IROQUOIS GAS TRANSMISSION SYSTEM
                   SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
                                 FOR PAUL BAILEY


     THIS AGREEMENT is made and entered into as of the first day of July, 1997,
between IROQUOIS GAS TRANSMISSION LIMITED PARTNERSHIP (the "Company") and PAUL
BAILEY ("Mr. Bailey").

     WHEREAS, Mr. Bailey is currently serving as Vice President and Chief
Financial Officer of Iroquois Pipeline Operating Company ("IPOC"); and

     WHEREAS, the Company highly values the efforts, abilities and
accomplishments of Mr. Bailey and desires that he remain in his current
position with IPOC; and

     WHEREAS, in order for Mr. Bailey to continue to serve as Vice President and
Chief Financial Officer of IPOC, it is necessary for him to terminate his
employment with TransCanada Pipelines, Ltd. ("TransCanada");

     WHEREAS, in order to induce Mr. Bailey to continue in his position as Vice
President and Chief Financial Officer of IPOC and to relinquish his employment
with TransCanada, the Management Committee of the Company wishes to enter into
an unfunded deferred compensation arrangement upon the terms and conditions
hereinafter stated, to ensure that Mr. Bailey will be provided with retirement
benefits, from all qualified and non-qualified sources, that are at least equal
in value to those benefits he would have been entitled to had he remained
employed by TransCanada.

     WHEREAS, Mr. Bailey wishes to provide for his retirement and financial
security, and the Management Committee of the Company has approved and
authorized the entry into this Agreement with Mr. Bailey.

     NOW THEREFORE, the parties agree as follows:

          1.   Retirement Upon Reaching Normal Retirement Date. Mr. Bailey shall
be entitled to retire and commence receiving benefits under this Agreement
upon attaining his sixtieth (60th) birthday (his "Normal Retirement Date").

          2.   Normal Retirement Benefits. Upon retiring from active service
with IPOC on or after his Normal Retirement Date as defined in this Agreement,
Mr. Bailey shall be entitled to receive, beginning on the first day of the
month immediately following Mr. Bailey's retirement, and on the first day
of each month thereafter for his life, an amount calculated as a single
life annuity payable at his Normal Retirement Date (or, if later his actual
retirement date), equal to one-twelfth (1/12) of (a) minus (b):

               (a)  Forty Percent (40%) of his Final Average Earnings (as
          hereinafter defined),

               (b)  reduced by the sum of the following:

<PAGE>

               (i)   Mr. Bailey's accrued benefit based on his credited service
          through September 1, 1995, which would be payable to him from the
          Pension Plan for Employees of TransCanada Pipelines Limited and
          Designated or Associated, Subsidiary or Affiliated Companies (the
          "TransCanada Registered Pension Plan") as of his actual retirement
          date, regardless whether he actually commences receiving such accrued
          benefit on such date, calculated in the form of a single life annuity,
          in accordance with the terms of the TransCanada Registered Pension
          Plan and using the conversion factors specified therein; plus

               (ii)  Mr. Bailey's accrued benefit based upon an additional one
          year and ten months of credited service (i.e., his service from
          September 1, 1995 through June 30, 1997), which would be payable to
          him from the TransCanada Pipelines Limited Executive Supplemental
          Retirement Benefits Plan (the "TransCanada SERP") as of his actual
          retirement date, regardless whether he actually commences receiving
          such accrued benefit, calculated in the form of a single life annuity,
          in accordance with the terms of the TransCanada SERP; plus

               (iii) Mr. Bailey's accrued benefit which would be payable to him
          from the Iroquois Pipeline Operating Company Cash Balance Retirement
          Plan (the "Iroquois Qualified Pension Plan" or "IPOC Cash Balance
          Plan") as of his actual retirement date, regardless whether he
          actually commences receiving such accrued benefit, calculated in the
          form of a single life annuity in accordance with the terms of the
          Iroquois Qualified Pension Plan; plus

               (iv) Mr. Bailey's supplementary pension benefit which would be
          payable to him from the Iroquois Pipeline Operating Company
          Supplementary Pension Plan based on his Credited Service as of actual
          retirement date (his "IPOC Supplementary Pension Benefit"), regardless
          whether he actually commences receiving such accrued benefit,
          calculated in the form of a single life annuity; plus

               (v) Mr. Bailey's 401(k) Employer Contribution Account, which
          Account is calculated to be the Actuarially Equivalent life annuity
          value of an Employer contribution equal to 100% of his salary
          reduction contributions up to five percent (5%) of his base annual
          salary for each year of his participation in the Iroquois Pipeline
          Operating Company Savings Plan and Supplemental Savings Plan (the
          "IPOC 401(k) Plan"), plus the Actuarially Equivalent value of any
          discretionary contributions that may be made on his behalf under the
          IPOC 401(k) Plan, together with interest and earnings actually
          accumulated on such account as of Mr. Bailey's actual termination of
          service or retirement; plus

               (vi) the Actuarial Equivalent of Mr. Bailey's age 62 Primary
          monthly Social Security Benefit based upon Mr. Bailey's actual age as
          of the determination of his Accrued Benefit. In the event that Mr.
          Bailey terminates service later than age 62, the Actuarial Equivalent
          of Mr. Bailey's Primary Monthly Social Security Benefit payable at his
          actual retirement date shall be used.

                                       -2-
<PAGE>

          In calculating the benefit to which Mr. Bailey is entitled under this
Agreement, the methodology specified in the Iroquois Gas Transmission System
Proposed SERP Sample Benefit Illustrations, which are attached hereto as Exhibit
A, shall be followed.

               (c) For purposes of converting Canadian dollars to U.S. dollars
     in determining the amount of the offsets specified in (i) and (ii) above,
     the exchange rate shall be the rate as announced by Citbank N.A. in effect
     on the last business day prior to the actual retirement of Mr. Bailey.

               (d) In calculating the benefit to which Mr. Bailey is entitled
     under this Agreement, the following definitions shall have the following
     meanings:

               "Actuarial Equivalence" shall mean

                    (a) for purposes of calculating the offsets specified in
               Paragraph 2(b)(iii)(vi), shall mean a benefit of equivalent
               current value to the benefit to which it is being compared,
               determined on the basis of the definition of "Actuarial
               Equivalence" contained in the IPOC Cash Balance Plan, as those
               factors may be amended from time to time. As of July 1, 1997, the
               following factors were used:

                    (1) the 1983 Group Annuity Mortality Table blended by 50% of
                    the Male Table and 50% of the Female Table (the "Applicable
                    Mortality Table"); and

                    (2) the annual rate of interest on the 30 Year Treasury Bond
                    for the third month which precedes the commencement of the
                    year containing the benefit commencement date under this
                    Agreement, for purposes of calculating lump sums (including
                    the lump sum value of a commuted death benefit); and

                    (3) for purposes of converting benefits (including death
                    benefits) into equivalent forms (other than a lump sum), the
                    Applicable Mortality Table specified in (1) above in
                    combination with an eight percent (8%) interest rate; and

                    (b) for purposes of calculating the offsets specified in
               Paragraph 2(b)(i)(ii), the factors for determining actuarial
               equivalence specified in the plan referred to in (b)(i) and (ii)
               or, in the absence of such factors, the definition of Actuarial
               Equivalence specified in (a) above; and

               "Credited Service" for purposes of calculating Mr. Bailey's IPOC
               Supplementary Pension Plan Benefit and benefit under this
               Agreement, Credited Service shall include Mr. Bailey's aggregate
               years of employment with IPOC, the Company and TransCanada.
               Credited Service for purposes of determining offsets under
               Paragraph 2(b) hereof shall be determined in accordance with the
               definitions contained in the specific benefit plan which is the
               subject of the offset.

                                       -3-
<PAGE>

               "Final Average Earnings" shall mean the average of the three
               highest consecutive calendar years of Earnings with IPOC.
               "Earnings" shall mean Mr. Bailey's annual base salary, plus the
               actual annual incentive bonus payment paid with respect to a
               calendar year. Final Average Earnings and Earnings shall be
               calculated without regard to the dollar limitations imposed by
               Section 401(a)(17) of the Internal Revenue Code.

               "Primary Social Security Benefit" shall mean (i) Mr. Bailey's
               actual Social Security Benefit, he provides evidence of that
               amount to the Company or, in the absence of such amount, (ii) the
               estimated annual amount of benefit under Title II of the Social
               Security Act that Mr. Bailey would be entitled to receive as of
               age 62 (or, his actual retirement date, if later), whether or not
               he applies for or actually receives such benefit. For purposes of
               this Agreement, such estimated amount shall be determined on the
               following basis:

                    (1) the Social Security Act in effect on Mr. Bailey's
                    termination of employment;

                    (2) the rate of past wage increases equal to the rate in
                    increases in the average national wage as reported by the
                    Social Security Administration;

                    (3) assuming no wages for the period following Mr. Bailey's
                    termination of employment; and

                    (4) assuming no change in the Primary Social Security
                    Benefit amount occurs after Mr. Bailey's termination of
                    employment.

     3.   Early Retirement Benefit. Mr. Bailey shall be entitled to retire from
active service with IPOC as of the first day of any month on or after reaching
age fifty-five (55) (his "Early Retirement Date") and shall be entitled to
receive an immediate supplemental pension under this Agreement calculated in
the manner provided in Paragraph 2 above, except that

     (a)  the 40% figure provided for in Paragraph 2 above shall be prorated by
     multiplying it by a fraction, the numerator of which is Mr. Bailey's
     Credited Service as of his actual early retirement date, and the
     denominator of which is his Credited Service had he remained employed by
     IPOC until age 60; and

     (b) the benefit derived under Paragraph 2 shall be further reduced by three
     percent (3%) for each year from ages year from ages 55 through 59, by which
     Mr. Bailey's benefit commencement date precedes his Normal Retirement Date
     as defined in this Agreement.

     4.   Benefits Subject to a Substantial Risk of Forfeiture. Mr. Bailey shall
be vested in his Accrued Benefit under this Agreement as of July 1, 2002. No
benefits shall be payable if Mr. Bailey terminates employment for any reason,
including death, prior to having become vested in his Accrued Benefit.

                                       -4-
<PAGE>

     5. Payment of Benefits Upon Termination of Service. If Mr. Bailey
terminates service with a vested Accrued Benefit under this Agreement prior to
reaching age fifty-five (55), he may commence payment of his vested Accrued
Benefit under this Agreement, calculated in accordance with Paragraph 2, at any
time on or after having reached age fifty-five (55), provided, however, that:

     (a)  the 40% figure provided for in Paragraph 2 above shall be prorated by
     multiplying it by a fraction, the numerator of which is Mr. Bailey's
     Credited Service as of his actual termination of service, and the
     denominator of which is the Credited Service he would have had had he
     remained employed until age 60; and

     (b)  the benefit derived under Paragraph 2 shall be further reduced by five
     percent (5%) for each year from ages year from ages 55 through 59, by which
     Mr. Bailey's benefit commencement date precedes age sixty (60).

     6.   Timing and Forms of Benefit Payment.

          (a) Normal Form of Benefit Payment. The normal form of benefit payment
     under this Agreement shall be an annuity for the life of Mr. Bailey.

          (b) Actuarially Equivalent Optional Forms. At least twelve full months
     prior to the commencement of his benefits under this Agreement, Mr. Bailey
     may elect to retire and commence benefits under this Agreement in one of
     the following Actuarially Equivalent forms of benefit payments:

          (i)   a joint and sixty percent (60%) survivor annuitant with his
          spouse as the joint annuitant; and

          (ii)  a joint and fifty percent (50%) survivor annuitant with his
          spouse as the joint annuitant; and

          (iii) a life and ten (10) year certain form of benefit payment with
          his spouse or other Beneficiary.

          (c) Timing of Election of Optional Forms and Commencement Date. At
     least twelve months prior to the date on which benefits otherwise would
     commence hereunder, Mr. Bailey may elect to change the commencement date of
     his benefits or elect an Actuarially Equivalent form of benefit payment;
     provided, however, that no election as to the timing of commencement of
     benefits under this Agreement, or the form of benefit payments hereunder,
     shall be given effect if such election is made by Mr. Bailey within twelve
     months of his retirement or termination of service from IPOC.

                                       -5-
<PAGE>

     7.   Death Benefits.

          (a)  If Mr. Bailey had no vested interest in his Accrued Benefit as of
     his death, no death benefit shall be payable under this Agreement.

          (b)  If Mr. Bailey dies after having commenced benefits under this
     Agreement, then a death benefit shall be payable to his Spouse or other
     Beneficiary only if the form of payment in force for Mr. Bailey under this
     Agreement provides for such a death benefit.

          (c)  If Mr. Bailey had a nonforfeitable right to his Accrued Benefit
     under this Agreement and dies while employed by IPOC prior to benefit
     commencement, then a monthly death benefit shall be payable to his Spouse
     for her life in an amount equal to sixty percent (60%) of the benefit to
     which Mr. Bailey would have been entitled had he retired or terminated
     service, survived to the earliest date on which he could commence benefits
     under this Agreement, and then commenced benefit payments immediately
     before his death. In the sole discretion of the Company, the Actuarially
     Equivalent present value of this monthly amount may be paid in a lump sum
     to Mr. Bailey's surviving spouse as soon as administratively feasible
     following Mr. Bailey's death.

          (d) Mr. Bailey's Spouse shall be his Beneficiary under this Agreement.
     With his Spouse's consent, Mr. Bailey may designate another Beneficiary to
     receive payments in the form of a life and ten year certain form of benefit
     payment in accordance with Paragraph 6(c). In such event, Mr. Bailey shall
     file with the Company a written designation of a Beneficiary on such form
     as may be prescribed by the Company. If Mr. Bailey fails to designate a
     Beneficiary or if a Participant's designation of Beneficiary fails for any
     reason, then the Beneficiary or Beneficiaries designated by Mr. Bailey, or
     deemed to have been designated by Mr. Bailey under the Qualified Plan shall
     be deemed to be the Participant's Beneficiary.

     8.   Unfunded Benefits. The benefits under this Agreement shall be
unfunded and all benefit payments shall be made from the general assets of the
Company. The right of Mr. Bailey or his Spouse or other Beneficiary to receive
benefits under this Agreement shall be an unsecured claim against the general
assets of the Company. All benefits accrued under this Agreement shall remain
the property of the Company until paid to Mr. Bailey or his spouse or other
Beneficiary and shall be subject only to the claims of the Company's general
creditors. The Company may in its discretion set aside assets, purchase
insurance contracts, and the like to provide a source of funds that the Company
may use, in its discretion, to make payments that become due under the
Agreement, however, any amounts set aside shall remain the general assets of
the Company subject to the claims of the general creditors of the Company.

     (a) Provisions for Rabbi Trust. Notwithstanding the provisions of
Paragraph 8, the Company may, in its discretion, enter into a trust agreement
known as a "Rabbi Trust", whereby it contributes to the trust, from time to
time, such amounts as may be approved by the Management Committee of the
Company for the purposes of providing benefits under this Agreement. The Trust
Agreement shall be substantially in the form of the model trust agreement set
forth in Internal Revenue Procedure 92-64, as that may be modified or revised
from time to

                                      -6-
<PAGE>

time, and shall include provisions that all of the assets of the Trust shall be
subject to the creditors of the Company in the event of insolvency.

     9.   Administration of this Agreement. The Management Committee of the
Company is appointed to administer the terms of this Agreement. The Committee
shall have the absolute authority and discretion:

          (a) to determine the benefits payable under the Plan;

          (b) to interpret the Agreement, and to decide all matters arising
     under it, including the right to remedy possible ambiguities,
     inconsistencies, and omissions;

          (c) to employ actuaries, attorneys, accountants, and other agents and
     advisors, and to delegate to such persons, and any additional persons, such
     powers and responsibilities as it deems appropriate;

          (d) to establish the basis for actuarial calculations made pursuant to
     the Agreement;

          (e) to direct the Company to make appropriate financial arrangements
     to facilitate the Company's satisfaction of its obligations hereunder;

          (f) to delegate allocate the administrative responsibilities as they
     deem appropriate; and

          (g) to maintain all necessary records for the administration of the
     Agreement, and file and distribute all reports that may be required by the
     Internal Revenue Service, Department of Labor, or others as required by
     law.

          10.  Benefit Upon a Change of Control.

          (a)  Lump Sum Payment Upon a Change of Control. Notwithstanding any
other provision of the Agreement, upon a Change in Control, Mr. Bailey
shall automatically be paid a lump sum amount in cash by the Company which,
together with the payment, if any, under a Rabbi or other trust arrangement
established by the Company to make payments hereunder in the event of a
Change in Control, would provide Mr. Bailey with the same benefit as he
would have received under this Agreement if he terminated service upon the
date of the Change of Control, based on the benefits accrued to the Mr.
Bailey hereunder as of the date of the Change in Control. Payment under
this Paragraph shall not in and of itself terminate the Agreement, but such
payment shall be taken into account in calculating benefits under the
Agreement which may otherwise become due thereafter.

          (b) No Divestment Upon a Change of Control. In no event shall a
Change of Control deprive Mr. Bailey of, or adversely affect his right to, any
benefit accrued under this Agreement.

                                      -7-
<PAGE>

          (c) Change of Control Define.

     For purposes of the Agreement, a "Change in Control" shall be deemed to
have occurred if:

          (i) a person, partnership, joint venture, corporation or other entity,
          or two or more of any of the foregoing acting as a group (or a
          'person' within the meaning of Sections 13(d)(3) and 14(d)(2) of the
          Securities Exchange Act of 1934, as amended (the "Act"), other than
          the Company, a majority-owned subsidiary of the Company or an employee
          benefit plan maintained or contributed to by the Company), becomes the
          'beneficial owner' (as defined in Rule 13d-3 of the Act) of more than
          65% of the then outstanding voting stock of IPOC or more than 65% of
          the partnership interests of IGTS; or

          (ii) the stockholders of IPOC approve a merger or consolidation of
          IPOC with any other corporation, other than (a) a merger or
          consolidation which would result in the voting securities of IPOC
          outstanding immediately prior thereto continuing to represent (either
          by remaining outstanding or by being converted into voting securities
          of the surviving entity) more than 80% of the combined voting power of
          the voting securities of IPOC or such surviving entity outstanding
          immediately after such merger or consolidation, or (b) a merger or
          consolidation effected to implement a recapitalization of IPOC (or
          similar transaction) in which no "person" (as previously defined)
          acquires more than 65% of the combined voting power of IPOC's then
          outstanding securities; or

          (iii) the stockholders of IPOC (or the partners of IGTS) approve a
          plan of complete liquidation of IPOC or IGTS or an agreement for the
          sale or disposition by IPOC or IGTS of all or substantially all of the
          IPOC's or IGTS's assets.

     (d)  Arbitration. Any dispute or controversy arising under or in connection
with the Agreement subsequent to a Change in Control shall be settled
exclusively by arbitration in Connecticut, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.

     11.  Indemnification. The Company shall indemnify and hold harmless any
member of the Committee from any liability incurred in his or her capacity as
administrator of this Agreement for acts which he or she undertakes in good
faith as a member of such Committee.

     12.  Amendment. This Agreement may be amended or modified only by a writing
signed by both parties thereto.

     13.  Miscellaneous.

     (a)  Anti-alienation. Neither Mr. Bailey nor any Beneficiary shall have the
right to assign, transfer, encumber or otherwise subject to any lien any payment
or other interest under this Agreement, nor shall such payment or interest be
subject to attachment, execution or levy of any kind.

                                       -8-
<PAGE>

     (b)  No Employment Rights. Nothing in this Agreement shall confer any right
upon Mr. Bailey to be retained in the service of the Company, IPOC or any of
their Affiliates.

     (c)  Incompetence. In the event that the Committee determines that Mr.
Bailey is unable to care for his affairs because of illness or accident or for
any other reason, any amounts payable under this Agreement may be paid to the
duly appointed guardian, conservator or other legal representative or, if none,
to his Spouse or other relative or person deemed by the Committee to be
responsible for Mr. Bailey's care, and any such payment shall be in complete
discharge of the liabilities of the Agreement therefor.

     (d) Governing Law. The Agreement shall be construed and governed in
accordance with the laws of the State of Connecticut to the extent not preempted
by ERISA.

     (e) Withholding. The Company shall deduct from all amounts paid under this
Agreement any taxes required to be withheld by any federal, state, or local
government tax statutes. Mr. Bailey, or if applicable his Spouse or other
Beneficiary or their personal representatives will be responsible for the
payment of any and federal, foreign, state, local, or other income or other
taxes imposed on amounts paid under this Agreement.

     (f) Headings. The headings and subheadings of this Agreement have been
inserted for convenience of reference only and shall not be used in the
construction of this Agreement.



Dated as of July 1, 1997          IROQUOIS GAS TRANSMISSION SYSTEM LIMITED
                                  PARTNERSHIP, by its agent IROQUOIS PIPELINE
                                  OPERATING COMPANY



                                   By:/s/
                                      -----------------------------------------
                                      Its President and Chief Executive Officer



                                   By: /s/
                                       ----------------------------------------
                                       Its Vice President and General Counsel


                                   PAUL BAILEY


                                   /s/PAUL BAILEY
                                   --------------------------------------------

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