AMENDED AND RESTATED
            WHOLESALE STANDARD OFFER SERVICE AGREEMENT







                     WHOLESALE STANDARD OFFER
                        SERVICE AGREEMENT


                             between


                THE NARRAGANSETT ELECTRIC COMPANY


                               and

                  USGEN ACQUISITION CORPORATION










Dated as of October 29, 1997


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                        Table of Contents


ARTICLE 1.   BASIC UNDERSTANDINGS..........................................  1

ARTICLE 2.   DEFINITIONS...................................................  2

ARTICLE 3.   TERM AND REGULATORY APPROVAL..................................  4
          3.1   Term....................................................  4
          3.2   Obtaining and Maintaining Required Permits..............  5

ARTICLE 4.   SALE AND PURCHASE.............................................  5

ARTICLE 5.   PRICE AND BILLING.............................................  6
          5.1   Price...................................................  6
          5.2   Payment.................................................  7
          5.3   Taxes, Fees and Levies..................................  8

ARTICLE 6.   DELIVERY, LOSSES, AND DETERMINATION AND
          REPORTING OF HOURLY LOADS.....................................  8
          6.1   Delivery................................................  8
          6.2   Losses..................................................  8
          6.3   Determination and Reporting of Hourly Loads.............  9

ARTICLE 7.   DEFAULT AND TERMINATION....................................... 10
          7.1   Material Breach and Termination......................... 10

ARTICLE 8.   NOTICES, REPRESENTATIVES OF THE PARTIES....................... 11
          8.1   Notices................................................. 11
          8.2   Authority of Representative............................. 12

ARTICLE 9.   LIABILITY, INDEMNIFICATION, AND
          RELATIONSHIP OF PARTIES....................................... 12
          9.1   Limitation on Consequential, Incidental and
                Indirect Damages........................................ 12
          9.2   Recovery of Direct Damages Permitted.................... 12
          9.3   Indemnification......................................... 13
          9.4   Independent Contractor Status........................... 14

ARTICLE 10.  ASSIGNMENT.................................................... 14
          10.1   Assignment............................................. 14

ARTICLE 11.  SUCCESSORS AND ASSIGNS........................................ 15

ARTICLE 12.  FORCE MAJEURE................................................. 15
          12.1   Force Majeure Standard................................. 15
          12.2   Force Majeure Definition............................... 15
          12.3   Obligation to Diligently Cure Force Majeure............ 16

ARTICLE 13.  WAIVERS....................................................... 16

ARTICLE 14.  REGULATION.................................................... 16
          14.1   Laws and Regulations................................... 16
          14.2   NEPOOL Requirements.................................... 17

ARTICLE 15.  INTERPRETATION, DISPUTE RESOLUTION............................ 17
          15.1   Interpretation......................................... 17
          15.2   Dispute Resolution..................................... 17

ARTICLE 16.  SEVERABILITY.................................................. 17

ARTICLE 17.  MODIFICATIONS................................................. 18

ARTICLE 18.  SUPERSESSION.................................................. 18

ARTICLE 19.  COUNTERPARTS.................................................. 18

ARTICLE 20.  HEADINGS...................................................... 18

Appendix A.  Incremental Revenues..........................................A-1

Appendix B.  Estimation of Supplier Hourly Loads...........................B-1

Appendix C.  Arbitration Agreement.........................................C-1

<PAGE>
          AMENDED AND RESTATED WHOLESALE STANDARD OFFER
                        SERVICE AGREEMENT

          This AMENDED AND RESTATED WHOLESALE STANDARD OFFER SERVICE
AGREEMENT ("Agreement") is dated as of October 29, 1997 and is by and between
THE NARRAGANSETT ELECTRIC COMPANY, a Rhode Island corporation ("NECO"), and
USGen Acquisition Corporation, a Delaware corporation ("Seller"), and amends
and restates and, together with the NECO Wholesale Standard Offer Service
Agreement II dated as of the date hereof between NECO and Seller, supersedes
in its entirety the Wholesale Standard Offer Service Agreement dated as of
August 5, 1997 between NECO and Seller.  This Agreement provides for the
purchase by NECO and the sale by Seller of Wholesale Standard Offer Service,
as defined in this Agreement.

                 ARTICLE 1.  BASIC UNDERSTANDINGS

     NECO purchases all of its requirements of electricity for resale to its
retail electric customers from its affiliate, New England Power Company
("NEP").

     NEP, NECO and other parties have entered into an agreement in settlement
of regulatory proceedings before the Federal Energy Regulatory Commission (the
"Rhode Island Restructuring Agreement") that, among other things, implements
certain requirements of the Rhode Island Utility Restructuring Act of 1996
(the "Act"), permits NECO to terminate wholesale purchases from NEP, permits
current retail customers of NECO to purchase electricity from other suppliers
on and after a date defined therein as the "Retail Access Date," or, for a
limited time, to purchase Standard Offer Service from NECO, obligates NEP to
supply NECO with power sufficient to meet the latter's obligations to supply
Standard Offer Service, and obligates NEP to transfer its interests in the
electric generating business to another party or parties.

     NEP, NECO, and Seller have entered an agreement under which Seller will
acquire certain NEP and NECO generating assets.

     NEP and Seller desire that Seller shall supply electric capacity and
energy to NECO to fulfill a portion of NEP's power supply obligations under
the Rhode Island Restructuring Agreement.

     Under the Rhode Island Restructuring Agreement, NECO is obligated to
afford wholesale power suppliers other than NEP the opportunity to commit to
supply NECO with power sufficient to meet NECO's obligation to supply retail
Standard Offer Service after the Retail Access Date.

     This Agreement sets forth the terms under which Seller will supply
Wholesale Standard Offer Service to NECO, for a period beginning on the
Closing Date, to enable NECO to meet the needs of its retail customers for
electricity, including all or a portion of the needs of customers receiving
retail Standard Offer Service after the Retail Access Date.


                      ARTICLE 2. DEFINITIONS

     The following words and terms shall be understood to have the following
meanings when used in this Agreement, or in any associated documents entered
into in conjunction with this Agreement.  In addition, except as otherwise
expressly provided, where terms used in this Agreement are defined in the
NEPOOL Agreement and not otherwise defined herein, such definitions are
expressly incorporated into this Agreement by reference.

Affiliate of NECO - Any company that is a subsidiary of New England Electric
System and its successors.

Closing Date - The date upon which the Seller acquires ownership of generating
assets it purchases from NEP.

Commission or FERC - The Federal Energy Regulatory Commission or such
successor federal regulatory agency as may have jurisdiction over this
Agreement.

Contract Termination Date - The date established by the Rhode Island
Restructuring Agreement when the respective obligations of NEP and NECO under


<PAGE>
NEP's FERC Electric Tariff, Original Volume No. 1, to sell and purchase
wholesale electric requirements service shall cease.  The Contract Termination
Date shall occur on the earlier of the Retail Access Date or the Wholesale
Access Date.

GWh - Gigawatt hour.

ISO - The Independent System Operator to be established in accordance with the
NEPOOL Agreement and the Interim Independent System Operator Agreement as
amended, superseded or restated from time to time.

kWh - Kilowatt- hour.

MECO - Massachusetts Electric Company.

MECO Wholesale Standard Offer Service Agreement - The Wholesale Standard Offer
Service Agreement of even date herewith between MECO and the Seller.

NECO's Service Territory - The geographic area in which NECO provided electric
service to retail customers on August 6, 1996.

NECO's System - The electrical system of NECO and/or the electrical system of
any Affiliate of NECO.

MMBtu - Million British thermal units.

NEP - New England Power Company, an Affiliate of NECO.

NEPEX - The New England Power Exchange.

NEPOOL - The New England Power Pool.

NEPOOL Agreement - The New England Power Pool Agreement dated as of September
1, 1971, as amended and as may be amended or restated from time to time.

Price - The price set forth in SECTION 5.1, below.

Prime Rate - The prime (or comparable) rate announced from time to time as its
prime rate by the Bank of Boston or its successor, which rate may differ from
the rate offered to its more substantial and creditworthy customers.

PTF - Facilities categorized as Pool Transmission Facilities under the NEPOOL
Agreement.

Retail Access Date - The date so defined under the Rhode Island Restructuring
Agreement, as the later of January 1, 1998, or the date of a final,
nonappealable order of the RIPUC approving the divestiture plan for the
disposition of NEP's non-nuclear generating facilities provided, however, that
in any event the Retail Access Date shall occur no later than three (3) months
after retail access is available to forty percent (40%) or more of the
kilowatt hour sales in New England including the total kilowatt hour sales in
Rhode Island.

Rhode Island Restructuring Agreement - The Offer of Settlement dated May 30,
1997, entered into by and among the RIPUC, the Rhode Island Division of Public
Utilities and Carriers, NECO, and NEP, as amended and accepted or approved by
the FERC.

RIPUC - The Rhode Island Public Utilities Commission.

Standard Offer Auction -  The solicitation by NECO of offers from wholesale
power suppliers, including, at their option, NEP and Seller, of electric
energy and associated capacity and ancillary services necessary to meet the
needs of ultimate customers of NECO eligible for and accepting retail Standard
Offer Service on or after the Retail Access Date, and any wholesale electric
supply contracts resulting from that solicitation.  The solicitation and any
contract(s) entered into as a result thereof shall not be on terms that are
materially different from those described by MECO in the Massachusetts
Restructuring Agreement (as defined in the MECO Wholesale Standard Offer
Service Agreement), the RFQ dated April 3, 1997, and the letter to potential
asset purchasers dated June 16, 1997, or result in a material adverse impact
on Seller.  NECO shall not, without Seller's consent, conduct the Standard
Offer Auction more than once or more than six (6) months prior to the Retail
Access Date, which date shall be as reasonably determined by NECO.

<PAGE>
Standard Offer Service - The electric service provided by NECO pursuant to the
Rhode Island Restructuring Agreement:  (i) to retail customers in NECO's
Service Territory during the period, if any, during the term of this Agreement
preceding the Retail Access Date; and (ii) to NECO's retail customers on the
Retail Access Date that do not elect to obtain their electric supply from an
alternative supplier on or after the Retail Access Date through December 31,
2009.

Wholesale Access Date - The date so defined under the Rhode Island
Restructuring Agreement, as the date on which NECO in its sole discretion
decides to terminate its purchase from NEP of wholesale requirements service
pursuant to NEP's FERC Electric Tariff, Original Volume No. 1, by providing
the Commission and the Signatories to the Rhode Island Restructuring Agreement
with 90 days advance notice in writing, said date not to be earlier than
January 1, 1998.

Wholesale Standard Offer Service - The generation and delivery, to any
location on the NEPOOL PTF system or NECO's system, of the portion of the
electric capacity, energy and ancillary services required by NECO to meet the
needs of NECO's ultimate customers taking Standard Offer Service, excluding,
after the Retail Access Date, any portion of such requirements that NECO has
contracted to obtain through the Standard Offer Auction, determined in
accordance with ARTICLE 4.  Seller, as the supplier of Wholesale Standard
Offer Service capacity and energy, will be responsible for all present, or
future requirements and associated costs for installed capability, operable
capability, energy, operating reserves, and automatic generation control,
including tie benefit payments, losses and any congestion charges associated
with Seller's supply of Wholesale Standard Offer Service and any other
requirements imposed by NEPOOL or the ISO, as they may be in effect from time
to time.  To the extent that any NEPOOL, ISO or any successor entity expenses
or uplift costs are allocated to wholesale suppliers, the portion of such
costs associated with Seller's supply of Standard Offer Service will also be
the responsibility of Seller.  To the extent any costs contemplated by this
paragraph are applicable to NECO and recoverable by NECO from its customers,
NECO shall be responsible for such costs.


             ARTICLE 3.  TERM AND REGULATORY APPROVAL

3.1  Term

     The term of this Agreement shall begin at 12:01 am on the Closing Date
and continue until the earlier of: (a)11:59 pm on December 31, 2009; or (b)
the first date that NECO has no requirements for electric capacity and energy
to supply Standard Offer Service that are not satisfied by contracts resulting
from the Standard Offer Auction.

3.2  Obtaining and Maintaining Required Permits

     (a)  Performance under this Agreement is conditioned upon both Parties
securing and maintaining such federal, state or local approvals, grants or
permits as may be necessary for the sale and purchase of Wholesale Standard
Offer Service, which shall not include any approvals, grants, or permits
necessary for the operation of any particular generating facility.  Each Party
shall use reasonable efforts to acquire and maintain such approvals, grants or
permits.  If the acquisition or maintenance of a particular approval, grant,
or permit requires a modification to this Agreement, then the Parties agree to
negotiate in good-faith to reach a mutually agreeable modification of the
Agreement.  The Parties are not required to reach such a mutually acceptable
modification.

     (b)  Seller will file this Agreement with FERC (and any other
     regulatory agency as may have jurisdiction over the Agreement) in
     accordance with the provisions of applicable laws, rules and
     regulations.  Seller will be responsible for any filing fees for filing
     this Agreement with FERC (and any other regulatory agency as may have
     jurisdiction over the Agreement) and for any regulatory assessments
     associated with sales under this Agreement.  FERC approval of  this
     Agreement shall be a condition to the obligations of the Parties
     hereunder.

<PAGE>
                   ARTICLE 4. SALE AND PURCHASE

     Seller shall sell and deliver to the Delivery Points, as defined in
ARTICLE 6, SECTION 6.1, and NECO shall purchase 90.78% of NECO's requirements
for Wholesale Standard Offer Service.  NECO's requirements for Wholesale
Standard Offer Service shall be determined on the basis of ARTICLE 6, SECTION
6.3, below, and the price for such sale and purchase shall be as set forth in
ARTICLE 5, SECTION 5.1, below.


                   ARTICLE 5. PRICE AND BILLING

5.1  Price

     For each kilowatt hour of Wholesale Standard Offer Service that Seller
delivers to the Delivery Points, in accordance with ARTICLE 6, SECTION 6.3,
below, NECO shall pay Seller a price equal to the following amounts for each
period during the term of this Agreement:


          Period                     Price in Cents per kWh
          1998                       3.2 Cents
          1999                       3.5 Cents
          2000                       3.8 Cents
          2001                       3.8 Cents
          2002                       4.2 Cents
          2003                       4.7 Cents
          2004                       5.1 Cents
          2005                       5.5 Cents
          2006                       5.9 Cents
          2007                       6.3 Cents
          2008                       6.7 Cents
          2009                       7.1 Cents

     In addition, in the event of increases in the market price of No. 6
residual fuel oil (1% sulphur) and natural gas after 1999 as described in
Appendix A, NECO shall pay Seller a percentage of any incremental revenues
received by NECO as a result of NECO's Customer Rate Fuel Adjustment,
described in Appendix A, attached and incorporated herein by reference.  Such
percentage, with respect to the billing month, shall equal the percentage of
NECO's total Standard Offer Service requirements during the month that Seller
delivers under this Agreement.

5.2  Payment

     (a)  On or before the tenth (10th) day of each month during the term of
     this Agreement, NECO shall: (i) calculate the amount due and payable to
     Seller pursuant to this ARTICLE 5 with respect to the preceding month;
     and (ii) advise Seller of the schedule upon which it shall pay the
     amount so calculated, which schedule shall comply with paragraph (b),
     below.  The amount payable shall be calculated by multiplying the Price
     specified in the first paragraph of ARTICLE 5, SECTION 5.1, above, for
     the applicable Contract Period by the quantity of Wholesale Standard
     Offer Service delivered by Seller to the Delivery Points for NECO's
     Standard Offer Service customers in the month, as determined in
     accordance with ARTICLE 6, SECTION 6.3, below.  Because quantities
     determined under SECTION 6.3 are estimated, subject to a reconciliation
     process described in SECTION 6.3(d), quantities used in calculations
     under this paragraph (a) shall be subject to adjustment, whether
     positive or negative, in subsequent months' calculations, to reflect
     that reconciliation process, and any adjusted quantities shall be
     applied to the Price applicable during the month of the calculation
     being adjusted.  Seller's percentage of any Customer Rate Fuel
     Adjustment incremental revenue shall be added to such amount.

     (b)  NECO shall pay Seller any amounts due and payable on or before the
     twenty-fifth (25th) day after the date a calculation is made pursuant to
     paragraph (a), provided that, if and to the extent NECO pays Seller any
     portion of the amount due and payable before the twenty-fifth (25th) day
     after a calculation is made, it shall be entitled, without interest or
     penalty, to defer payment of an equal portion of the amount due and
     payable for that month by the lesser of: (i) the same number of days
     that the early payment preceded the twenty-fifth day after the

<PAGE>
     calculation; and (ii) twenty-five (25) days.  If all or any part of any
     amount due and payable pursuant to paragraph (a) shall remain unpaid
     thereafter, interest shall thereafter accrue and be payable to Seller on
     such unpaid amount at a rate per annum equal to two percent (2%) above
     the Prime Rate in effect on the date of such bill; provided, however, if
     the amount due and payable is disputed, interest shall accrue and be
     payable to Seller on the unpaid amount finally determined to be due and
     payable at a rate per annum equal to the Prime Rate in effect on the
     date of the calculation pursuant to paragraph (a); and provided,
     further, no interest shall accrue in favor of Seller or NECO on amounts
     that are added to or credited against a calculation due to the
     adjustment of estimated quantities in accordance with paragraph (a) and
     ARTICLE 6, SECTION 6.3.

     (c)  With respect to reconciliation adjustments pursuant to SECTION
     6.3(d) or any error in a calculation (whether the amount is paid or
     not), any overpayment, underpayment, or reconciliation adjustment will
     be refunded or paid up, as appropriate.  Interest shall accrue from the
     date of the error or adjustment on the unpaid or overpaid amount finally
     determined to be due and shall be calculated pursuant to Section 35.19a
     of the Commission regulations.

5.3  Taxes, Fees and Levies

     Seller shall be obligated to pay all present and future taxes, fees and
levies which may be assessed upon Seller by any entity upon the purchase or
sale of electricity covered by the Agreement.  To the extent such taxes, fees,
and levies are allowed to be, and are actually, recoverable by NECO from its
customers, NECO shall reimburse Seller for such taxes, fees, and levies paid
by Seller.  It is expressly agreed that Seller shall not be responsible for,
and shall be held harmless from, the Rhode Island Tax on gross receipts or
earnings (Public Service Corporation Tax, Chapter 44-13 of the Rhode Island
General Laws, as amended or superseded).


ARTICLE 6.     DELIVERY, LOSSES, AND DETERMINATION AND
                   REPORTING OF HOURLY LOADS

6.1  Delivery

     All electricity shall be delivered to NECO in the form of three-phase
sixty-hertz alternating current at any location on the NEPOOL PTF system or
NECO's System ("Delivery Points").  Title shall pass to NECO at the Delivery
Point and Seller shall incur no expense or risk beyond the Delivery Point
other than those described in SECTION 6.2.  If the NEPOOL control area
experiences congestion, Seller will be responsible for any congestion costs
incurred in delivering power across the PTF system to NECO to the extent such
costs are imposed by NEPOOL or the ISO on suppliers.  Seller shall be
responsible for all transmission and distribution costs associated with the
use of transmission systems outside of NEPOOL and any local point to point
charges and distribution charges needed to deliver the power to the NEPOOL
PTF.

6.2  Losses

     Seller shall be responsible for all transmission and distribution losses
associated with the delivery of electricity supplied under this Agreement to
the meters of ultimate customers of NECO receiving retail Standard Offer
Service, provided, however, that losses do not include service to unmetered
facilities for which estimates of kWh use are available and provided, further,
that Seller shall not be responsible for unmetered use or consumption of
electricity by NECO's Affiliates.  Seller shall provide NECO at the Delivery
Points with additional quantities of electricity and ancillary services to
cover such losses, but Seller shall not be entitled to payment under ARTICLE 5
of this Agreement for such additional quantity.  The quantities required for
this purpose in each hour of a billing period shall be determined in
accordance with NEPOOL's, NEP's and NECO's filed procedures for loss
determination.

6.3  Determination and Reporting of Hourly Loads


<PAGE>
     (a)  To meet its NEPOOL obligations, Seller, or a NEPOOL member having
     an own-load dispatch or settlement account with the NEPOOL billing
     system with whom Seller has a load inclusion agreement, must report to
     NEPOOL or the ISO the Standard Offer Service load for which Seller is
     providing Wholesale Standard Offer Service pursuant to this Agreement,
     including losses.  To accomplish this, NECO will estimate its total
     hourly Standard Offer Service load based upon average load profiles
     developed for each NECO customer class and NECO's actual total hourly
     load.  Appendix B, attached and incorporated herein by reference,
     provides a general description of the estimation process that NECO will
     initially employ (the "Estimation Process").  NECO reserves the right,
     subject to the approval of appropriate regulatory authorities having
     jurisdiction to modify the Estimation Process in the future, provided
     that any such modification be designed to improve the accuracy of its
     results, and provided further that NECO shall consult with Seller and
     other similarly situated sellers to the maximum extent permitted by any
     applicable standards of conduct.  NECO will report to NEPOOL, on behalf
     of Seller or such other NEPOOL member, Seller's hourly Standard Offer
     Service load, which shall equal the portion of NECO's estimated total
     Standard Offer Service hourly load for which Seller is responsible for
     supplying Wholesale Standard Offer Service under this Agreement.

     (b)  NECO will report to NEPOOL or the ISO Seller's hourly adjusted
     Standard Offer Service loads by 12:00 noon of the second following
     business day.  This adjusted load should be added by NEPOOL or the ISO
     to the other NEPOOL load of Seller or such other NEPOOL member.

     (c)  At the end of each month, NECO shall aggregate Seller's hourly
     loads for the month as determined by the Estimation Process.  For
     purposes of SECTION 5.1, above, the result of the Estimation Process,
     less losses to the Standard Offer Service customers' meters determined
     as specified in ARTICLE 6 SECTION 6.2, above, will be deemed to be the
     quantity of Wholesale Standard Offer Service delivered by Seller to the
     Delivery Points in a month.

     (d)  To refine the estimates of Seller's monthly Standard Offer Service
     load developed by the Estimation Process, a monthly calculation will be
     performed to reconcile the original estimate of Seller's Standard Offer
     Service loads to actual customer usage based on meter reads.  NECO will
     apply any resulting billing adjustment (debit or credit) to Seller's
     account no later than the last day of the third month following the
     billing month.  Appendix B, attached and incorporated herein by
     reference, also provides a general description of this reconciliation
     process.


                ARTICLE 7. DEFAULT AND TERMINATION

7.1  Material Breach and Termination

     (a)  (i)  If NECO fails in any material respect to comply with,
               observe or perform any covenant, warranty or obligation
               under this Agreement (except due to causes excused by force
               majeure or attributable to Seller's wrongful act or wrongful
               failure to act); and

          (ii)      After receipt of written notice from Seller such failure
                    continues for the Cure Period (as defined below), or, if
                    such failure cannot be reasonably cured within the Cure
                    Period, such further period as shall reasonably be required
                    to effect such cure (except in the case of a payment
                    default), provided that NECO commences within the Cure
                    Period to effect such cure and at all times thereafter
                    proceeds diligently to complete such cure as quickly as
                    possible; then

          (iii)     Seller shall have the right to terminate this Agreement,
                    subject to paragraph (c) below.  For purposes of this
                    Section 7.1(a), the Cure Period shall mean five days in the
                    case of a failure by NECO to fulfill its payment obligations
                    pursuant to Section 5.2 and forty-five (45) days in the case
                    of a failure by NECO to comply with, observe or perform any
                    other covenant, warranty or obligation under this Agreement.
                    If an unexcused failure to pay continues for fifteen (15)

<PAGE>
               days, Seller shall have the right to suspend service until
               payment is made in full and appropriate security is posted
               for future payments or to terminate this Agreement.

     (b)  (i)  If Seller fails in any material respect to comply with,
               observe, or perform any covenant, warranty or obligation
               under this Agreement (except due to causes excused by force
               majeure or attributable to NECO's wrongful act or wrongful
               failure to act); and

          (ii)      After receipt of written notice from NECO such failure
                    continues for a period of forty-five (45) days, or, if such
                    failure cannot be reasonably cured within such forty-five
                    (45) day period, such further period as shall reasonably be
                    required to effect such cure, provided that Seller commences
                    within such forty-five (45) day period to effect such cure
                    and at all times thereafter proceeds diligently to complete
                    such cure as quickly as possible; then

          (iii)     NECO shall have the right to terminate this Agreement,
                    subject to paragraph (c) below.

     (c)  Any termination arising out of the exercise of the termination
rights specified in paragraphs (a) or (b) above (with the exception of
termination for a payment default) may not take effect unless and until an
arbitrator (pursuant to ARTICLE 15, SECTION 15.2 of this Agreement) has made a
ruling that the exercise of such termination right was valid.  The fact that
one party alleged to be in material breach of this Agreement ("Alleged
Breaching Party") complies with the request of the other to cure an alleged
material breach shall not be considered by the arbitrator as an admission
against the Alleged Breaching Party or evidence that such party was or was not
in material breach.

     (d)  Nothing in this SECTION 7.1 shall be construed to limit the right
of any party to seek any remedies for damages, as limited by ARTICLE 9 of this
Agreement, even if a cure of an alleged breach is made within the periods of
time specified for curing any such breach stated above.  The provisions of
this SECTION 7.1 are intended only to provide the exclusive process through
which one party may exercise and effectuate its right to terminate this
Agreement as a result of a material breach of this Agreement.


       ARTICLE 8.  NOTICES, REPRESENTATIVES OF THE PARTIES

8.1  Notices

     Any notice, demand, or request required or authorized by this Agreement
to be given by one party to another party shall be in writing.  It shall
either be sent by facsimile (confirmed by telephone), overnight courier,
personally delivered and acknowledged in writing or by registered or certified
mail, (return receipt requested) postage prepaid, to the representative of the
other party designated in this ARTICLE 8.  Any such notice, demand, or request
shall be deemed to be given (i) when sent by facsimile confirmed by telephone,
(ii) when actually received if delivered by courier or personal deliver or
(iii) three (3) days after deposit in the United States mail, if sent by first
class mail.

     Notices and other communications by Seller to NECO shall be addressed
to:
                    The Narragansett Electric Company
                    c/o New England Power Service Company
                    25 Research Drive
                    Westborough, MA 01582
                    Attention:  Michael J. Hager
                    Fax:  (508) 389-3001

     Notices and other communications by NECO to Seller shall be addressed
to:

                    USGen Acquisition Corporation
                    7500 Old Georgetown Road, 13th Floor
                    Bethesda, MD  20814
                    Attention:  Stephen A. Herman
                    Fax:  (301) 718-6913

<PAGE>
     Any party may change its representative by written notice to the others.

8.2  Authority of Representative

     The parties' representatives designated in ARTICLE 8, SECTION 8.1 shall
have full authority to act for their respective principals in all technical
matters relating to the performance of this Agreement.  They shall not,
however, have the authority to amend, modify, or waive any provision of this
Agreement unless they are authorized officers of their respective entities.


            ARTICLE 9. LIABILITY, INDEMNIFICATION, AND
                     RELATIONSHIP OF PARTIES

9.1  Limitation on Consequential, Incidental and Indirect Damages

     To the fullest extent permissible by law, neither NECO nor Seller, nor
their respective officers, directors, agents, employees, parent or affiliates,
successor or assigns, or their respective officers, directors, agents, or
employees, successors, or assigns, shall be liable to the other party or its
parent, subsidiaries, affiliates, officers, directors, agents, employees,
successors or assigns, for claims, suits, actions or causes of action for
incidental, indirect, special, punitive, multiple or consequential damages
(including attorney's fees or litigation costs) connected with or resulting
from performance or non-performance of this Agreement, or any actions
undertaken in connection with or related to this Agreement, including without
limitation any such damages which are based upon causes of action for breach
of contract, tort (including negligence and misrepresentation), breach of
warranty, strict liability, Rhode Island Gen. Laws Title 6, c. 13.1, statute,
operation of law, or any other theory of recovery.  The provisions of this
SECTION 9.1 shall apply regardless of fault and shall survive termination,
cancellation, suspension, completion or expiration of this Agreement.

9.2  Recovery of Direct Damages Permitted

     Notwithstanding the provisions of ARTICLE 9, SECTION 9.1, subject to the
duty to mitigate damages as provided under common law of damages recovery,
both NECO and Seller shall be entitled to recover their actual, direct damages
(i) incurred as a result of the other party's breach of this Agreement or (ii)
incurred as a result of any other claim arising out of any action undertaken
in connection with or related to this Agreement.  For purposes of avoiding any
disputes about the difference between direct damages and consequential
damages, the parties agree as follows:

     (a)  (1)  To the extent that NECO is found to be in breach of this
               Agreement or liable under another cause of action; and

          (2)  as a result of such breach or event giving rise to the cause
               of action, Seller suffers loss of profits that Seller
               reasonably expected to have received from NECO under this
               Agreement had NECO performed under this Agreement; then

          (3)  Seller shall be entitled to recover any lost profits that
               Seller can demonstrate it lost or will lose as a result of
               NECO's breach, subject to the duty to mitigate.

     (b)  (1)  To the extent that Seller fails to provide NECO Wholesale
               Standard Offer Service Power under the terms of this
               Agreement; and

          (2)  as a result, Seller is found to be in material breach of
               this Agreement or liable under another cause of action; and

          (3)  subject to the duty to mitigate, NECO purchases (as a result
               of Seller's failure) power from a third party at a price
               that is higher than what NECO would have paid under the
               terms of this Agreement, NECO may recover the difference
               between the price NECO paid to such third party and the
               price it would have paid had Seller performed; provided,
               however, Seller shall not be liable to NECO for lost profits
               associated with any expected revenue streams from the sale
               of power to third parties or lost profits from any other
               contracts or sales.

<PAGE>
     (c)  Except as provided in paragraphs (a) and (b) above, neither NECO
nor Seller shall be liable to the other for lost profits arising out of
performance, or non-performance of this Agreement, whether such lost profits
may be categorized as direct, incidental, indirect, or consequential damages
and irrespective of whether such claims are based upon warranty, tort, strict
liability, contract, statute (including R.I. G.L. Title 6, c. 13.1), operation
of law or otherwise.

9.3  Indemnification

     (a)  Seller agrees to defend, indemnify and save NECO, its officers,
directors, employees, agents, successors, assigns, and Affiliates and their
officers, directors, employees, and agents harmless from and against any and
all claims, suits, actions or causes of action for damage by reason of bodily
injury, death, or damage to property caused by Seller, its officers,
directors, employees, agents or affiliates or caused by or sustained on its
facilities, except to the extent caused by an act of negligence or willful
misconduct by an officer, director, agent, employee or Affiliate of NECO or
their successors or assigns.

     (b)  NECO agrees to defend, indemnify and save Seller, its officers,
directors, employees, agents, successors, assigns, and affiliates and their
officers, directors, employees, and agents harmless from and against any and
all claims, suits, actions or causes of action for damage by reason of bodily
injury, death, or damage to property caused by NECO, its officers, directors,
employees, agents or affiliates or caused by or sustained on its facilities,
except to the extent caused by an act of negligence or willful misconduct by
an officer, director, agent, employee or Affiliate of Seller or their
successors or assigns.

     (c)  If any party intends to seek indemnification under this ARTICLE
from the other party with respect to any action or claim, the party seeking
indemnification shall give the other party notice of such claim or action
within fifteen (15) days of the commencement of, or actual knowledge of, such
claim or action.  Such party seeking indemnification shall have the right, at
its sole cost and expense, to participate in the defense of any such claim or
action.  The party seeking indemnification shall not compromise or settle any
such claim or action without the prior consent of the other party, which
consent shall not be unreasonably withheld.

9.4  Independent Contractor Status

     Nothing in this Agreement shall be construed as creating any
relationship between NECO and Seller other than that of independent
contractors for the sale and purchase of electricity provided as Wholesale
Standard Offer Service.


                      ARTICLE 10. ASSIGNMENT

10.1 Assignment

     This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto,
including by operation of law without the prior written consent of the other
party, nor is this Agreement intended to confer upon any other Person except
the parties hereto any rights or remedies hereunder.  Notwithstanding the
foregoing, (i) NECO may, without Seller's prior written consent, (A) assign
all or a portion of its rights and obligations under this Agreement to any
Affiliate of NECO or (B) assign its rights and obligations hereunder, or
transfer such rights and obligations by operation of law, to any corporation
or other entity with which or into which NECO shall merge or consolidate or to
which NECO shall transfer all or substantially all of its assets, provided
that such Affiliate or other entity agrees to be bound by the terms thereof;
provided, in either case, that the assignee or transferor shall have senior
securities rated investment grade or better; (ii) the Seller may assign all of
its rights and obligations hereunder to any wholly owned Subsidiary (direct or
indirect) of PG&E Corporation and upon NECO's receipt of notice from Seller of
any such assignment, the Seller will be released from all liabilities and
obligations hereunder, accrued and unaccrued, such assignee will be deemed to
have assumed, ratified, agreed to be bound by and perform all such liabilities
and obligations, and all references herein to "Seller" shall thereafter be

<PAGE>
deemed references to such assignee, in each case without the necessity for
further act or evidence by the parties hereto or such assignee; provided,
however, that no such assignment and assumption shall release the Buyer from
its liabilities and obligations hereunder unless the assignee shall have
acquired all or substantially all of the Buyer's assets; provided, further,
however, that no such assignment and assumption shall relieve or in any way
discharge PG&E Corporation from the performance of its duties and obligations
under the Guaranty dated as of the date of this Agreement executed by PG&E
Corporation, and (iii) the Seller or its permitted assignee may assign,
transfer, pledge or otherwise dispose of its rights and interests hereunder to
a trustee or lending institution(s) for the purposes of financing or
refinancing the Purchased Assets, including upon or pursuant to the exercise
of remedies under such financing or refinancing, or by way of assignments,
transfers, conveyances or dispositions in lieu thereof; provided, however,
that no such assignment or disposition shall relieve or in any way discharge
the Seller or such assignee from the performance of its duties and obligations
under this Agreement.  NECO agrees to execute and deliver such documents as
may be reasonably necessary to accomplish any such assignment, transfer,
conveyance, pledge or disposition of rights hereunder so long as NECO's rights
under this Agreement are not thereby altered, amended, diminished or otherwise
impaired.


               ARTICLE 11.  SUCCESSORS AND ASSIGNS

     This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective permitted successors and assigns.


                    ARTICLE 12.  FORCE MAJEURE

12.1 Force Majeure Standard

     The parties shall be excused from performing their respective
obligations hereunder and shall not be liable in damages or otherwise, if and
only to the extent that they are unable to so perform or are prevented from
performing by an event of force majeure.

12.2 Force Majeure Definition

     An event of force majeure includes, without limitation, storm, flood,
lightning, drought, earthquake, fire, explosion, equipment failure, civil
disturbance, labor dispute, act of God or the public enemy, action of a court
or public authority, or any other cause beyond a party's control, but only if
and to the extent that the event directly affects the availability of the
transmission or distribution facilities of NEPOOL, NECO or an Affiliate
necessary to deliver Wholesale Standard Offer Service to NECO's customers.
Events affecting the availability or cost of operating any generating facility
shall not be events of force majeure.

12.3 Obligation to Diligently Cure Force Majeure

     If any party shall rely on the occurrence of an event or condition
described in ARTICLE 12, SECTION 12.2, above, as a basis for being excused
from performance of its obligations under this Agreement, then the party
relying on the event or condition shall:

          a.   provide written notice to the other parties promptly but in
               no event later than 5 days of the occurrence of the event or
               condition giving an estimation of its expected duration and
               the probable impact on the performance of its obligations
               hereunder;

          b.   exercise all reasonable efforts to continue to perform its
               obligations hereunder;

          c.   expeditiously take reasonable action to correct or cure the
               event or condition excusing performance; provided that
               settlement of strikes or other labor disputes will be
               completely within the sole discretion of the party affected
               by such strike or labor dispute;


<PAGE>
          d.   exercise all reasonable efforts to mitigate or limit damages
               to the other parties to the extent such action will not
               adversely affect its own interests; and

          e.   provide prompt notice to the other parties of the cessation
               of the event or condition giving rise to its excuse from
               performance.


                       ARTICLE 13.  WAIVERS

     The failure of either party to insist in any one or more instance upon
strict performance of any of the provisions of this Agreement or to take
advantage of any of its rights under this Agreement shall not be construed as
a general waiver of any such provision or the relinquishment of any such
right, but the same shall continue and remain in full force and effect, except
with respect to the particular instance or instances.


                     ARTICLE 14.  REGULATION

14.1 Laws and Regulations

     This Agreement and all rights, obligations, and performances of the
parties hereunder, are subject to all applicable Federal and state laws, and
to all duly promulgated orders and other duly authorized action of
governmental authority having jurisdiction.

14.2 NEPOOL Requirements

     This Agreement must comply with all NEPOOL Criteria, Rules, and Standard
Operating Procedures ("Rules").  If, during the term of this Agreement, the
NEPOOL Agreement is terminated or amended in a manner that would eliminate or
materially alter a Rule affecting a right or obligation of a party hereunder,
or if such a Rule is eliminated or materially altered by NEPOOL, the parties
agree to negotiate in good faith in an attempt to amend this Agreement to
incorporate a replacement Rule ("Replacement Rule").  The intent of the
parties is that any such Replacement Rule reflect, as closely as possible, the
intent and substance of the Rule being replaced as such Rule was in effect
prior to such termination or amendment of the NEPOOL Agreement or elimination
or alteration of the Rule.  If the parties are unable to reach agreement on
such an amendment, the parties agree to submit the matter to arbitration under
the terms of Appendix C, attached and incorporated herein by reference, and to
seek a resolution of the matter consistent with the above stated intent.

         ARTICLE 15.  INTERPRETATION, DISPUTE RESOLUTION

15.1 Interpretation

     The interpretation and performance of this Agreement shall be in
accordance with and controlled by the laws of The State of Rhode Island.

15.2 Dispute Resolution

     All disputes between NECO and Seller arising out of or relating to this
Agreement which are defined as "Arbitrable Claims" in SECTION 2 of Appendix C,
attached and incorporated herein by reference, shall be resolved by binding
arbitration and be governed by the terms of such Arbitration Agreement.  Any
arbitration of an Arbitrable Claim that is substantially related to an
arbitrable claim under a Wholesale Standard Offer Service Agreement among
Seller, Massachusetts Electric Company, and Nantucket Electric Company shall
be conducted jointly with the arbitration of the latter claim, before the same
panel of arbitrators, with NECO, Massachusetts Electric Company, and Nantucket
Electric Company jointly exercising their rights regarding the selection of
arbitrators.  Any decisions of the arbitrators shall be final and binding upon
the parties.


                    ARTICLE 16.  SEVERABILITY

     If any provision or provisions of this Agreement shall be held invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.


<PAGE>
                    ARTICLE 17.  MODIFICATIONS

     No modification to this Agreement will be binding on any party unless it
is in writing and signed by all parties.


                    ARTICLE 18.  SUPERSESSION

     This Agreement constitutes the entire agreement between the parties
relating to the subject matter hereof and its execution supersedes any other
agreements, written or oral, between the parties concerning such subject
matter.


                    ARTICLE 19.  COUNTERPARTS

     This Agreement may be executed in any number of counterparts, and each
executed counterpart shall have the same force and effect as an original
instrument.

                      ARTICLE 20.  HEADINGS

     Article and Section headings used throughout this Agreement are for the
convenience of the parties only and are not to be construed as part of this
Agreement.

     IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement on their behalf as of the date first
above written.

                              THE NARRAGANSETT ELECTRIC COMPANY


                              BY:

                              Its


                              USGEN ACQUISITION CORPORATION

                              BY:

                              Its


<PAGE>
                APPENDIX A.  INCREMENTAL REVENUES
             FROM NECO CUSTOMER RATE FUEL ADJUSTMENT

     In the event of substantial increases in the market prices of No. 6
residual fuel oil (1% sulphur) and natural gas after 1999, incremental
revenues received by NECO as a result of NECO's  Customer Rate Fuel
Adjustment, described below, will be fully allocated among suppliers of
Wholesale Standard Offer Service Power in proportion to the percentage of
NECO's total Standard Offer Service requirements during the month that such
supplier delivers under its respective agreement with NECO.

     NECO's Customer Rate in effect for a given billing month is multiplied
by a "Fuel Adjustment" that is set equal to 1.0 and thus has no impact on the
Customer Rate unless the "Market Gas Price" plus "Market Oil Price" for the
billing month exceeds the "Fuel Trigger Point" then in effect, where:

          The NECO Customer rate for retail customers who elect Standard
          Offer Service by choice or inaction is the following
          predetermined, flat rate for energy consumed:

               Calendar Year         Price per Kilowatt hour

               1998                  3.2 cents
               1999                  3.5 cents
               2000                  3.8 cents
               2001                  3.8 cents
               2002                  4.2 cents
               2003                  4.7 cents
               2004                  5.1 cents
               2005                  5.5 cents
               2006                  5.9 cents
               2007                  6.3 cents
               2008                  6.7 cents
               2009                  7.1 cents

     Market Gas Price is the average of the values of  "Gas Index" for the
most recent available twelve months, where:

          Gas Index is the average of the daily settlement prices for the
          last three days that the NYMEX Contract (as defined below) for the
          month of delivery trades as reported in the "Wall Street Journal",
          expressed in dollars per MMBtu.  NYMEX Contract shall mean the New
          York Mercantile Exchange Natural Gas Futures Contract as approved
          by the Commodity Futures Trading Commission for the purchase and
          sale of natural gas at Henry Hub;

     Market Oil Price is the average of the values of "Oil Index" for the
most recent available twelve months, where:

          Oil Index is the average for the month of the daily low quotations
          for cargo delivery of 1.0% sulphur No. 6 residual fuel oil into
          New York harbor, as reported in "Platt's Oilgram U.S. Marketscan"
          in dollars per barrel and converted to dollars per MMBtu by
          dividing by 6.3; and

     If the indices referred to above should become obsolete or no longer
suitable, NECO shall file alternate indices with the RIPUC.

     Fuel Trigger Point is the following amounts, expressed in dollars per
MMBtu, applicable for all months in the specified calendar year:

                  2000                  $5.35/MMBtu
                  2001                  $5.35
                  2002                  $6.09
                  2003                  $7.01
                  2004                  $7.74
                  2005                  $8.48
                  2006                  $9.22
                  2007                  $9.95
                  2008                  $10.69
                  2009                  $11.42


<PAGE>
     In the event that the Fuel Trigger Point is exceeded, the Fuel
Adjustment value for the billing month is determined based according to the
following formula:

    Fuel =   (Market Gas Price +$.60/MMBtu)+(Market Oil Price +$.04/MMBtu)
  Adjustment  ____________________________________________________________
                    Fuel Trigger Point+$.60+$.04/MMBtu

     Where:

          Market Gas Price, Market Oil Price and Fuel Trigger Point are as
          defined above.  The values of $.60 and $.04/MMBtu represent for
          gas and oil respectively, estimated basis differentials or market
          costs of transportation from the point where the index is
          calculated to a proxy power plant in the New England market.

     For example if at a point in the year 2002 the Market Gas Price and
Market Oil Price total $6.50 ($3.50/MMBtu plus $3.00/MMBtu respectively), the
Fuel Trigger Point of 6.09 would be exceeded.  In this case the Fuel
Adjustment value would be:

          ($3.50+$.60/MMBtu)+($3.00+$.04/MMBtu)  =  1.0609
          _____________________________________
               $6.09+$.60+$.04/MMBtu

The Customer Rate paid to NECO is increased by this Fuel Adjustment factor for
the billing month, becoming 4.4548 cents/kWh (4.2 x 1.0609).

     In subsequent months the same comparisons are made and, if applicable, a
Fuel Adjustment determined.


<PAGE>
         APPENDIX B.  ESTIMATION OF SUPPLIER HOURLY LOADS

OVERVIEW

     Generating units operated by suppliers are dispatched by the power pool
to meet the region's electrical requirements reliably, and at the lowest
possible cost.  As a result, a supplier's electricity production may not match
the demand of its customers.  In each hour some suppliers with low cost
production units are net sellers of electricity to the pool, while other
suppliers are purchasing power from the pool to meet the demand of their
customers.  To determine the extent to which suppliers are net buyers or
sellers on an hourly basis, it is necessary to estimate the hourly aggregate
demand for all of the customers served by each supplier ("own-load").  NECO
will estimate Seller's Wholesale Standard Offer Service "own-load" within
NECO's service territory and report the hourly results to NEPOOL or the ISO on
a daily basis.

     The estimation process is a cost effective approach to producing results
that are reliable, unbiased and reasonably accurate.  The hourly load
estimates will be based on rate class load profiles which will be developed
from statistically designed samples.  Each day, the class load shapes will be
scaled to the population of customers served by each supplier contracting with
NECO as a result of the Standard Offer Auction ("Standard Offer Auction
Supplier"), Seller, and any other entity providing Wholesale Standard Offer
Service.  In cases where telemetered data on individual customers are
available, they will be used in place of the estimated shapes.  On a monthly
basis, the estimates will be refined by incorporating actual usage data
obtained from meter readings.  In both processes, the sum of all suppliers'
estimated Standard Offer Service loads will match the total load delivered
into the distribution system.  A description of the estimation process
follows.

DAILY ESTIMATION OF SUPPLIERS' OWN LOAD

     The daily process estimates the hourly load for each Standard Offer
Auction Supplier, Seller, and any other entity providing Wholesale Standard
Offer Service, for the previous day.  There are four components in this
process:

     -    Select a proxy date from the previous year with characteristics
          which best match the day for which the hourly demand estimates are
          being produced.  Extract class load shapes for the selected proxy
          date from the load research data base.

     -    Scale the class load shapes appropriately for each individual
          customer based on the usage level of the customer relative to the
          class average usage level.

     -    Calculate a factor for each customer which reflects their relative
          usage level and includes an adjustment for losses ("load
          adjustment factor").  Aggregate the load adjustment factors across
          the customers served by each supplier in each class.

     -    Produce a preliminary estimate of each supplier's hourly loads by
          combining the proxy day class load shapes with the supplier's
          total load adjustment factors.  Aggregate the loads across the
          classes for each supplier.

     -    Adjust the preliminary hourly supplier estimates so that their sum
          is equal to NECO's actual hourly metered loads (as metered at the
          point of delivery to the distribution system) by allocating any
          differences to suppliers in proportion to their estimated load.

MONTHLY RECONCILIATION PROCESS

     The monthly process will improve the estimates of Standard Offer Service
supplier loads by incorporating the most recent customer usage information,
which will be available after the monthly meter readings are processed.  A
comparison will be made between customers' estimated and actual usage, by
billing cycle, then summed across billing cycles for each supplier.  The ratio
between the actual kWh and the estimated kWh reflects the kWh amount for which
the supplier may have been overcharged or undercharged by NEPOOL or the ISO

<PAGE>
during the month.  This ratio will be used to develop a kWh adjustment amount
for each supplier for the calendar month.  The sum of the adjustments will be
zero because the total kWh will still be constrained to equal NECO's actual
hourly metered Standard Offer Service loads during the month.


<PAGE>
                APPENDIX C.  ARBITRATION AGREEMENT

                      ARBITRATION AGREEMENT


     This Arbitration Agreement, dated as of _______________________ (date of
Wholesale Standard Offer Service Agreement), is entered into between The
Narragansett Electric Company, a Rhode Island corporation ("NECO") and
_______________________________, a _______________________ (describe entity)
("Seller").  Reference is made to that certain Wholesale Standard Offer
Service Agreement dated as of ___________________, 199__ (the "Service
Agreement") between NECO and Seller.  Unless otherwise specified or apparent
from the context of this Arbitration Agreement, the term "Party" shall mean
either NECO or Seller, or both of them.

     WHEREAS, NECO and Seller wish to avoid the burden, time, and expense of
court proceedings with respect to any disputes that may arise from or relate
to the Service Agreement, and to submit such disputes to mandatory binding
arbitration if they cannot first be resolved through negotiation and
mediation.

     NOW, THEREFORE, NECO and SELLER AGREE AS FOLLOWS:

1.   Mediation

     Before resorting to mediation or arbitration under this Arbitration
Agreement, the Parties will try to resolve promptly through negotiation any
Arbitrable claim, as defined below.  If the Arbitrable Claim has not been
resolved through negotiation within ten (10) days after the existence of the
Arbitrable Claim has been brought to the attention of the other Party in a
writing, any Party may request in writing to resolve the Arbitrable Claim
through mediation conducted by a mediator selected by agreement of the
Parties.  The mediation procedure shall be determined by the Parties in
consultation with the mediator.  Any medication pursuant hereto shall be kept
confidential.  The fees and expenses of the mediator shall be borne equally by
the Parties. If the Parties are unable to agree upon the identity of a
mediator or a mediation procedure within ten (10) days after a Party has
requested mediation in writing or if the Arbitrable Claim has not been
resolved to the satisfaction of either NECO or Seller within forty (40) days
after the Parties have selected a mediator and agreed upon a mediation
procedure, either Party may invoke arbitration pursuant to the following
sections by notifying the other Party of such selection in writing consistent
with Section 3(c), below.

2.   Mandatory Arbitration

     (a)  Except as provided in paragraph (b) of this Section 2 and in
Section 8, below, any case, controversy or claim arising out of or relating to
the Service Agreement, its breach, or any other disputes arising out of the
business relationship created by the Service Agreement, of whatever nature,
including but not limited to any claim based in contract, in law, in equity,
any statute, regulation, or theory of law now in existence or which may come
into existence in the future, whether known or unknown, including without
limitation, claims based upon deceit, fraudulent inducement,
misrepresentation, 18 U.S.C sec. 1962 and 1964 (RICO), and R.I. G.L. Title 6,
c. 13.1, the federal and state antitrust laws (collectively, the "Arbitrable
Claims"), which cannot be resolved by negotiation or mediation, as provided in
Section 1 above, shall be submitted to mandatory, binding, and final
arbitration in accordance with procedures set forth in this Agreement, which
shall constitute the exclusive remedy for any and all Arbitrable Claims.

     (b)  Notwithstanding paragraph (a) above, physical accidents or events
giving rise to negligence or intentional tort claims for the recovery of
property damages and/or damages for personal injury and failure to make
payments due under Section 5.2 of the Service Agreement shall not be
considered "Arbitrable Claims."  However disputes regarding the interpretation
or scope of any indemnification clauses in the Service Agreement shall be
subject to arbitration, even if the dispute relates to whether one Party must
indemnify the other for property damages and/or damages for personal injury,
the recovery of which was or will be determined in a court of  law.


<PAGE>
     (c)  Each Party agrees that it will not attempt to circumvent this
Arbitration Agreement by coordinating or cooperating with their respective
parent companies of affiliates or guarantors in the filing of a legal action
in the name of any of the parent companies or affiliates or guarantors of the
Parties to this Arbitration Agreement regarding claims that otherwise are
subject to this Arbitration Agreement.  Any Party failing to comply with this
provision shall indemnify the other Party against, and hold the other harmless
from, the costs (including reasonable litigation costs) incurred by the other
in defending any and all claims brought by a parent company or affiliate or
guarantor of the other in a court of law regarding claims that otherwise would
be Arbitrable Claims under this Arbitration Agreement.

3.   Selection and Qualification of Arbitrators

     (a)  Any arbitration shall be conducted by a panel of three neutral
arbitrators, consisting of  (i) a practicing lawyer admitted to practice in
the Commonwealth of Massachusetts; (ii) a person with professional experience
in and substantial knowledge of the power generation industry in any one or
more of the New England States, who may be, but need not be a lawyer, and
(iii) a person with professional experience in and substantial knowledge of
power markets in any one or more of the New England States, who may, but need
not be, a lawyer (collectively, the "Arbitration Panel").  For purposes of
this Arbitration Agreement, an arbitrator or candidate shall be considered
"neutral" only if the arbitrator or candidate has not previously served as an
arbitrator for a Party or one of its affiliates or guarantors and is not a
present or former lawyer, employee or consultant of a Party or any of its
affiliates or guarantors.

     (b)  Any Party entitled to commence arbitration hereunder shall do so
by serving a written Notice of Arbitration briefly describing the Arbitrable
Claims and the Agreements under which they are brought.  Service of such
Notice of Arbitration shall be complete upon receipt by the person designated
for each party at the addresses specified in Section 12 below.

     (c)  Within twenty (20) days after service of a Notice of Arbitration,
each Party shall serve upon the other Party a list of seven neutral candidates
for each of the three panel members described in subparagraph (a) above.

     (d)  Within twenty (20) days after service of the lists referred to in
subparagraph (c), NECO and Seller shall then strike from the other's lists any
two candidates from each of the lists, for any reason whatsoever.  For the
remaining candidates each Party shall rank each candidate on its three lists
from one to five and shall do the same for the other Party's lists.

     (e)  The candidates in each of the three categories with the lowest
total score shall be invited to serve as panel members.  In the event that the
candidate in any of the three categories with the lowest total score is unable
or unwilling to serve, or has a potential conflict of interest not consented
to by each Party, then the candidate with the next lowest score in that
category  shall be invited to serve, subject to full disclosure by each
candidate of, and consent by each Party to any potential conflicts of
interests.  This process shall be repeated until a full arbitration Panel is
selected or the list of candidates for that category is exhausted.  If the
list of candidates for a category is exhausted the Parties shall exchange a
new list of candidates for that category and the procedures set forth above
shall be repeated a second time.

     (f)  If the parties cannot select a full Arbitration Panel in
accordance with these procedures than any Party may request that a court of
competent jurisdiction appoint the remaining members subject to their
qualifications, willingness and ability to serve as provided above.

     (g)  The American Arbitration Association shall be appointed to
facilitate and administer the parties' compliance with the procedures set
forth above.

4.   Time Schedule

     The Arbitration shall be conducted as expeditiously as possible.  The
Arbitration Panel shall schedule a pre-hearing conference and hearings as it
deems advisable and shall use its best efforts to schedule consecutive days of
hearings.  Hearings shall be limited to a total of ten (10) days.  The
Arbitration Panel shall issue its final decision and award within thirty (30)

<PAGE>
days of the close of the hearings, which shall be accompanied by a written,
reasoned opinion.

5.   Remedies

     (a)  The Arbitration Panel shall not award punitive or multiple damages
or any other damages not measured by the prevailing Party's actual damages -
except that the Arbitration Panel, in its sole discretion, may shift all or a
portion of the costs of the Arbitration to any Party.

     (b)  Any award of damages by the Arbitration Panel shall be determined,
limited and controlled by the damages limitation clauses of the Service
Aereement applicable to the dispute before the Arbitration Panel.

     (c)  The Arbitration Panel may, in its discretion, award pre-award and
post-award interest on any damages award; provided, however, that the rate of
pre-award or post-award interest shall not exceed a rate equal to the rate
provided for post-judgment interest by 28 U.S.C. sec. 1961 as published from
time to time by the Administrative Office of the United States Courts based on
the equivalent coupon issue yield for auctions of 52-week Treasury bills.

6.   Confidentiality

     The existence,  contents, or results of any mediation or arbitration
hereunder may not be disclosed without the prior written consent of both
Parties; provided, however, either Party may make disclosures as may be
necessary to fulfill regulatory obligations to any regulatory bodies having
jurisdiction, and may inform their lenders, affiliates, auditors and insurers,
as necessary, under pledge of confidentiality and can consult with experts as
required in connection with the arbitration under pledge of confidentiality.
If any Party seeks preliminary injunctive relief from any court to preserve
the status quo or avoid irreparable harm pending mediation or arbitration, the
Parties agree to use best efforts to keep the court proceedings confidential,
to the maximum extent permitted by law.

7.   FERC Jurisdiction over Certain Disputes

     (a)  Nothing in this Arbitration Agreement shall preclude, or be
construed to preclude, any Party from filing a petition or complaint with the
Federal Energy Regulatory Commission ("FERC") with respect to any Arbitrable
Claim.  In such case, the other Party may request FERC to reject or to waive
jurisdiction.  If the FERC rejects or waives jurisdiction, with respect to all
or a portion of the claim, the portion of the claim not so accepted by FERC
shall be resolved through arbitration, as provided in this Arbitration
Agreement.  To the extent that FERC asserts or accepts jurisdiction over the
claim, the decision, finding of fact, or order of FERC shall be final and
binding, and any arbitration proceedings that may have commenced prior to the
assertion or acceptance of jurisdiction by FERC shall be stayed, pending the
outcome of the FERC proceedings.

     (b)  The Arbitration Panel shall have no authority to modify, and shall
be conclusively bound by, any decision, finding of fact, or order of FERC.
However, to the extent that a decision finding of fact, or order of FERC does
not provide a final or complete remedy to the Party seeking relief, such Party
may proceed to arbitration under this Arbitration Agreement to secure such
remedy, subject to the FERC decision, finding or order.

8.   Preliminary Injunctive Relief

     Nothing in this Arbitration Agreement shall preclude, or be construed to
preclude, the resort by either Party to a court of competent jurisdiction
solely for the purposes of securing a temporary or preliminary injunction to
preserve the status quo or avoid irreparable harm pending mediation or
arbitration pursuant to this Arbitration Agreement.

9.   Governing Law

     This Arbitration Agreement shall be construed, enforced in accordance
with, and governed by, the laws of the State of Rhode Island.

10.  Location of Arbitration

     Any arbitration hereunder shall be conducted in Boston, Massachusetts.


<PAGE>
11.  Severability

     If any section, subsection, sentence, or clause of this Arbitration
Agreement is adjudged illegal, invalid, or unenforceable, such illegality,
invalidity, or enforceability shall not affect the legality, validity, or
enforceability of the Arbitration Agreement as a whole or of any section,
subsection, sentence or clause hereof not so adjudged.

12.  Notices

     Any notices required to be given pursuant to this Arbitration Agreement
shall be in writing and sent to the receiving party by (i) certified mail,
return receipt requested, (ii) overnight delivery service, or (iii) facsimile
transmission (confirmed by telephone), addressed to the receiving party at the
address shown below or such other address as a party may subsequently
designate in writing.  Any such notice shall be deemed to be given (i) three
days after deposit in the United States mail, if sent by mail, (ii) when
actually received if sent by overnight delivery service, or (iii) when sent,
if sent by facsimile and confirmed by telephone.

     If to NECO:                                                      The Narragansett Electric Company
                    25 Research Drive
                    Westborough, Massachusetts  01582
                    Attention:  General Counsel
                    Facsimile:  (508) 389-2463

     If to Seller


                    Attention:
                    Facsimile:  (             )

     In addition, the parties shall send copies of any notices required by
the terms of any of the Agreements, in accordance with the terms of each
Agreement.

     IN WITNESS WHEREOF, Each Party has caused its duly authorized officers
to execute this Arbitration Agreement on the dates set forth below.

                                   THE NARRAGANSETT ELECTRIC COMPANY


                                   BY:

                                   Its


                                   USGEN ACQUISITION CORPORATION

                                   BY:

                                   Its