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                COMMONWEALTH OF MASSACHUSETTS
                DEPARTMENT OF PUBLIC UTILITIES
  
  ____________________________________
                       )
  Electric Utility Industry )       D.P.U. Docket Nos. 96-100
  Restructuring        )                            and 96-25
                       )
  ____________________________________)
  
  
  
             RESTRUCTURING SETTLEMENT AGREEMENT
              ----------------------------------
                                
  
   This Restructuring Settlement Agreement  ("Settlement") is jointly
  sponsored by the Attorney General, American National Power, Conservation Law
  Foundation, Division of Energy Resources, KCS Power Marketing, Inc., Low-
  Income Intervenors(1), Massachusetts Community Action Directors Association,
  Massachusetts Energy Directors Association, Massachusetts High Technology
  Council, Northeast Energy and Commerce Association, Northeast Energy
  Efficiency Council, Inc, The Energy Consortium, Union of Concerned
  Scientists, U.S. Generating Company, New England Power Company ("NEP"), and
  Massachusetts Electric
  Company and Nantucket Electric Company (referred to collectively as "Mass.
  Electric").  The Settlement is designed to provide a resolution of some
  issues presented in the industry restructuring Docket Nos. D.P.U. 96-100
  (the Department's generic proceeding on electric utility restructuring) and
  D.P.U. 96- 25 (Mass. Electric's own restructuring proceeding).  This
  Settlement, once approved by the Department, would require a restructuring
  of the New England Electric System ("NEES") in furtherance of the
  competitive market structure objectives of the Department and would
  implement the restructuring plan of the Attorney General as applied to Mass.
  Electric and its affiliates in the New 
  __________
  1 The Low-Income Intervenors are Irving Berstein and Pearl Noorigian who are
  represented by the National Consumer Law Center.
  
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England Electric System.  The Settlement includes a requirement for a filing
  by NEP to separate its generation business from its transmission business,
  a commitment voluntarily to divest NEP's generation business through a sale
  or spinoff of 100 percent of that business, a request for approval of the
  jurisdictional separation between transmission facilities subject to the
  Federal Energy Regulatory Commission's ("FERC") jurisdiction and
  distribution facilities subject to the Department's jurisdiction, and the
  assurance of stranded cost recovery by NEP and Mass. Electric.  This
  Settlement also resolves all ratemaking issues for Mass. Electric and
  assures that Mass. Electric's rates to retail customers comply fully with
  the requirements of the Attorney General's principles.  Finally, this
  Settlement resolves certain other issues necessary to implement retail
  choice for Mass. Electric's customers on the Retail Access Date which is
  defined as the later of January 1, 1998 or the date when retail access is
  made available to all customers of the investor-owned utilities in
  Massachusetts.
   The parties to this Settlement recognize and fully understand that
  their mutual promises in this Settlement evidence the consideration they
  have extended to each other in their efforts to settle the issues of D.P.U.
  96-25 in accordance with the principles articulated in D.P.U. 96-100.  The
  willingness and ability of Mass. Electric and NEP to commit to and fulfill
  any and all of their obligations under this Settlement, including in
  particular the full divestiture of NEP's generating business, are predicated
  and conditioned upon the commitments by the Attorney General and the
  Department to the recovery in full of Mass. Electric's and NEP's stranded
  costs, as set forth in this Settlement and in the wholesale rate settlement
  included in Attachment 3.  The Settlement is designed to implement the
  Attorney General's principles for electric industry restructuring in
  Massachusetts in a manner that is consistent with the proposals articulated
  by the Department in its
    <PAGE>
orders in D.P.U. 96-100.  It is further designed to insure recovery of Mass.
  Electric's access charge as part of its transition from a fully bundled,
  completely regulated electric utility to an unbundled distribution company
  in an emerging competitive industry.
   The Settlement follows the outline of the Attorney General's
  principles.  The parties have agreed on the following:
  
  I.    Price Reductions for Customers.
   ------------------------------
  
   The Attorney General's principles will produce reduced rates for all
  customers on the Retail Access Date.  The Settlement accomplishes that
  objective by freezing Mass. Electric's base rates prior to the Retail Access
  Date, implementing unbundled rates for Mass. Electric on January 1, 1997,
  and providing retail delivery tariffs with a standard offer option on the
  Retail Access Date.  Mass. Electric's unbundled tariffs that will be
  effective from January 1, 1997 through the Retail Access Date, together with
  supporting documentation, are included in Attachment 1.  Mass. Electric's
  retail delivery tariffs with the standard offer option that will be
  effective on and after the Retail Access Date are included in Attachment 2. 
  Mass. Electric's retail delivery tariffs contemplate the corporate
  separation of NEP's generation and transmission, and recognize that NEP will
  be paid the transmission rates established by FERC.
   Under a separate wholesale rate settlement included in Attachment 3,
  NEP's wholesale base rates to Mass. Electric will be frozen through the
  Retail Access Date, or through December 31, 2000 if the Retail Access Date
  has not yet occurred or Mass. Electric has not otherwise terminated its all-
  requirements service under the wholesale tariff.  Following the Retail
  Access Date, NEP will cease providing Mass. Electric all-requirements
  service under its wholesale tariff, FERC Electric Tariff, Original Volume
  No. 1 (Tariff 1),
    <PAGE>
and NEP will implement, and Mass. Electric will pay, the contract
  termination charges set forth in that wholesale rate settlement.
   The approval by FERC of the wholesale rate settlement included in
  Attachment 3 is a condition to the effectiveness of this Settlement and to
  the provision of retail access by Mass. Electric to its customers.  Failure
  by FERC to approve the wholesale rate settlement as filed shall render this
  Settlement null and void and of no effect.
   A.   The Unbundled Rates Effective from January 1, 1997 Through the
          Retail Access Date.
        --------------------------------------------------------------
  
   The unbundled rates included in Attachment 1 shall be phased in during
  the first six months of 1997 beginning on January 1, 1997 in accordance with
  the following terms:
   1.   Mass. Electric's unbundled rates in Attachment 1 are divided
          into delivery service charges and energy service charges.  The
          delivery service charges include Mass. Electric's distribution
          costs including the conservation cost factors approved by the
          Department for calendar year 1997, an allowance for
          transmission costs, and recovery of fixed costs associated with
          NEP's purchased power expense currently recovered in NEP's W-95
          rate.  The energy service charges include Mass. Electric's fuel
          clause plus an allowance equal to the variable energy cost
          currently recovered in NEP's W-95 rate.  Mass. Electric's fuel
          clause will continue to operate as a fully reconciling charge
          during the effective period of the unbundled rates.
   2.   Mass. Electric's unbundled rates will be used for billing
          purposes to provide information to customers.  Further
          information, such as the estimate of variable energy and
          capacity costs under the
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        Boston Edison Company E-Plan proposal will be made available to
          any customer upon request.
   3.   Mass. Electric will eliminate its purchased power adjustment
          clause as of January 1, 1997 and will roll PPCA W-95(S) into
          its base rates by adding the PPCA W-95(S) amount of $0.00307
          per kilowatthour and the PPCA reconciliation adjustment of
          $0.00051 per kilowatthour to base revenues.  No further
          reconciliations of purchased power expense and revenues will be
          required after August 1, 1996, and any balance whether positive
          or negative existing from the PPCA reconciliation will be
          retained or borne by Mass. Electric and will not be refunded or
          collected from customers.(1)
  __________
  1 The balance in the PPCA reconciliation account through July 1996 is
  approximately $18 million. This includes:  a) an overrecovery of $25 million
  since the last PPCA factor adjustment; and b) a remaining balance of $7
  million on the underrecovery now being collected through a PPCA
  reconciliation adjustment.  Mass. Electric will credit the $18 million
  balance by applying $3 million to prefund a storm fund effective on August
  1, 1996, and by applying $15 million to Mass. Electric's hazardous waste
  fund in lieu of the repayment of service extension discounts for customers
  who have received the discounts and who choose another supplier within the
  Service Extension Discount notice period.  No further reconciliations of
  purchased power expense and revenues will be required after July 31, 1996. 
  For August through December, Mass. Electric will accept the risk of an
  underrecovery and retain the benefit of any overrecovery.  In addition, any
  refunds made pursuant to footnote 2 of the wholesale rate settlement in
  Attachment 3 shall be retained by Mass. Electric.
  
    <PAGE>
   4.   The unbundled rates in Attachment 1 shall remain in effect for
          all usage prior to the Retail Access Date, subject to Section
          I.C. below.  The fuel adjustment factor shall be applied to
          billings after the Retail Access Date for usage occurring
          before the Retail Access Date.  The final balances in the fuel
          factor remaining after the Retail Choice Date shall be returned
          to or collected from customers in the first quarter after the
          Retail Access Date.
   5.   Effective on January 1, 1997, Mass. Electric shall close, or
          cease to offer, to new customers the following rates and
          incentive clauses: 
                  Scheduled Interruptible Service, Rate I-1
                  Economy Interruptible Service, Rate I-2
                  Cooperative Interruptible Service Provision, Rate
  I-3
                  Cooperative Interruptible Service Provision, Rate
  I-4
                  Cooperative Interruptible Service Provision, Rate
  I-5
                  Flexible Time-of-Use Pricing, Rate G-5
                  Community Partnership Program Discount Provision
                  Jobs Through Conservation Program Discount Provision
                  General Service - G-5 Rate Incentive Provision
                  Service Extension Discount
  
   B.   Retail Delivery Rates and the Standard Offer Effective from the
          Retail Access Date Through December 31, 2000.
        ---------------------------------------------------------------
  
   The retail delivery rates included in Attachment 2 shall become
  effective for usage on and after the Retail Access Date on the following
  terms.
   1.   Mass. Electric's retail delivery rates included in Attachment
          2 include  four components.  The first three of the components
          will be included in a delivery service charge, and the fourth
          will be billed separately to customers taking standard offer
          service.  The four components are as follows:
        (a)       Distribution charges that will remain in place
                    through December 31, 2000 and which may be
                    superseded by a filing that becomes effective after
                    suspension on January 1, 2001.
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                  Performance standards are also established for
                    reliability and customer satisfaction in the
                    distribution component of the rate with credits to
                    customers if the standards are not achieved;
        (b)       Transmission charges that recover on a fully
                    reconciling basis the transmission charges billed
                    to Mass. Electric by NEP together with the charges,
                    if any, billed to Mass. Electric by or for the
                    benefit of a Regional Transmission Group, an
                    Independent System Operator, any other transmission
                    provider, or any regional entity that may be
                    created or allowed to implement rates and tariffs
                    for transmission services or reliability related
                    operating services under FERC accepted tariffs;
        (c)       Access charges that are designed to recover on a
                    fully reconciling basis all contract termination
                    charges paid by Mass. Electric to NEP.  As set
                    forth more fully below these access charges are
                    fixed at 2.8 cents per kilowatthour for the period
                    through December 31, 2000, subject to the residual
                    value credit under Attachment 3, and at declining
                    levels thereafter.  The access charges are subject
                    to adjustment for various factors in NEP's
                    wholesale rate settlement included in Attachment 3.
        (d)       A standard offer for service during a transition
                    period that is fixed for the period through
                    December 31, 2004 subject only to a fuel index,
                    which is set forth in Attachment 8, on the
                    following schedule:
    <PAGE>
                  Calendar Year  Average Price per kilowatthour
                  -------------  ------------------------------
  
                                         1998             2.8 cents
                                         1999             3.1 cents
                                         2000             3.4 cents
                                         2001             3.8 cents
                                         2002             4.2 cents
                                         2003             4.7 cents
                                         2004             5.1 cents
  
  
  Together the charges in paragraphs (a) through (d) comply with the Attorney
  General's principles related to rates and prices.  In addition, Attachment
  4 contains revised terms and conditions for Mass. Electric that reflect
  changes to Mass. Electric's terms and conditions associated with its change
  to an unbundled distribution company, and which set forth the requirements
  for customers taking retail access.  The details of each charge included in
  the rates and the changes to the terms and conditions are set forth in the
  paragraphs below.
   2.   Distribution Charges.  The distribution charges in the retail
          delivery rates will become effective on the Retail Access Date
          and will remain in effect through December 31, 2000 on the
          following terms.
        (a)  Mass. Electric shall be authorized to implement the
               depreciation rates shown in Attachment 5 as of the
               effective date of the retail delivery rates.
        (b)  Mass. Electric shall be authorized to establish a storm
               fund to pay for all of the incremental costs of any major
               storm, defined as any storm with incremental costs of
               over $1.0 million occurring after the date this
               Settlement is approved by the Department.  The storm fund
               will be prefunded with $3.0 million on August 1, 1996
               pursuant to footnote 2 above.  The distribution component
               of the retail delivery rates contains a $3.0 million
               accrual for this charge and Mass. Electric shall begin to
               accrue this amount to the fund on an annual basis
               commencing on the date when the retail delivery
    <PAGE>
             rates become effective.  The accrual shall continue at
               $3.0 million per year until a modification is approved by
               the Department following a filing by Mass. Electric. 
               Mass. Electric is authorized to charge all incremental
               costs of major storms against the fund and to pay or
               accrue interest on the fund balance whether positive or
               negative in accordance with the protocols for the fund
               set forth in Attachment 6.
        (c)  This Settlement is based on the existing separation of
               distribution and transmission facilities on the
               integrated NEP and Mass. Electric systems, and thus
               assumes that all property owned by Mass. Electric, except
               for those facilities that are paid for by NEP pursuant to
               the Integrated Facilities Schedule III-B of Tariff 1, is
               subject to the Department's ratemaking jurisdiction when
               it is used to provide access to retail customers.(1)  As
               set forth below, the parties agree that this separation
               is reasonable and appropriate, and should be approved by
               FERC and the Department for ratemaking purposes as part
               of this Settlement.  However, approval of the
               jurisdictional separation of facilities without change is
               not a condition of this Settlement, and Mass. Electric
               and NEP will modify the separation in a manner that is
               necessary to accommodate
  __________
  1 An analysis that supports the jurisdictional separation and demonstrates
  its compliance with the seven factor test established by FERC in Order 888
  is included in Attachment 12.
    <PAGE>
             the policies of the Commission and the Department.  In
               the event that facilities or costs are transferred from
               transmission to distribution or from distribution to
               transmission, the parties agree that appropriate
               adjustments to the transmission and distribution
               components of the rates will be made to reflect the
               transfer.
        (d)  The retail delivery rates are based on the assumption
               that all remaining unfunded state and federal deferred
               income tax balances(1) are recovered over six years after
               the effective date of the retail delivery rates.
        (e)  Mass. Electric shall implement the performance standards
               for reliability and customer satisfaction set forth in
               Attachment 7, and Mass. Electric shall be required to
               credit customers with an amount calculated in accordance
               with the schedules in that attachment during the year
               following any year that it failed to meet any performance
               standard.  In addition, Mass. Electric shall propose, by
               July 1, 1997, a performance standard for the effective
               management of line losses.
        (f)  By April 1 of each year, Mass. Electric shall file with
               the Department to adjust rates to recover or refund
               revenues necessary to assure that Mass. Electric's annual
               return on equity associated with distribution operations
               from the prior year averaged between six percent and
               eleven percent
  __________
  1 At December 31, 1995, unfunded deferred federal and state income tax
  balances were $4,490,000 and $8,761,000, respectively.  See Attachment 6,
  pp. 3-4.
    <PAGE>
             before any credits that may be required pursuant to
               paragraph (e) or incentives earned on demand side
               programs as authorized by the Department pursuant to
               section III.C, below.  Mass. Electric's return on equity
               for the prior year shall be calculated using the earnings
               available for common equity as reported to the Securities
               and Exchange Commission in Mass. Electric's annual report
               as adjusted in the preceding sentence divided by the
               average of the thirteen monthly common equity balances on
               Mass. Electric's books for the same period.(1)  If Mass.
               Electric's return on equity so calculated is below six
               percent, it shall be authorized to increase its rates by
               a uniform per kilowatthour surcharge calculated to
               provide sufficient revenues to increase Mass. Electric's
               return on equity to six percent.  If Mass. Electric's
               calculated return on equity is above eleven percent, it
               shall be required to reduce its rates by a uniform per
               kilowatthour surcharge to refund revenues necessary to
               reduce the calculated return on equity between eleven and
               12.5 percent by 50 percent and the earnings above 12.5
               percent by 100 percent.  If Mass. Electric's calculated
               return on equity falls between six and eleven percent,
               then no further adjustment shall be authorized or
               required.
  __________
  1 Mass. Electric's earnings available for common equity and common equity
  balances shall also be adjusted to eliminate the effects of any writedown
  and to restore expenses associated with any such writedown that may result
  from the implementation of industry restructuring or this Settlement.
    <PAGE>
        (g)  Mass. Electric shall also adjust its retail delivery
               rates for the effects of any changes in the federal or
               state income, revenue, sales, or franchise tax rates or
               laws, or any externally imposed accounting changes, if
               they affect Mass. Electric's costs by more than $1.0
               million per year or any other charges under the retail
               delivery rates in Attachment 2.
        (h)  The retail delivery rates in Attachment 2 include fully
               reconciling charges for Mass. Electric's access charges
               and transmission payments.  To maintain rate stability
               and avoid rate dislocations, cost allocations among rate
               classes were determined using the allocators for these
               cost functions that have been developed and approved in
               prior cases within continuity constraints, and then, once
               rates have been designed, a uniform cents per
               kilowatthour reconciling factor is subtracted from the
               energy component of the rate designs and applied to all
               customers as a uniform cents per kilowatthour charge. 
               For billing purposes the transmission and access charges
               shall be rolled into the distribution rates and shall not
               be shown separately on bills to customers.
        (i)  The discount for the R-2 Rate that is available for Mass.
               Electric's low income customers is designed to reduce the
               base rates of a customer taking standard offer service by
               35 percent in accordance with the Attorney General's
               principles.  To assure that the same level of discount is
               available regardless of the supplier and to allow the
               operation of the reconciling access and transmission
    <PAGE>
             charges, the discount is applied exclusively to the
               distribution component of the rate.  The recovery of the
               discount from Mass. Electric's other customers is based
               on distribution rate base in accordance with the practice
               in prior cases.
        (j)  Mass. Electric's energy conservation services charge and
               conservation cost factors are included in the base rates
               in Attachment 2, and separate Energy Conservation Service
               and conservation cost factors will be discontinued on the
               effective date of the retail delivery rates.  Any
               outstanding balances, whether positive or negative, will
               be added to or subtracted from Mass. Electric's demand
               side program budgets for the first two years after the
               Retail Access Date.
   3.   Transmission Charges.  The transmission charges in Mass.
          Electric's retail delivery rates shall be recovered in a
          uniform cents per kilowatthour factor under the transmission
          cost adjustment provisions included in the tariffs in
          Attachment 2.  The transmission cost adjustment shall recover
          the costs billed to Mass. Electric by NEP, by any other
          transmission provider, and by other regional transmission or
          operating entities, such as NEPOOL,  a regional transmission
          group (RTG), an independent system operator (ISO), or other
          regional body, in the event that they are authorized to bill
          Mass. Electric directly for their services.  The transmission
          cost adjustment shall be established annually based on a
          forecast of transmission costs, and shall include a full
          reconciliation and adjustment for any over- or under-
        recoveries occurring under the prior year's adjustment.  As set
    <PAGE>
        forth below, the Parties have agreed to support the
          implementation of NEPOOL reforms, including the formation of an
          RTG and ISO to the extent consistent with this Settlement. 
          These reforms are desirable, but are neither a condition to
          retail access by Mass. Electric nor of the approval of this
          Settlement.
   4.   Access Charges.  The access charges in Mass. Electric's retail
          delivery rates shall be recoverable in a uniform cents per
          kilowatthour factor under the access cost adjustment provisions
          included in the tariffs in Attachment 2.  The access cost
          adjustment factor will recover on a fully reconciling basis the
          contract termination charges billed by NEP to Mass. Electric
          under the wholesale rate settlement included in Attachment 3
          and shall be subject to the dispute resolution procedures set
          forth in Section 3.5 of that wholesale rate settlement.  The
          Parties agree that:  a) the wholesale rate settlement in
          Attachment 3 is reasonable; b) approval of this Settlement by
          the Department represents express authorization of Mass.
          Electric to pay those charges under G.L. c. 164, Sec. 94A until
          Mass. Electric's obligation to NEP for payment of contract
          termination charges has been fully extinguished; c) the
          decision by Mass. Electric to execute the contract termination
          agreement with NEP included in Attachment 3 and to pay the
          contract termination charges is reasonable and prudent; and (d)
          the contract termination charges shall be recoverable in Mass.
          Electric's rates for retail delivery services for as long as
          the contract termination charges remain in effect.
   5.   Standard Offer.  Consistent with the Attorney General's
          principles Mass. Electric shall arrange to provide standard
          offer service through a transition period ending on December
          31, 2004, by
    <PAGE>
        putting it out to bid.  Standard offer service shall be
          available to all of Mass. Electric's retail customers on the
          Retail Access Date.  After the Retail Access Date customers are
          free to leave the standard offer at any time to purchase from
          an alternative supplier in the market, but, once the market
          option is selected, a customer may not return to service at
          standard offer prices, provided, however, that standard offer
          service shall be available to all residential or G-1 customers
          who have previously taken service from an alternative supplier
          for the first year after the Retail Access Date, if such
          residential or G-1 customer elects to return to standard offer
          service within 90 days of first taking service from the
          alternative supplier.  The terms and conditions for the bids by
          potential suppliers for standard offer service are set forth in
          Attachment 8.
             Mass. Electric's standard offer prices are guaranteed,
          subject to the fuel price index described in Attachment 8. 
          Under the tariffs included in Attachment 2, Mass. Electric's
          charges for standard offer service are included as a separate
          surcharge to the rates for retail delivery service that apply
          to all retail access customers.  Mass. Electric shall reconcile
          the revenues billed to retail customers taking standard offer
          service against payments to suppliers of standard offer service
          and recover or refund any under or overcollections on the
          following terms:
        (a)  Any revenues billed by Mass. Electric for standard offer
               service in excess of payments to suppliers of that
               service shall be accumulated in an account and credited
               with interest calculated using the methodology for
               calculating interest on customer deposits specified in
               Mass. Electric's
    <PAGE>
             terms and conditions.  The accumulated balance at the end
               of each calendar year shall be credited to all of Mass.
               Electric's retail delivery customers through a uniform
               cents per kilowatthour factor in the following year.
        (b)  In the event that the revenues billed by Mass. Electric
               do not recover Mass. Electric's payments to suppliers or
               Mass. Electric defers expenses to meet the inflation cap
               established in Section I.B.9, Mass. Electric shall be
               authorized to accumulate the deficiencies in the account
               together with interest calculated as above and recover
               those amounts by implementing a uniform cents per
               kilowatthour surcharge on the rates for standard offer
               service, if and to the extent that the access charges
               billed by Mass. Electric to its retail delivery customers
               are for any reason below the unadjusted contract
               termination charges listed under the NEP wholesale rate
               settlement in Attachment 3.  Under-
             recoveries, if any, that remain after the standard offer
               transition period ends on December 31, 2004 shall be
               recovered from all retail delivery customers by a uniform
               surcharge not exceeding $0.004 per kilowatthour
               commencing on January 1, 2010.
   
   6.   Safety Net Service.  In recognition that electricity is an
          essential service, and that there is a risk that in a
          competitive market some low-income customers may be unable to
          obtain or retain service on reasonable terms on account of a
          credit profile that would not create a barrier to service under
          the current regulated monopoly supply, Mass. Electric shall
          arrange to provide electric
    <PAGE>
        supply for low-income customers who are no longer eligible to
          receive service under the standard offer and not adequately
          supplied by the market because they are unable to obtain or
          retain electric service from competitive power suppliers. 
          Service under this provision shall be made available under
          rates, terms and conditions approved by the Department.  Mass.
          Electric shall fully recover the reasonable costs it incurs in
          arranging this service.
   7.   Basic Service.  In recognition that customers may face an
          occasional hiatus between competitive suppliers, and in an
          effort to prevent such customers from losing power because they
          do not have a contractual relationship with a viable supplier,
          Mass. Electric shall facilitate the continued delivery of
          power, such as by providing supply through the short-term
          wholesale power market, to such customers and allow them to
          have a reasonable opportunity to make other supply
          arrangements, and shall fully recover its reasonable costs of
          providing such service.  Such supply shall be provided on terms
          and conditions approved by the Department.
   8.   Terms and Conditions.  Mass. Electric's terms and conditions in
          Attachment 4 have been modified to reflect the changes in Mass.
          Electric's operations.  In addition to modifications that are
          necessary to reflect changes to Mass. Electric's business with
          its customers, the terms and conditions included in Attachment
          9 have been added to specify the terms and conditions for the
          settlement process with suppliers.  Those requirements are
          designed to allocate load and resources as required under the
          NEPOOL agreement and protocols.  These terms and conditions are
          recommended by Mass. Electric for approval by the Department as
          part of this
    <PAGE>
        Settlement.  However, approval is not a condition of the
          Settlement.
   9.   Inflation Cap for Standard Offer Customers.  Mass. Electric
          shall assure that the economic value of the ten percent rate
          reduction for customers is maintained by capping average
          revenues per kilowatthour for retail delivery service plus the
          standard offer, adjusted to exclude:  (1) the fuel price index
          in Attachment 8; (2) any adjustments caused by the return on
          equity floor under Section I.B.1(f); and (3) changes in tax
          laws or accounting under Section I.B.1(g), at 8.91 cents per
          kilowatthour adjusted for the Consumer Price Index occurring
          between October 1, 1996 and the effective date of any
          adjustment to the standard offer price under Section I.B.1(d). 
          Mass. Electric shall defer expenses associated with payments to
          vendors under the standard offer equal to the amount necessary
          to meet the inflation cap and recover such deferral using the
          mechanism in Section I.B.5(b).
  C.    Right to File for Rate Change in the Event that Retail Access Date
          Postponed
   ------------------------------------------------------------------
   Nothing in this Settlement shall prevent the Parties  from seeking a
  rate change to become effective after suspension on January 1, 2001 in the
  event that the Retail Access Date has not occurred by that time.
  
  II.   Benefits of Competition Extended to All Customers.
   -------------------------------------------------
  
   The Attorney General's principles require utilities to extend the
  benefits of competition to all customers.  This Settlement achieves that
  requirement by providing all customers with the opportunity to choose
  alternative suppliers on the Retail Access Date and by guaranteeing
    <PAGE>
significant rate reductions for customers who take standard offer service
  prior to choosing an alternative supplier under the ratemaking portion of
  this Settlement.  Specifically, the parties agree that Mass. Electric shall
  implement retail access on the following terms:
   A.   Prior Commitments with Customers.
        --------------------------------
  
   Prior commitments under Mass. Electric's rates or contracts will be
  treated as follows:
   1.   Service Extension Agreements:  Many of Mass. Electric's non-
        residential customers have executed Service Extension
          Agreements under Paragraph 3 of Mass. Electric's currently
          effective terms and conditions.  Mass. Electric shall waive the
          five year notice provision insofar as it would limit the
          customer's ability to purchase electricity from an alternative
          supplier under the terms of Mass. Electric's retail delivery
          tariffs included in Attachment 2 and shall require no repayment
          by the customer as would otherwise be required under the terms
          and conditions and their contracts.  Nothing in this Settlement
          shall require Mass. Electric to waive the advance written
          notice required before the retail customer may install on-site
          non-emergency generation for its own use or bypass Mass.
          Electric's distribution system.
   2.   Service Extension Discounts.  Many of Mass. Electric's
          customers served under Rate G-3 have exercised their option to
          sign a service extension discount agreement under which the
          customer must provide five years prior notice before purchasing
          electricity from an alternative supplier or installing non-emergency generation for its own use, but is allowed to buy
          down its five year notice provision to three years by repaying
          120 percent of all Service Extension Discounts received from
          Mass. Electric over the prior
    <PAGE>
        two years.  Under this Settlement, Mass. Electric will waive
          the five year notice provision without requiring such repayment
          insofar as it would limit the customer's ability to purchase
          electricity from an alternative supplier under the terms of
          Mass. Electric's retail delivery tariffs included in Attachment
          2.(1)  As with the Service Extension Agreements, nothing in
          this Settlement shall require Mass. Electric to waive the
          advance written notice required before the retail customer may
          install on-
        site non-emergency generation for its own use or bypass Mass.
          Electric's distribution system.  Mass. Electric shall eliminate
          the Service Extension Discount as of the Retail Access Date.
             Under Section 7.3 of its W-95 wholesale rate settlement
          (in FERC Docket No. ER95-267-000), NEP agreed to reimburse
          Mass. Electric for the discounts provided to customers under
          Service Extension Discount agreements.  NEP's tariff provision,
          however, requires that payments for the buy down of the notice
          period be paid to NEP  (Tariff 1, Section III-D, p.2, Par. 4)
          and requires Mass. Electric to obtain NEP's consent prior to
          modifying the Service Extension Discount agreements. (Id,
          Par.6).  In the wholesale rate settlement included as
          Attachment 3 to this 
  __________
  1 To the extent necessary to allow customers to purchase from alternative
  suppliers under the retail delivery tariffs, Mass. Electric will also waive
  condition 3 in the availability provisions of its G-5 Rate Incentive
  Provision that requires customers participating on that rate not to have
  provided notice under the Service Extension Discount Agreement.
  
   Mass. Electric also has a special contract with Raytheon that was
  approved by the Department on January 30, 1996.  Under Section V.A. of that
  contract, the Parties agreed that the agreement was to remain in effect
  through December 31, 1998, even if retail access were to occur earlier than
  that date.  Under this Settlement, Mass. Electric shall provide Raytheon
  with the option to terminate as of the Retail Access Date even if that date
  occurs prior to January 1, 1999.
    <PAGE>
        Settlement, NEP provides that consent and waives its right to
          reimbursement, as well as ceases payment to Mass. Electric for
          Service Extension Discounts.
   3.   Notice Provisions in Mass. Electric's Tariffs.  Mass.
          Electric's General Service (G) rate tariffs include a provision
          requiring all customers to provide two years prior written
          notice before purchasing from an alternative source or
          installing additional on-
        site generation capacity for the customer's own use.  Mass.
          Electric shall waive this notice requirement for purchases from
          alternative suppliers under the terms of Mass. Electric's
          retail delivery rates included in Attachment 2.  Nothing in
          this Settlement shall require Mass. Electric to waive the
          advance written notice required before the retail customer may
          install additional on-site, non-emergency generation for its
          own use or bypass Mass. Electric's distribution system.
   4.   Conservation and Load Management Program Terms and Conditions. 
          Many of Mass. Electric's nonresidential customers have
          participated in Mass. Electric's conservation and load
          management programs that require repayment of Mass. Electric's
          incentive payments if the customer purchases electricity from
          an alternative supplier.  Mass. Electric shall waive this
          repayment obligation insofar as it would limit the customer's
          ability to purchase electricity from an alternative supplier. 
          Nothing in this Settlement shall require Mass. Electric to
          waive the requirement for repayment before the retail customer
          may install on-site, non-
        emergency generation for its own use or bypass Mass. Electric's
          distribution system.
    <PAGE>
   B.   Implementation of Retail Access.
        -------------------------------
  
        This Settlement requires Mass. Electric to provide retail
     access and implement the retail delivery rates in Attachment 2 on the
     Retail Access Date, which is the later of January 1, 1998 or the date
     on which retail access is made available to all customers of the
     investor-owned utilities in Massachusetts.  Under this Settlement,
     this condition will be achieved when legislation, final regulatory or
     court action, or unchallenged settlements with all other investor-
     owned utilities are in place.  In the event that retail access is not
     yet available to all customers of investor-owned utilities by January
     1, 1998, Mass. Electric in its sole discretion shall have the option
     to accelerate the Retail Access Date under this Settlement, implement
     retail access for its customers, and make the tariffs in Attachment
     2 effective by providing the Department and the Parties with 90 days
     advance notice in writing.  Upon such notice, no further action by
     the Department will be required for the tariffs to become effective.
   
  III.  Protect the Environment and Promote Conservation.
   ------------------------------------------------
  
   The third element of the Attorney General's plan requires the
  restructuring plans of utilities to protect the environment and promote
  conservation.  This Settlement complies with these requirements by requiring
  significant emissions reductions from NEP's units, and by continuing funding
  for demand side programs including clean renewable resources.  The Parties
  have agreed to the following terms:
   A.   Siting Reform
        -------------
  
   The parties agree to work cooperatively with all interested persons
  to update the existing Energy Facilities Siting Board statute, G.L. C. 164,
  Secs.
    <PAGE>
69G through 69R, to substitute for the existing need and least cost
  requirements in the current statute a mechanism that maintains the existing
  alternative technologies review (with its minimum environmental impacts
  standard), maintains the existing alternative site review, and which gives
  a preference for clean energy technologies, including demand-side management
  and clean renewables, in the Commonwealth's energy supply.  The parties will
  make best efforts to reach agreement on proposed legislation reflecting
  these changes on or before December 4, 1996, for filing with the Legislature
  on that date.  The Division of Energy Resources and the clients represented
  by the National Consumer Law Center elect not to be signatories to this
  paragraph.
   B.   Emissions Reductions.
        --------------------
  
   NEP or its successors in interest shall reduce the emissions of NOx
  and SO2 from its Salem Harbor Units 1, 2, 3, and 4, and its Brayton Point
  Units 1, 2, 3, and 4 by the amounts and on the schedule and terms set forth
  in Attachment 10.  Nothing in this Settlement shall affect NEP's obligations
  to comply with environmental regulations lawfully imposed or restrict the
  environmental regulators' authority to impose new environmental standards.
   C.   Conservation and Load Management and Renewables.
        -----------------------------------------------
  
   By July 1, 1997, Mass. Electric shall develop and file with the
  Department annual budgets for demand side programs and clean renewables for
  the period 1998 through 2001 designed at $66.7 million adjusted for any
  outstanding balances from the ECS and conservation cost factors on the
  Retail Access Date pursuant to Section I.B.2., above.  At least 15 percent
  of the amount budgeted for residential programs in any given year shall be
  spent on low income residential programs, and the amount budgeted for low
  income residential programs implemented through the existing weatherization
  and fuel assistance program network shall be a minimum of $1.1 million in
  1998, $1.3
    <PAGE>
million in 1999, $1.4 million in 2000, and $1.5 million in 2001 provided
  that the performance of the network contractors is of satisfactory quality. 
  For each of the following years, funds shall be allocated within the $66.7
  million budget to commercialize and develop fuel cells and a diverse group
  of clean renewables in a manner approved by the Department, with
  collaborative input, based on the following rates per kilowatthour times the
  kilowatthours distributed by Mass. Electric.  In 1998 the rate shall be
  $0.00025; in 1999, $0.00055; in 2000, $0.00085; and in 2001, $0.00125 times
  the kilowatthours distributed by Mass. Electric.  The budgets shall also
  include expenditures for the energy conservation service (ECS) program,
  interruptible rate credits, Mass. Electric's demand side programs, the
  installation of sophisticated metering and control systems, overhead costs,
  and the incentive or bonus earned from programs implemented prior to the
  Retail Access Date and to be earned on the demand side programs implemented
  after the Retail Access Date pursuant to this paragraph.  During any given
  year Mass. Electric shall reconcile actual spending and earned incentive to
  the approved budget, with a separate reconciliation for renewables and
  demand side management, and shall carry forward any balance, positive or
  negative, into the following year through an adjustment to the approved
  budget.
   While the Department will decide the appropriate level for ongoing
  conservation, load management and renewables funding after December 31,
  2001, Mass. Electric, the Attorney General, the Conservation Law Foundation,
  the Northeast Energy Efficiency Council, the Union of Concerned Scientists,
  and the Division of Energy Resources jointly recommend that evaluation of
  funding after this date be informed by review of the then current market
  barriers and experience gained with the competitive energy markets and
  customer choice established in this Agreement; and should further be based
  upon environmental and economic goals to be achieved by such funding
  established by the
    <PAGE>
Department through appropriate proceedings.  Ongoing commercialization
  support for fuel cells and clean renewable technologies beyond December 31,
  2001 should also be based on a goal of supplying at least four percent of
  Massachusetts electricity kilowatthour sales from such new, clean
  technologies by the end of 2007.
   Generation technologies potentially eligible for commercialization
  support, subject to Department review, shall include a diverse group of low
  and zero emissions generation technologies with substantial long-term, cost-
  effective regional production potential which utilize any of the following:
   a)   solar photovoltaic and solar thermal electric energy;
   b)   wind energy;
   c)   ocean thermal, wave and/or tidal energy;
   d)   fuel cells;
   e)   landfill gas; and
   f)   low emission advanced biomass power conversion technologies
          like gasification using such biomass fuels as wood,
          agricultural, or food wastes; energy crops, biogas, or organic
          refuse-derived fuel.
   While the Department will decide how funds shall be allocated based
  on input from a collaborative process, the commercialization of clean
  generating technologies should be accomplished in a least cost manner. 
  Optimal use should be made of competitive bidding in funding
  commercialization activities.  Commercialization activities shall also
  attempt to promote as diverse a group of clean technologies as is practical
  and ensure no single resource or technology dominates commercialization
  efforts.
   The Company will perform pilot projects in 1997 funded out of the
  adjustment for cost of conservation and load management approved by the
  Department for 1997 to assess the value of distributed clean generation,
    <PAGE>
conservation and load management technologies in reducing or avoiding
  distribution system costs.  Operational procedures to invest in clean
  distributed generation and geographically-targeted DSM that lower
  distribution service costs should be implemented as soon as is practical.
   Clean distributed generation of 30 kilowatts (kW) or less to include
  fuel cells, renewables and small scale cogeneration shall remain eligible
  for "net metering" as provided for in existing Department regulations
  regarding the buy- back of generated power at the retail rate.  
  IV.   Protect Low Income Customers.
   ----------------------------
   The fourth principle in the Attorney General's plan focuses on the
  continued protection of low income customers.  Mass. Electric's plan
  complies with this principle by continuing the discount for Rate R-2
  customers, assuring that all customers receive immediate rate reductions
  through standard offer service, providing safety net service for low-income
  customers that have no other alternative supplier (see Section I.B.2.,
  above), and funding the residential low income demand side programs in
  Section III.C.  In addition, Mass. Electric shall implement a program to
  protect against redlining by market suppliers by paying market suppliers of
  Rate R-2 customers directly for electricity delivered up to the prices for
  Standard Offer Service set forth in Section I.B.1.(d) and then including the
  costs of such service in Mass. Electric's distribution bill to Rate R-2
  customers.  In this way, Mass. Electric, rather than the market supplier,
  shall assume the risk of nonpayment from Rate R-2 customers.
   Electric service is essential and should be available to all
  customers.  The restructured electricity industry should provide adequate
  safeguards to assure universal service.  Programs and mechanisms that enable
  residential customers with low incomes to manage and afford essential
  electricity
    <PAGE>
requirements will be maintained throughout the period of the settlement in
  order to foster the goal of universal service.
  
  V.    Create a Fully Functioning Stable and Reliable Structure for the
          Competitive Market.
   ----------------------------------------------------------------
   The Attorney General's final principle focuses on the institutional
  structure and protections necessary to prevent unfair and anti-competitive
  conduct, and to maintain reliable and safe electricity supplies.  These
  industry structure issues focus on the region as a whole and the corporate
  structure of Mass. Electric and its affiliates within the New England
  Electric System.
   A.   Regional Reform.
        ---------------
   The regional issues center on the formation of a regional transmission
  group, an independent system operator and NEPOOL reform.  Mass. Electric and
  NEP have made proposals and participated actively in these issues.  The
  current version of NEP's NEPOOL Restructuring Proposal and proposal for a
  regional transmission group is included as Attachment 11.  NEP and Mass.
  Electric shall continue to support at a minimum, the regional reforms set
  forth in those documents, and shall consult with the parties to this
  Settlement to develop mutually agreeable approaches to these issues that are
  consistent with the terms of this Settlement.  However, this Settlement is
  not conditional upon the adoption, approval, or implementation of the
  regional reforms listed in those attachments.  Nothing in this Settlement
  shall limit parties from advocating positions other than those in Attachment
  11.
  
    <PAGE>
   B.   The Jurisdictional Separation Between Transmission and
          Distribution.
        ------------------------------------------------------
   In Order 888, FERC set forth a seven factor test for determining
  whether facilities used to provide access to retail customers are subject
  to the ratemaking jurisdiction of FERC under the Federal Power Act or of the
  Department under state law.  Attachment 12 provides a specific evaluation
  of FERC's seven factors as applied to the separation of facilities between
  Mass. Electric and NEP.  The parties agree that all of Mass. Electric's
  facilities, except for those that are paid for by NEP pursuant to the
  Integrated Facilities Schedule III-B of Tariff 1, meet FERC's seven factor
  test for designation as distribution facilities subject to the Department's
  jurisdiction, and the parties support an affirmative recommendation by the
  Department to FERC that the current separation between the transmission
  facilities owned by NEP and distribution facilities owned by Mass. Electric
  be adopted by FERC for ratemaking purposes as part of the approval of this
  Settlement.  However, approval of the jurisdictional separation of
  facilities without change is not a condition of this Settlement.
   C.   The Transfer of Transmission Properties and Facilities.
        ------------------------------------------------------
   NEP shall develop and file a plan with the Department by July 1, 1997
  to separate its generating business from its transmission business.
   D.   Divestiture of NEP's Generating Business.
        ----------------------------------------
   1.   Consistent with the restructuring plan advanced by the Division
          of Energy Resources, NEP agrees, subject to the receipt of all
          required governmental approvals, to sell, spin off, or
          otherwise transfer ownership of its generating business to a
          nonaffiliated entity or entities, other than properties,
          assets, and
    <PAGE>
        entitlements classified to the transmission function.  The
          parties intend that the properties to be divested shall also
          include (1) properties owned by  New England Energy Inc.
          (NEEI), (2) the generating units of Nantucket Electric, to the
          extent they are not classified to the transmission function,
          including any proceeds from the sale of emission credits, and
          (3) The Narragansett Electric Company's ownership interest in
          the Manchester Street Station.  NEP shall develop and file by
          July 1, 1997 a plan with the Department to implement
          divestiture.  This plan shall include in particularized detail
          the generating business to be divested and all properties,
          assets, and entitlements to be included in the divestiture and
          shall be updated with an informational filing 90 days before
          the date of divestiture.  The Department shall review the plan
          and shall issue a final order on the method of sale and the
          reasonableness of the proceeds as part of its plan approval. 
          The divestiture shall be completed by six months after the
          later of the Retail Access Date or the receipt of all
          governmental approvals necessary for the transfer.    If, for
          any reason, the divestiture is not completed within three years
          of the Retail Access Date, NEP shall file a report with the
          Department explaining the delay.
   2.   As part of the divestiture, NEP will endeavor to sell, lease,
          assign, or otherwise dispose of its minority shares of nuclear
          units or entitlements on terms that will assign ongoing
          operating costs and responsibility to a nonaffiliated third
          party but may require NEP to retain the obligation for post-
          shutdown, decommissioning, and site restoration for these units
          or entitlements.  NEP shall recover these post-shutdown,
    <PAGE>
        decommissioning, and site restoration costs from Mass. Electric
          through the contract termination charge, and shall credit any
          net positive value or recover any payments associated with such
          transaction in the reconciliation account of the contract
          termination charge.  The Parties agree that this approach is
          reasonable and NEP is authorized to include it in its
          divestiture plan.  This plan will be subject to the approval of
          the Nuclear Regulatory Commission ("NRC") to the extent
          required by NRC regulations.  In the event that NEP is unable
          to sell, lease, assign, or otherwise dispose of its nuclear
          units or entitlements, NEP shall include 80 percent of the
          going forward costs of operating the units and entitlements,
          including variable costs and capital additions, and 80 percent
          of the revenues from kilowatthour sales from the units and
          entitlements, in the reconciliation account and recover or
          return any differences through its contract termination charges
          to Mass. Electric.  Within six months prior to implementing the
          Performance Based Rate set forth in the prior sentence, NEP
          will consult with the parties on a performance standard for
          nuclear safety indicators and will file such performance
          standard with a maximum potential credit for nonperformance of
          $1 million.  NEP's sales, if any, from its nuclear units and
          entitlements shall only be made in the wholesale market to
          nonaffiliates, provided that NEP shall retain the right to use
          its minority shares of the units or entitlements to fulfill its
          minimum, zero bid obligations under the standard offer.
             As part of the divestiture, NEP will endeavor to sell,
          assign or otherwise dispose of its power contracts on terms
          that will assign ongoing contract payments to a nonaffiliated
          third
    <PAGE>
        party.  In that event, changes to the above market payment to
          power suppliers shall be reflected in the Reconciliation
          Account.  In the event that such contracts cannot be sold,
          assigned, or otherwise disposed of, the power purchased from
          those contracts shall be sold and the contract payments and
          market value associated with the sale shall be reflected in the
          Reconciliation Account.  Such sales, if any, shall only be made
          in the wholesale market to nonaffiliates, provided, however,
          that NEP shall retain the right to use the contracts, including
          that with Hydro Quebec, to fulfill its minimum, zero bid
          obligations under the standard offer.  Nothing in this
          Settlement shall affect the rights of suppliers or NEP under
          purchased power contracts.
   3.   In this proceeding, the Department and intervenors have
          expressed the goals of attaining a market valuation of utility
          stranded costs and creating a competitive market for supplying
          electricity to consumers.  The Department has expressed a
          preference for voluntary divestiture of utility generation as
          a means of achieving these goals.  The Department has stated
          that it "has the authority to approve the voluntary divestiture
          of assets", but that it has "no explicit statutory authority
          [to] order divestiture, nor is it likely to be implied." 
          (D.P.U. 95-30, August 16, 1995).  NEP and Mass. Electric have
          asserted that the Department lacks authority to order
          divestiture, and would contest any effort by the Department to
          do so.  NEP and Mass. Electric have agreed, as part of this
          Settlement, voluntarily to undertake such divestiture.  In
          exchange, and as consideration for this voluntary divestiture,
          the parties to this Settlement, and the Department by its
          approval of this Settlement, agree that NEP's
    <PAGE>
        contract termination charges as set forth in Attachment 3 to
          Mass. Electric and Mass. Electric's access charges as set forth
          in Section I.B.1(c) for the period contemplated by this
          Settlement are just and reasonable.  Accordingly, and to give
          effect to the reliance placed by the parties on the foregoing,
          the Department shall treat the findings that such contract
          termination charges and access charges are just and reasonable
          as a final determination made after public notice and a full
          investigation of the merits, and, in any future proceeding
          brought by any person or party, or by the Department on its own
          motion, shall accord such finding the full benefit of policies
          of repose including, without limitation, the application of the
          doctrines of res judicata, collateral estoppel, the filed rate
          doctrine, the prohibition against retroactive ratemaking, and
          the finality of contracts, it being the express intention of
          the parties to prevent, as a matter of law and policy, the
          Department or any other authority from: (a) revisiting the
          issue of the justness and reasonableness of the contract
          termination charges and the access charges; (b) reducing, other
          than as set forth in Attachment 3, the amount of the contract
          termination charges or the access charges; or (c) otherwise
          limiting the right of NEP, its successors or assigns, or Mass.
          Electric to charge and recover the contract termination charges
          or the access charges set forth in this Settlement for any
          reason prior to their recovery in full as contemplated by this
          Settlement.
   4.   As a part of this Settlement, NEP is requesting financing and
          other authorizations from the Department, including approval of
          the assignment of its right to receive all or a portion of
    <PAGE>
        contract termination charges from Mass. Electric to lender(s)
          or other third parties.  Mass. Electric is requesting 
          authorization from the Department to guarantee full payment to
          lender(s) of all or a portion of access charges payable to NEP
          and/or its assignee(s) and/or to fully indemnify NEP and/or its
          assignee(s) in the event that payments to lender(s) are not
          fully covered by access charges.  In connection with these
          financings, NEP and Mass. Electric may be required to make
          irrevocable commitments to lenders in substantially the form of
          Attachment 13.  Approval of this Settlement by the Department
          shall constitute authorization and approval by the Department
          under the statutes listed in Attachment 13 including, but not
          limited to, (1) NEP to complete the financing including the
          assignments, (2) NEP and Mass. Electric to make these
          irrevocable commitments, and (3)  Mass. Electric to indemnify
          NEP and/or its assignee.  Approval of this Settlement shall
          represent findings by the Department that (1) these irrevocable
          commitments, indemnification, and assignments are just and
          reasonable and in the public interest, and (2) the payments by
          Mass. Electric and NEP related to these commitments and
          indemnification are fully recoverable in retail delivery rates.
   5.   To facilitate the divestiture and valuation of NEP's units, the
          parties agree that it is in the public interest for NEP or its
          successors or assigns to be authorized to sell electricity at
          market prices in  the wholesale  markets, and that NEP or its
          successors or assigns shall be free to apply to become an
          exempt wholesale generator pursuant to Section 32 of the Public
          Utility Holding Company Act of 1935 and other Federal law,
          rules and
  
        regulations, and to designate each and every generating
          facility and entitlement it owns as an eligible facility
          pursuant to that statute.  Approval of this Settlement by the
          Department shall represent express findings by the Department
          that it has sufficient regulatory authority, resources, and
          access to books
    <PAGE>
        and records to exercise its duties, and that the full
          participation of NEP in the market and the designation of each
          of its facilities as eligible facilities will benefit
          consumers, is consistent with state laws, will not provide any
          unfair competitive advantage by virtue of its status as a
          facility owned or formerly owned by NEP, and is in the public
          interest.
             Nothing in this Settlement shall prevent an affiliate of
          Mass. Electric from re-entering the generation business
          following the completion of divestiture, and nothing in this
          Settlement shall prevent affiliates of Mass. Electric from
          marketing electricity, other energy sources, or energy services
          to customers within or outside Mass. Electric's service
          territory.
   E.   Standards of Conduct.
        --------------------
   As of the date of approval of this Settlement, Mass. Electric shall
  adopt the standards of conduct set forth in Attachment 14.  These standards
  are recommended by Mass. Electric for approval by the Department as part of
  this Settlement.  However, approval is not a condition of the Settlement.
   F.   Customer Service Standards
        --------------------------
   Minimum residential customer service safeguards and protections for
  consumers in their dealings with competitive power suppliers, as provided
  by statute or the rules of the Department, should be maintained.
  
    <PAGE>
   G.   Unbundled Distribution Services
        ------------------------------- 
   Effective January 1, 2000, Mass. Electric shall file with the
  Department a proposal to unbundle distribution services that can be provided
  competitively, without impairing system reliability or other system
  benefits.
  
  VI.   Successors and Assigns.
   ----------------------
   The rights conferred and obligations imposed on any Signatory by this
  Settlement shall be binding on or inure to the benefit of their successors
  in interest or assignees as if such successor or assignee was itself a
  Signatory hereto.
  
  VII.  Additional Provisions.
   --------------------- 
   A.   This Settlement is the product of settlement negotiations.  The
  content of those negotiations shall be privileged and all offers of
  settlement shall be without prejudice to the position of any party or
  participant presenting such offer.
   B.   Except as expressly set forth above, this Settlement is
  submitted on the conditions that it be approved in full by the Department
  and that FERC approve in full the wholesale rate settlement included in
  Attachment 3, and on the further conditions that if the Department does not
  approve the Settlement in its entirety or FERC does not approve Attachment
  3 in its entirety, the Settlement shall be deemed withdrawn and shall not
  constitute a part of the record in any proceeding or used for any purpose.
   C.   Acceptance of this Settlement  by the Department shall not be
  deemed to restrain the Department' exercise of its authority to promulgate
    <PAGE>
future orders, regulations or rules which resolve similar matters affecting
  other parties in a different fashion, provided, however, that approval of
  this Settlement by the Department shall represent an express grant by the
  Department of a waiver for Mass. Electric and NEP of any rule, requirement
  or regulation promulgated by the Department as part of its proceeding on
  utility restructuring that is inconsistent with the terms of this Settlement
  and the wholesale rate settlement included in Attachment 3.  Nor shall this
  Settlement be deemed to restrain the authority of the General Court to enact
  any law which would resolve similar matters affecting other parties in a
  different fashion.
   D.   The Department approval of this Settlement shall endure so long
  as is necessary to fulfill this Settlement's objectives.  In the event of
  future regulatory or legislative actions which may render any part of this
  Settlement ineffective, Mass. Electric and NEP shall nevertheless be held
  harmless and made whole.
                            Respectfully submitted,