FIRST SUPPLEMENTAL INDENTURE

                        between

                 ILLINOIS POWER COMPANY

                          and

                WILMINGTON TRUST COMPANY

              Dated as of January 1, 1996







                           TABLE OF CONTENTS
                                                                       Page

                                ARTICLE I
                               DEFINITIONS

     SECTION 1.1.  Definition of Terms                                  2

                               ARTICLE II
        GENERAL TERMS AND CONDITIONS OF THE SUBORDINATED DEBENTURES

     SECTION 2.1.  Designation and Principal Amount                     4
     SECTION 2.2.  Maturity                                             4
     SECTION 2.3.  Form and Payment                                     4
     SECTION 2.4.  Global Debenture                                     4
     SECTION 2.5.  Interest                                             6

                             ARTICLE III
                  REDEMPTION OF THE SUBORDINATED DEBENTURES

     SECTION 3.1.  Special Event Redemption                             7
     SECTION 3.2.  Optional Redemption by Company                       7
     SECTION 3.3.  No Sinking Fund                                      8

                             ARTICLE IV
                 EXTENSION OF INTEREST PAYMENT PERIOD

     SECTION 4.1.  Extension of Interest Payment Period                 8
     SECTION 4.2.  Notice of Extension                                  9
     SECTION 4.3.  Limitation of Transactions                           9

                             ARTICLE V
                              EXPENSES

     SECTION 5.1.  Payment of Expenses                                 10
     SECTION 5.2.  Payment Upon Resignation or Removal                 10

                            ARTICLE VI
                           SUBORDINATION

      SECTION 6.1. Agreement to Subordinate                            11
      SECTION 6.2. Default on Senior Indebtedness                      11
      SECTION 6.3. Liquidation; Dissolution; Bankruptcy                12
      SECTION 6.4. Subrogation                                         13
      SECTION 6.5. Trustee to Effectuate Subordination                 14

      SECTION 6.6. Notice by the Company                               14
      SECTION 6.7. Rights of the Trustee; Holders of Senior 
                   Indebtedness                                        15
      SECTION 6.8. Subordination May Not Be Impaired                   15

                            ARTICLE VII
                   COVENANT TO LIST ON EXCHANGE

      SECTION 7.1. Listing on an Exchange                              16

                           ARTICLE VIII
                          FORM OF DEBENTURE

      SECTION 8.1. Form of Debenture                                   16

                            ARTICLE IX
                 ORIGINAL ISSUE OF SUBORDINATED DEBENTURES

      SECTION 9.1. Original Issue of Subordinated Debentures           23

                             ARTICLE X
                            MISCELLANEOUS

      SECTION 10.1.Ratification of Indenture                           23
      SECTION 10.2.Trustee Not Responsible for Recitals                23
      SECTION 10.3.Governing Law                                       23
      SECTION 10.4.Separability                                        23
      SECTION 10.5.Counterparts                                        24

           FIRST  SUPPLEMENTAL INDENTURE, dated as of January  1,
1996 (the "First Supplemental Indenture"), between Illinois Power
Company,  an Illinois corporation (the "Company"), and Wilmington
Trust Company, not in its individual capacity but solely as trust
ee  (the  "Trustee") under the Indenture dated as of  January  1,
1996 between the Company and the Trustee (the "Indenture").

                      W I T N E S S E T H:

            WHEREAS,  the  Company  executed  and  delivered  the
Indenture  to the Trustee to provide for the future  issuance  of
the Company's unsecured junior subordinated debt securities to be
issued  from  time  to time in one or more  series  as  might  be
determined  by the Company under the Indenture, in  an  unlimited
aggregate  principal amount which may be authenticated and delivered
as provided in the Indenture;

           WHEREAS,  pursuant to the terms of the Indenture,  the
Company desires to provide for the establishment of a new  series
of  its Debt Securities to be known as its 8% Junior Subordinated
Deferrable   Interest  Debentures  due  2045  (the  "Subordinated
Debentures"),  the  form  and  substance  of  such   Subordinated
Debentures and the terms, provisions and conditions thereof to be
set   forth   as  provided  in  the  Indenture  and  this   First
Supplemental Indenture;

            WHEREAS,  Illinois  Power  Financing  I,  a  Delaware
statutory business trust (the "Trust"), has offered to the public
$100,000,000  aggregate  liquidation  amount  of  its  8%   Trust
Originated  Preferred  Securities (the  "Preferred  Securities"),
representing undivided beneficial interests in the assets of  the
Trust  and  proposes to invest the proceeds from  such  offering,
together with the proceeds of the issuance and sale by the  Trust
to  the Company of $3,100,000 aggregate liquidation amount of its
8%  Trust Originated Common Securities, in $103,100,000 aggregate
principal amount of the Subordinated Debentures; and

           WHEREAS,  the Company has requested that  the  Trustee
execute  and  deliver this First Supplemental Indenture  and  all
requirements necessary to make this First Supplemental  Indenture
a  valid instrument in accordance with its terms, and to make the
Subordinated  Debentures,  when  executed  by  the  Company   and
authenticated and delivered by the Trustee, the valid obligations
of  the  Company,  have  been performed, and  the  execution  and
delivery  of  this  First Supplemental Indenture  has  been  duly
authorized in all respects;

           NOW  THEREFORE, in consideration of the  purchase  and
acceptance of the Subordinated Debentures by the holders thereof,
and  for  the  purpose  of  setting forth,  as  provided  in  the
Indenture,  the form and substance of the Subordinated Debentures
and  the  terms, provisions and conditions thereof,  the  Company
covenants and agrees with the Trustee as follows:

                                   ARTICLE I
                                  DEFINITIONS

Section 1.1. Definition of Terms.

      Unless the context otherwise requires:

          (a)       a term defined in the Indenture has the same meaning
when used in this First Supplemental Indenture;

          (b)       a term defined anywhere in this First Supplemental
Indenture has the same meaning throughout;

          (c)       the singular includes the plural and vice versa;

          (d)       a reference to a Section or Article is to a Section or
Article of this First Supplemental Indenture;

          (e)       headings are for convenience of reference only and do
not affect interpretation;

          (f)       the following terms have the meanings given to them in
the  Declaration:  (i) Business Day; (ii) Clearing Agency;  (iii)
Delaware  Trustee; (iv) Depositary; (v) Dissolution Tax  Opinion;
(vi)   No   Recognition   Opinion;   (vii)   Preferred   Security
Certificate; (viii) Pricing Agreement; (ix) Property Trustee; (x)
Regular  Trustees; (xi) Special Event; and (xii) Tax  Event;  and
(xiii) Underwriting Agreement;

          (g)       the following terms have the meanings given to them in
this Section 1.1(g):

           "Additional Interest" shall have the meaning set forth
            in Section 2.5.

           "Compounded Interest" shall have the meaning set forth
            in Section 4.1.

           "Coupon  Rate"  shall have the meaning  set  forth  in
            Section 2.5.

            "Declaration"   means   the  Amended   and   Restated
             Declaration  of Trust of Illinois Power Financing I,  a  
             Delaware statutory business trust, dated as of January 11, 
             1996, including the Terms of Securities attached thereto as 
             Annex I.

            "Deferred Interest" shall have the meaning set forth in
             Section 4.1.

            "Dissolution  Event" means that, as a  result  of  the
             occurrence and continuation of a Special Event, the Trust 
             is to be terminated in accordance with the Declaration, and the
             Subordinated Debentures held by the Property Trustee are to be
             distributed to the holders of the Trust Securities issued by the
             Trust pro rata in accordance with the Declaration.

            "Extended Interest Payment Period" shall have the meaning set 
             forth in Section 4.1.

            "Global Debenture" shall have the meaning set forth in
             Section 2.4.

            "Maturity Date" means the date on which the Subordinated 
             Debentures mature and on which the principal shall
             be due and payable together with all accrued and unpaid interest
             thereon including Compounded Interest and Additional Interest, if
             any.

            "Non Book-Entry Preferred Securities" shall have the
             meaning set forth in Section 2.4.

            "Optional Redemption Price" shall have the meaning set
             forth in Section 3.2.

            "Senior Indebtedness" means, with respect to the Company,
            (i) the principal, premium, if any, and interest in
            respect of (A) indebtedness of such obligor for money borrowed
            and (B) indebtedness evidenced by securities, debentures, bonds
            or other similar instruments issued by such obligor, including,
            without limitation, indebtedness evidenced by securities issued
            pursuant to the Company's Mortgage and Deed of Trust dated
            November 1, 1943, as supplemented, and its General Mortgage
            Indenture and Deed of Trust dated November 1, 1992, as
            supplemented; (ii) all capital lease obligations of such obligor,
            (iii)  all obligations of such obligor issued or assumed  as  the
            deferred purchase price of property, all conditional sale  obliga
            tions  of such obligor and all obligations of such obligor  under
            any  title  retention  agreement (but  excluding  trade  accounts
            payable  arising  in the ordinary course of business);  (iv)  all
            obligations of such obligor for the reimbursement on  any  letter
            of  credit,  banker's acceptance, security purchase  facility  or
            similar  credit  transaction; (v) all  obligations  of  the  type
            referred to in clauses (i) through (iv) of other Persons for  the
            payment  of  which  such  obligor is  responsible  or  liable  as
            obligor, guarantor or otherwise; and (vi) all obligations of  the 
            type  referred  to  in clauses (i) through (v) of  other  Persons
            secured  by  any  lien on any property or asset of  such  obligor
            (whether  or  not  such obligation is assumed by  such  obligor),
            except  for  (1)  any  such indebtedness that  is  by  its  terms
            subordinated  to or pari passu with the Subordinated  Debentures,
            and  (2)  any indebtedness between or among such obligor and  its
            Affiliates, including all other debt securities and guarantees in
            respect of those debt securities, issued to any other trust, or a
            trustee  of  such  trust, partnership or other entity  affiliated
            with  the Company which is a financing vehicle of the Company  (a
            "Financing  Entity")  in connection with  the  issuance  by  such
            Financial  Entity  of  preferred securities or  other  securities
            which   rank  pari  passu  with,  or  junior  to,  the  Preferred
            Securities.


                                       ARTICLE II
            GENERAL  TERMS AND CONDITIONS OF THE SUBORDINATED DEBENTURES

SECTION 2.1. Designation and Principal Amount.

           There is hereby authorized a series of Debt Securities
designated  the  "8%  Junior  Subordinated  Deferrable   Interest
Debentures  due 2045", limited in aggregate principal  amount  to
$103,100,000, which amount shall be as set forth in  any  written
order  of  the  Company for the authentication  and  delivery  of
Subordinated  Debentures  pursuant  to  Section   2.04   of   the
Indenture.

SECTION 2.2. Maturity.

          The Maturity Date is January 31, 2045.

SECTION 2.3. Form and Payment.

           The  Subordinated Debentures shall be issued in  fully
registered certificated form without interest coupons.  Principal
and  interest on the Subordinated Debentures will be payable, the
transfer of such Subordinated Debentures will be registrable  and
such   Subordinated   Debentures   will   be   exchangeable   for
Subordinated  Debentures bearing identical terms and  provisions,
at  the office or agency of the Trustee; provided, however,  that
payment  of interest may be made at the option of the Company  by
check mailed to the holder at such address as shall appear in the
Security Register.  Notwithstanding the foregoing, so long as the
holder  of  any Subordinated Debentures is the Property  Trustee,
the  payment of the principal of and interest (including Compound
ed Interest and Additional Interest, if any) on such Subordinated
Debentures  held  by the Property Trustee will be  made  at  such
place  and  to such account as may be designated by the  Property
Trustee.

SECTION 2.4. Global Debenture.

          (a)    In connection with a Dissolution Event:

               (i)       the Subordinated Debentures may be presented to the
     Trustee  by  the Property Trustee in exchange for  a  global
     Subordinated Debenture in an aggregate principal amount equal to
     the aggregate principal amount of all outstanding Subordinated
     Debentures (a "Global Debenture"), to be registered in the name
     of the Depositary, or its nominee, and delivered by the Trustee
     to  the  Depositary  for crediting to the  accounts  of  its
     participants  pursuant to the instructions  of  the  Regular
     Trustees.  The Company, upon any such presentation, shall execute
     a Global Debenture in such aggregate principal amount and deliver
     the  same to the Trustee for authentication and delivery  in
     accordance  with  the Indenture and this First  Supplemental
     Indenture.  Payments on the Subordinated Debentures issued as a
     Global Debenture will be made to the Depositary; and

               (ii)      if any Preferred Securities are held in non book-entry
     certificated form, the Subordinated Debentures may be presented
     to the Trustee by the Property Trustee and any Preferred Security
     Certificate which represents Preferred Securities other than
     Preferred Securities held by the Clearing Agency or its nominee
     ("Non  Book-Entry Preferred Securities") will be  deemed  to
     represent  beneficial  interests in Subordinated  Debentures
     presented  to the Trustee by the Property Trustee having  an
     aggregate principal amount equal to the aggregate liquidation
     amount of the Non Book-Entry Preferred Securities until such
     Preferred Security Certificates are presented to the Security
     Registrar for transfer or reissuance at which time such Preferred
     Security  Certificates will be cancelled  and  a  Debenture,
     registered in the name of the holder of the Preferred Security
     Certificate or the transferee of the holder of such Preferred
     Security  Certificate, as the case may be, with an aggregate
     principal amount equal to the aggregate liquidation amount of the
     Preferred Security Certificate cancelled, will be executed by the
     Company and delivered to the Trustee for authentication  and
     delivery  in  accordance with the Indenture and  this  First
     Supplemental  Indenture.   On  issue  of  such  Subordinated
     Debentures, Subordinated Debentures with an equivalent aggregate
     principal amount that were presented by the Property Trustee to
     the Trustee will be deemed to have been cancelled.

          (b)       Except as provided in clause (c) below, a Global
Debenture may be transferred, in whole but not in part,  only  to
another  nominee of the Depositary, or to a successor  Depositary
selected  or  approved by the Company or to  a  nominee  of  such
successor Depositary.

          (c)       If at any time the Depositary notifies the Company that
it  is unwilling or unable to continue as Depositary or if at any
time the Depositary for such series shall no longer be registered
or  in  good standing under the Exchange Act, or other applicable
statute or regulation, and a successor Depositary for such series
is  not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such condition,  as  the
case may be, the Company will execute, and, subject to Article II
of  the  Indenture,  the Trustee, upon written  notice  from  the
Company,   will   authenticate  and  deliver   the   Subordinated
Debentures   in   definitive  registered  form,   in   authorized
denominations, and in an aggregate principal amount equal to  the
principal  amount  of the Global Debenture in exchange  for  such
Global  Debenture.   In addition, the Company  may  at  any  time
determine  that the Subordinated Debentures shall  no  longer  be
represented  by  a Global Debenture.  In such event  the  Company
will  execute,  and subject to Section 2.11(c) of the  Indenture,
the  Trustee, upon receipt of an Officers' Certificate evidencing
such  determination by the Company, will authenticate and deliver
the  Subordinated  Debentures in definitive registered  form,  in
authorized  denominations, and in an aggregate  principal  amount
equal to the principal amount of the Global Debenture in exchange
for  such  Global  Debenture.  Upon the exchange  of  the  Global
Debenture   for   such  Subordinated  Debentures  in   definitive
registered   form,  in  authorized  denominations,   the   Global
Debenture  shall be cancelled by the Trustee.  Such  Subordinated
Debentures  in definitive registered form issued in exchange  for
the  Global  Debenture shall be registered in such names  and  in
such  authorized  denominations as the  Depositary,  pursuant  to
instructions   from  its  direct  or  indirect  participants   or
otherwise, shall instruct the Trustee.  The Trustee shall deliver
such  Subordinated Debentures to the Depositary for  delivery  to
the  Persons in whose names such Subordinated Debentures  are  so
registered.

SECTION 2.5. Interest.

          (a)       Each Subordinated Debenture will bear interest at the
rate  of 8% per annum (the "Coupon Rate") from the original  date
of  issuance until the principal thereof becomes due and payable,
and  on any overdue principal and (to the extent that payment  of
such interest is enforceable under applicable law) on any overdue
installment   of   interest,  at  the  Coupon  Rate,   compounded
quarterly,  payable  (subject to the provisions  of  Article  IV)
quarterly  in  arrears  on March 31, June 30,  September  30  and
December  31  of  each year (each, an "Interest  Payment  Date"),
commencing  March  31, 1996, to the Person  in  whose  name  such
Subordinated Debenture or any predecessor Subordinated  Debenture
is  registered,  at the close of business on the  regular  record
date  for  such  interest installment, which, in respect  of  any
Subordinated  Debentures  of which the Property  Trustee  is  the
holder  of a Global Debenture, shall be the close of business  on
the  Business  Day  next  preceding that Interest  Payment  Date.
Notwithstanding   the  foregoing  sentence,  if   the   Preferred
Securities  are no longer in book-entry only form or,  except  if
the Subordinated Debentures are held by the Property Trustee, the
Subordinated  Debentures  are  not  represented   by   a   Global
Debenture, the Company may select a regular record date for  such
interest  installment  which shall  be  any  date  at  least  one
Business Day before an Interest Payment Date.

          (b)       The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day  months.
Except  as  provided  in the following sentence,  the  amount  of
interest  payable  for any period shorter than a  full  quarterly
period  for which interest is computed, will be computed  on  the
basis  of  the  actual number of days elapsed in  such  a  30-day
period.  In the event that any date on which interest is  payable
on  the  Subordinated  Debentures is not  a  Business  Day,  then
payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any  interest
or  other payment in respect of any such delay), except that,  if
such  Business Day is in the next succeeding calendar year,  such
payment shall be made on the immediately preceding Business  Day,
in  each  case with the same force and effect as if made on  such
date.

          (c)       If, at any time while the Property Trustee is the
holder  of any Subordinated Debentures, the Trust or the Property
Trustee  is  required  to pay any taxes, duties,  assessments  or
governmental  charges of whatever nature (other than  withholding
taxes)  imposed  by  the  United  States,  or  any  other  taxing
authority,  then, in any case, the Company will pay as additional
interest  ("Additional Interest") on the Subordinated  Debentures
held by the Property Trustee, such additional amounts as shall be
required  so  that the net amounts received and retained  by  the
Trust  and the Property Trustee after paying such taxes,  duties,
assessments  or other governmental charges will be equal  to  the
amounts  the  Trust and the Property Trustee would have  received
had  no  such  taxes,  duties, assessments or other  governmental
charges been imposed.


                            ARTICLE III
             REDEMPTION OF THE SUBORDINATED DEBENTURES

SECTION 3.1. Special Event Redemption.

          If a Tax Event has occurred and is continuing and:

          (a)       the Company has received a Redemption Tax Opinion; or

          (b)       after receiving a Dissolution Tax Opinion, the Regular
     Trustees shall have been informed by tax counsel rendering the
     Dissolution Tax Opinion that a No Recognition Opinion cannot be
     delivered to the Trust,

then,  notwithstanding  Section 3.2(a)  but  subject  to  Section
3.2(b),  the Company shall have the right upon not less  than  30
days  nor  more  than  60  days notice  to  the  holders  of  the
Subordinated Debentures to redeem the Subordinated Debentures, in
whole  or  in  part,  for  cash  within  90  days  following  the
occurrence  of  such  Tax  Event  (the  "90-Day  Period")  at   a
redemption  price  equal to 100% of the principal  amount  to  be
redeemed plus any accrued and unpaid interest thereon to the date
of  such redemption (the "Redemption Price"), provided that if at
the  time  there  is available to the Company the opportunity  to
eliminate, within the 90-Day Period, the Tax Event by taking some
ministerial action ("Ministerial Action"), such as filing a  form
or  making an election, or pursuing some other similar reasonable
measure which has no adverse effect on the Company, the Trust  or
the  holders  of  the Trust Securities issued by the  Trust,  the
Company  shall pursue such Ministerial Action in lieu  of  redemp
tion,  and,  provided, further, that the Company  shall  have  no
right  to  redeem the Subordinated Debentures while the Trust  is
pursuing any Ministerial Action pursuant to its obligations under
the Declaration.

SECTION 3.2. Optional Redemption by Company.

          (a)       Subject to the provisions of Section 3.02(b) and to the
provisions  of Article III of the Indenture, except as  otherwise
may  be  specified in this First Supplemental Indenture, the  Com
pany  shall have the right to redeem the Subordinated Debentures,
in  whole or in part, from time to time, on or after January  31,
2001, at a redemption price equal to 100% of the principal amount
to  be  redeemed plus any accrued and unpaid interest thereon  to
the  date  of such redemption (the "Optional Redemption  Price").
Any  redemption pursuant to this paragraph will be made upon  not
less  than 30 days nor more than 60 days notice to the holder  of
the  Subordinated  Debentures, at the Optional Redemption  Price.
If  the  Subordinated  Debentures  are  only  partially  redeemed
pursuant to this Section 3.2, the Subordinated Debentures will be
redeemed  pro rata or by lot or by any other method  utilized  by
the  Trustee;  provided, that if at the time  of  redemption  the
Subordinated Debentures are registered as a Global Debenture, the
Depositary  shall determine, in accordance with  its  procedures,
the principal amount of such Subordinated Debentures held by each
holder of Subordinated Debentures to be redeemed.

          (b)       If a partial redemption of the Subordinated Debentures
would  result  in the delisting of the Preferred Securities  from
any  national securities exchange or other organization on  which
the  Preferred Securities are then listed, the Company shall  not
be  permitted  to  effect such partial redemption  and  may  only
redeem the Subordinated Debentures in whole.

SECTION 3.3.       No Sinking Fund.

           The  Subordinated Debentures are not entitled  to  the
benefit of any sinking fund.


                                ARTICLE IV
                          EXTENSION OF INTEREST PAYMENT

SECTION 4.1. Extension of Interest Payment Period.

           The Company shall have the right, at any time and from
time  to time during the term of the Subordinated Debentures,  to
defer  payments  of  interest by extending the  interest  payment
period of such Subordinated Debentures for a period not exceeding
20 consecutive quarters (the "Extended Interest Payment Period"),
during  which Extended Interest Payment Period no interest  shall
be  due and payable.  To the extent permitted by applicable  law,
interest, the payment of which has been deferred because  of  the
extension of the interest payment period pursuant to this Section
4.1,  will  bear  interest thereon at the Coupon Rate  compounded
quarterly  for  each  quarter of the  Extended  Interest  Payment
Period  ("Compounded  Interest").  At the  end  of  the  Extended
Interest  Payment  Period, the Company  shall  pay  all  interest
accrued and unpaid on the Subordinated Debentures, including  any
Additional Interest and Compounded Interest (together,  "Deferred
Interest")  that  shall  be  payable  to  the  holders   of   the
Subordinated   Debentures  in  whose   names   the   Subordinated
Debentures are registered in the Security Register on  the  first
record  date  after  the  end  of the Extended  Interest  Payment
Period.   Before the termination of any Extended Interest Payment
Period, the Company may further extend such period, provided that
such  period  together with all such further  extensions  thereof
shall  not  exceed 20 consecutive quarters.  Upon the termination
of  any Extended Interest Payment Period and upon the payment  of
all  Deferred Interest then due, the Company may commence  a  new
Extended  Interest  Payment  Period,  subject  to  the  foregoing
requirements.   No  interest shall be due and payable  during  an
Extended Interest Payment Period, except at the end thereof,  but
the  Company  may prepay at any time all or any  portion  of  the
interest accrued during an Extended Interest Payment Period.

SECTION 4.2. Notice of Extension.

          (a)       If the Property Trustee is the only registered holder
of  the Subordinated Debentures at the time the Company elects an
Extended Interest Payment Period, the Company shall give  written
notice  to  the  Regular Trustees, the Property Trustee  and  the
Trustee of its election of such Extended Interest Payment  Period
at  least  one  Business Day before the earlier of (i)  the  next
succeeding  date  on which Distributions on the Trust  Securities
issued  by the Trust are payable, or (ii) the date the  Trust  is
required  to  give notice of the record date, or  the  date  such
Distributions  are  payable, to the New York  Stock  Exchange  or
other  applicable self-regulatory organization or to  holders  of
the  Preferred Securities, but in any event at least one Business
Day before such record date.

          (b)       If the Property Trustee is not the only holder of the
Subordinated  Debentures  at  the  time  the  Company  elects  an
Extended  Interest  Payment Period, the Company  shall  give  the
holders  of  the Subordinated Debentures and the Trustee  written
notice  of its election of such Extended Interest Payment  Period
10  Business  Days before the earlier of (i) the next  succeeding
Interest  Payment Date, or (ii) the date the Company is  required
to  give  notice of the record or payment date of  such  interest
payment to the New York Stock Exchange or other applicable  self-
regulatory   organization  or  to  holders  of  the  Subordinated
Debentures.

          (c)       The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one
of  the  20  quarters permitted in the maximum Extended  Interest
Payment Period permitted under Section 4.1.

SECTION 4.3.  Limitation of Transactions.

           If  (i) the Company shall exercise its right to  defer
payment  of  interest as provided in Section 4.1, or  (ii)  there
shall  have  occurred any Event of Default, then (a) the  Company
shall  not declare or pay any dividend on, make any distributions
with  respect  to,  or  redeem,  purchase,  acquire  or  make   a
liquidation  payment with respect to, any of its  capital  stock,
provided,  however,  the  Company may declare  and  pay  a  stock
dividend  where the dividend stock is the same stock as  that  on
which the dividend is being paid, (b) the Company shall not  make
any  payment  of interest, principal or premium, if  any,  on  or
repay,  repurchase or redeem any debt securities  issued  by  the
Company  which rank pari passu with or junior to the Subordinated
Debentures; and (c) the Company shall not make guarantee payments
with  respect  to  the  foregoing (other  than  pursuant  to  the
Preferred Securities Guarantee).


                                ARTICLE V
                                 EXPENSES

SECTION 5.1. Payment of Expenses.

           In connection with the offering, sale and issuance  of
the  Subordinated  Debentures  to the  Property  Trustee  and  in
connection  with the sale of the Trust Securities by  the  Trust,
the  Company,  in its capacity as borrower with  respect  to  the
Subordinated Debentures, shall:

          (a)       pay all costs and expenses relating to the offering,
sale  and  issuance  of  the Subordinated  Debentures,  including
commissions   to  the  underwriters  payable  pursuant   to   the
Underwriting Agreement and compensation of the Trustee under  the
Indenture  in accordance with the provisions of Section  7.06  of
the Indenture;

          (b)       pay all costs and expenses of the Trust (including, but
not  limited  to, costs and expenses relating to the organization
of  the  Trust,  the  offering, sale and issuance  of  the  Trust
Securities   (including  commissions  to  the   underwriters   in
connection  therewith),  the fees and expenses  of  the  Property
Trustee and the Delaware Trustee, the costs and expenses relating
to  the  operation  of  the Trust, including without  limitation,
costs  and  expenses  of accountants, attorneys,  statistical  or
bookkeeping  services, expenses for printing  and  engraving  and
computing or accounting equipment, paying agent(s), registrar(s),
transfer  agent(s), duplicating, travel and telephone  and  other
telecommunications  expenses and costs and expenses  incurred  in
connection  with the acquisition, financing, and  disposition  of
Trust assets); and

          (c)       pay any and all taxes (other than United States
withholding  taxes attributable to the Trust or its  assets)  and
all liabilities, costs and expenses with respect to such taxes of
the Trust.

SECTION 5.2. Payment Upon Resignation or Removal.

           Upon  termination of this First Supplemental Indenture
or  the  Indenture or the removal or resignation of  the  Trustee
pursuant  to  this Section, the Company shall pay to the  Trustee
all  amounts accrued to the date of such termination, removal  or
resignation.  Upon termination of the Declaration or the  removal
or  resignation of the Delaware Trustee or the Property  Trustee,
as  the  case may be, pursuant to Section 5.6 of the Declaration,
the Company shall pay to the Property Trustee all amounts accrued
to the date of such termination, removal or resignation.


                                 ARTICLE VI
                                SUBORDINATION

SECTION 6.1. Agreement to Subordinate.

           The  Company covenants and agrees, and each holder  of
Subordinated  Debentures  issued  hereunder,  by  such   holder's
acceptance  thereof,  likewise covenants  and  agrees,  that  all
Subordinated Debentures shall be issued subject to the provisions
of  this  Article;  and each holder of a Subordinated  Debenture,
whether  upon  original  issue  or upon  transfer  or  assignment
thereof, accepts and agrees to be bound by such provisions.

           The  payment  by  the  Company of  the  principal  of,
premium,  if  any,  and  interest on all Subordinated  Debentures
issued   hereunder  shall,  to  the  extent  and  in  the  manner
hereinafter  set  forth, be subordinate and junior  in  right  of
payment  to  the prior payment in full of all Senior Indebtedness
of the Company, whether outstanding at the date of this Indenture
or thereafter incurred.

           No  provision of this Article shall prevent the  occur
rence of any default hereunder or Event of Default.

SECTION 6.2. Default on Senior Indebtedness.

          In the event and during the continuation of any default
by  the Company in the payment of principal, premium, interest or
any  other payment due on any Senior Indebtedness of the Company,
and  any applicable grace period with respect to such default has
expired  and such default has not been cured or waived or  ceased
to  exist,  or  in  the  event that the maturity  of  any  Senior
Indebtedness  of  the  Company, as the  case  may  be,  has  been
accelerated  because  of  a default, then,  in  either  case,  no
payment  shall be made by the Company with respect to the  princi
pal  (including  redemption and sinking  fund  payments)  of,  or
premium, if any, or interest on the Subordinated Debentures.

           In  the event that, notwithstanding the foregoing, any
payment  shall  be received by the Trustee when such  payment  is
prohibited  by  the  preceding paragraph of  this  Section,  such
payment  shall be held in trust for the benefit of, and shall  be
paid over or delivered to, the holders of Senior Indebtedness  or
their  respective representatives, or to the trustee or  trustees
under any indenture pursuant to which any of such Senior Indebted
ness  may  have  been issued, as their respective  interests  may
appear,  but  only to the extent that the holders of  the  Senior
Indebtedness  (or  their representative or representatives  or  a
trustee)  notify the Trustee in writing within 90  days  of  such
payment  of the amounts then due and owing on the Senior Indebted
ness and only the amounts specified in such notice to the Trustee
shall be paid to the holders of Senior Indebtedness.

SECTION 6.3. Liquidation; Dissolution; Bankruptcy.

           Upon  any  payment by the Company or  distribution  of
assets of the Company of any kind or character, whether in  cash,
property  or  securities, to creditors upon  any  dissolution  or
winding-up  or  liquidation  or reorganization  of  the  Company,
whether  voluntary  or involuntary or in bankruptcy,  insolvency,
receivership  or  other proceedings, all  amounts  due  upon  all
Senior  Indebtedness of the Company shall first be paid in  full,
or  payment thereof provided for in money in accordance with  its
terms,  before any payment is made by the Company on  account  of
the  principal  (and premium, if any) or interest  on  the  Subor
dinated  Debentures; and upon any such dissolution or  winding-up
or  liquidation or reorganization, any payment by the Company, or
distribution  of assets of the Company of any kind or  character,
whether in cash, property or securities, which the holders of the
Subordinated  Debentures  or the Trustee  would  be  entitled  to
receive  from  the  Company, except for the  provisions  of  this
Article, shall be paid by the Company or by any receiver, trustee
in  bankruptcy, liquidating trustee, agent or other Person making
such   payment  or  distribution,  or  by  the  holders  of   the
Subordinated Debentures or by the Trustee if received by them  or
it, directly to the holders of Senior Indebtedness of the Company
(pro  rata to such holders on the basis of the respective amounts
of Senior Indebtedness held by such holders, as calculated by the
Company)  or their representative or representatives, or  to  the
trustee  or  trustees under any indenture pursuant to  which  any
instruments  evidencing such Senior Indebtedness  may  have  been
issued,  as their respective interests may appear, to the  extent
necessary  to pay such Senior Indebtedness in full, in  money  or
money's  worth, after giving effect to any concurrent payment  or
distribution  to or for the holders of such Senior  Indebtedness,
before  any  payment or distribution is made to  the  holders  of
Subordinated Debentures or to the Trustee.

           In  the event that, notwithstanding the foregoing, any
payment  or distribution of assets of the Company of any kind  or
character, whether in cash, property or securities, prohibited by
the foregoing, shall be received by the Trustee before all Senior
Indebtedness of the Company is paid in full, or provision is made
for  such  payment in money in accordance with  its  terms,  such
payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of such Senior
Indebtedness  or their representative or representatives,  or  to
the trustee or trustees under any indenture pursuant to which any
instruments  evidencing such Senior Indebtedness  may  have  been
issued,  and their respective interests may appear, as calculated
by  the  Company, for application to the payment  of  all  Senior
Indebtedness of the Company, as the case may be, remaining unpaid
to  the extent necessary to pay such Senior Indebtedness in  full
in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit  of  the
holders of such Senior Indebtedness.

          For purposes of this Article, the words "cash, property
or  securities" shall not be deemed to include shares of stock of
the  Company as reorganized or readjusted, or securities  of  the
Company  or  any  other corporation provided for  by  a  plan  of
reorganization  or  readjustment,  the  payment   of   which   is
subordinated at least to the extent provided in this Article  Six
with respect to the Subordinated Debentures to the payment of all
Senior Indebtedness of the Company, as the case may be, that  may
at  the  time  be  outstanding, provided  that  (i)  such  Senior
Indebtedness is assumed by the new corporation, if any, resulting
from any such reorganization or readjustment, and (ii) the rights
of  the holders of such Senior Indebtedness are not, without  the
consent  of  such  holders,  altered by  such  reorganization  or
readjustment.   The  consolidation of the Company  with,  or  the
merger   of  the  Company  into,  another  corporation   or   the
liquidation   or  dissolution  of  the  Company   following   the
conveyance  or  transfer  of  its property  as  an  entirety,  or
substantially  as  an entirety, to another corporation  upon  the
terms  and  conditions provided for in Article X of the Indenture
shall  not  be  deemed a dissolution, winding-up, liquidation  or
reorganization  for the purposes of this Section  if  such  other
corporation  shall,  as  a  part of such  consolidation,  merger,
conveyance  or  transfer, comply with the  conditions  stated  in
Article  X of the Indenture.  Nothing in Section 6.2 or  in  this
Section 6.3 shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 7.06 of the Indenture.

SECTION 6.4. Subrogation.

            Subject  to  the  payment  in  full  of  all   Senior
Indebtedness  of the Company, the rights of the  holders  of  the
Subordinated Debentures shall be subrogated to the rights of  the
holders  of  such  Senior  Indebtedness to  receive  payments  or
distributions of cash, property or securities of the Company,  as
the case may be, applicable to such Senior Indebtedness until the
principal  of  (and  premium,  if  any)  and  interest   on   the
Subordinated  Debentures shall be paid  in  full;  and,  for  the
purposes of such subrogation, no payments or distributions to the
holders  of  such  Senior Indebtedness of any cash,  property  or
securities to which the holders of the Subordinated Debentures or
the  Trustee would be entitled except for the provisions of  this
Article, and no payment over pursuant to the provisions  of  this
Article  to  or  for the benefit of the holders  of  such  Senior
Indebtedness  by  holders of the Subordinated Debentures  or  the
Trustee, shall, as between the Company, its creditors other  than
holders of Senior Indebtedness of the Company, and the holders of
the  Subordinated Debentures, be deemed to be a  payment  by  the
Company  to  or  on account of such Senior Indebtedness.   It  is
understood  that  the  provisions of this  Article  are  and  are
intended solely for the purposes of defining the relative  rights
of  the holders of the Subordinated Debentures, on the one  hand,
and the holders of such Senior Indebtedness on the other hand.

           Nothing contained in this Article or elsewhere in  the
Indenture,   this  First  Supplemental  Indenture   or   in   the
Subordinated Debentures is intended to or shall impair, as  among
the  Company,  its  creditors other than the  holders  of  Senior
Indebtedness  of the Company, and the holders of the Subordinated
Debentures, the obligation of the Company, which is absolute  and
unconditional,  to  pay  to  the  holders  of  the   Subordinated
Debentures the principal of (and premium, if any) and interest on
the Subordinated Debentures as and when the same shall become due
and payable in accordance with their terms, or is intended to  or
shall   affect  the  relative  rights  of  the  holders  of   the
Subordinated Debentures and creditors of the Company, as the case
may  be,  other  than the holders of Senior Indebtedness  of  the
Company, as the case may be, nor shall anything herein or therein
prevent  the Trustee or the holder of any Subordinated  Debenture
from  exercising all remedies otherwise permitted  by  applicable
law  upon default under the Indenture, subject to the rights,  if
any,   under   this  Article  of  the  holders  of  such   Senior
Indebtedness  in respect of cash, property or securities  of  the
Company,  as the case may be, received upon the exercise  of  any
such remedy.

           Upon  any  payment or distribution of  assets  of  the
Company referred to in this Article, the Trustee, subject to  the
provisions  of Section 7.01 of the Indenture, and the holders  of
the  Subordinated  Debentures shall be entitled  to  conclusively
rely  upon  any  order or decree made by any court  of  competent
jurisdiction  in which such dissolution, winding-up,  liquidation
or  reorganization proceedings are pending, or a  certificate  of
the  receiver, trustee in bankruptcy, liquidation trustee,  agent
or other Person making such payment or distribution, delivered to
the Trustee or to the holders of the Subordinated Debentures, for
the  purposes of ascertaining the Persons entitled to participate
in  such  distribution,  the holders of Senior  Indebtedness  and
other indebtedness of the Company, as the case may be, the amount
thereof  or  payable  thereon, the  amount  or  amounts  paid  or
distributed thereon and all other facts pertinent thereto  or  to
this Article.

SECITON 6.5. Trustee to Effectuate Subordination.

            Each  holder  of  Subordinated  Debentures,  by  such
holder's  acceptance thereof, authorizes and directs the  Trustee
on  such  holder's behalf to take such action as may be necessary
or  appropriate to effectuate the subordination provided in  this
Article  and  appoints the Trustee such holder's attorney-in-fact
for any and all such purposes.

SECTION 6.6 Notice by the Company.

           The  Company  shall give prompt written  notice  to  a
Responsible  Officer  of the Trustee of any  fact  known  to  the
Company  that would prohibit the making of any payment of  monies
to  or  by  the Trustee in respect of the Subordinated Debentures
pursuant to the provisions of this Article.  Notwithstanding  the
provisions  of  this  Article  or  any  other  provision  of  the
Indenture  and  this  First Supplemental Indenture,  the  Trustee
shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment of monies to or  by
the Trustee in respect of the Subordinated Debentures pursuant to
the  provisions of this Article, unless and until  a  Responsible
Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior Indebtedness or
from  any  trustee therefor; and before the receipt of  any  such
written notice, the Trustee, subject to the provisions of Section
7.01  of  the  Indenture, shall be entitled in  all  respects  to
assume  that no such facts exist; provided, however, that if  the
Trustee  shall not have received the notice provided for in  this
Section at least two Business Days prior to the date upon  which,
by the terms hereof, any money may become payable for any purpose
(including,  without limitation, the payment of the principal  of
(or  premium, if any) or interest on any Subordinated Debenture),
then,  anything herein contained to the contrary notwithstanding,
the  Trustee shall have full power and authority to receive  such
money  and to apply the same to the purposes for which they  were
received, and shall not be affected by any notice to the contrary
that may be received by it within two Business Days prior to such
date.

           The Trustee, subject to the provisions of Section 7.02
of  the Indenture, shall be entitled to conclusively rely on  the
delivery  to  it  of  a  written notice by a Person  representing
himself to be a holder of Senior Indebtedness of the Company,  as
the  case  may  be  (or a trustee on behalf of such  holder),  to
establish  that  such notice has been given by a holder  of  such
Senior Indebtedness or a trustee on behalf of any such holder  or
holders.  In the event that the Trustee determines in good  faith
that  further evidence is required with respect to the  right  of
any Person as a holder of such Senior Indebtedness to participate
in  any  payment  or distribution pursuant to this  Article,  the
Trustee  may  request  such Person to  furnish  evidence  to  the
reasonable satisfaction of the Trustee as to the amount  of  such
Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution
and  any other facts pertinent to the rights of such Person under
this Article, and, if such evidence is not furnished, the Trustee
may   defer   any   payment  to  such  Person  pending   judicial
determination  as  to the right of such Person  to  receive  such
payment.

SECTION 6.7. Rights of the Trustee; Holders of Senior Indebtedness.

           The  Trustee in its individual capacity shall be  enti
tled  to  all the rights set forth in this Article in respect  of
any  Senior  Indebtedness at any time held by  it,  to  the  same
extent as any other holder of Senior Indebtedness, and nothing in
this Indenture shall deprive the Trustee of any of its rights  as
such holder.

           With respect to the holders of Senior Indebtedness  of
the Company, the Trustee undertakes to perform or to observe only
such  of  its  covenants and obligations as are specifically  set
forth  in  this Article, and no implied covenants or  obligations
with respect to the holders of such Senior Indebtedness shall  be
read  into  the  Indenture or this First  Supplemental  Indenture
against the Trustee.  The Trustee shall not be deemed to owe  any
fiduciary  duty  to the holders of such Senior Indebtedness  and,
subject  to the provisions of Section 7.02 of the Indenture,  the
Trustee  shall  not  be  liable to  any  holder  of  such  Senior
Indebtedness  if  it  shall pay over or  deliver  to  holders  of
Subordinated Debentures, the Company or any other Person money or
assets  to which any holder of such Senior Indebtedness shall  be
entitled by virtue of this Article or otherwise.

SECTION 6.8. Subordination May Not Be Impaired.

           No right of any present or future holder of any Senior
Indebtedness  of the Company to enforce subordination  as  herein
provided  shall at any time in any way be prejudiced or  impaired
by  any act or failure to act on the part of the Company, as  the
case  may be, or by any act or failure to act, in good faith,  by
any  such holder, or by any noncompliance by the Company, as  the
case  may  be, with the terms, provisions and covenants  of  this
Indenture,  regardless  of any knowledge thereof  that  any  such
holder may have or otherwise be charged with.

           Without  in  any  way limiting the generality  of  the
foregoing  paragraph, the holders of Senior Indebtedness  of  the
Company  may,  at  any time and from time to  time,  without  the
consent  of  or  notice  to the Trustee or  the  holders  of  the
Subordinated Debentures, without incurring responsibility to  the
holders  of the Subordinated Debentures and without impairing  or
releasing  the  subordination provided in  this  Article  or  the
obligations   hereunder  of  the  holders  of  the   Subordinated
Debentures to the holders of such Senior Indebtedness, do any one
or  more of the following:  (i) change the manner, place or terms
of  payment or extend the time of payment of, or renew or  alter,
such Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing  the
same  or  any  agreement under which such Senior Indebtedness  is
outstanding; (ii) sell, exchange, release or otherwise deal  with
any property pledged, mortgaged or otherwise securing such Senior
Indebtedness; (iii) release any Person liable in any  manner  for
the collection of such Senior Indebtedness; and (iv) exercise  or
refrain  from exercising any rights against the Company,  as  the
case may be, and any other Person.

                                 ARTICLE VII
                           COVENANT TO LIST ON EXCHANGE

SECTION 7.1. Listing on an Exchange.

           If  the Subordinated Debentures are to be issued as  a
Global  Debenture  in  connection with the  distribution  of  the
Subordinated   Debentures  to  the  holders  of   the   Preferred
Securities  upon a Dissolution Event, the Company  will  use  its
best efforts to list such Subordinated Debentures on the New York
Stock  Exchange  or on such other exchange as the Preferred  Secu
rities are then listed.


                                 ARTICLE VIII
                               FORM OF DEBENTURE

SECTION 8.1. Form of Debenture.

           The  Subordinated Debentures and the Trustee's Certifi
cate  of  Authentication  to  be  endorsed  thereon  are  to   be
substantially in the following forms:

                  (FORM OF FACE OF DEBENTURE)

          [IF THE Debenture IS TO BE A GLOBAL Debenture, INSERT -
This  Debenture is a Global Debenture within the meaning  of  the
Indenture hereinafter referred to and is registered in  the  name
of  a Depositary or a nominee of a Depositary.  This Debenture is
exchangeable for Subordinated Debentures registered in  the  name
of  a person other than the Depositary or its nominee only in the
limited circumstances described in the Indenture, and no transfer
of  this Debenture (other than a transfer of this Debenture as  a
whole  by the Depositary to a nominee of the Depositary or  by  a
nominee of the Depositary to the Depositary or another nominee of
the   Depositary)   may   be   registered   except   in   limited
circumstances.

           Unless  this  Debenture is presented by an  authorized
representative of The Depository Trust Company (55 Water  Street,
New  York,  New York) to the issuer or its agent for registration
of  transfer,  exchange or payment, and any Debenture  issued  is
registered  in  the  name of Cede & Co. or  such  other  name  as
requested by an authorized representative of The Depository Trust
Company  and  any  payment hereon is made  to  Cede  &  CO.,  ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY  A
PERSON IS WRONGFUL since the registered owner hereof, Cede & CO.,
has an interest herein.]

No._______________




                         ILLINOIS POWER COMPANY

          8% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
                                DUE 2045

           Illinois  Power Company, an Illinois corporation  (the
"Company",  which  term includes any successor corporation  under
the  Indenture  hereinafter referred  to),  for  value  received,
hereby  promises to pay to ______________, or registered assigns,
the  principal  sum  of  One Hundred Three  Million  One  Hundred
Thousand Dollars ($103,100,000) on January 31, 2045, and  to  pay
interest on said principal sum from January 17, 1996, or from the
most  recent interest payment date (each such date, an  "Interest
Payment  Date") to which interest has been paid or duly  provided
for,  quarterly  (subject to deferral as  set  forth  herein)  in
arrears  on  March 31, June 30, September 30 and December  31  of
each  year commencing March 31, 1996, at the rate of 8% per annum
until the principal hereof shall have become due and payable, and
on  any  overdue  principal and premium,  if  any,  and  (without
duplication  and to the extent that payment of such  interest  is
enforceable  under applicable law) on any overdue installment  of
interest  at  the same rate per annum compounded quarterly.   The
amount of interest payable on any Interest Payment Date shall  be
computed on the basis of a 360-day year of twelve 30-day  months.
In  the event that any date on which interest is payable on  this
Debenture is not a Business Day, then payment of interest payable
on  such date will be made on the next succeeding day that  is  a
Business  Day  (and  without any interest  or  other  payment  in
respect of any such delay), except that, if such Business Day  is
in  the next succeeding calendar year, such payment shall be made
on  the immediately preceding Business Day, in each case with the
same  force  and  effect as if made on such date.   The  interest
installment so payable, and punctually paid or duly provided for,
on  any Interest Payment Date will, as provided in the Indenture,
be  paid  to the person in whose name this Debenture (or  one  or
more  Predecessor  Securities, as defined in said  Indenture)  is
registered  at the close of business on the regular  record  date
for  such  interest  installment, which shall  be  the  close  of
business on the business day next preceding such Interest Payment
Date.   [IF  PURSUANT  TO THE PROVISIONS  OF  THE  INDENTURE  THE
SUBORDINATED  DEBENTURES ARE NO LONGER REPRESENTED  BY  A  GLOBAL
DEBENTURE -- which shall be the close of business on the 15th day
of  the  month in which such Interest Payment Date shall  occur.]
Any  such  interest  installment  not  punctually  paid  or  duly
provided  for  shall  forthwith  cease  to  be  payable  to   the
registered holders on such regular record date and may be paid to
the  Person  in  whose  name  this  Debenture  (or  one  or  more
Predecessor Securities) is registered at the close of business on
a  special record date to be fixed by the Trustee for the payment
of  such defaulted interest, notice whereof shall be given to the
registered holders of this series of Subordinated Debentures  not
less  than 10 days prior to such special record date, or  may  be
paid at any time in any other lawful manner not inconsistent with
the   requirements  of  any  securities  exchange  on  which  the
Subordinated  Debentures may be listed, and upon such  notice  as
may  be required by such exchange, all as more fully provided  in
the  Indenture.  The principal of (and premium, if any)  and  the
interest  on  this Debenture shall be payable at  the  office  or
agency of the Trustee maintained for that purpose in any coin  or
currency  of  the United States of America that at  the  time  of
payment is legal tender for payment of public and private  debts;
provided,  however, that payment of interest may be made  at  the
option of the Company by check mailed to the registered holder at
such   address   as  shall  appear  in  the  Security   Register.
Notwithstanding  the foregoing, so long as  the  holder  of  this
Debenture  is the Property Trustee, the payment of the  principal
of  (and premium, if any) and interest on this Debenture will  be
made  at  such place and to such account as may be designated  by
the Property Trustee.

          The indebtedness evidenced by this Debenture is, to the
extent provided in the Indenture, subordinate and junior in right
of   payment  to  the  prior  payment  in  full  of  all   Senior
Indebtedness,  and  this  Debenture  is  issued  subject  to  the
provisions of the Indenture with respect thereto.  Each holder of
this Debenture, by accepting the same, (a) agrees to and shall be
bound  by such provisions, (b) authorizes and directs the Trustee
on  his or her behalf to take such action as may be necessary  or
appropriate  to  acknowledge or effectuate the  subordination  so
provided and (c) appoints the Trustee his or her attorney-in-fact
for any and all such purposes.  Each Holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance  of
the   subordination  provisions  contained  herein  and  in   the
Indenture  by  each  holder of Senior Indebtedness,  whether  now
outstanding  or hereafter incurred, and waives reliance  by  each
such holder upon said provisions.

           This  Debenture shall not be entitled to  any  benefit
under  the Indenture hereinafter referred to, be valid or  become
obligatory   for   any   purpose   until   the   Certificate   of
Authentication hereon shall have been signed by or on  behalf  of
the Trustee.

           The provisions of this Debenture are continued on  the
reverse  side hereof and such continued provisions shall for  all
purposes have the same effect as though fully set forth  at  this
place.

           IN  WITNESS  WHEREOF,  the  Company  has  caused  this
instrument to be executed.

Dated

                              ILLINOIS POWER COMPANY

                              By:
                              Name:
                              Title


Attest:

By:
Name:
Title:



            (FORM OF CERTIFICATE OF AUTHENTICATION)

                 CERTIFICATE OF AUTHENTICATION

           This  is  one  of the Subordinated Debentures  of  the
series    of   Subordinated   Debentures   described    in    the
within-mentioned Indenture.


as Trustee

                              or as Authentication Agent


By                            By
  Authorized Signatory                  Authorized Signatory

                 (FORM OF REVERSE OF DEBENTURE)

           This  Debenture is one of a duly authorized series  of
Subordinated Debentures of the Company (herein sometimes referred
to as the "Subordinated Debentures"), specified in the Indenture,
all  issued  or  to  be issued in one or more  series  under  and
pursuant  to  an  Indenture dated as of  January  1,  1996,  duly
executed  and delivered between the Company and Wilmington  Trust
Company, as Trustee (the "Trustee"), as supplemented by the First
Supplemented Indenture dated as of January 1, 1996,  between  the
Company  and  the Trustee (the Indenture as so supplemented,  the
"Indenture"), to which Indenture and all indentures  supplemental
thereto reference is hereby made for a description of the rights,
limitations   of  rights,  obligations,  duties  and   immunities
thereunder  of  the Trustee, the Company and the holders  of  the
Subordinated  Debentures.  By the terms  of  the  Indenture,  the
Subordinated Debentures are issuable in series that may  vary  as
to  amount,  date  of  maturity, rate of interest  and  in  other
respects   as  provided  in  the  Indenture.   This   series   of
Subordinated Debentures is limited in aggregate principal  amount
as specified in said First Supplemental Indenture.

           Because  of the occurrence and continuation of  a  Tax
Event,  in  certain circumstances, this Debenture may become  due
and  payable  at the principal amount together with any  interest
accrued thereon (the "Redemption Price").  The Company shall have
the  right to redeem this Debenture at the option of the Company,
without premium or penalty, in whole or in part at any time on or
after January 31, 2001 (an "Optional Redemption"), or at any time
in certain circumstances upon the occurrence of a Tax Event, at a
redemption price equal to 100% of the principal amount  plus  any
accrued but unpaid interest, to the date of such redemption  (the
"Optional  Redemption Price").  Any redemption pursuant  to  this
paragraph  will be made upon not less than 30 days nor more  than
60  days  notice,  at  the  Optional Redemption  Price.   If  the
Subordinated  Debentures  are  only  partially  redeemed  by  the
Company  pursuant  to  an Optional Redemption,  the  Subordinated
Debentures  will be redeemed pro rata or by lot or by  any  other
method utilized by the Trustee; provided that if, at the time  of
redemption,  the  Subordinated Debentures  are  registered  as  a
Global  Debenture, the Depositary shall determine  the  principal
amount   of   such   Subordinated   Debentures   held   by   each
Debentureholder to be redeemed in accordance with its procedures.

           In  the event of redemption of this Debenture in  part
only,  a  new  Debenture or Debentures of  this  series  for  the
unredeemed  portion  hereof will be issued in  the  name  of  the
holder hereof upon the cancellation hereof.

           In  case  an  Event  of Default,  as  defined  in  the
Indenture,  shall have occurred and be continuing, the  principal
of  all of the Subordinated Debentures may be declared, and  upon
such  declaration shall become, due and payable, in  the  manner,
with  the  effect and subject to the conditions provided  in  the
Indenture.

            The  Indenture  contains  provisions  permitting  the
Company and the Trustee, with the consent of the holders  of  not
less  than 66_% in aggregate principal amount of the Subordinated
Debentures  of  each series affected at the time Outstanding,  as
defined in the Indenture, to execute supplemental indentures  for
the purpose of adding any provisions to or changing in any manner
or  eliminating any of the provisions of the Indenture or of  any
supplemental indenture or of modifying in any manner  the  rights
of the holders of the Subordinated Debentures; provided, however,
that  no  such supplemental indenture shall (i) extend the  fixed
maturity of any Subordinated Debentures of any series, or  reduce
the  principal amount thereof, or reduce the rate or  extend  the
time  of  payment  of  interest thereon, or  reduce  any  premium
payable upon the redemption thereof, without the consent  of  the
holder  of  each  Debenture  so  affected,  or  (ii)  reduce  the
aforesaid  percentage of Subordinated Debentures, the holders  of
which are required to consent to any such supplemental indenture,
without  the  consent of the holders of each Debenture  then  Out
standing  and  affected  thereby.  The  Indenture  also  contains
provisions  permitting  the holders of a  majority  in  aggregate
principal amount of the Subordinated Debentures of any series  at
the  time outstanding affected thereby, on behalf of all  of  the
holders  of the Subordinated Debentures of such series, to  waive
any  past default in the performance of any of the covenants  con
tained in the Indenture, or established pursuant to the Indenture
with  respect  to  such  series, and its consequences,  except  a
default in the payment of the principal of or premium, if any, or
interest  on  any of the Subordinated Debentures of such  series.
Any  such  consent  or waiver by the registered  holder  of  this
Debenture (unless revoked as provided in the Indenture) shall  be
conclusive  and  binding upon such holder  and  upon  all  future
holders and owners of this Debenture and of any Debenture  issued
in  exchange  herefor or in place hereof (whether by registration
of  transfer or otherwise), irrespective of whether  or  not  any
notation of such consent or waiver is made upon this Debenture.

           No  reference herein to the Indenture and no provision
of  this Debenture or of the Indenture shall alter or impair  the
obligation  of  the Company, which is absolute and unconditional,
to pay the principal of and premium, if any, and interest on this
Debenture at the time and place and at the rate and in the  money
herein prescribed.

          The Company shall have the right at any time during the
term  of  the Subordinated Debentures and from time  to  time  to
extend  the  interest payment period of such  Subordinated  Deben
tures  for  up to 20 consecutive quarters (an "Extended  Interest
Payment  Period"), at the end of which period the  Company  shall
pay  all interest then accrued and unpaid (together with interest
thereon at the rate specified for the Subordinated Debentures  to
the  extent  that  payment of such interest is enforceable  under
applicable  law).   Before the termination of any  such  Extended
Interest  Payment  Period, the Company may  further  extend  such
Extended  Interest  Payment Period, provided that  such  Extended
Interest Payment Period together with all such further extensions
thereof  shall not exceed 20 consecutive quarters.  At the  termi
nation of any such Extended Interest Payment Period and upon  the
payment  of  all  accrued and unpaid interest and any  additional
amounts  then due, the Company may commence a new Extended  Inter
est Payment Period.

           As  provided in the Indenture and subject  to  certain
limitations therein set forth, this Debenture is transferable  by
the  registered  holder hereof on the Security  Register  of  the
Company,  upon  surrender of this Debenture for  registration  of
transfer  at the office or agency of the Trustee in the City  and
State  of New York accompanied by a written instrument or  instru
ments  of  transfer in form satisfactory to the  Company  or  the
Trustee  duly  executed by the registered holder  hereof  or  his
attorney  duly authorized in writing, and thereupon one  or  more
new  Subordinated Debentures of authorized denominations and  for
the same aggregate principal amount and series will be issued  to
the  designated transferee or transferees. No service charge will
be  made  for  any  such transfer, but the  Company  may  require
payment  of a sum sufficient to cover any tax or other  governmen
tal charge payable in relation thereto.

           Prior  to due presentment for registration of transfer
of this Debenture, the Company, the Trustee, any paying agent and
the  Security Registrar may deem and treat the registered  holder
hereof  as  the absolute owner hereof (whether or not this  Deben
ture shall be overdue and notwithstanding any notice of ownership
or  writing  hereon made by anyone other than the Security  Regis
trar)  for  the purpose of receiving payment of or on account  of
the principal hereof and premium, if any, and interest due hereon
and  for  all  other purposes, and neither the  Company  nor  the
Trustee nor any paying agent nor any Security Registrar shall  be
affected by any notice to the contrary.

           No recourse shall be had for the payment of the princi
pal  of or the interest on this Debenture, or for any claim based
hereon, or otherwise in respect hereof, or based on or in respect
of  the Indenture, against any incorporator, stockholder, officer
or  director, past, present or future, as such, of the Company or
of any predecessor or successor corporation, whether by virtue of
any  constitution, statute or rule of law, or by the  enforcement
of  any  assessment or penalty or otherwise, all  such  liability
being,  by the acceptance hereof and as part of the consideration
for the issuance hereof, expressly waived and released.

            [The  Subordinated  Debentures  of  this  series  are
issuable only in registered form without coupons in denominations
of   $25  and  any  integral  multiple  thereof.]   [This  Global
Debenture   is   exchangeable  for  Subordinated  Debentures   in
definitive  form  only  under certain limited  circumstances  set
forth  in the Indenture.  Subordinated Debentures of this  series
so issued are issuable only in registered form without coupons in
denominations  of  $25  and any integral multiple  thereof.]   As
provided  in  the  Indenture and subject to  certain  limitations
herein  and  therein set forth, Subordinated Debentures  of  this
series  so issued are exchangeable for a like aggregate principal
amount  of  Subordinated Debentures of this series of a different
authorized  denomination, as requested by the holder surrendering
the same.

           All  terms used in this Debenture that are defined  in
the  Indenture shall have the meanings assigned to  them  in  the
Indenture.


                                 ARTICLE IX
                   ORIGINAL ISSUE OF SUBORDINATED DEBENTURES


SECTION 9.1.  Original Issue of Subordinated Debentures.

           Subordinated  Debentures in  the  aggregate  principal
amount  of $103,100,000 may, upon execution of this First  Supple
mental Indenture, be executed by the Company and delivered to the
Trustee  for  authentication,  and the  Trustee  shall  thereupon
authenticate and deliver said Subordinated Debentures to or  upon
the  written  order of the Company, signed by its  Chairman,  its
Vice  Chairman, its President, or any Vice President and its Trea
surer  or  an Assistant Treasurer, without any further action  by
the Company.


                               ARTICLE X
                             MISCELLANEOUS

SECTION 10.1. Ratification of Indenture.

           The  Indenture, as supplemented by this  First  Supple
mental Indenture, is in all respects ratified and confirmed,  and
this  First  Supplemental Indenture shall be deemed part  of  the
Indenture  in  the  manner and to the extent herein  and  therein
provided.

SECTION 10.2. Trustee Not Responsible for Recitals.

           The  recitals herein contained are made by the Company
and not by the Trustee, and the Trustee assumes no responsibility
for the correctness thereof.  The Trustee makes no representation
as  to  the  validity  or sufficiency of this First  Supplemental
Indenture.

SECTION 10.3. Governing Law.

          This First Supplemental Indenture and each Subordinated
Debenture  shall  be  deemed  to be a  contract  made  under  the
internal  laws  of  the State of New York, and for  all  purposes
shall be construed in accordance with the laws of said State.

SECTION 10.4. Separability.

           In case any one or more of the provisions contained in
this  First  Supplemental Indenture or in the Subordinated  Deben
tures  shall for any reason be held to be invalid, illegal or  un
enforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other provisions  of  this
First  Supplemental Indenture or of the Subordinated  Debentures,
but  this  First  Supplemental  Indenture  and  the  Subordinated
Debentures  shall be construed as if such invalid or  illegal  or
unenforceable  provision  had  never  been  contained  herein  or
therein.

SECTION 10.5. Counterparts.

           This  First Supplemental Indenture may be executed  in
any  number  of counterparts each of which shall be an  original,
but  such counterparts shall together constitute but one and  the
same instrument.

          IN WITNESS WHEREOF, the parties hereto have caused this
First  Supplemental  Indenture to be  duly  executed,  and  their
respective  corporate seals to be hereunto affixed and  attested,
on  the date or dates indicated in the acknowledgements and as of
the day and year first above written.

                              ILLINOIS POWER COMPANY


                              By: /s/ Cynthia G. Steward
                              Name: Cynthia G. Steward
                              Title:         Controller



Attest:


By: /s/ Leah Manning Stetzner
Name:   Leah Manning Stetzner
Title:  Vice President, General Counsel
        and Corporate Secretary

[Seal]


                                          THE WILMINGTON TRUST COMPANY,
                                          not in its individual capacity
                                          but solely as Trustee


                                          By: /s/ Emmett R. Harmon
                                          Name:   Emmett R. Harmon
                                          Title:  Vice President

Attest:

By: /s/ W. Chris Sponenberg
Name:   W. Chris Sponenberg
Title:  Financial Services Officer

[Seal]



SoftSolutions Document Identifier: CHI2:43297.1
Dataset:   CHI2  Chicago - Floors 72 and 73
Doc #:     43297
Version:   1CHI2:43297.1  03.26.96 16.03