TRANSITION POWER AGREEMENT
(District of Columbia)

 

By and Between

 

POTOMAC ELECTRIC POWER COMPANY

and

SOUTHERN COMPANY ENERGY MARKETING, L.P.

Dated December 19, 2000

 

TABLE OF CONTENTS

ARTICLE 1

DEFINITIONS

1

ARTICLE 2
    2.1
    2.2

TERM AND TERMINATION
    Term
    Termination

2
2
2

ARTICLE 3
    3.1
    3.2

CAPACITY RESOURCES
    Capacity Resources Obligations
    Capacity Resources Information Requirements

2
2
3

ARTICLE 4

ANCILLARY SERVICES

4

ARTICLE 5
    5.1
    5.2
    5.3

ENERGY
    Required Energy
    Optional Energy
    Determination of Energy Requirements, Losses

4
4
4
5

ARTICLE 6
    6.1
    6.2

PRICING
    Compensation for Services
    Taxes

5
5
6

ARTICLE 7

SERVICES OBTAINED BY GENERATOR FROM PJM

6

ARTICLE 8
    8.1
    8.2

ALTERNATIVE SERVICES AND LIMITED LIABILITY
    Alternative Services
    Limitation on Liability

6
6
7

ARTICLE 9
    9.1
    9.2
    9.3

FORCE MAJEURE
    Effect of Force Majeure
    Force Majeure Defined
    Notification

7
7
7
8

ARTICLE 10
    10.1
    10.2
    10.3
    10.4

INDEMNIFICATION FOR THIRD PARTY CLAIMS
    Generator's Indemnification
    Pepco's Indemnification
    Indemnification Procedures
    Survival

8
8
8
9
9

ARTICLE 11
    11.1
    11.2

DEFAULT
    Event of Default
    Remedies

9
9
10

ARTICLE 12
    12.1
    12.2

PROJECTIONS AND OPERATING COMMITTEE
    Projections
    Operating Committee

10
10
10

ARTICLE 13
    13.1
    13.2
    13.3

COST RESPONSIBILITIES AND BILLING PROCEDURES
    Billing Procedures
    Billing Disputes
    Interest on Unpaid Balances

11
11
11
12

ARTICLE 14
    14.1
    14.2
    14.3

CONFIDENTIALITY
    Confidentiality Obligations of Pepco
    Confidentiality of Audits
    Remedies

12
12
13
13

ARTICLE 15
    15.1
    15.2

DISPUTE RESOLUTIONS
    Disputes
    Arbitration

13
13
14

ARTICLE 16
    16.1
    16.2

REPRESENTATIONS
    Representations of Pepco
    Representations of Generator

15
15
16

ARTICLE 17
    17.1
    17.2
    17.3
    17.4
    17.5
    17.6

ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
    Generally
    Pepco's Assignment Rights
    Generator's Assignment Rights
    Mergers or Consolidations
    Limitations
    Successors

17
17
17
17
18
18
18

ARTICLE 18

NOTICES

18

ARTICLE 19
    19.1
    19.2

AMENDMENTS
    Amendments
    PJM Agreement Modifications

19
19
19

ARTICLE 20

AUDITS

20

ARTICLE 21
    21.1
    21.2
    21.3
    21.4
    21.5
    21.6
    21.7
    21.8
    21.9
    21.10
    21.11

MISCELLANEOUS PROVISIONS
    Waiver
    No Third Party Beneficiaries
    Governing Law
    Counterparts
    Interpretation
    Jurisdiction and Enforcement
    Entire Agreement
    Severability
    Further Assurances
    Independent Contractor Status
    Conflicts

20
20
21
21
21
21
22
22
22
23
23
23

SCHEDULE 1

DEFINITIONS

25

EXHIBIT A

Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity Resources for
the Service Load

29

EXHIBIT B

Capacity Resources Plan for Contract Year 1

30

                TRANSITION POWER AGREEMENT (District of Columbia)

            This Transition Power Agreement ("Agreement") dated as of December
19,
2000 by and between Potomac Electric Power Company ("Pepco") a District of
Columbia
and Virginia corporation, and Southern Company Energy Marketing, L.P.
("Generator")
a Delaware limited partnership.   Pepco and Generator are each referred to
herein as a "Party,"
and collectively referred to herein as the "Parties."

                                                       WITNESSETH:

           WHEREAS, Pepco and Southern Energy, Inc., a Delaware corporation (the
"SEI") have entered into an Asset Sale and Purchase Agreement (as amended
from time to time, the "Asset Sale Agreement") dated June 7, 2000 for (i) the
sale and
purchase of certain of Pepco's generating resources and (ii) the assignment or
rights and
obligations under five power purchase agreements ("PPAs") or for alternative
arrangements relating to such PPAs;

          WHEREAS, SEI has assigned its rights and obligations under this
Agreement
to Generator in accordance with Section 12.5 of the Asset Sale Agreement;

          WHEREAS, certain of the PPAs provide for the purchase and sale of
renewable
energy resources;

          WHEREAS, Pepco will continue to operate its transmission and
distribution
businesses which includes obligations to sell power to its retail customers; and

          WHEREAS, the Parties have agreed in the Asset Sale Agreement to
execute this
Agreement in order to provide for the sale by Generator, and purchase by Pepco,
of
capacity, electric energy and certain ancillary services in accordance with the
terms and
conditions of this Agreement.

          NOW THEREFORE, in consideration of the mutual representations,
covenants
and agreements hereinafter set forth, and intending to be legally bound hereby,
the
Parties hereto agree as follows:

                                                               ARTICLE 1
                                                             DEFINITIONS

          Unless otherwise defined herein, capitalized terms used in this
Agreement shall
have the meanings specified or referred to in Schedule 1 of this Agreement.

                                                              ARTICLE 2
                                                TERM AND TERMINATION

          2.1      Term. This Agreement shall become effective upon consummation
of the
Closing ("Effective Date"). Unless terminated sooner in accordance with the
terms of this
Agreement, this Agreement shall continue in full force and effect from the
Effective Date
until the end of Contract Year 4.

          2.2      Termination. The applicable provisions of this Agreement
shall continue in
effect after cancellation or termination hereof to the extent necessary to
provide for final
billings, billing adjustments and payments pertaining to liability and
indemnification
obligations arising from acts or events that occurred while this Agreement was
in effect.

                                                                     ARTICLE 3
                                                          CAPACITY RESOURCES

           3.1     Capacity Resources Obligations

                     (a)            During the term of this Agreement, Generator
shall supply to
Pepco and make available within PJM on Pepco's behalf, and Pepco shall purchase
from
Generator, Pepco's full requirements for Capacity Resources to serve the Service
Load
("Capacity Resource Requirements") at the prices set forth in Article 6 of this
Agreement.
Capacity Resources shall be determined, and provided by the Generator, in
accordance
with the PJM Reliability Agreement and other applicable PJM requirements.
Capacity
Resource Requirements shall mean the portion of Pepco's Accounted-For
Obligation, as
that term is defined and determined in accordance with the PJM Reliability
Agreement
and applicable PJM requirements, that is located in the District of Columbia.

                     (b)            To the extent that PJM assigns to Pepco
Fixed Transmission Rights
for Capacity Resources contained in a Capacity Resource Plan and designated for
Fixed
Transmission Rights, Pepco shall transfer such Fixed Transmission Rights to
Generator
pursuant to PJM's procedures for assigning Fixed Transmission Rights

                     (c)           Generator shall provide to the PJM System
Operator or PJM
Interconnection LLC, as applicable, all information and data required with
respect to the
Capacity Resources Requirements, with copies to Pepco, and Generator shall be
responsible for any charges levied by the PJM System Operator or the PJM
Interconnection LLC on Pepco or Generator due to the delayed receipt of such
information and data in accordance with the PJM Reliability Agreement unless the
delay
is due to Pepco's delay in providing Generator with information that Pepco is
required to
provide.

           3.2     Capacity Resources Information Requirements

                      (a)           Generator shall provide in accordance with
this Section 3.2 its
proposed plan to satisfy its obligations hereunder to provide the Capacity
Resources
Requirements under this Agreement ("Capacity Resources Plan").

                      (b)           Exhibit A hereto sets forth Pepco's
non-binding estimate of the
Capacity Resources required to supply the Service Load for each month during the
2001
calendar year. On or before April 1 preceding each Planning Period thereafter,
Pepco
shall provide Generator with a non-binding estimate of the Capacity Resources
required
to supply the Service Load for each month in the following Planning Period.

                      (c)           Exhibit B hereto sets forth the Generator's
Capacity Resources Plan
for Contract Year 1.

                      (d)           On or before May 1 preceding each Planning
Period thereafter
during the term of this Agreement, the Generator shall provide to the Operating
Committee, for review and approval (such approval not to be unreasonably
withheld or
delayed), its proposed Capacity Resources Plan (including Generator's proposed
designation of Capacity Resources for associated Fixed Transmission Rights) to
be
submitted to the PJM Interconnection LLC in accordance with Schedule 6 of the
PJM
Reliability Agreement for the upcoming Planning Period.

                      (e)           If the Generator intends to propose any
material change to a
Capacity Resources Plan (including any change in a designation of Capacity
Resources
eligible for Fixed Transmission Rights) which has previously been approved by
the
Operating Committee, the Generator shall provide such proposed changes to the
Operating Committee before it is submitted for approval pursuant to the PJM
Reliability
Agreement and such change shall be subject to the Operating Committee for review
and
approval (such approval not to be unreasonably withheld or delayed) if the
change (1)
adds a resource other than (x) capacity already certified by the PJM
Interconnection LLC
or PJM System Operator, as applicable, as a Capacity Resource or (y) Capacity
Credits, or
(2) proposes to change a designation of Capacity Resources eligible for Fixed
Transmission Rights.

                                                    ARTICLE 4
                                              ANCILLARY SERVICES

           During the term of this Agreement, Generator shall supply to Pepco
and deliver
within PJM on Pepco's behalf, and Pepco shall purchase, Pepco's full
requirements for
Ancillary Services for the Service Load ("Ancillary Services Requirements") at
the prices
set forth in Article 6 of this Agreement. Ancillary Services mean Regulation and
Frequency Response Service (as defined in Schedule 3 of the PJM Tariff) and
Operating
Reserves (as defined in Schedules 5 and 6 of the PJM Tariff).

                                                        ARTICLE 5
                                                          ENERGY

           5.1      Required Energy. During the term of this Agreement,
Generator shall supply
to Pepco at the Delivery Points, and Pepco shall purchase, the following
percentages of
Pepco's Full Energy Requirements in the year indicated below (the "Required
Energy
Percent") at the prices set forth in Article 6 of this Agreement:

 

Year

Required Energy Percent

 

Contract Year 1

100%

 

Contract Year 2

  75%

           5.2     Optional Energy

                      (a)     For the duration of each of Contract Year 2,
Contract Year 3 and
Contract Year 4, Pepco shall have the right to purchase from Generator (the
"Call
Options") the percentages of the Full Energy Requirements indicated below (the
"Optional Energy Percent"). To the extent Pepco exercises a Call Option for a
given
year, Generator shall supply to Pepco at the Delivery Points the Optional Energy
Percent
at the price set forth in Article 6 of this Agreement.

 

Year

Optional Energy Percent

 

Contract Year 2

25%

 

Contract Year 3

100% (in 25% increments)

 

Contract Year 4

100% (25% increments)

           Notwithstanding the foregoing, the total of Pepco's Call Options
exercised with
respect to the Optional Energy Percent for Contract Year 3 and Contract Year 4,
respectively, shall not exceed the percentage of the Full Energy Requirements
that Pepco
elected to purchase in the immediately preceding contract year.

                      (b)     By each October 1 prior to the contract year in
which the applicable
Optional Energy Percent is deliverable ("Strike Date"), Pepco shall notify
Generator in
writing whether it is exercising any of its Call Options for the upcoming
contract year,
and if so, the percentage of its Full Energy Requirements it elects to purchase.

                      5.3     Determination of Energy Requirements. The amount
of Full Energy
Requirements shall be as determined by PJM in accordance with Schedule 1,
Section 3.2
of the PJM Operating Agreement at the respective PJM load buses measured by PJM
for
the Service Load served by Pepco (the "Delivery Points"). Generator shall be
responsible
for all energy losses (including allocated PJM losses, unaccounted-for energy
and
distribution losses) associated with delivery of Required Energy Percent and
Optional
Energy Percent to the Service Load.

                                                                   ARTICLE 6
                                                                     Pricing

                      6.1     Compensation for Services.Subject to the terms of
this Agreement,
Pepco shall be obligated to make a monthly payment to Generator for the Services
it
provides which shall be comprised of the following components:

                                (a)       For each Month during the term of the
Agreement, a Capacity
Payment for the Capacity Resources Requirements and Ancillary Services
Requirements
that Generator provides to Pepco in such Month calculated as follows:

                     Capacity Payment = (Capacity Price + Ancillary Services
Price) x Metered
                     Energy Requirements

                                Where:

                                           Capacity Price = $3.50/MWh

                                           Ancillary Services Price = $0.50/MWh

                     (b)      For each Month during the term of the Agreement,
an Energy
Payment for the Required Energy Percent and Optional Energy Percent, if any,
that
Generator delivers to Pepco at the Delivery Points in each Month calculated as
follows:

                      Energy Payment = [Metered Energy Requirements x (Required
                     Energy Percent + Optional Energy Percent)] x Energy Price

                                Where:

                                            Energy Price = $35.50/MWh during a
Summer
                                            Month and $25.30/MWh during a Winter
Month.

                      (c)     Pepco's monthly payment to Generator will be
decreased by
(i) any PJM charges for transmission congestion, allocated losses and
unaccounted-for energy that Pepco incurs in connection with the Services
Generator delivers to Pepco pursuant to Articles 4, 5 and 6 of this Agreement,
and (ii) the amounts of any payments Generator owes to Pepco pursuant to
Article 8 of this Agreement.

                     6.2      Taxes.  Generator shall be responsible for taxes
related to the sale or
provision of Services hereunder.

                                                        ARTICLE 7
                      SERVICES OBTAINED BY GENERATOR FROM PJM

                      Pepco shall, upon Generator's request, reasonably
cooperate with Generator
to facilitate its acquisition in the PJM marketplace and resale to Pepco of the
Services
Generator is obligated to provide to Pepco under this Agreement. Pepco shall
follow
Generator's instructions with respect to scheduling load in the day ahead PJM
market.

                                                        ARTICLE 8
           ALTERNATIVE SERVICES AND LIMITATION OF LIABILITY

                      8.1     Alternative Services. To the extent that Generator
does not provide
Capacity Resources Requirements, Ancillary Services Requirements, the Required
Energy
and/or Optional Energy ("Services") to Pepco as required under this Agreement,
Generator, as an alternative method of performing such obligations, shall pay
Pepco the
positive difference between the price Pepco pays for such Services in the
appropriate PJM
marketplace, or if not available in the PJM market, any other market
("Alternative
Services") and the price Pepco would have paid to Generator for such Services
under this
Agreement, plus penalties and nonperformance charges, if any, assessed on Pepco
by the
PJM Interconnection LLC or PJM System Operator as a result of the Generator not
providing the Services. Calculation of the cost of Alternative Services
hereunder shall
include all reasonable direct costs associated with the procurement and delivery
of
Alternative Services, including legal or transactional costs and expenses;
taxes, energy,
demand, capacity, or reservation charges; energy losses; emergency energy; and
any
transmission or congestion costs but does not include the cost of PJM network
service.
For purposes of determining the amount of Alternative Services Pepco purchases
to
satisfy its energy requirements, energy requirements for any day shall be the
net amount of
energy Pepco purchases for the Service Load in the PJM day-ahead and second
settlement
markets.

                      8.2     Limitation of Liability. Except for indemnity
obligations set forth in
Article 10 and the damages, charges or penalties set forth in Sections 3.1(c),
5.3, 8.1 and
13.3 of this Agreement, neither Party, nor their respective officers, directors,
agents,
employees, Affiliates, or successors or assigns of any of them, shall be liable
to the other
Party or its Affiliates, officers, directors, agents, employees, successors or
assigns for
claims, suits, actions or causes of action for incidental, punitive, special,
indirect, multiple
or consequential damages (including, without limitation, lost revenues, claims
of
customers, attorneys' fees and litigation costs) connected with, or resulting
from,
performance or non-performance of this Agreement, or any actions undertaken in
connection with or related to this Agreement, including, without limitation, any
such
damages which are based upon causes of action for breach of contract, tort
(including
negligence and misrepresentation), breach of warranty or strict liability. The
provisions of
this Section 8.2 shall apply regardless of fault and shall survive termination,
cancellation,
suspension, completion, or expiration of this Agreement.

                                                         ARTICLE 9
                                                       Force Majeure

                      9.1     Effect of Force Majeure. Notwithstanding anything
in this Agreement
to the contrary, the Parties shall be excused from performing their respective
obligations
hereunder (except for the obligation to pay sums of money due and owing
hereunder) and
shall not be liable in damages or otherwise, to the extent that a Party is
unable to perform
or is prevented from performing by an event of Force Majeure and has complied
with
Section 9.3.

                     9.2      Force Majeure Defined. Force Majeure includes,
without limitation,
storm, flood, lightning, drought, earthquake, fire, explosion, civil
disturbance, acts of God
or the public enemy, civil disturbance, or any other cause beyond a Party's
reasonable
control but only if and to the extent that the event directly affects the
availability of the
transmission or distribution facilities of PJM or Pepco which are necessary to
deliver
capacity or energy to the Service Load. Force Majeure shall not include events
affecting
the availability or cost of operating any generating facility or resource.

                      9.3     Notification. A Party shall not be entitled to
rely on the occurrence of
an event of Force Majeure as a basis for being excused from performance of its
obligations
under this Agreement unless the Party relying on the event or condition shall:
(a)
provide prompt written notice of such Force Majeure event to the other Party,
including
an estimation of its expected duration and the probable impact on the
performance of its
obligations hereunder; (b) exercise all reasonable efforts to continue to
perform its
obligations under this Agreement; (c) expeditiously take action to correct or
cure the
event or condition excusing performance; (d) exercise all reasonable efforts to
mitigate or
limit damages to the other Party; and (e) provide prompt notice to the other
Party of the
cessation of the event or condition giving rise to its excuse from performance.
Subject to
this Section 9.3, any obligation under this Agreement shall be suspended only to
the
extent caused by such Force Majeure and only during the continuance of any
inability of
performance caused by such Force Majeure but for no longer period.

                                                       ARTICLE 10
                          Indemnification FOR THIRD PARTY CLAIMS

                     10.1      Generator's Indemnification. Generator shall
indemnify, hold
harmless, and defend Pepco and its Affiliates, as the case may be, and their
respective
officers, directors, employees, agents, contractors, subcontractors, invitees,
successors and
permitted assigns from and against any and all claims, liabilities, costs,
damages, and
expenses (including, without limitation, reasonable attorney and expert fees,
and
disbursements incurred by any of them in any action or proceeding between Pepco
and a
third party or Generator) for damage to property of unaffiliated third parties,
injury to or
death of any person, including Pepco's employees or any third parties, to the
extent
caused, by the negligence or willful misconduct of Generator's and/or its
officers,
directors, employees, agents, contractors, subcontractors or invitees arising
out of or
connected with Generator's performance or breach of this Agreement, or the
exercise by
Generator of its rights hereunder.

                      10.2     Pepco's Indemnification. Pepco shall indemnify,
hold harmless, and
defend Generator and its Affiliates, as the case may be, and their respective
officers,
directors, employees, agents, contractors, subcontractors, invitees, successors
and
permitted assigns from and against any and all claims, liabilities, costs,
damages, and
expenses (including, without limitation, reasonable attorney and expert fees,
and
disbursements incurred by any of them in any action or proceeding between the
Generator and a third party or Pepco) for damage to property of unaffiliated
third parties,
injury to or death of any person, including Generator's employees or any third
parties, to
the extent caused by the negligence or willful misconduct of Pepco and/or its
officers,
directors, employees, agents, contractors, subcontractors or invitees arising
out of or
connected with Pepco's performance or breach of this Agreement, or the exercise
by
Pepco of its rights hereunder.

                      10.3     Indemnification Procedures. If either Party
intends to seek
indemnification under this Article 10 from the other Party, the Party seeking
indemnification shall give the other Party notice of such claim within ninety
(90) days of
the later of the commencement of, or the Party's actual knowledge of, such claim
or
action. Such notice shall describe the claim in reasonable detail, and shall
indicate the
amount (estimated if necessary) of the claim that has been, or may be sustained
by, said
Party. To the extent that the other Party will have been actually and materially
prejudiced as a result of the failure to provide such notice, such notice will
be a condition
precedent to any liability of the other Party under the provisions for
indemnification
contained in this Agreement. Neither Party may settle or compromise any claim
without
the prior consent of the other Party; provided, however, said consent shall not
be
unreasonably withheld or delayed.

                      10.4     Survival. The indemnification obligations of each
Party under this
Article 10 shall continue in full force and effect regardless of whether this
Agreement has
either expired or been terminated or canceled.

                                                       ARTICLE 11
                                                            Default

                     11.1      Event of Default. Unless excused by Force
Majeure, each of the
following events shall constitute an event of default (an "Event of Default")
under this
Agreement:

                                 (a)      the failure by a Party to pay any
amount due within thirty (30)
days after receipt of written notice of nonpayment by the other Party, unless
the payment
of such amount is disputed in good faith;

                                (b)       a Party's breach of any material term
or condition of this
Agreement including any material breach of a representation, warranty or
covenant made
in this Agreement which, after receiving written notice of the breach from the
non-
breaching Party (such notice to set forth in reasonable detail the nature of the
default
and, where known and if applicable, the steps necessary to cure such default),
(i) the
breaching Party fails to cure within thirty (30) days following receipt of the
notice or (ii)
if such default is of such a nature that it cannot be cured within thirty (30)
days following
receipt of such notice, the breaching Party fails within such thirty (30) days
to commence
the necessary cure and fails at any time thereafter diligently and continuously
to
prosecute such cure to completion provided that the cure is completed no later
than 180
days after the receipt of the default notice;

                                (c)      the appointment of a receiver or
liquidator or trustee for either
Party and such receiver, liquidator or trustee is not discharged within sixty
(60) days;

                                (d)       the entry of a decree adjudicating a
Party as bankrupt or
insolvent, and such decree is continued undischarged and unstayed for a period
of sixty
(60) days; or

                                (e)       the filing of a voluntary or
involuntary petition in bankruptcy
under any provision of any federal or state bankruptcy law by a Party or against
it, and,
with respect to an involuntary petition in bankruptcy, such petition continues
undischarged and unstayed for a period of sixty (60) days.

                      11.2     Remedies. Upon the occurrence of an Event of
Default, the non-
defaulting Party may (a) terminate this Agreement by providing sixty (60) days'
prior
written notice to the defaulting Party and this Agreement shall thereupon
terminate upon
receipt of regulatory approval for such termination, but not before the date
specified in
the notice, and/or (b) subject to Section 8.2 of this Agreement, exercise all
such rights
and remedies as may be available to it under this Agreement or at law or equity
with
respect to such Event of Default.

                                                        ARTICLE 12
                          PROJECTIONS AND OPERATING COMMITTEE

                      12.1      Projections. No later than three (3) business
days prior to each
Monday during the term of this Agreement, Pepco shall provide Generator with
non-
binding projections of the Services to be provided by Generator to Pepco under
this
Agreement for the week beginning that Monday.

                      12.2     Operating Committee. The Parties shall establish
an operating
committee consisting of one representative for each Party ("Operating
Committee"). The
Operating Committee shall act only by unanimous agreement or consent. The
Parties
shall designate their respective representatives to the Operating Committee,
plus an
alternate by written notice. Each Party's representative on the Operating
Committee is
authorized to act on behalf of such Party with respect to any matter arising
under this
Agreement which is to be decided by the Operating Committee, however, the
Operating
Committee shall not have any authority to modify or otherwise alter the rights
and
obligations of the Parties hereunder. The Operating Committee shall develop and
implement suitable policies and procedures with to coordinate the interaction of
the
Parties with respect to the performance of their duties and obligations under
this
Agreement.

                                                        ARTICLE 13
                      COST RESPONSIBILITIES AND BILLING PROCEDURES

13.1     Billing Procedures.

                                 (a)      Within ten (10) days after the first
day of each Month Pepco
shall provide to Generator a written invoice setting forth (a) the amount Pepco
owes to
Generator pursuant to Article 6 of this Agreement for Services and any other
payments
which may be due hereunder, and (b) the amounts, if any, that Generator owes to
Pepco
pursuant to this Agreement. Each invoice shall (i) delineate the Month in which
the
Services or Alternative Services were provided or reimbursable charges were
incurred, (ii)
fully describe the Services or Alternative Services rendered or reimbursable
charges
incurred, (iii) be itemized to reflect the Services or Alternative Services
performed or
provided or reimbursable charges incurred, and (iv) provide reasonable detail as
to the
calculation of the amounts involved.

                                 (b)       All invoices shall be paid within
fifteen (15) days after the date
of issuance, but not earlier than the 25th day of the month in which the invoice
is
rendered. All payments shall be made by wire transfer to a bank designated in
writing by
such Party. Payment of invoices shall not relieve the paying Party from any
responsibilities or obligations it has under this Agreement, nor shall such
payment
constitute a waiver of any claims arising hereunder.

                                 (c)      To the extent that, for any billing
period, Generator is obligated
to pay to Pepco amounts due and calculated pursuant to this Section 13.1, Pepco
may use
such amounts as a set-off against any amounts owed by Pepco to Generator.

                      13.2      Billing Disputes. In the event of a billing
dispute between the Parties,
(i) each Party shall continue to perform its obligations in accordance with the
terms of
this Agreement subject to the other Party's rights hereunder, and (ii) the Party
required
to make payments hereunder shall pay to the other Party all invoiced amounts
when due,
net of any set-offs permitted under Section 13.1(d), that are not in dispute.
Payment of
invoices by either Party shall not relieve the paying Party from any
responsibilities or
obligations it has under this Agreement; nor shall it constitute a waiver of any
claims
arising hereunder.

                      13.3      Interest on Unpaid Balances. Interest on any
unpaid amounts shall
be calculated in accordance with the methodology specified for interest on
refunds in
FERC regulations at 18 C.F.R. Section 35.19a(a)(2)(iii). Interest on delinquent
amounts shall
be calculated from the due date of the bill to the date of payment. When
payments are
made by mail, bills shall be considered as having been paid on the date of
receipt by the
other Party.

                                                         ARTICLE 14
                                                  CONFIDENTIALITY

                      14.1      Confidentiality Obligations of Pepco. Each Party
shall hold in
confidence, unless compelled to disclose by judicial or administrative process
or other
provisions of law, all documents and information furnished by one Party to the
other
Party in connection with this Agreement marked "Confidential" or "Proprietary."
Except
to the extent that such information or documents are (i) generally available to
the public
other than as a result of a disclosure by a receiving Party in breach of this
Agreement, (ii)
available to the receiving Party on a non-confidential basis prior to disclosure
by the other
Party , or (iii) available to the receiving Party on a non-confidential basis
from a source
other than the other Party, provided that such source is not known, and by
reasonable
effort could not be known, by the receiving Party to be bound by a
confidentiality
agreement with the other Party or otherwise prohibited from transmitting the
information
to the receiving Party by a contractual, legal or fiduciary obligation, the
receiving Party
shall not release or disclose such information to any other person, except to
its employees,
representatives or agents on a need-to-know basis, in connection with this
Agreement
who has not first been advised of the confidentiality provisions of this Section
14.1 and
has agreed in writing to comply with such provisions. In no event shall such
information
be disclosed in violation of the requirements of FERC Orders 889 and 889-A, and
any
successor thereto. The Party receiving confidential information from the other
Party shall
promptly notify the other Party if it receives notice or otherwise concludes
that the
production of any information subject to this Section 14.1 is being sought under
any
provision of law and the receiving Party shall use reasonable efforts in
cooperation with
the other Party to seek confidential treatment for such confidential information
provided
thereto.

                      14.2      Confidentiality of Audits. The independent
auditor performing any
audit, as referred to in Article 20, shall be subject to a confidentiality
agreement between
the auditor and the Party being audited. Such audit information shall be treated
as
confidential except to the extent that its disclosure is required by regulatory
or judicial
order, for reliability purposes pursuant to PJM requirements and pursuant to the
FERC's
rules and regulations. Except as provided herein, neither Party will disclose
the audit
information to any third party, without the other Party's prior written consent.
Audit
information in the hands of the Party not being audited shall be subject to all
provisions
of Article 20.

                      14.4      Remedies. The Parties agree that monetary
damages would be
inadequate to compensate a Party for the other Party's breach of its obligations
under
Sections 14.1 and 14.2. Each Party accordingly agrees, subject to Section 8.2,
that the
other Party shall be entitled to equitable relief, by way of injunction or
otherwise, if the
first Party breaches or threatens to breach its obligations under Sections 14.1
or 14.2 of
this Agreement, as applicable, which equitable relief shall be granted without
bond or
proof of damages, and the receiving Party shall not plead in defense that there
would be
an adequate remedy at law.

                                                                   ARTICLE 15
                                                        DISPUTE RESOLUTION

                      15.1     Disputes. A Party with a claim or dispute under
this Agreement shall
submit to the Operating Committee a notification of such claim or dispute within
sixty
(60) days after the circumstances that gave rise to the claim or the question or
issue in
dispute. The notification shall be in writing and shall include a concise
statement of the
claim or the issue or question in dispute, a statement of the relevant facts and
documentation to support the claim. In the event the Operating Committee is
unable, in
good faith, to resolve their disagreement in a manner satisfactory to both
Parties within
thirty (30) days after receipt by the Operating Committee of a notification
specifying the
claim, issue or question in dispute, the Parties shall refer the dispute to
their respective
senior management. If, after using their good faith best efforts to resolve the
dispute,
senior management cannot resolve the dispute within thirty (30) days, the
Parties shall
utilize the arbitration procedures set forth below in Section 15.2 to resolve a
dispute,
provided that nothing herein or therein shall prohibit a Party from at any time
requesting
from a court of competent jurisdiction a temporary restraining order,
preliminary
injunction, or other similar form of equitable relief to enforce performance of
the
provisions of this Agreement.

                      15.2      Arbitration.

                                 (a)       Unless the Parties otherwise mutually
agree in
writing to another form of dispute resolution such as dispute resolution under
the PJM
Agreement or the MAAC agreement, any arbitration initiated under this Agreement
shall be conducted before a single neutral arbitrator appointed by the Parties
within thirty
(30) days of receipt by respondent of the demand for arbitration. If the Parties
are unable
to agree on an arbitrator, such arbitrator shall be appointed by the American
Arbitration
Association. Unless the Parties agree otherwise, the arbitrator shall be an
attorney or
retired judge with at least fifteen (15) years of experience, and shall not have
any current
or past substantial business or financial relationships with any Party to the
arbitration. If
possible, the arbitrator shall have experience in the electric utility industry.
Unless
otherwise agreed, the arbitration shall be conducted in accordance with the
American
Arbitration Association's Commercial Arbitration Rules, then in effect. Any
arbitration
proceedings, decision or award rendered hereunder and the validity, effect and
interpretation of this arbitration agreement shall be governed by the Federal
Arbitration
Act of the United States, 9 U.S.C. Sections 1 et seq. The location of any
arbitration hereunder
shall be in the District of Columbia.

                                 (b)       The arbitration shall, if possible,
be concluded not later than six
(6) months after the date that it is initiated. The arbitrator shall be
authorized only to
interpret and apply the provisions of this Agreement or any related agreements
entered
into under this Agreement and shall have no power to modify or change any of the
above
in any manner. The arbitrator shall have no authority to award punitive or
multiple
damages or any damages inconsistent with this Agreement. The arbitrator shall,
within
thirty (30) days of the conclusion of the hearing, unless such time is extended
by
agreement of the Parties, notify the Parties in writing of his or her decision,
stating his or
her reasons for such decision and separately listing his or her findings of fact
and
conclusions of law. The decision of the arbitrator rendered in such a proceeding
shall be
final and binding on the Parties. Judgment on the award may be entered upon it
in any
court having jurisdiction.

                                 (c)       Nothing in this Agreement shall
preclude, or be construed to
preclude, any Party from filing a petition or complaint with FERC with respect
to any
arbitrable claim over which FERC has jurisdiction. In such case, the other Party
may
request FERC to reject or to waive jurisdiction. If FERC rejects or waives
jurisdiction
with respect to all or a portion of the claim, the portion of the claim not so
accepted by
FERC shall be resolved through arbitration, as provided in this Agreement. To
the
extent that FERC asserts or accepts jurisdiction over the claim, the decision,
finding of
fact or order of FERC shall be final and binding, subject to judicial review
under the
Federal Power Act, and any arbitration proceedings that may have commenced with
respect to the claim prior to the assertion or acceptance of jurisdiction by
FERC shall be
terminated.

                                               ARTICLE 16
                                             Representations

                      16.1      Representations of Pepco. Pepco hereby
represents and warrants to
Generator as follows:

                                 (a)      Incorporation. Pepco is a corporation
duly organized, validly
existing and in good standing under the laws of the District of Columbia and the
Commonwealth of Virginia, and has all requisite corporate power and authority to
own,
lease and operate its material assets and properties and to carry on its
business as now
being conducted.

                                 (b)       Authority. Pepco has all necessary
corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions
contemplated hereby. The execution and delivery by Pepco of this Agreement and
the
consummation by Pepco of the transactions contemplated hereunder have been duly
and
validly authorized by the Board of Directors of Pepco or by a committee thereof
to whom
such authority has been delegated and no other corporate proceedings on the part
of
Pepco are necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by Pepco
and,
assuming that this Agreement constitutes a valid and binding agreement of
Generator,
constitutes a valid and binding agreement of Pepco, enforceable by Pepco in
accordance
with its terms.

                                 (c)       Consents and Approvals; No Violation.

                                 (i)       Neither the execution and delivery of
this Agreement by Pepco
nor performance by Pepco of its obligations hereunder will (A) conflict with or
result in
any breach of any provision of the Certificate of Incorporation or By-laws of
Pepco,
(B) result in a default (or give rise to any right of termination, cancellation
or
acceleration) under any of the terms, conditions or provisions of any note,
bond,
mortgage, indenture, license, agreement, lease or other instrument or obligation
to which
Pepco or any of its subsidiaries is a party or by which any of their respective
assets may be
bound or (C) violate any order, writ, injunction, decree, statute, rule or
regulation
applicable to Pepco, or any of its assets, except in the case of clauses (B) and
(C) for such
failures to obtain a necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse effect on the ability
of Pepco to
discharge its obligations under this Agreement (a "Pepco Material Adverse
Effect").

                                 (ii)       No declaration, filing or
registration with, or notice to, or
authorization, consent or approval of any governmental authority is necessary
for
performance by Pepco of its obligations hereunder, other than such declarations,
filings,
registrations, notices, authorizations, consents or approvals which, if not
obtained or
made would not, individually or in the aggregate, have a Pepco Material Adverse
Effect.

                      16.2      Representations of Generator. Generator hereby
represents and
warrants to Pepco as follows:

                                   (a)       Incorporation. Generator is a
limited partnership duly formed,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite limited partnership power and authority to own, lease and
operate its material assets and properties and to carry on its business as now
being conducted.

                                 (b)       Authority. Generator has all
necessary limited partnership power
and authority to execute and deliver this Agreement and to consummate the
transactions
contemplated hereby. The execution and delivery by the Generator of this
Agreement
and the consummation by Generator of the transactions contemplated hereby have
been
duly and validly authorized by the partnership of Generator or by a committee
thereof to whom such authority has been delegated and no other limited
partnership proceedings
on the part of Generator are necessary to authorize this Agreement or the
transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered
by Generator and, assuming that this Agreement constitutes a valid and binding
agreement of Pepco, constitutes a valid and binding agreement of Generator,
enforceable
against Generator in accordance with its terms.

                                 (c)        Consents and Approvals.

                                   (i)        Neither the execution and delivery
of this Agreement by
Generator nor performance by Generator of its obligations hereunder will (A)
conflict
with or result in any breach of any provision of the Certificate of Limited
Partnership or
Partnership Agreement or other charter documents of Generator, (B) result in a
default
(or give rise to any right of termination, cancellation or acceleration) under
any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Generator or any of
its
subsidiaries is a party or by which any of their respective assets may be bound
or
(C) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to
Genrator, or any of its assets, except in the case of clauses (B) and (C) for
such failures
to obtain a necessary consent, defaults and violations which would not,
individually or in
the aggregate, have a material adverse effect on the ability of Generator to
discharge its
obligations under this Agreement (a "Generator Material Adverse Effect").

                                 (ii)      No declaration, filing or
registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary
for
performance by Generator of its obligations hereunder, other than such
declarations,
filings, registrations, notices, authorizations, consents or approvals which, if
not obtained
or made would not, individually or in the aggregate, have a Generator Material
Adverse
Effect.

                                                        ARTICLE 17
                      ASSIGNMENT/CHANGE IN CORPORATE IDENTITY

                      17.1      Generally. Except as otherwise set forth in this
Article 17, neither
this Agreement nor any of the rights, interests, or obligations hereunder shall
be assigned
by either Party hereto, without the prior written consent of the other Party,
which
consent shall not be unreasonably withheld or delayed.

                      17.2      Pepco's Assignment Rights. Subject to Section
17.5 below, upon ten
(10) days prior written notice to Generator, Pepco may assign this Agreement,
and
Pepco's rights, interests and obligations hereunder, to an Affiliate of Pepco
that assumes
Pepco's obligations to provide Services to the Service Load.

                      17.3     Generator's Assignment Rights. Subject to Section
17.5 below,
Generator may assign, transfer, pledge or otherwise dispose of its rights and
interests
hereunder to a trustee, lending institution, or other Person for the purposes of
financing
or refinancing the Auctioned Assets, including upon or pursuant to the exercise
of
remedies under such financing or refinancing, or by way of assignments,
transfers,
conveyances of dispositions in lieu thereof; provided, however, that no such
assignment in
accordance with this Section 17.3 shall relieve or in any way discharge
Generator from
the performance of its duties and obligations under this Agreement. Pepco agrees
to
execute and deliver, at Generator's expense, such documents as may be reasonably
necessary to accomplish any such assignment, transfer, conveyance, pledge or
disposition
of rights hereunder for purposes of the financing or refinancing of the
Facility, so long as
Pepco's rights under this Agreement are not thereby altered, amended, diminished
or
otherwise impaired.

                      17.4      Mergers or Consolidations. Subject to Section
17.5 below, either
Party may assign this Agreement to a successor to all or substantially all of
the assets of
such Party by way of merger, consolidation, sale or otherwise, provided such
successor
assumes in writing and becomes liable for all of such Party's duties and
obligations
hereunder.

                      17.5     Limitations

                                 (a)       No assignment, transfer, conveyance,
pledge or disposition of
rights, interests, duties or obligations under this Agreement by a Party shall
relieve that
Party from liability and financial responsibility for the performance thereof
after any such
transfer, assignment, conveyance, pledge or disposition unless and until (i) the
transferee
or assignee shall agree in writing to assume the obligations and duties of that
Party under
this Agreement and to impose such obligations on subsequent permitted
transferees and
assignees and (ii) the non-assigning Party has consented in writing to such
assumption
and to a release of the assigning Party from such liability, such consent not to
be
unreasonably withheld or delayed.

                                  (b)       If Generator terminates its
existence as a limited partnership entity
by merger, acquisition, sale, consolidation or otherwise, or if all or
substantially all of
Generator's assets are transferred to another person or business entity without
complying
with this Article 17, Pepco shall have the right, enforceable in a court of
competent
jurisdiction, to enjoin Generator's successor from using its assets in any
manner that does
not comply with the requirements of this Agreement or that impedes Pepco's
ability to
carry on its ongoing business operations.

                      17.6      Successors. This Agreement and all of the
provisions hereof are
binding upon, and inure to the benefit of, the Parties and their respective
successors and
permitted assigns.

                                                      ARTICLE 18
                                                        NOTICES

           Except as otherwise expressly set forth in this Agreement, all
notices and other
communications hereunder shall be in writing and shall be deemed given (as of
the time
of delivery or, in the case of a telecopied communication, of confirmation) if
delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof
of delivery) to the Parties at the following addresses (or at such other address
for a Party
as shall be specified by like notice):

                      if to Pepco, to:

                                  Potomac Electric Power Company
                                 1900 Pennsylvania Avenue, N. W.
                                 Washington, D.C. 20068
                                 Telecopier: (202) 261-7889
                                 Attention: William T. Torgerson
                                                  General Counsel

                      if Generator, to:

                                 c/o Southern Company Energy Marketing L.P.
                                 1155 Perimeter Center West
                                 Suite 130
                                 Atlanta, GA 30338
                                 Telecopier: (678) 579-5752
                                 Attention: Sonnet Edmonds

                                                          ARTICLE 19
                                                      AMENDMENTS

                      19.1      Amendments. Except as provided in Section 19.2,
this Agreement
shall not be amended, modified, or supplemented unless mutually agreed to by the
Parties
in writing. Except as provided in Section 19.2(b) below, the rates, terms and
conditions
contained in this Agreement are not subject to change under Sections 205 or 206
of the
Federal Power Act absent the mutual written agreement of the Parties. It is the
intent of
this Section 19.1 that, except as provided in Section 19.2(b) below, the rates,
terms and
conditions of this Agreement shall not be subject to change except by mutual
written
agreement by the Parties.

                      19.2      PJM Agreement Modifications

                                 (a)       If the PJM Agreements are amended or
modified so that any schedule or section references herein to such agreements is
changed,
such schedule or section references herein shall be deemed to automatically (and
without
any further action by the Parties) refer to the new or successor schedule or
section in the
PJM Agreements which replaces that originally referred to in this Agreement.

                                 (b)      If the applicable provisions of the
PJM Agreements referenced
herein, or any other PJM rules relating to the implementation of this Agreement,
are
changed materially from those in effect on May 31, 2000, the Operating Committee
shall
cooperate to make conforming changes to this Agreement to fulfill the purposes
of this
Agreement; provided that no such changes shall alter the economic benefits of
this
Agreement between the Parties. If the Operating Committee fails to agree on such
changes within 15 days, Pepco may unilaterally make conforming changes to this
Agreement to fulfill the purposes of this Agreement, and shall file such changes
with the
FERC on behalf of both Parties; provided that nothing herein shall prejudice the
Generator's rights to protest such change.

                                                       ARTICLE 20
                                                          AUDITS

           The Parties shall have the right, during normal business hours, to
audit each other's
accounts and records pertaining to transactions under this Agreement, upon
twenty (20)
days prior written notice, at the offices where such accounts and records are
maintained.
Any such audit of a Party's accounts and records will be at the expense of the
auditing
Party, shall not be made more frequently than once in any twelve (12) month
period, and
no such audit may be made with respect to accounts and records relating to
periods more
than twenty-four (24) months prior to the date of the audit notice. The Party
being
audited will be entitled to review the audit report and any supporting
materials. The
Party conducting the audit shall maintain the confidentiality of all information
obtained
during the audit in compliance with Section 14.2 of this Agreement. To the
extent that
audited information includes confidential information, the auditing Party shall
designate
an independent auditor at its expense to perform such audit.

                                                    ARTICLE 21
                                        Miscellaneous Provisions

                     21.1      Waiver. Except as otherwise provided in this
Agreement, any failure
of a Party to comply with any obligation, covenant, agreement, or condition
herein may
be waived by the Party entitled to the benefits thereof only by a written
instrument signed
by the Party granting such waiver, but such waiver or failure to insist upon
strict
compliance with such obligation, covenant, agreement, or condition shall not
operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.

                     21.2      No Third Party Beneficiaries.Nothing in this
Agreement is intended
to confer upon any other person except the Parties any rights or remedies
hereunder or
shall create any third party beneficiary rights in any person. No provision of
this
Agreement shall create any rights in any such persons in respect of any benefits
that may
be provided, directly or indirectly, under any employee benefit plan or
arrangement
except as expressly provided for thereunder.

                     21.3      Governing Law. This Agreement shall be governed
by and construed
in accordance with the laws of the District of Columbia (regardless of the laws
that might
otherwise govern under applicable principles of conflicts of law).

                     21.4      Counterparts. This Agreement may be executed in
two or more
counterparts, each of which shall be deemed an original, but all of which
together shall
constitute one and the same instrument.

                     21.5      Interpretation. When a reference is made in this
Agreement to an
article, section, schedule or exhibit, such reference shall be to an article or
section  of, or
schedule or exhibit to, this Agreement unless otherwise indicated. The table of
contents
and headings contained in this Agreement are for reference purposes only and
shall not
affect in any way the meaning or interpretation of this Agreement. Whenever the
words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be
followed by the words "without limitation" or equivalent words. The words
"hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
The definitions contained in this Agreement are applicable to the singular as
well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter
genders of such term. Unless otherwise expressly stated otherwise herein, the
word "day"
shall mean any calendar day including weekends and holidays. Any agreement,
instrument, statute, regulation, rule or order defined or referred to herein or
in any
agreement or instrument that is referred to herein means such agreement,
instrument,
statute, regulation, rule or order as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent
and (in the case of statutes, regulations, rules or orders) by succession of
comparable
successor statutes, regulations, rules or orders and references to all
attachments thereto
and instruments incorporated therein. References to a person are also to its
permitted
successors and assigns. Each Party acknowledges that it has been represented by
counsel
in connection with the review and execution of this Agreement, and, accordingly,
there
shall be no presumption that this Agreement or any provision hereof be construed
against
the Party that drafted this Agreement.

                     21.6      Jurisdiction and Enforcement. Each of the Parties
irrevocably submits
to the exclusive jurisdiction of (i) the Superior Court of the District of
Columbia and
(ii) the United States District Court for the District of Columbia, for the
purposes of any
suit, action or other proceeding arising out of this Agreement or any
transaction
contemplated hereby. Each of the Parties agrees to commence any action, suit or
proceeding relating hereto either in the United States District Court for the
District of
Columbia or, if such suit, action or proceeding may not be brought in such court
for
jurisdictional reasons, in the Superior Court of the District of Columbia. Each
of the
Parties further agrees that service of process, summons, notice or document by
hand
delivery or U.S. registered mail at the address specified for such Party in
Article 18 (or
such other address specified by such Party from time to time pursuant to Article
18) shall
be effective service of process for any action, suit or proceeding brought
against such
Party in any such court. Each of the Parties irrevocably and unconditionally
waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this
Agreement or the transactions contemplated hereby in (i) the Superior Court of
the
District of Columbia and (ii) the United States District Court for the District
of
Columbia, and hereby further irrevocably and unconditionally waives and agrees
not to
plead or claim in any such court that any such action, suit or proceeding
brought in any
such court has been brought in an inconvenient forum.

                      21.7     Entire Agreement. This Agreement, the Asset Sale
Agreement, the
Confidentiality Agreement and the Ancillary Agreements including the exhibits,
schedules, documents, certificates and instruments referred to herein or therein
and other
contracts, agreements and instruments contemplated hereby or thereby, embody the
entire agreement and understanding of the Parties in respect of the transactions
contemplated by this Agreement. There are no restrictions, promises,
representations,
warranties, covenants or undertakings other than those expressly set forth or
referred to
herein or therein. This Agreement, the Asset Sale Agreement and the Ancillary
Agreements supersede all prior agreements and understandings between the Parties
with
respect to the transactions contemplated by this Agreement other than the
Confidentiality Agreement.

                     21.8      Severability. If any term or other provision of
this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and
effect. Upon such determination that any term or other provision is invalid,
illegal or
incapable of being enforced, the Parties shall negotiate in good faith to modify
this
Agreement so as to effect the original intent of the Parties as closely as
possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the
transactions contemplated hereby are fulfilled to the extent possible.

                     21.9      Further Assurances. The Parties hereto agree to
execute and deliver
promptly, at the expense of the Party requesting such action, any and all other
and
further instruments, documents and information which may be reasonably requested
in
order to effectuate the transactions contemplated hereby. Each Party agrees to
cooperate
with, assist and accommodate all reasonable requests made by the other Party in
respect
of any regulatory approval necessary for, or any regulatory proceeding relating
to, the
execution, delivery or performance of this Agreement. Each Party further agrees
to
comply in all material respects with all laws of governmental authorities
relating to this
Agreement and the consummation of the transactions contemplated hereby.

                     21.10      Independent Contractor Status. Nothing in this
Agreement shall be
construed as creating any relationship between Pepco and Generator other than
that of
independent contractors.

                     21.11      Conflicts. Except with respect to the
amendments, indemnification,
liability, default and remedies provisions contained herein or as otherwise
expressly
provided herein, in the event of any conflict or inconsistency between the terms
of this
Agreement and the terms of the Asset Sale Agreement, the terms of the Asset Sale
Agreement shall prevail.

                     IN WITNESS WHEREOF, Pepco and Generator have caused this
Transition Power Agreement (District of Columbia) to be signed by their
respective duly
authorized officers as of the date first above written.

                                                          POTOMAC ELECTRIC POWER
COMPANY

                                                        By: /s/ MARY
SHARPE-HAYES
                                                                        Name:   
Mary Sharpe-Hayes
                                                                      
  Title:    Vice President

                                                            SOUTHERN COMPANY
ENERGY

                                                           MARKETING, L.P.

                                                           By: /S/ DAVID L.
DAVIS
                                                                       Name:   
  David L. Davis
                                                                   
    Title:      Attorney-in-Fact

                                                        SCHEDULE 1
                                                       DEFINITIONS

Part A.      Capitalized terms not defined in the body of the Agreement shall
have the
                meaning set forth in Part A of this Schedule 1. (Part B of this
Schedule 1 sets
                forth capitalized terms defined within the Agreement.)

          1.            "Affiliate" has the meaning set forth in Rule 12b-2 of
the General Rules
and Regulations under the Securities Exchange Act of 1934.

           2.            "Auctioned Assets" has the meaning set forth in the
Asset Sale
Agreement.

           3.            "Capacity Credits" has the meaning set forth in the PJM
Reliability
Agreement.

          4.            "Capacity Resources" has the meaning set forth in the
PJM Reliability
Agreement.

           5.            "Contract Year 1" means the period beginning on the
Effective Date and
ending thirteen calendar months thereafter.

           6.            "Contract Year 2" means the period beginning
immediately after the end of
Contract Year 1 and ending twelve calendar months thereafter.

          7.            "Contract Year 3" means the period beginning immediately
after the end of
Contract Year 2 and ending twelve calendar months thereafter.

           8.            "Contract Year 4" means the period beginning
immediately after the end of
Contract Year 3 and ending twelve calendar months thereafter.

           9.            "Closing" has the meaning set forth in the Asset Sale
Agreement.

           10.           "Confidentiality Agreement" has the meaning set forth
in the Asset Sale
Agreement.

           11.           "FERC" means the Federal Energy Regulatory Commission
or its
successors.

           12.           "Fixed Transmission Rights" has the meaning set forth
in the PJM
Operating Agreement.

          13.           "Full Energy Requirements" means the full electric
energy requirements of
the Service Load in any hour, measured in megawatt hours at the Delivery Points.

           14.           "Generator" has the meaning set forth in the preamble
of this Agreement
and shall include its permitted successors and assigns.

           15.           "Metered Energy Requirements" means the full electric
energy
requirements of the Service Load in any hour, measured in megawatt hours at the
retail
(customer revenue meter) level. For customers without, interval metering, Pepco
will use
customer or retail class profiles in accordance with the District of Columbia
Public
Service Commission regulations to distribute periodic metered energy usage to
obtain
hourly customer energy usage. When Pepco curtailable load programs are operated,
customer loads which are curtailed will be increased by Pepco to reflect the
hourly energy
usage which would have occurred if curtailments had not taken place.

           16.           "Month" means a calendar month.

           17.           Network Customer" has the meaning set forth in the PJM
Tariff.

           18.           "Network Load" has the meaning set forth in the PJM
Tariff.

           19.           "Optional Energy" means the Optional Energy Percent, as
elected by
Pepco through the exercise of its Call Options, of Pepco's Full Energy
Requirements.

           20.           "Pepco" has the meaning set forth in the preamble of
this Agreement and
shall include its permitted successors or assigns.

           21.           "PJM" means the Pennsylvania New Jersey-Maryland
interconnected
power pool operated under the PJM Operating Agreement and any successor thereto
including any regional transmission organization, independent system operator,
transco,
or any other independent system administrator that possesses operational control
or
planning control over Pepco's transmission system.

           22.           "PJM Agreements" means the PJM Operating Agreement, PJM
Reliability
Agreement, and PJM Tariff.

           23.           "PJM Control Area" has the meaning set forth in the PJM
Reliability
Agreement.

           24.           "PJM Operating Agreement" means the Amended and
Restated
Operating Agreement of the PJM Interconnection LLC dated as of June 2, 1997.

           25.           "PJM Interconnection LLC" means the independent system
operator of
the PJM Control Area pursuant to the PJM Operating Agreement and the PJM Tariff.

           26.           "PJM Reliability Agreement" means the PJM Reliability
Assurance
Agreement dated June 2, 1997, establishing obligations, standards and procedures
for
maintaining the reliable operation of the PJM Control Area.

           27.           "PJM System Operator" means the PJM Interconnection LLC
energy
control center staff responsible for central dispatch as provided in the PJM
Agreement.

           28.           "PJM Tariff" means the PJM Open Access Transmission
Tariff providing
transmission service within the PJM Control Area.

           29.           "Planning Period" has the meaning set forth in the PJM
Reliability
Agreement.

           30.           "Required Energy" means the Required Energy Percent of
Pepco's Full
Energy Requirements.

           31.           "Service Load" means (i) all of Pepco's default service
retail electric energy
customers located in Pepco's service territory, as such territory exists on the
Effective
Date, in the District of Columbia, and (ii) the energy requirements of the
Washington
Metropolitan Area Transit Authority in the Commonwealth of Virginia which Pepco
is
required to provide.

           32.           "Summer Month" means each Month during the period of
May 1 through
September 30.

           33.           "Winter Month" means each Month during the period of
October 1
through April 30.

Part B.      The following terms have the meaning specified in the section of
this
                Agreement set forth opposite to such term:

Term

Agreement Reference

Agreement

Preamble

Alternative Services

Section 8.1

Ancillary Services

Article 4

Ancillary Services Requirements

Article 4

Asset Sale Agreement

First Recital

Call Options

Section 5.2(a)

Capacity Resources Plan

Section 3.2(a)

Capacity Resources Requirements

Section 3.1(a)

Delivery Points

Section 5.3

Effective Date

Section 2.1

Event of Default

Section 11.1

Force Majeure

Section 9.2

Generator Material Adverse Effect

Section 16.2(c)(i)

Operating Committee

Article 12

Optional Energy Percent

Section 5.2(a)

Pepco Material Adverse Effect

Section 16.1(c)(i)

Party or Parties

Preamble

PPAs

First Recital

Required Energy Percent

Section 5.1

Services

Section 8.1

 

 

                                                       EXHIBIT A

Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity Resources for
                                           the Service Load

MW Capacity Obligation (1)

w/o Migration

w Migration (2)

January-01

2467

2126

February-01

2467

2022

March-01

2467

1565

April-01

2467

1289

May-01

2467

1014

June-01

2503

749

July-01

2503

747

August-01

2503

745

September-01

2503

743

October-01

2503

741

November-01

2503

739

December-01

2503

737

(1) PEPCO's current Unforced Capacity without Benning and Buzzard Point is
approx. 5750 MWs .

(2) Migration estimates are based on observation of retail choice programs in
other jurisdictions.

Exhibit B to Transition Power Agreement (DC)
D.C.Capacity Resource Plan - 2001

 

Jan-01

Feb-01

Mar-01

Apr-01

May-01

Jun-01

Jul-01

Aug-01

Sep-01

Oct-01

Nov-01

Dec-01

CHALK POINT 1

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

CHALK POINT 2

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

139.7

CHALK POINT 3

266.4

266.4

266.4

266.4

266.4

265.4

265.4

265.4

265.4

265.4

265.4

265.4

CHALK POINT 4

261.1

261.1

261.1

261.1

261.1

261.1

261.1

261.1

261.1

261.1

261.1

261.1

CHALK POINT CT 1

6.2

6.2

6.2

6.2

6.2

6.2

6.2

6.2

6.2

6.2

6.2

6.2

CHALK POINT CT 2

10.8

10.8

10.8

10.8

10.8

10.8

10.8

10.8

10.8

10.8

10.8

10.8

CHALK POINT CT 3

37.7

37.7

37.7

37.7

37.7

37.7

37.7

37.7

37.7

37.7

37.7

37.7

CHALK POINT CT 4

37.5

37.5

37.5

37.5

37.5

37.5

37.5

37.5

37.5

37.5

37.5

37.5

CHALK POINT CT 5

41.6

41.6

41.6

41.6

41.6

41.6

41.6

41.6

41.6

41.6

41.6

41.6

CHALK POINT CT 6

47.7

47.7

47.7

47.7

47.7

47.7

47.7

47.7

47.7

47.7

47.7

47.7

DICKERSON 1

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

DICKERSON 2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

79.2

DICKERSON 3

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

DICKERSON CT 1

5.4

5.4

5.4

5.4

5.4

5.4

5.4

5.4

5.4

5.4

5.4

5.4

DICKERSON HCT 1

27.3

27.3

27.3

27.3

27.3

26.3

26.3

26.3

26.3

26.3

26.3

26.3

DICKERSON HCT2

60.8

60.8

60.8

60.8

60.8

60.8

60.8

60.8

60.8

60.8

60.8

60.8

MCRRF

22.3

22.3

22.3

22.3

22.3

22.3

22.3

22.3

22.3

22.3

22.3

22.3

MORGANTOWN 1

250.6

250.6

250.6

250.6

250.6

250.6

250.6

250.6

250.6

250.6

250.6

250.6

MORGANTOWN 2

247.2

247.2

247.2

247.2

247.2

247.2

247.2

247.2

247.2

247.2

247.2

247.2

MORGANTOWN CT 1

6.4

6.4

6.4

6.4

6.4

6.4

6.4

6.4

6.4

6.4

6.4

6.4

MORGANTOWN CT 2

6.8

6.8

6.8

6.8

6.8

6.8

6.8

6.8

6.8

6.8

6.8

6.8

MORGANTOWN CT 3

20.8

20.8

20.8

20.8

20.8

20.8

20.8

20.8

20.8

20.8

20.8

20.8

MORGANTOWN CT 4

20.6

20.6

20.6

20.6

20.6

20.6

20.6

20.6

20.6

20.6

20.6

20.6

MORGANTOWN CT 5

11.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0

MORGANTOWN CT 6

18.8

18.8

18.8

18.8

18.8

18.8

18.8

18.8

18.8

18.8

18.8

18.8

PANDA

101.1

101.1

101.1

101.1

101.1

101.1

101.1

101.1

101.1

101.1

101.1

101.1

POTOMAC RIVER 1

35.3

35.3

35.3

35.3

35.3

35.3

35.3

35.3

35.3

35.3

35.3

35.3

POTOMAC RIVER 2

36.7

36.7

36.7

36.7

36.7

36.7

36.7

36.7

36.7

36.7

36.7

36.7

POTOMAC RIVER 3

44.8

44.8

44.8

44.8

44.8

44.8

44.8

44.8

44.8

44.8

44.8

44.8

POTOMAC RIVER 4

43.1

43.1

43.1

43.1

43.1

43.1

43.1

43.1

43.1

43.1

43.1

43.1

POTOMAC RIVER 5

44.7

44.7

44.7

44.7

44.7

44.7

44.7

44.7

44.7

44.7

44.7

44.7

SMECO

33.7

33.7

33.7

33.7

33.7

33.7

33.7

33.7

33.7

33.7

33.7

33.7

OE

200.0

200.0

200.0

200.0

200.0

200.0

-

-

200.0

200.0

200.0

200.0

Owned

2,464.2

2,464.2

2,464.2

2,464.2

2,464.2

2,464.2

2,262.2

2,262.2

2,462.2

2,462.2

2,462.2

2,462.2

Purchased

2.8

2.8

2.8

2.8

2.8

40.8

240.8

240.8

40.8

40.8

40.8

40.8

Total Requirements

2,467.0

2,467.0

2,467.0

2,467.0

2,467.0

2,503.0

2,503.0

2,503.0

2,503.0

2,503.0

2,503.0

2,503.0