4$72$18.08$93222.72219518.1018901L451L4816.161L5524.1418.07$83618.8421A323.7823.7817.1619.67220721.60229931.77237524.7624.6929.1631.132342$928$7AO15.691L7922.1117.44$72$18.08$93222722U5$1L101L9020A418AT18.1520542L1l20072026208323.4225.7725.7719.152$$7JaneeFableMsr8Apl'ay.98 AnS8JLC98Auy88ecp88Od98Oeo.98AnnualGcncraccn

$4A7$4A7$4.47$4.47$4AT$4.47$4.47$4AT$4.47$4AT$4AT34A734A70380380380380380380380380380380380280380.680.680.680.68aee0.680.680.680.680.680.68$750$59317.0218A327m$920202320.1524.682aee26.671LM2$J$$$952$722$5Jre$9A$3223817.6617A3$820$95623.002222$63019.1418.681L681L3618.7824A41830$85919.0721.6924.0824.08$737$98223.0221.45238S32.8524.7225.7525.6731.1032.192439$952$722$5J$8$9.03223817.6617A31L30$95623.0022221a3019.142058159818.662$AS26.7420.602089213724.00253819.672222Jan&8Fan@Msr48Apl@8MayyeJLI48Aug-98ScpgeOd88Now88Oea98ArnuslGcnctaccn

$456$456$456$456$456$456$456$456$456$456$456$456$4560390390390390390390390390390cy039039OMaegaeg0.690.690.690.690.690.690.690.690.690.69aeg$7AS$626$7M18Jt227J$919.6020.65205725.$926.1127m$92821A4$952$758$82$19A2228518.0317.7918.69$99723A822.6816.6419.54$9.06$7.0316.7019.17249518.681L9819.4722.1524$S245817.73203323.50218024.462524262826.2130.8331.75328724.8927.08$992$758162119A222J$518.0317.791L6919.9723A822,681L6l19.54eAvcraye21A1$93819.05215227302$AO21332$JI224.5026.93269320.0822.68Sdl10iyl97SCS1998.XLS

NAGARAMONAWKPOWERCORPORATION DEVELOPMENT OFPSC207SCSBVYBACKRATESENERGYandCAPACITYAree4PREMRAATTACHMENT 0AppendixDPage23of43Q~nlhGeneralon Jan98$423Fcb98$423Mar~$423Apr48$423Map98$423JI4X98$423JI448$423Au998S423$4Z$Oo$98$423NESS$4nBeo-98$423AreaalS423096096a36096096096096096096096a360960960.6l0.640.640.640.640.640.6la640.6l0.640.640.64312530.7029.10249$2596229024952498239925.1428.61309926.762L32249622.621L0120072a542098219418.6720AT209622892$9$2L372795253220.64222721.52225322.602a722242n902a852XTOFebSSAprreMay98Ju$48hi98Au998SeP98Oc$98Genera$on$498$428$428$428$428$428$428$428$4285428$428$428$4nCnpeak$3223$31965309$$25.07526.15$23.61$25.63S25.12$2493$2592S2990$3196S27.6027.1425.74n931LET20.7021.18219322.01$99521.1121.0024.64ZL1829262a2$26.11212822.972220n24n.3021972312249427.6924A4SESO35933l28292530A32799299029AO28.60302033.783623319727.1425.74n331L5720.7021.1821932201$92521.11219024.6422.1831.042999279922062LTS2L9825.022S.092L152490269229A7Jan98Feb.98MerrNIAy~An98Al98Au998Sep98Oca98~8Oeo98AnnualGeneraoon S4.41$4A1S4A1$4.41$4A1$4A1SL41$4A1$4A1$4A1$4A1$4A1$4.41098098098098098098098098098098098098098Onyeek53325$32.66$3096S2288$2698$2496$26A4$2592$25.10$26.75$30.44S3297S28AT28.00269524.0619.1621952195222122.7019.8621.782$.6625A2228830.1929.102L94219522702290n9724.0422.04239525922L56252138.0337A535.7530.653$.7729.15312230.7029.88319337.7628.00269524.0619.1621952195n2122.7019.8821.7821.6625A2228832.1831.092893239525.692499259726.0424.0l2594279$3096272$Rm$0$5tn!MaSu$4.47$4.47$4.47$4ATS4A7S4A7$4A7$4AT$4A7S4ATS4AT$4ATS4AT$$$85$SSSS$$$0980980980980980980980980980980980980.680.680.680.680.680.68a680.680.680.680.680.68a6833.6633.07319426.18279224.672L2425A127.083398OnpeekS$SSSS$$$$5$S28952698249819.4021.6222.12229920.1122.05219325.7323.17309629A6272722nn9923182427249422322l.1425.632892259339.18SLI$36.8731.71328l30.19322931.76309332.603L3434952L352a88249619AO21.6222.1222A9229920.112205219325.n23.1732863$.7629972493282925A82aST26.6l24.6226A5279331222793GenealcnS496$496$496$4.56$496$496$496$496$498$496$496$4965496099099099099099099099099099a390990990.39S0.695a69$0.6950.69S0.69$0.69S0.69S0.69$0.69$0.69$0.69$0.69S0.69OnpeakS3496$33.76332.00S26.73S2798S2S.18$2792$26.79$259lS27.64$31A6$34.08S29.4227.45249719.8022.0722M229623AS20932251312030.072794226924,492%6724.78249522.7824.6526.17299226.06399937.6332373L5230.82329632,42319837.1039.713S.06289427AS2497$99022.072258229623.462093225122392a2723.65335532A230.1925.0426.8l26.0227.13272025.1327Am2L52319728A1sdl10/9$7SCB1998.XLS

NAGARAMOHAWKPOWERCORPORAllON DEYELOPMEMT OFPSC207SCSBUYBACKRATESENERGYandCAPACIIYArea1-POStMRAATfACHMENTDAppendixDPage24of43Q~nInGenerafkn Jrn88$423Feb98$423Mere$423Agre$423May@8$423Jrn98$423Jfl48$423Au988$423Sep98S423Od86$423Nov88$423Dec66$423Arnusl$423096096aw096096096096096096a36096096aM0.640.640.640.6l0.640.640.640.640.640.640.640.640.64Onyeak$2S.102390229821.622$.1924.1023.1424.642392282624.0l19.1517.7518.4320.1820$0189719.4519.531997212218$119$2199921.6320.15202920.7820AT219921.1222.6$20.7223162123Off-PeakAverageJrn86Feb98MsrrkfApr48Msp98Jfn98Jr$98Auy88Sep98OcP98Nov9SDeb98AnnualGenerslon

$4283428$428342S$428$428$428342S$42834283428$428$4282599242323.602229259823A3249524.07239625A124$629.1424.7919.7518901991209121.1419A6209620.14'1997219819.0920.131999223120.78209221A323.1621.1122.0621.7821$92395219723.88219930.1628$12797$27.71$29.13$2%34$28.1433.4229.0719.75183019.01209121.1419.4620.0620.14199721.8819.0920.13199924.092256227023212494229023$42396233825.1323.1525.6723.78CnpeskOS-PeakAverageJm98FebgaMar@8Afr48May@8Jrn68AHSAuy98Sep98Od98Nov98Deb98ArrssrfGenerafkn

$4.41$4.41$4.41$4.41$4.41$4.41$4.41$4.41$4.41$4.41$441$4.41$4A10980980980980980980980980980980980980982L7125.00249423fo269024.1725.64248324.62262125943ao625982097189819.6121AT2191209820.6920.7820.612298199920.7720.6323.0121A421$8221123.8921.782LTS22A7222824.09220524.6422.6931A929.7929.1327.793199289630.4329.6229AO31.0030.1334$$30972097189819.6121.47219120.6920.7820.61225S19.6920.7725.0123A3239824.1025.8823.7824.7524A6242726.0924.0l26.6l24.68Feb98MarMApr~Map98Jrn98Aug.98Sep98Od98Nov98Deb98Gencralcn

$4.47$4.4784AT$4.47$4.47$4,47$4AT$4.4734.47$4A7$4.47$4.47$4.470980980980980980280980980980980980980980$80$80.680.680$80.680.680.680.680.68a680.6827.04259124.65232927.1324A72$.142492269425.662590209319.12'19$521.7422.082093209521.0420962296199421932098233021.7021$$229824.1922.05ZL042275225624992232249522.973256309330.17289132.66299931A830.6630.4532.0631.18359631A220.6319.1219.8521.7422.082093209521.0420.8622.86199421.0320$824.0024.1524.6826A9249$259424.8624.622725Generalon

$4.56$4.56$4$6$4.56$4.56$496$4$6$4$6$496$4$6$496$4$6$4$60290990990990990990990990990990990990990.690.690.690$90.690.690.690.690.690.690.690$90.6925.1627.7024.9825.6626.1931.0721.0619$2202722.19225420.75219921A721202323209521A621922L7822,162230228524.69225123$22322Zk03249022.7925A723ASCnpeskS332431A8309029A1339430.6232.1431203198u.7331$33LTI320721.0619$222.19225420.75219921.4721902323209521.462f9226.132ASO24.65252027.0l24$8259725972597272525.13279225.80Otf.PeakAverageSdf10/9/97SC61998.XLS

NAGARAMOHAWKPOWERCORPORATION DEVELOPMENT OFPSC207SCSBUYBACKRATESENERGYandCAPACIIYAres2-POSTMRAATTACHMENT 0AppendixDPage25of43QLnnrn~IS Gcnerallcn Jsn88$423Feb88$423Msr4S$423APTS$423Msy86$423Jun8S$423Jal88$423Au9883423Scp883423Od88$423Nov88$423Dec-98$423Arrrusl$4230.360.36026026OM026026026OM026026OM0280.640.640.640.64a640.640.640.640.640.640.647snsnrsskn asrrrans.

23A32283218525.6623AO24.74n8623.672a372%952a672494Olriaeek$192631720$1839320AO$20JIS319.13319rIT5199631981$22.71$22A9$1980$20.1121.7620.09202421.00228820.752185215921A2242325.182L5022.12Jsn88Feb88Msr4SApr~May88Jaca88Jal88Au988Sep98Oc188Nov88Deo83Gcncralcn

$4283428$428$428$428428$428$428$428$428$428S428S428260424.162354225l26A6n75255124.6024A127.1929.85295625.72$19JIT$182531896$21AQ32154S19.72S2059$2059S20.43$23A2$2320320A2$20.7422Al20.7220.8721.66n5921AO22.64222622.09249925972423228130222L4427JI226JII30.7428.0229.792a8828.6931AT34.1333JH299919JIT1825189621'15419.7220592a5920.4323.42n2020A220.74242222.65252723.1824.4223JIT26.7727.7526.012459Jsn88Feb88MarakiApr48May88JaS88Au988Sep88OcS98Nov88Deb88Generaaan S4A1$4.41$4A1$4A1$4AI$4A1$4A1$4A194A1$4A134A1$4.41$4.41a38028028028038OM028028OMa38a38a38028nc2587249324292325272024502L32252825.18280530AO30502L53$20A9$1a83$1956$21.70$2222$2a3532124$2124321AS$24.16$2393$21A17$212923.1521M21432235242422.08n36229622.7925.7826.7925.00n5331.6529.7229J)7280432.09292931.1130.172997328435583529312220A91L83195621.7022222a352124212421AIS24.162L932UIT212925.1423532424262324.07252524.7827.7828.79269925.53Jsn88Feb88MarakiApr48May88Jasa88JaS88Au988Sep88Od88Nov88Deb98Generalcn S4AT$4A7$4A7$4AT$4AT$4A7S4A7$4.47S4A7$4.47$4ATS4A7$4A7028OM0.38028OM028028038038OM0280280280.680.680.680.680.680.680.680.680.680.680.680.680.6827m25242459235427.6l24JO26jr525.70255028AO31.1830AS26AS$20.75$19.06$198132197S2250S20JIO$2151$2150S2124$24A6$2423$2123$215623A421.6l212022.6224.64223523.65n2523.0726.1027.132521n83EnexShtxJhlmruz OnpeskOrriaeskAvera9e32.7330.7630.1129.0633.163a3332.17312231.02339236.7036AO323820.7519.0619JII2197225020.6021412150212424AS2423212321.6625.74239424.102483269424.652595255525.372L4029.4327.6126.13Jsn88MsrrrsAprMMay.98Jasa88JaS88Au988Sep88Od88Ncna98Dec86ArluatGeneraecn$456$456$456$456$456S456$456$446S456$456$456$456$456029029029029029028029AS029029028OM0290.690.690.690.690.690.690.690.690.690.690.690.690.6927.7725.7625.10240328222a32272026232L032L993&3315227A2Orf-Peek$21.18$19A6$2022$22A3$2296$2120$219532195S21.79$2487S2873$21.77$22.11n9322.09222523.1025.15228224.1423.74n5526.6527.6925JM242233.4131AO30.7429.6732863096328431JIT31.6734.6337AT37.1633.0621.1819A6202222.43229621.032195219521.79249724.7321.7722.1124.4424.6025.44275025.1726A926.0829.0028.1826.67sdl10887SC61998.XLS

tnAGARAMOHAWKPOWERCORPORATON DEVELOPMENT OFPSC207SC6BIIYBACKRATESENERGYandCAPACITYArea4POSTMRAATTACHMENT 0AppendixDPage26of43Eunn!~9319 Generaaon Jsnge$423FeM8$423Msr48$423Apr48$423Mayge$423hnS8$423JrL985423Aug48S423Sep68S423OctdtSS423Nov68$423DeoSS$423AnnualS423tL360964360960264360360960260964MIL364360.640.640.640.640.640.640.640.640.6l0.6l0.64Onpeak631$7$30.19$28.7524$3259622962496232l25.7528.6930.702L6626.642$A723.672020209920$821A3219619$82267222223962?973S5$$.$5S$$$$28.692?A425.7922.0022.632197228622.1221.16239$2l9226.7724.16GenendmJsngeS428Feb'428Mar~$428Apr~$428Msyge$428Jjnge8428Jd686428Aug68$428ecP68$428Od486428Novae3428Deo48$428Arnual9428325631.1329.6S2L3025$l23.6825.6l242$23972L5529$931.6627A927AT2L2724.41209321$l21222?.1021.7220292L38229124.7123.0729$92L2926$922.692333222523$72?$1219224.7025$927.60249136$335.41339229$73tL122795299128.62282434833396359331.7727.47262724A1204321$l212222.1021.7220292L38229124.7123.07319730.072L3724A725.1224.032L3524$923.6126.4S27A8292926.69Jan@8F~Mar%6AprrteMay-98Jrn68AI68Aug68eep68OcugeNov68Deo68AnnualGeneratcn

$4.4134A1$4A154A154A1S4A154A16lA1$4A1$4.41$4A1$4.41$4A1098098438098IL380980980280980980980$809833$932.1226.1026.6624A326A$25,1224.72272934522L36289427.1025.1821A92?222UI22.802?AO209424.1223.6425A923.80305329.1927A323AI2497249223$4225125AS26$128AS2$.7038373690359730.8831A529213123299029.5132.18359137A533.15243427.1025.1821A9222221A822AN22AO209424.1223.6425A923$0325231.1829A325AO26.0724942L3125.5324.512?AS285030AT27.69GeeratcnJan68$4ATFcb45$4A7Mar48S4A7Apr48S4A7Mayge$447Jtn68$4ATJU68$4ATAug68$4A7eep68S4ATOcp98$4A7No48S447Deo68S447Arnuat$4AT0980980280980280980984M028438438098098aee0$8aee0.68ae80.680$80.680$80.680.684683?$230.9726A2269924.7326.7825.4327.74309033.072IL7228.6927A325$021.76225022.172%0822.68212024.42239325.8124.10309129$52L7823.7024272324249223$3228025902L842L8326.02EmnnLI?nhldnsnt OnpeskOSPoakAverage39$3340436.4931943?'$230253230309530$5332636.433L$9342428,692TA32$$021.76225022,1723.082268212024.422L93259124.103321319526.67269226.132$.1028.1029.143t.13Genccaton

$4$6F~S4$6Msr4S$4$6AprMS4$6$4$6Ange$4$6Jd48S4$6Auyge$4$6Sep6864$6OcNSS4$6Nov48S4$6Dax98$4$6ArnualS4$60290290&i099099029099039IL39IL394390990990.690$90.690.690.690.690.690.690$90.690.690.6934.71332031.61269727$525252794259625$5243131$533.76299129292tL0126.032221229722.63235623.1621.6l249324A3269524.60Average31$530.172L?$24.192l$8?L7225.1424932327269427.4029.4326$640953483372532.6133.1930$8329731.6031.19339537.1839993495292928.0126.032221229722.6323$623.162194249324.43262$24.6033903?$2347026$4272326.072?A826.6725.6228.6929.7531.782891ectl10/9/97SCB19983Q.S

ORIGINALAPPENDIXDSCHEDULE7,SHEET35FROM7/23/97PROPOSALUnbundled PriceDataAppendixDPage27of43199819992000arketriceofElectriiForecastMWesternRegionSC1SG2NDSC2DSC3SecondaSC3PrimaSC3Subtransmission SC3Transmission SC3ASecondaWnSC3ASeconda-OffSC3APrimaWnSC3APrimaWffSC3ASubtransmission WnSC3ASubtransmission

-OffSG3ATransmission WnSC3ATransmission

-OffAllhourswithlossesaliedOn/Offaklossesalied$0.02556$0.02501$0.02527$0.02449$0.02361$0.02324$0.02218$0.02725$0.02318$0.02145$0.02525$0.02134$0.02419$0.02040$0.02564$0.02591$0.02510$0.02420$0.02382$0.02273$0.02793$0.02376$0.02199$0.02588$0.02188$0.02479$0.02091$0.02686$0.02628$0.02655$0.02573$0.02480$0.02441$0.02330$0.02863$0.02435$0.02671$0.02242$0.02541$0.02143CentralRegionSC1SC2NDSC2DSC3SecondaSC3PrimaSC3Subtransmission SC3Transmission AIIhourslossesalied$0.02498$0.02407$0.02370$0.02261$0.02671$0.02614$0.02560$0.02467$0.02430$0.02317$0.02738$0.02679$0.02624$0.0252S$0.02490$0.02375SC3ASeconda-OnSC3ASeconda-OffSC3APrima-OnSG3APrimaWffSG3ASubtransmission

-OnSC3ASubtransmission

-OffSC3ATransmission WnSC3ATransmission

-OffOn/Offaklossesatied$0.02617$0.02172$0.02598$0.02214$0.02550$0.02117$0.02937$0.02463$0.02282$0.02729$0.02269$0.02614$0.02170EasternRegionSC1SC2NDSC2DSC3SecondaSC3PrimaSC3Subtransmission SG3Transmission Allhourslossesalied$0.03058$0.03000$0.03021$0.02924$0.02818$0.02770$0.02657$0.03134$0.03075$0.03097$0.02997$0.02888$0.02840$0.02724$0.03213$0.03152$0.03174$0.03072$0.02961$0.02911$0.02792SC3ASeconda-OnSC3ASeconda-OffSC3APrtmaWnSC3APrimaWffSC3ASubtransmission

-OnSC3ASubtransmission

-OffSC3ATransmission

-OnSC3ATransmission

-OffOn/Offaklossesalied$0.03293$0.0271S$0.03115$0.02529$0.03072$0.02498$0.03375$0.02787$0.03459$0.02857$0.03272$0.03099$0.025139/30/972:38PMConrdential Settlement DocumentCOM$.XLS

REVISEDAPPENDIXDSCHEDULE7,SHEET35FROM7/23/97PROPOSALWITHREVISEDBACKOUTRATESUnbundled PriceDataAppendixDPage28Of43199819992000ForecastMarketPriceofElecticiWesternRegionSC1SC2NDSC2DSC3SecondaSC3PrimaSC3Subtransmission SC3Transmission Allhourslossesalied$0.02556$0.02501$0.02527$0.02449$0.02361$0.02324$0.02218$0.02827$0.02766$0.02795$0.02708$0.02611$0.02570$0.02453$0.03076$0.03009$0.03041$0.02947$0.02840$0.02796$0.02668SC3ASecondaWnSC3ASeconda~fSC3APrimaWnSC3APrimaWffSC3ASubtransmission WnSC3ASubtransmission

~fSC3ATransmission

~SC3ATransmission WffOn/Offwithlossesaplied$0.02725$0.02318$0.02543$0.02145$0.02525$0.02134$0.02419$0.03014$0.02564$0.02812$0.02373$0.02675$0.02256$0.03279$0.02789$0.03059$0.02910CentralRegionSC1SC2NDSC2DSC3SecondaSC3PrimaSC3Subtransmission SC3Transmission SC3ASccondaSC3ASeconda~fSC3APrimaSC3APrimaWffSC3ASubtransmission WnSC3ASubtransmission

~fSC3ATransmission WnSC3ATransmission

~fAllhourswithlossesaliedOn/Offlossesapplied$0.02550$0.02578$0.02498$0.02407$0.02370$0.02261$0.02796$0.02617$0.02172$0.02598$0.02882$0.02820$0.02851$0.02762$0.02662$0.02894$0.02402$0.02873$0.02752$0.02284$0.03136$0.03069$0.03102$0.03005$0.02897$0.02852$0.02720$0.03364$0.02821$0.03149$0.02613$0.03126EasternRegionSC1SC2NDSC2DSC3SecondaSC3PrimaSC3Subtransmission SC3Transmission AIIhourslossesalied$0.03058$0.03000$0.03021$0.02924$0.02818$0.02770$0.02657$0.03382$0.03318$0.03341$0.03233$0.03117$0.03064$0.02939$0.03679$0.03610$0.03635$0.03518$0.03391$0.03333$0.03197SC3ASecondaWnSC3ASeconda~fSC3APrimaSC3APrimaWffSC3ASubtransmission WnSC3ASubtransmission

~fSC3ATransmission WnSC3ATransmission WffOn/Offlossesalied$0.03293$0.02719$0.03115$0.02529$0.03072$0.02498$0.03641$0.03007$0.03445$0.02797$0.03398$0.02763$0.028789/30/97,2:45PMConfidential Settiement DocumentCOM$997.XLS

NIAGARAMOHAWKPOWERCORPORATION PowerChoice RevenueComponents PrivateAreaLihtingS.C.No.1-Full ServicePresentStructure'owerChoice Structure

~cornoncetFacilityRevenue$2,680,288

~cornonenrFacilityServicesRevenue$1,605,598 Energy$2,017,413 EnergyServices$3,092,103

$0.105787Total$4,697,701 Total$4,697,701 1998SalesForecasL29,229,395 kWh'1996FreezeRates0>D(D'z>>Qrarog.OX<<Odtm.unbundlei98ry95l revrordslpel

AppendixDPage30of43NIAGARAMOHAWKPOWERCORPORATION P.S.C.No.213,S.C.No.1PrivateAreaLightingComparison ofMonthlyFacilityPricesFreezeandPowerChoice LAMPS&LUMINAIRES

~DeeIeiStandardMercuryVaporHighPressureSodium175w400w1000w70w100w1Sow250w400w1000wFreezeCharac$8.75$10.76$14.72$6.44$6A3$9.78$6.95$11.25$19.78Proposed~Chare$4.34$4.87$9.64$4.24$4.23$4.30$4.82$5.06$9.87($4.42)($5.89)($5.08)($2.20)($2.20)($5.48)($2.13)($6.19)($9.91)-606%-54.8%-34.5%342oro342%-56.1%306%-550501%Adjustment AmountPercentRoodMercuryVaporHighPressureSodiumMetalHalideShoeboxHighPressureSodiumMetalHalide~P*tTeColonialHighPressureSodium400w1000w250w400w1000w400w$11.25$14.89$5.86$13.03$16.16$7.0770w100w150w$6.24$6.23$6.19100w$9.08150w$8.94250w$8.95400w$9.03400w$9.22$6.64$6.74$5.41$5.65$7.03$6.35$7.18$6.52$7.12$7.06$7.21$4.61$4.62$4.72($5.71)($8.15)($0.45)($7.38)($9.13)($0.72)($1.91)($2A2)($1.84)($1.97)($2.01)($1.63)($1.61)($1.47)-50.8%-54.7%-7.7%-56.7%565-102%21.0%2720S%218%18oro262%-25.8%-237%Traditional HighPressureSodium70w100w150w$10.64$10.78$10.64$8.51$8.92$8.73($2.13)($1.86)($1.92)20.0%-172%18.0%AcornHighPressureSodium70w$10.39100w$10.381SowS10.19$8.31$8.31$8.31($2.08)($2.07)($1.88)20.0%19.9%-18.4%EnergyPriceperKwh$0.06902$0.10579$0.0367753.3%Confidonrlal Serrlerrrenr Doeurrrenr

AppendixDPage31of43NIAGARAMOHAWKPOWERCORPORATION P.S.C.No.213,S.C.No.1PrivateAreaLightingComparison ofMonthlyFacilityPricesFreezeandPowerChoice POLESFOUNDATIONS CIRCUITSPOLES~DecotoOverheadServiceFreezeCh~rcheProposedCh~rcheAdjustment AmountPercentWoodUnderroundService-Standard

$5.50$5.45($005)a08%~Retees16'rloss16'rless,embeddedover16'-25'-pendant Aluminum16'rless,squareover16'-25'-davit over16'-30',square$6.50$9.10$12.20$24.25$15.10$40.32$5.09$6.99$11.39$22.52$16e41$36.87($1.41)($2.11)($0.81)($1.73)$1.31($3.45)217%23.2%6-7.1%87%8.6%FOUNDATIONS PouredConcreteforpoles:16'rlossover16'20.95$14.20($6.75).32.2%$2425$1655($770)317%~Screw.Teallapplications

~PkinLotallapplications

$11.25$8.13$14.75$11.19($312)-277%($3.57)-24.2%CIRCUITSOverheadService(basedon150tt.)cableonlyUnderroundService(basedonperft.)cableandconduitcableonlydirectburiedcable$2.05$2.52047227%$0.18$0,13($0.06)30.6%$0.04$0.03($0.01)-27.0%$0.15S0.10($0.05)-33.3%Confid'nrlclSeulenrenr Doeumenr

NIAGARAMOHAWKPOWERCORPORATION PowerChoice RevenueComponents StreetandHihwaLihtinS.C.No.2-FullServiceContract-Customer Contributory PresentStructure'owerChoice Structure

~ComonenrRevenue~ComonenrRevenuelkwhFacilitySC2Contract$33,615,147 f43790Total$33,658,937 FacilityServicesSC2Contract$27,578,724

$33328Total$27,612,050 EnergySC2Contract$12,030,023 r1538Total$12,031,561 EnergyServicesSC2Contract$18,066,446

$12002Total$18,078,448

$0.103784TotalSC2Contract$45,645,170 345328Total$45,690,498 TotalSC2Contract$45,645,170 345328Total$45,690,498 1996SalesForecast:

SC2174,171,474 kWhContract~6kWh174,193,736 kWh'1996FreezeRates.dfm-unbundlettr8rteSI revrorrdototrt2conl

NIAGARAMOHAWKPOWERCORPORATION AppendixDPage33of43P.S.C.No.213Electricity, S.C.No.2StreetandHighwayLighting-Full ServiceComparison ofAnnualFacilityPricesFreezePricesandPowerChoice STANDARDEQUIPMENT LAMPSLUMINAIRES LAMPSFsciliSize8iTeFreezeCharcheProposed~ChareAdjustment AmountPercentMercuryVaporHighPressureSodiumLUMINAIRES StandardArchitectural Underpass ParkwayDecorative 100w175w400w1000w70w100w150w250w400w1000w70w100w150w/175w 400w1000w100w150w/175w 250w400w70w/100w150w/175w 150w/175w 1000w$30.62$26.40$30.93$38.83$33A3$39.96$43.35$44.84$45.49$85.11$57.16$55.17$58.81$78.05$126.54$85.11$85.11$141.85$136.32$80.85$66.16$95.55$192.65$5.29$5.17$5.96$8.89$6.30$6.33$6.55$6.61$6.62$12.90$44.68~$44.58$45.62$52.70$107.27$72.32$58.74$78.91$7847$80.35$81.16$94.21$189.96($25.33)($21.23)($24.97)($29.94)($27.13)($27.13)($33.63)($36.80)($38.23)($38.87)($1248)($10.59)($13.19)($25.35)($19.27)($12.79)($26.37)($62.94)($57.85)($0.50)$15.00($1.34)($2.69)82.7%-so.a%-807%-77.1%-81.2%-81.2%-Sa.2%-849%853o/o-854%-21.8%192%.224%32.5%15.2o)o150%31.0%-aa.4%42.4o/~06%227%1.4%1.4%Roodarmorysquareedgewater centralparkmarineredgewatercentralpark100w100w100w100w150w/175w 150w/175w 250w400w$123.17$126.34$133.07$237.00$126.43$113.26$60.37$61.54$122.93$120.95$116.16$296.00$126.34$107.62$52.89$55.73($0.24)($5.39)($16.91)$59.00($0.09)($5.64)($7.48)($5.81)0.2%-4.3%-12.7%249%01%-5.0%12.4%9.4%EnergyRateperKWH$0.06907$0.10378$0.0347150.3%Confidential Serilemenr Daeumenr

NIAGARAMOHAWKPOWERCORPORATION AppendixDPage34of43P.S.C.No.213Electricity, S.C.No.2StreetandHighwayLighting.

FullServiceComparison ofAnnualFacilityPricesFreezePdcesandPowerChoice

'STANDARD EQUIPMENT POLESFOUNDATIONS POLESFacilitSize&TeOverheadServiceFreezeProposedAdjustment Ch~rche~ChareAmountPercentWoodSteelAluminumUnderroundService-Standard

$57.75$79.10$100.00$95.65$163.62$167.25$37.9065.6%$84.52106.9%S67.2567.3%Steel16'under16'under,embeddedover16'ver16',heavydutyAl16'underover16'ver16',heavydutyover16',square~RGGlass$40.05$79.95$102.90$127.35$39.70$102.90$204.35$316.05$102.79$120.67$237.73$326.37$121.92$231s48$273.95$470.02$62.74$40.72$134.83$199.02$82.22$128.58$69.60$153.971567%50.9%131.0%156.3%207.1%125.0%34.1%487%16'under16'under,embeddedover16'nderground Service-Decorative Al16'under:$32.95$61.10$28.15$64.25$83.87$19.62$96.20$156.02$59.8285.4%30.5%622%Casl*Rb*nblasarmorysquare16'under:armorysquare16'under:$271.90$310.61$271.90$345.66$38.71$73.7614.2%27.1%presidential presidential, embeddedFOUNDATIONS

$126.08$185.42$162.08$214.07$36.0028.6%S28.6515.5%CGt*forpoles:16'underover16'ver16',heavyduty~a*-tallapplications S100.15$140.75$182.85$62.50$170.40$198.62$217.68$97.60$70.25$57.87$34.83$35.1070.1%41.1%190%56.2%Confidenria!

Seulemenr Doeumenr

NIAGARAMOHAWKPOWERCORPORATION AppendixDPage350f43P.S.C.No.213Electricity, S.C.No.2StreetandHighwayLighting-Full ServiceComparison ofAnnualFacilityPricesFreezePricesandPowerChoice STANDARDEQUIPMENT CIRCUITSOTHERCHARGESFacilitSize8TeCIRCUITSStandardUnderroundFreezeProposedAdjustment CharcheCher<heAmountPercentcableandconduitcableonlydirectburiedcableResidential UnderrounddirectburiedcableExcessFootae-erfoot$102.80$19.75$56.35$11.25$12.06$0.817.2%$75.14($27.66l.26.9%S17.66(S2.09)-10.6%$60.29$3.947.0cableandconduitcableonlydirectburiedcable$2.05$0.34$1.10$1.50$0.35$1.20($0.55)$0.01$0.'IO.26.8%2.9%9.1%OTHERCHARGES24HourService-Additional ChareMercuryVaporHighPressureSodium100w175w70w100w150w$9.75$9.55$10.90$10.65$9.55$5.29$5.17$6.30$6.33$6.55($4.46)($4.38)($4.60)($4.32)($3.00)-45.7%-45.9%42.2%-406%31.4%Convenience Outletsonnewmetalpoleonexistingmetalpoleonwoodpole$16.90$34.30$48.01$42.12$58.00$52.85$25.22149.2%$23.7069.1%$4.8410.1%EnergyRateperKWH$0.06907$0.10378$0.0347150.3%Conjidenrial Sealemenr Docnnrenr

NIAGARAMOHAWKPOWERCORPORATION AppendixDPage36of43P.S.C.No.213Electricity, S.C.No.2StreetandHighwayLighting-Full ServiceComparison ofAnnualFacilityPricesFreezePricesandPowerChoice DISCONTINUED EQUIPMENT LAMP&LUMINAIRE CONVENIENCE OUTLETFecilitSize&TeFreezeProposedAdjustment

~ChareChsrcheAmountPercentLAMP&LUMINAIRE

~M6raurVr100watt-open 700watt-enclosed

$74.94$176.12$74.94$176.12$0.00$0.00p.p0.0%Incandescent 2500lumen-open 2500lumen.enclosed4000lumen-open 4000lumen-enclosed 6000lumen-enclosed 10000lumen-enclosed

$64.14$83.07$79.65$85.71$92.32$140.07$64.14$83.07$79.65$85.7'I$92.32$140.07$0.00$0.00$0.00$0.00$0.00$0.00p.p0.0%0.0%p.pP0%p.pFluorescent underpass-1 lampunderpass-1 lamp,24hrunderpass-2 lamp$144.91$181.95$190.81$144.91$181.95$190.81$0.00$0.00$0.000.0%0.0%0.0%CONVENIENCE OUTLETold$4.75$4.75$0.00PP%EnergyRateperKWH$0.06907$0.10378$0.0347150.3%Confidenttal Settlement Document

N)AGARAMOHAWKPOWERCORPORATlON AppendixDPage37of43ContractUghting-Customer Contributory Comparison ofAnnualFacilityPricesFreezePricesandPowerChoice LAMPSFacihtSize8iTeFreeze~ChareProposed~ChareAd/ustment AmountPercent~MessVsssHihPressureSodiuin100W175W400W1000W70W100W150W250W400W1000W$30.62$26.40$30.93$38.83$33.43$39.96$43.35sa4.84$45.49$85.11$5.29$5.17$5.96$8.89$6.30$6.33$6.55$6.61$6.62$12.90($25.33)'$21.23){$24.97)($29.94)($27.13)($33.63)($36.80)i$38.23)($38.87)($72.21)8280.4%-80.7%771%812%-84.2%-849%853854%-84.8%LUMINAIRES Standard~Uds70W100W150W/175W 250/400W1000W$15.03$15.21$15.36$17.46$46.13$15.03$15.21$15.36$17A6$46.13$0.00$0.00$0.00$0.00$0.00p.pp.p0.0%0.0%0.0%Architectural 70W/100W150W/175W$23.55$23.55$20.76$20.76$0.00$0.000.0%0.0%100W150W/175W 400WDecorative armorysquare100Wedgewater 100Wedgewater 150Wcentralpark100Wcentralpark175Wmariner100WRood250Wappw$19.89$18.49$22.62$38.43$34.33$34.21$32.65$29.61$73.99$18.10$18.45$19.89$18A9$22.62$38.43$34.33$34.21$32.65$29.61$73.99$18.10$18.45$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.000.0%0.0%0.0%p.pP0%PP%p.p0.0%00%p.p00%EnergyRateperKWH$0.06907$0.10378$0.0347150.3%Confidential Sea/einenr Document

NIAGARAMOHAWKPOWERCORPORATION AppendixDPage38of43ContractLighting-Customer Contributory Comparison ofAnnualFacilityPricesFreezePricesandPowerChoice FaciliSize8iTePOLESUnderoround Service-Standard SteelFreezeCh~rcheProposed~ChareAdjustment AmountPercent16'ndunder16'ndunder,embeddedover16'lumlum$26.02$34.97,$53.50$26.02S34.97$53.50$0.00$0.00$0.00Oe0%0.0%0.0%over16'ver16',heavydutyover16',square~Reelss16'ndunder16'ndunder,embeddedover16'nderroundService-Decorative Aluminum16'ndunderarmorysquareCastIron16'ndunderarmorysquare~Ruele16'ndunder$54.82$55.68$124.72$54.82$55.68$124.72$16.53$16.53$25.59$25.59$41.54$41.54$103.59$103.59$103.59$103.59Sp.pp$0.00$0.00$0.00$0.00$0.00$0.00$0.00p.pp.p00%0.0%PP%p.p0.0%p.ppresidential presidential, embedded$39.22$45.68$39.22$45.68Sp.pp$0.000.0%0.0%FOUNDATIONS Concreteforpoles:16'ndunderover16'ver16'eavyduty~eeew-tallapplications

$58.41$66.91$73e44$32.51$58.41$66.91$73.44$32.51$0.00$0.00$0.00$0.00p.p0.0%p.p0P%Confidential Settlement Document

AppendixDPage39of43NIAGARAMOHAWKPOWERCORPORATION ContractLighting-Customer Contributory Comparison ofAnnualFacilityPricesFreezePricesandPowerChoice FscilitSize&TeCIRCUITSStandardUnderroundServiceFreezeProposedAdjustment

~Chare~ChareAmountPercentcableandconduitcableonlydirectburiedcableResidential UnderroundServicedirectburiedcableExcessFootseBothCatepriescableandconduitcableonlydirectburiedcable$25.21$5.64$20.43$4.08$0.51$0.11$0.41$25.21$5.64$20e43$4.08$0.51$0.11$0.41$0.00$0.00SO.OP$0.00$0.00$0.00$0.000.0%00%0.0%0.0%O.po/op.p0.0%MISCELLANEOUS 24HourService-Additional Chare~MerVeor100W175WHihPressureSodium70W100W150W$9.27$9.08$10.63$10.57$10.62$9.27$9.08"$10.63$10.57$10.62$0.00$0.00$0.00$0.00$0.000.0%0P%p.p0.0%p.pCreditforLsmsUnlitMercreMVoHihPressureSodium100W175W400W1000W($30.62)($26e40)($30.93)($38.83)($5.29)$25.33-82.7%($517)$2123-804%($5.96)$24.97-80.7%($8.89)$29.94-77.1%70W100W150W250W400W1000W($33.43)($39.96)($43.35)($44.84)($45.49)-($85.11)($6.30)(S6.33)($6.55)($6.61)($6.62)($12.90)$27.13$33.63$36.80$38.23$38.87$72.21812%84.2%-849%85.3%-854%84.BoffoConvenience Outletsnewmetalpoleexistingmetalpoler$11.52$18.29$11.52$18.29$0.00$0.00p.pP0%EnergyRateperKWH$0.06907$0.10378$0.0347150.3%Conf)denrlalSerrlemenr Doeumenr

NIAGARAMOHAWKPOWERCORPORATION PowerChoice RevenueComponents StreetandHihwaIihtinS.C.No.3-EnergyOnly~ComonenlRevenuePresentStructure'Com onenlPowerChoice Structure RevenueIkWhEnergy$438,773EnergyServices$438,773$0.069070Total$438,773Total$438,7731998SalesForecasL'1996FreezeRates.6,352,605 kWhU>CD0tQC5CDCDO-0<<0COellm~nbundloSary95(

revroc.xlslelrts

NIAGARAMOHAWKPOWERCORPORATION PowerChoice RevenueComponents StreetandHihwaLihtinS.C.No.6-Company Maint./Customer Equipment PresentStructure'owerChoice Structure

~ComanentRevenue~ComoncetRevenueIkwhFacility$13,100FacilityServices$8,913Energy$50,691EnergyServices$54,878$0.074777Total$63,791Total$63,7911998SalesForecast:

733,885Rwh't996FreezeRates.dtttt.unbundleteaty95I revrot.ttbtebte

NIAGARAMOHAWKPOWERCORPORATION AppendixDPage42of43P.S.C.No.213Electricity, S.CNo.6StreetandHighwayLighting-Co.

Maint.,Cust.Equip.Comparison ofAnnualFacilityPricesFreezePricesandPowerChoice FaciiitSize&TeLAMPMAINTENANCE MercuneMVa iHihPressureSodium100W175W250W400W1000W70W100W150W250W400W1000WFreezeChar<he$11.27$11.01$11.63$11.63$17.53$13.11$13.09$13.10$13.48$13.64$23.67ProposedChsrche$6.81$6.42$7.02$7.02$9.27$7.31$7.35$7.51$7.59$7.59$12.73($4.46)($4.59)($4.61)($4.61)($8.26)($5.80)($5.74)($5.59)($5.89)($6.05)($10.94)39.6%417%39.6%39.6%471%-44.2%-43.9%42.7%-43.7%-44.4%46.2%Adjustment AmountPercentCONTINUOUS ILLUMINATION-ADDITIONAL LAMPMAINTENANCE CHARGE~MBPCUVHihPressureSodiumCREDITFORLAMPSUNLITMeule¹VBHihPressureSodium100W175W70W100W150W100W175W250W400W1000W70W100W150W250W400W1000W$10.36$10.17$11.72$11.66$11.71($11.27)($11.01)($11.63)($11.63)($17.53)($13.11)($13.09)($13.10)($13.48)($13.64)($23.67)$5.82$5.48$6.02$6.05$6.21($6.81)($6.42)($7.02)($7.02)($9.27)($7.31)($7.35)($7.51)($7.59)($7.59)($12.73)($4.54)($4.69)($5.70)($5.61)($5.50)$4.46$4.59$4.61$4.61$8.26$5.80$5.74$5.59$5.89$6.05$10.9443.8%-461%48.6%48.1%-47.0%39.6%41.7%39.6%39.6%471%44.2%43.9%-42.7%43.7%-44.4%46.2%EnergyRateperKWH$0.06907$0.07478$0.00571Confidenttal Settlement Document

NIAGARAMOHAWKPOWERCORPORATION

'owerChoice RevenueComponents S.C.No.4PresentStructure'owerChoice Structure

~Comonenievenue~ComonentRevenueISinalaceSignalFace/Energy

$1,926,478 SignalFace/Energy Services$1,926,478

$3.76Total$1,926,478 Total$1,926,478 1998SalesForecast:

25,618,077 kWh512,362SignalFaces'1996FreezeRatesU>OIUlO'l3CDCDCp)-.Odfm.unbundleIS8ry95f fevloe.xloIbfela

APPENDIXEBALANCESOFDEFERREDDEBITSANDCREDITSNOTYETREFLECTED INRATES 0

L5II235GABhJ}IOZKQYIU'QKElU OM5HMX19it RegllJkf~ssClSJNSLRCaM)119lg3 Milt(ties KoxeeastaUa3hcemhet31M2~ujingturnoscs Revised09-Oct-97 DeferredforRegulatory Puoses12/96DeferredDebitsNotinRatesBalanceAllocated toElectric1997ChaneEst.ElectricBalanceI12/97TobeRecovered 141.10049141.10151246.00063141.10184141.10187141.10191141.10179246.00006141.10165141.10115141.10117NM2AFUDCDeferredforCWIPNUGActionPlanImplementation CostsPensionExpenseDeferred-ElectricStormRestoration CostsDeferredBFALineofCreditFees-ElectricNYSSalesTaxAuditAssessment('88-'92)

DunkirkPropertyTaxesDeferredPurchaseofEmissionCreditsWasteDisposalFeesDeferred-NM2 HumanResourcePlanSeparation Allowance InterestonIRSAuditAssessment

-1986239,880,022 44,981,724 11,101,282 8,726,000 3,199,133 7,566,520 1,237,698 48,75048,25237,482(292470)239,880,022 44,981,724 11,101,282 8,726,000 3,199,133 7,433,785 1,237,698 48,75048,25232,564(255180)6,220,000 1,800,000 (1,299,000)

(2,649,400) 239,880,022 51,201,724 12,901,282 8,726,000 1,900,133 4,784,385 1,237,698 48,75048,25232,564(255180)Lesahmomts~uslyMpmsuQMtfetL09 246.00063PensionExpenseDeferred-Electric141.10184StormRestoration CostsDeferred141.10191NYSSalesTaxAuditAssessment('88-'92) 141.10187BFALineofCreditFees-Electric141.10179DunkirkPropertyTaxesDeferred00006PurchaseofEmissionCredits.10115HumanResourcePlanSeparation Allowance 141.10117InterestonIRSAuditAssessment

-19863165343933164340304071600A3205056301,161,195 8,726,000 5,382,075 602,3971,237,698 48,7503,405(48053)17,113,467 NetdeferreddebitsA-B303392163246.00025145.35246.00036246.00103246.00104246.00099242.05111246.00042246.00071246.00048246.00059NM2AFUDCDeferredforCWIPSIROvercollection AccruedUnbilledRevenue-ElectricMERITOvercollection IBMCustomerServiceSettlement Agreement ElectricCustomerServicePenaltyNYSGRTAuditRefund(1987-1990)

PensionSettlement GainDeferred'RSAuditRefund(1983%4)NM2Contractor Litigation NM2Construction SparePartsDeferred239,880,022 6,033,455 11,129,074 12,144,882 7,500,000 4,222,000 6,435,434 19,268,578 973,73318,0901687239,880,022 6,033,455 11,129,074 10,592,712 6,375,000 4,222,000 5,616,434 16,443,804 827,67318,090168716,914,000 (3,648,631)

(5,896,000) 239,880,022 22,947,455 11,129,074 10,592,712 6,375,000 4,222,000 1,967,803 10,547,804 827,67318,0901687C308509320NetdeferredcreditsoverdebitsA0C~511715$'heCompanyrecognizes thereisataxbenefitassociated withtheamortization ofthisitem,whichisnotreflected onthisschedule.

APPENDIXFGENERALSTRUCTURE OFFINANCIAL SWAPSANDSWAPTION

APPENDIXFGENERALSTRUCTURE OFFINANCIAL SWAPSANDSWAPTIONS F.1GENERALSTRUCTURE OFFINANCIAL SWAPSFinancial Swapsarecontracts thatrequireRegCotopaygenerators thedifference betweenthecontractpriceandtheapplicable locational basedmarginalprice(LBMP).Morespecifically, foreachmonthofeachyearofthecontractterm,RegCowillpaygenerator n:NetPayment=S,((P;P,,)*Q,}+

FP-GSwhere:(Equation 1.0)PP~QIFPGSvolumetric component ofcontractpricespotmarketprice(LBMP)forpowerinhourIateachgenerator buscontractquantityforeachhourIhourspermonthfixedchargepaidbyRegCotoreflectnon-volumetric portionoftheContractpricemarketpriceofpaymentsmadebyISO/Power ExchangeorRegCoforothergeneration servicesThevolumetric contractpriceisthenegotiated pricebetweenRegCoandeachgenerator andmayincludeenvironmentally effluentcostchanges.Thespotpriceisthehourlywholesale marketlocational spotprice(LBMP)foreachofthegenerators.

AproxymarketpricewillbeuseduntiltheISOisformedandanLBMPisavailable.

Thecontractquantityisthehourlyamountofenergy(kWh)onwhichthecontractisbased.Foreachfinancial swapanhourlyprofile(kWh)willbeforecastforthecontractterm.Thefixedcostchargeisamonthlyfixedpaymenttothegenerator(s) designedtocoverthefixedandunavoidable costs.ThemarketpriceofpaymentsmadebytheRegCofornon-energy generation servicesincludepaymentsforcapacity, ancillary

services, andothergenerator servicesthatarereflected incustomerprices(allofthenon-energy generation serviceswillbereferredtoas"othergeneration services" intheremainder ofthisdocument).'his adjustment forothergeneration servicesreflectsthepossibleexistence ofseparatesupplymarketsforcapacityandancillary servicesand'heothergeneration servicesinclude:installed

capacity, operating

reserves, frequency control,blackstart capability, andvoltagesupport.

separatepaymentstogenerators fortheseotherservices.

Theseothergeneration servicesmaybeincludedasupliftinthespotpriceschargedtocustomers inthewholesale market.Theothergeneration servicesarecurrently providedaspartofthegeneration costsincludedinretailprices.Ingeneral,generators withfinancial contracts willhavetheISO'scostoftheseothergeneration servicessubtracted fromtheircontractpaymentswithquantities nottoexceedcontracted amountsandpricesdetermined bythemarket.F.2GENERALSTRUCTURE OFFINANCIAL SWAPTIONS Theswaptioncontractconceptwillequalthefinancial swapdescribed aboveifRegCoexercises itscalloptionineachhourforexactlytheforecasted contractquantity.

However,theswaptionstructure allowsRegCoadditional flexibility nottocalItheoptioninperiodsoftheyearwherethemarketpriceislowerthanthevariablecontractprice,resulting inlowerpricesforcustomers.

TheoptionprovidesRegCotheflexibility toshiftsomecontractquantitybetweenhourstoadjusttoshiftsinthehourlydemandforelectricity.

Swaptionquantities forindividual generators shallnotexceedpre-determined annuallimitsbasedonaggregate generator outputforRegCo'sretailload.Additionally, theseaggregate quantities alongwithRegCo'sotherphysicalandfinancial powersupplyhedgesmaynotexceedRegCo'snetenergyforloadrequirements inanyhour.RegComustprovideswaptionquantitynotification togenerators atthesametimeasthegenerators mustsubmitday-ahead forwardbidstotheISO.PageF-2

APPENDIXG CREDITWORTHINESS EVALUATION

APPENDIXGCREDITWORTHINESS EVALUATION Establishment ofCreditLimit.NiagaraMohawkestablishes creditlimitsforGasSuppliers (marketers) whoactassupplyaggregators andcustomers towhomtheCompanymakessaleofgasforresalebyapplyingonaconsistent non-discriminatory basisthesamefinancial evaluation standard.

TheCompanywillestablish creditlimitsforESCosbyapplyingthesameconsistent financial evaluation standardindetermining creditworthiness.

Creditlimitsarereviewedcontinually.

Ifanentityisassignedacreditlimitthatisnotsufficient tomeettherequirements, theserequirements maybemetbyproviding securityinaformthatisacceptable toNiagaraMohawk.Asummaryofthecriteriaandactionstepsinitiated inapplyingthefinancial evaluation areasfollows:1.CustomerCreditProfile.Generalcreditinformation isdeveloped basedoninformation fromaCommercial CreditReporting/Rating Organization, Securities andExchangeCommission, customer's auditedfinancial statements andotherrecognized companies thatprovidefinancial information andforecasts.

Theprofilefocusesonthefollowing areas:~Thenatureofthebusinessandproduct.~Whatisthebusinessenterprise andwhoownsthecompany?~Whatisthecompany's historybasedontradereports?~Howmanyyearshasthecustomerbeeninbusiness?

~Whatdoyouknowaboutthemanagement's integrity?

~Arebankloanssecuredunsecured, orsecuredbycurrentassets?~Whatisthefirms'ayment historywithNiagaraMohawk?~Doesthecompanyowntheirownfacilities?

~AsktheNiagaraMohawksalesperson assignedtotheaccountaboutthecompany.2.BaIeeeces.Bankingreferences providedandauthorizedby thecustomer.

Whenreferences arefurthercheckedthefollowing questions areaskedofthebankofficerhandingtheaccount.~Howlonghasthebankhadtheaccount?~Doesthecompanyhaveoutstanding loans?~Whatisthehighestaccommodation thebankwouldallow?~Doyouconsiderthecustomeragoodrisk?~Doesthecustomerkeeploanterms?~Arebankloanssecured,unsecured, orsecuredbycurrentassets?

3.Financial information.

Financial dataisusedtoanalyzeafirm'spastperformance andassessitscurrentfinancial standing.

Financial ratiosareusedtosummarize thedataandcomparethefirm'sperformance withstandardpractices.

Thesefinancial ratiosandotherindicators are:~Liquidity Ratios~CurrentRatio(measurecashreservoir

-currentassets/current liabilities).

~QuickRatio(company's currentliabilities arecoveredbyitsmostcurrentliquidasset;cash,equivalents andtradereceivables/current liabilities).

~WorkingCapital~Positive(checkaverageofpastthreeyears).~Negative(ifnegative, checktoseeifcompanyhasstronginternalcash-generating capabilities and/oraccesstoreadyfinancing).

~DebtRatio~DebtEquity(awaytoexpressleverageintermsofthecompany's debt-equity ratio;long-term debt/equity).

~Profitability Ratio~Salestototalassets(showshowhardthefirm'sassetsarebeingused;sales/average totalassets)..

~Percentofreturnonnetworthcomparedtoindustrystandards.

~NetWorth~Checkforintangibles (goodwill).

~Reviewtheincreases/decreases inretainedearningsforthepastthreeyears.4.BillPametPerformance

~Reviewthenumberofexperiences andthetermskept.~Highestcreditgrantedandthepaymentperformance overthepast12months.~Checkwithmajortradevendors,ifnecessary.

~Numberofreturnedchecks.

5.~PP'*Piti

.Pdttd<<tdttt,It5t,dtdactionsthatcouldimpactthefirm'sfinancial health.~RequirecustomertoprovidecopyofCourtOrderofDismissal ifclaimssatisfied.

~Checkforanyindication ofbankruptcy filingsbyparent/subsidiary.

~Investigate announced takeovers, buyoutmergers,andacquisitions.

6.Determine CeditLimit.Ifnoothermajornegativecreditindicators arepresent,thecreditlineisderivedbytakingthesmallerof:~4%to6%ofnetworth(reviewretainedearningsperformance)

~10%to12%ofworkingcapital(basedonmostcurrentauditedreport).Whencheckingworkingcapitallookatnatureofthebusiness.

Thecompanymayhavecapacitytogeneratefundstopaybillspromptly.

7.DecreaseorShutOfftheCreditLimi.Thefollowing indicators mayresultinacustomer's creditlimitshutoffordowngraded:

~Company's creditratingisdowngraded bycreditreporting agency.~Significant decreaseinreportedearningsandequitypositionisweakened.

~Authenticated reportsthatthecompanyisexperiencing serious'ash flowandotherfinancial problems.

~Reportsofliens,attachments orotherlegalactionsthatmayimpairthecompany's financial health.~BillpaymentproblemswithNiagaraMohawk.8.IncreaseorReturnSecuri.Thefollowing indicators mayresultinanincreaseintheunsecured creditlimitand/orreturnoffinancial security:

~Thecompanyhasbeenprofitable forthelasttwoyearsandhasreinvested profitsinthebusiness.

~Strongimprovements intheearningperformance.

~Long-term debtissteadilybeingreduced.~Improvedfinancing arrangements thatallowsforfinancial flexibility.

~Improvedcreditratingbycommercial ratingagencies.

Inreachingacreditdecisionregarding grantingunsecured credit,thefirm'spastfinancial performance anditscurrentfinancial standingweighsmoreheavilythanotherinformation andcreditindicators.

Ifthisinformation isnotavailable andotherinformation isinsufficient todetermine thecreditworthiness ofafirm,securityisrequiredtocollateralize thecreditlimit.

APPENDIXHLISTOFFACILITIES THATAREPOTENTIAL CANDIDATES FORSALE,LEASEORSALELEASEBACK TRANSACTIONS

f'7000700170027003700470057101710271037104710571067108710974017402740374047405770277047705770677087709771080008001800280038004800580078008805080518052805380548055Commonchargestobedistributed DEWEY/KENSINGTON COMMONDEWEYAVE.BLDG.1"DEWEYAVEBLDGS.2,3,6,7""DEWEYAVE.BLDGS.4,5"KENSINGTON COMPLEXBUFFALOELECTRICBLDG.AM%ERSTC.F.SENECAC.F.TONAWANDA C.F.NIAGARAFALLSS.C.JAMESST.RIGGERSBLDGCFNEWPANEC.P.N.AMHERSTS.C.ERIECOUNTYFAIRBLDGALBIONC.F.E.AVONC.F.BATAVIAS.C.MEDINAC.F.LEROYC.F.ANGOLAC.F.ELLICOTIVILLE C.F.FRANIU.GRILLE C.F.FREDONIAC.F.OLEANC.F.STOWC.F.SHEEGvG&l STOREHOUSE Commonchargestobedistributed SOCCOMMONGRDS.SOCBLDG.ASOCBLDG.BSOCBLDG.CSOCBLDG.DSOCBLDG.FSOCGUARDSTATIONCommonchargestobedistributed HCBMETER8cTESTBLDG.HCBBLDG2STORESACFHCBFACILITYMAINT.BLDGHCBBLDG.4TSDFACILITYHCBTSDOFFICETIVJLERSL~OCEON0ELILCCINNEEIN 7BOOKVALUE28,696,488 13,332,604 353,945539,098257,1172,422,366 2,068,279 33,593931,9352,809,329 5,057,151 760,2541,161,631 29,006138,3733,715,623 2,898,650 904,1413,56350,008,377 11,181,060 7110CONFIDENTIAL SETTLEMENT DOCUMENT-page1

8056805880768103810581068107810981108112811381148115811681178120812181228123812481258401840284048405840684088410841184128413841584168701870487058706870787088710871187128713HCBMETER&;TEST'IRAILERHCBCOMMONGROUNDSEMERSONAVE.C.F.INVESTMENT RECOVERYBREWERTON C.F.CAZENOVIA C.F.CORTLANDC.F.FULTONC.F.FULTONST.HIAWATHABLVD.C.F.HINSDALEC.F.OSWEGOFIRESCHOOLOSWEGOC.F.PULASKIC.F.RADISSONC.F.TOWPATHIC.F.TOWPATHIIC.F.TOWPATHIIIC.F.TULLYC.F.VOLNEYC.F.JAMESA.O'EILLCAMDENC.F.CAMPIONRD.S.C.HEMQMERS.C.ILLIONC.F.OLDFORGEC.F.ONEIDAC.F.TRENTONFALLSC.F.W.ROMES.C.HARBORPOINTC.F.HARBORPTREMEDIATION FACS.WASHINGTON STHERKIMERKINGSLEYAVE.S.C.CLAYTONC.F.W.CARTHAGEC.F.LOWVILLES.C.WATERTOWN hVdNAVE.C.F.MALONES.C.MILLSTREETC.F.OGDENSBURG S.C.POTSDAMC.F.SARANACLAKES.C.S.WATERTOWN S.C.2,816,424 6,221,729 464,071219,951812,535449,7621,305,389 28,081755,1902,195,392 751,9061,991,173 934,4671,976,681 621,5951,647,101 10,146,571 8,317,820 328,77122,958307,039462,592169,2742,889,301 273,8682,142,371 831,384331,4824,029,565 624,459399,0613,871,959 694,1715,651,048 CONFIDENTIAL SETTLEMENT DOCUMENT-page2

8716MPJKI'.BLDG.WTOWNC.F.*inclin87068717ENGINEST.STORAGEAREA9000Commonchargestobedistributed 9001N.ALBANYCOMMONAREA9002N.ALBANYBLDG.29005N.ALBANYVERSAIRE019006N.ALBANYTRI-AIRD2-19007N.ALBANYBLDG.59009N.ALBANYBLDG.2-39010N.ALBANYBLDG.2-49103GLENMONTC.F.9104HUDSONS.C.9105OAKWOODAVE.TROYCZ.9106SMITHAVE.C.F.9107RENSSELAER'IHI:RD AVEC.F.9109SCHENECTADY BROADWAYC.F.9111CLIFTONPARK9113SENECASTREETC.F.9115EASTERNREG.CTRL.CTR.9402AMSTERDAM C.F.9410GLENSFALLSMOHICANSTCF9411GLOVERSVILLE C.F.9413SARATOGAEXCELSIOR AVECF9420NORTHCREEKC.F.19,714,544 873,8781,724,666 2,771,851 1,574,788 1,837,749 6,325,438 662,759791,9552,721,336 2,029,812 1,021,174 CONFIDENTIAL SETTLEMENT DOCUMEYI' page3

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