EXHIBIT NO. 10-9

STATE OF NEW YORK
PUBLIC SERVICE COMMISSION

At a session of the Public Service
Commission held in the City of
Albany on October 24, 2001

COMMISSIONERS PRESENT:

Maureen O. Helmer, Chairman
Thomas J. Dunleavy
James D. Bennett
Leonard A. Weiss
Neal N. Galvin

CASE 01-E-0011 Joint Petition of Niagara Mohawk Power Corporation, New York
State Electric & Gas Corporation, Rochester Gas and Electric Corporation,
Central Hudson Gas & Electric Corporation, Constellation Nuclear, LLC and Nine
Mile Point Nuclear Station, LLC for Authority Under Public Service Law Section
70 to Transfer Certain Generating and Related Assets and for Related Approvals.

ORDER AUTHORIZING ASSET TRANSFERS

(Issued and Effective October 26, 2001)

BY THE COMMISSION:

INTRODUCTION

On January 31, 2001, Niagara Mohawk Power Corporation (Niagara Mohawk),
Rochester Gas and Electric Corporation (RG&E), Central Hudson Gas & Electric
Corporation (Central Hudson) and New York State Electric & Gas Corporation
(NYSEG) submitted, pursuant to Public Service Law (PSL) §70, a Joint Petition
seeking authority to transfer their respective interests in the Nine Mile Point
Nuclear Generating Station to Constellation Nuclear, LLC and Nine Mile Point
Nuclear Station, LLC (together Constellation).¹

The Administrative Law Judge assigned to this case conducted conferences on
January 17 in anticipation of the Joint Petition and on February 14, 2001.²
Thereafter, the Judge required the parties to file comments or testimony
concerning the proposed sale and the ratemaking for the gain or loss on the
transaction.³ On or about April 13, 2001, six parties filed either comments or
testimony: Department of Public Service Staff, the State Attorney General’s
Office, the International Brotherhood of Electrical Workers - Local 97, Nucor
Steel Auburn, Inc., RG&E, and Mr. John Mavretich.4 On or about May 11, 2001,
NYSEG, RG&E, Central Hudson, Niagara Mohawk and IBEW Local 97 responded to the
April 13 submissions.

In accordance with 16 NYCRR 3.9, the petitioners notified the active parties and
other interested persons of the settlement conferences being conducted in this
case. The conferences began in March 2001 and continued throughout the
proceeding. As a result, each petitioner has executed a Joint Proposal with
Staff. The State Consumer Protection Board has also entered into the Joint
Proposals.

Niagara Mohawk filed its Joint Proposal on May 7, 2001 and Multiple Intervenors
joined in it. If we adopt its terms, the Joint Proposal would resolve all
matters pertaining to Niagara Mohawk.

RG&E filed next on August 9, 2001. Like the first one, RG&E’s Joint Proposal
seeks to resolve all matters related to the sale of the Nine Mile facilities and
the recovery of the company’s costs. Central Hudson filed on September 19, 2001.
This proposal also seeks to resolve matters related to the sale and other
matters that could have been raised in this proceeding.

On September 20, 2001, Constellation and Staff submitted a Joint Proposal that
addresses decommissioning trust fund matters. Finally, on September 27, 2001,
NYSEG filed a Joint Proposal like the other cotenants’ proposals that would
resolve all the company’s issues related to Nine Mile.

By notices issued on September 18 and 28, 2001, we provided the public and
interested parties an opportunity to comment on the cotenants’ and
Constellation’s Joint Proposals. Comments and responses were received from the
State Attorney General’s Office, Mr. Mavretich, IBEW Local 97, Nucor Steel
Auburn, Inc., Niagara Mohawk, Central Hudson, RG&E, NYSEG, Constellation and
Staff.

THE JOINT PETITION

Niagara Mohawk proposes to sell Nine Mile 1 to Constellation for $234 million
subject to various specified price adjustments. Niagara Mohawk and the other
utility company cotenants propose to sell their 82% interest in Nine Mile Unit 2
to Constellation for $581 million, also subject to price adjustments.5 Half the
purchase price is payable at the closing; the other half will be paid in five
annual installments with interest. The real, personal and intangible property
included in the sales is specified in the December 11, 2000 Asset Purchase
Agreements.6

Constellation will assume various liabilities and obligations for the fuel the
units consume; the storage and disposal of spent nuclear fuel; high-level and
low-level waste; environmental liabilities; and, for injury and damage to
persons or property.

Constellation will also be responsible for decommissioning the Nine Mile units.
The cotenants will transfer their decommissioning funds to Constellation at the
closing and adjustments will be made for any over- or under-funding as
necessary.

Constellation has offered to employ the 1,337 employees who currently work at
the Nine Mile facilities. It will also assume the collective bargaining
agreement that exists between Niagara Mohawk and IBEW Local 97. Employees who
transfer to Constellation will retain their seniority and receive full credit
for their service with Niagara Mohawk.

Niagara Mohawk and Constellation have entered into a Nine Mile 1 Power Purchase
Agreement (PPA). The PPA would run to August 22, 2009, concurrent with the
facility’s NRC operating license. The cotenants and Constellation have also
entered into Nine Mile 2 Power Purchase Agreements for ten years. Pursuant to
the PPAs, Constellation will sell to the utility companies 90% of the capacity
and electric output from the generating units. The parties have agreed to
monthly base prices, differentiated between on-peak and off-peak periods. When
the PPAs expire, the utility companies will have no further right or obligation
to purchase any output from the Nine Mile units.

In connection with Nine Mile 2, the cotenants have entered into ten-year Revenue
Sharing Agreements (RSAs). The RSAs provide the utility companies 80% of the
amount by which actual market prices exceed a specific schedule of floor prices.
Any such amounts will be credited to the utility companies.

In a related matter, RG&E, Central Hudson and the Long Island Power Authority
(LIPA) are selling their Nine Mile 2 transmission facilities to Niagara Mohawk
at their net book value.7 Niagara Mohawk will also enter into an agreement with
NYSEG to operate and maintain NYSEG’s 18% interest in the Nine Mile 2
transmission facilities. Niagara Mohawk will provide Constellation
interconnection service and off-site services for Nine Mile 2 until they
mutually agree to terminate this arrangement.

Niagara Mohawk will retain ownership of the Nine Mile 1 interconnection
facilities and provide Constellation interconnection service and off-site
services for this unit until they agree to end the arrangement.

The Nine Mile 2 cotenants (including LIPA) have entered into a Cotenant
Agreement that addresses the materials and supply inventory, nuclear insurance
matters, and the accounting for employee pension and retirement benefits. This
agreement requires them to share Nine Mile 2 costs and benefits to the time of
the closing and as necessary to wind down the cotenancy. They will share the
cost of certain employee retention, incentive and severance payments.

The selling cotenants have also entered into a Selling Cotenants Agreement that
specifies the closing and transaction costs they will and will not share. This
agreement also addresses the transfer of decommissioning funds to Constellation,
and the regulatory treatment for the Nine Mile 2 material and supplies
inventory.

The petitioners have also entered into Reciprocal Easement Agreements that
provide the owners of the generation and transmission rights access to certain
facilities after the sale. Niagara Mohawk may also provide Constellation
services after the closing pursuant to a Service Agreement.

Finally, the Town of Scriba entered into a Memorandum Of Understanding (MOU)
with the cotenants that addresses property taxes, special assessments, and other
levies applicable to the Nine Mile facilities. The MOU provides a gradual tax
reduction over five years and stable taxes thereafter. Over a ten-year period,
taxes are expected to be $125 million less than past amounts. Constellation has
agreed to accept the MOU.

THE JOINT PROPOSALS

Niagara Mohawk

The Niagara Mohawk Joint Proposal (NMJP) addresses the sale of the Nine Mile 1
and 2 facilities and the recovery of the company’s costs. Among other things, it
covers: operating practices, budgets, expenses, capital costs, inventories,
material and supplies, investment tax credits, excess deferred federal income
taxes, plant valuations, ratepayer benefits, costs and benefits realized after
the closing, nuclear insurance matters and stranded costs. The Joint Proposal
does not limit Staff’s right to audit the final transaction costs (and
adjustments) for the sales.

In general, the NMJP adopts the accounting and ratemaking methods presented by
two company witnesses in prefiled testimony that accompanied the Joint
Petition.8 The NMJP reduces Niagara Mohawk’s unamortized investment in the Nine
Mile units by $123 million before the company is permitted to record a
regulatory asset for the remainder. Until the Commission addresses Niagara
Mohawk’s rates, the NMJP requires the company to record (in a memorandum
account) the amortization, variations and adjustments to the nuclear regulatory
asset in accordance with its terms.

The NMJP applies the same rate of return to the nuclear regulatory asset as
applies to Niagara Mohawk’s transmission and distribution assets. The next time
the Commission sets the company’s rates, Niagara Mohawk will continue to seek to
earn the same return on the regulatory asset as applies to the transmission and
distribution assets.

The NMJP applies the entire purchase price to the ratepayers’ benefit as of the
closing and it does not wait for Constellation to pay the second half over five
years. For this reason, the NMJP permits Niagara Mohawk to retain the interest
payments and any prepayments Constellation makes.

With respect to nuclear insurance matters, the NMJP requires Niagara Mohawk to
pass to ratepayers any future distributions from the Nuclear Electric Insurance
Limited (NEIL) related to the premiums it paid to ensure eligibility for future
distributions. If and when Niagara Mohawk accesses or converts its nuclear
insurance rights into an asset, it will flow them to ratepayers.

Rochester Gas & Electric

The terms of the RG&E Joint Proposal (RJP) resolve all matters related to the
sale of the company’s interest in Nine Mile 2 and the recovery of its costs. The
RJP preserves Staff’s right to audit the final transaction costs and
adjustments.

Among other things, the RJP addresses: the auction, operating practices,
budgets, expenses, capital costs, inventories, Nine Mile 2 revenue requirements,
capacity and energy forecasts used to purchase electricity from Constellation,
replacement power costs, transaction costs incurred in this and another
proceeding, RG&E’s right of first refusal, the company’s Advantage New York
proposal, pension and retirement benefits, investment tax credits, excess
deferred federal income taxes, RG&E’s Exit Agreement with Niagara Mohawk,
decommissioning costs, Nine Mile 2 valuation, ratepayer benefits, costs and
benefits realized after the closing, nuclear insurance matters and regulatory
asset recovery, including the rate of return on and the risks associated with
the regulatory asset.

The RJP adopts the accounting and ratemaking methods presented by two company
witnesses in affidavits and testimony accompanying the Joint Petition.9 It
allows RG&E to establish a $329.5 million regulatory asset when Nine Mile 2 is
sold. Thereafter, the company would write off and reduce this amount by $20
million. The company would record its amortization, variations and adjustments
to the Nine Mile 2 regulatory asset in a specified account in accordance with
the terms of the Joint Proposal. The regulatory asset would earn an 11.5% return
until the next time RG&E’s electric rates are set. RG&E will seek to have the
return on the regulatory asset set the same as its electric utility business.

Ratepayers would obtain the full benefits of the purchase price RG&E receives
from Constellation from the start. Consequently, the company would keep the
interest payments and any prepayments it receives from Constellation. Any
Nuclear Electric Insurance Limited (NEIL) distributions RG&E receives for Nine
Mile 2 would be flowed to customers, as would any portion of the asset rights
that convert to the company.

Central Hudson

The Central Hudson Joint Proposal (CHJP) resolves all Nine Mile 2 matters that
could have been raised in this case and it does not limit Staff’s rights to
audit the final transaction costs. The matters covered by the CHJP include: the
auction, operating practices, budgets, expenses, capital costs, inventories,
transaction costs for this and another proceeding, retirement and pension
benefits, investment tax credits, excess deferred federal income taxes,
decommissioning costs, Nine Mile 2 valuation, ratepayer benefits, costs and
benefits realized after the closing, nuclear insurance costs, federal tax and
auction incentives related to the Danskammer and Roseton Generating Stations
that Central Hudson has sold.

The CHJP incorporates the accounting and ratemaking methods a company witness
presented in testimony filed with the Joint Petition.10 The CHJP requires
Central Hudson to use the Nine Mile purchase price (net of adjustments, offsets,
and expenses) to benefit ratepayers. It also requires the company to provide
another $19 million to benefit ratepayers. The CHJP allows the company to keep
the interest payments and any prepayments Constellation provides. All future
NEIL distributions will flow to ratepayers, as would any rights that convert to
Central Hudson.

New York State Electric & Gas

The NYSEG Joint Proposal (NYJP) resolves all matters pertaining to Nine Mile 2,
including cost recovery. Like the other Joint Proposals, it does not limit
Staff’s right to audit the final transaction costs and adjustments. Among other
things, it covers: the transfer of NYSEG’s interest, rate and accounting issues
(other than complete disposition of the Nine Mile 2 gain), compliance with the
April 25, 2000 order in Case 99-E-0933, compliance with the Price Cap Plan
authorized by Opinion No. 98-6, auction results, operating practices, budgets,
expenses, capital costs, inventories, transactions costs incurred in this
proceeding and in other efforts to sell or transfer Nine Mile 2, pension and
retirement benefits, investment tax credits, excess deferred federal income
taxes, decommissioning costs, plant valuation, ratepayer benefits, costs and
benefits realized after the closing, nuclear insurance matters, and the use of
the sale proceeds.

NYSEG has agreed to establish an Asset Sale Gain Account (ASGA) for the $113
million it expects to receive for its interest in Nine Mile 2. The ASGA will
accrue interest and be used by the Commission for financially responsible
purposes. One year after it establishes the ASGA, NYSEG will begin to place
$1.78 million in the account monthly until new electric rates supercede the
prevailing Price Cap Plan. NYSEG will retain the interest payments it obtains
from Constellation. Ratepayers will receive all future NEIL distributions and
any rights that convert to NYSEG.

Constellation

The Constellation Joint Proposal (CJP) resolves certain issues Staff raised
concerning the disposition of the decommissioning trust funds. It amends the
Nine Mile 1 and 2 Asset Purchase Agreements consistent with the prefiled
testimony Staff submitted in this case. The sellers agree with the proposed
amendments.

In sum, the CJP retains Constellation’s commitment to make payments to the
sellers should it realize unanticipated gains due to any delay in the
decommissioning schedules for the facilities. Rather than establish fixed
payment amounts for events not expected to occur for many years, the CJP
provides an approach that does not create any improper incentives concerning
plant decommissioning activity. It is similar to the one Consolidated Edison and
Entergy used for the sale of the Indian Point generating facilities. Should
decommissioning not occur at the end of the facilities’ operating lives, half of
any excess decommissioning trust funds will flow to ratepayers.

Support for the Sale

In support of the sale, the Joint Petition acknowledges that the divestiture of
utility-owned generation facilities furthers electric industry restructuring and
fosters a competitive marketplace in New York. The cotenants maintain that the
proposed sale aptly responds to our request that they establish the value of the
Nine Mile facilities through an open market process. They point out that
experienced managers were used to conduct an auction open to all licensed
operators of nuclear power plants.

The petitioners observe that each utility company will continue their
transmission and distribution businesses without impairment and they will remain
subject to Commission jurisdiction. Constellation will become an electric
company in New York subject to Public Service Law requirements.11

The Joint Petition lists Constellation’s qualifications to own and operate the
Nine Mile facilities. They include the parent company’s sizable generation and
energy holdings and its interests in nuclear power plants in Maryland.12

When the Nine Mile facilities stop generating electricity, Constellation states,
it will return the Oswego site to a greenfield condition. To this end, it will
apply the decommissioning trust funds in accordance with NRC requirements and
ratepayers will not have to provide any more contributions to the trust funds.

In addition to assuming decommissioning responsibilities, Constellation will
assume all operational costs and risks for the Nine Mile facilities. Its
ownership of the facilities is not expected to provide it market power in New
York. The petitioners note that Constellation does not own any transmission
facilities in the State.

The petitioners state that they have addressed employee concerns and labor
interests by offering continued employment and compensation for transfers and
severances. They also claim the sale will benefit the local community in Oswego
County. Given a favorable real property tax agreement, the petitioners believe
Constellation will operate the generating plants reliably in the competitive
market.

Staff also provides its support for the Joint Proposals. It states that each one
provides a reasonable balance between ratepayer and shareholder interests. In
each instance, Staff considers the amount of costs the utility will absorb (and
not seek to recover from ratepayers) as an acceptable result in the prevailing
circumstances. Staff also credits the provisions it obtained for various
companies to apply amounts already being collected in rates to the unrecovered
investment in the nuclear facilities.

Addressing the Power Purchase Agreements, Staff notes that the PPAs are priced
at the current estimate for electricity on the open market. As such, it
considers them to be good hedges against market price fluctuations that could
adversely affect customers. Likewise, with the Revenue Sharing Agreements, Staff
states that the RSAs provide good hedges against market price increases at
virtually no cost to ratepayers.

Overall, Staff states that the Joint Proposals help to introduce competition in
the electric industry by ending controversy about the recovery of nuclear power
stranded costs.

In support of the NMJP, Niagara Mohawk states that the proposal provides an
equitable resolution of the sale transaction issues and the treatment of
stranded and other costs. The company observes that the NMJP is consistent with
applicable law and public policy, and it provides a negotiated result that is
comparable to a litigated outcome. Niagara Mohawk considers the NMJP’s chief
attributes to be its preservation of jobs in Oswego County and the continuation
of a zero-emission source of electricity.

Multiple Intervenors also supports the NMJP. It states that the proposal
provides a reasonable resolution of the issues, including the reduction of the
company’s investment by $123 million. MI specifically supports the proposal’s
Nuclear Electric Insurance Limited (NEIL), purchased power, and revenue sharing
provisions.

According to RG&E, the RJP balances customer and utility interests well and it
meets Commission objectives. Having used a competitive bid process, RG&E insists
that the purchase price for the facilities compares favorably with the prices
paid for other nuclear power plants. It also believes that the separation of the
Nine Mile facility from the transmission and distribution assets will foster
competition. Given the stranded costs it will forgo and the rate amounts it will
use to amortize stranded costs, RG&E considers the proposal to be a fair
resolution of the issues.

Central Hudson also states that it made beneficial concessions to customers that
support adoption of the CHJP. By achieving closure on the nuclear generation
issues, Central Hudson believes it can focus better on the provision of delivery
services and more effectively implement the vision for a competitive electric
industry. Thus, the company considers its proposal to be reasonable and in the
public interest.

NYSEG states that the NYJP adds to the development of a competitive electric
market and it points to the capital gain on the Nine Mile 2 sale that can be
used to benefit ratepayers. It notes that a non-bypassable wires charge might
have otherwise been needed to recover nuclear stranded costs. It also notes that
customers do not risk Nine Mile 2 replacement power costs during the remainder
of the prevailing rate restructuring plan. Finally, NYSEG states its strong
preference to avoid becoming a minority owner of Nine Mile 2 with little control
over its budget or operations.

COMMENTS CONCERNING THE JOINT PROPOSALS13

State Attorney General

The State Attorney General’s Office (OAG) believes that utility company losses
from the sale of nuclear power plants should be borne by shareholders and not be
charged to ratepayers.14 According to OAG, shareholders should shoulder the risk
of nuclear power plants in return for the rewards they may provide. Given the
sale of the Nine Mile facilities at less than their book value, OAG believes the
stranded costs should be written off and not be converted into regulatory assets
for ratepayers to pay. It contends that the utility companies’ management (not
ratepayers) decided to make uneconomic investments in nuclear power plants.
According to OAG, the Commission has ample authority to relieve ratepayers of
the stranded cost burdens. It points out that the utility companies were never
provided any assurances that stranded costs would be recovered in rates.

OAG also opposes provisions in various Joint Proposals that seek to restrict
parties’ rights to challenge the rate of returns the companies will seek in
upcoming rate proceedings. It insists that no party should be precluded from
advocating a different rate of return for regulatory assets than the one
provided for transmission and distribution assets.

Finally, OAG objects to Joint Proposal provisions that specify monthly true-ups
of purchase power costs with market costs.15 It prefers that these matters be
considered in rate cases where other factors bearing on just and reasonable
rates can also be considered.

Mr. Mavretich 16

Mr. Mavretich recognizes the convenient opportunity the Joint Proposals provide
to end the Nine Mile 2 controversy. However, he see little benefit in them for
ratepayers. According to Mr. Mavretich, a greater portion of the companies’
stranded costs should be disallowed and not be recovered from ratepayers. He
believes that the Joint Proposals are lopsided and they favor shareholder
interests. He estimates that over $1 billion of cost recovery is provided to
shareholders and he claims that ratepayers will receive no comparable advantage.
Consequently, he urges that the Joint Proposals be rejected and that litigation
or further negotiations be used to obtain better results for ratepayers.

Mr. Mavretich specifically endorses the Joint Proposals’ terms concerning the
future benefits available from Nuclear Electric Insurance Limited (NEIL). He
states that they properly preserve the benefits for ratepayers and they are
consistent with the prefiled testimony he provided.

IBEW Local 97

IBEW Local 97 represents 6,200 utility workers; 700 work at the Nine Mile
facilities. The union supports the Joint Proposals and states that they
reasonably balance shareholder and ratepayer interests. Local 97 urges us to act
expeditiously to end the uncertainty for workers at the facilities.

Nucor Steel Auburn

Nucor Steel Auburn, Inc. believes the NYJP provides an acceptable resolution of
the issues concerning NYSEG. It specifically endorses the establishment of an
Asset Sale Gain Account that will be used to provide ratepayer benefits in a
financially responsible manner.

Alliance For Municipal Power

In May 2001, the Alliance For Municipal Power (AMP) commented on the NMJP. AMP
is concerned about the exit fees that municipal customers pay before they can
leave the electric network. In general, AMP has complained about the summary
nature of the NMJP, contending that it should have included more details about
the purchase price and stranded costs. AMP specifically criticizes the provision
that would apply Niagara Mohawk’s allowed rate of return to the nuclear
regulatory assets. It also wants to review the final transaction costs for the
sale. AMP proposes that Niagara Mohawk not be allowed to recover its legal fees
related to the sale.

Public Comments

Throughout this proceeding, we have received letters, electronic mail, and
comments concerning the Joint Petition.17 Recently, when the parties filed their
Joint Proposals, we conducted public information forums in Syracuse on October
2, and in Oswego on October 3, 2001. At the forums, the staff of the Office of
Consumer Education and Advocacy described the Joint Petition, the Joint
Proposals and solicited comments. The public was also advised to mail,
telephone, or submit comments electronically over the internet.

Among others, we have heard from a certified public accountant in Liverpool who
urges us to reject the Joint Proposal and from a resident of Greenlawn who
believes that the nuclear power plants should not be sold. A student attending
the State University of New York at Potsdam wrote us concerning the safe
operation of nuclear power plants and an RG&E ratepayer believes his utility
company should write off all the remaining Nine Mile 2 costs. A resident of
Oswego not only opposes recovery of stranded costs he believes a portion of the
costs ratepayers have paid for the facilities should be returned.

At the public forums, 33 persons attended and 12 provided comments. Several
speakers urged that the power plants not be sold and that they no longer
operate. Others expressed concerns about public safety, decommissioning efforts,
and the need for more information. We also heard from an individual who was
unable to attend the public forums who is concerned about the risks of operating
nuclear power plants and would prefer that they be shut down.

DISCUSSION AND CONCLUSION

The proposed sale of the four utility companies’ interests in Nine Mile 1 and 2,
with associated facilities, is consistent with the policies the Commission
announced in 1996 to open the electric system to competition and to allow
electric generation companies to compete in the sale of electricity. Each of the
utility companies has been operating since that time pursuant to a rate
restructuring plan the terms of which the Commission has ordered.

To their credit, the terms of the proposed sales to Constellation are the result
of a competitive bid and auction process. This is in stark contrast to the sale
terms two utility companies presented in mid-1999 that they subsequently
withdrew.18 In Case 99-E-0933, we understood that multiple bidders were
interested in the nuclear generation facilities and we insisted that the utility
companies seek to obtain a substantially higher market value for them. That
objective has been met in this case with the results of Constellation’s
successful bid that we find acceptable.

To assist the utility companies in their auction efforts, in April 2000, we
addressed nuclear stranded cost matters and provided several observations. Chief
among them, we stated that the sale of the nuclear generation facilities at
their current market value would constitute appropriate mitigation of the
stranded costs. We also stated our willingness to address the ratemaking
treatment for the Nine Mile sale at the same time we determined whether the
proposed asset transfer was in the public interest.19

As in the recent case involving Consolidated Edison’s sale of the Indian Point
nuclear facilities to Entergy, the Office of the Attorney General (OAG) has
stated its general opposition to ratepayers paying the stranded costs for sales
that fail to produce sufficient proceeds to cover book costs. In this case, two
utility companies (Niagara Mohawk and RG&E) clearly have stranded cost losses
attributable to the sale of their nuclear generation facilities, a portion of
which ratepayers are being called upon to pay. The same might also be said of
the results of Central Hudson’s and NYSEG’s sale of their nuclear generation
assets; however, these companies used gains achieved from the sale of other
generating facilities to cover a portion of their book costs for Nine Mile 2.

Addressing first the circumstances presented by Central Hudson and NYSEG, we
find that treatment of nuclear stranded costs provided by the CHJP and the NYJP
is acceptable and that they reasonably balance the interests of ratepayers and
shareholders. The CHJP requires Central Hudson to place its share of the Nine
Mile 2 purchase price in a benefit fund for ratepayers and it requires the
company to contribute another $19 million to the benefit fund. These are
substantial advantages for ratepayers that support our finding that the sale of
Central Hudson’s portion of Nine Mile 2 is in the public interest and should be
authorized.

Similarly, the NYJP requires NYSEG to establish an asset sale gain account and
to fund it with the company’s portion of the Nine Mile 2 sale proceeds and
additional amounts. Like the funds Central Hudson is putting aside, the NYSEG
funds will be used to benefit ratepayers in a financially responsible manner.
These results support our finding that the sale of NYSEG’s portion of Nine
Mile 2 is in the public interest and should be authorized.

With respect to Central Hudson and NYSEG, we reject OAG’s and Mr. Mavretich’s
assertions that the gains achieved from the sale of other generation facilities
should not have been used to reduce their book costs for Nine Mile 2. Given the
acceptable terms of the CHJP and the NYJP that we can adopt, there is no merit
in the contention that ratepayer interests are not served by applying the gain
on other sales to the Nine Mile book costs.

Turning to Niagara Mohawk and RG&E, and their proposals to establish regulatory
assets to recover Nine Mile stranded costs, in neither instance does the utility
company seek to recover their entire loss on the sale transaction. The RJP
requires RG&E to write off $20 million of its loss which we find to be a proper
amount given the company’s current financial and business circumstances, and
considering the continuing challenges associated with RG&E’s ownership and
operation of the Ginna Nuclear Station and its remaining unrecovered nuclear
investments. In addition, the RJP requires the company to redirect and use up to
$30 million currently being collected in rates to amortize the nuclear
regulatory asset. These are substantial ratepayer benefits that otherwise reduce
the charges that could have been applied to them. For these reasons, we find
that the terms of the RJP are acceptable and the sale of RG&E’s interest in Nine
Mile 2 is in the public interest.

As the sole owner of Nine Mile 1 and as the company with the largest single
interest in Nine Mile 2 (at 41%), it is no surprise that Niagara Mohawk incurs
the greatest loss on the sale of the nuclear facilities. The NMJP balances
ratepayer and shareholder interests by requiring the company to write off $123
million of the loss on the sale. However, according to OAG and Mr. Mavretich,
Niagara Mohawk (and the other utility companies) should have written off much
more than this to provide a proper balance of ratepayer and shareholder
interests. Inasmuch as the generation assets were constructed to serve
ratepayers and Niagara Mohawk’s regulated rate of return was constrained and
limited to its cost of capital, OAG’s and Mr. Mavretich’s contentions are
incorrect.20 Thus, we find no merit in Mr. Mavretich’s request for the parties
to engage in further negotiations or for us to initiate litigation in this case.

As to other Joint Proposal terms that have drawn adverse comments, the OAG and
the Alliance For Municipal Power (AMP) object to any limits on the rate of
return issues in upcoming RG&E and Niagara Mohawk rate proceedings.21 While the
RJP’s provisions apply only to Staff and the company,22 OAG nonetheless objects
to them as a matter of public policy. Both the OAG and AMP object to the NMJP’s
provisions for the limits they seek to impose on third parties.

We find no compelling public policy reason to preclude Staff from stating in
advance the approach it will adhere to and use in upcoming rate proceedings. We
are not troubled by the commitments it has made with RG&E that do not impose any
limits or restrictions on any other party. With respect to the restrictions the
NMJP seeks on third parties proposing a different rate of return for the nuclear
regulatory asset, we will place no such restrictions on the comments, or other
submissions, that may be provided in other cases.

OAG is also opposed to the purchase power cost true-up provisions proposed by
Niagara Mohawk and RG&E and claims this matter is better left to the companies’
upcoming rate proceedings.23 In response, RG&E states that it only intended the
RJP’s true-up provision to operate on an interim basis pending the results of
its next proceeding.24 Thus, there does not appear to be any true issue between
these parties. With respect to Niagara Mohawk, as stated above, any party who
seeks to address the true-up provision in a ratemaking context will not be
precluded from submitting their comments or submissions.

Finally, while AMP believes that Niagara Mohawk should not be allowed to recover
all its legal fees, the company’s legal fees and final transaction costs remain
subject to a final audit.25

In summary, we have considered the Joint Petition, and the various agreements
the selling cotentants and Constellation have executed for the Nine Mile
facilities. We have also considered the Joint Proposals that the petitioners
have executed with Staff, CPB and Multiple Intervenors. Further, as discussed
above, we have evaluated the comments that the parties and the public have
provided concerning the Joint Petition and the Joint Proposals. All of this
leads us to find that the proposed sale of the Nine Mile nuclear generation
assets is in the public interest and the transfer should be authorized pursuant
to PSL §70.

State Environmental Quality Review Act Findings

On May 3, 1996, the Commission issued a Final Generic Environmental Impact
Statement (FGEIS) that addressed the statewide environmental, social and
economic impacts of a policy opening New York’s electric markets to
competition.26 The FGEIS acknowledged that localized impacts could arise as a
result of specific divestiture proposals presented by individual companies. To
determine if any such impacts existed, each company was directed to file a draft
Environmental Assessment Form (EAF) with its divestiture plan.

The approval of the sale of Nine Mile 1 and 2 to Constellation constitutes a
subsequent action to the policy determinations issued in Case 94-E-0952 and to
the rate and restructuring decisions made by the Commission (Opinion Nos. 98-1,
98-6, 98-8, and 98-14).27 Therefore, under the State Environmental Quality
Review Act (SEQRA), the Commission must determine whether the impacts associated
with the proposed transfer are within the conditions and thresholds of the
FGEIS.

The Commission issued a Final Supplemental Environmental Impact Statement on
October 5, 2001, which analyzed the detailed site-specific information provided
in the draft SEIS submitted by the petitioners as part of their PSL §70 filing
and the other factual information referenced therein. It identifies and
addresses the environmental, social and economic impacts found to arise as a
result of the transaction. Determinations were made as to whether the impacts
identified are within the conditions and thresholds of the FGEIS. Additionally,
a comparison was made to the no action alternative to gauge the extent to which
impacts actually arose as a result of the proposed action.

We solicited but did not receive any comments from the public on the draft SEIS.
Nonetheless, we recognized a potential significant adverse impact--the asset
transfer’s effects on property tax revenues. This impact was addressed and found
to be mitigated to the maximum extent practicable by a Memorandum of
Understanding (MOU) between the cotenants and the Town of Scriba that sets the
property taxes for the Nine Mile facilities for the next ten years.
Constellation has agreed to accept and abide by the MOU.

When the localized impacts identified are balanced against the overall benefits
to be derived from the proposed transfer (as addressed in this order), it is
clear that utility ratepayers, and the State as a whole, will be better off by
approving the transaction. The separation of generation facilities from
transmission and distribution assets should lead to a competitive marketplace
and reduced rates. Lower electric rates should lead to economic growth and
development. Given Constellation’s focus on nuclear electricity, this
transaction should contribute to the safe and continued operation of the plants
and to system reliability.

Accordingly, the Commission makes the findings stated above regarding the
environmental impacts associated with the sale. Pursuant to 6 NYCRR 617.11, the
Commission certifies that, consistent with environmental, social and economic
considerations from among the reasonable alternatives available, the approval of
the sale of Nine Mile 1 and 2, and related assets, avoids or minimizes adverse
impacts to the maximum extent practicable and satisfies the requirements of
SEQRA. The action is also consistent with applicable policies set forth in
Article 42 of the Executive Law (Local Waterfront Revitalization and Coastal
Resources), as implemented by 19 NYCRR 600, and will achieve a balance between
the protection of the environment and the need to accommodate social and
economic considerations.

Federal and State Regulation

The petitioners interpret the Public Utility Holding Company Act (PUHCA) as
requiring a finding that new ownership of a generating facility will benefit
customers, is in the public interest, and does not violate state law, before
Constellation can be afforded exempt wholesale generator (EWG) status for the
Nine Mile 1 and 2 generating facilities. Constellation seeks this status so it
may operate the facilities free of federal regulation intended for monopoly
utilities. Constellation sees the requisite benefit for the public in its
participation in the wholesale competitive market, which should result in
increased competition.

Therefore, the petitioners request that findings be made that the Nine Mile
generating facilities be determined to be “eligible facilities” as that term is
defined by PUHCA §32, thereby allowing the Federal Energy Regulatory Commission
(FERC) to issue a decision qualifying Constellation for EWG status under federal
law.

In conformance with PUHCA and FERC’s regulations,28 the Commission finds that
allowing the Nine Mile facilities to become eligible facilities, with
Constellation owning the plants (either directly or indirectly through one or
more affiliates as defined under federal law)29 will benefit New York consumers,
is in the public interest, and does not violate New York law.

These findings are made on the same basis that we have found that the
transaction is in the public interest pursuant to PSL §70. The Commission
determined in Case 94-E-0952 (Opinion No. 96-12) that a competitive marketplace
for the provision of electricity supply would benefit New York customers and
this transaction furthers that goal. Moreover, there is no violation of New York
law in transferring the plants to Constellation.

While Constellation will become an electric corporation under New York law when
it assumes ownership of the Nine Mile facilities, it is being accorded lightened
regulation.30 This approach to regulation has been previously approved for
generators that intend to participate entirely or primarily in the wholesale
market.31 Constellation, however, will still be subject to state regulation with
respect to such matters as enforcement, investigation, safety (subject to the
NRC’s jurisdiction over radiological matters), reliability and system
improvements.

The Commission orders:

1.    The terms and conditions of the five Joint Proposals identified and
described herein are adopted and incorporated as part of this order.
2.    The Nine Mile 1 and 2 Asset Purchase Agreements are approved, subject to
the requirements of this order.
3.    The Cotenant Agreement (as amended by the First Amendment dated September
28, 2000) and the Selling Cotenant Agreement (as amended by the First Amendment
       dated September 28, 2000) are approved, subject to the requirements of
this order.
4.    The Transmission Purchase and Sale Agreement and the Transmission Owners
Agreement are approved, subject to the requirements of this order.
5.    The Power Purchase Agreements and the Revenue Sharing Agreements are
approved, subject to the requirements of this order.
6.    The Property Tax Memorandum of Understanding is deemed to be reasonable,
prudent, and in the public interest.
7.    No later than 90 days following the closing of the sale and transfer of
the Nine Mile nuclear assets, the petitioners shall file with the Commission a
statement of the amount
       of proceeds received, the costs incurred, and the proposed accounting and
ratemaking treatment for the net proceeds, in conformance with the requirements
of this order.
8.    The findings related to the Final Supplemental Environmental Impact
Statement required under the State Environmental Quality Review Act described in
the body of this
       order are made.
9.    The findings on exempt wholesale generator status under the Public Utility
Holding Company Act described in the body of this order are made.
10.  This proceeding is continued.

By the Commission,

/s/  JANET HAND DEIXLER    
Janet Hand Deixler
Secretary

FOOTNOTES

1 Niagara Mohawk owns Nine Mile Unit 1 and 41% of Nine Mile Unit 2. NYSEG owns
18% of Nine Mile 2, RG&E owns 14%, and Central Hudson has 9%. The remainder
belongs to the Long Island Power Authority. LIPA is not selling its interest at
this time.

2 Additional conferences were held on May 15 and September 14, 2001. An
evidentiary hearing was scheduled to begin on September 25, 2001; however, it
was cancelled when the last Joint Proposal was executed.

3 The Joint Petition contained supporting affidavits and prefiled testimony from
Constellation, Niagara Mohawk and the other Nine Mile 2 cotenants. This
permitted the Judge to solicit other parties’ positions early in the proceeding.

4 Mr. Mavretich appeard in this proceeding on behalf of Congressman Maurice D.
Hinchey.

5 Adjustments will be made to the base purchase price for the actual closing
date for the sale, human resource payments, capital additions and replacements,
low-level waste disposal costs, the continuation of the facilities’ NRC
licenses, and uranium enrichment/fabrication costs.

6 The property includes: spent nuclear fuel, high-level and low-level waste, and
fuel-related inventory; machinery and equipment; transferable agreements,
contracts and permits; books and records; and, unexpired warranties and
guarantees from third parties.

7 This transaction concerns the Scriba Substation, a tract of land encompassing
the substation, and certain transmission lines that connect Nine Mile 2 to
Niagara Mohawk’s transmission system.

8 The NMJP incorporates the joint testimony of Messrs. Steven W. Tasker and
Dennis B. Schafer. While this testimony supported an amortization period for the
nuclear regulatory asset balance not to exceed ten years, the NMJP recognizes
adjustments to the nuclear regulatory asset balance that can either shorten the
amortization period or extend it beyond ten years.

9 The RJP incorporates the affidavits and testimony of Messrs. James J. Fletcher
and Joseph J. Syta.

10 It incorporates Mr. Arthur R. Upright’s testimony.

11 Constellation has petitioned for lightened regulation in Case 01-E-0349. An
order in that case is being issued today.

12 The petitioners also point out that the Nuclear Regulatory Commission (NRC)
requires license transferees to provide assurances that they are qualified to
assume ownership. They specifically point to the NRC’s safety, decommissioning,
and financial requirements as providing additional support for the
authorizations they are seeking here.

13 In addition to the comments reported below, comments were also received from
NYSEG and RG&E. NYSEG’s comments concerning the need for a new operating
agreement for Nine Mile 2 is moot given the NYJP and the proposed sale of the
company’s interest in the facility. RG&E’s comments concern a transmission
facility dispute between it and Niagara Mohawk that is pending court action.
Whether or not Staff helps to mediate this dispute, RG&E’s comments neither
detract from nor dispute the merits of the NMJP.

14 OAG took the same position concerning the recent sale of the Indian Point
nuclear generation facilities, See Case 01-E-0040, Consolidated Edison Company
of New York, Inc. - Asset Sale, Order Authorizing Asset Transfer (issued August
31, 2001).

15 Such provisions are contained in the NMJP and the RJP.

16 As noted above, Mr. Mavretich appeared in this proceeding on behalf of
Congressman Maurice D. Hinchey.

17 Some of the correspondence we received was initially sent to Governor Pataki
and various state legislators. Such letters were forwarded to us to consider in
this proceeding.

18 Case 99-E-0933, Joint Petition to Transfer Nuclear Generation Assets, Order
Allowing Petitions to be Withdrawn (issued April 25, 2000).

19 Id., pp. 7 and 8.

20 We also note that Niagara Mohawk recently announced that it is willing, in
the context of its proposal to merger with National Grid, to write-off an
additional $850 million. Case 01-M-0075, Niagara Mohawk and National Grid Merger
Proposal , Joint Proposal (dated October 11, 2001).

21 The CHJP and the NYJP do not contain any such provisions.

22 RG&E’s Reply Comments (dated September 28, 2001), p. 8

23 OAG also opposed such provision in the CHJP; however, Central Hudson denies
that there are any provisions of this sort in its Joint Proposal. Central
Hudson’s Reply Comments (dated September 28, 2001), pp. 4 and 5.

24 RG&E’s Reply Comments (dated September 28, 2001), pp. 9 and 10.

25 The companies’ filing of their final costs will be made public and available
for inspection by AMP or any other interested party.

26 Case 94-E-0952, et al., Competitive Opportunities Proceeding.

27 Case 94-E-0952, supra, Opinion No. 96-12 (issued May 20, 1996); Case
96-E-0898, Rochester Gas and Electric Corporation - Rate Restructuring, Opinion
No. 98-1 (issued January 14, 1998); Case 96-E-0891, New York State Electric &
Gas Corporation - Rate Restructuring, Opinion No. 98-6 (issued March 5, 1998);
Case 94-E-0098, Niagara Mohawk Power Corporation - Electric Rates, Opinion No.
98-8 (issued March 20, 1998); and, Case 96-E-0909, Central Hudson Gas & Electric
Corporation - Rate Restructuring, Opinion No. 98-14 (issued June 30, 1998).

28 15 U.S.C.A. §79z-51; 18 C.F.R. §365.

29 15 U.S.C.A. §79b(a)(ii); 18 C.F.R. §365(a)(1)(i).

30 Case 01-E-0349, Nine Mile Point Nuclear Station, LLC, Order Providing for
Lightened Regulation of Nuclear Generation Facilities (issued October 29, 2001).

31 See, e.g., Case 98-E-1670, Carr Street Generating Station, Order Providing
for Lightened Regulation (issued April 23, 1999).