Exhibit 10.2.1.4

PARTICIPANTS AGREEMENT

among

ISO New England Inc.

as the Regional Transmission Organization

for New England

and

the New England Power Pool

and

the entities that are from time to time

parties hereto constituting the

Individual Participants

--------------------------------------------------------------------------------

Table of Contents

 

         Page SECTION 1.   DEFINITIONS    2 SECTION 2.   PURPOSE, INTENT AND
OBJECTIVES    15 SECTION 3.   OPERATIONS DATE    16 SECTION 4.   TERM    16
SECTION 5.   AGREEMENT ADMINISTRATION    16 SECTION 6.   PARTIES    17 SECTION
7.   PARTICIPANT PROCESSES    18 SECTION 8.   COMMITTEES    23 SECTION 9.  
ORGANIZATION OF ISO    31 SECTION 10.   INTERACTION OF GOVERNANCE PARTICIPANTS
AND ISO    35 SECTION 11.   CHANGES TO MARKET RULES, OPERATING PROCEDURES,
MANUALS, RELIABILITY STANDARDS, INFORMATION POLICY, INSTALLED CAPACITY
REQUIREMENTS, GENERAL TARIFF PROVISIONS, AND NON-TO OATT PROVISIONS    36
SECTION 12.   ISO BUDGET    40 SECTION 13.   NOMINATION AND ELECTION OF ISO
DIRECTORS    40 SECTION 14.   FINANCIAL OBLIGATIONS OF GOVERNANCE PARTICIPANTS
   42 SECTION 15.   ANNUAL REPORTS AND PERFORMANCE AUDITS    42 SECTION 16.  
FINANCIAL STATEMENTS    43 SECTION 17.   MISCELLANEOUS    43 Schedule 1 –
Individual Participants    Schedule 2 – Operating Procedures in Effect on the
Operations Date   

 

i

--------------------------------------------------------------------------------

PARTICIPANTS AGREEMENT

This Participants Agreement (this “Agreement”) is made and entered into this
     day of             , 2004, by and among ISO New England Inc., a Delaware
corporation (“ISO”), the New England Power Pool, an unincorporated association
created pursuant to the RNA (“NEPOOL”), and the Entities that are parties to
this Agreement from time to time pursuant to Section 6.3 hereof (each, an
“Individual Participant”). Collectively, ISO, NEPOOL and the Individual
Participants may be referred to herein as the “Parties” and, individually, each
may be referred to as a “Party.” Each of the capitalized terms used herein shall
have the meaning ascribed to it in Section 1 of this Agreement.

WHEREAS, ISO has been approved as the RTO for the New England region consisting
of the states of Connecticut, Massachusetts, New Hampshire, Rhode Island,
Vermont and substantial portions of Maine;

WHEREAS, consistent with the requirements of Order 2000, ISO will be responsible
for maintaining the reliability of the System by, among other things, exercising
operational authority over the Transmission Facilities of the System,
administering and seeking to enhance sustainable, competitive and efficient
energy markets in New England and providing non-discriminatory, open-access
transmission service over the Transmission Facilities;

WHEREAS, the Parties desire to establish a collaborative process for receiving
input from and responding to the concerns of, among others, Governance
Participants and government officials on issues affecting System reliability,
markets or transmission;

WHEREAS, the Parties wish to facilitate the receipt of input from Governance
Participants by structuring this Agreement in such a manner that NEPOOL may
execute it on behalf of those Governance Participants that wish to act through
NEPOOL, and those Governance Participants that wish to act independently of
NEPOOL may execute it individually;

WHEREAS, the Parties recognize the vital importance to ISO, including the ISO
Board, of both formal and informal processes to solicit, receive, consider and
respond to such input from the Governance Participants on reliability, market
and transmission issues in New England;

WHEREAS, the Parties desire to establish Participant Processes that fully
satisfy the Commission’s independence requirements for an RTO;

WHEREAS, the Parties desire to set forth certain other obligations and
responsibilities of NEPOOL, the Governance Participants and ISO;

WHEREAS, the Parties wish to ensure that ISO is an organization that satisfies
the objectives of Order 2000 with prospects for long-term stability;

WHEREAS, the Parties desire an ISO Board that is independent, responsive,
informed, unbiased, accessible and accountable for its actions; and

--------------------------------------------------------------------------------

WHEREAS, the Parties desire Participant Processes that reflect self-governance,
encourage full and timely participation by all stakeholders, coordinate and
clarify input to ISO, clarify and refine ISO positions as appropriate to account
for input, and facilitate the formation of consensus positions that have both
practical and legal significance.

NOW, THEREFORE, ISO, NEPOOL and each of the Individual Participants, in
consideration of the mutual agreements set forth herein, agree as follows.

SECTION 1. DEFINITIONS

1.1 Defined Terms. Each of the capitalized terms used in this Agreement shall
have the meaning ascribed to it in this Section 1.

“Agreement” shall mean this Participants Agreement, as it may be amended or
supplemented from time to time.

“Alternative Resources” shall mean Renewable Generation Resources, Distributed
Generation Resources, and Load Response Resources.

“AR Provider” shall mean a NEPOOL Participant with a “Substantial Business
Interest” in Alternative Resources located within the New England Control Area.
For the purposes of this Agreement,

(a) a NEPOOL Participant has a Substantial Business Interest in Alternative
Resources if:

(i) either (A) the NEPOOL Participant owns or controls any Alternative Resource
and at least 75% of its Energy resources within the New England Control Area are
Alternative Resources; or (B) the NEPOOL Participant (1) owns or controls at
least 50 MW (or its equivalent) of Alternative Resources within the New England
Control Area or (2) has an independently verifiable capital investment in its
Alternative Resources in the New England Control Area as of the end of the most
recent calendar year of at least $30,000,000, regardless of the percentage of
its business interests those Alternative Resources represent; and

(ii) either (A) the quantity of Alternative Resources (in megawatts) and other
generation resources owned or controlled by the NEPOOL Participant exceeds the
highest quantity of hourly Governance Load responsibility held by the NEPOOL
Participant in the prior twelve (12) months; or (B) the quantity of generation
(in megawatt hours) in the past twelve months from Alternative Resources and
other generation resources that the NEPOOL Participant owns or controls exceeds
the total quantity of Governance Load responsibility held by the NEPOOL
Participant in the prior twelve months; or (C) the NEPOOL Participant has not
held any Governance Load responsibility in the prior twelve (12) months but
otherwise meets one of the tests set forth in (i)(A) or (i)(B) above.

the only Alternative Resources that shall be taken into account for purposes of
determining whether an Entity qualifies as an AR Provider are (i) those
generating resources that are within the New England Control Area that are
(A) currently in operation, (B) under construction, or (C) proposed for
operation as generation and that have received approvals under Sections 18.4
and/or 18.5

 

2

--------------------------------------------------------------------------------

of the First Restated NEPOOL Agreement between July 1, 2002 and the Effective
Date or received approvals on or after the Effective Date under Sections I.3.9
and/or I.3.10 of the Tariff or for which completed environmental air or
environmental siting applications have been filed or permits exist; or
(ii) Demand Response Resources that are enrolled in the Load Response Program
and have not been inactive in that Program for a period exceeding six
(6) months; or (iii) Energy Efficiency Resources that have not been inactive in
an energy efficiency program of a New England state for a period exceeding six
(6) months..

“AR Sector” or “Alternative Resources Sector” shall have the meaning set forth
in Section 7.3.2(d) of this Agreement.

“AR Sector Voting Share” shall mean the sum of the Sub-Sector Voting Shares of
the AR Sub-Sectors.

“AR Sub-Sector” shall mean the Renewable Generation Sub-Sector, Distributed
Generation Sub-Sector, or the Load Response Sub-Sector of the AR Sector created
pursuant to the terms of the RNA and this Agreement.

“Balloting Agent” shall have the meaning given it in the RNA..

“Budget & Finance Subcommittee” shall mean the Budget & Finance Subcommittee
established pursuant to the RNA and the responsibilities of which are specified
in Section 8.4.

“Commission” shall mean the Federal Energy Regulatory Commission.

“Demand Response Resource” is any resource in the New England Control Area that
(a) produces quantifiable and verified, time-specific and location-specific load
reductions from implementation of demand response measures for which the Entity
that provides or controls the resource receives compensation; or (b) qualifies
as a demand response resource, including distributed generation, pursuant to the
Load Response Program; or (c) qualifies to receive an Installed Capacity payment
pursuant to the Load Response Program; or (d) is determined by the Participants
Committee to be a Demand Response Resource.

“Distributed Generation Resource” shall mean any electric generating facility in
the New England Control Area that: (a) generates electricity pursuant to a
distributed generation tariff or contract; or (b) is interconnected to the
Transmission Facilities or a New England distribution system pursuant to a
distributed generation agreement; or (c) the Participants Committee determines
is a Distributed Generation Resource.

“Distributed Generation Resource Provider” shall mean an AR Provider which,
together with its Related Persons, owns or controls Distributed Generation
Resources.

“Distributed Generation Sub-Sector” shall mean the AR Sub-Sector established
pursuant to Section 7.3.2(d)(i)(B) of this Agreement.

“DRP” shall mean a NEPOOL Participant that (a) is eligible and has enrolled
itself and/or one or more eligible end users to provide a reduction in energy
usage in the New England Control Area (whether through reduced energy
consumption or the

 

3

--------------------------------------------------------------------------------

operation of on-site generation which when operated does not result in net
electric export to the grid) pursuant to the Load Response Program; (b) does not
participate in the New England Market other than as permitted or required
pursuant to the Load Response Program; (c) elected to be treated as a DRP before
it became a Participant; and (d) was a DRP before the Effective Date.

“DRP Group Member” shall have the meaning set forth in Section 7.3.2(d)(i)(B) of
this Agreement.

“Effective Date” shall mean the Operations Date that occurs in accordance with
Paragraph 1 of the Settlement Agreement dated August 20, 2004 entered into by
and among the Settling Parties (as that term is defined in the Settlement
Agreement)..

“End User Organization” is an End User Participant which is (a) a registered
tax-exempt non-profit organization with (i) an organized board of directors and
(ii) a membership (A) of at least 100 Entities that buy electricity at wholesale
or retail in the New England states or (B) with an aggregate peak monthly demand
(non-coincident) for load in New England, including load served by Governance
Only End User Behind-the-Meter Generation, of at least ten (10) megawatts or
(b) a municipality or other governmental agency located in New England which
does not meet the definition of Publicly Owned Entity.

“End User Participant” shall mean a NEPOOL Participant which is (a) a consumer
of electricity in the New England Control Area that generates or purchases
electricity primarily for its own consumption, (b) a non-profit group
representing such consumers, or (c) a Related Person of another End User
Participant and which (i) is licensed as a competitive supplier under the
statutes and regulations of the state in which the End User Participant which is
its Related Person is located and (ii) participates in the New England Market
solely to serve the load of the End User which is its Related Person.

“End User Sector” shall have the meaning set forth in Section 7.3.2(f) of this
Agreement.

“Energy” shall mean power produced in the form of electricity, measured in
kilowatt-hours or megawatt-hours.

“Energy Efficiency Resource” shall mean any resource in the New England Control
Area that is not a generator and either (a) produces quantifiable and verified,
time-specific and location-specific load reductions from implementation of
measures that reduce the Energy used by end-use devices and systems while
maintaining comparable service for which the Entity that provides or controls
the resource receives compensation pursuant to an energy efficiency program of a
New England state; or (b) is determined by the Participants Committee to be an
Energy Efficiency Resource.

“Entity” shall mean any person or organization, whether the United States of
America or Canada or a state or province or a political subdivision thereof or a
duly established agency of any of them, a private corporation, a partnership, an
individual, an electric cooperative or any other person or organization
recognized in law as capable of owning property and contracting with respect
thereto that is either:

(a) engaged in the electric power business (the generation and/or transmission
and/or distribution of electricity for consumption by the public; or the
purchase, as a principal or broker, of installed capability, Energy, operating
reserve, or ancillary services; or the ownership or control of Load Response
Resources); or

 

4

--------------------------------------------------------------------------------

(b) a consumer of electricity in the New England Control Area that generates or
purchases electricity primarily for its own consumption or a non-profit group
representing such consumers.

“Exigent Circumstances” shall mean circumstances such that ISO determines in
good faith that (i) failure to immediately implement a new Market Rule,
Operating Procedure, Reliability Standard, provision of the Information Policy,
Non-TO OATT Provision or Manual would substantially and adversely affect
(A) System reliability or security, or (B) the competitiveness or efficiency of
the New England Markets, and (ii) invoking the procedures set forth in
Section 11.1, 11.3 or 11.4 would not allow for timely redress of ISO’s concerns.

“First Restated NEPOOL Agreement” shall mean the version of the RNA in effect
prior to the Effective Date.

“Fully Activated Sub-Sector Voting Share” shall mean eight and one-third percent
(8 1/3%) in the case of the Renewable Generation Sub-Sector and four and
one-sixth percent (4 1/6%) in the case of each of the Distributed Generation and
Load Response Sub-Sectors.

“GAAP” shall mean generally accepted accounting principles in the United States.

“General Tariff Provisions” shall mean all of the provisions of the Tariff other
than the OATT provisions, the Market Rules and Section IV of the Tariff (RTO
operating and capital funding provisions).

“Generation Facilities” shall mean generating Resources (as defined in the
Market Rules).

“Generation Group Member” shall have the meaning set forth in Section 7.3.2(a)
of this Agreement.

“Generation Sector” shall have the meaning set forth in Section 7.3.2(a) of this
Agreement.

“GIS” shall mean the generation information database and certificate system that
accounts for certain attributes of energy consumed within the New England
Control Area and exported outside the New England Control Area, including all
software, equipment, enhancements, and interfaces related thereto.

“Good Utility Practice” shall mean any of the practices, methods, and acts
engaged in or approved by a significant portion of the electric utility industry
during the relevant time period, or any of the practices, methods, and acts
which, in the exercise of reasonable judgment in light of the facts known at the
time the decision was made, could have been expected to accomplish the

 

5

--------------------------------------------------------------------------------

desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition. Good Utility Practice is not limited to a
single, optimum practice method or act to the exclusion of others, but rather is
intended to include all acceptable practices, methods, or acts generally
accepted in the region.

“Governance Load” (in kilowatts) of a Governance Participant during any
particular hour and solely for purposes of determining eligibility for
participation in the AR Sector is the greater of (A) Real-Time Load Obligation
(as defined in the Market Rules) for the period in question, or (B) the total
during such hour, of (a) kilowatthours provided by such Participant to its
retail customers for consumption, plus (b) kilowatthours of use by such
Participant, plus (c) kilowatthours of electrical losses and unaccounted for use
by the Participant on its system, plus (d) kilowatthours used by such
Participant for pumping Energy for its entitlements in pumped storage
hydroelectric generating facilities, plus (e) kilowatthours delivered by such
Participant to Non-Participants. The Governance Load of a Governance Participant
may be calculated in any reasonable manner which substantially complies with
this definition.

“Governance Only End User Behind-the-Meter Generation” shall mean generation
that has all three (3) of the following attributes: (i) it is owned by a
Governance Only Member; and (ii) it is used to meet that Governance Only
Member’s load or, for any hour in which the output of the Governance Only End
User Behind-the-Meter Generation owned by the Governance Only Member exceeds its
Regional Network Load (as defined in Section II of the Tariff), another
Governance Participant which is not a Governance Only Member is obligated under
tariff or contract to report such excess to ISO pursuant to the Market Rules;
and (iii) it is delivered to the Governance Only Member without the use of PTF
or another Entity’s transmission or distribution facilities.

“Governance Only Member” shall mean an End User Participant that participates
hereunder for governance purposes only; provided, however, that a Governance
Only Member may elect to participate in the Load Response Program without losing
the benefits of Governance Only Member status for any other purpose under this
Agreement. An End User Participant may elect to be a Governance Only Member
before its application is approved by NEPOOL or by a written notice delivered to
the Secretary of the Participants Committee. Other than for an election made
prior to the approval of its application by NEPOOL, the election to be a
Governance Only Member shall become effective beginning on the first annual
meeting of the Participants Committee following notice of such election.

“Governance Participants” shall mean the Individual Participants and the NEPOOL
Participants.

“Governance Rating” is (a) with respect to an electric generating unit or
combination of units (other than a Distributed Generation Resource), (i) the
Winter Capability of such unit or combination of units, or (ii) if no Winter
Capability has been determined by the System Operator, the aggregate name plate
rating of such unit or combination of units ; (b) with respect to Demand
Response Resources, the highest adjusted capability value (determined in
accordance with the Load Response Program) for those Demand Response Resources
in the prior twelve (12) months; (c) for Distributed Generation Resources not
participating in the New

 

6

--------------------------------------------------------------------------------

England Markets or the Load Response Program, the name plate rating of the
Distributed Generation Resource; or (d) for Energy Efficiency Resources, the
highest verified co-incident peak savings provided during the hours of the Load
Response Program during the prior twelve (12) months. The Governance Rating of a
Participant may be determined by the ISO in any reasonable manner which
substantially complies with this definition.

“Governance Transmission Owner” for the purposes of this Agreement is an owner
of PTF which makes its PTF available under the Tariff and owns a Local Network
(as that term is defined in the Tariff) listed in Attachment E to the Tariff
which is not a Publicly Owned Entity, including any affiliate of an owner of PTF
that owns transmission facilities that are made available as part of such
owner’s Local Network; provided that if an owner of PTF was not listed in
Attachment E to the NEPOOL Open Access Transmission Tariff as that Tariff was in
effect on May 10, 1999, the owner of PTF must also (1) own, or lease with rights
equivalent to ownership, PTF with an original capital investment in its PTF as
of the end of the most recent year for which figures are available from annual
reports submitted to the Commission in Form 1 or any similar form containing
comparable annualized data of at least $30,000,000, and (2) provide transmission
service to non-affiliated customers pursuant to an open access transmission
tariff on file with the Commission.

“Governmental Authority” shall mean the government of any nation, state,
province or other political subdivision thereof, including any Entity exercising
executive, military, legislative, judicial, regulatory, or administrative
functions of or pertaining to a government.

“IMMU” shall have the meaning set forth in Section 9.4.2 of the Agreement.

“Individual Participants” shall have the meaning set forth in the first
paragraph hereof. As of the date of this Agreement, the Individual Participants
are those Entities listed as such on Schedule 1 hereto.

“Information Policy” shall mean the policy on file with the Commission as part
of the Tariff establishing guidelines regarding the information received,
created and distributed by Governance Participants and ISO in connection with
the New England Markets and the New England Transmission System.

“Installed Capacity Requirements” shall have the meaning set forth in Section
III of the Tariff.

“INTMMU” shall have the meaning set forth in Section 9.4.2 of the Agreement.

“ISO” shall have the meaning set forth in the first paragraph above.

“ISO Board” shall mean the Board of Directors of ISO.

“ITC” shall mean an independent transmission company, as defined by the
Commission.

 

7

--------------------------------------------------------------------------------

“Large End User” shall mean an End User Participant which is considered for this
purpose to be (a) a single end user with a peak monthly demand (non-coincident)
for load in New England, including load served by Governance Only End User
Behind-the-Meter Generation, of at least one (1) megawatt, or (b) a group of two
or more corporate entities each with a peak monthly demand (non-coincident) for
load in New England, including load served by Governance Only End User
Behind-the-Meter Generation, of at least 0.35 megawatts that together totals at
least one (1) megawatt.

“Load Response Program” shall mean the load response program included in the
Market Rules.

“Load Response Resource” shall mean an Energy Efficiency Resource or Demand
Response Resource.

“Load Response Resource Provider” shall mean an AR Provider which, together with
its Related Persons, owns or controls Load Response Resources.

“Load Response Sub-Sector” shall mean the AR Sub-Sector established pursuant to
Section 7.3.2(d)(i)(C) of this Agreement.

“Manuals” shall mean the manuals posted on the ISO website implementing the
Market Rules that are adopted in accordance with this Agreement, as in effect
from time to time. On the Operations Date, the Manuals shall consist in
substance of the NEPOOL Manuals in effect immediately prior to the Operations
Date.

“Market Monitoring and Mitigation Plan” shall mean those provisions of the
Market Rules which provide for ISO’s market monitoring and market power
mitigation for the New England Markets. On the Operations Date, the Market
Monitoring and Mitigation Plan shall consist of Appendix A to the Market Rule 1.

“Markets Committee” shall mean the Markets Committee established pursuant to the
RNA and the responsibilities of which are specified in Section 8.2.2.

“Market Rules” shall mean the rules for the administration of the New England
Markets filed with the Commission in accordance with this Agreement and accepted
by the Commission.

“Member Adjusted Voting Share” shall mean:

(a) for a voting member of each active Sector (other than the AR Sector) which
casts an affirmative or negative vote on a proposed action or amendment and
which has been appointed by a Participant or group of Participants which are
members of a Sector satisfying its Sector Quorum requirement for the proposed
action or amendment, is the quotient obtained by dividing (i) the Sector Voting
Share of that Sector for the Participants Committee or the Adjusted Sector
Voting Share of that Sector for the Technical Committees by (ii) the number of
voting members appointed by members of that Sector which cast affirmative or
negative votes on the matter, adjusted, if necessary, for End User Participants
and group voting members as provided in the definition of “Member Fixed Voting
Share”; and

 

8

--------------------------------------------------------------------------------

(b) for a voting member of an AR Sub-Sector which casts an affirmative or
negative vote on a proposed action or amendment and which has been appointed by
a Participant or group of Participants which are members of an AR Sub-Sector
satisfying its AR Sub-Sector Quorum Requirement for a proposed action or
amendment, is the quotient obtained by dividing (i) the Adjusted AR Sub-Sector
Voting Share of that Sub-Sector by (ii) the number of voting members appointed
by members of that Sub-Sector which cast affirmative or negative votes on the
matter.

“Member Fixed Voting Share” shall mean:

(a) for a voting member of each active Sector (other than the AR Sector),
whether or not the member is in attendance, is the quotient obtained by dividing
(i) the Sector Voting Share of the Sector to which the NEPOOL Participant or
group of NEPOOL Participants which appointed the voting member belongs by
(ii) the total number of voting members appointed by members of that Sector,
adjusted, if necessary, to take into account (A) the manner in which the voting
shares of End User Participants are to be determined while they are members of
the Publicly Owned Entity Sector, and (B) any required change in the voting
share of the Transmission Group Member, as determined in accordance with
Section 7.3.2(b); and

(b) for a voting member of an AR Sub-Sector whether or not the member is in
attendance and until the sum of the Member Fixed Voting Shares of the AR
Sub-Sector voting members equals or exceeds the Fully Activated Sub-Sector
Voting Share, is either 1 2/3% if the voting member represents a NEPOOL
Participant or NEPOOL Participants which own or control, together with their
Related Persons, more than 15 MW (or its equivalent) of Alternative Resources or
1% if the voting member represents less than 15 MW (or its equivalent) of
Alternative Resources. When the sum of the Member Fixed Voting Shares of the AR
Sub-Sector voting members equals or exceeds the Fully Activated Sub-Sector
Voting Share, the Member Fixed Voting Share for the voting member whether or not
the voting member is in attendance will be the quotient obtained by dividing
(i) the Fully Activated Sub-Sector Voting Share by (ii) the total number of
voting members appointed by NEPOOL Participants of that AR Sub-Sector.

“Minimum Response Requirement” shall mean, with respect to a proposed amendment
to this Agreement pursuant to Section 17.2.3, that the ballots received by the
Balloting Agent from Governance Participants relating to the proposed amendment
of this Agreement before the end of the appropriate time specified in
Section 17.2.3(d) must satisfy the following thresholds:

(a) the sum of the Member Fixed Voting Shares, as adjusted to accommodate the
Individual Participants pursuant to the requirements of Section 17.2.3(c), of
the Governance Participant voting members whose ballots are received must equal
at least fifty percent (50%); and

(b) the Governance Participants whose voting members timely return ballots for
or against the amendment must include Governance Participants that are
represented by voting members having at least fifty percent (50%) of the Member
Fixed Voting Shares, as adjusted to accommodate the Individual Participants
pursuant to the requirements of Section 17.2.3(c), in each of a majority of the
Sectors.

 

9

--------------------------------------------------------------------------------

“MW” shall mean megawatts.

“Natural Person Participant” shall mean a Governance Participant who is also a
natural person.

“NECPUC” shall mean the New England Conference of Public Utilities
Commissioners, Inc., including any successor organization.

“NEPOOL” shall have the meaning set forth in the first paragraph hereof.

“NEPOOL Participants” shall mean the current and future parties to the RNA.

“NERC” shall mean the North American Electric Reliability Council, including any
successor organization.

“New England Control Area” shall have the meaning set forth in Section II of the
Tariff.

“New England Markets” shall mean the markets for electric Energy, capacity and
certain ancillary services within the New England Control Area as set forth in
the Market Rules.

“Non-TO OATT Provisions” shall mean all of the provisions of the OATT for which
ISO has Section 205 rights under the Federal Power Act pursuant to the TOA.

“NPCC” shall mean the Northeast Power Coordinating Council, including any
successor organization.

“OATT” shall mean Section II of the Tariff.

“Operating Procedures” shall mean the detailed operating procedures for
operation of the System as in effect from time to time. On the Operations Date,
the Operating Procedures shall consist of the procedures identified in Schedule
2.

“Operating Year” shall mean a calendar year. The first Operating Year shall
commence on the Operations Date and continue until the following December 31,
and the last Operating Year shall conclude on the date that this Agreement
terminates.

“Operations Date” shall have the meaning set forth in the TOA.

“Order 2000” shall mean the Commission’s Order No. 2000, i.e., Regional
Transmission Organizations, Order No. 2000, 65 Fed. Reg. 809 (January 6, 2000),
FERC Stats. & Regs. ¶31,089 (1999), order on reh’g, Order No. 2000-A, 65 Fed.
Reg. 12,088 (March 8, 2000), FERC Stats. & Regs. ¶31,092 (2000), aff’d, Public
Utility District No. 1 of Snohomish County, Washington v. FERC, 272 F.3d 607
(D.C. Cir. 2001).

 

10

--------------------------------------------------------------------------------

“Participant Expenses” shall mean those costs and expenses that are incurred
pursuant to authorization of the Participants Committee and are not considered
costs and expenses of ISO.

“Participant Processes” shall mean those processes for Governance Participants
outlined in Section 7.1.1.

“Participant Vote” shall mean:

(a) with respect to an amendment or proposed action of the Participants
Committee, the sum of (i) the Member Adjusted Voting Shares of the voting
members of the Committee which cast an affirmative vote on the proposed action
or amendment and which have been appointed by a NEPOOL Participant or group of
NEPOOL Participants which are members of a Sector satisfying its Sector Quorum
requirements and, in the case of amendments, including Member Adjusted Voting
Shares of Individual Participants; and (ii) the Member Fixed Voting Shares of
the voting members of the Committee which cast an affirmative vote on the
proposed action or amendment and which have been appointed by a NEPOOL
Participant or group of NEPOOL Participants which are members of a Sector which
fails to satisfy its Sector Quorum requirements plus, in the case of amendments,
the Member Fixed Voting Shares of Individual Participants; and

(b) with respect to a proposed action of a Technical Committee, the sum of the
Member Adjusted Voting Shares of the voting members of the Committee which cast
an affirmative vote on the proposed action.

“Participants Committee” shall mean the Participants Committee established
pursuant to the RNA and the responsibilities of which are specified in
Section 8.1 hereof.

“Party” or “Parties” shall have the meaning identified in the first paragraph of
this Agreement.

“Planning Procedures” shall mean the guides, manuals, procedures and protocols
for planning and expansion of the Transmission Facilities, as the same may be
modified from time to time.

“Pool Transmission Facilities” or “PTF” shall have the meaning set forth in the
Tariff.

“Participating Transmission Owner” or “PTO” shall have the meaning set forth in
the Tariff.

“Power Year” shall mean a period of twelve (12) months commencing on June 1 of
each year and ending on May 31 of the next calendar year.

“Principal Committees” shall mean the Participants Committee and the Technical
Committees.

 

11

--------------------------------------------------------------------------------

“Publicly Owned Entity” shall mean an Entity which is either a municipality or
an agency thereof, or a body politic and public corporation created under the
authority of one of the New England states, authorized to own, lease and operate
electric generation, transmission or distribution facilities, or an electric
cooperative, or an organization of any such entities.

“Publicly Owned Entity Sector” shall have the meaning set forth in
Section 7.3.2(e) of this Agreement.

“PURPA” shall mean the Public Utility Regulatory Policies Act of 1978.

“Related Person” of a Governance Participant shall mean:

(a) for all Governance Participants, either (i) a corporation, partnership,
business trust, limited liability company or other business organization 10% or
more of the stock or equity interest in which is owned directly or indirectly by
the Governance Participant, or (ii) a corporation, partnership, business trust
or other business organization which owns directly or indirectly 10% or more of
the stock or equity interest in the Governance Participant, (iii) a corporation,
partnership, business trust or other business organization 10% or more of the
stock or equity interest in which is owned directly or indirectly by a
corporation, partnership, business trust or other business organization which
also owns 10% or more of the stock or equity interest in the Governance
Participant; or (iv) a natural person, or a member of such natural person’s
immediate family, who is, or within the last 12 months has been, an officer,
director, partner, employee, or representative in ISO activities of, or natural
person having a material ongoing business or professional relationship directly
related to New England Markets activities with, the Governance Participant or
any corporation, partnership, business trust or other business organization
related to the Governance Participant pursuant to clauses (i), (ii) or (iii) of
this paragraph (a); and

(b) for all Natural Person Participants, a Related Person is (i) a member of
such Natural Person Participant’s immediate family, or (ii) any corporation,
partnership, business trust or other business organization of which such Natural
Person Participant, or a member of such Natural Person Participant’s immediate
family, is, or within the last 12 months has been, an officer, director,
partner, employee, or with which a Natural Person Participant has, or within the
last 12 months has had, a material ongoing business or professional relationship
directly related to New England Markets activities, or (iii) another Governance
Participant which, within the last 12 months has paid a portion of the Natural
Person Participant’s expenses under Section 14 of this Agreement, or (iv) a
corporation, partnership, business trust or other business organization in which
the Natural Person Participant owns equity with a fair market value in excess of
$50,000.

(c) Notwithstanding the foregoing, for the purposes of this definition, an
individual shall not be deemed to have or had a material ongoing business
relationship directly related to New England Markets activities with any
corporation, partnership, business trust, other business organization solely as
a result of being served, as a customer, with electricity or gas.

“Reliability Committee” shall mean the Reliability Committee established
pursuant to the RNA and the responsibilities of which are specified in
Section 8.2.3.

 

12

--------------------------------------------------------------------------------

“Reliability Standards” shall mean those rules, standards, procedures and
protocols posted on the ISO website, as in effect from time to time, other than
Operating Procedures, that establish the parameters relating to reliability
matters for ISO’s exercise of its authority over the System.

“Renewable Generation Resource” shall mean any electric generating facility in
the New England Control Area that: (a) is defined as renewable generation under
any New England state renewable portfolio standard; or (b) satisfies the
criteria for a Small Power Production Facility under PURPA; or (c) primarily
uses one or more of the following fuels, energy resources, or technologies:
solar, wind, hydro, tidal, geothermal, or biomass; or (d) the Participants
Committee determines is a Renewable Generation Resource.

“Renewable Generation Resource Provider” shall mean an AR Provider which,
together with its Related Persons, owns or controls Renewable Generation
Resources.

“Renewable Generation Sub-Sector” shall mean the AR Sub-Sector established
pursuant to Section 7.3.2(d)(i)(A) of this Agreement.

“RNA” shall mean the Second Restated New England Power Pool Agreement, which
restated for a second time by an amendment dated as of August 16, 2004 the New
England Power Pool Agreement dated September 1, 1971, as the same may be amended
and restated from time to time, governing the relationship among the NEPOOL
Participants.

“RTO” shall mean an entity that complies with the requirements of Order 2000 and
the Commission’s corresponding regulations for a regional transmission
organization, as determined by the Commission, or a successor organization
performing comparable functions.

“Sector” shall mean the AR Sector, End User Sector, Generation Sector, Publicly
Owned Entity Sector, Supplier Sector, Transmission Sector, or any other Sector
created pursuant to the terms of the RNA and Section 6.2.2(a) hereof.

“Sector Quorum” for a Sector shall mean the lesser of (a) fifty percent (50%) or
more (rounded to the next higher whole number) of the voting members of the
Sector, or (b) five (5) or more voting members of the Sector for the
Participants Committee or three (3) or more voting members of the Sector for the
Technical Committees.

“Sector Voting Share” shall mean:

(a) for the AR Sector, the sum of the Member Fixed Voting Shares; and

(c) for each active Sector (other than the AR Sector), the quotient obtained by
dividing one hundred percent (100%) minus the Sector Voting Share for the AR
Sector by the number of active Sectors (other than the AR Sector). For example,
if there are five active Sectors (other than the AR Sector) and the AR Sector
Voting Share is sixteen and two-thirds percent (16 2/3%), the Sector Voting
Share of each of the other Sectors is also sixteen and two-thirds percent
(16 2/3%). The aggregate Sector Voting Shares shall equal one hundred percent
(100%).

 

13

--------------------------------------------------------------------------------

“Settlement Agreement” shall mean the agreement dated August 20, 2004 among
NEPOOL, ISO and the other parties thereto.

“Small End User” shall mean an End User Participant which does not otherwise
meet the definition of Large End User or End User Organization.

“Supplier Sector” shall have the meaning set forth in Section 7.3.2(c) of this
Agreement.

“System” shall mean Generation Facilities and Transmission Facilities.

“Tariff” shall mean ISO’s Transmission, Markets and Services Tariff, FERC
Electric Tariff, Volume No.1, as amended from time to time.

“Technical Committees” shall have the meaning set forth in Section 8.2 of this
Agreement.

“TOA” shall mean the Transmission Operating Agreement among ISO and the
Participating Transmission Owners that are parties thereto, as the same may be
amended from time to time.

“Transmission Committee” shall mean the committee whose responsibilities are
specified in Section 8.2.4.

“Transmission Facilities” shall mean the Merchant Transmission Facilities, Other
Transmission Facilities and Pool Transmission Facilities, as each such term is
defined in the Tariff.

“Transmission Group Member” shall have the meaning set forth in Section 7.3.2(b)
of this Agreement.

“Transmission Sector” shall have the meaning set forth in Section 7.3.2(b) of
this Agreement.

“Winter Capability” shall mean, with respect to an electric generating unit or
combination of units, the maximum dependable load carrying ability in kilowatts
of such unit or units (exclusive of capacity required for station use) during
the Winter Period, as determined by ISO.

“Winter Period” shall mean the eight-month period from October through May for
each Power Year.

1.2 Interpretation. The terms “hereof,” “hereunder,” and any similar terms, as
used in this Agreement, refer to this Agreement.

The terms “include” or “including” shall be interpreted as if the word “without
limitation” immediately followed such terms.

 

14

--------------------------------------------------------------------------------

Any reference to any Section, Subsection, Exhibit or Schedule contained in this
Agreement shall refer to such Section, Subsection, Exhibit or Schedule as set
forth in this Agreement, notwithstanding use of or failure to use the term
“above,” “below,” “hereof,” “hereto,” or “herein” in connection with such
reference.

Words of the masculine gender shall mean and include correlative words of the
feminine and neuter genders and words importing the singular number shall mean
and include the plural number or vice versa.

Any headings preceding the texts of the several Sections, Subsections, Exhibits
and Schedules of this Agreement, and any table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not constitute a
part of this Agreement, nor shall they affect its meaning, construction or
effect.

Unless expressly limited, all references to documents are references to
documents as the provisions thereof may be amended, modified or waived from time
to time or successor documents thereof.

SECTION 2. PURPOSE, INTENT AND OBJECTIVES

2.1 Purpose. The purpose of this Agreement is to (i) establish processes by
which Governance Participants will provide and ISO will receive, consider and
respond to input and advice, (ii) set forth the rights and obligations of the
Parties with respect to the Participant Processes created by this Agreement, and
(iii) establish certain rights and obligations of the Governance Participants
with respect to ISO.

2.2 Intent of the Parties. It is the intent of the Parties that NEPOOL provide
the sole Participant Processes for advisory voting on ISO matters and the
selection of ISO Board members, except for input from state regulatory
authorities and as otherwise may be provided in the Tariff, TOA and the Market
Participant Services Agreement included in the Tariff; provided that nothing in
this Agreement will preclude any Entity from interacting, individually or
collectively with other Entities, with the ISO staff and ISO Board to the same
extent an individual NEPOOL Participant is permitted to do so.

2.3 Objectives of ISO. The objectives of ISO are (through means including but
not limited to planning, central dispatching, coordinated maintenance of
electric supply and demand-side resources and transmission facilities, obtaining
emergency power for market participants from other control areas, system
restoration (when required), the development of Market Rules, the provision of
an open access regional transmission tariff and the provision of a means for
effective coordination with other control areas and utilities situated in the
United States and Canada):

(a) to assure the bulk power supply system within the New England Control Area
conforms to proper standards of reliability;

(b) to create and sustain open, non-discriminatory, competitive, unbundled,
markets for energy, capacity and ancillary services (including operating
reserves) that are (i) economically efficient and balanced between buyers and
sellers, and (ii) provide an opportunity for a participant to receive
compensation through the market for a service it provides, in a manner
consistent with proper standards of reliability and the long-term sustainability
of competitive markets;

 

15

--------------------------------------------------------------------------------

(c) to provide Market Rules that (i) promote a market based on voluntary
participation, (ii) allow market participants to manage the risks involved in
offering and purchasing services, and (iii) compensate at fair value
(considering both benefits and risks) any required service, subject to the
Commission’s jurisdiction and review;

(d) to allow informed participation and encourage ongoing market improvements;

(e) to provide transparency with respect to the operation of and the pricing in
markets and purchase programs;

(f) to provide access to competitive markets within the New England Control Area
and to neighboring regions; and

(g) to provide for an equitable allocation of costs, benefits and
responsibilities among market participants.

The Parties agree that the preceding objectives are consistent with the Federal
Power Act and do not in and of themselves create independent causes of action.

SECTION 3. EFFECTIVE DATE

This Agreement shall become effective as of the Effective Date.

SECTION 4. TERM

The term of this Agreement shall continue until such time as ISO ceases to be
the RTO for New England or the TOA is terminated (unless the TOA is terminated
due to the withdrawal of all of the TOs to participate in an Independent
Transmission Company), in each case pursuant to a final order of the Commission.
The term of this Agreement shall not be affected by the withdrawal or
termination of any Party to this Agreement, other than ISO.

SECTION 5. AGREEMENT ADMINISTRATION

5.1 Representatives of the Governance Participants. The Participants Committee,
or its designee(s), shall have authority to act for NEPOOL and the NEPOOL
Participants in connection with the administration of this Agreement. Each
Individual Participant shall supply ISO with the name and contact information
for a representative authorized to act for it.

5.2 Consultation. ISO shall consult as necessary with the Participants Committee
or its designee(s) and/or the representatives of the Individual Participants in
order to resolve any matters that may arise in connection with this Agreement.
Any matter that remains in dispute shall be resolved in accordance with the
dispute resolution provisions contained in Section 17.3, subject to the right of
any Party to seek to resolve the dispute through a proceeding with the
Commission, as stated in Section 17.3.

 

16

--------------------------------------------------------------------------------

5.3 Joint Committees. The Participants Committee and the ISO may from time to
time form such committees or working groups as they deem necessary to assist
them in carrying out activities appropriate to the administration of this
Agreement.

SECTION 6. PARTIES

6.1 ISO. On and after the Operations Date, ISO shall be the entity authorized by
the Commission to exercise those functions outlined in this Agreement, the TOA,
the Tariff, and any other applicable operating agreements, which functions the
Commission has found satisfy the requirements of Order 2000 for RTOs. The
Parties recognize that ISO is not a party to, and shall not be bound by, the
terms and conditions of the RNA.

6.2 NEPOOL.

6.2.1 NEPOOL Participants. On and after the Operations Date, NEPOOL shall be a
Party to this Agreement on behalf of its Participants as they exist from time to
time, and each NEPOOL Participant shall be a Governance Participant pursuant to
the terms and conditions hereof. In the event that the RNA is terminated, each
NEPOOL Participant which is not legally prohibited from doing so shall
automatically become a Party to this Agreement as an Individual Participant, and
maintenance of the Committee and Sector structures outlined herein shall become
the responsibility of ISO. This Agreement shall be amended accordingly by the
Entities who are Parties to this Agreement at the time of such amendment.

6.2.2 Obligations of NEPOOL and the NEPOOL Participants.

(a) Amendment of RNA. NEPOOL hereby agrees that the RNA shall include a
provision that prohibits, without the prior written consent of ISO, the
amendment of the RNA so as to create a conflict between the provisions of the
RNA and this Agreement.

(b) Inclusion of Individual Participants. The Principal Committees shall take
all such actions as are reasonably necessary to facilitate the participation of
the Individual Participants in the Participant Processes as set forth herein.

6.3 Individual Participants.

6.3.1 An Entity that meets the requirements for participation in NEPOOL but that
does not wish to become a NEPOOL Participant may, upon compliance with such
reasonable conditions as ISO may prescribe, become an Individual Participant by
delivering a counterpart of this Agreement, duly executed by such Entity, to
ISO, along with a check in payment of the application fee described below;
provided, however, that, while Individual Participants may attend and
participate in all NEPOOL meetings, including meetings of the Principal
Committees, Individual Participants shall have no right to vote with any of the
Principal Committees except on amendments to this Agreement as set forth in
Section 17.2 hereo..

6.3.2 Any such Entity that satisfies the requirements of this Section 6.3 shall
become an Individual Participant, and this Agreement shall become fully binding
and effective in accordance with its terms as to such Entity, as of the first
day of the calendar month immediately following its satisfaction of such
requirements; provided that an earlier or later effective date may be fixed by
ISO with the concurrence of such Entity or by the Commission.

 

17

--------------------------------------------------------------------------------

6.3.3 The application fee to be paid by each Entity seeking to become an
Individual Participant pursuant to this Section 6.3 shall be in addition to the
annual and other fees outlined in Section 14, and shall be calculated as if the
Individual Participant were a NEPOOL Participant in an appropriate Sector, as
determined by ISO in consultation with the officers of the Participants
Committee. The application fee shall be $500 for an applicant which qualifies
for membership only as an End User Participant, $1,000 for an applicant which
together with its Related Persons owns or controls less than 5 MW (or its
equivalent) of Alternative Resources and qualifies for membership as an AR
Provider, and $5,000 for all other applicants, or such other amount as may be
fixed by the RNA for NEPOOL Participants.

6.3.4 An Individual Participant shall cease being a Party to this Agreement
upon:

(a) For an Entity taking any type of service under the Tariff, upon termination
of service under the Tariff pursuant to a Commission order as a result of a
default under the Tariff; or

(b) For any other Entity, upon voluntary termination of its status as a Party,
bankruptcy or failure to pay annual fees; or

(c) as set forth in Section 7.3.3.

6.3.5 Termination of NEPOOL Participant Status. NEPOOL shall include a provision
in the RNA which prohibits the amendment of the provisions of the RNA regarding
termination of NEPOOL Participant status (currently contained in Section 16.1 of
the RNA) without the consent of ISO.

SECTION 7. PARTICIPANT PROCESSES

7.1 General.

7.1.1 Outline of Processes. The Participant Processes under this Agreement shall
consist of the following:

(a) Advice and input to ISO and consideration of that advice and input by ISO in
accordance with Sections 10 and 11;

(b) Advice and input to ISO with respect to changes in the General Tariff
Provisions, Non-TO OATT Provisions, the Market Rules, the Operating Procedures,
Installed Capacity Requirement, Manuals, Reliability Standards, and the
Information Policy in accordance with Section 11;

(c) Review and input on ISO’s annual operating and capital budgets and
consideration of that input by ISO in accordance with Section 12;

 

18

--------------------------------------------------------------------------------

(d) Participation in the process for the nomination and election of ISO Board
members in accordance with Section 13; and

(e) Consideration and approval of certain amendments to this Agreement in
accordance with Section 17.2.3.

7.1.2 Role of Committees. Except as otherwise set forth herein, the Participant
Processes shall be accomplished through the Principal Committees and other
committees, subcommittees, task forces, working groups or other bodies
established by the Participants Committee or jointly by ISO and the Participants
Committee.

7.2 Role of Sectors. Each NEPOOL Participant shall, together with its Related
Persons which are NEPOOL Participants, be a member of and participate in the
Principal Committees through Sectors in accordance with Section 7.3. Individual
Participants shall not participate in a Sector.

7.3 Sectors.

7.3.1 Sector Membership. Each NEPOOL Participant shall belong to a Sector, as
follows. On the Operations Date of this Agreement, each NEPOOL Participant and
its Related Person(s) shall belong to the Sector to which it belonged
immediately prior to the Operations Date, provided that a NEPOOL Participant
(and its Related Person(s)) that is eligible to join the AR Sector may elect to
be a member of that Sector as of or after the Operations Date by delivering,
before the Operations Date, a written notice to the Secretary of the
Participants Committee of a change in its Sector. From and after the Operations
Date, each new NEPOOL Participant shall be obligated to designate in a notice to
the Participants Committee and ISO a Sector that it and its Related Persons are
eligible to join and that it elects to join for purposes of all of the Principal
Committees; provided, however, that (i) a NEPOOL Participant and the NEPOOL
Participants which are its Related Persons shall not be eligible to join the End
User Sector if any one of them is not eligible to join the End User Sector and
(ii) a DRP and the NEPOOL Participants which are its Related Persons shall not
be represented by the DRP Group Member if any one of them is not a DRP. A NEPOOL
Participant and its Related Persons shall together be entitled to join only one
Sector and shall have no more than one vote on each Principal Committee,
provided that any voting member of a Principal Committee shall be entitled to
split its vote.

7.3.2 Criteria for Sector Membership. The Sectors for each Principal Committee,
the criteria for eligibility for membership in each Sector and the minimum
requirement that a NEPOOL Participant must meet as a member of a Sector in order
to appoint an individual voting member of the Sector and the Principal
Committees are as follows:

(a) a Generation Sector, which a NEPOOL Participant shall be eligible to join if
(i) it (A) owns or leases with rights equivalent to ownership facilities for the
generation of electric energy that are located within the New England Control
Area which are currently in operation, or (B) has proposed generation for
operation within the New England Control Area either which has received approval
under Sections 18.4 and/or 18.5 of the First Restated NEPOOL Agreement between
July 1, 2002 and the Effective Date or received approval on or after the
Effective Date under Sections I.3.9 and/or I.3.10 of the Tariff or for which
completed

 

19

--------------------------------------------------------------------------------

environmental air or environmental siting applications have been filed or
permits exist, and (ii) it is not a Publicly Owned Entity. Purchasing all or a
portion of the output of a generation facility shall not be sufficient to
qualify a NEPOOL Participant to join the Generation Sector. A NEPOOL Participant
which joins the Generation Sector shall be entitled but not required to
designate an individual voting member of each Principal Committee, and an
alternate to the member, if its operating or proposed generation facilities in
the New England Control Area have or will have, when placed in operation, an
aggregate Governance Rating of at least 15 MW. A NEPOOL Participant which joins
the Generation Sector but elects not to or is not eligible to designate an
individual voting member, shall be represented by a group voting member and an
alternate to that member for each Principal Committee (collectively, the
“Generation Group Member”). The Generation Group Member shall be appointed by a
majority of the NEPOOL Participants in the Generation Sector electing or
required to be represented by that member. The Generation Group Member shall
have the same percentage of the Sector vote as the individual voting members
designated by other NEPOOL Participants in the Generation Sector which meet the
15 MW threshold and designate an individual voting member.

(b) a Transmission Sector, which a NEPOOL Participant shall be eligible to join
if it is a Governance Transmission Owner and is not a Publicly Owned Entity.
Taking transmission service shall not be sufficient to qualify a NEPOOL
Participant to join the Transmission Sector. A NEPOOL Participant which joins
the Transmission Sector shall be entitled to designate an individual voting
member of each Principal Committee, and an alternate to the member, if it owns
or leases with rights equivalent to ownership PTF with an original capital
investment in its PTF as of the end of the most recent year for which figures
are available from annual reports submitted to the Commission in Form 1 or any
similar form containing comparable annualized data of at least $30,000,000. A
Governance Transmission Owner with facilities which were included as PTF prior
to December 31, 1998 only pursuant to clause (3) of the definition of PTF in the
First Restated NEPOOL Agreement shall be entitled to designate an individual
voting member of each Principal Committee, and an alternate to the member,
whether or not PTF which it owns or leases with rights equivalent to ownership
which has an original capital investment of at least $30,000,000, so long as
such Governance Transmission Owner continues to own PTF. A NEPOOL Participant
which joins the Transmission Sector but which is not entitled to designate an
individual voting member of each Principal Committee because (i) it, together
with all of its Related Persons, does not meet the $30,000,000 threshold or
(ii) it no longer owns PTF and it does not have a Related Person that is
entitled to designate an individual voting member for each Principal Committee
in another Sector, together with the other NEPOOL Participants in the
Transmission Sector which for the same reasons are unable to designate an
individual voting member, shall be represented by a group voting member of each
Principal Committee (the “Transmission Group Member”), and an alternate to that
member. The Transmission Group Member and alternate shall be appointed by a
majority vote of all NEPOOL Participants in the Transmission Sector required to
be represented by that Member. The Transmission Group Member shall have the same
percentage of the Sector vote as the individual voting members designated by
other NEPOOL Participants in the Transmission Sector which meet the $30,000,000
threshold unless and until the original capital investment in PTF of the NEPOOL
Participants represented by the Transmission Group Member equals or exceeds
twice the $30,000,000 threshold amount. If the aggregate original capital
investment in PTF equals or exceeds twice the $30,000,000 threshold amount, the
percentage of the Sector votes assigned to the Transmission Group Member shall
equal the

 

20

--------------------------------------------------------------------------------

number of full multiples of the $30,000,000 threshold, provided that the
Transmission Group Member shall in no event be entitled to more than twenty-five
percent (25%) of the Sector vote. For example, if NEPOOL Participants
represented by the Transmission Group Member have an aggregate original capital
investment in PTF in the New England Control Area totaling $70,000,000, the
Transmission Group Member will have the same percentage of such votes as two
($70,000,000/$30,000,000 Threshold = 2.33) individual voting members designated
by individual NEPOOL Participants, provided that there are at least six other
members in the Sector so the Transmission Group Member does not have more than
twenty-five percent (25%) of the Transmission Sector vote.

(c) a Supplier Sector, which a NEPOOL Participant shall be eligible to join if
(i) it engages in, or is licensed or otherwise authorized by a state or federal
agency with jurisdiction to engage in, power marketing, power brokering or load
aggregation within the New England Control Area, or it had been engaged on and
before December 31, 1998 solely in the distribution of electricity in the New
England Control Area and (ii) it is not a Publicly Owned Entity. A Participant
which joins the Supplier Sector shall be entitled to designate a voting member
of each Principal Committee, and an alternate to the member.

(d) an AR Sector, which an AR Provider shall be eligible to join; provided,
however, that a NEPOOL Participant that is eligible to join the End User Sector
shall not join the AR Sector.

(i) The AR Sector shall be divided into the following three (3) sub-Sectors:

(A) Renewable Generation Sub-Sector, which a NEPOOL Participant shall be
eligible to join if it is a Renewable Generation Resource Provider. A Renewable
Generation Resource Provider which joins the Renewable Generation Sub-Sector
shall be entitled but not required to designate an individual voting member of
each Principal Committee, and an alternate to the member, if it owns or controls
Renewable Generation Resources with an aggregate Governance Rating of at least 5
MW. A Renewable Generation Resource Provider which owns or controls Renewable
Generation Resources that have an aggregate Governance Rating of at least 15 MW
shall either designate an individual voting member of each Principal Committee,
and an alternate to the member, or elect to be represented by a Self-Defined
Renewable Group Member as described in the following sentence. A Renewable
Generation Resource Provider which joins the Renewable Generation Sub-Sector but
elects not to or is not eligible to designate an individual voting member, may
together with one or more Renewable Generation Resource Providers be represented
by a “Self-Defined Renewable Generation Group Member” and an alternate to that
member for each Principal Committee, provided that the group voting member
represents Renewable Generation Resource Providers that own or control Renewable
Generation Resources that in the aggregate have a Governance Rating of more than
5 MW. A Renewable Generation Resource Provider which joins the Renewable
Generation Sub-Sector but which (A) is not entitled to designate an individual
voting member of each Principal Committee because it does not own or control
Renewable Generation Resources with an aggregate Governance Rating of at least 5
MW, or (B) has not elected to be represented by a Self-Defined Renewable
Generation Group Member shall be represented by the “Small Renewable Generation
Group Member.”

 

21

--------------------------------------------------------------------------------

(B) Distributed Generation Sub-Sector, which a NEPOOL Participant shall be
eligible to join if it is a Distributed Generation Resource Provider or a DRP. A
Distributed Generation Resource Provider which joins the Distributed Generation
Sub-Sector shall be entitled but not required to designate an individual voting
member of each Principal Committee, and an alternate to the member, if it owns
or controls Distributed Generation Resources that in the aggregate have a
Governance Rating of at least 5 MW. A Distributed Generation Resource Provider
which joins the Distributed Generation Sub-Sector but elects not to or is not
eligible to designate an individual voting member, may together with one or more
Distributed Generation Resource Providers be represented by a “Self-Defined
Distributed Generation Group Member” and an alternate to that member for each
Principal Committee, provided that the group voting member represents
Distributed Generation Resource Providers that own or control Distributed
Generation Resources that in the aggregate have a Governance Rating of more than
5 MW. DRPs shall be represented by a separate group voting member and an
alternate to that member for each Principal Committee known as the “DRP Group
Member.” A Distributed Generation Resource Provider which joins the Distributed
Generation Sub-Sector but which (1) is not entitled to designate an individual
voting member of each Principal Committee because it does not own or control
Distributed Generation Resources that in the aggregate have a Governance Rating
of at least 5 MW, or (2) has not elected to be represented by an individual
voting member or a Self-Defined Distributed Generation Group Member shall be
represented by the “Small Distributed Generation Group Member.”

(C) Load Response Sub-Sector, which a NEPOOL Participant shall be eligible to
join if it is a Load Response Resource Provider. A Load Response Resource
Provider which joins the Load Response Sub-Sector shall be entitled but not
required to designate an individual voting member of each Principal Committee,
and an alternate to the member, if it owns or controls Load Response Resources
that in the aggregate have a Governance Rating of at least 5 MW (or its
equivalent). A Load Response Resource Provider which joins the Load Response
Sub-Sector but elects not to or is not eligible to designate an individual
voting member, may together with one or more Load Response Resource Providers be
represented by a “Self-Defined Load Response Group Member” and an alternate to
that member for each Principal Committee, provided that the group voting member
represents Load Response Resource Providers that own or control Load Response
Resources that in the aggregate have a Governance Rating of more than 5 MW (or
its equivalent). A Load Response Resource Provider which joins the Load Response
Sub-Sector but which (1) is not entitled to designate an individual voting
member of each Principal Committee because it does not own or control Load
Response Resources that in the aggregate have a Governance Rating of at least 5
MW (or its equivalent), or (2) has not elected to be represented by an
individual voting member or a Self-Defined Load Response Group Member shall be
represented by the “Small Load Response Group Member.”

(ii) A group voting member in the AR Sector shall be appointed or replaced by a
majority of the Participants represented by that member.

(e) a Publicly Owned Entity Sector, which all Participants which are Publicly
Owned Entities are eligible to join and shall join, and which End User
Participants are eligible to join if there is not an activated End User Sector.
A NEPOOL Participant which joins the Publicly Owned Entity Sector shall be
entitled to designate a voting member of each Principal Committee, and an
alternate to the member.

 

22

--------------------------------------------------------------------------------

(f) an End User Sector, which an End User Participant is eligible to join
provided all of its Related Persons which are either NEPOOL Participants or
Individual Participants are also eligible to join the End User Sector.
Participants which join the End User Sector shall be entitled to designate an
individual voting member of each Principal Committee and an alternate to the
member; provided, however, that a voting member, and the alternate to the
member, designated by a Small End User shall not be a Related Person of another
NEPOOL Participant in a Sector other than the End User Sector.

7.3.3 Sector Ineligibility; Changes. All NEPOOL Participants have the right to
join and be a member of a Sector. If a NEPOOL Participant ceases to be eligible
to be a member of the Sector which it previously joined and is not eligible to
join another existing Sector other than the End User Sector, it shall have the
right to remain and vote in the Sector in which the NEPOOL Participant is
currently a member for up to one (1) year. By the end of such year, either
(a) this Agreement shall be amended such that qualifications for an existing
Sector are changed so that the NEPOOL Participant qualifies for membership in an
existing Sector or a new Sector is created, or (b) the Participants Committee
shall seek Commission approval to terminate the status of the NEPOOL
Participant. A NEPOOL Participant may change the Sector of which it is a member.
Other than for changes required by this Section, a change in the Sector in which
a NEPOOOL Participant is a member shall become effective beginning on the first
annual meeting of the Participants Committee following notice of such change.

SECTION 8. COMMITTEES

8.1 Participants Committee.

8.1.1 Identification. NEPOOL shall maintain a Participants Committee composed of
the representatives of NEPOOL Participants that is organized and operated
pursuant to the terms of this Section 8.1.

8.1.2 Composition. The Participants Committee shall consist of the members and
alternates to such members appointed in accordance with Section 8.3.1.

8.1.3 Role. The Participants Committee shall serve in an advisory role to ISO
and shall perform those functions on behalf of the NEPOOL Participants and, in
relevant instances, the Individual Participants, as set forth in this Agreement,
including without limitation the following:

(a) Adopt and approve at each annual meeting a budget for Participant Expenses
for the ensuing calendar year, giving due consideration to budgetary requests of
each committee, subcommittee, task force or working group, and modifying that
budget as necessary from time to time after its adoption;

(b) Enter into contractual arrangements on behalf of the NEPOOL Participants in
support of matters relating to their rights and obligations hereunder including,
without limitation, the authority to retain counsel and consultants, to procure
computer time, and

 

23

--------------------------------------------------------------------------------

to procure through contract, purchase or otherwise access to such facilities and
such materials and supplies as may be needed for the Principal Committees and
their subcommittees, task forces, working groups and counsel and consultants to
perform their respective responsibilities;

(c) Make filings if and as appropriate before and participate on behalf of the
NEPOOL Participants in proceedings before the Commission and other Governmental
Authorities;

(d) Vote on new Market Rules, Operating Procedures, Manuals, Reliability
Standards, Information Policy and changes thereto, and on Installed Capacity
Requirements and changes to General Tariff Provisions and Non-TO OATT
Provisions, consistent with the procedures set forth in Section 11.1.3;

(e) Establish or approve schedules fixing the amounts to be paid by Governance
Participants to permit the recovery of Participant Expenses;

(f) Establish conditions and procedures (i) for addressing applications for
Entities to become NEPOOL Participants and (ii) for terminating their NEPOOL
Participant status;

(g) Delegate its powers and duties to one or more of the Technical Committees,
subcommittees, working groups, task forces or other entity as it sees fit,
provided that (i) such delegation is clearly stated and approved by a
Participants Committee action, (ii) such delegation does not violate any other
provision set forth herein, and (iii) the action of such entity on any matter
delegated to it may be appealed by any NEPOOL Participant to the Participants
Committee provided such an appeal is taken prior to the end of the fifth
business day following the action on that matter(s) so delegated;

(h) Act on any appeals to it of any action by a Technical Committee, or
subcommittee, working group, task force or other entity pursuant to delegated
authority by the Participants Committee;

(i) Take action to (A) enforce the provisions of this Agreement against ISO and
(B) enforce the provisions of the RNA against NEPOOL Participants;

(j) To the extent not otherwise covered under Section 8.1.2(d), and consistent
with this Agreement, vote on a matter as submitted by, amend and conduct a vote
on a matter submitted by, and/or resubmit a matter for additional comment to,
one or more Technical Committees, subject to any limitations otherwise set forth
in this Agreement;

(k) Vote on slates of nominees for the ISO Board recommended to it by the
Nominating Committee in accordance with Section 13.2.1; and

(l) Provide advice and undertake such other actions as are needed to exercise
any other powers and duties as are conferred or imposed upon it by other
sections of this Agreement, or for which ISO may seek input and advice.

8.1.4 Officers. At its annual meeting, the Participants Committee shall select
from among its members a Chair and one or more Vice-Chairs; the Participants
Committee shall also select a Secretary, who shall not be a Governance
Participant. These officers shall have the powers and duties usually incident to
such offices and as may be established by the Participants Committee.

 

24

--------------------------------------------------------------------------------

8.1.5 Attendance of Governance Participants at Committee Meeting. Each
Governance Participant that does not have the right to designate an individual
voting member of the Participants Committee, including Individual Participants,
shall be entitled to receive notice of (in accordance with the notice provisions
in Section 8.3.4 hereof) and to attend any meeting of the Participants Committee
or any other Principal Committee, and shall have a reasonable opportunity to
express views on any matter to be acted upon at the meeting. Entities that are
not Governance Participants may attend or speak at a meeting of a Principal
Committee only if and to the extent invited to do so by the Chair.

8.2 Technical Committees.

8.2.1 Standing Committees. The Participants Committee shall oversee the
activities of three standing Technical Committees - the Markets Committee, the
Reliability Committee and the Transmission Committee. The Participants Committee
or any Technical Committee may also form, select the membership and oversee the
activities of such other committees, subcommittees, task forces, working groups
or other bodies as it shall deem appropriate, to provide advice and
recommendations to the Principal Committees and to ISO.

8.2.2 Markets Committee. The Markets Committee shall provide input and advice to
ISO and the Participants Committee, and act for the Participants Committee if
authority is delegated to it by the Participants Committee, with respect to the
following:

(a) The Market Rules, including proposed changes thereto and the impact of the
Market Rules and proposed changes thereto on the reliable and efficient
operation of the New England Control Area;

(b) Studies of the market implications of maintenance scheduling procedures for
the supply and demand-side resources and Transmission Facilities of the
Governance Participants and operable capacity margins;

(c) The impact on the operation of the New England Markets of standards,
criteria and rules relating to protective equipment, switching, voltage control,
load shedding, emergency and restoration procedures, and the operation and
maintenance of supply and demand-side resources and Transmission Facilities of
the Governance Participants;

(d) Operating Procedures relating to the administration of the New England
Markets, including proposed changes thereto;

(e) Manuals;

(f) Information Policy;

(g) GIS Operating Rules, which are the responsibility of the Participants
Committee, and any changes, additions, or deletions thereto that are consistent
with the goals and intent of the GIS and are reasonably determined to be
necessary or appropriate for the continued effectiveness of the GIS, provided
that any action of the Markets Committee in this regard shall be subject to
appeal to the Participants Committee in accordance with the requirements of
Section 8.1.2(h); and

 

25

--------------------------------------------------------------------------------

(h) Such other matters as the Participants Committee may delegate to the Markets
Committee or for which ISO may seek input and advice.

8.2.3 Reliability Committee. The Reliability Committee shall provide input and
advice to ISO and the Participants Committee with respect to the following:

(a) Consultation with the Planning Advisory Committee established under the
Tariff with respect to the development of a regional system plan;

(b) Short-term and long-term load forecasts for use in ISO studies and
operations and to meet requirements of regulatory agencies;

(c) The collection and exchange of necessary system data and future plans
related to reliability for use in ISO planning and to meet requirements of
regulatory agencies;

(d) Coordination of studies of, and provision of information to Governance
Participants on, maintenance schedules for the supply and demand-side resources
and Transmission Facilities of the Governance Participants;

(e) Based on appropriate studies, the Reliability Standards to assure the
reliable operation, and facilitate the efficient operation, of the New England
Control Area, the Planning Procedures and those Operating Procedures that guide
the implementation of the Reliability Standards;

(f) Review of proposed supply and demand-side resource plans and the proposed
transmission and interconnection plans of Governance Participants;

(g) Applications to ISO pursuant to Section 3.9 of Section I of the Tariff;

(h) Procedures for dispatch infrastructure (i.e., voice and data communications
protocols, AGC pulsing arrangements, energy management system and system control
and data acquisition interfaces, local control center relations, etc.);

(i) Reliability considerations of general System operations (i.e.,
commitment/decommitment, real time dispatch, review and approval of distribution
of reserves, etc.);

(j) Interconnection procedures and documents related to such procedures;

(k) Criteria, guidelines and methodologies to assure consistency in monitoring
and assessing conformance of Governance Participants’ and regional transmission
plans to accepted reliability criteria;

 

26

--------------------------------------------------------------------------------

(l) To the extent appropriate, conducting and/or reviewing such studies and
making such determinations as are assigned to the Reliability Committee pursuant
to this Agreement and the Tariff with respect to financial treatment of
additions to or upgrades of PTF;

(m) Installed Capacity Requirements; and

(n) Such other matters as the Participants Committee may delegate to the
Reliability Committee or for which ISO may seek input and advice.

8.2.4 Transmission Committee. The Transmission Committee shall provide input and
advice to ISO, the Participants Committee, and/or the TOs with respect to the
following:

(a) Billing procedures for transmission and ancillary services pursuant to the
Tariff;

(b) Amendments, additions and other changes to General Tariff Provisions, Non-TO
OATT Provisions and related rules;

(c) Proposed amendments of the TOA; and

(d) Such other matters as the Participants Committee may delegate to the
Transmission Committee or for which ISO may seek input or advice.

8.2.5 Technical Committee Officers.

(a) ISO shall, after its Chief Executive Officer has conferred with the
Participants Committee regarding such appointment(s), appoint the Chair and
Secretary of each of the Technical Committees. Each individual appointed by ISO
shall be an independent person not affiliated with any Governance Participant.
ISO shall seek input from the Technical Committee to which such officer is being
appointed on the technical expertise and qualifications needed for such
position, and endeavor to appoint a person with such technical expertise and
qualifications. Before appointing an individual to the position of Chair or
Secretary, ISO shall notify the Technical Committee to which such officer is
being appointed of the proposed assignment and, consistent with its personnel
practices, provide any other information about the individual reasonably
requested by the Technical Committee. Each of the Technical Committees shall
elect from among its members a Vice-Chair.

(b) If a Technical Committee determines that the performance of its Chair or
Secretary is not satisfactory, the Committee shall provide notice to the Chair
of the Participants Committee, identifying perceived performance deficiencies of
such officer. The Chair of the Participants Committee shall discuss the
performance of such officer with the Chief Executive Officer of ISO, who shall
take such action as he or she deems necessary and appropriate based on such
discussions. If the perceived officer performance deficiencies continue for
thirty (30) days or more after such discussion between the Participants
Committee Chair and ISO’s Chief Executive Officer, the Participants Committee
Chair may provide notice of the officer performance concerns to the Board of
Directors of the ISO. The ISO Board shall meet with the Participants Committee
Chair at its next regularly scheduled meeting following the giving of such
notice and shall provide to the Participants Committee Chair a written response
to address the concerns

 

27

--------------------------------------------------------------------------------

with respect to the Committee officer’s performance not later than five
(5) Business Days following such meeting. If the perceived performance
deficiencies are with the Chair of a Technical Committee, and a written response
is not received from the ISO Board within such five (5) Business Day period, the
Vice-Chair shall serve as the acting Chair until such response is received.

8.3 Principal Committee Provisions.

8.3.1 Appointment of Members and Alternates. A NEPOOL Participant or group of
NEPOOL Participants shall designate, by a written notice delivered to the
Secretary of the appropriate Principal Committee, the voting member appointed by
it for the Principal Committee and an alternate of the member. In the absence of
the member, the alternate shall have all the powers of the member, including the
power to vote.

8.3.2 Term of Members. Each voting member of a Principal Committee shall hold
office until (a) such member is replaced by the NEPOOL Participant or group of
NEPOOL Participants that appointed the member, or (b) the appointing NEPOOL
Participant ceases to be a NEPOOL Participant, or (c) the appointing NEPOOL
Participant (or its Related Person) joins a new Sector in accordance with the
terms of Section 7.3.3. Replacement of a member shall be effected by delivery by
a NEPOOL Participant or group of NEPOOL Participants of written notice of such
replacement to the Secretary of the appropriate Principal Committee.

8.3.3 Regular and Special Meetings. Each Principal Committee shall hold an
annual meeting at such time and place as the Chair shall designate and shall
hold other meetings in accordance with a schedule adopted by the Principal
Committee or at the call of the Chair. Five or more voting members of a
Principal Committee may call, subject to the notice provisions of Section 8.3.4,
a special meeting of the Principal Committee in the event that the Chair fails
to schedule such a meeting within three business days following the Chair’s
receipt from such members of a request specifying the subject matters to be
acted upon at the meeting.

8.3.4 Notice of Meetings. Written or electronic notice of each meeting of a
Principal Committee shall be given to each Governance Participant, whether or
not such Governance Participant is entitled to appoint an individual voting
member of the Principal Committee, not less than three business days prior to
the date of the meeting in the case of the Technical Committees and five
business days prior to the date of the meeting for the Participants Committee. A
notice of meeting shall specify the principal subject matters expected to be
presented for consideration at the meeting. In addition, such notice shall
include, or specify internet location of, all draft resolutions to be voted at
the meeting (which draft resolutions may be subject to amendment of intent but
not subject matter during the meeting), and all background materials deemed by
the Chair of the Participants Committee and ISO or the Chair or Vice Chair of
the Technical Committee to be necessary to the Principal Committee to have an
informed opinion on such matters. Principal Committees may not formally consider
any motions raised for which no draft resolutions or background materials have
been provided for the meeting and shall not formally consider such motions until
a subsequent meeting that is properly noticed.

 

28

--------------------------------------------------------------------------------

8.3.5 Attendance. Regular and special meetings may be conducted in person, by
telephone, or other electronic means by means of which all persons participating
in the meeting can communicate in real time with each other. In order to vote
during the course of a meeting, attendance is required in person or by telephone
or other real time electronic means by a voting member or its alternate or a
duly designated agent who has been given, in writing, the authority to vote for
the member on all matters or on specific matters in accordance with
Section 8.3.8.

8.3.6 Quorum. All actions by a Principal Committee, other than a vote by the
Participants Committee by written ballot to amend this Agreement, shall be taken
at a meeting at which the members in attendance pursuant to Section 8.3.5
constitute a Quorum. A Quorum requires the attendance by members that satisfy
the Sector Quorum requirements for a majority of the activated Sectors. No
action may be taken by a Principal Committee unless a Quorum is present;
provided, however, that if a Quorum is not present, the voting members then
present shall have the power to adjourn the meeting from time to time until a
Quorum shall be present.

8.3.7 Voting by Committees. All matters to be acted upon by a Principal
Committee shall be stated in the form of a motion by a voting member, which must
be seconded. Only one motion and any one amendment to that motion may be pending
at one time. Votes taken for the purpose of providing advisory input to ISO
shall be recorded by Sector and/or by individual NEPOOL Participant. Except as
otherwise expressly set forth herein, passage of a motion requires a Participant
Vote equal to or greater than two-thirds of the aggregate Sector Voting Shares.
Voting members not in attendance or represented at a meeting as specified in
Section 8.3.5 or abstaining shall not be counted as affirmative or negative
votes.

8.3.8 Designated Representatives and Proxies. The vote of any member of a
Principal Committee or the member’s alternate, other than a ballot on an
amendment to this Agreement, may be cast by another person pursuant to a
written, standing designation or proxy; provided, however, that (i) the vote of
a member or alternate to that member representing a Small End User may not be
cast by a NEPOOL Participant or a Related Person of a NEPOOL Participant in a
Sector other than the End User Sector and (ii) the vote of the member or
alternate to that member representing an AR Provider which pays less than the
lowest amount of Participant Expenses paid by an individual voting NEPOOL
Participant in the Generation, Transmission or Supplier Sectors may not be cast
by a NEPOOL Participant or a Related Person of a NEPOOL Participant in a Sector
other than the AR Sector. A designation or proxy shall be dated not more than
one year previous to the meeting and shall be delivered by the member or
alternate to the Secretary of the Principal Committee at or prior to any votes
being taken at the meeting at which the vote is cast pursuant to such
designation or proxy. Subject to Section 8.3.9, a single individual may be the
designated representative of or be given the proxy of the voting members
representing any number of NEPOOL Participants of any one Sector or NEPOOL
Participants from multiple Sectors.

8.3.9 Limits on Representatives. In the End User Sector, no one person may vote
on behalf of more than five (5) Small End Users. Except as otherwise provided
herein, other Sectors may by unanimous written agreement elect to impose limits
on the voting power any one individual may have in that Sector as the designated
representative of multiple voting members or the grantee of multiple proxies
from voting members of that Sector. Notice of any such limits on voting power
must be posted on ISO’s website and must be capable of being accessed by all
NEPOOL Participants.

 

29

--------------------------------------------------------------------------------

8.3.10 Adoption of Bylaws. The Participants Committee shall adopt bylaws,
consistent with this Agreement, governing procedural matters including the
conduct of its meetings and those of the other Principal Committees. If there is
any conflict between such bylaws and this Agreement, this Agreement shall
control. A Principal Committee may vote to waive its bylaws for a particular
meeting, provided the motion to effect the waiver is approved in accordance with
Section 8.3.7.

8.3.11 ISO Assistance to NEPOOL and Membership on Principal Committees. ISO
shall provide general technical and administrative support to the Principal
Committees as contemplated by the ISO budget established therefor. ISO also
shall provide such additional technical and administrative support to the
Principal Committees, subcommittees, working groups and other entities properly
formed by the Principal Committees as is requested by the Participants Committee
and agreed to by ISO, which requests for support shall not be unreasonably
denied; provided, however, that the costs incurred by ISO in providing such
additional support to the extent not otherwise contemplated by the ISO budget
shall be paid by Governance Participants as Participant Expenses. ISO shall have
the right to appoint a non-voting member and an alternate to each Principal
Committee. The member appointed to each committee shall have all of the rights
of any other member of the committee except the right to vote.

8.4 Budget & Finance Subcommittee. There shall be a Budget & Finance
Subcommittee of the Participants Committee which shall provide input and advice
to ISO and the Participants Committee with respect to the following:

(a) ISO’s operating and capital budgets;

(b) ISO’s billing and settlement system;

(c) ISO’s financial assurance policy;

(d) ISO’s billing policy;

(e) Budgets for the Principal Committees; and

(f) Such other matters as the Participants Committee may delegate to the
Budget & Finance Subcommittee.

8.5 Advisory Role of Committees to ISO. Except as expressly agreed by NEPOOL and
ISO, each of the Principal Committees, including such other committees,
subcommittees, task forces, working groups or other bodies as may be formed by
it, shall serve only in an advisory role, and shall have no decisional authority
with respect to ISO. Notwithstanding the foregoing, the Participants Committee
shall have primary decisional authority with respect to the GIS.

 

30

--------------------------------------------------------------------------------

SECTION 9. ORGANIZATION OF ISO

9.1 ISO. On the Operations Date, ISO New England Inc., a Delaware corporation,
shall become the RTO for New England.

9.2 Board of Directors of ISO.

9.2.1 Management. The business and affairs of ISO will be managed by the ISO
Board.

9.2.2 Board Composition. The ISO Board shall be composed of ten members, nine of
whom shall be voting members selected in accordance with Section 13, and the ISO
Chief Executive Officer who, by virtue of his office, shall serve as a
non-voting member of the ISO Board. On the Operations Date, the ISO Board shall
be composed of the ten members of the Board of Directors of ISO New England Inc.
The members of the ISO Board shall possess a cross-section of skills and
experience (such as, for purposes of illustration but not by way of mandate or
limitation, experience in Commission electric regulatory affairs, energy
industry management, corporate finance, bulk power systems, human resource
administration, power pool operations, public policy, distributed generation or
demand response technologies, renewable energy, consumer advocacy, environmental
affairs, business management and information technologies), to ensure that ISO
has sufficient knowledge and expertise to act as the RTO for New England. At
least three of the directors shall have prior relevant experience in the
electric industry. In addition, to ensure sensitivity to regional concerns,
strong preference shall be given to electing members from New England to the
extent qualified candidates are available and such representation can be
accomplished consistent with ISO’s Code of Conduct, which is described in
Section 9.3.1.

9.2.3 Terms of Directors.

(a) Voting directors will serve staggered, three-year terms and will be subject
to (i) an age limitation prohibiting the election or re-election of any such
director unless such director is age seventy (70) or less at the time of such
election or re-election, and (ii) a term limit of three consecutive three-year
terms, which term limit may be waived by the Nominating Committee. Service as a
director of ISO New England Inc. prior to the Operations Date shall be included
in the calculation of the term limits.

(b) Notwithstanding clause 9.2.3(a)(ii) and any waiver by the Nominating
Committee pursuant thereto, the ISO Board shall have the right to designate, in
the aggregate, no more than two voting directors who may serve four, rather than
three, consecutive three-year terms.

(c) Except for directors removed from office, directors shall serve until their
successors are duly elected and qualified.

9.3 Conflict of Interest Policy.

9.3.1 Code of Conduct. To ensure the independence of ISO, ISO shall adopt and
enforce a Code of Conduct, which will comply with the requirements of the
Commission. No director of ISO shall be affiliated with any Governance
Participant in the New England Control Area in violation of the Code of Conduct.

 

31

--------------------------------------------------------------------------------

9.3.2 No Financial Interest. ISO as a corporate entity shall not have any
financial interest in the economic performance of any Governance Participant or
other market participant in the New England Control Area or any Related Person
of either, nor shall it engage in any transactions, directly or indirectly, for
its own account in the New England Markets. Notwithstanding the foregoing
provision, ISO shall be permitted to purchase electricity, power and energy as a
retail customer for its own account and consumption.

9.4 Market Monitoring.

9.4.1 Market Monitoring and Mitigation. ISO’s responsibility to administer the
New England Markets pursuant to the Tariff, the Operating Procedures and the
Manuals also includes market monitoring and market power mitigation pursuant to
Order 2000, the Commission’s regulations thereunder and the Market Rules.

9.4.2 Market Monitoring Framework. Until changed in accordance with a Commission
order, ISO will continue to fulfill its market monitoring and market power
mitigation functions through an internal market monitoring unit (the “INTMMU”)
reporting to the ISO Chief Executive Officer and the ISO Board and by
contracting with an independent market monitoring unit (the “IMMU”) selected by
and reporting to the ISO Board.

9.4.3 Functions of the IMMU. The contract between ISO and the IMMU shall provide
for the following IMMU functions:

(a) Review the competitiveness of the New England Markets, the impact that the
Market Rules and/or changes to the Market Rules will have on the New England
Markets and the impact that ISO’s actions have had on the New England Markets.
In the event that the IMMU uncovers problems with the New England Markets, the
IMMU shall promptly inform the Commission, ISO Board, state public utility
commissions for each of the six New England states, and the Governance
Participants of its findings, provided that in the case of Governance
Participants and the public utility commissions, information in such findings
shall be redacted as necessary to comply with the Information Policy.

(b) Perform independent evaluations and prepare annual and ad hoc reports on the
overall competitiveness and efficiency of the New England Markets or particular
aspects of the New England Markets, including the adequacy of Market Monitoring
and Mitigation Plan. The IMMU shall have the sole discretion to determine
whether and when to prepare ad hoc reports and may prepare such reports on its
own initiative or pursuant to requests by ISO, state public utility commissions
or one or more Governance Participants. Final versions of such reports shall be
disseminated contemporaneously to the Commission, the ISO Board, the Governance
Participants, and state public utility commissions for each of the six New
England states, provided that in the case of the Governance Participants and
public utility commissions, such information shall be redacted as necessary to
comply with the Information Policy. Such reports shall, at a minimum, include:

(i) Review and assessment of the practices, Market Rules, procedures, protocols
and other activities of ISO insofar as such activities, and the manner in which
ISO implements such activities, affect the competitiveness and efficiency of New
England Markets.

 

32

--------------------------------------------------------------------------------

(ii) Review and assessment of the practices, procedures, protocols and other
activities of any ITC or ITCs, transmission provider or similar entity insofar
as its activities affect the competitiveness and efficiency of the New England
Markets.

(iii) Review and assessment of the activities of Governance Participants insofar
as these activities affect the competitiveness and efficiency of the New England
Markets.

(iv) Review and assessment of the effectiveness of the Market Monitoring and
Mitigation Plan and the administration of the Market Monitoring and Mitigation
Plan by the INTMMU for consistency and compliance with the terms of the Market
Monitoring and Mitigation Plan.

(v) Review and assessment of the relationship of the New England Markets with
any ITC or ITCs and with adjacent markets.

The IMMU in its sole discretion may decide whether and to what extent to share
drafts of any report or portions thereof with the Commission, ISO, one or more
state public utility commission(s) in New England or Governance Participants for
input and verification before the report is finalized. The IMMU shall keep the
Governance Participants informed of the progress of any report being prepared
pursuant to the terms of this Agreement.

(c) Conduct evaluations and prepare reports on its own initiative or at the
request of others.

(d) Prepare recommendations to the ISO Board and the Governance Participants on
how to improve the overall competitiveness and efficiency of the New England
Markets or particular aspects of the New England Markets, including improvements
to the Market Monitoring and Mitigation Plan.

(e) Recommend actions to the ISO Board and the Governance Participants to
increase liquidity and efficient trade between regions and improve the
efficiency of the New England Markets.

(f) Review ISO’s filings with the Commission from the standpoint of the effects
of any such filing on the competitiveness and efficiency of the New England
Markets. The IMMU will have the opportunity to comment on any filings under
development by ISO during the Participant Processes and may file comments with
the Commission when the filings are made by ISO. The subject of any such
comments will be the IMMU’s assessment of the effects of any proposed filing on
the competitiveness and efficiency of the New England Markets, or the
effectiveness of the Market Monitoring and Mitigation Plan, as appropriate.

(g) Provide information to be directly included in the monthly market updates
that are provided at the meetings of the Participants Committee.

 

33

--------------------------------------------------------------------------------

(h) If and when established, participate in a committee of regional market
monitors to review issues associated with interregional transactions, including
any barriers to efficient trade and competition.

9.4.4 Functions of the INTMMU. The INTMMU shall have the following functions:

(a) Develop and maintain the Market Monitoring and Mitigation Plan. The INTMMU
will consider whether the Market Monitoring and Mitigation Plan requires
amendment as of the Operations Date. The amendments and any other changes to the
Market Monitoring and Mitigation Plan deemed to be necessary by the INTMMU shall
be undertaken after consultation with Governance Participants in accordance with
Section 11.

(b) Day-to-day, real-time review of market behavior and implement its functions
as delineated in the Market Monitoring and Mitigation Plan.

(c) Consult with the IMMU, as needed, with respect to implementing and applying
the Market Monitoring and Mitigation Plan.

(d) Refer market concerns to the ISO Board and/or the IMMU for their
consideration.

(e) Make recommendations concerning changes to improve the competitiveness and
efficiency of the New England Markets or particular aspects of the New England
Markets.

(f) Provide support and information to the ISO Board and the IMMU.

(g) Produce weekly, quarterly and annual reports regarding the New England
Markets.

(h) Be primarily responsible for interaction with external Control Areas, the
Commission, other regulators and Governance Participants with respect to the
Market Monitoring and Mitigation Plan.

9.4.5 Filing of IMMU Contract. ISO shall file its contract with the IMMU with
the Commission. In order to facilitate the performance of the IMMU’s functions,
ISO’s contract with the IMMU shall provide for reasonable access by the IMMU to
ISO data and personnel, including ISO management responsible for market
monitoring, operations and billing and settlement functions. Any proposed
termination of the contract with the IMMU or modification of, or other
limitation on, the IMMU’s scope of work shall be subject to prior Commission
approval. The contract shall prohibit the IMMU (i) from providing any consulting
services to the Governance Participants or any services to ISO that are
unrelated to the IMMU’s functions under the contract to ISO, provided that this
prohibition shall not limit in any way the ability of the IMMU to prepare and
file testimony or work on improvements to the New England Markets or (ii) from
providing consulting services to any Governance Participant. The contract will
also contain restrictions comparable to those on independent auditors (e.g.,
prohibiting any other business relationship with ISO or any Governance
Participant).

 

34

--------------------------------------------------------------------------------

9.4.6 IMMU Budget. The IMMU budget will be separately identified, included and
considered in the overall ISO budget process set forth in Section 12.

SECTION 10. INTERACTION OF GOVERNANCE PARTICIPANTS AND ISO

10.1 Participant Processes. The Participant Processes are intended to facilitate
a collaborative process between the Governance Participants and ISO to assist
ISO in fulfilling its responsibilities as the RTO for New England. The
Participant Processes are intended to (i) provide the Governance Participants
with timely and adequate opportunities to provide input and present their views
to ISO on issues and to make recommendations to ISO and the ISO Board and
(ii) describe how ISO shall receive, consider, and respond to input, review and
recommendations from the Governance Participants.

10.2 Interaction with Board. To assist in meaningful communications between the
Governance Participants and ISO, the Parties shall follow the following
processes and procedures:

10.2.1 Participants Committee Meetings. Board members are welcome to attend
meetings of the Participants Committee and it is expected that ISO’s Chief
Executive Officer will generally attend each Participants Committee meeting;
provided that one or more members of the ISO Board will attend a meeting of the
Participants Committee upon reasonable request of the Participants Committee. If
a member of the ISO Board attends a Participants Committee meeting, that member
shall, at the next scheduled ISO Board meeting after such Participants Committee
meeting, report to the entire ISO Board the issues raised and other discussions
held at the Participants Committee meeting.

10.2.2 Dates of Board Meetings. The Governance Participants and ISO shall
coordinate the dates of regularly scheduled meetings to the extent reasonably
possible so that meetings of the Participants Committee are held within a
reasonable period of time before regularly scheduled Board meetings.

10.2.3 Meeting Agenda. Before each Participants Committee meeting, ISO shall use
its best efforts to make available on its website or by other means of
distribution to Governance Participants an agenda for the next scheduled ISO
Board meeting identifying those matters presented for Governance Participant
consideration in accordance with Section 11 which the ISO Board is expected to
consider and act upon at its meeting.

10.2.4 Report of Board Action. After each ISO Board meeting, the Chief Executive
Officer of ISO shall report to Governance Participants, by posting on ISO’s
website or otherwise, all actions related to Market Rules or Tariff issues taken
by the ISO Board.

10.2.5 Governance Participant Submission of Documents to the ISO Board. In
advance of an ISO Board meeting, the ISO Board shall accept written materials
from Governance Participants regarding an agenda item. ISO shall promptly make
such written materials available on its website. Such written materials must be
submitted in accordance with reasonable parameters established by ISO, which
parameters shall be posted on the ISO website. These parameters shall establish
time frames for the submission of documents (i.e., sufficiently in advance of
the ISO Board meetings so that they can be synopsized and distributed to the ISO
Board).

 

35

--------------------------------------------------------------------------------

10.2.6 Periodic Meetings with Governance Participants. At least twice a year,
the ISO Board shall meet with the Governance Participants. The agenda for such
meetings shall be established by ISO in consultation with the Chair and
Vice-Chairs of the Participants Committee. When practicable, the meetings shall
be scheduled in conjunction with a Participants Committee or ISO Board meeting
(e.g., the day before or the day of a Participants Committee or ISO Board
meeting).

10.2.7 Other Meetings with Governance Participants. As mutually agreed,
representatives of the ISO Board shall meet with Participants Committee officers
and/or representative groups of Governance Participants on an “as needed” basis.
The ISO Board, at its sole discretion, may invite one or more representatives of
Governance Participants to join a meeting of the ISO Board or a committee
thereof, and may accept requests from Governance Participants to meet with ISO
Board committees, provided that the ISO Board or committee shall notify all
Governance Participants of such meeting, and provided further that the ISO Board
or committee shall invite representatives of all other Governance Participants
to that or another meeting.

10.3 Amendments to the TOA. ISO shall notify the Governance Participants of the
commencement of negotiations between ISO and the Participating Transmission
Owners regarding any material amendment of the TOA.

10.4 Reserved Rights of Governance Participants.

10.4.1 Communications with ISO. Except for communications with the ISO Board
which are covered by Section 10.2, nothing in this Agreement is intended to
limit a Governance Participant’s right to notify ISO in writing and with
specificity of any market design or Market Rule and/or administration by ISO
thereof that is adversely affecting the Governance Participant.

10.4.2 Communications with IMMU. Nothing in this Agreement is intended to limit
a Governance Participant’s right to request the IMMU to report whether the
current market design/rules support efficient and competitive outcomes. If the
IMMU determines that the Market Rules do not support competitive outcomes, the
IMMU may recommend changes to ISO that will address the problem.

10.4.3 Section 206 Filings. Nothing in this Agreement is intended to limit a
Governance Participant’s rights pursuant to Section 206 of the Federal Power
Act.

SECTION 11. CHANGES TO MARKET RULES, OPERATING PROCEDURES, MANUALS, RELIABILITY
STANDARDS, INFORMATION POLICY, INSTALLED CAPACITY REQUIREMENTS, GENERAL TARIFF
PROVISIONS, AND NON-TO OATT PROVISIONS

11.1 General Provisions (Absent Exigent Circumstances). ISO shall be required
and Governance Participants shall have the opportunity, but not the obligation,
in response to an ISO proposal or independent of any ISO proposal (with or
without initial ISO

 

36

--------------------------------------------------------------------------------

support for a Governance Participant proposal), to present proposals for changes
to Market Rules, Operating Procedures, Manuals, Reliability Standards, General
Tariff Provisions, or Non-TO OATT Provisions for Governance Participant
consideration and NEPOOL Participant vote in accordance with the following
procedures set forth in this Section 11.

11.1.1 Notice Preceding Proposed Changes to Market Rules. Absent Exigent
Circumstances, before making any proposal to revise the Market Rules to change
the design of the New England Markets or substantially affect the operation of
the New England Markets or prices thereunder, ISO shall provide notice to the
Governance Participants, through a market planning process or otherwise, of
issues potentially requiring such revisions, and shall consult with and receive
feedback from the Governance Participants concerning the relative priority and
alternative means to address those issues.

11.1.2 Technical Committee Review. Absent Exigent Circumstances, every ISO
proposal and each Governance Participant proposal proposing a change to the
Market Rules, Operating Procedures, Manuals, Reliability Standards, General
Tariff Provisions, or Non-TO OATT Provisions shall be presented by ISO or such
Governance Participant, as appropriate (the “Proponent”), to the appropriate
Technical Committee(s) for consideration and an advisory vote. The Technical
Committee, at its next regular meeting following the one in which the initial
presentation by the Proponent is made (which shall be no later than thirty-five
(35) days after any proposal is made) shall: (i) by motion and Participant Vote
of at least 66 2/3%, defer action on any proposal presented if it reasonably
determines that additional information should and could be provided to more
adequately inform the members of such Technical Committee before a vote on the
merits is taken, or (ii) conduct an advisory vote on (A) the merits of the
proposal as it may be amended by the Proponent or by a Participant Vote of at
least 60% for any proposed Market Rule change and 66 2/3% for any other proposed
change, and (B) if any ISO proposal is modified in a way that ISO does not
support, the ISO’s proposal and any changes thereto ISO finds acceptable. Any
deferral shall generally be until the next regularly scheduled meeting, at which
time the Proponent may move for a vote upon its proposal; provided, however,
that such deferral shall be for no more than thirty-five (35) days from the vote
to defer. At that time, the Technical Committee shall: (x) take an advisory vote
on (A) the merits of the proposal as it may be amended by the Proponent or by a
Participant Vote of at least 60% for any proposed Market Rule change and 66 2/3%
for any other proposed change, and (B) if any ISO proposal is modified in a way
that ISO does not support, the ISO’s proposal and any changes thereto ISO finds
acceptable; or (y) vote to oppose a proposal on the grounds that sufficient
information has still not been provided, but may not defer consideration of the
proposal for any further period without the consent of the Proponent. Failure of
the Technical Committee to vote within the time frames set forth in this
paragraph shall advance the process to the next step.

11.1.3 Participants Committee Review. Absent Exigent Circumstances, after the
fulfillment of the procedures outlined in Section 11.1.2, every ISO proposal and
each Governance Participant proposal to change a Market Rule, Operating
Procedure, Manual, Reliability Standard, Installed Capacity Requirement, General
Tariff Provision, or Non-TO OATT Provision shall be promptly presented to the
Participants Committee, along with a report of any advisory vote or other action
taken by any Technical Committee(s) or failure to act within the prescribed time
frames outlined herein. Such proposal shall be considered by the Participants

 

37

--------------------------------------------------------------------------------

Committee no later than the first regularly scheduled meeting following the
submission of such proposal (which meeting shall be held within thirty-five
(35) days of the submission of the proposal); provided that such proposal is
submitted with sufficient time to permit proper notice in accordance with
Section 8.3.4. The Participants Committee shall: (i) by motion and vote defer
action on any proposal if it reasonably determines that the proposal presented
is materially different from the proposal presented to the Technical Committee
and was not voted on by the Technical Committee, or (ii) vote on (A) the merits
of the proposal as it may be amended by the Proponent or by a Participant Vote
of at least 60% for any proposed Market Rule change and 66 2/3% for any other
proposed change, and (B) if any ISO proposal is modified in a way that ISO does
not support, the ISO’s proposal and any changes thereto ISO finds acceptable.
Any deferral shall result in a repeat of the processes outlined above.
Notwithstanding the foregoing, the Participants Committee may, at its
discretion, consider and vote upon any proposal submitted to it and such a vote
shall have the same effect as if the proposal had first been voted upon by a
Technical Committee. The Participants Committee may not defer a vote on any item
that has been voted on by a Technical Committee and presented to the
Participants Committee for a vote unless the Proponent consents to such
deferral.

11.1.4 Termination of Governance Participant Proceedings. A vote by the
Participants Committee on the merits of any proposal terminates the Participant
Processes absent voluntary resubmission of the same or a modified proposal by
the Proponent at a future time. A failure by the Participants Committee to vote
within the time frames outlined above also terminates the Participant Processes
absent voluntary resubmission of the same or a modified proposal by the
Proponent at a future time. ISO shall report to the ISO Board and in any
relevant filing made by ISO with the Commission the results of any Participants
Committee vote or the Participants Committee’s failure to act within the
prescribed time frames. Any ISO proposal that has completed the processes in
Sections 11.1.2 through 11.1.4 above may be filed by ISO with the Commission
under Section 205 of the Federal Power Act or implemented by ISO without filing
if no filing is required. Any Governance Participant-sponsored proposal that has
completed the processes in Sections 11.1.2 through 11.1.4 and received a
Participant Vote of at least 66 2/3% shall be submitted by ISO to the ISO Board
for consideration. If the proposal is not approved or rejected by ISO within 45
days of the Participants Committee’s vote, ISO consideration thereof shall be
deemed to be complete.

11.1.5 Alternative Committee Market Rule Proposal. If the Participants Committee
vote relating to an ISO Market Rule proposal results in the approval by the
Participants Committee by a Participants Vote equal to or greater than 60% of a
Market Rule proposal that is different from the one proposed by ISO, including,
but not limited to, a Governance Participant proposal, ISO shall, as part of any
required Section 205 filing, describe the alternate Market Rule proposal in
detail sufficient to permit reasonable review by the Commission, explain ISO’s
reasons for not adopting the proposal, and provide an explanation as to why ISO
believes its own proposal is superior to the proposal approved by the
Participants Committee. The Commission will not be required to consider whether
the then-existing filed rate is unlawful, and may adopt any or all of ISO’s
Market Rule proposal or the alternate Market Rule proposal as it finds, in its
discretion, to be just and reasonable and preferable.

11.2 Exigent Circumstances. In Exigent Circumstances, ISO may unilaterally, upon
written notice to the Participants Committee and Individual Participants, file
with the Commission pursuant to Section 205, if necessary, and implement a new
or amended

 

38

--------------------------------------------------------------------------------

Market Rule, Operating Procedure, Manual, Reliability Standard, provision of the
Information Policy (subject to 11.3), General Tariff Provision, or Non-TO OATT
Provision. Notwithstanding the generality of the foregoing, any change in the
Information Policy shall be effective prospectively only and only for
information received after such change becomes effective.

11.3 Changes to Information Policy. All of the processes described in Sections
11.1.2 and 11.1.3 for Governance Participants’ consideration of proposed changes
in Market Rules shall be followed for consideration of any proposed changes to
the Information Policy, and any changes to the Information Policy must then be
presented to the Participants Committee for a vote. ISO shall file the
Information Policy and any changes thereto with the Commission pursuant to
Section 205 of the Federal Power Act. No change to the Information Policy shall
become effective unless and until it is first accepted or approved by the
Commission. In no event shall any change in the Information Policy that is not
approved by the Participants Committee apply retroactively or apply to
confidential information under the Information Policy that was furnished to ISO
before such change becomes effective.

11.4 Installed Capacity Requirements. ISO shall, in its discretion, determine
and file with the Commission pursuant to Section 205 of the Federal Power Act
the Installed Capacity Requirements for each Power Year. ISO shall present
Installed Capacity Requirements for each Power Year toGovernance Participants
pursuant to the processes described in Sections 11.1.2 and 11.1.3 for
consideration of proposed changes in Market Rules, and the Participants
Committee shall take an advisory vote on the proposed Installed Capacity
Requirements for any Power Year. ISO’s filing with the Commission of the
Installed Capacity Requirements shall report on the advisory vote of the
Participants Committee.

11.5 Compliance Filings. No provision of this Section 11 is intended to or shall
restrict ISO’s right to make any compliance filing with the Commission within
the time frame required by the Commission for such compliance filing. If the
time required for such compliance filing does not permit ISO to undertake the
entire stakeholder process contemplated by this Section 11, ISO will consult
with the Chair or Vice Chair of the Participants Committee or the Vice Chair of
the appropriate Technical Committee on appropriate procedures for receiving
Governance Participant input under the circumstances.

11.6 NEPOOL Review Board. If the Review Board created pursuant to the RNA grants
an appeal of a NEPOOL Participant and makes a recommendation on how to address
the subject matter of the appeal, ISO shall respond in writing to any such
recommendation within ten (10) business days after it has been issued to ISO by
the Review Board. Nothing in this Section 11.6 shall be deemed to require ISO to
delay making a filing or require the Commission to delay deciding any matter
because an appeal is pending before the Review Board. The Review Board shall not
have the right to review or otherwise participate in actions of ISO or to take
any action with respect to any matter involving a dispute between ISO and NEPOOL
or any Governance Participant.

 

39

--------------------------------------------------------------------------------

SECTION 12. ISO BUDGET

12.1 Preparation of Budget. No later than one hundred twenty (120) days before
the start of each Operating Year, ISO shall prepare and submit to the Budget &
Finance Subcommittee for comment a proposed budget for the upcoming Operating
Year. The budget shall contain separate sections for ISO’s (a) operating
expenses, (b) proposed capital expenses, if any, and (c) other extraordinary
nonrecurring expenses, if any. To the extent that any proposed capital or other
extraordinary expenses involve commitments which extend beyond the next
Operating Year, the budget shall contain the projected expenses, including
carrying charges for the length of the project.

12.2 Participants Committee Review. After taking into consideration the comments
of the Budget & Finance Subcommittee, ISO shall submit the budget to the
Participants Committee and the Individual Participants, which shall consider the
proposed budget no later than seventy-five (75) days before the start of the
Operating Year.

12.3 Participant Votes. ISO shall report the results of all Participants
Committee votes, if any, on the ISO budget to the ISO Board.

12.4 ISO Authority. The ISO Board shall have the sole authority to approve the
final ISO budget.

12.5 Filing of Budget. No later than sixty (60) days before the start of each
Operating Year, ISO shall file rates reflecting the final ISO budget with the
Commission and shall report the results of all Participants Committee votes on
the ISO budget to the Commission. If the Participants Committee does not
recommend to the ISO Board to approve all or a part of ISO’s proposed budget,
ISO shall request that the Commission expedite its review of the filing and
shall provide with its filing such factual and other information available to
ISO as is necessary to permit the Commission to address expeditiously those
issues that were raised during the Participants Committee meeting at which ISO’s
proposed budget was considered and were identified by the Governance
Participants and recorded by the Secretary of the Committee in the final minutes
of that Participants Committee meeting as reasons for opposing such budget.

SECTION 13. NOMINATION AND ELECTION OF ISO DIRECTORS

13.1 Nomination of Voting ISO Directors.

13.1.1 Nomination of Voting Directors. All nominees for election or re-election
as a voting director of the ISO Board shall be nominated by the Nominating
Committee. The nomination process shall take place sufficiently in advance of
the ISO Board’s annual meeting.

13.1.2 Composition of Nominating Committee. The composition of the Nominating
Committee shall be as follows: (i) up to seven (7) members of the ISO Board,
none of whom can be incumbent directors standing for re-election to the Board;
(ii) up to six (6) representatives of the NEPOOL Participants; and (iii) one
(1) representative of NECPUC; provided that, if there are less than five
(5) voting members in the AR Sector, the number of representatives of the ISO
Board and of the NEPOOL Participants shall each be reduced by one (1). Of the
NEPOOL Participant representatives, (x) all such representatives shall be
officers of the Participants

 

40

--------------------------------------------------------------------------------

Committee or their designees; (y) such representatives shall not include more
than one (1) representative from any Sector; and (z) all designees of the
officers of the Participants Committee shall meet certain criteria designated by
the ISO Board’s representatives on the Nominating Committee and the officers of
the Participants Committee. The Chair of the Nominating Committee shall be one
of the incumbent members of the ISO Board.

13.1.3 Input from Governance Participants. The Nominating Committee will solicit
input from Governance Participants and regulators on the types of expertise
(such as, for purposes of illustration but not by way of mandate or limitation,
experience in Commission electric regulatory affairs, energy industry
management, corporate finance, bulk power systems, human resource
administration, power pool operations, public policy, distributed generation or
demand response technologies, renewable energy, consumer advocacy, environmental
affairs, business management and information technologies) needed to ensure that
ISO has sufficient knowledge and expertise to act as the RTO for New England.

13.1.4 Search for Candidates. The Nominating Committee shall engage a nationally
recognized executive search firm to identify candidates to fill any vacancies
for voting directors on the ISO Board. The Nominating Committee may choose a
subset of the full Committee to interview candidates to fill vacancies.

13.1.5 Nominating Process. The Nominating Committee shall develop a slate of
candidates for election as voting directors to the ISO Board composed of
(i) incumbent ISO Board members whose term is expiring and who have been
identified by the ISO Board for reelection and (ii) candidates to fill
vacancies, if any, with assistance from the executive search firm engaged
pursuant to Section 13.1.4. The slate shall be selected by a consensus of the
Nominating Committee. The Nominating Committee shall present the slate of
candidates for election or re-election to the Participants Committee for a vote
on such slate at the Participants Committee’s next scheduled meeting.

13.2 Election of Directors.

13.2.1 NEPOOL Participant Vote. Following the nomination of the slate by the
Nominating Committee, such slate shall be submitted to the Participants
Committee for vote. A vote of 70% of the aggregate Sector Voting Shares shall be
required for Participants Committee endorsement of the slate. If the
Participants Committee endorses the slate, the Nominating Committee shall
present such slate to the ISO Board, or a Committee thereof, for a final vote at
the next regularly scheduled meeting of the ISO Board.

13.2.2 Failure of Endorsement. If the Participants Committee does not endorse
the initial slate, the Nominating Committee shall consider feedback from NECPUC,
the ISO Board, Individual Participants and the Participants Committee. The
Nominating Committee shall then repeat the process set forth in Sections 13.1.5
and 13.2.1, with the presentation of the second slate to occur at the next
regularly scheduled Participants Committee meeting held after the vote rejecting
the initial slate; provided that the Nominating Committee shall, in the second
slate, substitute a new nominee for at least one of the nominees included in the
initial slate without regard to whether such initial nominee was an incumbent
included on the initial slate pursuant to clause (i) of Section 13.1.5. If the
Participants Committee does not endorse either slate, then the Nominating
Committee shall present to the ISO Board, or a Committee thereof, for a final
vote one of the two slates presented to the Participants Committee.

 

41

--------------------------------------------------------------------------------

13.2.3 Rejection of Slate by ISO Board. If the ISO Board, acting as the members
of ISO, fails to elect a slate presented to it pursuant to Section 13.2.1 or
Section 13.2.2, the processes outlined in Section 13.1.5 and this Section 13.2
shall be repeated, provided that (i) the Nominating Committee shall present the
next slate for a final vote at the next regularly scheduled ISO Board meeting,
and (ii) the Nominating Committee shall have no obligation to include or exclude
any nominee from a previous slate.

13.2.4 Failure to Present a Slate to the ISO Board. Notwithstanding any other
provision of this Agreement, if the Participants Committee fails to present a
slate of nominees to the ISO Board prior to the annual meeting of members of ISO
held for purpose of electing directors, the ISO Board, acting as members of ISO,
will nominate and elect the directors of ISO at the annual meeting. ISO will
advise the Participants Committee on or prior to its first regular meeting of
each calendar year of the date of the annual meeting of members of ISO.

SECTION 14. FINANCIAL OBLIGATIONS OF GOVERNANCE PARTICIPANTS

14.1 Billing and Collection Agent. NEPOOL hereby appoints ISO, and ISO agrees to
act, as billing and collection agent for NEPOOL in respect of Participants
Expenses to be collected from Governance Participants pursuant to the terms of
the RNA and this Agreement.

14.2 NEPOOL Participants. Pursuant to the terms of the RNA, NEPOOL shall
calculate, and each NEPOOL Participant shall be obligated to pay, for the
relevant portion of the calendar year in which the Entity initially becomes a
NEPOOL Participant and in January of each subsequent calendar year (i) an annual
fee which shall be applied toward Participants Expenses, and (ii) the NEPOOL
Participant’s share of the remaining Participant Expenses. These sums shall be
collected by ISO pursuant to the terms of Section 14.1 above.

14.3 Individual Participants. ISO shall calculate, and each Individual
Participant shall be obligated to pay, for the relevant portion of the calendar
year in which the Entity initially becomes an Individual Participant and in
January of each subsequent calendar year (i) an annual fee which shall be
applied toward Participants Expenses, and (ii) the Individual Participant’s
share of the remaining Participant Expenses; provided that an Individual
Participant and Related Persons of an Individual Participant will in the
aggregate pay only the amount they would otherwise be required to pay if all the
Related Persons were NEPOOL Participants (i.e., only one total expense share in
the aggregate). For purposes of determining an Individual Participant’s annual
fee and share of the Participant Expenses, each Individual Participant will be
deemed to be a member of an appropriate Sector, as determined by ISO in
consultation with the officers of the Participants Committee.

SECTION 15. ANNUAL REPORTS AND PERFORMANCE AUDITS

15.1 Performance Audits. At the request of the Participants Committee, ISO shall
engage an independent third party to be chosen by mutual agreement of ISO and
the Participants Committee to conduct a periodic audit of ISO’s performance and
shall cooperate fully in the conduct of such audits. Such audits shall be
conducted at such intervals as shall be determined by the

 

42

--------------------------------------------------------------------------------

Participants Committee, but no more frequently than every three years unless a
specified issue has been identified for audit by the Participants Committee and
ISO. The report resulting from this audit shall be submitted to the ISO Board.
The ISO Board will share such report with the Participants Committee.

15.2 Response to Audit Recommendations. ISO shall respond in writing to any
recommendations from a performance audit and shall include periodic reports
regarding the status of any uncompleted commitments in response to such
recommendations. Such responses and reports shall be shared with the
Participants Committee.

15.3 Performance Measurements. If and to the extent the Commission establishes
standards to measure the performance of RTOs and/or independent system
operators, ISO shall provide the Participants Committee and Individual
Participants with reports of its performance against those standards. In
addition, ISO shall identify in writing any action it plans to take in response
to its measured performance relative to those standards and shall include in its
periodic reports the status of any uncompleted commitments so identified.

SECTION 16. FINANCIAL STATEMENTS

16.1 Provision of Financial Statements. To the extent not made publicly
available by ISO, ISO shall make available to each Governance Participant:
(a) quarterly unaudited financial statements within sixty (60) days after the
end of each quarter, and (b) annual audited financial statements within one
hundred twenty (120) days after the end of each fiscal year. In each instance,
the financial statements made available by ISO pursuant to (a) and (b) above
shall be prepared in accordance with GAAP and shall be true and correct in all
material respects.

16.2 Other Publicly Available Documents. If financial statements, permit
applications or any other filing with any Governmental Authority are publicly
available, ISO shall, upon request by a Governance Participant, provide such
Governance Participant information sufficient to allow such Governance
Participant to locate such documents, including the date and place of the filing
of the relevant documents.

SECTION 17. MISCELLANEOUS

17.1 Confidentiality. The Parties shall comply with the requirements of the
Information Policy with respect to any proprietary or confidential information
received from or about any Governance Participant or ISO, and, through the terms
of the RNA, NEPOOL shall require the NEPOOL Participants to comply with the
requirements of the Information Policy with respect to any proprietary or
confidential information received from or about any Governance Participant or
ISO.

17.2 Amendments.

17.2.1 Amendments in Writing; Exceptions. Except as otherwise provided for in
this Section 17.2.1, this Agreement may be amended only in writing and as agreed
to by ISO and the Governance Participants, provided that additional Entities may
become Governance Participants without any amendment to this Agreement or any
consent or approval of the Governance Participants.

 

43

--------------------------------------------------------------------------------

17.2.2 Categorization of Amendments. Any amendment of this Agreement to cure any
ambiguity or correct or supplement any defective provision or to make any other
change that does not affect the rights or obligations of any Governance
Participant shall be authorized on behalf of the Parties to this Agreement other
than ISO by the unanimous approval of the Chair and Vice-Chairs of the
Participants Committee. All other amendments shall require a vote as set forth
in Section 17.2.3.

17.2.3 Voting on Amendments to this Agreement. A Participants Committee vote to
amend this Agreement pursuant to Section 17.2.3 shall be accomplished as
follows:

(a) Amendments proposed by ISO, a Principal Committee or ad hoc committee, or a
Governance Participant shall be sent to the Participants Committee for its
consideration.

(b) The Balloting Agent shall circulate ballots for amendments that are both
agreeable to ISO and directed by the Participants Committee for balloting to
each Governance Participant for execution by its voting member or alternate on
the Participants Committee or such Governance Participant’s duly authorized
representative.

(c) Solely for purposes of this Section 17.2, the Individual Participants shall
have a vote on the Participants Committee. Such vote shall be calculated as if
each Individual Participant belonged to the Sector in accordance with which its
portion of the Participant Expenses is assessed.

(d) In order to be counted, ballots must be executed and returned to the
Balloting Agent in accordance with the following schedule:

(i) If the ballots are delivered to each Governance Participant by regular mail,
properly executed ballots must be returned to and received by the Balloting
Agent within ten (10) business days after deposit of such ballots in the mail by
the Balloting Agent.

(ii) If the ballots are delivered to each Governance Participant by overnight
delivery, facsimile, electronic mail or hand delivery, then properly executed
ballots must be returned to and received by the Balloting Agent within five
(5) business days after (A) deposit of such ballots with an overnight delivery
courier if delivered by overnight delivery, or (B) transmission of such ballots
by the Balloting Agent if delivered by facsimile or electronic mail, or
(C) receipt by the Governance Participant if delivered by hand delivery.

(iii) If the Minimum Response Requirement for an amendment has not been received
by the Balloting Agent within the schedule identified in subsections (i) or
(ii) above, the Balloting Agent shall send notice by overnight delivery,
facsimile, electronic mail or hand delivery to all non-responding Governance
Participants and shall count any additional properly executed ballots which it
receives within five (5) business days after such notice. The date by which
properly executed ballots must be returned and received by the Balloting Agent
shall be specified by the Balloting Agent in the notice accompanying such
ballots.

 

44

--------------------------------------------------------------------------------

(e) In order for a proposed amendment to this Agreement to be approved by the
Participants Committee, the Minimum Response Requirement must be satisfied with
respect to the proposed amendment, and the affirmative ballot votes with respect
to the proposed amendment must equal or exceed 70% of the Participant Vote.

17.2.4 Binding Effect of Amendments. Any amendment of this Agreement pursuant to
this Section 17.2 shall bind all Governance Participants regardless of whether
they have executed a ballot in favor of such amendment, on the date specified in
the amendment, subject to acceptance or approval by the Commission. Nothing
herein shall be construed to prevent any Governance Participant from challenging
any proposed amendment before the Commission on the grounds that the proposed
amendment or its application to the Governance Participants is in violation of
the Federal Power Act or of the Agreement.

17.3 Dispute Resolution. The Parties agree that any dispute arising under this
Agreement shall be the subject of good-faith negotiations among the affected
Parties and that each affected Party shall designate one or more representatives
with the authority to negotiate the matter in dispute to participate in such
negotiations. If the dispute involves NEPOOL, NEPOOL’s designated representative
shall be the Chair of the Participants Committee. The Parties shall engage in
such good-faith negotiations for a period of not less than sixty (60) calendar
days, unless: (a) a Party identifies exigent circumstances reasonably requiring
expedited resolution of the dispute by the Commission; or (b) the provisions of
this Agreement otherwise provide a Party the right to submit a dispute directly
to the Commission for resolution. Any other dispute that is not resolved through
good-faith negotiations may be submitted by any Party for resolution to the
Commission upon the conclusion of such negotiations. Any Party may request that
any dispute submitted to the Commission for resolution be subject to the
Commission’s settlement procedures.

17.4 Disclaimer of Liabilities/Force Majeure.

17.4.1 Disclaimer of Liabilities. The limitation of liability provisions of
Section I of the Tariff are hereby incorporated by reference.

17.4.2 Force Majeure. A Party shall not be considered to be in default or breach
under this Agreement, and shall be excused from performance or liability for
damages to any other Party, if and to the extent it shall be delayed in or
prevented from performing or carrying out any of the provisions of this
Agreement, except the obligation to pay any amount when due, in consequence of
any act of God, labor disturbance, failure of contractors or suppliers of
materials (not including as a result of non-payment), act of the public enemy,
terrorist, war, invasion, insurrection, riot, fire, storm, flood, ice,
explosion, breakage or accident to machinery or equipment (not by reason of
negligence) or by any other cause or causes (not including a lack of funds or
other financial causes) beyond such Party’s reasonable control, including any
order, regulation, or restriction imposed by governmental, military or lawfully
established civilian authorities. Any Party claiming a force majeure event shall
use reasonable diligence to remove the condition that prevents performance,
except that the settlement of any labor disturbance shall be in the sole
judgment of the affected Party, and shall notify the affected Parties of such
force majeure event. No Party shall be required to take any action or refrain
from taking any action that would result in a violation of any applicable law,
regulation or order of any Governmental Authority.

 

45

--------------------------------------------------------------------------------

17.5 Governing Law. The terms of this Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware.

17.6 Jurisdiction; Venue; Service of Process. Each Party hereby irrevocably
(1) submits to the jurisdiction of any Massachusetts state court or the United
States District Court for the District of Massachusetts over any action or
proceeding arising out of or relating to this Agreement that is not subject to
the exclusive jurisdiction of the Commission, (2) agrees that all claims with
respect to such action or proceeding shall be heard and determined in such
Massachusetts state court or the United States District Court for the District
of Massachusetts, (3) waives any objection to venue or any action or proceeding
in Massachusetts on the basis of forum non conveniens, (4) agrees that service
of process may be made on a Party outside Massachusetts by certified mail,
postage prepaid, mailed to the Party at the address of its principal place of
business, and agrees to waive service of a summons in federal court as provided
by Rule 4(d) of the Federal Rules of Civil Procedure, and (5) waives the right
to contest that service of process as contemplated by Section 17.6(4) is
invalid.

17.7 Assignment. The Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the respective signatories hereto,
but no assignment of ISO’s interests or obligations under this Agreement or any
portion thereof shall be made without the written consent of the Participants
Committee and no assignment of an Individual Participant’s or NEPOOL’s interest
or obligations under this Agreement or any portion thereof shall be made without
the consent of ISO, except as otherwise permitted by the Tariff, or except in
connection with a sale, merger, or consolidation which results in the transfer
of all or a portion of an Individual Participant’s generation or transmission
assets to, and the assumption of all of the obligations of the Individual
Participant under this Agreement (or in the case of a transfer of a portion of
an Individual Participant’s generation or transmission assets, the assumption of
obligations of the Individual Participant under this Agreement with respect to
such assets) by, an acquiring or surviving Entity which either is, or
concurrently becomes, an Individual Participant, or agrees to assume such of the
Individual Participant’s obligations with respect to such assets as ISO may
reasonably require, or except in connection with the grant of a security
interest in an Individual Participant’s assets as security for bonds or other
financing.

17.8 Relationship of Parties. Nothing in this Agreement is intended to create a
partnership, joint venture or other joint legal entity making any Party jointly
or severally liable for the acts or omissions of any other Party. Nothing in
this Agreement is intended to create a principal/agency relationship between or
among any of the Parties and, except as expressly provided herein, no Party
shall have any authority, in any way, to bind any other Party. Notwithstanding
the Participant Processes hereunder, including the provisions of
Section 8.1.3(i), each Party is acting in its individual capacity and has the
full right to enforce its rights against the other under this Agreement.

17.9 Waiver. Delay by any Party in enforcing its rights under this Agreement
shall not be deemed a waiver of such rights. Any waiver of rights by any Party
with respect to any default or other matter arising under this Agreement shall
not be deemed a waiver with respect to any additional default or other matter
arising under this Agreement.

 

46

--------------------------------------------------------------------------------

17.10 Severability. If any term, condition, covenant, restriction or other
provision of this Agreement is held by a court or regulatory agency of competent
jurisdiction or by legislative enactment to be invalid, void, otherwise
unenforceable or, with respect to any provision relating to ISO’s corporate
governance, a court of competent jurisdiction or ISO, in good faith, determines
that such provision is not authorized by Delaware corporate law, the remainder
of the terms, conditions, covenants, restrictions and other provisions of this
Agreement shall remain in full force and effect unless such an interpretation
would materially alter the rights and privileges of any Party hereto. If any
term, condition, covenant, restriction or other provision of this Agreement is
held to be invalid, void, otherwise unenforceable or, with respect to any
provision relating to ISO’s corporate governance, determined not to be
authorized by Delaware corporate law, the Parties shall attempt to negotiate an
appropriate replacement provision or other revisions to this Agreement to
restore the rights and obligations conferred under the original Agreement. In
advance of the Parties’ agreement on renegotiated terms, the Parties shall
comply with the relevant laws.

17.11 Notices to ISO, Governance Participants, Committees, or Committee Members.

(a) Any notice, demand, request or other communication required or authorized by
this Agreement to be given to ISO shall be in writing, and shall be
(1) personally delivered to the ISO’s Chief Executive Officer; (2) mailed,
postage prepaid, to ISO at the address of ISO’s principal office, Attention:
Chief Executive Officer; (3) sent by facsimile (“faxed”) to ISO at the fax
number of its Chief Executive Officer; or (4) delivered electronically to ISO’s
Chief Executive Officer at his or her electronic mail address at ISO.

(b) Any notice, demand, request or other communication required or authorized by
this Agreement to be given to any Governance Participant shall be in writing,
and shall be (1) personally delivered to the Participants Committee member or
alternate representing that Governance Participant or, in the case of an
Individual Participant, to the representative specified by the Individual
Participant pursuant to Section 5.1 hereof; (2) mailed, postage prepaid, to the
Governance Participant at the address of its member on the Participants
Committee as set out in the Governance Participant roster, at the address of its
principal office, or, in the case of an Individual Participant, to the address
specified by the Individual Participant pursuant to Section 5.1 hereof; (3) sent
by facsimile (“faxed”) to the Governance Participant at the fax number of its
member on the Participants Committee as set out in the Governance Participant
roster, or, in the case of an Individual Participant, to the number specified by
the Individual Participant pursuant to Section 5.1 hereof; or (4) delivered
electronically to the Governance Participant at the electronic mail address of
its member on the Participants Committee, or, in the case of an Individual
Participant, to the electronic mail address specified by the Individual
Participant pursuant to Section 5.1 hereof. The designation of any such address
may be changed at any time by written notice delivered to the Secretary of the
Participants Committee, in the case of a NEPOOL Participant, or to the ISO, in
the case of an Individual Participant, in each case who shall cause such change
to be reflected in the relevant roster.

 

47

--------------------------------------------------------------------------------

(c) Any notice, demand, request or other communication required or authorized by
this Agreement to be given to any Principal Committee shall be in writing and
shall be delivered to the Secretary of the committee. Each such notice shall
either be personally delivered to the Secretary, mailed, postage prepaid, or
sent by facsimile (“faxed”) to the Secretary at the address or fax number set
out in the NEPOOL Participant roster, or delivered electronically to the
Secretary. The designation of such address may be changed at any time by written
notice delivered to each Governance Participant.

(d) Any notice, demand, request or other communication required or authorized by
this Agreement to be given to a member or alternate to that member of a
Principal Committee (for the purposes of this Section 17.11, individually or
collectively, the “Committee Member”) shall be (1) personally delivered to the
Committee Member; (2) mailed, postage prepaid, to the Committee Member at the
address of the Committee Member set out in the NEPOOL Participant roster;
(3) sent by facsimile (“faxed”) to the Committee Member at the fax number of the
Committee Member set out in the NEPOOL Participant roster; or (4) delivered
electronically to the Committee Member at the electronic mail address of the
Committee Member set out in the NEPOOL Participant roster. The designation of
any such address may be changed at any time by written notice delivered to the
Secretary of the Principal Committee on which the Committee Member serves, who
shall cause such change to be reflected in the NEPOOL Participant roster.

(e) To the extent that ISO is required to serve upon any Governance Participant
a copy of any document or correspondence filed with the Commission under the
Federal Power Act or the Commission’s rules and regulations thereunder, such
service may be accomplished by electronic delivery to the Governance Participant
at the electronic mail address of its Participants Committee member and
alternate or, in the case of an Individual Participant, to the electronic mail
address specified by the Individual Participant pursuant to Section 5.1 hereof.
The designation of any such address may be changed at any time by written notice
delivered to ISO’s General Counsel.

(f) To the extent that a Governance Participant is required to serve upon ISO a
copy of any document or correspondence filed with the Commission under the
Federal Power Act or the Commission’s rules and regulations thereunder, such
service may be accomplished by electronic delivery to ISO’s General Counsel. The
designation of any such address may be changed at any time by written notice
delivered to each Governance Participant.

(g) Any such notice, demand or request so addressed and mailed by registered or
certified mail shall be deemed to be given when so mailed. Any such notice,
demand, request or other communication sent by regular mail or by facsimile
(“faxed”) or delivered electronically shall be deemed given when received by
ISO, the Governance Participant, Secretary of the committee, or Committee
Member, whichever is applicable.

17.12 No Third-Party Beneficiaries. This Agreement is intended to be solely for
the benefit of the Parties and their respective successors and permitted assigns
and, unless expressly stated herein, is not intended to and shall not confer any
rights or benefits on any third party (other than successors and permitted
assigns) not a signatory hereto, including without limitation the NEPOOL
Participants.

 

48

--------------------------------------------------------------------------------

17.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.

 

49

--------------------------------------------------------------------------------

SCHEDULE 1

Individual Participants

--------------------------------------------------------------------------------

SCHEDULE 2

Operating Procedures in Effect on the Operations Date

ISO New England Operating Procedure no. 1 (Central Dispatch Operating
Responsibility and Authority of ISO New England, the Local Control Centers and
Market Participants)

ISO New England Operating Procedure no. 2 (Maintenance of Communications,
Computers, Metering and Computer Support Equipment)

ISO New England Operating Procedure no. 3 (Transmission Outage Scheduling)

ISO New England Operating Procedure no. 4 (Action During a Capacity Deficiency)

ISO New England Operating Procedure no. 5 (Generation Maintenance and Outage
Scheduling)

ISO New England Operating Procedure no. 6 (System Restoration)

ISO New England Operating Procedure no.7 (Action in an Emergency)

ISO New England Operating Procedure no. 8 (Operating Reserve and Regulation)

ISO New England Operating Procedure no. 9 (Scheduling and Dispatch of External
Transactions)

ISO New England Operating Procedure no. 10 (Analysis and Reporting of Power
System Emergencies)

ISO New England Operating Procedure no. 11 (Black Start Capability Testing
Requirements)

ISO New England Operating Procedure no. 12 (Voltage and Reactive Control)

ISO New England Operating Procedure no. 13 (Standards for Voltage Reduction and
Load Shedding Capability)

ISO New England Operating Procedure no. 14 (Technical Requirements for
Generation, Dispatchable and Interruptible Loads)

ISO New England Operating Procedure no.16 (Transmission System Data)

ISO New England Operating Procedure no. 17 (Load Power Factor Correction)

ISO New England Operating Procedure no. 18 (Metering and Telemetering Criteria)

ISO New England Operating Procedure no. 19 (Transmission Operations)