Unassociated Document


    Exhibit
      10(b)


     

     

    SERVICING
      AGREEMENT

     

     

    BONDABLE
      TRANSITION PROPERTY SERVICING AGREEMENT

     

    between

     

    JCP&L
      TRANSITION FUNDING II LLC
Issuer

     

    and

     

    JERSEY
      CENTRAL POWER & LIGHT COMPANY
Servicer

     

    Dated
      as
      of_______, 2006

     

     

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    TABLE
      OF CONTENTS

     

    
      
        
          
            	
                     

                    ARTICLE
                      I 

                     

                  	
                     

                    DEFINITIONS

                     

                  	
                     

                    1

                     

                  
	
                    Section
                      1.01

                  	
                    Definitions

                  	
                    1

                  
	
                    Section
                      1.02

                  	
                    Other
                      Definitional Provisions

                  	
                    1

                  
	
                     

                    ARTICLE
                      II

                     

                  	
                     

                    APPOINTMENT
                      AND AUTHORIZATION OF SERVICER

                     

                  	
                     

                    2

                     

                  
	
                    Section
                      2.01

                  	
                    Appointment
                      of Servicer; Acceptance of Appointment

                  	
                    2

                  
	
                    Section
                      2.02

                  	
                    Authorization

                  	
                    2

                  
	
                    Section
                      2.03

                  	
                    Dominion
                      and Control Over Transferred Bondable Transition Property

                  	
                    2

                  
	
                     

                    ARTICLE
                      III

                     

                  	
                     

                    BILLING
                      SERVICES

                     

                  	
                     

                    3

                     

                  
	
                    Section
                      3.01

                  	
                    Duties
                      of Servicer

                  	
                    3

                  
	
                    Section
                      3.02

                  	
                    Collection
                      and Allocation of the Transition Bond Charge.

                  	
                    4

                  
	
                    Section
                      3.03

                  	
                    Payment
                      of TBC Collections

                  	
                    5

                  
	
                    Section
                      3.04

                  	
                    Servicing
                      and Maintenance Standards

                  	
                    7

                  
	
                    Section
                      3.05

                  	
                    Servicer’s
                      Certificates

                  	
                    7

                  
	
                    Section
                      3.06

                  	
                    Annual
                      Statement as to Compliance

                  	
                    7

                  
	
                    Section
                      3.07

                  	
                    Annual
                      Independent Registered Public Accountants’ Report

                  	
                    8

                  
	
                    Section
                      3.08

                  	
                    Bondable
                      Transition Property Documentation

                  	
                    8

                  
	
                    Section
                      3.09

                  	
                    Computer
                      Records; Audits of Documentation

                  	
                    9

                  
	
                    Section
                      3.10

                  	
                    Defending
                      Transferred Bondable Transition Property Against Claims

                  	
                    9

                  
	
                     

                    ARTICLE
                      IV

                     

                  	
                     

                    SERVICES
                      RELATED TO TRANSITION BOND CHARGE ADJUSTMENTS

                     

                  	
                     

                    10

                     

                  
	
                    Section
                      4.01

                  	
                    Transition
                      Bond Charge Adjustments

                  	
                    10

                  
	
                     

                    ARTICLE
                      V

                     

                  	
                     

                    THE
                      SERVICER

                     

                  	
                     

                    10

                     

                  
	
                    Section
                      5.01

                  	
                    Representations
                      and Warranties of Servicer

                  	
                    10

                  
	
                    Section
                      5.02

                  	
                    Indemnities
                      of Servicer; Release of Claims

                  	
                    12

                  
	
                    Section
                      5.03

                  	
                    Merger
                      or Consolidation of, or Assumption of the Obligations of,
                      Servicer

                  	
                    14

                  
	
                    Section
                      5.04

                  	
                    Assignment
                      of Servicer’s Obligations

                  	
                    15

                  
	
                    Section
                      5.05

                  	
                    Limitation
                      on Liability of Servicer and Others

                  	
                    15

                  
	
                    Section
                      5.06

                  	
                    JCP&L
                      Not to Resign as Servicer

                  	
                    16

                  
	
                    Section
                      5.07

                  	
                    Quarterly
                      Servicing Fee

                  	
                    16

                  
	
                    Section
                      5.08

                  	
                    Servicer
                      Expenses

                  	
                    16

                  
	
                    Section
                      5.09

                  	
                    Subservicing.

                  	
                    16

                  
	
                    Section
                      5.10

                  	
                    No
                      Servicer Advances

                  	
                    17

                  
	
                    Section
                      5.11

                  	
                    Remittances.

                  	
                    17

                  
	
                    Section
                      5.12

                  	
                    Protection
                      of Title

                  	
                    18

                  
	
                     

                    ARTICLE
                      VI

                     

                  	
                     

                    SERVICER
                      DEFAULT

                     

                  	
                     

                    18

                     

                  
	
                    Section
                      6.01

                  	
                    Servicer
                      Default

                  	
                    18

                  
	
                    Section
                      6.02

                  	
                    Notice
                      of Servicer Default

                  	
                    20

                  


          

          
            	
                    Section
                      6.03

                  	
                    Waiver
                      of Past Defaults

                  	
                    20

                  


          

           

          
            
              
              

            

            
              i

              
                

              

            

            
              
              

            

          

           

          
            	
                    Section
                      6.04

                  	
                    Appointment
                      of Successor

                  	
                    20

                  
	
                    Section
                      6.05

                  	
                    Cooperation
                      With Successor

                  	
                    21

                  
	
                     

                    ARTICLE
                      VII

                     

                  	
                     

                    MISCELLANEOUS
                      PROVISIONS

                     

                  	
                     

                    21

                     

                  
	
                    Section
                      7.01

                  	
                    Amendment.

                  	
                    21

                  
	
                    Section
                      7.02

                  	
                    Notices

                  	
                    22

                  
	
                    Section
                      7.03

                  	
                    Limitations
                      on Rights of Others

                  	
                    23

                  
	
                    Section
                      7.04

                  	
                    Severability.

                  	
                    23

                  
	
                    Section
                      7.05

                  	
                    Separate
                      Counterparts

                  	
                    24

                  
	
                    Section
                      7.06

                  	
                    Headings

                  	
                    24

                  
	
                    Section
                      7.07

                  	
                    Governing
                      Law.

                  	
                    24

                  
	
                    Section
                      7.08

                  	
                    Assignment
                      to the Trustee

                  	
                    24

                  
	
                    Section
                      7.09

                  	
                    Nonpetition
                      Covenants

                  	
                    24

                  
	
                    Section
                      7.10

                  	
                    Termination

                  	
                    25

                  


          

        

      
 

    ANNEX
      1      
Issuer
      Annex

     

    EXHIBIT
      A    Servicing
      Procedures

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    


    BONDABLE
      TRANSITION PROPERTY SERVICING AGREEMENT, dated as of _______ 2006, by and
      between JCP&L TRANSITION FUNDING II LLC, a Delaware limited liability
      company, as Issuer (the “Issuer”), and JERSEY CENTRAL POWER & LIGHT COMPANY,
      a New Jersey corporation, in its capacity as Servicer (the “Servicer”) of the
      Bondable Transition Property hereunder. 

     

    W
      I T N E
      S S E T H:

     

    WHEREAS
      the Servicer is willing to service all Transferred Bondable Transition Property
      purchased from the Seller by the Issuer; 

     

    WHEREAS,
      the TBC Collections initially will be commingled with other funds collected
      by
      the Servicer; 

     

    WHEREAS,
      certain parties may have an interest in such commingled collections, and such
      parties have entered into an Intercreditor Agreement as of the date hereof
      that
      allows the Servicer to allocate the collected, commingled funds according to
      each party’s interest; and

     

    WHEREAS
      the Issuer, in connection with its ownership of the Transferred Bondable
      Transition Property, desires to engage the Servicer to carry out the functions
      described herein.

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants herein
      contained and other good and valuable consideration, the receipt and sufficiency
      of which are hereby acknowledged, and intending to be legally bound hereby,
      the
      parties hereto agree as follows: 

     

    ARTICLE
      I

     

    DEFINITIONS

     

    Section
      1.01 Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      assigned to them in Appendix A of the Indenture dated as of_______ , 2006
      between the Issuer and The Bank of New York, as Trustee (the
“Trustee”).

     

    Section
      1.02 Other
      Definitional Provisions.

     

    (a)
       Non-capitalized
      terms used herein that are defined in the Competition Act, as the context
      requires, have the meanings assigned to such terms in the Competition Act,
      but
      without giving effect to amendments to the Competition Act after the date hereof
      which have a material adverse effect on the Issuer or the Transition
      Bondholders.

     

    (b)
       All
      terms
      defined in this Servicing Agreement have such defined meanings when used in
      any
      certificate or other document made or delivered pursuant hereto unless otherwise
      defined therein.

     

    (c)
       The
      words
“hereof”, “herein”, “hereunder” and words of similar import when used in this
      Servicing Agreement shall refer to this Servicing Agreement as a whole
      and

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    not
      to
      any particular provision of this Servicing Agreement; Article, Section, Annex,
      Schedule and Exhibit references contained in this Servicing Agreement are
      references to Articles, Sections, Annexes, Schedules and Exhibits in or to
      this
      Servicing Agreement unless otherwise specified; and the term “including” shall
      mean “including without limitation”.

     

    (d)
       The
      definitions contained in this Servicing Agreement are applicable to the singular
      as well as the plural forms of such terms.

     

    ARTICLE
      II

     

    APPOINTMENT
      AND AUTHORIZATION OF SERVICER

     

    Section
      2.01 Appointment
      of Servicer; Acceptance of Appointment.
      The
      Issuer hereby appoints the Servicer, and the Servicer hereby accepts such
      appointment, to perform the Servicer’s obligations pursuant to this Servicing
      Agreement on behalf of and for the benefit of the Issuer in accordance with
      and
      subject to the terms of this Servicing Agreement. This appointment and the
      Servicer’s acceptance thereof may not be revoked except in accordance with the
      express terms of this Servicing Agreement.

     

    Section
      2.02 Authorization.
      With
      respect to all or any portion of the Transferred Bondable Transition Property
      and in connection with the performance of its duties hereunder, the Servicer
      shall be, and hereby is, authorized and empowered by the Issuer to:

     

    (a)
       on
      behalf
      of itself, the Issuer, or both of them, as the case may be, execute and deliver
      any and all instruments, documents or notices; and

     

    (b)
       on
      behalf
      of itself, the Issuer, or both of them, as the case may be, make any filing
      and
      participate in proceedings of any kind with any governmental authorities,
      including with the BPU and the Securities and Exchange Commission
      (“SEC”).

     

    The
      Issuer shall furnish the Servicer with such executed documents as have been
      prepared by the Servicer for execution by the Issuer, and with such other
      documents as may be in the Issuer’s possession, that are necessary or
      appropriate to enable the Servicer to carry out its servicing and administrative
      duties hereunder. Upon the written request of the Servicer, the Issuer shall
      furnish the Servicer with any powers of attorney or other documents necessary
      or
      appropriate to enable the Servicer to carry out its duties
      hereunder.

     

    Section
      2.03 Dominion
      and Control Over Transferred Bondable Transition Property.
      Notwithstanding
      any other provision herein, the Servicer and the Issuer agree that the Issuer
      shall have dominion and control over the Transferred Bondable Transition
      Property, and the Servicer, in accordance with the terms hereof, is acting
      solely as the servicing agent of the Issuer with respect to the Transferred
      Bondable Transition Property. The Servicer hereby agrees that it shall not
      take
      any action hereunder that is not authorized by this Servicing Agreement, the
      Competition Act or the Financing Order, that is not consistent with its
      customary procedures and practices, or that shall impair the rights of the
      Issuer with respect to the Transferred Bondable Transition Property, in each
      case unless such action is required by law or court or regulatory
      order.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      III

     

    BILLING
      SERVICES

     

    Section
      3.01 Duties
      of Servicer.
      The
      Servicer, as agent for the Issuer (to the extent provided herein), shall have
      the following duties: 

     

    (a)
       Duties
      of Servicer Generally.
      The
      Servicer will manage, service, administer and make collections in respect of
      the
      Transition Bond Charge. The Servicer’s duties will include:

     

    (i) obtaining
      meter reads, calculating and billing the Transition Bond Charge in accordance
      with the Financing Order and collecting the Transition Bond Charge from
      Customers and Third Parties, as applicable;

     

    (ii) responding
      to inquiries by Customers, Third Parties, the BPU, or any federal, local or
      other state governmental authority with respect to the Transition Bond
      Charge;

     

    (iii) delivering
      bills or arranging for the delivery of bills to Customers and Third Parties,
      accounting for TBC Collections, investigating and resolving delinquencies (and
      furnishing reports with respect to such delinquencies to the Issuer), processing
      and depositing collections, making periodic remittances and furnishing periodic
      reports to the Issuer, the Trustee and the Rating Agencies;

     

    (iv) selling,
      as the agent for the Issuer, as its interest may appear, defaulted or written
      off accounts in accordance with the Servicer’s usual and customary practices for
      accounts of its own electric service customers; and

     

    (v) taking
      action in connection with Transition Bond Charge Adjustments as set forth
      herein.

     

    Anything
      to the contrary notwithstanding, the duties of the Servicer set forth in this
      Servicing Agreement shall be qualified in their entirety by the Competition
      Act
      and any other applicable law effective in New Jersey, the Financing Order,
      any
      BPU Regulations and the federal securities laws and the rules and regulations
      promulgated thereunder, including without limitation, Regulation AB, as in
      effect at the time such duties are to be performed. Without limiting the
      generality of this Section 3.01(a), in furtherance of the foregoing, the
      Servicer hereby agrees that it shall also have, and shall comply with, the
      procedures, duties and responsibilities set forth in Exhibit A hereto which,
      among other things, relate to data acquisition, usage and bill calculation,
      billing, customer service functions, collections, payment processing and
      remittance. 

     

    (b)
       Notification
      of Laws and Regulations.
      The
      Servicer shall immediately notify the Issuer, the Trustee and the Rating
      Agencies in writing of any laws or BPU Regulations hereafter promulgated that
      have or will reasonably be likely to have a material adverse effect on the
      Servicer’s ability to perform its duties under this Servicing
      Agreement.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (c)
       Other
      Information.
      Upon the
      reasonable request of the Issuer, the Trustee or any Rating Agency, the Servicer
      shall provide to the Issuer, the Trustee or the Rating Agencies, as the case
      may
      be, any public financial information in respect of the Servicer, or any material
      information regarding the Transferred Bondable Transition Property (or related
      TBC Collections) to the extent it is reasonably available to the Servicer,
      that
      may be reasonably necessary and permitted by law for the Issuer, the Trustee
      or
      the Rating Agencies to monitor the performance by the Servicer hereunder. In
      addition, so long as any of the Transition Bonds of any Series are Outstanding,
      the Servicer shall provide to the Issuer and to the Trustee, within a reasonable
      time after written request therefor, any information available to the Servicer
      or reasonably obtainable by the Servicer that is necessary to calculate the
      Transition Bond Charge.

     

    (d)
       Preparation
      of Reports, Certifications, etc.
      The
      Servicer shall prepare, procure, deliver and/or file, or cause to be prepared,
      procured, delivered or filed, any reports, attestations, exhibits,
      certifications or other documents required to be delivered or filed with the
      SEC
      (and/or any other governmental or regulatory agency) by the Issuer under the
      federal securities or other applicable laws or in accordance with the Basic
      Documents, including, but without limiting the generality of foregoing, filing
      with the SEC, if applicable, a copy or copies of (i) the certificates described
      in Section 3.05 and Annex 1 hereof (under Form 10-D or any other applicable
      form), (ii) the annual statements of compliance, attestation reports and other
      certifications described in Section 3.06 hereof, and (iii) the Annual
      Independent Certified Public Accountant’s Report (and any attestation required
      under Regulation AB) described in Section 3.07 hereof. In addition, the
      appropriate officer or officers of the Servicer shall sign the Issuer’s Form
      10-K (and any other applicable SEC or other reports, attestations,
      certifications and other documents), to the extent required by, and consistent
      with, the federal securities laws and/or any other applicable law.

     

    Section
      3.02 Collection
      and Allocation of the Transition Bond Charge.

     

    (a)
       The
      Servicer shall use all reasonable efforts, consistent with its customary
      servicing procedures, to collect all amounts owed in respect of the Transition
      Bond Charge as and when the same shall become due and shall follow such
      collection procedures as the Servicer follows with respect to collection
      activities that the Servicer conducts for itself and others. The Servicer shall
      not change the amount of or reschedule the due date of any scheduled payment
      of
      the Transition Bond Charge, except as contemplated in this Servicing Agreement
      or as required by law or court order or BPU Regulations; provided, however,
      that
      the Servicer may take any of the foregoing actions to the extent that such
      action would be in accordance with customary billing and collection practices
      of
      the Servicer with respect to billing and collection activities that the Servicer
      conducts for itself. The Servicer shall diligently enforce the obligations
      of
      any Third Parties providing billing and collection services with respect to
      the
      Transition Bond Charge.

     

    (b)
       As
      specified in the Petition and the Financing Order, any amounts received by
      the
      Servicer from a Customer that represent a partial payment toward an outstanding
      balance will be applied in the following manner:

     

    (i) to
      sales
      taxes with respect to the partial payment (which the Servicer collects as
      trustee for the State of New Jersey and not for its own account or for that
      of
      the Issuer);

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (ii) pro
      rata
      to the Transition Bond Charge and the Servicer’s other charges and taxes, where
      any of such charges are in arrears, based on their proportion to the Servicer’s
      total charges in arrears for that period; and

     

    (iii) pro
      rata
      to the Transition Bond Charge and the Servicer’s other charges and taxes, where
      any of such charges are current charges, based on their proportion to the
      Servicer’s total current charges assessed for that period.

     

    JCP&L’s
      other charges may include the Market Transition Charge, the MTC-Tax and all
      other charges that JCP&L and any Third Party may be authorized to bill and
      collect from Customers on account of the provision of electric service. If
      there
      is more than one series of transition bonds outstanding, whether they be
      Transition Bonds issued by the Issuer, or transition bonds issued by JCP&L
      Transition Funding LLC or any other issuer for which the Servicer is acting
      as
      servicer, the Servicer shall allocate partial payments among such series in
      accordance with the Intercreditor Agreement.

     

    Section
      3.03 Payment
      of TBC Collections. 

     

    (a)
      With
      the exception of the Quarterly Servicing Fee, which the Servicer is entitled
      to
      withhold from TBC Collections pursuant to Section 5.07 hereof, the Servicer
      agrees to remit to the Trustee for deposit in the Collection Account TBC
      Collections for each Billing Month based on its estimated system-wide write-off
      percentage and the average number of days outstanding of bills, as in effect
      from time to time as follows:

     

    (i) on
      each
      Monthly Remittance Date, for so long as the Servicer has satisfied the
      conditions of Section 5.11(b), the Servicer shall remit to the Trustee for
      each
      preceding Billing Month an amount equal to the amount of TBC Collections deemed
      to have been received during the preceding calendar month, based on the
      estimated system-wide write-off percentage and the average number of days
      outstanding of bills then in effect; and

     

    (ii) on
      each
      Daily Remittance Date, for so long as the Servicer has not satisfied the
      conditions of Section 5.11(b), the Servicer shall remit to the Trustee an amount
      equal to the amount of TBC Collections deemed to have been received during
      the
      Business Day which is two Business Days preceding such Daily Remittance Date,
      including (for the first Daily Remittance Date following a period when the
      Servicer had been remitting on a Monthly Remittance Date) any amounts on deposit
      with the Servicer (for the Billing Month and any prior Billing Month) prior
      to
      such Daily Remittance Date during a period when the Servicer had been remitting
      on a Monthly Remittance Date based on the estimated system-wide write-off
      percentage and the average number of days outstanding of bills then in
      effect.

     

    (b)
       On
      or
      before each Reconciliation Date, the Servicer will reconcile actual TBC
      Collections with estimated TBC Collections previously made to the Trustee in
      respect of (i) each Annual Reconciliation Date, each of the twelve Billing
      Months beginning fifteen months before the month in which such Reconciliation
      Date occurs (or from the first Series Issuance

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Date,
      if
      less than fifteen months have elapsed), and (ii) each Monthly Reconciliation
      Date, the Billing Month that is three months prior to the Billing Month in
      which
      such Reconciliation Date occurs. In the event that there is a payment shortfall
      (i.e., the remittances of the estimated payments are less than the actual
      payments arising from the transition bond charges) with respect to the
      applicable Billing Months or Billing Month, as the case may be, the Servicer
      shall pay the shortfall to the Trustee for deposit into the Collection Account
      within two Business Days of that Reconciliation Date, or, if the Servicer remits
      TBC Collections on each Monthly Remittance Date in accordance with Section
      5.11(b), on the next Monthly Remittance Date. In the event that there is an
      overpayment (i.e., the remittances of estimated payments exceed the amounts
      that
      should have been remitted based on the actual system-wide write-offs) for the
      applicable Billing Months or Billing Month, as the case may be, the Servicer
      may
      either (A) reduce the amount that the Servicer is required to remit to the
      Trustee for deposit in the Collection Account on the following Remittance Date
      (and, if necessary, succeeding Remittance Dates) by the amount of the
      overpayment or (B) direct the Trustee in writing to pay to the Servicer from
      the
      General Subaccount the amount of the overpayment, which upon payment shall
      become the property of the Servicer.

     

    (c)
       In
      the
      event that the Servicer makes changes to its current computerized customer
      information system that would allow the Servicer to track actual TBC Collections
      and/or otherwise monitor payment and collection activity more efficiently or
      accurately than is currently being done under this Servicing Agreement, the
      Servicer may substitute actual remittance procedures for the estimated
      remittance procedures described above and otherwise modify the remittance
      procedures described above as may be appropriate in the interests of efficiency,
      accuracy, cost and/or system capabilities. However, the Servicer may not make
      any such modification or substitution that will materially and adversely affect
      the Transition Bondholders. The Servicer must also give notice to the Rating
      Agencies of any such computer system changes no later than sixty business days
      after the date on which all customer accounts are first billed on the new
      system. 

     

    (d)
       The
      Servicer and Issuer agree and acknowledge that, although the Servicer will
      remit
      estimated payments arising from the TBC Collections to the Trustee, the Servicer
      is not obligated to make any payments on the Transition Bonds. The Servicer
      agrees and acknowledges that it holds all TBC Collections collected by it for
      the benefit of the Issuer and that all amounts will be remitted by the Servicer
      in accordance with this Servicing Agreement without any surcharge, fee, offset,
      charge or other deduction and without making any claim to reduce its obligation
      to remit all TBC Collections collected by it, except (i) as set forth in clause
      (b) above, (ii) with respect to the Quarterly Servicing Fee that it may withhold
      pursuant to Section 5.07 hereof and (iii) with respect to late fees permitted
      by
      Section 5.07. 

     

    Section
      3.04 Servicing
      and Maintenance Standards.
      The
      Servicer shall, on behalf of the Issuer:

     

    (a)
       manage,
      service, administer and make collections in respect of the Transferred Bondable
      Transition Property with reasonable care and in material compliance with
      applicable law and regulations, including all applicable BPU Regulations, using
      the same degree of care and diligence that the Servicer exercises with respect
      to billing and collection activities that the Servicer conducts for itself
      and
      others;

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (b)
       follow
      standards, policies and procedures in performing its duties as Servicer that
      are
      customary in the electric power distribution industry in New
      Jersey;

     

    (c)
       use
      all
      reasonable efforts, consistent with its customary servicing procedures, to
      enforce and maintain the rights of the Issuer and the Trustee in respect of
      the
      Transferred Bondable Transition Property; and

     

    (d)
       calculate
      the Transition Bond Charge in compliance with the Competition Act, the Financing
      Order and any applicable tariffs; 

     

    except
      where the failure to comply with any of the foregoing would not have a material
      adverse effect on the Issuer’s or the Trustee’s respective interests in the
      Transferred Bondable Transition Property. The Servicer shall follow such
      customary and usual practices and procedures as it shall deem necessary or
      advisable in its servicing of the Transferred Bondable Transition Property,
      which, in the Servicer’s judgment, may include the taking of legal action
      pursuant to Section 3.10 or otherwise. Notwithstanding the foregoing, the
      Servicer shall not change its customary and usual practices and procedures
      in
      any manner that would have a material adverse effect on the Issuer’s or the
      Trustee’s respective interests in the Transferred Bondable Transition Property
      unless it shall have provided the Rating Agencies with prior written
      notice.

     

    Section
      3.05 Servicer’s
      Certificates.
      The
      Servicer will provide to the Issuer and to the Trustee the statements specified
      in Annex 1 at the times indicated therein.

     

    Section
      3.06 Annual
      Statement as to Compliance.
      The
      Servicer shall deliver to the Issuer and the Trustee, on or before the earlier
      of (a) March 31 of each year or (b) with respect to each calendar
      year during which the Issuer’s annual report on Form 10-K is required to be
      filed in accordance with the Exchange Act and the rules and regulations
      thereunder, the date on which the annual report on Form 10-K is required to
      be
      filed in accordance with the Exchange Act and the rules and regulations
      thereunder, (i) a Servicer Officers’ Certificate containing, and certifying as
      to, the statements of compliance required by Item 1123 (or any successor or
      similar items or rule) of Regulation AB, as then in effect and (ii) a Servicer
      Officers’ Certificate containing, and certifying as to, the statements and
      assessment of compliance required by Item 1122(a) (or any successor or similar
      items or rule) of Regulation AB, as then in effect.

     

    The
      Servicer shall use commercially reasonable efforts to obtain from each other
      party participating in the servicing function any additional certifications
      as
      to the statements and assessment required under Item 1122 or Item 1123 of
      Regulation AB to the extent required in connection with the filing of the annual
      report on Form 10-K; provided, however, that a failure to obtain such
      certifications shall not be a breach of the Servicer’s duties
      hereunder.

     

    Section
      3.07 Annual
      Independent Registered Public Accountants’ Report.

     

    (a)
       The
      Servicer shall cause a firm of Independent registered public accountants (which
      may also provide other services to the Servicer or the Seller) to prepare,
      and
      the Servicer shall deliver to the Issuer, to the Trustee and to each Rating
      Agency, on or before the earlier of (a) March 31 of each year or
      (b) with respect to each calendar year during which the Issuer’s annual
      report on Form 10-K is required to be filed in accordance with the Exchange
      Act
      and the rules and regulations thereunder, the date on which the annual report
      on
      Form 10-K

     

    
      
        
        

      

      
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    is
      required to be filed in accordance with the Exchange Act and the rules and
      regulations thereunder, a report addressed to the Servicer (the “Annual
      Accountant’s Report”), which may be included as part of the Servicer’s customary
      auditing activities, to the effect that such firm has performed certain
      procedures in connection with the Servicer’s compliance with its obligations
      under this Servicing Agreement during the preceding calendar year (or, in the
      case of the first Annual Accountant’s Report, the period of time from the
      Initial Transfer Date until December 31, 2006), identifying the results of
      such
      procedures and including any exceptions noted. In the event such accounting
      firm
      requires the Trustee or the Issuer to agree or consent to the procedures
      performed by such firm, the Issuer shall direct the Trustee in writing to so
      agree, it being understood and agreed that the Trustee will deliver such letter
      of agreement or consent in conclusive reliance upon the direction of the Issuer,
      and the Trustee will not make any independent inquiry or investigation as to,
      and shall have no obligation or liability in respect of, the sufficiency,
      validity or correctness of such procedures. 

     

    (b)
       The
      Annual Accountant’s Report shall also indicate that the accounting firm
      providing such report is independent of the Servicer in accordance with the
      Rules of the Public Company Accounting Oversight Board and shall include the
      attestation report required under Item 1122(b) of Regulation AB (or any
      successor or similar items or rule), as then in effect.

     

    Section
      3.08 Bondable
      Transition Property Documentation.
      To
      assure uniform quality in servicing the Transferred Bondable Transition Property
      and to reduce administrative costs, the Servicer shall keep on file, in
      accordance with its customary procedures, all Bondable Transition Property
      Documentation, it being understood that the Servicer is acting solely as the
      servicing agent and custodian for the Issuer with respect to the Bondable
      Transition Property Documentation.

     

    Section
      3.09 Computer
      Records; Audits of Documentation.

     

    (a)
       Safekeeping.
      The
      Servicer shall maintain accurate and complete accounts, records and computer
      systems pertaining to the Transferred Bondable Transition Property and the
      Bondable Transition Property Documentation in accordance with its standard
      accounting procedures and in sufficient detail to permit reconciliation between
      payments or recoveries on (or with respect to) the Transition Bond Charge and
      the estimated TBC Collections from time to time remitted to the Trustee pursuant
      to Section 3.03 and to enable the Issuer to comply with this Servicing Agreement
      and the Indenture. The Servicer shall conduct, or cause to be conducted,
      periodic audits of the Bondable Transition Property Documentation held by it
      under this Servicing Agreement and of the related accounts, records and computer
      systems, in such a manner as shall enable the Issuer and the Trustee, as pledgee
      of the Issuer, to verify the accuracy of the Servicer’s record keeping. The
      Servicer shall promptly report to the Issuer and to the Trustee any failure
      on
      the Servicer’s part to hold the Bondable Transition Property Documentation and
      maintain its accounts, records and computer systems as herein provided and
      shall
      promptly take appropriate action to remedy any such failure. Nothing herein
      shall be deemed to require an initial review or any periodic review by the
      Issuer or the Trustee of the Bondable Transition Property Documentation. The
      Servicer’s duties to hold the Bondable Transition Property Documentation on
      behalf of the Issuer set forth in this Section 3.09, to the extent such Bondable
      Transition Property Documentation has not been previously transferred
      to

     

    
      
        
        

      

      
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    a
      Successor Servicer, shall terminate three years after the earlier of the date
      on
      which (i) the Servicer is succeeded by a Successor Servicer pursuant to the
      provisions of this Servicing Agreement or (ii) no Transition Bonds of any Series
      are Outstanding.

     

    (b)
       Maintenance
      of and Access to Records.
      The
      Servicer shall maintain the Bondable Transition Property Documentation at 76
      South Main Street, Akron, Ohio 44308 or at such other office as shall be
      specified to the Issuer and to the Trustee by written notice not later than
      thirty days prior to any change in location. The Servicer shall permit the
      Issuer and the Trustee or their respective duly authorized representatives,
      attorneys, agents or auditors at any time during normal business hours to
      inspect, audit and make copies of and abstracts from the Servicer’s records
      regarding the Transferred Bondable Transition Property, the Transition Bond
      Charge and the Bondable Transition Property Documentation. The failure of the
      Servicer to provide access to such information as a result of an obligation
      or
      applicable law (including BPU Regulations) prohibiting disclosure of information
      regarding customers shall not constitute a breach of this Section
      3.09(b).

     

    Section
      3.10 Defending
      Transferred Bondable Transition Property Against Claims.
      The
      Servicer shall institute and maintain any action or proceeding necessary to
      compel performance by the BPU or the State of New Jersey of any of their
      obligations or duties under the Competition Act or the Financing Order with
      respect to the Transferred Bondable Transition Property, and the Servicer agrees
      to take such legal or administrative actions, including defending against or
      instituting and pursuing legal actions and appearing or testifying at hearings
      or similar proceedings, as may be reasonably necessary to block or overturn
      any
      attempts to cause a repeal of, modification of or supplement to the Competition
      Act, the Financing Order or the Restructuring Order (to the extent it affects
      the rights of Transition Bondholders or the validity or value of the Transferred
      Bondable Transition Property), as the case may be, the Bondable Transition
      Property or the rights of the holders of Transferred Bondable Transition
      Property if such repeal, modification or supplement would be adverse to the
      Transition Bondholders. The costs of any such action reasonably allocated by
      the
      Servicer to the Transferred Bondable Transition Property shall be payable from
      TBC Collections as an Operating Expense in accordance with the Indenture. The
      Servicer’s obligations pursuant to this Section 3.10 shall survive and continue
      notwithstanding the fact that the payment of Operating Expenses pursuant to
      the
      Indenture may be delayed (it being understood that the Servicer may be required
      to advance its own funds to satisfy its obligations under this Section
      3.10).

     

    ARTICLE
      IV

     

    SERVICES
      RELATED TO TRANSITION BOND CHARGE ADJUSTMENTS

     

    Section
      4.01 Transition
      Bond Charge Adjustments.
      The
      Servicer shall perform the calculations and take the actions relating to
      adjusting the Transition Bond Charge, as set forth in Section 5 of Annex 1,
      at
      the times indicated therein.

     

    
      
        
        

      

      
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    ARTICLE
      V

     

    THE
      SERVICER

     

    Section
      5.01 Representations
      and Warranties of Servicer.
      The
      Servicer makes the following representations and warranties as of the Transfer
      Date, on which the Issuer has relied and will rely in acquiring Transferred
      Bondable Transition Property and in entering into this Servicing Agreement.
      These representations and warranties shall survive the execution and delivery
      of
      this Servicing Agreement, the sale, transfer, assignment and conveyance of
      the
      Transferred Bondable Transition Property to the Issuer pursuant to the Sale
      Agreement and the pledge thereof to the Trustee pursuant to the
      Indenture.

     

    (a)
       Organization
      and Good Standing.
      The
      Servicer is a corporation duly organized and in good standing under the laws
      of
      the State of its incorporation, with the corporate power and authority to own
      its properties and to conduct its business as such properties are currently
      owned and such business is presently conducted and to execute, deliver and
      carry
      out the terms of this Servicing Agreement, and has the power, authority and
      legal right to service the Transferred Bondable Transition Property.


     

    (b)
       Due
      Qualification.
      The
      Servicer is duly qualified to do business as a foreign corporation in good
      standing, and has obtained all necessary licenses and approvals, in all
      jurisdictions in which the ownership or lease of property or the conduct of
      its
      business (including the servicing of the Transferred Bondable Transition
      Property as required by this Servicing Agreement) requires such qualifications,
      licenses or approvals (except where the failure to so qualify would not be
      reasonably likely to have a material adverse effect on the Servicer’s business,
      operations, assets, revenues, properties or prospects or on the transactions
      contemplated by this Servicing Agreement).

     

    (c)
       Power
      and Authority.
      The
      Servicer has the corporate power and authority to execute and deliver this
      Servicing Agreement and to carry out its terms; and the execution, delivery
      and
      performance of this Servicing Agreement have been duly authorized by the
      Servicer by all necessary corporate action.

     

    (d)
       Binding
      Obligation.
      This
      Servicing Agreement constitutes a legal, valid and binding obligation of the
      Servicer enforceable against the Servicer in accordance with its terms, subject
      to bankruptcy, receivership, fraudulent transfer, insolvency, reorganization,
      moratorium or other similar laws affecting creditors’ rights generally from time
      to time in effect and to general principles of equity (regardless of whether
      considered in a proceeding in equity or at law).

     

    (e)
       No
      Violation.
      The
      consummation of the transactions contemplated by this Servicing Agreement and
      the fulfillment of the terms hereof will not: conflict with, result in any
      breach of any of the terms and provisions of, or constitute (with or without
      notice or lapse of time or both) a default under, the articles of incorporation,
      by-laws or other constituent documents of the Servicer, or any indenture,
      material agreement or other material instrument to which the Servicer is a
      party
      or by which it is bound; or result in the creation or imposition of any Lien
      upon any of its properties pursuant to the terms of any such indenture,
      material

     

    
      
        
        

      

      
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    agreement
      or other material instrument; or violate any law or any order, rule or
      regulation applicable to the Servicer of any court or of any federal or State
      regulatory body, administrative agency or other governmental instrumentality
      having jurisdiction over the Servicer or its properties.

     

    (f)
       Approvals.
      Except
      for filings with the BPU for adjusting the Transition Bond Charge pursuant
      to
      Section 4.01 and Annex 1, the filing of financing statements under the New
      Jersey UCC and the Delaware UCC, and the filing of continuation filings under
      the New Jersey UCC and the Delaware UCC, no approval, authorization, consent,
      order or other action of, or filing with, any court, federal or state regulatory
      body, administrative agency or other governmental instrumentality is required
      in
      connection with the execution and delivery by the Servicer of this Servicing
      Agreement, the performance by the Servicer of the transactions contemplated
      hereby or the fulfillment by the Servicer of the terms hereof, except those
      that
      have been obtained or made. 

     

    (g)
       Reports
      and Certificates.
      Each
      report and certificate delivered in connection with any filing made with the
      BPU
      by the Servicer on behalf of the Issuer with respect to the Transition Bond
      Charge or Transition Bond Charge Adjustments will constitute a representation
      and warranty by the Servicer that each such report or certificate, as the case
      may be, is true and correct in all material respects; provided, however, that
      to
      the extent any such report or certificate is based in part upon or contains
      assumptions, forecasts or other predictions of future events, this
      representation and warranty of the Servicer with respect thereto will be limited
      to the representation and warranty that such assumptions, forecasts or other
      predictions of future events are reasonable based upon historical performance
      or
      facts known to the Servicer on the date such report or certificate is
      delivered.

     

    (h)
       No
      Proceedings.
      There
      are no proceedings or investigations pending or, to the Servicer’s best
      knowledge, threatened before any court, federal or state regulatory body,
      administrative agency or other governmental instrumentality having jurisdiction
      over the Servicer or its properties:

     

    (i) seeking
      to prevent the issuance of the Transition Bonds or the consummation of any
      of
      the transactions contemplated by this Servicing Agreement or any of the other
      Basic Documents;

     

    (ii) except
      as
      disclosed by the Servicer to the Issuer (or as disclosed in filings with the
      Commission made by the Servicer), seeking any determination or ruling that
      might
      materially and adversely affect the performance by the Servicer of its
      obligations under, or the validity or enforceability against the Servicer of,
      this Servicing Agreement or any of the other Basic Documents; or 

     

    (iii) relating
      to the Servicer and which might materially and adversely affect the federal
      or
      State income tax attributes of the Transition Bonds.

     

    Section
      5.02 Indemnities
      of Servicer; Release of Claims.

     

    (a)
       
      The
      Servicer shall be liable as such in accordance herewith only to the extent
      of
      the obligations specifically undertaken by the Servicer under this Servicing
      Agreement.

     

    
      
        
        

      

      
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    (b)
       The
      Servicer shall indemnify the Issuer and the Trustee (for itself and on behalf
      of
      the Transition Bondholders) and each of their respective trustees, members,
      managers, officers, directors, employees and agents for, and defend and hold
      harmless each such person from and against, any and all Losses that may be
      imposed upon, incurred by or asserted against any such person as a result
      of:

     

    (i) the
      Servicer’s willful misconduct, bad faith or gross negligence in the performance
      of its duties or observance of its covenants under this Servicing Agreement
      or
      the Servicer’s reckless disregard of its obligations and duties under this
      Servicing Agreement;

     

    (ii) the
      Servicer’s breach of any of its representations or warranties in this Servicing
      Agreement; and

     

    (iii) litigation
      and related expenses relating to its status and obligations as Servicer (other
      than any proceedings the Servicer is required to institute under this Servicing
      Agreement);

     

    provided,
      however, that the Servicer shall not be liable for any Losses resulting from
      the
      willful misconduct or gross negligence of any person indemnified pursuant to
      this Section 5.02 (each, an “Indemnified Person”) or resulting from a breach of
      a representation or warranty made by such Indemnified Person in any of the
      Basic
      Documents that gives rise to the Servicer’s breach.

     

    Promptly
      after receipt by an Indemnified Person of notice of its involvement in any
      action, proceeding or investigation, such Indemnified Person shall, if a claim
      for indemnification in respect thereof is to be made against the Servicer under
      this Section 5.02, notify the Servicer in writing of such involvement. Failure
      by an Indemnified Person to so notify the Servicer shall relieve the Servicer
      from the obligation to indemnify and hold harmless such Indemnified Person
      under
      this Section 5.02 only to the extent that the Servicer suffers actual prejudice
      as a result of such failure. With respect to any action, proceeding or
      investigation brought by a third party for which indemnification may be sought
      under this Section 5.02, the Servicer shall be entitled to assume the defense
      of
      any such action, proceeding or investigation unless (x) such action, proceeding
      or investigation exposes the Indemnified Person to a risk of criminal liability
      or forfeiture, (y) the Servicer and such Indemnified Person have a conflict
      of
      interest in their respective defenses of such action, proceeding or
      investigation or (z) there exists at the time the Servicer would assume such
      defense an ongoing Servicer Default. Upon assumption by the Servicer of the
      defense of any such action, proceeding or investigation, the Indemnified Person
      shall have the right to participate in such action or proceeding and to retain
      its own counsel (including local counsel), and the Servicer shall bear the
      reasonable fees, costs and expenses of such separate counsel. The Indemnified
      Person shall not settle or compromise or consent to the entry of any judgment
      with respect to any pending or threatened claim, action, suit or proceeding
      in
      respect of which indemnification may be sought under this Section 5.02 (whether
      or not the Servicer is an actual or potential party to such claim or action)
      unless the Servicer agrees in writing to such settlement, compromise or consent
      and such settlement, compromise or consent includes an unconditional release
      of
      the Servicer from all liability arising out of such claim, action, suit or
      proceeding.

     

    
      
        
        

      

      
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    (c)
       The
      Servicer’s indemnification obligations under Section 5.02(b) for events
      occurring prior to the removal or resignation of the Trustee or the termination
      of this Servicing Agreement shall survive the resignation or removal of the
      Trustee or the termination of this Servicing Agreement and shall include
      reasonable costs, fees and expenses of investigation and litigation (including
      the Issuer’s and the Trustee’s reasonable attorneys’ fees and
      expenses).

     

    (d)
       Except
      to
      the extent expressly provided for in the Basic Documents (including the
      Servicer’s claims with respect to the Quarterly Servicing Fees and the Seller’s
      claim for payment of the purchase price of the Transferred Bondable Transition
      Property), the Servicer hereby releases and discharges the Issuer (including
      its
      Member, Managers, officers, employees and agents, if any) and the Trustee
      (including its respective officers, directors, employees and agents)
      (collectively, the “Released Parties”) from any and all actions, claims and
      demands whatsoever, which the Servicer shall or may have against any such person
      relating to the Transferred Bondable Transition Property or the Servicer’s
      activities with respect thereto other than any actions, claims and demands
      arising out of the willful misconduct, bad faith or gross negligence of the
      Released Parties.

     

    Section
      5.03 Merger
      or Consolidation of, or Assumption of the Obligations of,
      Servicer.
      Any
      Person or Persons:

     

    (a)
       into
      which the Servicer may be merged or consolidated and which succeeds to all
      or a
      significant part of the electric distribution business of the
      Servicer,

     

    (b)
       which
      results from the division of the Servicer into two or more Persons and which
      succeeds to all or a significant part of the electric distribution business
      of
      the Servicer,

     

    (c)
       which
      may
      result from any merger or consolidation to which the Servicer shall be a party
      and which succeeds to all or a significant part of the electric distribution
      business of the Servicer,

     

    (d)
       which
      may, in a transaction or a series of related transactions, succeed to the
      properties and assets of the Servicer substantially as a whole and which, in
      a
      transaction or a series of related transactions, succeeds to all or a
      significant part of the electric distribution business of the Servicer, or
      

     

    (e)
       which
      may
      otherwise succeed to all or a significant part of the electric distribution
      business of the Servicer,

     

    which
      Person or Persons in any of the foregoing cases executes or execute an agreement
      of assumption to perform every obligation of the Servicer under this Servicing
      Agreement, shall be the successor or successors to the Servicer hereunder
      without the execution or filing of any document or any further act by any of
      the
      parties to this Servicing Agreement; provided, however, that:

     

    (i) immediately
      after giving effect to such transaction, no representation or warranty made
      pursuant to Section 5.01 shall have been breached and no Servicer Default,
      and
      no event that, after notice or lapse of time, or both, would become a Servicer
      Default, shall have occurred and be continuing;

     

    
      
        
        

      

      
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    (ii) the
      Servicer shall have delivered to the Issuer, the Trustee and the Rating Agencies
      a Servicer Officers’ Certificate and an Opinion of Counsel each stating that
      such consolidation, merger or succession and such agreement of assumption comply
      with this Section 5.03 and that all conditions precedent, if any, provided
      for
      in this Servicing Agreement relating to such transaction have been complied
      with;

     

    (iii) the
      Servicer shall have delivered to the Issuer, the Trustee and the Rating Agencies
      an Opinion of Counsel either:

     

    
      	 	
              (A)

            	
              stating
                that, in the opinion of such counsel, all filings to be made by the
                Servicer, including New Jersey UCC filings and Delaware UCC filings,
                that
                are necessary fully to preserve and protect the interests of the
                Trustee
                in the Transferred Bondable Transition Property have been executed
                and
                filed and reciting the details of such filings,
                or

            


    

     

    
      	 	
              (B)

            	
              stating
                that, in the opinion of such counsel, no such action is necessary
                to
                preserve and protect such
                interests;

            


    

     

    (iv) the
      Rating Agencies shall have received prior written notice of such transaction,
      and the then current ratings on any of the Outstanding Transition Bonds will
      not
      be withdrawn or downgraded by the Rating Agencies; and

     

    (v) the
      Servicer shall have delivered to the Issuer, the Trustee and the Rating Agencies
      an opinion of independent tax counsel (as selected by, and in form and substance
      reasonably satisfactory to, the Servicer, and which may be based on a ruling
      from the Internal Revenue Service) to the effect that, for federal income tax
      purposes, such consolidation or merger will not result in a material adverse
      federal income tax consequence to the Servicer, the Issuer, the Trustee or
      the
      then existing Transition Bondholders.

     

    The
      Servicer shall not consummate any transaction referred to in clauses (a), (b),
      (c), (d) or (e) above except upon execution of the above described agreement
      of
      assumption and compliance with subclauses (i), (ii), (iii), (iv) and (v) above.
      When any Person or Persons acquires or acquire the properties and assets of
      the
      Servicer substantially as a whole and becomes or become the successor or
      successors to the Servicer in accordance with the terms of this Section 5.03,
      then upon the satisfaction of all of the other conditions of this Section 5.03,
      the Servicer shall automatically and without further notice be released from
      its
      obligations hereunder.

     

    Section
      5.04 Assignment
      of Servicer’s Obligations.
      Subject
      to the provisions of Section 5.06, the Servicer may assign any or all of its
      obligations hereunder to any successor if either (i) prior written notice has
      been provided to the Rating Agencies and the then current ratings on any of
      the
      Outstanding Transition Bonds will not be withdrawn or downgraded by the Rating
      Agencies and any other conditions specified in the Financing Order have been
      satisfied or (ii) the Servicer is replaced by a successor pursuant to Section
      5.03 hereof.

     

    
      
        
        

      

      
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    Section
      5.05 Limitation
      on Liability of Servicer and Others.
      The
      Servicer, in such capacity, shall not be liable to the Issuer, the Trustee,
      or
      the Transition Bondholders except as provided under this Servicing Agreement,
      for any action taken or for refraining from the taking of any action pursuant
      to
      this Servicing Agreement or for good faith errors in judgment; provided,
      however, that this provision shall not protect the Servicer against any
      liability that would otherwise be imposed by reason of willful misconduct,
      bad
      faith or gross negligence in the performance of its duties or by reason of
      reckless disregard of its obligations and duties under this Servicing Agreement.
      The Servicer and any director, officer, employee or agent of the Servicer may
      rely in good faith on the advice of counsel reasonably acceptable to the Trustee
      or on any document of any kind, prima facie properly executed and submitted
      by
      any Person, respecting any matters arising under this Servicing
      Agreement.

     

    Except
      as
      provided in this Servicing Agreement, the Servicer, in such capacity, shall
      not
      be under any obligation to appear in, prosecute or defend any legal action
      that
      is not incidental to its duties to service the Transferred Bondable Transition
      Property in accordance with this Servicing Agreement or related to its
      indemnification obligations, and that in its reasonable opinion may cause it
      to
      incur any expense or liability.

     

    Section
      5.06 JCP&L
      Not to Resign as Servicer.
      Subject
      to the provisions of Sections 5.03 and 5.04, JCP&L shall not resign
      from the obligations and duties imposed on it as Servicer under this Servicing
      Agreement except upon a determination that the performance of its duties under
      this Servicing Agreement shall no longer be permissible under applicable law.
      Any such resignation shall not be effective until approved by the BPU. Notice
      of
      any such determination permitting the resignation of JCP&L shall be
      communicated to the Issuer, the Trustee and each Rating Agency at the earliest
      practicable time (and, if such communication is not in writing, shall be
      confirmed in writing at the earliest practicable time), and any such
      determination shall be evidenced by an Opinion of Counsel to such effect
      delivered to the Issuer and the Trustee concurrently with or promptly after
      such
      notice. No such resignation shall be permitted if such resignation will result
      in the reduction or withdrawal of the then current ratings on any Outstanding
      Transition Bond. No such resignation shall become effective until a Successor
      Servicer has assumed the servicing obligations and duties hereunder of the
      Servicer in accordance with Section 6.04.

     

    Section
      5.07 Quarterly
      Servicing Fee.
      The
      Issuer agrees to pay the Servicer the Quarterly Servicing Fee with respect
      to
      all Series of Transition Bonds. On each Monthly Remittance Date that coincides
      with a Payment Date, the Servicer shall be entitled to withhold the amount
      of
      the Quarterly Servicing Fee from TBC Collections as compensation under this
      Servicing Agreement unless the Trustee has notified the Servicer in writing
      that
      the Issuer does not hold sufficient funds to pay amounts owed in such month
      to
      the Trustee. For so long as JCP&L is the Servicer, the Quarterly Servicing
      Fee shall be $[ ]. The Servicer shall be entitled to retain as additional
      compensation net investment income on TBC Collections related to the Transferred
      Bondable Transition Property received by the Servicer during any Collection
      Period prior to remittance to the Collection Account and the late fees, if
      any,
      paid by Customers to the Servicer. The Issuer and the Servicer agree and
      acknowledge that the foregoing fees constitute a fair and reasonable price
      for
      the obligations to be performed by the Servicer. In no event shall the Trustee
      be liable for any Quarterly Servicing Fee.

     

    
      
        
        

      

      
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    Section
      5.08 Servicer
      Expenses.
      Except
      as
      otherwise expressly provided herein, the Servicer shall be required to pay
      all
      expenses incurred by it in connection with its activities hereunder, including
      fees and disbursements of independent accountants and counsel, taxes imposed
      on
      the Servicer and expenses incurred in connection with reports to the Transition
      Bondholders and shall not be entitled to any additional payment or reimbursement
      therefor.

     

    Section
      5.09 Subservicing.The
      Servicer may at any time appoint a subservicer to perform all or any portion
      of
      its obligations as Servicer hereunder; provided, however, that written notice
      has been given to the Rating Agencies and the Trustee and the then current
      ratings on any Outstanding Transition Bonds will not be withdrawn or downgraded
      by the Rating Agencies; and provided, further, that the Servicer shall remain
      obligated and be liable to the Issuer, the Trustee and the Transition
      Bondholders for the servicing and administering of the Transferred Bondable
      Transition Property in accordance with the provisions hereof without diminution
      of such obligation and liability by virtue of the appointment of such
      subservicer and to the same extent and under the same terms and conditions
      as if
      the Servicer alone were servicing and administering the Transferred Bondable
      Transition Property. The fees and expenses of the subservicer shall be as agreed
      between the Servicer and its subservicer from time to time, and none of the
      Issuer, the Trustee or the Transition Bondholders shall have any responsibility
      therefor. Any such appointment shall not constitute a Servicer resignation
      under
      Section 5.06. 

     

    Section
      5.10 No
      Servicer Advances.
      The
      Servicer shall not make any advances of interest on or principal of the
      Transition Bonds. 

     

    Section
      5.11 Remittances.

     

    (a)
       The
      Servicer shall remit TBC Collections (from whatever source) in accordance with
      Section 3.03(a)(ii), and all proceeds of other Collateral of the Issuer, if
      any, received by the Servicer, to the Trustee for deposit pursuant to the
      Indenture, not later than each Daily Remittance Date. The Servicer shall
      promptly remit any Indemnity Amounts paid or received by it immediately to
      the
      Trustee for deposit pursuant to the Indenture.

     

    (b)
       Notwithstanding
      the foregoing clause (a), as long as 

     

    (i) JCP&L
      or any successor to JCP&L’s electric distribution business remains the
      Servicer,

     

    (ii) no
      Servicer Default has occurred and is continuing,

     

    (iii)
      (A) JCP&L,
      or any Successor Servicer to JCP&L’s electric distribution business,
      maintains a short-term rating of ‘A-1’ or better by S&P, ‘P-1’ or better
      byMoody’s, and ‘F-1’ or better by Fitch,

     

    or

     

    (B) 
any
      additional conditions or limitations imposed by the Rating Agencies are complied
      with and each

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    Rating
      Agency has notified the Servicer, the Issuer and the Trustee that the monthly
      remittance will not result in a downgrade or withdrawal of the then current
      ratings of any Outstanding Transition Bonds (except that with regard to Moody’s
      and Fitch it will be sufficient to provide ten days notice of any such
      action),

     

    (iv) the
      BPU
      has approved Servicer remittances on a monthly basis and

     

    (v) the
      Servicer has delivered to the Rating Agencies an Opinion of Counsel addressing
      certain “true sale” and “non-consolidation” issues in form and substance
      reasonably satisfactory to such Rating Agencies,

     

    the
      Servicer need not make the daily remittances required by clause (a), but in
      lieu
      thereof, shall remit all TBC Collections (from whatever source) in accordance
      with Section 3.03(a)(i), and all proceeds of other Collateral of the Issuer,
      if
      any, received by the Servicer during any Collection Period to the Trustee for
      deposit pursuant to the Indenture, not later than the corresponding Monthly
      Remittance Date.

     

    Section
      5.12 Protection
      of Title.The
      Servicer shall execute and file such filings and cause to be executed and filed
      such filings, all in such manner and in such places as may be required by law
      fully to preserve, maintain and protect the interests of the Trustee in the
      Transferred Bondable Transition Property and other Collateral, including all
      filings required under the New Jersey UCC and the Delaware UCC relating to
      the
      transfer of ownership of or a security interest in the Transferred Bondable
      Transition Property by the Seller to the Issuer or the security interest granted
      by the Issuer to the Trustee in the Transferred Bondable Transition Property
      and
      other Collateral. The Servicer shall deliver (or cause to be delivered) to
      the
      Issuer and the Trustee file-stamped copies of, or filing receipts for, any
      document filed as provided above, as soon as available following such
      filing.

     

    ARTICLE
      VI

     

    SERVICER
      DEFAULT

     

    Section
      6.01 Servicer
      Default.
      If
      any
      one of the following events (a “Servicer Default”) occurs and is
      continuing:

     

    (a)
       any
      failure by the Servicer to remit to the Trustee, on behalf of the Issuer, any
      required remittance that continues unremedied for a period of five Business
      Days
      after the date it is required to be paid; or

     

    (b)
       any
      failure by the Servicer duly to observe or perform in any material respect
      any
      other covenant or agreement of the Servicer set forth in this Servicing
      Agreement or any other Basic Document to which the Servicer, as such, is a
      party, which failure:

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (i) materially
      and adversely affects the Transferred Bondable Transition Property or the rights
      of the Transition Bondholders; and

     

    (ii) continues
      unremedied for a period of sixty days after the date on which written notice
      of
      such failure has been given to the Servicer by the Issuer, the Trustee or the
      Holders of not less than twenty-five percent of the Outstanding principal
      balance of the Transition Bonds of all Series and Classes, acting together
      as a
      single class, or after discovery of such failure by an officer of the Servicer,
      as the case may be; or

     

    (c)
       any
      representation or warranty made by the Servicer in this Servicing Agreement
      proves to have been incorrect when made, which has a material adverse effect
      on
      the Issuer or the Transition Bondholders and which material adverse effect
      continues unremedied for a period of sixty days after the date on which written
      notice thereof has been given to the Servicer by the Issuer, the Trustee or
      the
      Holders of not less than twenty-five percent of the Outstanding principal
      balance of the Transition Bonds of all Series and Classes, acting together
      as a
      single class, or after discovery of such failure by an officer of the Servicer,
      as the case may be; or

     

    (d)
       an
      Insolvency Event occurs with respect to the Servicer; 

     

    then,
      and
      in each and every case, so long as the Servicer Default shall not have been
      remedied, the Trustee, with the written consent of the Holders of a majority
      of
      the Outstanding principal balance of the Transition Bonds of all Series and
      Classes, voting together as a single class, by notice then given in writing
      to
      the Servicer (a “Termination Notice”), may terminate all the rights and
      obligations (other than the indemnification obligations set forth in Section
      5.02 hereof, the obligation under Section 6.04 to continue performing its
      functions as Servicer until a Successor Servicer is appointed and the right
      to
      receive the requisite portion of the Quarterly Servicing Fees) of the Servicer
      under this Servicing Agreement. In addition, upon a Servicer Default because
      of
      a failure to make required remittances, the Issuer and the Trustee shall each
      be
      entitled to apply to the BPU or any court of competent jurisdiction for
      sequestration and payment to the Trustee of revenues arising with respect to
      the
      Transferred Bondable Transition Property.

     

    On
      or
      after the receipt by the Servicer of a Termination Notice, all authority and
      power of the Servicer under this Servicing Agreement, whether with respect
      to
      the Transferred Bondable Transition Property, the related Transition Bond Charge
      or otherwise, shall, upon appointment of a Successor Servicer pursuant to
      Section 6.04, without further action, pass to and be vested in such Successor
      Servicer and, without limitation, the Trustee is hereby authorized and empowered
      to execute and deliver, on behalf of the predecessor Servicer, as
      attorney-in-fact or otherwise, any and all documents and other instruments,
      and
      to do or accomplish all other acts or things necessary or appropriate to effect
      the purposes of such Termination Notice, whether to complete the transfer of
      the
      Bondable Transition Property Documentation and related documents, or otherwise.
      The predecessor Servicer shall cooperate with the Successor Servicer, the
      Trustee and the Issuer in effecting the termination of the responsibilities
      and
      rights of the predecessor Servicer under this Servicing Agreement, including
      the
      transfer to the Successor Servicer for administration by it of all cash amounts
      that shall at the time be held by the predecessor Servicer for remittance,
      or
      shall thereafter be received by it with respect to the

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Transferred
      Bondable Transition Property or the related Transition Bond Charge. As soon
      as
      practicable after receipt by the Servicer of such Termination Notice, the
      Servicer shall deliver the Bondable Transition Property Documentation to the
      Successor Servicer. All reasonable costs and expenses (including attorneys’ fees
      and expenses) incurred in connection with transferring the Bondable Transition
      Property Documentation to the Successor Servicer and amending this Servicing
      Agreement to reflect such succession as Servicer pursuant to this Section 6.01
      shall be paid by the predecessor Servicer upon presentation of reasonable
      documentation of such costs and expenses. Termination of JCP&L as Servicer
      shall not terminate JCP&L’s rights or obligations under the Sale
      Agreement.

     

    Section
      6.02 Notice
      of Servicer Default.
      The
      Servicer shall deliver to the Issuer, the Trustee and each Rating Agency
      promptly after having obtained knowledge thereof, but in no event later than
      five Business Days thereafter, written notice in a Servicer Officers’
Certificate of any event or circumstance which, with the giving of notice or
      the
      passage of time or both, would become a Servicer Default under Section 6.01.
      If
      any Outstanding Transition Bonds are listed on the Luxembourg Stock Exchange,
      such notice shall also be given by publication in a daily newspaper in
      Luxembourg, if the rules of the Luxembourg Stock Exchange so require.


     

    Section
      6.03 Waiver
      of Past Defaults.
      The
      Trustee, with the written consent of the Holders of not less than a majority
      of
      the Outstanding principal balance of the Transition Bonds of all Series and
      Classes, voting together as a single class, may waive in writing any default
      by
      the Servicer in the performance of its obligations hereunder and its
      consequences, except a default in making any required remittances to the Trustee
      of TBC Collections in accordance with Section 3.03. Upon any such waiver of
      a
      past default, such default shall cease to exist, and any Servicer Default
      arising therefrom shall be deemed to have been remedied for every purpose of
      this Servicing Agreement. No such waiver shall extend to any subsequent or
      other
      default or impair any right consequent thereto. 

     

    Section
      6.04 Appointment
      of Successor.

     

    (a)
       Upon
      the
      Servicer’s receipt of a Termination Notice pursuant to Section 6.01 or the
      Servicer’s resignation in accordance with the terms of this Servicing Agreement,
      the predecessor Servicer shall continue to perform its functions as Servicer
      under this Servicing Agreement and shall be entitled to receive the requisite
      portion of the Quarterly Servicing Fees, until a Successor Servicer has assumed
      in writing the obligations of the Servicer hereunder as described below. In
      the
      event of the Servicer’s removal or resignation hereunder, the Trustee, as
      assignee of the Issuer, may, at the sole expense of the Issuer, appoint a
      Successor Servicer, with the consent of the Holders of not less than a majority
      of the Outstanding principal balance of the Transition Bonds of all Series
      and
      Classes, voting together as a single class, and the Successor Servicer shall
      accept its appointment by a written assumption in form acceptable to the Issuer
      and the Trustee. If, within thirty days after the delivery of the Termination
      Notice, a new Servicer has not been appointed and accepted such appointment,
      the
      Trustee, at the sole expense of the Issuer, may petition the BPU or a court
      of
      competent jurisdiction to appoint a Successor Servicer under this Servicing
      Agreement. A Person shall qualify as a Successor Servicer only if:

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (i) such
      Person is permitted to perform the duties of the Servicer pursuant to the
      Competition Act, the BPU Regulations, the Financing Order and this Servicing
      Agreement;

     

    (ii) prior
      notice has been given to the Rating Agencies and the then current ratings on
      any
      Outstanding Transition Bonds shall not be withdrawn or downgraded by the Rating
      Agencies; and 

     

    (iii) such
      Person enters into a servicing agreement with the Issuer having substantially
      the same provisions as this Servicing Agreement.

     

    (b)
       Upon
      appointment, the Successor Servicer shall be the successor in all respects
      to
      the predecessor Servicer under this Servicing Agreement and shall be subject
      to
      all the responsibilities, duties and liabilities arising thereafter relating
      thereto placed on the predecessor Servicer and shall be entitled to the
      Quarterly Servicing Fee and all the rights granted to the predecessor Servicer
      by the terms and provisions of this Servicing Agreement. 

     

    (c)
       The
      Successor Servicer may resign only if it is prohibited from serving as such
      by
      applicable law.

     

    (d)
       A
      Successor Servicer may bring an action against a particular Customer for
      nonpayment of the Transition Bond Charge, or terminate service for failure
      to
      pay the Transition Bond Charge, only if such Successor Servicer is the electric
      public utility with respect to that Customer.

     

    (e)
       All
      expenses incurred by the Trustee in connection with the appointment of a
      Successor Servicer shall be reimbursed to the Trustee, pursuant to Section
      8.02(d) of the Indenture.

     

    Section
      6.05 Cooperation
      With Successor.
      The
      Servicer covenants and agrees with the Issuer that it will, on an ongoing basis,
      cooperate with the Successor Servicer and provide whatever information is,
      and
      take whatever actions are, reasonably necessary to assist the Successor Servicer
      in performing its obligations hereunder.

     

    ARTICLE
      VII

     

    MISCELLANEOUS
      PROVISIONS

     

    Section
      7.01 Amendment.

     

    (a)
       Upon
      five
      Business Days’ prior written notice to the Rating Agencies, this Servicing
      Agreement may be amended by the Servicer and the Issuer with the written consent
      of the Trustee upon receipt of an Issuer Order, but without the consent of
      the
      Transition Bondholders, to: 

     

    (i) cure
      any
      ambiguity;

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (ii) correct
      or supplement any provision in this Servicing Agreement;

     

    (iii) add
      any
      provisions to or change in any manner or eliminate any of the provisions of
      this
      Servicing Agreement; or

     

    (iv) modify
      in
      any manner the rights of the Transition Bondholders;

     

    provided,
      that such action will not, as certified in a Servicer Officers’ Certificate of
      the Servicer delivered to the Issuer and to the Trustee and the Managers,
      adversely affect in any material respect the interest of any Holder of
      Transition Bonds then Outstanding.

     

    (b)
       This
      Servicing Agreement may be amended by the Servicer and the Issuer with five
      Business Days’ prior written notice to the Rating Agencies and with the written
      consent of the Trustee and the consent of the Holders of not less than a
      majority of the Outstanding principal balance of the Transition Bonds of all
      Series and Classes affected thereby, voting together as a single class, for
      the
      purpose of adding any provisions to or changing in any manner or eliminating
      any
      of the provisions of this Servicing Agreement or of modifying in any manner
      the
      rights of the Transition Bondholders; provided, however, no amendment adopted
      in
      this manner may increase or decrease, or accelerate or delay the timing or
      collection of the Transition Bond Charge, or reduce the percentage of Transition
      Bondholders required to consent to amendments.

     

    No
      amendment of the provisions of this Servicing Agreement relating to the
      Servicer’s remittance and Transition Bond Charge Adjustment obligations will be
      permitted absent confirmation from the Rating Agencies that such amendment
      will
      not result in a reduction or withdrawal of the then existing ratings of any
      Outstanding Transition Bonds by the Rating Agencies (except that with regard
      to
      Moody’s and Fitch it will be sufficient to provide ten days’ prior notice of the
      amendment).

     

    (c)
       The
      Issuer may also amend the servicing procedures provided in this Servicing
      Agreement solely to address changes to the Servicer’s method of calculating
      payments of the Transition Bond Charge received as a result of changes to the
      Servicer’s current computerized information system, if the amendment does not
      have a material adverse effect on the Holders of Transition Bonds then
      Outstanding, with prior written notice to the Trustee and the Rating Agencies,
      but without the consent of the Trustee, any Rating Agency or any Transition
      Bondholder. These changes may include changes that would replace remittances
      calculated by estimation procedures with remittances of TBC Collections actually
      received.

     

    Prior
      to
      the execution of any amendment to this Servicing Agreement, the Issuer and
      the
      Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
      that the execution of such amendment is authorized or permitted by this
      Servicing Agreement and the Opinion of Counsel referred to in Section 3.06(b)
      of
      the Indenture. The Issuer and the Trustee may, but shall not be obligated to,
      enter into any such amendment which affects their own rights, duties or
      immunities under this Servicing Agreement or otherwise. 

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    Section
      7.02 Notices.
      Unless
      otherwise specifically provided herein, all notices, directions, consents and
      waivers required under the terms and provisions of this Servicing Agreement
      shall be in English and in writing, and any such notice, direction, consent
      or
      waiver may be given by United States first-class mail, reputable overnight
      courier service, facsimile transmission or electronic mail (confirmed by
      telephone, United States first-class mail or reputable overnight courier service
      in the case of notice by facsimile transmission or electronic mail) or any
      other
      customary means of communication, and any such notice, direction, consent or
      waiver shall be effective when delivered or transmitted, or if mailed, five
      days
      after deposit in the United States first-class mail with proper postage for
      first-class mail prepaid:

     

    (a)
       in
      the
      case of the Servicer, at Jersey Central Power & Light Company, 76 South Main
      Street, Akron, Ohio 44308;

     

    (b)
       in
      the
      case of the Issuer, at JCP&L Transition Funding II LLC, 103 Foulk Road,
      Suite 202, Wilmington, Delaware 19803, with a copy to JCP&L Transition
      Funding II LLC c/o FirstEnergy Service Company, 76 South Main Street, Akron,
      Ohio 44308;

     

    (c)
       in
      the
      case of the Trustee, at its Corporate Trust Office;

     

    (d)
       in
      the
      case of Moody’s, at Moody’s Investors Service, Inc., ABS Monitoring Department,
      99 Church Street, New York, New York 10007;

     

    (e)
       in
      the
      case of S&P, at Standard & Poor’s, Structured Finance, ABS Surveillance
      Corp., 55 Water Street, 41st
      Floor,
      New York, New York 10041-0003, Fax: 212-438-2664; and

     

    (f)
       in
      the
      case of Fitch, at Fitch, Inc., One State Street Plaza, New York, New York 10004,
      Attention: ABS Surveillance; 

     

    or,
      as to
      each of the foregoing, at such other address as shall be designated by written
      notice to the other parties.

     

    Section
      7.03 Limitations
      on Rights of Others.
      The
      provisions of this Servicing Agreement are solely for the benefit of the
      Servicer, the Issuer and the Trustee, on behalf of itself and the Transition
      Bondholders, and nothing in this Servicing Agreement, whether express or
      implied, shall be construed to give to any other Person any legal or equitable
      right, remedy or claim in any Collateral or under or in respect of this
      Servicing Agreement or any covenants, conditions or provisions contained
      herein.

     

    Section
      7.04 Severability.
      Any
      provision of this Servicing Agreement that is prohibited or unenforceable in
      any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof, and any such prohibition or unenforceability in any
      jurisdiction shall not invalidate or render unenforceable such provision in
      any
      other jurisdiction.

     

    Section
      7.05 Separate
      Counterparts.
      This
      Servicing Agreement may be executed by the parties hereto in separate
      counterparts, each of which when so executed and delivered shall

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    be
      an
      original, but all such counterparts shall together constitute but one and the
      same instrument.

     

    Section
      7.06 Headings.
      The
      headings of the various Articles and Sections herein are for convenience of
      reference only and shall not define or limit any of the terms or provisions
      hereof.

     

    Section
      7.07 Governing
      Law.  THIS
      SERVICING AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
      OF NEW JERSEY, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
      OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
      IN
      ACCORDANCE WITH SUCH LAWS.

     

    Section
      7.08 Assignment
      to the Trustee.
       

     

    (a)   The
      Servicer hereby acknowledges and consents to any pledge, assignment and grant
      of
      a security interest by the Issuer to the Trustee pursuant to the Indenture
      of
      all right, title and interest of the Issuer in, to and under the Transferred
      Bondable Transition Property and other Collateral owned by the Issuer and the
      proceeds thereof and the assignment of any or all of the Issuer’s rights
      hereunder to the Trustee.

     

    (b) In
      no
      event shall the Trustee have any liability for the representations, warranties,
      covenants, agreements or other obligations of the Issuer hereunder or in any
      of
      the certificates, notices or agreements delivered pursuant hereto, as to all
      of
      which recourse shall be had solely to the assets of the Issuer.

     

    (c) The
      Trustee, in acting hereunder, is entitled to all rights, benefits, protections,
      immunities and indemnities accorded to it under the Indenture. 

     

    Section
      7.09 Nonpetition
      Covenants.
      Notwithstanding any prior termination of this Servicing Agreement or the
      Indenture, the Servicer hereby covenants and agrees that it shall not, prior
      to
      the date which is one year and one day after the satisfaction and discharge
      of
      the Indenture, including, without limitation, any amounts owed to third-party
      credit enhancers, and any amounts owed by the Issuer under Interest Rate Swap
      Agreements, acquiesce, petition or otherwise invoke or cause the Issuer to
      invoke the process of any court or government authority for the purpose of
      commencing or sustaining a case against the Issuer under any federal or State
      bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
      assignee, trustee, custodian, sequestrator or other similar official of the
      Issuer or any substantial part of the property of the Issuer, or ordering the
      winding up or liquidation of the affairs of the Issuer.

     

    Section
      7.10 Termination.
      This
      Servicing Agreement shall terminate upon satisfaction and discharge of the
      Indenture. 

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Servicing Agreement to
      be
      duly executed and delivered by their respective duly authorized officers as
      of
      the date and year first above written.

     

    

      
        	 	
                JCP&L
                  TRANSITION FUNDING II LLC,

                as
                  Issuer

                 

              
	 	
                By:

              	 
	 	 	
                Name:

              
	 	 	
                Title:

              
	 	
                
JERSEY
                  CENTRAL POWER & LIGHT COMPANY,

                as
                  Servicer

                 

              
	 	
                By:

              	 
	 	 	
                Name:

              
	 	 	
                Title:

              


      

    

    


     

    Acknowledged
      and Accepted:

     

    The
      Bank
      of New York,

    as
      Trustee 

     

    By:
       __________________________

    Name:
      

    Title:
      

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


    ANNEX
      1

     

    TO

     

    SERVICING
      AGREEMENT

     

    The
      Servicer agrees to comply with the following with respect to JCP&L
      Transition Funding II LLC, as Issuer:

     

    Section
      1. Definitions.
      Capitalized
      terms used herein and not otherwise defined shall have the meanings set forth
      in
      Appendix A to the Indenture dated as of_______ , 2006 between the Issuer and
      The
      Bank of New York, as Trustee.

     

    Section
      2. Trustee
      and Servicer Payment Date Statements. At
      least
      one Business Day before each date on which distributions to the Trustee and
      Servicer are to be made pursuant to Sections 8.02(d) and (e) of the Indenture,
      the Servicer shall provide the Trustee with a statement setting forth the
      amounts to be distributed to each of the Trustee and Servicer pursuant to such
      Sections.

     

    Section
      3. Payment
      Date Statements.
      At least
      one Business Day before each Payment Date, the Servicer shall provide to the
      Issuer, the Trustee, each Rating Agency and, for so long as any Transition
      Bonds
      are listed on the Luxembourg Stock Exchange, any listing agent in Luxembourg,
      a
      statement indicating:

     

    
      	 	
              1.
                

            	
              the
                amount to be paid to Transition Bondholders of each Series and Class
                in
                respect of principal on such Payment Date in accordance with Section
                8.02
                of the Indenture and each Series Supplement
                thereto;

            


    

     

    
      	 	
              2.
                

            	
              the
                amount to be paid to Transition Bondholders of each Series and Class
                in
                respect of interest on such Payment Date in accordance with Section
                8.02
                of the Indenture and each Series Supplement
                thereto;

            


    

     

    
      	 	
              3.
                

            	
              the
                Transition Bond Balance and the Projected Transition Bond Balance
                and the
                transition bond balance for each Series and Class as of that Payment
                Date
                (in each case, after giving effect to the payments on such Payment
                Date);

            


    

     

    
      	 	
              4.
                

            	
              the
                amount on deposit in the Overcollateralization Subaccount for each
                Series
                and the Scheduled Overcollateralization Level for each Series, as
                of that
                Payment Date (after giving effect to the transfers to be made from
                or into
                the Overcollateralization Subaccount on such Payment
                Date);

            


    

     

    
      	 	
              5.
                

            	
              the
                amount on deposit in the Capital Subaccount for each Series as of
                that
                Payment Date (after giving effect to the transfers to be made from
                or into
                the Capital Subaccount on such Payment
                Date);

            


    

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    
      	 	
              6.
                

            	
              the
                amount, if any, on deposit in the Reserve Subaccount as of that Payment
                Date (after giving effect to the transfers to be made from or into
                the
                Reserve Subaccount on such Payment
                Date);

            


    

     

    
      	 	
              7.
                

            	
              the
                amounts to be paid to each Swap Counterparty (on a gross and a net
                basis,
                separately stated) under the related Interest Rate Swap Agreement
                on or
                before such Payment Date;

            


    

     

    
      	 	
              8.
                

            	
              the
                amounts paid to the Trustee since the preceding Payment Date pursuant
                to
                Section 8.02(d) of the Indenture;

            


    

     

    
      	 	
              9.
                

            	
              the
                amounts paid to or withheld by the Servicer since the preceding Payment
                Date pursuant to Section 8.02(e) of the Indenture;
                and

            


    

     

    
      	 	
              10.
                

            	
              the
                amount of any other transfers and payments to be made on such Payment
                Date
                pursuant to Sections 8.02(d), (e), (f), (g) and (i) of the
                Indenture.

            


    

     

    Section
      4. Remittance
      Date Statements.
      At least
      one Business Day before each Remittance Date, and in the case of Daily
      Remittances, on the last Remittance Date of such month, the Servicer shall
      prepare and furnish to the Issuer and the Trustee a statement setting forth
      the
      aggregate amount remitted or to be remitted by the Servicer to the Trustee
      (net
      of any payments owed to the Servicer in accordance with Section 3.03(b) of
      the
      Servicing Agreement) for deposit on such Remittance Date pursuant to the
      Indenture.

     

    Section
      5. Transition
      Bond Charge Adjustments.

     

    
      	 	
              (a)
                

            	
              Prior
                to each Calculation Date, the Servicer shall calculate
                

            


    

     

    
      	 	
              (i)

            	
              the
                Transition Bond Balance as of such Calculation Date (a written copy
                of
                which shall be delivered by the Servicer to the Trustee within five
                Business Days following such Calculation Date)
                and

            


    

     

    
      	 	
              (ii)

            	
              the
                revised Transition Bond Charge with respect to the Transferred Bondable
                Transition Property in respect of each Adjustment Date such that
                the
                Servicer projects that TBC Collections therefrom allocable to the
                Issuer
                will be sufficient so that: 

            


    

     

    
      	 	
              (A)

            	
              the
                Transition Bond Balance on the Payment Date immediately preceding
                the next
                Adjustment Date will equal the Projected Transition Bond Balance
                as of
                such date or, if earlier with respect to any Series or Class of Transition
                Bonds, as of the Payment Date immediately preceding the Expected
                Final
                Payment Date therefor;

            


    

     

    
      	 	
              (B)

            	
              the
                amount on deposit in the Overcollateralization Subaccount on the
                Payment
                Date immediately preceding the next Adjustment Date will equal the
                Scheduled 

            


    

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    
      	
            	
               

            	
              
                Overcollateralization
                  Level for such date or,
                  if earlier with respect to any Series or Class of Transition Bonds,
                  as of
                  the Payment Date immediately preceding the Expected Final Payment
                  Date
                  therefor;

              

            


    

     

    
      	 	
              (C)

            	
              the
                amount on deposit in the Capital Subaccount on the Payment Date
                immediately preceding the next Adjustment Date will equal its required
                level for such date or, if earlier with respect to any Series or
                Class of
                Transition Bonds, as of the Payment Date immediately preceding the
                Expected Final Payment Date therefor;


            


    

     

    
      	 	
              (D)

            	
              the
                amount on deposit in the Reserve Subaccount on the Payment Date
                immediately preceding the next Adjustment Date, will equal zero;
                and

            


    

     

    
      	 	
              (E)

            	
              the
                TBC Collections will provide for (i) amortization of the remaining
                outstanding principal balance of each Series in accordance with the
                Expected Amortization Schedule therefor, (ii) payment of interest
                on each
                Series when due and payment of any amounts (other than termination
                or
                breakage amounts) under each Interest Rate Swap Agreement, (iii)
                payment
                of all Operating Expenses of the Issuer when due in accordance with
                the
                Indenture and (iv) deposits to the Overcollateralization Subaccount
                such
                that the balance therein will equal the Scheduled Overcollateralization
                Level on each Payment Date.

            


    

     

    
      	 	
              (b)
                

            	
              On
                each Calculation Date, the Servicer shall file an Adjustment Request
                with
                the BPU. This filing shall include the data specified in the Petition
                and
                the Financing Order.

            


    

     

    
      	 	
              (c)
                

            	
              On
                each Adjustment Date, the Servicer shall


            


    

     

    
      	 	
              (i)

            	
              take
                all reasonable actions and make all reasonable efforts to effectuate
                all
                adjustments to the Transition Bond Charge either approved by the
                BPU or
                effective on an interim basis pending final approval
                and

            


    

     

    
      	 	
              (ii)

            	
              promptly
                send to the Trustee copies of all material notices and documents
                relating
                to such adjustments.

            


    

     

    
      	 	
              (d)
                

            	
              On
                each Adjustment Date, the Servicer shall provide Moody’s with a schedule
                indicating any changes to the Transition Bond Charge.
                

            


    

     

    
      	 	
              (e)
                

            	
              If
                deemed appropriate by the Servicer to protect Transition Bondholders
                and
                to remedy a significant and
                recurring

            


    

     

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

       

      
        	
              	
                 

              	
                variance
                  between actual and expected TBC Collections, as authorized by the
                  Financing Order, the Servicer shall make “non-routine” adjustments to the
                  Transition Bond Charge and the MTC-Tax (as defined in the Financing
                  Order)
                  to accommodate material changes to the methodology described in
                  Attachment
                  E-3 to Revised Exhibit E-Supplement of the Petition. Such filings
                  shall be
                  made at least thirty days prior to the proposed effective date
                  of the
                  proposed adjustments. The Servicer shall provide notice of such
                  non-routine adjustment and resulting change to the Transition Bond
                  Charge
                  to Fitch.

              


      

    

     

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    SERVICING
      PROCEDURES

     

    The
      Servicer agrees to comply with the following servicing procedures (and to
      consider and use the criteria specified in Item 1122(d) of Regulation AB (or
      any
      successor regulation), in effect from time to time, to assess its compliance
      with applicable servicing criteria.

     

    Section
      1.  Definitions.

     

    
      	 	
              (a)
                

            	
              Capitalized
                terms used herein and not otherwise defined shall have the meanings
                set
                forth in Appendix A to the Indenture dated as of_______ , 2006 between
                the
                Issuer and The Bank of New York, as
                Trustee.

            


    

     

    
      	 	
              (b)
                

            	
              Whenever
                used in this Exhibit A, the following words and phrases shall have
                the
                following meanings:

            


    

     

    Adjustment
      Request
      has,
      with respect to the Issuer, the meaning given to such term in Appendix
      A.

     

    Applicable
      MDMA
      means,
      with respect to each Customer, the meter data management agent or Third Party,
      if any, providing meter reading services for that Customer's
      account.

     

    Applicable
      Third Party
      means,
      with respect to each Customer, the Third Party, if any, providing billing or
      metering services to that Customer.

     

    Billed
      Transition Bond Charges
      means
      the amounts billed to Customers pursuant to the Transition Bond Charge, whether
      billed directly to such Customers by the Servicer or indirectly through a Third
      Party pursuant to Consolidated Third Party Billing. 

     

    Bills
      means
      each of the regular monthly bills, the summary bills, the opening bills and
      the
      Closing Bills issued to Customers or Third Parties by JCP&L.

     

    Budget
      Payment Plan
      means a
      levelized payment plan offered by JCP&L, which, if elected by a Customer,
      provides for level monthly Bill charges to such Customer. For residential
      Customers, this charge is calculated by calculating actual electricity charges
      for the previous year and dividing this amount by twelve. The number which
      results from this calculation is charged to the residential Customer each month.
      In the twelfth month, JCP&L bills the residential Customer for actual use in
      that month, adjusted for any excess or deficit the Customer has paid JCP&L
      over the prior eleven months. If the Customer owes JCP&L $4 or more over the
      normal budget amount, that Customer has the option of repaying the full amount
      in the twelfth month, or

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

    

     

    spreading
      the amount of this deficit in equal installments over the first four months
      of
      the Customer's next budget year. The procedure is similar for small industrial
      and commercial Customers.

     

    Closing
      Bill
      means
      the final bill issued to a Customer at the time service is
      terminated.

     

    Consolidated
      Third Party Billing
      means
      the billing option available to Customers served by a Third Party pursuant
      to
      which such Third Party will be responsible for billing and collecting all
      charges to Customers electing such billing option, including the Transition
      Bond
      Charge, and will become obligated to the Servicer for the Billed Transition
      Bond
      Charges, all in accordance with applicable BPU Regulations and the Financing
      Order. 

     

    Net
      Write-Off Percent
      means
      the number (expressed as a percent) equal to

     

    
      	 	
              (i)

            	
              the
                amount by which Write-Offs attributable to a particular billing period
                exceed Write-Off recoveries attributable to such billing period,
                divided
                by

            


    

     

    
      	 	
              (ii)

            	
              the
                total billed revenue attributable to such billing period.
                

            


    

     

    Servicer
      Policies and Practices
      means,
      with respect to the Servicer’s duties under this Exhibit A, the policies and
      practices of the Servicer applicable to such duties that the Servicer follows
      with respect to comparable assets that it services for itself.

     

    Transition
      Bond Charge Effective Date
      means
      the date on which the initial Transition Bond Charge goes into effect pursuant
      to the Financing Order.

     

    Variables
      includes
      the following variables used in calculating Adjustment Requests:

     

    
      	 	
              (i)

            	
              the
                estimated Net Write-Off Percent;
                and

            


    

     

    
      	 	
              (ii)

            	
              the
                projected billed consumption to which the Transition Bond Charge
                applies.

            


    

     

    Write-Offs
      means
      arrears that remain unpaid by Customers generally as of ninety days after the
      issuance of the Closing Bills containing such charges, unless payment
      arrangements are made and are being kept.

     

    Section
      2. Data
      Acquisition.

     

    
      	 	
              (a)
                

            	
              Installation
                and Maintenance of Meters.
                Except to the extent that a Third Party is responsible for such services,
                the Servicer shall use its best efforts to cause to be installed,
                replaced
                and maintained meters in such
                places

            


    

     

    
      
        
        

      

      
        Exhibit
          A-2

        
          

        

      

      
        
        

      

    

     

    
      	
            	
               

            	
              and
                in such condition as will enable the Servicer to obtain usage measurements
                for each Customer approximately every thirty days or as provided
                in the
                applicable tariff.

            


    

     

    
      	 	
              (b)
                

            	
              Meter
                Reading.
                At
                least once each calendar month, the Servicer shall obtain usage
                measurements from the Applicable MDMA for each Customer; provided,
                however, that the Servicer may determine any Customer’s usage on the basis
                of estimates in accordance with applicable BPU
                Regulations.

            


    

     

    
      	 	
              (c)
                

            	
              Cost
                of Metering.
                The Issuer shall not be obligated to pay any costs associated with
                the
                metering duties set forth in this Section 2, including, but not limited
                to, the costs of installing, replacing and maintaining meters, nor
                shall
                the Issuer be entitled to any credit against the Servicing Fee for
                any
                cost savings realized by the Servicer or any Third Party as a result
                of
                new metering and/or billing
                technologies.

            


    

     

    Section
      3. Usage
      and Bill Calculation.

     

    The
      Servicer shall obtain a calculation of each Customer’s usage (which may be based
      on data obtained from such Customer’s meter read or on usage estimates
      determined in accordance with applicable BPU Regulations) at least once each
      calendar month and shall determine therefrom each Customer’s individual charge
      relating to the Transition Bond Charge to be included on such Customer’s Bill
      pursuant to the Financing Order and BPU Regulations.

     

    Section
      4. Billing.

     

    The
      Servicer shall implement the Transition Bond Charge as of the Transition Bond
      Charge Effective Date and shall thereafter bill each Customer or the Applicable
      Third Party for the respective Customer’s outstanding current and past due
      charges relating to the Transition Bond Charge, accruing until all payments
      of
      principal and interest on each Series of Transition Bonds and all other costs
      and expenses related to such Series have been paid in accordance with the
      Indenture, all in accordance with the following:

     

    
      	 	
              (a)
                

            	
              Frequency
                of Bills; Billing Practices.
                In
                accordance with the Servicer’s then-existing Servicer Policies and
                Practices, as such Servicer Policies and Practices may be modified
                from
                time to time, the Servicer shall generate and issue a Bill to each
                Customer, or, in the case of a Customer who has elected Consolidated
                Third
                Party Billing, to an Applicable Third Party, for such Customer’s
                respective Transition Bond Charge as a general practice once approximately
                every thirty days or such other time period as allowed by the BPU,
                at the
                same time, with the same frequency and on the same Bill as that containing
                the

            


    

     

    
      
        
        

      

      
        Exhibit
          A-3

        
          

        

      

      
        
        

      

    

     

    
      	
            	
               

            	
              Servicer’s
                own charges to such Customer or Third Party, as the case may be.
                In the
                event that the Servicer makes any material modification to these
                practices, it shall notify the Issuer, the Trustee and the Rating
                Agencies
                as soon as practicable, and in no event later than sixty Business
                Days
                after such modification goes into effect; provided, however,
                that

            


       

    

    
      	 	
              (i)

            	
              the
                Servicer may not make any modification that will materially adversely
                affect the Transition Bondholders
                and

            


    

     

    
      	 	
              (ii)

            	
              the
                Rating Agencies shall receive prior notice of any modification that
                would
                change the frequency with which Bills are issued or would change
                any
                tariff charged.

            


    

     

    
      	 	
              (b)
                

            	
              Format.

            


    

     

    
      	 	
              (i)

            	
              Each
                Bill to a Customer shall contain the charge corresponding to the
                Transition Bond Charge owed by such Customer for the billing period.
                The
                Customer’s Bill will contain in text or in a footnote, text substantially
                to the effect that a portion of the monthly charge representing that
                Bondable Transition Property is being collected on behalf of the
                Issuer as
                owner of the Bondable Transition
                Property.

            


    

     

    
      	 	
              (ii)

            	
              In
                the case of each Customer that has elected Consolidated Third Party
                Billing, the Servicer shall deliver to the Applicable Third Party
                itemized
                charges for such Customer including the amount of such Customer’s
                Transition Bond Charge to be remitted by the Servicer to the
                Issuer.

            


    

     

    
      	 	
              (iii)

            	
              The
                Servicer shall conform to such requirements in respect of the format,
                structure and text of Bills delivered to Customers and Third Parties
                as
                applicable BPU Regulations shall from time to time prescribe. To
                the
                extent that Bill format, structure and text are not prescribed by
                the
                Competition Act, other applicable law or BPU Regulations, the Servicer
                shall, subject to clauses (i) and (ii) above, determine the format,
                structure and text of all Bills in accordance with its reasonable
                business
                judgment, its Servicer Policies and Practices with respect to its
                own
                charges and prevailing industry
                standards.

            


    

     

    
      	 	
              (c)
                

            	
              Delivery.
                The Servicer shall deliver all Bills to Customers
                

            


    

     

    
      	 	
              (i)

            	
              by
                United States mail in such class or classes as are consistent with
                the
                Servicer Policies and Practices followed by the Servicer with respect
                to
                its own charges or

            


    

     

    
      
        
        

      

      
        Exhibit
          A-4

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (ii)

            	
              by
                any other means, whether electronic or otherwise, that the Servicer
                may
                from time to time use to present its own charges to its
                Customers.

            


    

     

    In
      the
      case of Customers that have elected Consolidated Third Party Billing, the
      Servicer shall deliver all Bills to the Applicable Third Parties by such means
      as are prescribed by applicable BPU Regulations, or, if not prescribed by
      applicable BPU Regulations, by such means as are mutually agreed upon by the
      Servicer and the Applicable Third Party and are consistent with BPU Regulations.
      The Servicer or a Third Party, as applicable, shall pay from its own funds
      all
      costs of issuance and delivery of all Bills, including but not limited to
      printing and postage costs as the same may increase or decrease from time to
      time.

     

    Section
      5. Customer
      Service Functions.

     

    The
      Servicer shall handle all Customer inquiries and other Customer service matters
      according to the same procedures it uses to service Customers with respect
      to
      its own charges.

     

    Section
      6. Collections;
      Payment Processing; Remittance.

     

    
      	 	
              (a)
                

            	
              Collection
                Efforts; Policies; Procedures.

            


    

     

    
      	 	
              (i)

            	
              The
                Servicer shall use reasonable efforts to collect all Billed Transition
                Bond Charges from Customers and Third Parties as and when the same
                become
                due and shall follow such collection procedures as it follows with
                respect
                to comparable assets that it services for itself or others, including,
                as
                follows:

            


    

     

    
      	 	
              (A)

            	
              The
                Servicer shall prepare and deliver overdue notices to Customers and
                Third
                Parties in accordance with applicable BPU Regulations and the Servicer
                Policies and Practices.

            


    

     

    
      	 	
              (B)

            	
              The
                Servicer shall apply late payment charges to outstanding Customer
                and
                Third Party balances in accordance with applicable BPU Regulations.
                All
                late payment charges collected shall be payable to and retained by
                the
                Servicer as a component of its compensation under the Servicing Agreement,
                and the Issuer shall not have any right to share in the
                same.

            


    

     

    
      	 	
              (C)

            	
              The
                Servicer shall deliver verbal and written final call notices in accordance
                with applicable BPU Regulations and Servicer Policies and
                Practices.

            


    

     

    
      	 	
              (D)

            	
              The
                Servicer shall adhere to and carry out disconnection policies in
                accordance with the Competition Act,
                other

            


    

     

    
      
        
        

      

      
        Exhibit
          A-5

        
          

        

      

      
        
        

      

    

     

    
      	
            	
               

            	
              applicable
                law and BPU Regulations and Servicer Policies and
                Practices.

            


    

     

    
      	 	
              (E)

            	
              The
                Servicer may employ the assistance of collections agents in accordance
                with applicable BPU Regulations and Servicer Policies and
                Practices.

            


    

     

    
      	 	
              (F)

            	
              The
                Servicer shall apply Customer and Third Party deposits, Customers’ letters
                of credit and Customer posted surety bonds to the payment of delinquent
                accounts in accordance with applicable BPU Regulations and Servicer
                Policies and Practices and according to the priorities set forth
                in
                Sections 6(b)(ii), (iii) and (iv) of this Exhibit
                A.

            


    

     

    
      	 	
              (G)

            	
              The
                Servicer shall promptly take all necessary action in accordance with
                applicable BPU Regulations to terminate billing of Transition Bond
                Charges
                by Third Parties whose payments are twenty-two or more days delinquent,
                or
                as the then current BPU Regulations and any billing services agreements
                allow, and to resume, prospectively, to collect the Billed Transition
                Bond
                Charges directly from the applicable Customers. At such time, the
                Servicer
                will apply the Third Party’s security deposit to satisfy charges billed
                previously by the Third Party which remain outstanding, including
                outstanding Transition Bond
                Charges.

            


    

     

    
      	 	
              (ii)

            	
              The
                Servicer shall not waive any late payment charge or any other fee
                or
                charge relating to delinquent payments, if any, or waive, vary or
                modify
                any terms of payment of any amounts payable by a Customer, in each
                case
                unless such waiver or action:

            


    

     

    
      	 	
              (A)

            	
              would
                be in accordance with the Servicer’s customary practices or those of any
                Successor Servicer with respect to comparable assets that it services
                for
                itself and for others;

            


    

     

    
      	 	
              (B)

            	
              would
                not materially adversely affect the rights of the Transition Bondholders;
                and

            


    

     

    
      	 	
              (C)

            	
              would
                comply with applicable law;

            


    

     

    provided,
      however, that notwithstanding anything in the Servicing Agreement or this
      Exhibit A to the contrary, the Servicer is authorized to write off any Billed
      Transition Bond Charges in accordance with its Servicer Policies and
      Practices.

     

    
      	 	
              (iii)

            	
              The
                Servicer shall accept payment from Customers in respect of Billed
                Transition Bond Charges in such forms and methods and at
                

            


    

     

    
      
        
        

      

      
        Exhibit
          A-6

        
          

        

      

      
        
        

      

    

     

    
      	
            	
               

            	
              such
                times and places as it accepts for payment of its own charges. The
                Servicer shall accept payment from Third Parties in respect of Billed
                Transition Bond Charges in such forms and methods and at such times
                and
                places as the Servicer and each Third Party shall mutually agree
                in
                accordance with applicable BPU
                Regulations.

            


    

     

    
      	 	
              (b)
                

            	
              Payment
                Processing; Allocation; Priority of Payments.

            


    

     

    
      	 	
              (i)

            	
              The
                Servicer shall post all payments received to Customer accounts as
                promptly
                as practicable, and, in any event, substantially all payments shall
                be
                posted no later than two Business Days after
                receipt.

            


    

     

    
      	 	
              (ii)

            	
              Subject
                to clause (iii) below, the Servicer shall apply payments received
                to each
                Customer’s or Third Party’s account in proportion to the charges contained
                on the outstanding Bill to such Customer or Third
                Party.

            


    

     

    
      	 	
              (iii)

            	
              Any
                amounts collected by the Servicer that represent partial payments
                of the
                total Bill to a Customer or Third Party shall be allocated in accordance
                with the priorities set forth in Section 3.02(b) of the Servicing
                Agreement.

            


    

     

    
      	 	
              (iv)

            	
              The
                Servicer shall hold all over-payments for the benefit of the Issuer
                and
                shall apply such funds to future Bill charges in accordance with
                clauses
                (ii) and (iii) above as such charges become
                due.

            


    

     

    
      	 	
              (v)

            	
              For
                Customers on a Budget Payment Plan, the Servicer shall treat TBC
                Collections received from such Customers as if such Customers had
                been
                billed for the Transition Bond Charge in the absence of the Budget
                Payment
                Plan. Partial payment of a Budget Payment Plan payment shall be allocated
                according to clause (iii) above, and overpayment of a Budget Payment
                Plan
                payment shall be allocated according to clause (iv)
                above.

            


    

     

    
      	 	
              (c)
                

            	
              Accounts;
                Records.

            


    

     

    
      	 	
              (i)

            	
              The
                Servicer shall maintain accounts and records as to the Transferred
                Bondable Transition Property accurately and in accordance with its
                standard accounting procedures and in sufficient detail to permit
                reconciliation between payments or recoveries with respect to the
                Transferred Bondable Transition Property and the amounts from time
                to time
                remitted to the Collection Account in respect of the Transferred
                Bondable
                Transition Property.

            


    

     

    
      
        
        

      

      
        Exhibit
          A-7

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (ii)

            	
              The
                Servicer shall maintain accounts and records as to Third Parties
                performing Consolidated Third Party Billing for Customers accurately
                and
                in accordance with its standard accounting procedures and in sufficient
                detail to permit reconciliation between payments or recoveries with
                respect to the Transferred Bondable Transition Property and amounts
                owed
                by such Customers in respect of the Transition Bond
                Charge.

            


    

     

    
      	 	
              (d)
                

            	
              Investment
                of TBC Collections.
                Prior to remittance on the applicable Remittance Date, the Servicer
                may
                invest TBC Collections received at its own risk and for its own benefit,
                and such investments and funds shall not be required to be segregated
                from
                the other investments and funds of the
                Servicer.

            


    

     

    
      	 	
              (e)
                

            	
              Calculation
                of Collections; Determination of Aggregate Remittance
                Amount.

            


    

     

    
      	 	
              (i)

            	
              On
                or before each Remittance Date, the Servicer shall calculate the
                total TBC
                Collections received by the Servicer from or on behalf of Customers
                during
                prior Collection Periods in respect of all previously Billed Transition
                Bond Charges.

            


    

     

    
      	 	
              (ii)

            	
              In
                accordance with Section 4.01 of the Servicing Agreement and Annex
                1, the
                Servicer shall update the Variables and shall prepare Adjustment
                Requests
                to reflect the updated Variables when required to do so pursuant
                to Annex
                1.

            


    

     

    
      	 	
              (f)
                

            	
              Remittances.

            


    

     

    
      	 	
              (i)

            	
              The
                Servicer shall make remittances to the Issuer in accordance with
                Section
                5.11 of the Servicing Agreement.

            


    

     

    
      	 	
              (ii)

            	
              In
                the event of any change of account or change of institution affecting
                the
                remittances, the Issuer shall provide written notice thereof to the
                Servicer by the earlier of

            


    

     

    
      	 	
              (A)

            	
              five
                Business Days from the effective date of such change,
                or

            


    

     

    
      	 	
              (B)

            	
              five
                Business Days prior to the next applicable Remittance
                Date.

            


    

     

    
      
        
        

      

      
        Exhibit
          A-8