PROSPECTUS
    
    EXHIBIT 2(b).9.1
 
 National Grid USA  (incorporated in the State of Delaware, United States of America)
 Euro 4,000,000,000
Euro Medium Term Note Programme
 Programme Prospectus Issuer Instruments
 U.K. Listing Authority FSMA Official List London
Stock Exchange Market listed
 Securities Act
 temporary Global
Instrument permanent Global Instrument Global
Instruments NGN Common Safekeeper Euroclear société anonyme Clearstream,
Luxembourg Common Depositary Classic Global Notes CGNs
  Prospectus Directive 
  Programme Arranger
 HSBC
 Programme Dealers
 Commerzbank Corporates & Markets
    
    Deustche BankHSBC
    
    Morgan Stanley




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IMPORTANT NOTICES
 Base Prospectus Group
  Relevant Member States
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Euro Japanese yen £ Sterling U.S. dollars U.S.$ Canadian dollars Australian dollars New
Zealand dollars Swedish krona Danish krone Hong
Kong dollars Swiss francs
 In
connection with the issue of any Tranche (as defined in Overview of the Programme - Method
of Issue), the Dealer or Dealers (if any) named as the stabilising manager(s) (the
Stabilising Manager(s)) in the applicable Final Terms (or any person acting on behalf of any
Stabilising Manager(s)) may over-allot Instruments or effect transactions with a view to
supporting the market price of the Instruments at a level higher than that which might
otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or any
person acting on behalf of any Stabilising Manager) will undertake stabilisation action. Any
stabilisation action may begin on or after the date on which adequate public disclosure of the
final terms of the offer of the relevant Tranche is made and, if begun, may be ended at any
time, but it must end no later than the earlier of 30 days after the issue date of the relevant
Tranche and 60 days after the date of the allotment of the relevant Tranche. Any stabilisation
action or over-allotment must be conducted by the relevant Stabilising Manager(s) or person(s)
acting on behalf of any Stabilising Manager(s) in accordance with all applicable laws and
rules.
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TABLE OF CONTENTS
 PageIMPORTANT NOTICES
    
    
    2DOCUMENTS INCORPORATED BY REFERENCE
    
    
    5SUPPLEMENTAL PROSPECTUS
    
    
    6OVERVIEW OF THE PROGRAMME
    
    
    7RISK FACTORS
    
    
    13TERMS AND CONDITIONS OF THE INSTRUMENTS
    
    
    23SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS WHILE IN GLOBAL FORM
    
    
    45USE OF PROCEEDS
    
    
    50DESCRIPTION OF NATIONAL GRID USA
    
    
    51TAXATION
    
    
    62PLAN OF DISTRIBUTION
    
    
    65FORM OF FINAL TERMS
    
    
    68GENERAL INFORMATION
    
    
    79
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DOCUMENTS INCORPORATED BY REFERENCE
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SUPPLEMENTAL PROSPECTUS
 Supplemental Prospectus
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OVERVIEW OF THE PROGRAMME
  Issuer
    
    National Grid USADescription
    
    Euro Medium Term Note ProgrammeSize
    
    Up to Euro 4,000,000,000 (or its
equivalent in other currencies at the
date of issue) aggregate nominal amount
of Instruments outstanding at any one
time.Arranger
    
    HSBC Bank plcDealers
    
    Commerzbank Aktiengesellschaft
Deutsche Bank AG, London BranchHSBC Bank plcMorgan Stanley & Co. International plcThe Issuer may from time to time
terminate the appointment of any dealer
under the Programme or appoint additional
dealers either in respect of one or more
Tranches or in respect of the whole
Programme. References in this Prospectus
to the Permanent Dealers are to the
persons listed above as Dealers and to
such additional persons that are
appointed as dealers in respect of the
whole Programme (and whose appointment
has not been terminated) and to Dealers
are to all Permanent Dealers and all
persons appointed as a dealer in respect
of one or more Tranches.Trustee
    
    The Law Debenture Trust Corporation p.l.c.Issuing and Paying Agent
    
    The Bank of New York MellonOther Paying Agent
    
    KBL European Private Bankers S.A.
(previously known as Kredietbank S.A.
Luxembourgeoise)Method of Issue
    
    The Instruments will be issued on a
syndicated or non-syndicated basis. The
Instruments will be issued in series
(each a Series) having one or more
issue dates and on terms otherwise
identical (or identical other than in
respect of the first payment of
interest), the Instruments of each Series
being intended to be interchangeable with
all other Instruments of that Series.
Each Series may be issued in tranches
(each a Tranche) on the same or
different issue dates. The specific terms
of each Tranche (which will be completed,
where necessary, with supplemental terms
and conditions and, save in respect of
the issue date, issue price, first
payment of interest and nominal amount of
the Tranche, will be identical to the
terms of other Tranches of the same
Series) will be completed in the final
terms document (the Final Terms).Issue Price
    
    Instruments may be issued at their
nominal amount or at a discount or
premium to their nominal amount. Partly
Paid Instruments may be issued, the issue
price of which will be payable in two or
more instalments.
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Form of Instruments
    
    The Instruments may be issued in bearer
form only. Each Tranche of Instruments
will be represented on issue by a
temporary Global Instrument. The
Temporary Global Instrument may be
deposited on the relevant issue date with
a common depositary for Euroclear and
Clearstream, Luxembourg and/or any other
agreed clearance system. Temporary Global
Instruments will be exchangeable, only in
the manner and upon compliance with the
procedures described herein, (i) for
permanent Global Instruments or (ii) for
Definitive Instruments, in each case not
earlier than 40 days after the issue
date, upon certification of non-U.S.
beneficial ownership. No interest will be
payable in respect of a temporary Global
Instrument except as described under
Summary of Provisions Relating to the
Instruments while in Global Form. Any
permanent Global Instrument shall only be
exchanged for Instruments in definitive
form in the limited circumstances set out
in the permanent Global Instrument.Clearing Systems
    
    Clearstream, Luxembourg, Euroclear and,
in relation to any Tranche, such other
clearing system as may be agreed between
the Issuer, the Issuing and Paying Agent,
the Trustee and the relevant Dealer.Initial Delivery of Instruments
    
    On or before the issue date for each
Tranche, if the relevant Global
Instrument is intended to be eligible
collateral for Eurosystem monetary policy
and intra-day credit operations, the
Global Instrument will be delivered to a
Common Safekeeper for Euroclear and
Clearstream, Luxembourg. On or before the
issue date for each Tranche, if the
relevant Global Instrument is not
intended to be eligible collateral for
Eurosystem monetary policy and intra-day
credit operations, the Global Instrument
representing the relevant Instruments may
be deposited with a common depositary for
Euroclear and Clearstream, Luxembourg.
Global Instruments may also be deposited
with any other clearing system or may be
delivered outside any clearing system
provided that the method of such delivery
has been agreed in advance by the Issuer,
the Issuing and Paying Agent, the Trustee
and the relevant Dealer.Currencies
    
    Subject to compliance with all relevant
laws, regulations and directives,
Instruments may be issued in Euro,
Japanese yen, Sterling, U.S. dollars,
Canadian dollars, Australian dollars, New
Zealand dollars, Swedish krona, Danish
krone, Hong Kong dollars or Swiss francs
or in other currencies if the Issuer and
the relevant Dealer(s) so agree.
Instruments may, subject to compliance as
above, be issued as Dual Currency
Instruments.Maturities
    
    Subject to compliance with all relevant
laws, regulations and directives, any
maturity from one month to perpetuity.Any Instruments having a maturity of less
than one year from their date of issue
must (a) have a minimum redemption
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value
of £100,000 (or its equivalent in other
currencies) and be issued only to persons
whose ordinary activities involve them in
acquiring, holding, managing or disposing
of investments (as principal or agent)
for the purposes of their businesses or
who it is reasonable to expect will
acquire, hold, manage or dispose of
investments (as principal or agent) for
the purposes of their businesses or (b)
be issued in other circumstances which do
not constitute a contravention of Section
19 of FSMA by the Issuer.Denominations
    
    Definitive Instruments will be in such
denominations as may be specified in the
relevant Final Terms, save that (i) in
the case of any Instruments which are to
be admitted to trading on a regulated
market within the European Economic Area
or offered to the public in a Member
State of the European Economic Area in
circumstances which require the
publication of a prospectus under the
Prospectus Directive, the minimum
denomination shall be 50,000 (or its
equivalent in any other currency as at
the date of issue of the Instruments);
and (ii) unless otherwise permitted by
then current laws and regulations,
Instruments which have a maturity of less
than one year will have a minimum
denomination of £100,000 (or its
equivalent in other currencies).Fixed Rate Instruments
    
    Fixed interest will be payable in arrear
on the date or dates in each year
specified in the relevant Final Terms and
at maturity.Floating Rate Instruments
    
    Floating Rate Instruments will bear
interest set separately for each Series
as follows:(a)    on the same basis as the floating
rate under a notional interest rate swap
transaction in the relevant Specified
Currency governed by an agreement
incorporating the 2006 ISDA Definitions
published by the International Swaps and
Derivatives Association, Inc. or(b)    by reference to LIBOR, LIBID, LIMEAN
or EURIBOR (or such other benchmark as
may be specified in the relevant Final
Terms) as adjusted for any applicable
margin. Interest periods will be selected
by the Issuer prior to issue and
specified in the relevant Final Terms.
Floating Rate Instruments may also have a
maximum interest rate, a minimum interest
rate, or both.Zero Coupon Instruments
    
    Zero Coupon Instruments may be issued at
their nominal amount or at a discount to
it and will not bear interest.Dual Currency Instruments
    
    Payments (whether in respect of principal
or interest and whether at maturity or
otherwise) in respect of Dual Currency
Instruments will be made in such
currencies, and based on such rates of
exchange as may be specified in the
relevant Final Terms.Interest Periods and Rates of
    
    The length of the interest periods for
the Instruments and the
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Interest
    
    applicable
interest rate or its method of
calculation may differ from time to time
or be constant for any Series.
Instruments may have a maximum interest
rate, a minimum interest rate, or both.
The use of interest accrual periods
permits the Instruments to bear interest
at different rates in the same interest
period. All such information will be set
out in the relevant Final Terms.Redemption
    
    The relevant Final Terms will specify the
basis for calculating the redemption
amounts payable, which may be by
reference to a formula or as otherwise
provided in the relevant Final Terms.Unless permitted by then current laws and
regulations, Instruments which have a
maturity of less than one year must have
a minimum redemption amount of £100,000
(or its equivalent in other currencies).Redemption by Instalments
    
    The Final Terms issued in respect of each
issue of Instruments that are redeemable
in two or more instalments will set out
the dates on which, and the amounts in
which, such Instruments may be redeemed.Other Instruments
    
    Terms applicable to high interest
Instruments, low interest Instruments,
step-up Instruments, step-down
Instruments, Dual Currency Instruments,
reverse Dual Currency Instruments,
optional Dual Currency Instruments,
Partly-Paid Instruments and any other
type of Instrument that the Issuer, the
Trustee and any Dealer(s) may agree to
issue under the Programme, subject to
compliance with all relevant laws,
regulations and directives, will be set
out in the relevant Final Terms and (if
applicable) the relevant Supplemental
Prospectus.Optional Redemption
    
    The Final Terms issued in respect of each
issue of Instruments will state whether
such Instruments may be redeemed prior to
their stated maturity at the option of
the Issuer (either in whole or in part)
and/or the Instrumentholders, and if so
the terms applicable to such redemption.The Issuer may elect to redeem all, but
not some only, of the Instruments of any
Series at their Residual Holding
Redemption Amount at any time if the
Residual Holding Percentage or more of
the aggregate nominal amount of such
Instruments originally issued shall have
been redeemed or purchased and cancelled.Status of Instruments
    
    The Instruments will constitute
unsubordinated and unsecured obligations
of the Issuer, all as described in Terms
and Conditions of the Instruments 
Status.Negative Pledge
    
    The Instruments will have the benefit of
a negative pledge as described in Terms
and Conditions of the Instruments 
Status and Negative Pledge.Cross Acceleration
    
    The Instruments will have the benefit of
a cross acceleration
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provision as
described in Terms and Conditions of the
Instruments  Events of Default.Other Events of Default
    
    The other events of default under the
Instruments are as specified below under
Terms and Conditions of the Instruments
 Events of Default.Early Redemption
    
    Except as provided in Optional
Redemption and Redemption above,
Instruments will be redeemable at the
option of the Issuer prior to maturity
only for tax reasons. See Terms and
Conditions of the Instruments 
Redemption, Purchase and Options.Withholding Tax
    
    All payments of principal and interest in
respect of the Instruments, Receipts and
Coupons will be made free and clear of
withholding taxes of the United States of
America or any political sub-division of
the United States of America or any
authority in or of the United States of
America having power to tax, unless
compelled by law. In that event, the
Issuer will, subject to customary
exceptions (including the standard EU
exceptions), pay such additional amounts
as will result in the payment to the
Instrumentholders, Receiptholders or
Couponholders of the amounts which would
otherwise have been received in respect
of the Instruments, Receipts and Coupons
had no withholding or deduction been
made, all as described in Terms and
Conditions of the Instruments 
Taxation.Governing Law
    
    EnglishListing
    
    Each Series may be admitted to the
Official List and admitted to trading on
the Market and/or admitted to listing,
trading and/or quotation by any other
listing authority, stock exchange and/or
quotation system as may be agreed between
the Issuer and the relevant Dealer(s) and
specified in the relevant Final Terms or
may be unlisted.Ratings
    
    Tranches of Instruments (as defined in
Overview of the Programme) may be rated
or unrated. Where a Tranche of
Instruments is rated, such rating will be
specified in the relevant Final Terms. A
rating is not a recommendation to buy,
sell or hold securities and may be
subject to suspension, reduction or
withdrawal at any time by the assigning
rating agency.Selling Restrictions
    
    United States, United Kingdom, European
Economic Area (in the case of unlisted
Instruments) and Japan. See Plan of
Distribution.Category 3 selling restrictions will
apply to the Instruments for the purposes
of Regulation S under the Securities Act.The Instruments will be issued in
compliance with U.S. Treas. Reg.
§1.163-5(c)(2)(i)(D) (the D Rules)
unless the Instruments are issued other
than in compliance with the D Rules but
in circumstances in which the Instruments
will not constitute registration
required obligations under the United
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States Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA),
which circumstances will be referred to
in the relevant Final Terms as a
transaction to which TEFRA is not
applicable.Terms and Conditions
    
    The Terms and Conditions applicable to
each Series will be as agreed between the
Issuer, the Trustee and the relevant
Dealer(s) or other subscriber at or prior
to the time of issuance of such Series
and will be specified in the relevant
Final Terms. The Terms and Conditions
applicable to each Series will therefore
be those as set out in Terms and
Conditions of the Instruments below as
supplemented, modified or replaced by the
relevant Final Terms.
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RISK FACTORS
 The Issuer believes that the following factors may affect its ability to fulfil its obligations
under Instruments issued under the Programme. All of these factors are contingencies which may
or may not occur and the Issuer is not in a position to express a view on the likelihood of any
such contingency occurring.
 Factors which the Issuer believes may be material for the purpose of assessing the market risks
associated with Instruments issued under the Programme are also described below.
 The Issuer believes that the factors described below represent the principal risks inherent in
investing in Instruments issued under the Programme, but the Issuer may be unable to pay
interest, principal or other amounts on or in connection with any Instruments for other
reasons. If this occurs, prospective investors may lose the value of their entire investment or
part of it. Prospective investors should read the detailed information set out elsewhere in
this Prospectus and reach their own views prior to making any investment decision.
 Factors that may affect the Issuers ability to fulfil its obligations under Instruments issued
under the Programme
 Risks relating to the Issuer and its businesses
 Holding company status and changes in law or regulation in the geographies in which the Group
operates could have an adverse effect on its results of operations.
  Breaches of, or changes in, environmental or health and safety laws or regulations could expose
the Group to claims for financial compensation and adverse regulatory consequences, as well as
damaging the reputation of the Group.
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MGP
 Network failure or the inability to carry out critical non-network operations may have
significant adverse impacts on both the Groups financial position and its reputation.
  The Groups results of operations depend on a number of factors relating to business
performance including performance against regulatory targets, recovery of incurred expenditure
and the delivery of anticipated cost and efficiency savings.
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KeySpan
 Business development activity risks.
  The Groups risk mitigation techniques such as hedging and current regulatory arrangements may
not adequately provide protection.
  The Groups reputation and long-term financial condition may be harmed if consumers of energy
suffer a disruption to their supply even if this disruption is outside the Groups control.
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The Groups financial position may be adversely affected by a number of factors including
restrictions in borrowing and debt arrangements, changes to credit ratings or outlook and
effective tax rates.
  Future funding requirements of Issuers pension plans could adversely affect the results of
operations of the Issuer.
  New or revised accounting standards, rules and interpretations.
  The Groups operating results may fluctuate on a seasonal and quarterly basis.
  Customers and counterparties to the Groups transactions may fail to perform their obligations,
which could harm the Groups results of operations.
 LIPA
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A substantial portion of revenues are derived from agreements with LIPA and no assurances can
be made that these arrangements will not be discontinued at some point in the future.
 2006 MSA
 CID DOJ
 Additional risks include, but are not limited to, the following:
 
    
    inflationary trends and increases in prevailing interest rates on the Groups
borrowings as well as general economic conditions, especially in the northeast United
States;
    
    creditworthiness of counterparties to derivative instruments and commodity contracts;
    
    retention of key personnel and the Groups ability to successfully negotiate extensions
to collective bargaining agreements;
    
    potential write-down of the Groups investment in gas properties when gas prices are
depressed or if the Group has significant downward revisions in its estimated proved gas
reserves;
    
    the degree to which the Group develops unregulated business ventures as well as federal
and state regulatory policies affecting the ability of the Group to retain and operate
such business ventures profitably;
    
    a change in the fair market value of the Groups investments that could cause a
significant change in the carrying value of such investments or the carrying value of
related goodwill;
    
    the Groups insurance not adequately providing coverage for certain hazards, such as
unexpected outages at critical facilities, damage to pipelines, equipment, properties and
people;
    
    competition facing the Groups unregulated energy services businesses as well as the
Groups gas distribution business; and
    
    other risks detailed from time to time in other reports and other documents filed by
the Group or its affiliates with the SEC.
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Description of
National Grid USA
 Factors which are material for the purpose of assessing the market risks associated with
Instruments issued under the Programme
 Instruments may not be a suitable investment for all investors
  (i)
    
    have sufficient knowledge and experience to make a meaningful evaluation of the
relevant Instruments, the merits and risks of investing in the relevant Instruments and
the information contained or incorporated by reference in this Prospectus or any
applicable supplement;(ii)
    
    have access to, and knowledge of, appropriate analytical tools to evaluate, in the
context of its particular financial situation, an investment in the relevant Instruments
and the impact such investment will have on its overall investment portfolio;(iii)
    
    have sufficient financial resources and liquidity to bear all of the risks of an
investment in the relevant Instruments, including where principal or interest is payable
in one or more currencies, or where the currency for principal or interest payments is
different from the potential investors currency;(iv)
    
    understand thoroughly the terms of the relevant Instruments and be familiar with the
behaviour of any relevant indices and financial markets; and(v)
    
    be able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic, interest rate and other factors that may affect its investment and
its ability to bear the applicable risks.
  Risks related to the structure of a particular issue of Instruments
  Instruments subject to optional redemption by the Issuer
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Dual Currency Instruments
  (i)
    
    the market price of such Instruments may be volatile;(ii)
    
    they may receive no interest;(iii)
    
    payment of principal or interest may occur at a different time or in a different
currency than expected; and(iv)
    
    the amount of principal payable at redemption may be less than the nominal amount of
such Instruments or even zero;
 Partly-paid Instruments
  Variable rate Instruments with a multiplier or other leverage factor
  Fixed/Floating Rate Instruments
  Instruments issued at a substantial discount or premium
  Risks related to Instruments generally
  Modification, waiver and substitution
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European Monetary Union
  EU Savings Directive
   if implemented
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Change of law
  Risks related to the market generally
  The secondary market generally
  The Clearing Systems
     Exchange rate risks and exchange controls
 Investors Currency
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Interest rate risks
  Credit ratings may not reflect all risks
  Legal investment considerations may restrict certain investments
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TERMS AND CONDITIONS OF THE INSTRUMENTS
 The following is the text of the terms and conditions which, save for the text in italics and
subject to completion and amendment and as supplemented or varied in accordance with the
provisions of Part A of the relevant Final Terms, will be endorsed on the Instruments in
definitive form (if any) issued in exchange for the Global Instrument(s) representing each
Series. Either (a) the full text of these terms and conditions together with the relevant
provisions of Part A of the Final Terms or (b) these terms and conditions as so completed,
amended, supplemented or varied (and subject to simplification by the deletion of
non-applicable provisions), shall be endorsed on such Instruments. All capitalised terms which
are not defined in these Conditions will have the meanings given to them in the Trust Deed or
Part A of the relevant Final Terms. Those definitions will be endorsed on the Definitive
Instruments.
 Instruments
 Issuer Programme Instruments Trust Deed Trustee Agency Agreement Issuing and Paying Agent Paying Agents Calculation Agent(s)
 Coupons Talons Couponholders Receipts
 1
    
    Form, Denomination and Title
 
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Instrumentholder holder
 2
    
    Status and Negative Pledge
 2.1
    
    Status
 The Instruments and the Receipts and Coupons relating to them constitute direct,
unconditional and unsecured obligations of the Issuer and rank pari passuwithout any
preference or priority among themselves. The payment obligations of the Issuer under the
Instruments, Receipts and Coupons shall, subject to such exceptions as are from time to
time applicable under the laws of England, rank equally with all other present and future
unsecured obligations (other than subordinated obligations, if any) of the Issuer.
 2.2
    
    Negative Pledge
 So long as any Instrument, Receipt or Coupon remains outstanding (as defined in the Trust
Deed) the Issuer will not create or permit to subsist any mortgage, charge, pledge, lien
or other form of encumbrance or security interest (Security) upon the whole or any part
of its undertaking, assets or revenues present or future to secure any Relevant
Indebtedness, or any guarantee of or indemnity in respect of any Relevant Indebtedness
unless, at the same time or prior thereto, the Issuers obligations under the
Instruments, the Receipts, the Coupons and the Trust Deed (a) are secured equally and
rateably therewith or benefit from a guarantee or indemnity in substantially identical
terms thereto, as the case may be, in each case to the satisfaction of the Trustee, or
(b) have the benefit of such other security, guarantee, indemnity or other arrangement as
the Trustee in its absolute discretion shall deem to be not materially less beneficial to
the Instrumentholders or as shall be approved by an Extraordinary Resolution (as defined
in the Trust Deed) of the Instrumentholders.For the purposes of these Conditions, Relevant Indebtedness means any present or future
indebtedness in the form of, or represented by, bonds, notes, debentures, loan stock or
other securities which are for the time being, or are intended, with the agreement of the
Issuer, to be quoted, listed or ordinarily dealt in on any stock exchange.
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3
    
    Interest
 3.1
    
    Interest on Fixed Rate Instruments
 Each Fixed Rate Instrument bears interest on its outstanding nominal amount from the
Interest Commencement Date at the rate per annum (expressed as a percentage) equal to the
Rate of Interest, payable in arrear on each Interest Payment Date. The amount of Interest
payable shall be determined in accordance with Condition 3.8.If a Fixed Coupon Amount or a Broken Amount is specified in the relevant Final Terms, the
amount of interest payable on each Interest Payment Date will amount to the Fixed Coupon
Amount, or, if applicable, the Broken Amount so specified and in the case of a Broken
Amount will be payable on the particular Interest Payment Date(s) specified in the
relevant Final Terms.
 3.2
    
    Interest on Floating Rate Instruments
 3.2.1
    
    Interest Payment DatesEach Floating Rate Instrument bears interest on its outstanding nominal amount from
the Interest Commencement Date at the rate per annum (expressed as a percentage)
equal to the Rate of Interest, such interest being payable in arrear on each
Interest Payment Date. The amount of Interest payable shall be determined in
accordance with Condition 3.8. Such Interest Payment Date(s) is/are either
specified in the relevant Final Terms as Specified Interest Payment Dates or, if no
Specified Interest Payment Date(s) is/are specified in the relevant Final Terms,
Interest Payment Date shall mean each date which falls the number of months or
other period shown on this Instrument as the Interest Period after the preceding
Interest Payment Date or, in the case of the first Interest Payment Date, after the
Interest Commencement Date.3.2.2
    
    Business Day ConventionIf any date which is specified to be subject to adjustment in accordance with a
Business Day Convention would otherwise fall on a day which is not a Business Day,
then, if the Business Day Convention specified is (a) the Floating Rate Convention,
such date shall be postponed to the next day which is a Business Day unless it
would then fall into the next calendar month, in which event (x) such date shall be
brought forward to the immediately preceding Business Day and (y) each subsequent
such date shall be the last Business Day of the month in which such date would have
fallen had it not been subject to adjustment, (b) the Following Business Day
Convention, such date shall be postponed to the next day which is a Business Day,
(c) the Modified Following Business Day Convention, such date shall be postponed to
the next day which is a Business Day unless it would then fall into the next
calendar month, in that event such date shall be brought forward to the immediately
preceding Business Day or (d) the Preceding Business Day Convention, such date
shall be brought forward to the immediately preceding Business Day.3.2.3
    
    Rate of Interest for Floating Rate InstrumentsThe Rate of Interest in respect of Floating Rate Instruments for each Interest
Accrual Period shall be determined in the manner specified in the relevant Final
Terms and the provisions below relating to either ISDA Determination or Screen Rate
Determination shall apply, depending upon which is specified on this Instrument.
 (a)
    
    ISDA Determination for Floating Rate Instruments: Where ISDA
Determination is specified in the relevant Final Terms as the manner in which
the Rate of Interest is to be determined, the Rate of Interest for each
Interest Accrual Period shall be determined by the Calculation Agent as a rate
equal to the relevant ISDA Rate. For
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the purposes of this sub-paragraph (a),
ISDA Rate for an Interest Accrual Period
means a rate equal to the Floating Rate which would be determined by the
Calculation Agent under a Swap Transaction under the terms of an agreement
incorporating the ISDA Definitions and under which:
 (i)
    
    the Floating Rate Option is as specified in the
relevant Final Terms;(ii)
    
    the Designated Maturity is a period specified in
the relevant Final Terms; and(iii)
    
    the relevant Reset Date is the first day of that
Interest Accrual Period unless otherwise specified in the relevant Final
Terms.
 For the purposes of this sub-paragraph (a), Floating Rate, Calculation
Agent, Floating Rate Option, Designated Maturity, Reset Date and Swap
Transaction have the meanings given to those terms in the ISDA Definitions.(b)
    
    Screen Rate Determination for Floating Rate Instruments:
 (i)
    
    Where Screen Rate Determination is specified in
the relevant Final Terms as the manner in which the Rate of Interest is
to be determined, the Rate of Interest for each Interest Accrual Period
will, subject as provided below, be either:
 (x)
    
    the offered quotation; or(y)
    
    the arithmetic mean of the offered
quotations,
 (expressed as a percentage rate per annum) for the Reference Rate
which appears or appear, as the case may be, on the Relevant Screen
Page as at either 11.00 a.m. (London time in the case of LIBOR or
Brussels time in the case of EURIBOR) on the Interest Determination
Date in question as determined by the Calculation Agent. If five or
more of such offered quotations are available on the Relevant Screen
Page, the highest (or, if there is more than one such highest
quotation, one only of such quotations) and the lowest (or, if there
is more than one such lowest quotation, one only of such quotations)
shall be disregarded by the Calculation Agent for the purpose of
determining the arithmetic mean of such offered quotations.If the Reference Rate from time to time in respect of Floating Rate
Instruments is specified hereon as being other than LIBOR or EURIBOR,
the Rate of Interest in respect of such Instruments will be determined
as provided hereon.(ii)
    
    if the Relevant Screen Page is not available or
if, sub-paragraph (i)(x) applies and no such offered quotation appears
on the Relevant Screen Page or if sub-paragraph (i)(y) above applies and
fewer than three such offered quotations appear on the Relevant Screen
Page in each case as at the time specified above, subject as provided
below, the Calculation Agent shall request, if the Reference Rate is
LIBOR, the principal London office of each of the Reference Banks or, if
the Reference Rate is EURIBOR, the principal Euro-zone office of each of
the Reference Banks, to provide the Calculation Agent with its offered
quotation (expressed as a percentage rate per annum) for the Reference
Rate if the Reference Rate is LIBOR, at approximately 11.00 a.m. (London
time), or if the Reference Rate is EURIBOR, at approximately 11.00 a.m.
(Brussels time) on the Interest Determination Date in question. If two
or more of the Reference Banks provide the Calculation
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Agent with such
offered quotations, the Rate of Interest for such Interest
Period shall be the arithmetic mean of such offered quotations as
determined by the Calculation Agent; and(iii)
    
    if paragraph (ii) above applies and the
Calculation Agent determines that fewer than two Reference Banks are
providing offered quotations, subject as provided below, the Rate of
Interest shall be the arithmetic mean of the rates per annum (expressed
as a percentage) as communicated to (and at the request of) the
Calculation Agent by the Reference Banks or any two or more of them, at
which such banks were offered, if the Reference Rate is LIBOR, at
approximately 11.00 a.m. (London time) or, if the Reference Rate is
EURIBOR, at approximately 11.00 a.m. (Brussels time) on the relevant
Interest Determination Date, deposits in the Specified Currency for a
period equal to that which would have been used for the Reference Rate
by leading banks in, if the Reference Rate is LIBOR, the London
inter-bank market or, if the Reference Rate is EURIBOR, the Euro-zone
inter-bank market, as the case may be, or, if fewer than two of the
Reference Banks provide the Calculation Agent with such offered rates,
the offered rate for deposits in the Specified Currency for a period
equal to that which would have been used for the Reference Rate, or the
arithmetic mean of the offered rates for deposits in the Specified
Currency for a period equal to that which would have been used for the
Reference Rate, at which, if the Reference Rate is LIBOR, at
approximately 11.00 a.m. (London time) or, if the Reference Rate is
EURIBOR, at approximately 11.00 a.m. (Brussels time), on the relevant
Interest Determination Date, any one or more banks (which bank or banks
is or are in the opinion of the Trustee and the Issuer suitable for such
purpose) informs the Calculation Agent it is quoting to leading banks
in, if the Reference Rate is LIBOR, the London inter-bank market or, if
the Reference Rate is EURIBOR, the Euro-zone inter-bank market, as the
case may be, provided that, if the Rate of Interest cannot be determined
in accordance with the foregoing provisions of this paragraph, the Rate
of Interest shall be determined as at the last preceding Interest
Determination Date (though substituting, where a different Margin or
Maximum or Minimum Rate of Interest is to be applied to the relevant
Interest Accrual Period from that which applied to the last preceding
Interest Accrual Period, the Margin or Maximum or Minimum Rate of
Interest relating to the relevant Interest Accrual Period, in place of
the Margin or Maximum or Minimum Rate of Interest relating to that last
preceding Interest Accrual Period).
 3.3
    
    Zero Coupon Instruments
 Where an Instrument, the Interest Basis of which is specified to be Zero Coupon, is
repayable prior to the Maturity Date and is not paid when due, the amount due and payable
prior to the Maturity Date shall be the Early Redemption Amount of such Instrument. As
from the Maturity Date, the Rate of Interest for any overdue principal of such an
Instrument shall be a rate per annum (expressed as a percentage) equal to the
Amortisation Yield (as defined in Condition 4.4.1(b)).
 3.4
    
    Dual Currency Instruments
 In the case of Dual Currency Instruments, if the rate or amount of interest falls to be
determined by reference to a Rate of Exchange or a method of calculating a Rate of
Exchange, the rate or amount of interest payable shall be determined in the manner
specified in the relevant Final Terms.
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3.5
    
    Partly Paid Instruments
 In the case of Partly Paid Instruments (other than Partly Paid Instruments which are Zero
Coupon Instruments), interest will accrue as previously stated on the paid-up nominal
amount of such Instruments and otherwise as specified in the relevant Final Terms.
 3.6
    
    Accrual of Interest
 Interest shall cease to accrue on each Instrument on the due date for redemption unless,
upon due presentation, payment is improperly withheld or refused, in which event interest
shall continue to accrue (as well after as before judgment) at the Rate of Interest in
the manner provided in this Condition 3 to the Relevant Date (as defined in Condition 6).
 3.7
    
    Margin, Maximum/Minimum Rates of Interest, Instalment Amounts and Redemption Amounts
and Rounding
 (i)
    
    If any Margin is specified in the relevant Final Terms (either (x)
generally, or (y) in relation to one or more Interest Accrual Periods), an
adjustment shall be made to all Rates of Interest, in the case of (x), or the Rates
of Interest for the specified Interest Accrual Periods, in the case of (y),
calculated in accordance with Condition 3.2.3(b) above, by adding (if a positive
number) or subtracting (if a negative number) the absolute value of such Margin,
subject always to the next paragraph.(ii)
    
    If any Maximum or Minimum Rate of Interest, Instalment Amount or
Redemption Amount is specified in the relevant Final Terms, then any Rate of
Interest, Instalment Amount or Redemption Amount shall be subject to such maximum or
minimum, as the case may be.(iii)
    
    For the purposes of any calculations required pursuant to these
Conditions (unless otherwise specified), (x) all percentages resulting from such
calculations shall be rounded, if necessary, to the nearest one hundred thousandth
of a percentage point (with halves being rounded up), (y) all figures shall be
rounded to seven significant figures (with halves being rounded up) and (z) all
currency amounts that fall due and payable shall be rounded to the nearest unit of
such currency (with halves being rounded up), save in the case of yen, which shall
be rounded down to the nearest yen. For these purposes unit means the lowest
amount of such currency which is available as legal tender in the country of such
currency.
 3.8
    
    Calculations
 The amount of interest payable per Calculation Amount in respect of any Instrument for
any Interest Accrual Period shall be equal to the product of the Rate of Interest, the
Calculation Amount as specified in the relevant Final Terms, and the Day Count Fraction
for such Interest Accrual Period, unless an Interest Amount (or a formula for its
calculation) is applicable to such Interest Accrual Period, in which case the amount of
interest payable per Calculation Amount in respect of such Instrument for such Interest
Accrual Period shall equal such Interest Amount (or be calculated in accordance with such
formula). Where any Interest Period comprises two or more Interest Accrual Periods, the
amount of interest payable per Calculation Amount in respect of such Interest Period
shall be the sum of the Interest Amounts payable in respect of each of those Interest
Accrual Periods. In respect of any other period for which interest is required to be
calculated, the provisions above shall apply save that the Day Count Fraction shall be
for the period for which interest is required to be calculated.
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3.9
    
    Determination and Publication of Rates of Interest, Interest Amounts, Final
Redemption Amounts, Early Redemption Amounts, Optional Redemption Amounts and Instalment
Amounts
 The Calculation Agent shall as soon as practicable on each Interest Determination Date or
such other time on such date as the Calculation Agent may be required to calculate any
rate or amount,
obtain any quotation or make any determination or calculation, determine such rate and
calculate the Interest Amounts for the relevant Interest Accrual Period, calculate the
Redemption Amount or Instalment Amount, obtain such quote or make such determination or
calculation, as the case may be, and cause the Rate of Interest and the Interest Amounts
for each Interest Accrual Period and the relevant Interest Payment Date and, if required
to be calculated, the Final Redemption Amount, Early Redemption Amount, Optional
Redemption Amount or any Instalment Amount to be notified to the Trustee, the Issuer,
each of the Paying Agents, the Instrumentholders, any other Calculation Agent appointed
in respect of the Instruments that is to make a further calculation upon receipt of such
information and, if the Instruments are listed on a stock exchange and the rules of such
exchange so require, such exchange as soon as possible after their determination but in
no event later than (i) the commencement of the relevant Interest Period, if determined
prior to such time, in the case of notification to such exchange of a Rate of Interest
and Interest Amount, or (ii) in all other cases, the fourth Business Day after such
determination. Where any Interest Payment Date or Interest Period Date is subject to
adjustment pursuant to Condition 3.2.3(b)(ii), the Interest Amounts and the Interest
Payment Date so published may subsequently be amended (or appropriate alternative
arrangements made with the consent of the Trustee by way of adjustment) without notice in
the event of an extension or shortening of the Interest Period. If the Instruments become
due and payable under Condition 8, the accrued interest and the Rate of Interest payable
in respect of the Instruments shall nevertheless continue to be calculated as previously
in accordance with this Condition but no publication of the Rate of Interest or the
Interest Amount so calculated need be made unless the Trustee otherwise requires. The
determination of any rate or amount, the obtaining of each quotation and the making of
each determination or calculation by the Calculation Agent(s) shall (in the absence of
manifest error) be final and binding upon all parties.
 3.10
    
    Determination or Calculation by Trustee
 If the Calculation Agent does not at any time for any reason determine or calculate the
Rate of Interest for an Interest Accrual Period or any Interest Amount, Instalment
Amount, Final Redemption Amount, Early Redemption Amount or Optional Redemption Amount
the Trustee shall do so (or shall appoint an agent on its behalf to do so) and such
determination or calculation shall be deemed to have been made by the Calculation Agent.
In doing so, the Trustee shall apply the preceding provisions of this Condition, with any
necessary consequential amendments, to the extent that, in its opinion, it can do so,
and, in all other respects it shall do so in such manner as it shall deem fair and
reasonable in all the circumstances.
 3.11
    
    Definitions
 In these Conditions, unless the context otherwise requires, the following defined terms
shall have the meanings set out below:Business Day means:
 (a)
    
    in the case of a currency other than Euro, a day (other than a Saturday
or Sunday) on which commercial banks and foreign exchange markets settle payments in
the principal financial centre for such currency; and/or(b)
    
    in the case of Euro, a day on which the TARGET System is operating (a
TARGET Business Day); and/or
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(c)
    
    in the case of a currency and/or one or more Business Centres as
specified in the relevant Final Terms, a day (other than a Saturday or a Sunday) on
which commercial banks and foreign exchange markets settle payments in such currency
or, if no currency is indicated, generally in each of the Business Centres.
 Day Count Fraction means, in respect of the calculation of an amount of interest on any
Instrument for any period of time (from and including the first day of such period to but
excluding the last) (whether or not constituting an Interest Period or Interest Accrual
Period, the Calculation Period):
 (a)
    
    if Actual/Actual or Actual/Actual-ISDA is specified in the relevant
Final Terms, the actual number of days in the Calculation Period divided by 365 (or,
if any portion of that Calculation Period falls in a leap year, the sum of (i) the
actual number of days in that portion of the Calculation Period falling in a leap
year divided by 366 and (ii) the actual number of days in that portion of the
Calculation Period falling in a non-leap year divided by 365);(b)
    
    if Actual/365 (Fixed) is specified in the relevant Final Terms, the
actual number of days in the Calculation Period divided by 365;(c)
    
    if Actual/360 is specified in the relevant Final Terms, the actual
number of days in the Calculation Period divided by 360;(d)
    
    if 30/360, 360/360 or Bond Basis is specified in the relevant Final
Terms, the number of days in the Calculation Period divided by 360 calculated on a
formula basis as follows:(EQUATION)where:Y1 is the year, expressed as a number, in which the first day of the Calculation
Period falls;Y2 is the year, expressed as a number, in which the day immediately following the
last day included in the Calculation Period falls;M1 is the calendar month, expressed as a number, in which the first day of the
Calculation Period falls;M2 is the calendar month, expressed as a number, in which the day immediately
following the last day included in the Calculation Period falls;D1 is the first calendar day, expressed as a number, of the
Calculation Period, unless such number would be 31, in which case D1
will be 30; andD2 is the calendar day, expressed as a number, immediately following
the last day included in the Calculation Period, unless such number would be 31 and
D1 is greater than 29, in which case D2 will be 30;(e)
    
    if 30E/360 or Eurobond Basis is specified in the relevant Final
Terms, the number of days in the Calculation Period divided by 360 calculated on a
formula basis as follows:(EQUATION)
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where:Y1 is the year, expressed as a number, in which the first day of the Calculation
Period falls;Y2 is the year, expressed as a number, in which the day immediately following the
last day included in the Calculation Period falls;M1 is the calendar month, expressed as a number, in which the first day of the
Calculation Period falls;M2 is the calendar month, expressed as a number, in which the day immediately
following the last day included in the Calculation Period falls;D1 is the first calendar day, expressed as a number, of the Calculation Period,
unless such number would be 31, in which case D1 will be 30; andD2 is the calendar day, expressed as a number, immediately following the last day
included in the Calculation Period, unless such number would be 31, in which case
D2 will be 30;(f)
    
    if 30E/360 (ISDA) is specified in the relevant Final Terms, the number
of days in the Calculation Period divided by 360, calculated on a formula basis as
follows:(EQUATION)where:Y1 is the year, expressed as a number, in which the first day of the Calculation
Period falls;Y2 is the year, expressed as a number, in which the day immediately following the
last day included in the Calculation Period falls;M1 is the calendar month, expressed as a number, in which the first day of the
Calculation Period falls;M2 is the calendar month, expressed as a number, in which the day immediately
following the last day included in the Calculation Period falls;D1 is the first calendar day, expressed as a number, of the Calculation Period,
unless (i) that day is the last day of February or (ii) such number would be 31, in
which case D1 will be 30; andD2 is the calendar day, expressed as a number, immediately following the last day
included in the Calculation Period, unless (i) that day is the last day of February
but not the Maturity Date or (ii) such number would be 31, in which case
D2 will be 30; and(g)
    
    if Actual/Actual-ICMA is specified in the relevant Final Terms:
 (i)
    
    if the Calculation Period is equal to or shorter than the
Determination Period during which it falls, the actual number of days in the
Calculation Period divided by the product of (x) the actual number of days in
such Determination Period and (y) the number of Determination Periods in any
year; and(ii)
    
    if the Calculation Period is longer than one Determination
Period, the sum of:
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(A)
    
    the actual number of days in such Calculation
Period falling in the Determination Period in which it begins divided by
the product of (a) the actual number of days in such Determination
Period and (b) the number of Determination Periods in any year; and(B)
    
    the actual number of days in such Calculation
Period falling in the next Determination Period divided by the product
of (a) the actual number of days in such Determination Period and (b)
the number of Determination Periods in any year,where:Determination Period means the period from and including a
Determination Date in any year to but excluding the next Determination
Date; andDetermination Date means the date specified as such in the relevant
Final Terms or, if none is so specified, the Interest Payment Date.
 Euro-zone means the region comprising of member states of the European Union that adopt
the single currency in accordance with the Treaty establishing the European Community as
amended.Interest Accrual Period means the period beginning on (and including) the Interest
Commencement Date and ending on (but excluding) the first Interest Period Date and each
successive period beginning on (and including) an Interest Period Date and ending on (but
excluding) the next succeeding Interest Period Date.Interest Amount means:
 (a)
    
    in respect of an Interest Accrual Period, the amount of interest payable
per Calculation Amount for that Interest Accrual Period and which, in the case of
Fixed Rate Instruments, and unless otherwise specified in the relevant Final Terms,
shall mean the Fixed Coupon Amount or Broken Amount specified in the relevant Final
Terms as being payable on the Interest Payment Date ending the Interest Period of
which such Interest Accrual Period forms part; and(b)
    
    in respect of any other period, the amount of interest payable per
Calculation Amount for that period.
 Interest Commencement Date means the Issue Date or such other date as may be specified
in the relevant Final Terms.Interest Determination Date means, with respect to a Rate of Interest and Interest
Accrual Period, the date specified as such in the relevant Final Terms or, if none is so
specified, (a) the first day of such Interest Accrual Period if the Specified Currency is
Sterling or (b) the day falling two Business Days in London prior to the first day of
such Interest Accrual Period if the Specified Currency is neither Sterling nor Euro or
(c) the day falling two TARGET Business Days prior to the first day of such Interest
Accrual Period if the Specified Currency is Euro.Interest Payment Date means the date or dates specified as such in, or determined in
accordance with the provisions of, the relevant Final Terms and, if a Business Day
Convention is specified in the relevant Final Terms, as the same may be adjusted in
accordance with the relevant Business Day Convention.Interest Period means the period beginning on (and including) the Interest Commencement
Date and ending on (but excluding) the first Interest Payment Date and each successive
period
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beginning on (and including) an Interest Payment Date and ending on (but
excluding) the next succeeding Interest Payment Date.Interest Period Date means each Interest Payment Date unless otherwise specified in the
relevant Final Terms.ISDA Definitions means the 2006 ISDA Definitions as published by the International
Swaps and Derivatives Association, Inc., unless otherwise specified in the relevant Final
Terms.Rate of Interest means the rate of interest payable from time to time in respect of
this Instrument and that is either specified on, or calculated in accordance with the
provisions of, the relevant Final Terms.Redemption Amount means, as appropriate, the Final Redemption Amount, the Early
Redemption Amount (Tax), the Optional Redemption Amount (Call), the Optional Redemption
Amount (Put), the Early Termination Amount or such other amount in the nature of a
redemption amount as may be specified in, or determined in accordance with the provisions
of the relevant Final Terms.Reference Banks means, in the case of a determination of LIBOR, the principal London
office of four major banks in the London inter-bank market and, in the case of a
determination of EURIBOR, the principal Euro-zone office of four major banks in the
Euro-zone inter-bank market, in each case selected by the Calculation Agent or as
specified in the relevant Final Terms.Reference Rate means the rate specified as such in the relevant Final Terms.Relevant Screen Page means such page, section, caption, column or other part of a
particular information service as may be specified in the relevant Final Terms.Specified Currency means the currency specified as such in the relevant Final Terms or,
if none is specified, the currency in which the Instruments are denominated.TARGET System means the Trans-European Automated Real-Time Gross Settlement Express
Transfer (known as TARGET2) System which was launched on 19 November 2007 or any
successor to it.
 3.12
    
    Calculation AgentThe Issuer shall procure that there shall at all times be one or more Calculation Agents
if provision is made for them in the relevant Final Terms and for so long as any
Instrument is outstanding. Where more than one Calculation Agent is appointed in respect
of the Instruments, references in these Conditions to the Calculation Agent shall be
construed as each Calculation Agent performing its respective duties under these
Conditions. If the Calculation Agent is unable or unwilling to act as such or if the
Calculation Agent fails duly to establish the Rate of Interest for an Interest Period or
Interest Accrual Period or to calculate any Interest Amount, Instalment Amount, Final
Redemption Amount, Early Redemption Amount or Optional Redemption Amount, as the case may
be, or to comply with any other requirement, the Issuer shall (with the prior approval of
the Trustee) appoint a leading bank or financial institution engaged in the interbank
market (or, if appropriate, money, swap or over-the-counter index options market) which
is most closely connected with the calculation or determination to be made by the
Calculation Agent (acting through its principal London office or any other office
actively involved in such market) to act as such in its place. The Calculation Agent may
not resign its duties without a successor having been appointed as specified in this
paragraph.
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4
    
    Redemption, Purchase and Options
 4.1
    
    Final RedemptionUnless previously redeemed, purchased and cancelled as provided below, this Instrument
will be redeemed at its Final Redemption Amount (which, unless otherwise provided, is its
nominal amount) on the Maturity Date specified in the relevant Final Terms provided,
however, that if this Instrument is a Perpetual Instrument it will only be redeemable and
repayable in accordance with the following provisions of this Condition 4.4.2
    
    Redemption for Taxation ReasonsIf, on the occasion of the next payment in respect of the Instruments the Issuer
satisfies the Trustee immediately before the giving of the notice referred to below that
it would be unable to make such payment without having to pay additional amounts as
described in Condition 6, and such requirement to pay such additional amounts arises by
reason of a change in the laws of the United States of America or any political
sub-division of the United States of America or any authority in or of the United States
of America having power to tax or in the interpretation or application of the laws of the
United States of America or any political sub-division of the United States of America or
any authority in or of the United States of America having power to tax or in any
applicable double taxation treaty or convention, which change becomes effective on or
after the date on which agreement is reached to issue the first Tranche of the
Instruments, and such requirement cannot be avoided by the Issuer taking reasonable
measures (such measures not involving any material additional payments by, or expense
for, the Issuer), the Issuer may, at its option, at any time, having given not less than
30 nor more than 45 days notice to the Instrumentholders in accordance with Condition
13, redeem all, but not some only, of the Instruments at their Early Redemption Amount
together with interest accrued to the date of redemption provided that the date fixed for
redemption shall not be earlier than 90 days prior to the earliest date on which the
Issuer would be obliged to pay such additional amounts or make such withholding or
deduction, as the case may be, were a payment in respect of the Instruments then due.
Prior to the publication of any notice of redemption pursuant to this Condition 4.2, the
Issuer shall deliver to the Trustee a certificate signed by two directors of the Issuer
stating that the requirement referred to above cannot be avoided by the Issuer taking
reasonable measures available to it and the Trustee shall be entitled to accept such
certificate as sufficient evidence of the satisfaction of the condition precedent set out
above in which event it shall be conclusive and binding on Instrumentholders and
Couponholders.4.3
    
    PurchasesThe Issuer and any of its Subsidiaries may at any time purchase Instruments (provided
that all unmatured Receipts and Coupons and unexchanged Talons appertaining to them are
attached or surrendered with them) in the open market or otherwise at any price.Subsidiary means any corporation a majority of the outstanding voting stock of which is
owned, directly or indirectly, by the Issuer.4.4
    
    Early Redemption
 4.4.1
    
    Zero Coupon Instruments
 (a)
    
    The Early Redemption Amount payable in respect of any Zero
Coupon Instrument, the Early Redemption Amount of which is not linked to a
formula, upon redemption of such Instrument pursuant to Condition 4.2 or upon
it becoming due and payable as provided in Condition 8 shall be the Amortised
Face Amount (calculated as provided below) of such Instrument unless otherwise
specified in the relevant Final Terms.
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(b)
    
    Subject to the provisions of sub-paragraph (c) below, the
Amortised Face Amount of any such Instrument shall be the scheduled Final
Redemption Amount of such Instrument on the Maturity Date discounted at a rate
per annum (expressed as a percentage) equal to the Amortisation Yield (which,
if none is specified in the relevant Final Terms, shall be such rate as would
produce an Amortised Face Amount equal to the issue price of the Instruments
if they were discounted back to their issue price on the Issue Date)
compounded annually.(c)
    
    If the Early Redemption Amount payable in respect of any such
Instrument upon its redemption pursuant to Condition 4.2 or, if applicable,
Condition 4.5 or upon it becoming due and payable as provided in Condition 8,
is not paid when due, the Early Redemption Amount due and payable in respect
of such Instrument shall be the Amortised Face Amount of such Instrument as
defined in sub-paragraph (b) above, except that such sub-paragraph shall have
effect as though the reference in that sub-paragraph to the date on which the
Instrument becomes due and payable was replaced by a reference to the Relevant
Date as defined in Condition 6. The calculation of the Amortised Face Amount
in accordance with this sub-paragraph shall continue to be made (as well after
as before judgment) until the Relevant Date, unless the Relevant Date falls on
or after the Maturity Date, in which case the amount due and payable shall be
the scheduled Final Redemption Amount of such Instrument on the Maturity Date
together with any interest that may accrue in accordance with Condition 3.2.
 Where such calculation is to be made for a period of less than one year, it shall
be made on the basis of the Day Count Fraction specified in the relevant Final
Terms.4.4.2
    
    Other InstrumentsThe Early Redemption Amount payable in respect of any Instrument (other than
Instruments described in Condition 4.4.1), upon redemption of such Instrument
pursuant to this Condition 4.4 or upon it becoming due and payable as provided in
Condition 8, shall be the Final Redemption Amount unless otherwise specified in the
relevant Final Terms.
 4.5
    
    Redemption at the Option of the Issuer and Exercise of Issuers Options
 4.5.1
    
    If (i) Residual Holding Call Option is specified in the relevant Final
Terms, and (ii) if at any time the Residual Holding Percentage or more of the
aggregate nominal amount of Instruments originally issued shall have been redeemed
or purchased and cancelled, the Issuer shall have the option to redeem such
outstanding Instruments in whole, but not in part, at their Residual Holding
Redemption Amount. Unless otherwise specified in the relevant Final Terms, the
Residual Holding Redemption Amount will be calculated by the Calculation Agent by
discounting the outstanding nominal amount of the Instruments and the remaining
interest payments (if applicable) to the Maturity Date by a rate per annum
(expressed as a percentage to the nearest one hundred thousandth of a percentage
point (with halves being rounded up)) equal to the Benchmark Yield, being the yield
on the Benchmark Security at the close of business on the third Business Day prior
to the date fixed for such redemption, plus the Benchmark Spread. Where the
specified calculation is to be made for a period of less than one year, it shall be
calculated using the Benchmark Day Count Fraction. The Issuer will give not less
than 15 nor more than 30 days irrevocable notice to the Instrumentholders and the
Trustee of any such redemption pursuant to this Condition 4.5.1.4.5.2
    
    If Call Option is specified in the relevant Final Terms, the Issuer may,
on giving not less than 15 nor more than 30 days irrevocable notice to the
Instrumentholders (or such other notice period as may be specified in the relevant
Final Terms), redeem, or exercise any
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Issuers option in relation to, all or, if so
provided, some of such Instruments on any Optional Redemption Date or Option
Exercise Date, as the case may be. Any such redemption of Instruments shall be at
their Optional Redemption Amount together with interest accrued to the date fixed
for redemption. Any such redemption or exercise must relate to Instruments of a
nominal amount at least equal to the minimum nominal amount (if any) permitted to be
redeemed specified hereon and no greater than the maximum nominal amount (if any)
permitted to be redeemed specified on this Instrument.
 All Instruments in respect of which any such notice is given shall be redeemed, or the
Issuers option shall be exercised, on the date specified in such notice in accordance
with this Condition.In the case of a partial redemption or a partial exercise of the Issuers option, the
notice to Instrumentholders shall also contain the serial numbers of the Instruments to
be redeemed, which shall have been drawn in such place as the Trustee may approve and in
such manner as it deems appropriate, subject to compliance with any applicable laws,
listing authority and stock exchange requirements.4.6
    
    Redemption at the Option of InstrumentholdersIf Put Option is specified in the relevant Final Terms, the Issuer shall, at the option
of any Instrumentholder, upon such Instrumentholder giving not less than 15 nor more than
30 days notice to the Issuer (or such other notice period as may be specified on this
Instrument) redeem such Instrument on the Optional Redemption Date(s) (as specified in
the Final Terms) at its Optional Redemption Amount (as specified in the Final Terms)
together with interest accrued to the date fixed for redemption.To exercise such option (which must be exercised on an Option Exercise Date) the holder
must deposit such Instrument with any Paying Agent at its specified office, together with
a duly completed option exercise notice (Exercise Notice) in the form obtainable from
any Paying Agent within the Instrumentholders Option Period (as specified in the Final
Terms). No Instrument so deposited and option exercised may be withdrawn (except as
provided in the Agency Agreement) without the prior consent of the Issuer.4.7
    
    Partly Paid InstrumentsPartly Paid Instruments will be redeemed, whether at maturity, early redemption or
otherwise, in accordance with the provisions of this Condition and the provisions
specified in the relevant Final Terms.4.8
    
    Redemption by InstalmentsUnless previously redeemed, purchased and cancelled as provided in this Condition 4, each
Instrument which provides for Instalment Dates and Instalment Amounts will be partially
redeemed on each Instalment Date at the Instalment Amount specified in the relevant Final
Terms. The outstanding nominal amount of each such Instrument shall be reduced by the
Instalment Amount (or, if such Instalment Amount is calculated by reference to a
proportion of the nominal amount of such Instrument, such proportion) for all purposes
with effect from the related Instalment Date, unless payment of the Instalment Amount is
improperly withheld or refused on presentation of the related Receipt, in which case,
such amount shall remain outstanding until the Relevant Date relating to such Instalment
Amount.4.9
    
    CancellationAll Instruments redeemed pursuant to any of the foregoing provisions will be cancelled
forthwith together with all unmatured Receipts and Coupons and unexchanged Talons
attached thereto. All Instruments purchased by or on behalf of the Issuer or any of its
Subsidiaries may, at the option of the Issuer be held by or may be surrendered together
with all unmatured Receipts and Coupons
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and all unexchanged Talons attached to them to a
Paying Agent for cancellation, but may not be resold and when held by the Issuer or any
of its Subsidiaries shall not entitle the holder to vote at any meeting of
Instrumentholders and shall not be deemed to be outstanding for the purposes of
calculating quorums at meetings of Instrumentholders or for the purposes of Condition 10.
 5
    
    Payments and Talons
 5.1
    
    PaymentsPayments of principal and interest in respect of Instruments will, subject as mentioned
below, be made against presentation and surrender of the relevant Receipts (in the case
of payments of Instalment Amounts other than on the due date for redemption and provided
that the Receipt is presented for payment together with its relative Instrument),
Instruments (in the case of all other payments of principal and, in the case of interest,
as specified in Condition 5.5.6) or Coupons (in the case of interest, save as specified
in Condition 5.5.6), as the case may be, at the specified office of any Paying Agent
outside the United States by a cheque payable in the currency in which such payment is
due drawn on, or, at the option of the holder, by transfer to an account denominated in
that currency with, a bank in the principal financial centre for that currency; provided
that in the case of Euro, the transfer shall be in a city in which banks have access to
the TARGET System.5.2
    
    Payments in the United StatesNotwithstanding the above, if any Instruments are denominated in U.S. dollars, payments
in respect of them may be made at the specified office of any Paying Agent in New York
City in the same manner as specified above if (a) the Issuer shall have appointed Paying
Agents with specified offices outside the United States with the reasonable expectation
that such Paying Agents would be able to make payment of the amounts on the Instruments
in the manner provided above when due, (b) payment in full of such amounts at all such
offices is illegal or effectively precluded by exchange controls or other similar
restrictions on payment or receipt of such amounts and (c) such payment is then permitted
by United States law, without involving, in the opinion of the Issuer, any adverse tax
consequence to the Issuer.5.3
    
    Payments subject to Fiscal Laws etc.All payments are subject in all cases to any applicable fiscal or other laws, regulations
and directives, but without prejudice to the provisions of Condition 6. No commission or
expenses shall be charged to the Instrumentholders or Couponholders in respect of such
payments.5.4
    
    Appointment of AgentsThe Issuing and Paying Agent, the Paying Agents and the Calculation Agent initially
appointed by the Issuer and their respective specified offices are listed below. The
Issuing and Paying Agent, the Paying Agents and the Calculation Agent act solely as
agents of the Issuer and do not assume any obligation or relationship of agency or trust
for or with any holder. The Issuer reserves the right at any time with the approval of
the Trustee to vary or terminate the appointment of the Issuing and Paying Agent, any
other Paying Agent or the Calculation Agent and to appoint additional or other Paying
Agents, provided that the Issuer shall at all times maintain (a) an Issuing and Paying
Agent, (b) a Paying Agent having its specified office in a major European city, (c) a
Calculation Agent where the Conditions so require one, (d) so long as the Instruments are
listed on any stock exchange or admitted to listing by any other relevant authority, a
Paying Agent having a specified office in such place as may be required by the rules and
regulations of any other relevant stock exchange or other relevant authority and (e) to
the extent that the Issuer is able to do so and not provided for by the foregoing
provisions of this Condition 5.4, a Paying Agent with a specified office in a European
Union member state that will not be obliged to withhold or deduct tax pursuant to any law
implementing European Council Directive 2003/48/EC or any
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other Directive implementing
the conclusions of the ECOFIN Council meeting of 26-27 November 2000. As used in these
Conditions, the terms Issuing and Paying Agent, Calculation Agent, and Paying Agent
include any additional or replacement Issuing and Paying Agent, Calculation Agent or
Paying Agent appointed under this Condition.In addition, the Issuer shall forthwith appoint a Paying Agent in New York City in
respect of any Instruments denominated in U.S. dollars in the circumstances described in
Condition 5.2.Notice of any such change or any change of any specified office shall promptly be given
to the Instrumentholders in accordance with Condition 13.
 5.5
    
    Unmatured Coupons and Receipts and unexchanged Talons
 5.5.1
    
    Unless the Instrument provides that the relevant Coupons are to become
void upon the due date for redemption of those Instruments, Instruments should be
surrendered for payment together with all unmatured Coupons (if any) appertaining to
them, failing which an amount equal to the face value of each missing unmatured
Coupon (or, in the case of payment not being made in full, that proportion of the
amount of such missing unmatured Coupon that the sum of principal so paid bears to
the total principal due) will be deducted from the Final Redemption Amount, Early
Redemption Amount or Optional Redemption Amount, as the case may be, due for
payment. Any amount so deducted shall be paid in the manner mentioned above against
surrender of such missing Coupon within a period of 10 years from the Relevant Date
for the payment of such principal (whether or not such Coupon has become void
pursuant to Condition 7).5.5.2
    
    If the relevant Instrument so provides, upon the due date for redemption
of any Instrument, unmatured Coupons relating to such Instrument (whether or not
attached) shall become void and no payment shall be made in respect of them.5.5.3
    
    If the relevant Instrument so provides, upon the due date for redemption
of any Instrument, any unexchanged Talon relating to such Instrument (whether or not
attached) shall become void and no Coupon shall be delivered in respect of such
Talon.5.5.4
    
    Upon the due date for redemption of any Instrument which is redeemable
in instalments, all Receipts relating to such Instrument having an Instalment Date
falling on or after such due date (whether or not attached) shall become void and no
payment shall be made in respect of them.5.5.5
    
    Where any Instrument which provides that the relevant Coupons are to
become void upon the due date for redemption of those Instruments is presented for
redemption without all unmatured Coupons and any unexchanged Talon relating to it,
and where any Instrument is presented for redemption without any unexchanged Talon
relating to it, redemption shall be made only against the provision of such
indemnity as the Issuer may require.5.5.6
    
    If the due date for redemption of any Instrument is not a due date for
payment of interest, interest accrued from the preceding due date for payment of
interest or the Interest Commencement Date, as the case may be, shall only be
payable against presentation (and surrender if appropriate) of the relevant
Instrument. Interest accrued on an Instrument that only bears interest after its
Maturity Date shall be payable on redemption of that Instrument against presentation
of that Instrument.
 5.6
    
    Non-business daysIf any date for payment in respect of any Instrument, Receipt or Coupon is not a business
day, the holder shall not be entitled to payment until the next following business day
nor to any interest or other sum in respect of such postponed payment. In this paragraph,
business day means a day (other than a Saturday or a Sunday) on which banks and foreign
exchange markets are open for
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business in the relevant place of presentation, in such
jurisdictions as shall be specified as Financial Centres in the relevant Final Terms
and:
 5.6.1
    
    (in the case of a payment in a currency other than Euro) where payment
is to be made by transfer to an account maintained with a bank in the relevant
currency, on which foreign exchange transactions may be carried on in the relevant
currency in the principal financial centre of the country of such currency; or5.6.2
    
    (in the case of a payment in Euro) which is a TARGET Business Day.
 5.7
    
    TalonsOn or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet
issued in respect of any Instrument, the Talon forming part of such Coupon sheet may be
surrendered at the specified office of the Issuing and Paying Agent in exchange for a
further Coupon sheet (but excluding any Coupons which may have become void pursuant to
Condition 7).
 6
    
    TaxationAll payments of principal and interest by or on behalf of the Issuer in respect of the
Instruments, the Receipts and the Coupons will be made without withholding or deduction for or
on account of, any present or future taxes or duties of whatever nature imposed or levied by or
on behalf of the United States of America or any political sub-division of the United States of
America or any authority in or of the United States of America having power to tax, unless such
withholding or deduction is compelled by law. In that event, the Issuer will pay such
additional amounts of principal and interest as will result in the payment to the
Instrumentholders, Receiptholders or, as the case may be, the Couponholders of the amounts
which would otherwise have been receivable in respect of the Instruments, Receipts or Coupons
had no withholding or deduction been made, except that no such additional amounts shall be
payable in respect of any Instrument, Receipt or Coupon presented for payment:
 (a)
    
    by or on behalf of, a person who is liable to such taxes or duties in respect of such
Instrument, Receipt or Coupon by reason of his having some connection with the United
States of America other than the mere holding of such Instrument, Receipt or Coupon; or(b)
    
    by or on behalf of a person who would not be liable or subject to such deduction or
withholding by making a declaration of non-residence or other claim for exemption to a tax
authority; or(c)
    
    more than 30 days after the Relevant Date except to the extent that the holder would
have been entitled to such additional amounts on presenting the same for payment on such
30th day; or(d)
    
    where such withholding or deduction is imposed on a payment to an individual and is
required to be made pursuant to any law implementing European Council Directive 2003/48/EC
or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27
November 2000; or(e)
    
    by a holder which is or was a controlled foreign corporation, personal holding
company or passive foreign investment company with respect to the United States or a
corporation that accumulates earnings to avoid United States federal income tax; or(f)
    
    if such tax is an estate, inheritance, gift, sales, transfer or personal property tax
or any similar tax, assessment, or governance charge; or(g)
    
    by a holder which is or has been a 10 per cent. shareholder of the obligor of the
Instruments as defined in Section 871(h)(3) of the United States Internal Revenue Code or
any successor provisions; or(h)
    
    by or on behalf of a holder who would have been able to avoid such withholding or
deduction (i) by presenting the relevant Instrument, Receipt or Coupon to another Paying
Agent in a Member
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State of the European Union; or (ii) by satisfying any statutory or
procedural requirements (including, without limitation, the provision of information); or(i)
    
    in the case of any combination of items (a) to (h) above.
 As used in these Conditions, Relevant Date in respect of any Instrument, Receipt or Coupon
means the date on which payment in respect of it first becomes due or (if any amount of the
money payable is improperly withheld or refused) the date on which payment in full of the
amount outstanding is made or (if earlier) the date on which notice is duly given to the
Instrumentholders in accordance with Condition 13 that, upon further presentation of the
Instrument, Receipt or Coupon being made in accordance with the Conditions, such payment will
be made, provided that payment is in fact made upon such presentation. References in these
Conditions to (a) principal shall be deemed to include any premium payable in respect of the
Instruments, all Instalment Amounts, Final Redemption Amounts, Early Redemption Amounts,
Optional Redemption Amounts, Amortised Face Amounts and all other amounts in the nature of
principal payable pursuant to Condition 4 or any amendment or supplement to it, (b) interest
shall be deemed to include all Interest Amounts and all other amounts payable pursuant to
Condition 3 or any amendment or supplement to it and (c) principal and/or interest shall be
deemed to include any additional amounts which may be payable under this Condition or any
undertaking given in addition to or in substitution for it under the Trust Deed.7
    
    PrescriptionInstruments, Receipts and Coupons (which, for this purpose, shall not include Talons) shall be
prescribed and become void unless presented for payment within 10 years (in the case of
principal) or five years (in the case of interest) from the appropriate Relevant Date in
respect of them.8
    
    Events of DefaultIf any of the following events (each an Event of Default) occurs and is continuing, the
Trustee at its discretion may, and if so requested by the holders of at least one-quarter in
nominal amount of the Instruments then outstanding or if so directed by an Extraordinary
Resolution shall, give notice to the Issuer at its registered office that the Instruments are,
and they shall accordingly immediately become due and repayable at their Redemption Amount
together with accrued interest (if any) to the date of payment:
 (a)
    
    Non-Payment:there is default for more than 30 days in the payment of any principal
or interest due in respect of the Instruments; or(b)
    
    Breach of Other Obligations:there is default in the performance or observance by the
Issuer of any other obligation or provision under the Trust Deed or the Instruments (other
than any obligation for the payment of any principal or interest in respect of the
Instruments) which default is incapable of remedy or, if in the opinion of the Trustee
capable of remedy, is not remedied within 90 days after notice of such default shall have
been given to the Issuer by the Trustee; or(c)
    
    Cross-Acceleration:if (i) any other present or future Relevant Indebtedness of the
Issuer or a Principal Subsidiary becomes due and payable prior to its stated maturity by
reason of any actual event of default or (ii) any amount in respect of such Relevant
Indebtedness is not paid when due or, as the case may be, within any applicable grace
period, provided that the aggregate amount of the Relevant Indebtedness in respect of
which one or more of the events mentioned above in this paragraph (c) have occurred equals
or exceeds U.S.$100,000,000 for the period up to and including 31 March 2017, and
thereafter U.S.$200,000,000 or(d)
    
    Winding-up:a resolution is passed, or a final order of a court in the United States
of America is made and, where possible, not discharged or stayed within a period of 90
days, that the Issuer be wound up or dissolved; or
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(e)
    
    Enforcement Proceedings:attachment is made of the whole or substantially the whole
of the assets or undertakings of the Issuer and such attachment is not released or
cancelled within 90 days or an encumbrancer takes possession or an administrative or other
receiver or similar officer is appointed of the whole or substantially the whole of the
assets or undertaking of the Issuer or an administration or similar order is made in
relation to the Issuer and such taking of possession, appointment or order is not
released, discharged or cancelled within 90 days; or(f)
    
    Insolvency:the Issuer ceases to carry on all or substantially all of its business or
is unable to pay its debts; or(g)
    
    Bankruptcy:the Issuer is adjudged bankrupt or insolvent by a court of competent
jurisdiction in the United States of America,
 provided that in the case of paragraph (b) the Trustee shall have certified that in its opinion
such event is materially prejudicial to the interests of the Instrumentholders.For the purposes of this Condition 8, Principal Subsidiary means KeySpan Corporation, KeySpan
Energy Delivery New York, KeySpan Energy Delivery Long Island, Niagara Mohawk Power Corporation
and New England Power Company, and includes any successor entity thereto or any member of the
group of companies comprising National Grid USA and each of its subsidiaries (the Group)
which the Auditors have certified to the Trustee as being a company to which all or
substantially all of the assets of a Principal Subsidiary are transferred. In the event that
all or substantially all of the assets of a Principal Subsidiary are transferred to a member of
the Group as described above, the transferor of such assets shall cease to be deemed to be a
Principal Subsidiary for the purposes of this Condition.9
    
    EnforcementThe Trustee may, at its discretion and without further notice, institute such proceedings
against the Issuer as it may think fit to enforce any obligation, condition or provision
binding on the Issuer under the Instruments or under the Trust Deed, but shall not be bound to
do so unless:
 (a)
    
    it has been so directed by an Extraordinary Resolution or in writing by the holders
of at least one-quarter of the principal amount of the Instruments outstanding; and(b)
    
    it has been indemnified to its satisfaction.
 No Instrumentholder, Receiptholder or Couponholder shall be entitled to institute proceedings
directly against the Issuer unless the Trustee, having become bound to proceed as specified
above, fails to do so within a reasonable time and such failure is continuing.10
    
    Meetings of Instrumentholders, Modifications and Substitution
 10.1
    
    Meetings of InstrumentholdersThe Trust Deed contains provisions for convening meetings of Instrumentholders to
consider any matter affecting their interests, including the sanctioning by Extraordinary
Resolution (as defined in the Trust Deed) of a modification of any of these Conditions or
any provisions of the Trust Deed. An Extraordinary Resolution duly passed at any such
meeting shall be binding on Instrumentholders (whether or not they were present at the
meeting at which such resolution was passed) and on all Couponholders, except that any
Extraordinary Resolution proposed, inter alia, (a) to amend the dates of maturity or
redemption of the Instruments, any Instalment Date or any date for payment of interest on
the Instruments, (b) to reduce or cancel the nominal amount of, or any Instalment Amount
of, or any premium payable on redemption of, the Instruments, (c) to reduce the rate or
rates of interest in respect of the Instruments or to vary the method or basis of
calculating the rate or rates or amount of interest or the basis for calculating any
Interest Amount in respect of the Instruments, (d) if a Minimum and/or a Maximum Rate of
Interest is shown on the face of the Instrument, to reduce any such Minimum and/or
Maximum Rate of Interest, (e) to vary
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any method of calculating the Final Redemption
Amount, the Early Redemption Amount or the Optional Redemption Amount, (f) to take any
steps that as specified in this Instrument may only be taken following approval by an
Extraordinary Resolution to which the special quorum provisions apply, and (g) to modify
the provisions concerning the quorum required at any meeting of Instrumentholders or the
majority required to pass the Extraordinary Resolution will only be binding if passed at
a meeting of the Instrumentholders (or at any adjournment of that meeting) at which a
special quorum (as defined in the Trust Deed) is present. A resolution in writing signed
by the holders of not less than 95 per cent. in nominal amount of the Instruments will be
binding on all Instrumentholders and Couponholders. The Issuer may convene a meeting of
Instrumentholders jointly with the holders of all other instruments issued pursuant to
the Agency Agreement and not forming a single series with the Instruments to which
meeting the provisions referred to above apply as if all such instruments formed part of
the same series, provided that the proposals to be considered at such meeting affect the
rights of the holders of the instruments of each series attending the meeting in
identical respects (save insofar as the Conditions applicable to each such series are not
identical).10.2
    
    Modification of the Trust DeedThe Trustee may agree, without the consent of the Instrumentholders or Couponholders, to
(a) any modification of any of the provisions of the Trust Deed that is of a formal,
minor or technical nature or is made to correct a manifest error, and (b) any other
modification (except as mentioned in the Trust Deed), and any waiver or authorisation of
any breach or proposed breach, of any of the provisions of the Trust Deed that is in the
opinion of the Trustee not materially prejudicial to the interests of the
Instrumentholders. Any such modification, authorisation or waiver shall be binding on the
Instrumentholders and the Couponholders and, if the Trustee so requires, such
modification shall be notified to the Instrumentholders as soon as practicable.10.3
    
    SubstitutionThe Trust Deed contains provisions permitting the Trustee to agree, subject to such
amendment of the Trust Deed and such other conditions as the Trustee may require, but
without the consent of the Instrumentholders or the Couponholders, to the substitution of
any other company in place of the Issuer or of any previous substituted company, as
principal debtor under the Trust Deed and the Instruments. In the case of such a
substitution the Trustee may agree, without the consent of the Instrumentholders or the
Couponholders, to a change of the law governing the Instruments, the Receipts, the
Coupons, the Talons and/or the Trust Deed provided that such change would not in the
opinion of the Trustee be materially prejudicial to the interests of the
Instrumentholders.10.4
    
    Entitlement of the TrusteeIn connection with the exercise of its functions (including but not limited to those
referred to in this Condition) the Trustee shall have regard to the interests of the
Instrumentholders as a class and shall not have regard to the consequences of such
exercise for individual Instrumentholders or Couponholders and the Trustee shall not be
entitled to require, nor shall any Instrumentholder or Couponholder be entitled to claim,
from the Issuer any indemnification or payment in respect of any tax consequence of any
such exercise upon individual Instrumentholders or Couponholders.
 11
    
    Replacement of Instruments, Receipts, Coupons and TalonsIf an Instrument, Receipt, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed, it
may be replaced, subject to applicable laws, listing authority and stock exchange regulations,
at the specified office of such other Paying Agent as may from time to time be designated by
the Issuer for the purpose and notice of whose designation is given to Instrumentholders in
accordance with Condition 13 on payment by the claimant of the fees and costs incurred in
connection with that replacement and on such terms as to evidence, security and indemnity
(which may provide, inter alia, that if the allegedly lost,
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stolen or destroyed Instrument,
Receipt, Coupon or Talon is subsequently presented for payment or, as the case may be, for
exchange for further Coupons, there shall be paid to the Issuer on demand the amount payable by
the Issuer in respect of such Instruments, Receipts, Coupons or further Coupons) and otherwise
as the Issuer may require. Mutilated or defaced Instruments, Receipts, Coupons or Talons must
be surrendered before replacements will be issued.12
    
    Further IssuesThe Issuer may from time to time without the consent of the Instrumentholders or Couponholders
create and issue further instruments having the same terms and conditions as the Instruments
and so that such further issue shall be consolidated and form a single series with such
Instruments.References in these Conditions to the Instruments include (unless the context requires
otherwise) any other instruments issued pursuant to this Condition and forming a single series
with the Instruments. Any such further instruments forming a single series with Instruments
constituted by the Trust Deed or any deed supplemental to it shall, and any other instruments
may (with the consent of the Trustee), be constituted by the Trust Deed.The Trust Deed contains provisions for convening a single meeting of the Instrumentholders and
the holders of instruments of other series if the Trustee so decides.13
    
    NoticesAll notices to the Instrumentholders will be valid if published in a daily English language
newspaper of general circulation in the United Kingdom (which is expected to be the Financial
Times). If in the opinion of the Trustee any such publication is not practicable, notice shall
be validly given if published in another leading daily English language newspaper with general
circulation in Europe. Any such notice shall be deemed to have been given on the date of such
publication or, if published more than once or on different dates, on the first date on which
publication is made, as provided above.Couponholders shall be deemed for all purposes to have notice of the contents of any notice
given to the holders of Instruments in accordance with this Condition.14
    
    Indemnification of TrusteeThe Trust Deed contains provisions for the indemnification of the Trustee and for its relief
from responsibility, including but not limited to provisions relieving it from any obligation
to (a) appoint an independent financial adviser and (b) take proceedings to enforce repayment
unless indemnified to its satisfaction. The Trustee is entitled to enter into business
transactions with the Issuer or any of its subsidiary undertakings, parent undertakings, joint
ventures or associated undertakings without accounting for any profit resulting from these
transactions and to act as trustee for the holders of any other securities issued by the Issuer
or any of its subsidiary undertakings, parent undertakings, joint ventures or associated
undertakings.15
    
    Contracts (Rights of Third Parties) Act 1999No person shall have any right to enforce any term or condition of the Instruments under the
Contracts (Rights of Third Parties) Act 1999.16
    
    Governing Law and Jurisdiction
 16.1
    
    Governing LawThe Instruments and any non-contractual obligations arising out of or in connection with
the Instruments are governed by, and shall be construed in accordance with, English law.
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16.2
    
    JurisdictionThe courts of England have exclusive jurisdiction to settle any dispute (a Dispute),
arising from or connected with the Instruments. The Issuer agrees that the courts of
England are the most appropriate and convenient courts to settle any Dispute and,
accordingly, that it will not argue to the contrary. Nothing in this Condition 16
prevents the Trustee or any Instrumentholder from taking proceedings relating to a
Dispute (Proceedings) in any other courts with jurisdiction. To the extent allowed by
law, the Trustee or Instrumentholders may take concurrent Proceedings in any number of
jurisdictions.16.3
    
    Process AgentThe Issuer has irrevocably appointed National Grid plc at its registered office for the
time being, currently at 1-3 Strand, London WC2N 5EH as its agent in England to receive,
for it and on its behalf, service of process in any Proceedings in England. Nothing
herein or in the Trust Deed shall affect the right to serve process in any other manner
permitted by law.
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SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS
WHILE IN GLOBAL FORM
 Initial Issue of InstrumentsUpon the initial deposit of a Global Instrument with a common depositary for Euroclear and
Clearstream, Luxembourg (the Common Depositary), Euroclear or Clearstream, Luxembourg will
credit each subscriber with a nominal amount of Instruments equal to the nominal amount of
those Instruments for which it has subscribed and paid.If the Global Instruments are stated in the applicable Final Terms to be issued in NGN form,
they are intended to be eligible collateral for Eurosystem monetary policy and the Global
Instruments will be delivered on or prior to the original issue date of the Tranche to a Common
Safekeeper. Depositing the Global Instruments with the Common Safekeeper does not necessarily
mean that the Instruments will be recognised as eligible collateral for Eurosystem monetary
policy and intra-day credit operations by the Eurosystem either upon issue, or at any or all
times during their life. Such recognition will depend upon satisfaction of the Eurosystem
eligibility criteria.Global Instruments which are issued in CGN form may be delivered on or prior to the original
issue date of the Tranche to a Common Depositary.If the Global Instrument is a CGN, upon the initial deposit of a Global Instrument with the
Common Depositary, Euroclear or Clearstream, Luxembourg will credit each subscriber with a
nominal amount of Instruments equal to the nominal amount of those Instruments for which it has
subscribed and paid. If the Global Instrument is an NGN, the nominal amount of the Instruments
shall be the aggregate amount from time to time entered in the records of Euroclear or
Clearstream, Luxembourg. The records of such clearing system shall be conclusive evidence of
the nominal amount of Instruments represented by the Global Instrument and a statement issued
by such clearing system at any time shall be conclusive evidence of the records of the relevant
clearing system at that time.Instruments which are initially deposited with the Common Depositary may also be credited to
the accounts of subscribers with (if indicated in the relevant Final Terms) other clearing
systems through direct or indirect accounts with Euroclear and Clearstream, Luxembourg held by
such other clearing systems. Conversely, Instruments that are initially deposited with another
clearing system may similarly be credited to the accounts of subscribers with Euroclear,
Clearstream, Luxembourg or other clearing systems.Relationship of Accountholders with Clearing SystemsEach of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any other
clearing system as the holder of an Instrument represented by a Global Instrument must look
solely to Euroclear, Clearstream, Luxembourg or such clearing system (as the case may be) for
his share of each payment made by the Issuer to the bearer of such Global Instrument and in
relation to all other rights arising under the Global Instruments, subject to and in accordance
with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or such clearing
systems (as the case may be). Such persons shall have no claim directly against the Issuer in
respect of payments due on the Instruments for so long as the Instruments are represented by
such Global Instrument and such obligations of the Issuer will be discharged by payment to the
bearer of such Global Instrument in respect of each amount so paid.The Trustee may call for any certificate or other document to be issued by Euroclear,
Clearstream, Luxembourg or any other clearing system as to the principal amount of Instruments
represented by a Global Instrument standing to the account of any person. Any such certificate
or other document shall, in the absence of manifest error, be conclusive and binding for all
purposes. Any such certificate or other
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document may comprise any form of statement or print
out of electronic records provided by the relevant clearing system (including Euroclears
EUCLID or Clearstream, Luxembourgs Cedcom system) in accordance with its usual procedures and
in which the holder of a particular principal amount of any other clearing system is clearly
identified together with the amount of such holding. The Trustee shall not be liable to any
person by reason of having accepted as valid or not having rejected any certificate or other
document to such effect purporting to be issued by Euroclear, Clearstream, Luxembourg or any
other clearing system and subsequently found to be forged or not authentic.Exchange1
    
    Temporary Global InstrumentsEach temporary Global Instrument will be exchangeable, free of charge to the holder, on or
after its Exchange Date:
 1.1
    
    if the relevant Final Terms indicates that such Global Instrument is issued in
compliance with the C Rules or in a transaction to which TEFRA is not applicable (as to
which, see Summary of the Programme  Selling Restrictions), in whole, but not in part,
for the Definitive Instruments defined and described below; and1.2
    
    otherwise, in whole or in part upon certification as to non-U.S. beneficial ownership
in the form set out in the Agency Agreement for interests in a permanent Global Instrument
or, if so provided in the relevant Final Terms, for Definitive Instruments.
 2
    
    Permanent Global InstrumentsEach permanent Global Instrument will be exchangeable, free of charge to the holder, on or
after its Exchange Date in whole but not, except as provided under Partial Exchange of
Permanent Global Instruments, in part for Definitive Instruments (i) if the holder of an
Instrument gives notice to the Issuing and Paying Agent of its election for such exchange and
(ii) otherwise, if the permanent Global Instrument is held on behalf of Euroclear or
Clearstream, Luxembourg or any other clearing system (an Alternative Clearing System) and any
such clearing system is closed for business for a continuous period of 14 days (other than by
reason of holidays, statutory or otherwise) or announces an intention permanently to cease
business or in fact does so.3
    
    Partial Exchange of Permanent Global InstrumentsFor so long as a permanent Global Instrument is held on behalf of a clearing system and the
rules of that clearing system permit, such permanent Global Instrument will be exchangeable in
part on one or more occasions for Definitive Instruments (a) if principal in respect of any
Instruments is not paid when due or (b) if so provided in, and in accordance with, the
Conditions (which will be set out in the relevant Final Terms) relating to Partly Paid
Instruments.4
    
    Delivery of InstrumentsIf the Global Instrument is a CGN, on or after any due date for exchange the holder of a Global
Instrument may surrender such Global Instrument or, in the case of a partial exchange, present
it for endorsement to or to the order of the Issuing and Paying Agent. In exchange for any
Global Instrument, or the part of that Global Instrument to be exchanged, the Issuer will (a)
in the case of a temporary Global Instrument exchangeable for a permanent Global Instrument,
deliver, or procure the delivery of, a permanent Global Instrument in an aggregate nominal
amount equal to that of the whole or that part of a temporary Global Instrument that is being
exchanged or, in the case of a subsequent exchange, endorse, or procure the endorsement of, a
permanent Global Instrument to reflect such exchange or (b) in the case of a Global Instrument
exchangeable for Definitive Instruments, deliver, or procure the delivery of, an equal
aggregate nominal amount of duly executed and authenticated Definitive
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Instruments or if the
Global Instrument is a NGN, the Issuer will procure that details of such exchange be entered
pro ratain the records of the relevant clearing system. In this Prospectus, Definitive
Instruments means, in relation to any Global Instrument, the Definitive Instruments for which
such Global Instrument may be exchanged (if appropriate, having attached to them all Coupons
and Receipts in respect of interest or Instalment Amounts that have not already been paid on
the Global Instrument and a Talon). Definitive Instruments will be security printed in
accordance with any applicable legal and stock exchange requirements in or substantially in the
form set out in the Schedules to the Trust Deed. On exchange in full of each permanent Global
Instrument, the Issuer will, if the holder so requests, procure that it is cancelled and
returned to the holder together with the relevant Definitive Instruments.5
    
    Exchange DateExchange Date means, in relation to a temporary Global Instrument, the day falling after the
expiry of 40 days after its issue date and, in relation to a permanent Global Instrument, a day
falling not less than 60 days, or in the case of failure to pay principal in respect of any
Instruments when due 30 days, after that on which the notice requiring exchange is given and on
which banks are open for business in the city in which the specified office of the Issuing and
Paying Agent is located and in the city in which the relevant clearing system is located.6
    
    Amendment to ConditionsThe temporary Global Instruments and permanent Global Instruments contain provisions that apply
to the Instruments which they represent, some of which modify the effect of the terms and
conditions of the Instruments set out in this Prospectus. The following is a summary of certain
of those provisions:7
    
    PaymentsNo payment falling due after the Exchange Date will be made on any Global Instrument unless
exchange for an interest in a permanent Global Instrument or for Definitive Instruments is
improperly withheld or refused. Payments on any temporary Global Instrument issued in
compliance with the D Rules before the Exchange Date will only be made against presentation of
certification as to non-U.S. beneficial ownership in the form set out in the Agency Agreement.
All payments in respect of Instruments represented by a Global Instrument will be made against
presentation for endorsement and, if no further payment falls to be made in respect of the
Instruments, surrender of that Global Instrument to or to the order of the Issuing and Paying
Agent or such other Paying Agent as shall have been notified to the Instrumentholders for such
purpose. If the Global Instrument is a CGN, a record of each payment so made will be endorsed
on each Global Instrument, which endorsement will be prima facieevidence that such payment has
been made in respect of the Instruments. If the Global Instrument is a NGN, the Issuer shall
procure that details of each such payment shall be entered pro ratain the records of the
relevant clearing system and in the case of payments of principal, the nominal amount of the
Instruments recorded in the records of the relevant clearing system and represented by the
Global Instrument will be reduced accordingly. Payments under the NGN will be made to its
holder. Each payment so made will discharge the Issuers obligations in respect thereof. Any
failure to make the entries in the records of the relevant clearing system shall not affect
such discharge.8
    
    PrescriptionClaims against the Issuer in respect of Instruments which are represented by a permanent Global
Instrument will become void unless it is presented for payment within a period of 10 years (in
the case of principal) and five years (in the case of interest) from the appropriate Relevant
Date (as defined in Condition 6).
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9
    
    MeetingsThe holder of a permanent Global Instrument shall (unless such permanent Global Instrument
represents only one Instrument) be treated as being two persons for the purposes of any quorum
requirements of a meeting of Instrumentholders and, at any such meeting, as having one vote in
respect of each integral currency unit of the Specified Currency of the Instruments for which
it may be exchanged in accordance with its terms.10
    
    CancellationCancellation of any Instrument represented by a permanent Global Instrument which is required
by the Conditions to be cancelled (other than upon its redemption) will be effected by
reduction in the nominal amount of the relevant permanent Global Instrument.11
    
    PurchaseInstruments represented by a permanent Global Instrument may only be purchased by the Issuer or
any of its subsidiary undertakings if they are purchased together with the right to receive all
future payments of interest and Instalment Amounts (if any) on those Instruments.12
    
    Issuers OptionAny option of the Issuer provided for in the Conditions of any Instruments while such
Instruments are represented by a permanent Global Instrument shall be exercised by the Issuer
giving notice to the Instrumentholders within the time limits set out in and containing the
information required by the Conditions, except that the notice shall not be required to contain
the serial numbers of Instruments drawn in the case of a partial exercise of an option and
accordingly no drawing of Instruments shall be required. In the event that any option of the
Issuer is exercised in respect of some but not all of the Instruments of any Series, the rights
of accountholders with a clearing system or Approved Intermediary in respect of the Instruments
will be governed by the standard procedures of Euroclear and/or Clearstream, Luxembourg (to be
reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a
reduction in nominal amount, at their discretion) or any other Alternative Clearing System (as
the case may be).13
    
    Instrumentholders OptionsAny option of the Instrumentholders provided for in the Conditions of any Instruments while
such Instruments are represented by a permanent Global Instrument may be exercised by the
holder of the permanent Global Instrument giving notice to the Issuing and Paying Agent within
the time limits relating to the deposit of Instruments with a Paying Agent set out in the
Conditions substantially in the form of the notice available from any Paying Agent stating the
nominal amount of Instruments in respect of which the option is exercised and at the same time,
where the permanent Global Instrument is a CGN, presenting the permanent Global Instrument for
notation. Where the Global Instrument is an NGN, the Issuer shall procure that details of such
exercise shall be entered pro ratain the records of the relevant clearing system and the
nominal amount of the Instruments recorded in those records will be reduced accordingly.14
    
    NGN nominal amountWhere the Global Note is a NGN, the Issuer shall procure that any exchange, payment,
cancellation, exercise of any option or any right under the Instruments, as the case may be, in
addition to the circumstances set out above shall be entered in the records of the relevant
clearing systems and upon any such entry being made, in respect of payments of principal, the
nominal amount of the Instruments represented by such Global Instrument shall be adjusted
accordingly.
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15
    
    Trustees PowersIn considering the interests of Instrumentholders while any Global Instrument is held on behalf
of a clearing system, the Trustee may have regard to any information provided to it by such
clearing system or its operator as to the identity (either individually or by category) of its
accountholders with entitlements to such Global Instrument and may consider such interests as
if such accountholders were the holders of the Instruments represented by such Global
Instrument.16
    
    Events of DefaultEach Global Instrument provides that the Trustee, at its discretion, may, and if so requested
by holders of at least one-quarter in nominal amount of the Instruments then outstanding or if
so directed by an Extraordinary Resolution, shall cause such Global Instrument to become due
and repayable in the circumstances described in Condition 8 by stating in the notice to the
Issuer the principal amount of such Global Instrument which is becoming due and repayable. If
principal in respect of any Instrument is not paid when due, only the Trustee may enforce the
rights of the Instrumentholders against such Issuer under the terms of the Trust Deed unless
the Trustee, having become bound to proceed, fails to do so within a reasonable time and such
failure is continuing.17
    
    NoticesSo long as any Instruments are represented by a Global Instrument and such Global Instrument is
held on behalf of a clearing system, notices to the holders of Instruments of that Series may
be given by delivery of the relevant notice to that clearing system for communication by it to
entitled accountholders in substitution for publication as required by the Conditions or by
delivery of the relevant notice to the holder of the Global Instrument.18
    
    Partly Paid InstrumentsThe provisions relating to Partly Paid Instruments are not set out in this Prospectus, but will
be contained in the relevant Final Terms and so in the Global Instruments. While any
instalments of the subscription moneys due from the holder of Partly Paid Instruments are
overdue, no interest in a Global Instrument representing such Instruments may be exchanged for
an interest in a permanent Global Instrument or for Definitive Instruments (as the case may
be). If any Instrumentholder fails to pay any instalment due on any Partly Paid Instruments
within the time specified, the Issuer may forfeit such Instruments and shall have no further
obligation to their holder in respect of them.
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USE OF PROCEEDS
 The net proceeds of the issue of each Series of Instruments will be used by the Issuer for its
general corporate purposes. If in respect of any particular issue of Instruments, there is a
particular identified use of proceeds, this will be stated in the applicable Final Terms.
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DESCRIPTION OF NATIONAL GRID USA
 OverviewNational Grid USA is an indirect wholly-owned U.S. subsidiary of National Grid plc, a
London-based international network utility with principal activities in the regulated electric
and gas industries in both the UK and the U.S. As used in this description, unless the context
requires otherwise, National Grid USA or the Issuer, refer to National Grid USA and its
principal public utility subsidiaries. National Grid USA is the U.S. public utility holding
company of various U.S. electric and gas subsidiaries in the National Grid plc system. National
Grid USAs assets primarily consist of shares of the U.S. public utility companies acquired,
over time, pursuant to several merger and acquisition transactions, including, most recently,
KeySpan Corporation in August 2007. National Grid USA does not conduct any business other than
through its U.S. subsidiaries and is dependent on dividends or distributions from its U.S.
subsidiaries. National Grid USA, through its subsidiaries and their predecessors, has been
serving various portions of New York and New England since the mid-1800s.National Grid USA was incorporated in the State of Delaware on 10 December 1998 under the
General Corporation Laws of the State of Delaware with file number 2977161. The address of
National Grid USA is 25 Research Drive, Westborough, MA 01582 and its telephone number is
+1-508-389-2000.IntroductionNational Grid USAs principal operations are in regulated networks and comprise the
transmission and distribution of electricity and gas based in the United States. The Issuer
also owns and operates electric generating facilities in New York State and has interests in
electricity interconnectors in the United States.Business overviewPrincipal activities and marketsNational Grid USAs principal businesses are:
 
    
    Electricity transmission;
    
    Gas distribution;
    
    Electricity distribution and generation; and
    
    Non-regulated businesses.
 National Grid USAs principal public utility subsidiaries are as follows:
 
    
    KeySpan Corporation (collectively KeySpan) directly and indirectly owns public
utilities consisting of:
 
    
    The Brooklyn Union Gas Company d/b/a/ National Grid NY  New York;
    
    KeySpan Gas East Corporation d/b/a National Grid  New York;
    
    Colonial Gas Company  New England;
    
    Boston Gas Company  New England;
    
    Essex Gas Company  New England; and
    
    EnergyNorth Natural Gas, Inc.  New England;
 
    
    Niagara Mohawk Power Corporation (NMPC)  New York;
    
    New England Power Company (NEP)  New England;
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
    
    Massachusetts Electric Company (MECO)  Massachusetts;
    
    The Narragansett Electric Company (Narragansett)  Rhode Island
    
    Granite State Electric Company (Granite State)  New Hampshire
    
    Nantucket Electric Company (NEC)  Massachusetts
    
    New England Electric Transmission Corporation (NEET)  Massachusetts and New
Hampshire;
    
    New England Hydro-Transmission Corporation (N.H. Hydro)  New Hampshire; and
    
    New England Hydro-Transmission Electric Company, Inc. (Mass. Hydro)  Massachusetts.
 National Grid USAs principal electric transmission and distribution subsidiaries provide the
following services: (i) electricity transmission and distribution in New York through NMPC;
(ii) electricity transmission in New England principally through NEP; and (iii) electricity
distribution in New England through MECO, Narragansett, Granite State and NEC. National Grid
USAs principal gas distribution subsidiaries provide gas distribution in central and eastern
New York through NMPC, and in downstate New York and in New England through KeySpans gas
utility affiliates and through Narragansett in Rhode Island. In addition to the Issuers
regulated networks for the transmission and distribution of electricity and gas, National Grid
USAs KeySpan affiliates (i) manage the electric transmission and distribution system in Long
Island, New York owned by the Long Island Power Authority (LIPA); (ii) provide generating
capacity and, to the extent required, energy conversion services for LIPA; (iii) provide
energy-related services to customers primarily located within the northeast of the United
States, with concentrations in the New York City and Boston metropolitan areas; and (iv)
operate gas exploration and production activities as well as domestic pipelines and gas storage
facilities.Electricity TransmissionThe Issuer owns and operates an electricity transmission network, excluding the managed LIPA
facilities, of approximately 8,600 miles spanning upstate New York, Massachusetts, Rhode
Island, New Hampshire and Vermont. National Grid USAs U.S. transmission facilities operate at
voltages ranging from 69 kV to 345kV, utilising nearly 8,500 miles of overhead lines, 99 miles
of underground cable and 501 substations. The Issuer is the largest electricity transmission
service provider in the northeast of the United States, by reference to the length of these
high-voltage transmission lines. In addition, as referenced below, the Issuer owns and operates
a 139-mile direct current transmission line rated at 450 kV that is a key section of an
interconnector between New England and Canada.In New England and New York, the Issuers transmission business, managed as part of National
Grid plcs international transmission business, operates within two independent system
operators (ISOs), the New England and New York ISO. These non-profit entities are the system
operators for the New England and New York transmission networks. The ISOs are responsible for
operating organised wholesale markets for energy, operating reserves and capacity; for
maintaining the operating reliability of the New England and New York transmission networks;
for co-ordinating the activities of the transmission owners; and for managing transparent
transmission expansion planning processes.The Issuer is one of several transmission owners operating within each of these ISOs. The
transmission owners are responsible for certain aspects of the operation of the transmission
facilities they each own, such as maintenance, equipment restoration and switching operations.
The Issuer works closely with the ISOs in New England and New York to support efficient market
and network operations and transmission investment.Gas DistributionNational Grid USAs gas distribution businesses in upstate New York, Massachusetts, and Rhode
Island provide service to approximately 571,000 customers across upstate New York through NMPC
and
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approximately 248,000 customers in Rhode Island through Narragansett. As a result of the
acquisition of KeySpan, the largest distributor of gas in the northeast of the United States,
the Issuer now provides gas distribution services to approximately 2.6 million additional gas
customers located in downstate New York, Massachusetts, and New Hampshire. National Grid USAs
gas distribution companies network consists of approximately 35,000 miles of gas pipelines in
New York and New EnglandNational Grid USAs gas distribution operations provide the core services of operation and
emergency response, as well as billing, customer service, and supply services. Except for
residential and small business customers in Rhode Island, customers may purchase their supply
from independent providers, with the option of having billing services for those purchases
provided by the Issuers gas distribution companies. The majority of gas supplied to customers
in the United States is still sold by local regulated utilities to their customers. Regulated
utilities, such as National Grid USAs gas distribution companies, purchase gas from gas
producers and gas transporters, then transport this gas on the independent interstate pipeline
system and into regulated utilities gas distribution networks for delivery to customers.
National Grid USAs gas distribution companies receive gas from the inter-state pipeline system
at various gate stations of the Issuers gas distribution companies. The interstate pipeline
system and local gas distribution networks are also used to deliver gas on behalf of customers
who have purchased gas from independent suppliers or direct from gas producers.Gas supplies required to meet the needs of the Issuers gas customers winter demands for gas
are purchased under long and short-term firm contracts, as well as on the spot market. Gas
supplies purchased by the Issuer for its customers are transported by interstate pipelines
under long term contracts with interstate pipeline companies from domestic and Canadian supply
basins. In addition to long term pipeline contracts, National Grid USA is capable of
supplementing its winter supply portfolio on the coldest days of the year with seasonal firm
transportation pipeline contracts,various long-term contracts for underground storage capacity
and peaking supplies to economically meet the increased requirements of its heating customers.
The peaking supplies include various liquefied natural gas (LNG) interests and operations,
including local production plants that store LNG and liquid propane until vaporised, which are
located strategically across National Grid USAs service territories in New York, New
Hampshire, Rhode Island and Massachusetts.Electricity Distribution and GenerationNational Grid USA operates National Grid plcs United States electricity distribution and
generation business. National Grid USAs electricity distribution system operates in upstate
New York through NMPC and in Massachusetts, Rhode Island and New Hampshire through MECO,
Narragansett, Granite State and NEC, with customers that include domestic homes and small and
large commercial and industrial enterprises. The Issuer is one of the leading electricity
distribution service providers in the northeast of the United States, as measured by energy
delivered, and one of the largest utilities in the United States, as measured by the number of
electricity distribution customers. National Grid USAs U.S. electricity distribution and
generation business, excluding KeySpans management and operation of LIPA described below,
serves approximately 3.4 million electricity customers over a network of approximately 72,000
circuit miles in New England and New York.National Grid USAs primary business drivers are the rate plans approved by state regulators
for the Issuers utility subsidiaries. These plans provide incentive returns and shared savings
allowances, which allow us an opportunity to benefit from efficiency gains that the Issuer may
identify and achieve within the operations of its subsidiaries.The Issuer recovers its costs of providing electricity to customers through delivery rates
approved by applicable regulators, which are based on historical or forecasted costs, and which
include a return on the Issuers assets. The cost of the electricity supplied is passed through
to customers. The Issuers businesses are also subject to service quality standards in New
York, Massachusetts, and Rhode Island with respect to reliability and certain aspects of
customer service and safety.
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Under various legacy contractual arrangements more fully described below, certain of the
Issuers KeySpan subsidiaries provide power, electric transmission and distribution services,
billing and other customer services for approximately 1.1 million electriccustomers of LIPA.
LIPA is a corporate municipal instrumentality and a political subdivision of the State of New
York. On 28 May 1998, certain of the Long Island Lighting Companys (LILCOs) business units
were merged with KeySpan and LILCOs common stock and remaining assets were acquired by LIPA.
In addition to managing the electric transmission and distribution system owned by LIPA; these
subsidiaries also provide generating capacity and, to the extent required, energy conversion
services for LIPA from the Issuers 57 electric generating facilities located on Long Island;
and manage fuel supplies for LIPA to fuel the Issuers generating facilities. All of the
generating capacity and, to the extent requested, energy conversion services from the Issuers
Long Island based generating plants are sold to LIPA under long-term contracts.Sales of generating capacity and energy conversion services are made under rates approved by
the Federal Energy Regulatory Commission (FERC)in accordance with a 1998 Power Supply
Agreement (the 1998 PSA) described below. The original FERC-approved rates, which had been in
effect since May 1998, expired on 31 December 2003. On 1 October 2004 the FERC approved a
settlement reached between KeySpan and LIPA to reset rates which became effective on 1 January
2004. That settlement agreement reflects a cost of equity of 9.5 per cent., as well as updated
operating and maintenance expense levels and recovery of certain other costs as agreed to by
the parties. Those rates will expire on 31 December 2008. A Fifth Amendment to the 1998 PSA was
filed on 31 October 2008, by which the parties agreed to extend the current rates for 30 days
to 31 January 2008. It is anticipated that the new revised rates for the final term of the 1998
PSA (until May 2013) will be filed in early December 2008.On 1 February 2006, KeySpan and LIPA entered into (i) the 2006 Management Services Agreement
(2006 MSA), pursuant to which KeySpan will continue to operate and maintain the electric
transmission and distribution system (T&D System) owned by LIPA on Long Island; (ii) a new
Option and Purchase and Sale Agreement (the 2006 Option Agreement), to replace the Generation
Purchase Rights Agreement (as amended, the GPRA), pursuant to which LIPA had the option,
through 15 December 2005, to acquire substantially all of the electric generating facilities
owned by KeySpan on Long Island; and (iii) a Settlement Agreement (the 2006 Settlement
Agreement) resolving outstanding issues between the parties. The 2006 Option Agreement expires
on 31 December 2008 with respect to all affected facilities. The Issuer and LIPA are discussing
the prospect of extending the option with respect to two plants with a combined capacity of 470
megawatts.Pursuant to the 2006 MSA, KeySpan must meet 19 performance metrics, one of which is a Customer
Satisfaction metric. Failure to achieve a minimum level of performance under this metric for
three consecutive years creates an event of default under the 2006 MSA. The measured results of
the Customer Satisfaction performance metric were below the minimum threshold for the 2006 and
2007 contract years and it is possible that the 2008 results may be below such threshold as
well. At this time, we are unable to predict what action, if any, LIPA will take under the 2006
MSA if an event of default occurs or the financial impact of any such action.The Issuer is able, with the approval of the utility commissions in the states in which the
Issuers public utility subsidiaries operate, to recover most of these costs through a special
rate charged to electricity customers.OtherNEET owns and operates an alternating current/direct current converter terminal and related
facilities for the first phase of the Hydro-Quebec and New England interconnection (the
Interconnection), and six miles of high-voltage direct current transmission line in New
Hampshire. N.H. Hydro, in which the Issuer holds 54 per cent. of the common stock, owns and
operates 139 miles of high-voltage direct current transmission line in New Hampshire for the
second phase of the Interconnection, extending to the Massachusetts border. Mass. Hydro, in
which the Issuer holds 54 per cent. of the voting stock, owns and
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operates an alternating
current/direct current terminal and related facilities for the second phase of the
Interconnection and 12 miles of high-voltage direct current transmission line in Massachusetts.
These facilities are made available to customers under the New England ISOs Open Access
Transmission Tariff, and are subject to New England ISO operational control.In addition, the Issuer has established certain regulatory assets that provide for (i) the
recovery of the Issuers historical investments in generating plants that were stranded when
the Issuer divested its generation business as part of the industry restructuring and wholesale
power deregulation process in New England and New York; and (ii) the recovery of certain
above-market costs of commodity purchase contracts that were in place at the time of
restructuring and deregulation.Non Regulated ActivityThe Issuer also has an interest in certain unregulated business activities.Specifically, subsidiaries provide energy-related services to customers located primarily
within the northeast of the United States, with concentrations in the New York City and Boston
metropolitan areas. These subsidiaries provide residential and small commercial customers with
service and maintenance of energy systems and appliances, as well as operation and maintenance,
design, and consulting services to commercial, institutional and industrial customers. The
Issuers subsidiaries involved in this type of unregulated activity have over 200,000 service
contracts in place to provide home energy services.Other subsidiaries are engaged in gas production and development activities, domestic
pipelines, gas storage facilities and LNG facilities and operations. These subsidiaries own an
interest in a partnership of affiliates of six U.S. and Canadian energy companies, which
partnership is the owner of a 411-mile interstate gas pipeline extending from the U.S.-Canadian
border at Waddington, New York through western Connecticut to its terminus in Commack, New
York, and from Huntington to the Bronx. The pipeline can transport up to 1,124,500 decatherms
(DTH) per day of Canadian gas supply from the New York-Canadian border to markets in the
northeast of the United States. In addition, the Issuer owns an interest in a pipeline project
which is anticipated to transport up to 525,000 DTH of gas a day from Corning to Ramapo, New
York, interconnecting with the pipeline systems of various other utilities in New York.The Issuer also has equity investments, in two gas storage facilities in the State of New York
which provide up to 4.3 billion cubic feet of storage service to New York and New England, and
up to 6.2 billion cubic feet of storage service to New Jersey and Massachusetts, respectively.Ravenswood Generating StationIn August 2008, the 2,480 megawatt Ravenswood Generating Facility located in New York City was
divested as required by the terms of the National Grid/KeySpan NYPSC merger order dated 17
September 2007. The facility was sold to TransCanada Corporation for a total cash consideration
of U.S.$2.9 billion.Regulatory EnvironmentThe securities of the Issuers London based parent, National Grid plc, are listed on the London
Stock Exchange and on the New York Stock Exchange and, as a consequence, both National Grid plc
and National Grid USA, are subject to regulation by the Financial Services Authority in the UK
and by the Securities and Exchange Commission (SEC) in the U.S. However, because the Issuer,
as a public utility holding company with federal and state regulated subsidiaries, operates in
a highly regulated environment, good relationships with economic and safety regulators, in
addition to other stakeholders, are essential because this establishes the framework within
which the Issuers businesses operate.The transmission activities of each of the Issuers public utilities are regulated by the
relevant state utility commission in the states in which the Issuer operates and by the FERC.
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In relation to electricity transmission, the FERC, amongst other things, sets rates, service
standards for the transmission business of the Issuers public utilities, approves reliability
standards set by the North American Electric Reliability Council (an industry self regulatory
body), determines the potential levels of return on regulated transmission service, and
approves wholesale electric rates and market rules. Although FERC has jurisdiction over siting
of transmission lines in certain limited circumstances, the siting of transmission lines is
principally regulated by the relevant state and local siting authorities, including state
utility commissions. Due to the corporate structure of the Issuers operating subsidiaries in
the New England states, FERC has principal jurisdiction over the ultimate recovery of
transmission rates in that region. Due to the vertically integrated nature of the Issuers
operating subsidiaries in New York, the ultimate recovery of transmission rates is principally
regulated by the New York public utility commission.The Issuers gas distribution activities through the Issuers various operating subsidiaries,
are regulated by the relevant state utility commissions in the states in which each such
subsidiary operates.In relation to National Grid USAs gas distribution activities, the various state utility
commissions, amongst other things, set distribution service standards for the jurisdictional
public utilities, set retail rates for end use customers, and determine the public utility
potential levels of return on distribution service.The electricity distribution and, to a lesser extent, the generation activities through the
Issuers various KeySpan operating subsidiaries, are also regulated by the relevant state
utility commissions in the states in which the Issuer operates.As with the Issuers gas distribution activity, the various state utility commissions, amongst
other things; set distribution service standards and retail rates for end use customers; and
determine the potential levels of return on distribution service. However, FERC regulates
wholesale electricity sales by the Issuer including sales of generating capacity and energy
conversion services to LIPA, to the extent that any such sales are made.A more detailed decription of the various rate plans in effect is set forth below.Overview of Regulated Entities and Rate PlansGeneralIn New England, the Issuer has separate regulated entities that operate electric transmission
and distribution businesses. Revenue for the distribution entities in each state is collected
through tariffs approved by the applicable state commissions. Each of the distribution entities
are currently operating under multi-year rate plans. Revenue for the Issuers electric
transmission business for the regional transmission entity in New England is collected from
transmission customers through both regional and local tariffs approved by the FERC. The
transmission tariffs allow for recovery of, and return on, capital expenditures as new
investment enters service, bringing immediate revenue benefits.In New York, the Issuer has one entity that operates its electric distribution and transmission
businesses, NMPC. Revenue for the Issuers electric distribution business in New York is
collected from distribution customers exclusively through tariffs approved by the state
commission. Revenue for the Issuers electric transmission portion of the business is collected
from two sources: all end-use distribution customers through the same tariffs that recover the
distribution revenue and the balance collected from certain unaffiliated transmission customers
through regional tariffs approved by the FERC. Most of the revenue, however, is from
distribution customers.The Issuers revenue for gas distribution is collected through tariffs approved by the
applicable state commissions. Two of the three gas distribution entities of the Issuer in
Massachusetts are operating under multi-year rate plans, one of which expires in 2009. The plan
for the largest Massachusetts company, Boston Gas, is scheduled to expire in 2013. However, the
Issuer expects to file a request to reset rates for all three distribution entities in 2010.
The Issuers gas distribution entities in Rhode Island
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and New Hampshire have made filings to
increase distribution rates and those requests are pending before the respective state
commissions.In the past, increased deliveries of electricity and gas would result in higher revenues for
distribution companies similar to those of the Issuer. Conversely, a reduction in deliveries
would result in lower revenues. This is due to the fact that a significant portion of
distribution rates of volumetric. The states of New York and Massachusetts, however, have
adopted policies to employ revenue decoupling rate mechanisms. In addition, revenue decoupling
is under consideration in Rhode Island and New Hampshire. The policy objective behind revenue
decoupling is to eliminate the disincentive for utilities to aggressively pursue energy
efficiency programmes, which reduces delivery revenues. While the mechanism can be structured
with different features, the general principle is to allow the utility to recover a targeted
revenue requirement once the revenue level is set after a rate proceeding establishes new rates
or a new rate plan. To the extent revenues are below the target revenue level, the utility is
allowed to implement a surcharge to recover the shortfall. Conversely, to the extent the
utility over-recovers the targeted revenue level, a credit is given to customers through rates.
Under the policy, decoupling is not typically implemented until rate cases are filed to set new
rates or implement new rate plans.In all of the state jurisdictions, except New Hampshire, the gas and electric distribution
companies, including those principle operating subsidiaries of the Issuer, operate under the
provisions of service quality plans. While the plans differ slightly from state to state, they
share the common feature of imposing financial penalties if service quality performance, as
defined by certain objective reliability, safety and customer service measures, do not meet
minimum specified levels.Electricity Rate PlansNew YorkThe Issuers upstate New York subsidiary, NMPC, is operating under a ten year rate plan that
expires after 2011. Under the plan, the Issuer is allowed to earn up to a 10.6 per cent. return
on equity. Once this allowed return on equity is exceeded, varying percentages of the excess
are shared with customers. For earnings sharing purposes, the return on equity is measured in
accordance with US GAAP and calculated cumulatively from inception to 31 December 2005 and on a
two year rolling basis thereafter. The earnings calculation used to determine the regulated
returns excludes half of the synergy savings from the NMPC acquisition, net of the cost to
achieve them, that are assumed in the rate plan.The NMPC rate plan also allows for subsequent recovery of specified costs and revenue items
that have occurred since the rate plan was established. These deferral items include changes in
the levels of pension and post-retirement benefit expenses from levels specified in the rate
plan, as well as various other items, including extraordinary storm costs, environmental
remediation costs and certain rate discounts provided to customers, together with costs and
revenues from changes in tax, accounting and regulatory requirements that have an annual impact
exceeding U.S.$2 million. The deferred costs are allowed to accumulate in an account. When the
account exceeds U.S.$ 100 million, the Issuer is allowed to make an adjustment to rates to
recover the increment over U.S.$100 million in rates currently. Such adjustments are allowed
every two years, if applicable. At the end of the rate plan, the full balance remaining is
recoverable from customers under any follow on rate plan. The first deferral reset was
scheduled for 2004, but the deferral did not exceed the threshold. Thus, there was no
adjustment. In the next two successive scheduled deferral resets, the Issuer received
adjustments of U.S.$300 million in 2006 and 2007 and an annual adjustment of approximately
U.S.$124 million per year for 2008 and 2009. The final reset is scheduled for 2010, if
applicable.In obtaining approval of the KeySpan transaction, the Issuer made a commitment to invest
U.S.$1.4 billion in the transmission and distribution system over five years, pursuant to a
capital investment plan filed with the commission. The Issuer is also required to file annual
reports, showing amounts spent each year under the plan. To the extent the Issuer does not meet
its annual spending targets under the plan,
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the Issuer is subject to a financial penalty equal
to carrying charges at the allowed overall cost of capital on the under spent amounts, accrued
as a deferred credit for the future benefit of customers.MassachusettsRates for services rendered by the Issuers Massachusetts electric distribution companies are
subject to approval by the Massachusetts Department of Public Utilities (MDPU). In March
2000, the MDPU approved a long-term rate plan which became effective on 1 May 2000. During the
period from 1 March 2005 to 31 December 2009, the Rate Index Period, distribution rates are
adjusted annually, upward or downward, based upon the movement of a distribution index rate (in
cents per kilowatt-hour) of similarly unbundled distribution utilities in New England, New
York, Pennsylvania and New Jersey. In the first three such adjustments, the Issuers
Massachusetts electric distribution companies implemented increases in distribution rates
pursuant to this mechanism of 3.5 per cent., 16 per cent. and 1.9 per cent., effective from 1
March 2006, 2007 and 2008, respectively, following approval by the MDPU. In October 2008, the
Issuers electric distribution companies filed for their final rate index adjustment of 1.54
per cent. to be effective from 1 March 2009. This submission is under review by the MDPU. The
rate plan also includes provisions for recovery of major storm costs and recovery of
incremental costs for certain specified exogenous events and environmental remediation costs.
The Issuers Massachusetts electric distribution companies expect to file a distribution base
rate case during 2009 for effect following the end of the long-term rate plan.Rhode IslandThe Issuers electric distribution business in Rhode Island is governed by a multi-year rate
plan with frozen distribution rates until 2009. The rate plan also includes provisions for
recovery of major storm costs and recovery of incremental costs for certain specified exogenous
events and environmental remediation costs. This plan is due to expire at the end of 2009 and
the Issuer expects to file for an increase in distribution rates during the second quarter of
2009 for new rates to take effect from 1 January 2010.New HampshireRates for services rendered by the Issuers New Hampshire electric distribution company are
subject to approval by the New Hampshire Public Utilities Commission (NHPUC). In July 2007,
the NHPUC approved a settlement agreement related to issues surrounding the merger of National
Grid USA and KeySpan Corporation (the 2007 Settlement). Among other things, the 2007
Settlement provided for a U.S.$2,200,000 reduction in the New Hampshire electric distribution
companys base distribution rates. The 2007 Settlement also contains a distribution rate plan
spanning five years effective from 1 January 2008. During the rate plan period, distribution
rates are frozen except for rate adjustments related to capital spending for certain
reliability enhancement programmes. The rate plan also includes provisions for recovery of
major storm costs and recovery of incremental costs for certain specified exogenous events. The
Rate Plan also includes an earnings share mechanism based on an ROE sharing threshold of 11 per
cent. Earnings above 11 per cent. ROE are shared equally between customers and the Issuers New
Hampshire electric distribution company.Gas Rate PlansNew YorkThe NMPC gas distribution business in upstate New York currently has a rate request pending to
increase gas rates by approximately U.S.$72 million. This case is scheduled for evidentiary
hearings in December 2008. The staff of the Department of Public Service, representing the
interest of consumers, is opposing the size of the request, maintaining that the Issuer be
allowed an increase of approximately U.S.$35 million.
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The two gas distribution companies located downstate, in New York City and Long Island, The
Brooklyn Union Gas Company d/b/a National Grid NY (Brooklyn Union) and KeySpan Gas East d/b/a
National Grid (Gas East), are currently subject to five year rate plans until 1 January 2013.
The rate plans arose from the companies rate filings made in the context of the National Grid
merger proceeding. Base delivery rates were increased by U.S.$60 million for Gas East and are
being maintained at current levels for Brooklyn Union. The base delivery rates are then frozen
for five years. The plans are based on an allowed return on equity of 9.6 per cent. for each
entity. Cumulative earnings above 10.6 per cent. (including a 10 basis point incentive) would
be shared between gas sales customers and the KeySpan companies over the rate plan period.
There are various reconciliation mechanisms that permit the companies to fully or partially
true up to established thresholds for such items as real property, special franchise taxes,
site investigation and remediation costs. In the case of non growth-related capital, Brooklyn
Union and Gas East must return unspent funds below established targets to customers, but may
not recover overspending. Both companies are permitted to reconcile their actual pension and
other post-employment benefit expense to the amount allowed in rates. In addition, the
companies are subject to affiliate rules and various financial protections for the terms of the
rate plans.MassachusettsRates for services rendered by the Issuers Massachusetts gas distribution companies, Boston
Gas Company, Colonial Gas Company and Essex Gas Company are subject to approval by the MDPU.
Boston Gas currently has a long term rate plan in place to 2013, unless terminated earlier.
Under this plan, rates are adjusted each year with the approval of the MDPU based on a
GDP-based price-cap formula. Pension and PBOP costs, as well as certain environmental
remediation costs also are separately collected through a reconciling mechanism. There is also
an earnings sharing mechanism. If the return on equity (ROE) is greater than 14.2 per cent.
customers share 25 per cent. of the excess gain. Conversely, if the ROE is lower than 6.2 per
cent. customers bear 25 per cent. of the loss.For Essex Gas Company, its multi-year rate plan recently expired in September 2008. Until a new
rate case is filed, current rates remain in effect. For Colonial Gas Company, its current
multi-year rate plan terminates in July 2009. In the case of Colonial Gas, the Issuer will be
allowed recovery of acquisition premium and return on cash investment resulting from its merger
with Eastern Enterprises, subject to a stipulated merger savings proof. The three gas
distribution companies expect to file a request for a new consolidated rate plan in 2010.Rhode IslandIn April 2008, the Issuer filed a request to increase gas distribution rates by approximately
U.S.$20 million, which the Issuer later adjusted to U.S.$18.4 million. The staff representing
the consumer interests opposed the request, maintaining that the increase should be only
U.S.$8.4 million. In addition to the size of the rate relief, one of the issues before the
commission is the policy question whether revenue decoupling should be adopted. Evidentiary
hearings concluded at the end of October 2008 and the commission is required to issue an order
on new rates no later than 1 December 2008.New HampshireRates for services rendered by the Issuers New Hampshire gas distribution company are subject
to approval by the NHPUC. The Issuers last approved base rate increase in New Hampshire was in
1993. In July 2007, the NHPUC approved a settlement agreement related to issues surrounding the
merger of National Grid USA and KeySpan Corporation (the 2007 Settlement). This Settlement
includes an enhanced cast iron and bare steel main replacement programme, pursuant to which the
Issuers New Hampshire gas distribution company is allowed to track and recover incremental
capital expenses above its historic baseline level for such replacements on an annual basis. In
addition, on 24 February 2008, as set forth in the 2007 Settlement, the Issuer filed a request
for a rate increase of approximately U.S.$10 million. The filing included a request for a
pension and PBOP reconciliation mechanism. The case is not
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expected to be decided until the
first quarter of 2009. In August 2008, the NHPUC approved the Issuers request for a temporary
base rate increase of U.S.$6.6 million effective from August 2008. This temporary increase is
subject to retroactive adjustment, depending upon the outcome of the rate case, for the
difference between what was collected in rates based on the U.S.$6.6 million increase and the
final allowed permanent increase.Market DevelopmentsU.S. Electricity TransmissionIn the United States, consistent with FERCs transmission pricing policy, the Issuer applied
for and received an increased rate of return on the Issuers investment in transmission assets
in New England effective as of 1 February 2005. While FERC initially approved the application
in October 2006, in March 2008, it decided on a rehearing to limit a portion of that return to
transmission investment placed in service between the effective date and 31 December 2008. In
that order, FERC invited the Issuer to seek additional incentives on a case-by-case basis under
the auspices of its pricing policy. As a result, the Issuer applied for and received an
additional package of incentives on its largest upcoming transmission project, the New England
East-West Solution (NEEWS) effective as of 18 November 2008.The Issuer is involved in a regional planning process with the New York Independent System
Operator, Inc. (NYISO) to identify regional reliability and economic resource and
transmission needs. Progress has been made and the NYISO is in the third year of its
reliability planning process implementation. The Issuer has proposed regulated transmission
solutions to reliability needs identified by the NYISO. In addition, as part of FERCs recent
open access transmission tariff reform, FERC approved in October 2008 the NYISO process to
address economic planning and NYISO is pursuing implementation of that economic planning
process.Energy MarketsSharp increases in energy prices have renewed interest in the public policy debate about
restructuring the nations electricity industry and increased the pressure on regulators and
politicians to consider taking action to mitigate the effects on customers. As the debate
continues, the Issuer has taken a leadership position by advocating a well-managed system as
the key to enabling robust, competitive electricity markets that offer customers choice,
savings and other benefits. State regulators continue to strongly support current recovery of
power supply costs. The Issuer continues to collaborate with regulators, policy makers, and
customers to advance the development of the competitive electricity marketplace.KeySpan Department of Justice InvestigationIn May 2007, KeySpan received a Civil Investigative Demand (CID) from the United States
Department of Justice, Antitrust Division (DOJ), requesting the production of documents and
information relating to its investigation of competitive issues in the New York City electric
energy capacity market prior to National Grids acquisition of KeySpan. The CID is a request
for information in the course of an investigation and does not constitute the commencement of
legal proceedings and no specific allegations have been made against KeySpan. In April 2008,
KeySpan received a second CID in connection with this matter. KeySpan continues to believe that
its activity in the capacity market is consistent with all applicable laws and regulations and
will continue to fully co-operate with this investigation. At this time the Issuer is unable to
determine what effect, if any, the outcome may have on the Issuer and/or the Groups financial
position or profitability.Board of DirectorsThe Directors of the Issuer and their principal activities outside National Grid USA, are as
follows:
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Name
    
    Principal activities outsideNational Grid USA and the National GridGroup*
    
    Business AddressRobert Catell
    
    Co-Chair of the Board of the
Downtown Brooklyn
Partnership; Chairman of the
Long Island Association; Ex
Officio Director and Chairman
Emeritus of The Partnership
for New York City, Inc.;
Vice-Chairman of the US
National Petroleum Councils
Natural Gas Committee and on
the Board of the Business
Council of New York; Keyera
Energy Management Ltd.;
Sovereign Bancorp Inc.; and
JP Morgan/ Chases
Metropolitan Regional
Advisory Board.
    
    One MetroTech Center,
Brooklyn, NY 11201,
United States,Tom King
    
    Director of Jobs for Mass.;
Alliance to Save Energy; and
Edison Electric Institute
    
    201 Jones Road,
Waltham, MA 02451,
United StatesLinda Ryan
    
    None
    
    25 Research Drive,
Westborough, MA 01582,
United States
  There are no potential conflicts of interest between the duties to National Grid USA of each of
the Directors listed above and his or her private interests or other duties.
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TAXATION
 United States TaxationTO ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230 (CIRCULAR 230), HOLDERS OF
INSTRUMENTS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS
PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY HOLDERS
OF INSTRUMENTS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS OF
INSTRUMENTS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED HEREIN BY THE
ISSUER IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY
THE ISSUER OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS OF INSTRUMENTS
SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
  Under current U.S. federal income and estate tax law, and subject to the discussion of backup
withholding in the following section:
 (a)
    
    Payments of principal, original issue discount (OID), and interest by the Issuer or
any paying agent to any holder of an Instrument who is a United States Alien (as defined
below) will not be subject to U.S. federal withholding tax, provided that, in the case of
amounts treated as interest or OID with respect to Instruments with a maturity of more
than 183 days, (i) the amount of the payment is not determined by reference to any
receipts, sales or other cash flow, income or profits, change in value of any property of,
or dividend or similar payment made by, the Issuer or a person related to the Issuer (a
Contingent Payment), (ii) the holder does not actually or constructively own 10 per
cent. or more of the total combined voting power of all classes of stock of the Issuer
entitled to vote, (iii) the holder is not for U.S. federal income tax purposes a
controlled foreign corporation related to the Issuer through stock ownership, and (iv) the
holder is not a bank receiving interest described in Section 881(c)(3)(A) of the Internal
Revenue Code of 1986, as amended (the Code).(b)
    
    A United States Alien holder of an Instrument or coupon will not be subject to U.S.
federal income tax on any gain or income realised upon the sale, exchange, retirement or
other disposition of an Instrument or coupon, provided that (i) in the case of Instruments
with a maturity of more than 183 days, the Instruments do not provide for any Contingent
Payments, and (ii) neither the holder, nor a partner, fiduciary, settler or beneficiary of
the holder if the holder is a partnership or an estate or trust, or a person holding a
power over an estate or trust administered by a fiduciary holder, is considered as:
 (i)
    
    being or having been present or engaged in a trade or business in the
United States or having or having had a permanent establishment therein;(ii)
    
    having a current or former relationship with the United States, including
a relationship as a citizen or resident thereof;(iii)
    
    being or having been for U.S. federal income tax purposes a personal
holding company, a passive foreign investment company, a controlled foreign
corporation or a corporation that has accumulated earnings to avoid U.S. federal
income tax; or
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(iv)
    
    in the case of Instruments with a maturity of more than 183 days,
actually or constructively owning or having owned 10 per cent. or more of the total
combined voting power of all classes of stock of the Issuer entitled to vote.
 (c)
    
    An Instrument or coupon held by an individual who is a United States Alien at the
time of death will not be subject to U.S. federal estate tax as a result of the
individuals death if (i) at the time of the individuals death payments with respect to
the Instrument would not have been effectively connected with a U.S. trade or business of
the individual, and (ii) with respect to Instruments with a maturity of more than 183
days, (A) the holder does not own, actually or constructively, 10 per cent. or more of the
total combined voting power of all classes of stock of the Issuer entitled to vote, and
(B) the Instrument does not provide for any Contingent Payments.(d)
    
    A beneficial owner of an Instrument or coupon that is a United States Alien will not
be required to disclose its nationality, residence, or identity to the Issuer, a paying
agent, or any U.S. governmental authority in order to receive payment on the Instrument or
coupon from the Issuer or a paying agent outside the United States (although the
beneficial owner of an interest in the temporary Global Instrument will be required to
provide a Certificate of Non-U.S. Beneficial Ownership to Euroclear or Clearstream,
Luxembourg in order to receive a beneficial interest in a Permanent Global Instrument or
Definitive Instruments and coupons and interest thereon, as described in Summary of
Provisions Relating to the Instruments while in Global Form  Exchange).
 For purposes of this discussion, United States Alien means any corporation, partnership,
individual or fiduciary estate or trust that, for U.S. federal income tax purposes, is (i) a
foreign corporation, (ii) a foreign partnership all of whose partners are United States Aliens,
(iii) a non-resident alien individual or (iv) a foreign estate or trust all of whose
beneficiaries are United States Aliens .Backup Withholding and Information ReportingPayments of principal, OID and interest on Instruments made outside the United States to a
United States Alien by a non-U.S. payer will not be subject to information reporting and backup
withholding.In addition, except as provided in the following sentence, if principal, OID or interest
payments are collected outside the United States on behalf of a beneficial owner of an
Instrument by a foreign office of a custodian, nominee or other agent who is not a U.S.
Controlled Person, (as defined below), the custodian, nominee or other agent will not be
required to apply backup withholding to these payments when remitted to the beneficial owner
and will not be subject to information reporting. However, if the custodian, nominee or other
agent is a U.S. Controlled Person, payments collected by its United States or foreign office
may be subject to information reporting and backup withholding unless the custodian, nominee or
other agent has in its records documentary evidence that the beneficial owner is not a U.S.
person or is otherwise exempt from information reporting, and it has no actual knowledge or
reason to know that any of the information or certifications associated with this documentation
is incorrect.Payments on the sale, exchange or other disposition of an Instrument made to or through a
foreign office of a broker will generally not be subject to information reporting or backup
withholding. However, if the broker is a U.S. Controlled Person, payments on the sale, exchange
or other disposition of the Instrument made to or through a United States or foreign office of
the broker will be subject to information reporting unless the beneficial owner has furnished
the broker with documentation upon which the broker can rely to treat the payment as made to a
beneficial owner that is a foreign person, and the broker has no actual knowledge or reason to
know that any of the information or certifications associated with this documentation is
incorrect.For purposes of this discussion, a U.S. Controlled Person means (i) a U.S. person (as defined
in the Code), (ii) a controlled foreign corporation for U.S. federal income tax purposes, (iii)
a foreign person 50 per cent. or more of whose gross income was effectively connected with the
conduct of a United States
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trade or business for a specified three-year period, or (iv) a
foreign partnership, if at any time during its tax year, one or more of its partners are U.S.
persons who, in the aggregate, hold more than 50 per cent. of the partnerships income or
capital interest or if, at any time during its tax year, it is engaged in the conduct of a
trade or business in the United States.Any amounts withheld under the backup withholding rules may be allowed as a credit against the
holders U.S. federal income tax liability, and may entitle the holder to a refund, provided
that the required information is furnished to the U.S. Internal Revenue Service.Holders should consult their tax advisors regarding the application of information reporting
and backup withholding to their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining an exemption, if available.A holder of an Instrument with a maturity at issue of 183 days or less and a principal amount
of at least U.S.$500,000 (or its foreign currency equivalent based on the spot rate on the date
of issue), by accepting the Instrument, will be deemed to represent and warrant that it is not
a United States person (other than an exempt recipient described in section 6049(b)(4) of the
Code and the regulations thereunder), and is not acting for or on behalf of any such person.THE SUMMARY OF U.S. FEDERAL INCOME AND ESTATE TAX SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. ALL PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING INSTRUMENTS OR COUPONS, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND POSSIBLE CHANGES IN
TAX LAW.EU Savings DirectiveUnder EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is
required to provide to the tax authorities of another Member State details of payments of
interest or other similar income paid by a person within its jurisdiction to, or collected by
such a person for, an individual resident or certain limited types of entity established in
that other Member State; however, for a transitional period, Austria, Belgium and Luxembourg
may instead apply a withholding system in relation to such payments, deducting tax at rates
rising over time to 35 per cent. The transitional period is to terminate at the end of the
first full fiscal year following agreement by certain non-EU countries to the exchange of
information relating to such payments.Also, a number of non-EU countries, and certain dependent or associated territories of certain
Member States, have adopted similar measures (either provision of information or transitional
withholding) in relation to payments made by a person within its jurisdiction to, or collected
by such a person for, an individual resident or certain limited types of entity established in
a Member State. In addition, the Member States have entered into provision of information or
transitional withholding arrangements with certain of those dependent or associated territories
in relation to payments made by a person in a Member State to, or collected by such a person
for, an individual resident or certain limited types of entity established in one of those
territories.Investors should note that the European Commission has announced proposals to amend the
Directive in order to improve its effectiveness. The proposed amendments, if implemented,
include an extension of the scope of the Directive so as to cover, amongst other things, (i) a
wider range of income equivalent to interest, and (ii) payments made through certain types of
entity (whether or not established in a Member State) for the ultimate benefit of an EU
resident individual.
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PLAN OF DISTRIBUTION
 Summary of AgreementSubject to the terms and on the conditions contained in an amended and restated dealer
agreement dated 1 December 2008 (as amended or supplemented from time to time), between the
Issuer, the Permanent Dealers and the Arranger (the Dealer Agreement), the Instruments will
be offered on a continuous basis by the Issuer to the Permanent Dealers. However, the Issuer
has reserved the right to issue Instruments directly on its own behalf to dealers which are not
the Permanent Dealers. The Instruments may also be issued by the Issuer through the Dealers,
acting as agents of the Issuer. The Dealer Agreement also provides for Instruments to be issued
in syndicated Tranches which are jointly and severally underwritten by two or more Dealers. The
commissions in respect of an issue of Instruments on a syndicated basis will be stated in the
relevant Final Terms. The Issuer has agreed to indemnify the Dealers against certain
liabilities in connection with the offer and sale of the Instruments.Selling RestrictionsUnited StatesThe Instruments have not been and will not be registered under the Securities Act and may not
be offered or sold within the United States or to, or for the account or benefit of, U.S.
persons except in certain transactions exempt from the registration requirements of the
Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S
under the Securities Act.Any Instruments having a maturity of more than one year are subject to U.S. tax law
requirements and may not be offered, sold or delivered within the United States or its
possessions or to a U.S. person, except in certain transactions permitted by U.S. tax
regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal
Revenue Code and regulations under it.Each Dealer has represented and agreed and each further Dealer appointed under the Programme
will be required to represent and agree that, except as permitted by the Dealer Agreement, it
has not offered, sold or delivered and will not offer, sell or deliver the Instruments of any
identifiable Tranche, (a) as part of their distribution at any time or (b) otherwise until 40
days after completion of the distribution of such Tranche as determined and certified to the
Issuer and the Issuing and Paying Agent by such Dealer, or in the case of Instruments issued on
a syndicated basis by each of such Dealers with respect to Instruments of such Tranche
purchased by or through it, in which case the Issuer shall request the Issuing and Paying Agent
to notify each such Dealer when all such Dealers have so certified, within the United States or
to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to
which it sells Instruments during the distribution compliance period a confirmation or other
notice setting forth the restrictions on offers and sales of the Instruments within the United
States or to, or for the account or benefit of, U.S. persons.Each issuance of Dual Currency Instruments will be subject to such additional United States
selling restrictions as indicated in the applicable Final Terms. Each Dealer has agreed that it
shall offer, sell and deliver such Instruments only in compliance with such additional U.S.
selling restrictions.In addition, until 40 days after the commencement of the offering of any identifiable Tranche,
an offer or sale of Instruments within the United States by any dealer that is not
participating in the offering may violate the registration requirements of the Securities Act.Public Offer Selling Restriction under the Prospectus DirectiveIn relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a Relevant Member State), each Dealer has represented, warranted
and agreed, and each further Dealer appointed under the Programme will be required to
represent, warrant and agree, that with effect from and including the date on which the
Prospectus Directive is implemented
 65




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##### 



in that Relevant Member State (the Relevant Implementation
Date) it has not made and will not make an offer of Instruments which are the subject of the
offering contemplated by the Prospectus as completed by the Final Terms in relation thereto to
the public in that Relevant Member State except that it may, with effect from and including the
Relevant Implementation Date, make an offer of Instruments to the public in that Relevant
Member State:
 (a)
    
    if the Final Terms in relation to the Instruments specify that an offer of those
Instruments may be made other than pursuant to Article 3(2) of the Prospectus Directive in
that Relevant Member State (a Non-Exempt Offer), following the date of publication of a
prospectus in relation to those Instruments which has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in another
Relevant Member State and notified to the competent authority in that Relevant Member
State, provided that any such prospectus has subsequently been completed by the Final
Terms contemplating such Non-Exempt Offer, in accordance with the Prospectus Directive, in
the period beginning and ending on the dates specified in such prospectus or Final Terms,
as applicable;(b)
    
    at any time to legal entities which are authorised or regulated to operate in the
financial markets or, if not so authorised or regulated, whose corporate purpose is solely
to invest in securities;(c)
    
    at any time to any legal entity which has two or more of (1) an average of at least
250 employees during the last financial year; (2) a total balance sheet of more than
43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its last
annual or consolidated accounts;(d)
    
    at any time to fewer than 100 natural or legal persons (other than qualified
investors as defined in the Prospectus Directive) subject to obtaining the prior consent
of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or(e)
    
    at any time in any other circumstances falling within Article 3(2) of the Prospectus
Directive,
 provided that no such offer of Instruments referred to in (b) to (e) above shall require the
Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive
or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.For the purposes of this provision, the expression an offer of Instruments to the public in
relation to any Instruments in any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the offer and the Instruments to be
offered so as to enable an investor to decide to purchase or subscribe the Instruments, as the
same may be varied in that Member State by any measure implementing the Prospectus Directive in
that Member State.United KingdomEach Dealer has represented, warranted and agreed, and each further Dealer appointed under the
Programme will be required to represent, warrant and agree, that:
 (a)
    
    in relation to any Instruments which have a maturity of less than one year, (i) it is
a person whose ordinary activities involve it in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of its business and (ii) it has
not offered or sold and will not offer or sell any Instruments other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or as agent) for the purposes of their businesses or who it is
reasonable to expect will acquire, hold, manage or dispose of investments (as principal or
agent) for the purposes of their businesses where the issue of the Instruments would
otherwise constitute a contravention of Section 19 of the FSMA by the Issuer;
 66




---



##### 



(b)
    
    it has only communicated or caused to be communicated and will only communicate or
cause to be communicated an invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) received by it in connection with the issue
or sale of any Instruments in circumstances in which Section 21(1) of the FSMA does not
apply to the Issuer; and(c)
    
    it has complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to any Instruments in, from or otherwise
involving the United Kingdom.
 JapanThe Instruments have not been and will not be registered under the Financial Instruments and
Exchange Law of Japan (Law No. 25 of 1948, as amended) (the Financial Instruments and Exchange
Law). Accordingly, each of the Dealers has represented, warranted and agreed and each further
Dealer appointed under the Programme will be required to represent, warrant and agree that it
has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or
sell any Instruments in Japan or to, or for the benefit of, any resident of Japan or to others
for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any
resident of Japan except pursuant to an exemption from the registration requirements of, and
otherwise in compliance with the Financial Instruments and Exchange Law and other relevant laws
and regulations of Japan. As used in this paragraph, resident of Japan means any person
resident in Japan, including any corporation or other entity organised under the laws of Japan.GeneralThese selling restrictions may be modified by the agreement of the Issuer and the Dealers
following a change in a relevant law, regulation or directive. Any such modification will be
set out in the Final Terms issued in respect of the issue of Instruments to which it relates or
in a supplement to this Prospectus.No action has been or will be taken in any country or jurisdiction by the Issuer or the Dealers
that would permit a public offering of Instruments, or possession or distribution of any
offering material in relation thereto, in any country or jurisdiction where action for that
purpose is required. Persons into whose hands this Prospectus or any Final Terms comes are
required by the Issuer and the Dealers to comply with all applicable laws and regulations in
each country or jurisdiction in or from which they purchase, offer, sell or deliver Instruments
or have in their possession or distribute such offering material, in all cases at their own
expense.Each Dealer has agreed that it will comply with all relevant laws, regulations and directives
in each jurisdiction in which it purchases, offers, sells or delivers Instruments or has in its
possession or distributes this Prospectus, any other offering material or any Final Terms and
neither the Issuer nor any other Dealer shall have responsibility for such material.
 67




---



##### 



FORM OF FINAL TERMS
 The Final Terms in respect of each Tranche of Instruments will be substantially in the
following form, duly supplemented (if necessary), amended (if necessary) and completed to
reflect the particular terms of the relevant Instruments and their issue. Text in this section
appearing in italics does not form part of the form of the Final Terms but denotes directions
for completing the Final Terms.Final Terms dated []
 NATIONAL GRID USA
 PART A  CONTRACTUAL TERMS
 Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set
forth in the Prospectus dated 1 December 2008 [and the supplemental Prospectus dated []] which
[together] constitute[s] a base prospectus for the purposes of the Prospectus Directive
(Directive 2003/71/EC) (the Prospectus Directive). This document constitutes the Final Terms
of the Instruments described herein for the purposes of Article 5.4 of the Prospectus Directive
and must be read in conjunction with such Prospectus [as so supplemented]. Full information on
the Issuer and the offer of the Instruments is only available on the basis of the combination
of these Final Terms and the Prospectus. [The Prospectus [and the supplemental Prospectus] [is]
[are] available for viewing [at [website] [and] during normal business hours at [address] [and
copies may be obtained from [address]].The following alternative language applies if the first tranche of an issue which is being
increased was issued under a Prospectus with an earlier date.Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the
Conditions) contained in the Trust Deed dated [original date] and set forth in the Prospectus
dated [original date] [and the supplemental Prospectus dated []] and incorporated by reference
into the Prospectus dated 1 December 2008 and which are attached hereto. This document
constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of
the Prospectus Directive (Directive 2003/71/EC) (the Prospectus Directive) and must be read
in conjunction with the Prospectus dated 1 December 2008 [and the supplemental Prospectus dated
[]], which [together] constitute[s] a base prospectus for the purposes of the Prospectus
Directive. The Prospectuses [and the supplemental Prospectus] are available for viewing [at
[website]] [and] during normal business hours at [address] [and copies may be obtained from
[address]].[Include whichever of the following apply or specify as Not Applicable (N/A). Note that
the numbering should remain as set out below, even if Not Applicable is indicated for
individual paragraphs or sub-paragraphs. Italics denote guidance for completing the Final
Terms.][When completing final terms or adding any other final terms or information consideration
should be given as to whether such terms or information constitute significant new factors
and consequently trigger the need for a supplement to the Prospectus under Article 16 of the
Prospectus Directive.]
 1.
    
    Issuer:
    
    National Grid USA2.
    
    (i)
    
    Series Number:
    
    [     ](ii)
    
    Tranche Number:
    
    [     ](If fungible with an existing Series,
details 
of that Series, including the date
on which
 68




---



##### 



the Instruments become fungible).]3.
    
    Specified Currency or Currencies:
    
    [     ]4.
    
    Aggregate Nominal Amount:
    
    [     ][(i)]
    
    Series:
    
    [     ][(ii)]
    
    Tranche:
    
    [     ]5.
    
    Issue Price:
    
    [ ] per cent of the Aggregate Nominal Amount [plus
accrued interest from [insert date] ( if applicable)]6.
    
    (i)
    
    Specified Denominations:
    
    [     ]*(ii)
    
    Calculation Amount:
    
    [If only one Specified Denomination, insert the
Specified Denomination. If more than one Specified
Denomination, insert the highest common factor] [Note:
There must be a common factor in the case of two or
more Specified Denominations]7.
    
    [(i)]
    
    Issue Date:
    
    [     ]][(ii)]
    
    Interest Commencement Date:
    
    [Specify/Issue Date/Not Applicable]8.
    
    Maturity Date:
    
    [specify date or (for Floating Rate Instruments)
Interest Payment Date falling in or nearest to the
relevant month and year]9.
    
    Interest Basis:
    
    [[] per cent. Fixed Rate][[specify reference rate] +/ [] per cent. Floating
Rate][Zero Coupon][Other (specify)](further particulars specified below)10.
    
    Redemption/Payment Basis:
    
    [Redemption at par][Dual Currency][Partly Paid][Instalment][Other (specify)][N.B. If the Final Redemption Amount is less than 100
per cent. of the nominal value, the Instruments will
constitute derivative securities for the purposes of
the Prospectus Directive and the requirements of Annex
XII to the Prospectus Directive Regulation No.
809/2004 will apply and the Issuer will prepare and
publish a supplement to the Prospectus.]11.
    
    Change of Interest or Redemption/Payment Basis:
    
    [Specify details of any provision for convertibility of Instruments into another interest or redemption/payment basis]12.
    
    Put/Call Options:
    
    [Investor Put][Issuer Call][(further particulars specified below)]
 
 *
    
    Instruments which have a maturity of less than one year
must have a minimum denomination of £100,000 (or it equivalent in other
currencies) 69




---



##### 



13.
    
    (i)
    
    Status of the Instruments:
    
    Senior(ii)
    
    Date [Board] approval for issuance
of Instruments obtained:
    
    [     ] [and [     ], respectively]](N.B Only relevant where Board (or similar)
authorisation is required for the particular tranche
of Instruments)]14.
    
    Method of distribution:
    
    [Syndicated/Non-syndicated]PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE15.
    
    Fixed Rate Instrument Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Rate[(s)] of Interest:
    
    [     ] per cent. per annum [payable
[annually/semi-annually/quarterly/monthly] in arrear](ii)
    
    Interest Payment Date(s):
    
    [     ] in each year(iii)
    
    Fixed Coupon Amount[(s)]:
    
    [] per Calculation Amount(iv)
    
    Broken Amount(s):
    
    [] per Calculation Amount, payable on the Interest
Payment Date falling [in/on] [](v)
    
    Day Count Fraction (Condition
3.11):
    
    [30/360 / Actual/Actual ([ICMA]/ISDA)/other](vi)
    
    Determination Dates (Condition
3.11):
    
    [     ] in each year (insert regular interest payment
dates, ignoring issue date or maturity date in the
case of a long or short first or last coupon. N.B.
only relevant where Day Count Fraction is
Actual/Actual ([ICMA]))(vii)
    
    Other terms relating to the method
of calculating interest for Fixed
Rate Instruments:
    
    [Not Applicable/give details]16.
    
    Floating Rate Instrument Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Interest Period(s):
    
    [     ](ii)
    
    Specified Interest Payment Dates:
    
    [     ](iii)
    
    Business Day Convention:
    
    [Floating Rate Convention/ Following Business Day
Convention/ Modified Following Business Day
Convention/ Preceding Business Day Convention/ other
(give details)](iv)
    
    First Interest Payment Date:
    
    [     ](v)
    
    Business Centre(s) (Condition
3.11):
    
    [     ](vi)
    
    Manner in which the Rate(s) of
Interest is/are to be determined:
    
    [Screen Rate
Determination/ISDADetermination/other (give details)](vii)
    
    Interest Period Date(s):
    
    (Not Applicable unless different from Interest Payment
Date)(viii)
    
    Party responsible for calculating
the Rate(s) of Interest and
Interest Amount(s) (if not the
Calculation Agent):
    
    [     ]
 70




---



##### 



(ix)
    
    Screen Rate Determination
(Condition 3.2.3(b)):
    
    Reference Rate:
    
    [     ]
    
    Interest Determination Date(s):
    
    [[     ][TARGET] Business Days in [specify city] for
[specify currency] prior to [the first day in each
Interest Accrual Period/each Interest Payment Date]]
    
    Relevant Screen Page:
    
    [     ]
    
    Reference Banks (if Primary
Source is Reference Banks):
    
    [Specify five](x)
    
    ISDA Determination (Condition
3.2.3(a)):
    
    Floating Rate Option:
    
    [     ]
    
    Designated Maturity:
    
    [     ]
    
    Reset Date:
    
    [     ]
    
    [ISDA Definitions: (if different
from those set out in the
Conditions)
    
    [2000/2006]](xi)
    
    Margin(s):
    
    [+/-][     ] per cent. per annum(xii)
    
    Minimum Rate of Interest:
    
    [     ] per cent. per annum(xiii)
    
    Maximum Rate of Interest:
    
    [     ] per cent. per annum(xiv)
    
    Day Count Fraction (Condition
3.11):
    
    [     ](xv)
    
    Fall back provisions, rounding
provisions, denominator and any other
terms relating to the method of
calculating interest on Floating Rate
Instruments, if different from those
set out in the Conditions:
    
    [     ]17.
    
    Zero Coupon Instrument Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Amortisation Yield (Condition 4.4):
    
    [     ] per cent. per annum(ii)
    
    Day Count Fraction (Condition
3.11):
    
    [     ](iii)
    
    Any other formula/basis of
determining amount payable:
    
    [     ]18.
    
    Dual Currency Instrument Provisions
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Rate of Exchange/method of
calculating Rate of Exchange:
    
    [give details](ii)
    
    Calculation Agent, if any,
responsible for calculating the
principal and/or interest due:
    
    [     ](iii)
    
    Provisions applicable where
    
    [     ]
 71




---



##### 



calculation by reference to Rate of
Exchange impossible or impracticable:(iv)
    
    Person at whose option Specified
Currency(ies) is/are payable:
    
    [     ](v)
    
    Day Count Fraction (Condition
3.11):
    
    [           ]PROVISIONS RELATING TO REDEMPTION19.
    
    Residual Holding Call Option
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Residual Holding Percentage:
    
    [           ] per cent.(ii)
    
    Party responsible for calculating
the Residual Holding Redemption
Amount (if not the Calculation Agent):
    
    [           ](iii)
    
    Benchmark Security:
    
    [Specify Government Security/swap benchmark](iv)
    
    Benchmark Spread:
    
    [           ] per cent. per annum(v)
    
    Benchmark Day Count Fraction:
    
    [           ](vi)
    
    [Other relevant provisions:
    
    [           ]]20.
    
    Call
Option
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Optional Redemption Date(s):
    
    [     ](ii)
    
    Optional Redemption Amount(s) of
each Instrument and method, if any,
of calculation of such amount(s):
    
    [     ] per Calculation Amount(iii)
    
    If redeemable in part:(a)
    
    Minimum nominal amount to be
redeemed:
    
    [     ] per Calculation Amount(b)
    
    Maximum nominal amount to be
redeemed:
    
    [     ] per Calculation Amount(iv)
    
    Option Exercise Date(s):
    
    [     ](v)
    
    Notice period (if other than as
set out in the Conditions)
    
    [     ]21.
    
    Put Option
    
    [Applicable/Not Applicable](If not applicable, delete the remaining
sub-paragraphs of this paragraph)(i)
    
    Optional Redemption Date(s):
    
    [     ](ii)
    
    Optional Redemption Amount(s) of
each Instrument and method, if any,
of calculation of such amount(s):
    
    [     ] per Calculation Amount
 
 
    
    This does not include the tax call in Condition 4.2 or
the call option contained in Condition 4.5.1 72




---



##### 



(iii)
    
    Option Exercise Date(s):
    
    [     ](iv)
    
    Notice period (if other than as
set out in the Conditions)
    
    [     ]22.
    
    Final Redemption Amount of each Instrument:
    
    [     ] per Calculation Amount(i)
    
    Formula:
    
    [give or annex details](ii)
    
    Calculation Agent responsible for
calculating the Final Redemption
Amount:
    
    [     ](iii)
    
    Provisions for determining Final
Redemption Amount where calculated by
reference to Formula and/or other
variable:
    
    [give or annex details](iv)
    
    Determination Date(s):
    
    [     ](v)
    
    Provisions for determining Final
Redemption Amount where calculation
by reference to Index and/or Formula
and/or other variable is impossible
or impracticable or otherwise
disrupted:
    
    [     ](vi)
    
    Payment Date:(vii)
    
    Minimum Final Redemption Amount:
    
    [     ] per Calculation Amount(viii)
    
    Maximum Final Redemption Amount:
    
    [     ] per Calculation Amount23.
    
    Early Redemption Amount(i)
    
    Early Redemption Amount(s) of each
Instrument payable on redemption for
taxation reasons (Condition 4.2) or
on Event of Default (Condition 8) or
other early redemption and/or the
method of calculating the same (if
required or if different from that
set out in the Conditions):
    
    [     ](ii)
    
    Redemption for taxation reasons
permitted on days other than Interest
Payment Dates (Condition 4.2)
    
    [Yes/No](iii)
    
    Unmatured Coupons to become void
upon early redemption (Condition 5.5)
    
    [Yes/No/Not Applicable]GENERAL PROVISIONS APPLICABLE TO THE INSTRUMENTS24.
    
    Form of Instruments:
    
    Bearer Instruments:[temporary Global Instrument exchangeable for a
permanent Global Instrument which is exchangeable for
Definitive Instruments in the limited circumstances
specified in the permanent Global Instrument]
 73




---



##### 



[temporary Global Instrument exchangeable for
Definitive Instruments in the limited circumstances
specified in the temporary Global Instrument]
[permanent Global Instrument exchangeable for
Definitive Instruments in the limited circumstances
specified in the permanent Global Instrument]25.
    
    New Global Note
    
    [Yes] [No]26.
    
    Financial Centre(s) or other special
provisions relating to Payment Dates
(Condition 5.6):
    
    [Not Applicable/give details. Note that this item
relates to the date and place of payment, and not
interest period end dates, to which item 16(iv)
relates]27.
    
    Applicable TEFRA exemption:
    
    [D Rules/Not Applicable]28.
    
    Talons for future Coupons or Receipts to be
attached to Definitive Instruments (and
dates on which such Talons mature):
    
    [Yes/No. If yes, give details]29.
    
    Details relating to Partly Paid
Instruments: amount of each payment
comprising the Issue Price and date on
which each payment is to be made and
consequences (if any) of failure to pay,
including any right of the Issuer to
forfeit the Instruments and interest due on
late payment:
    
    [Not Applicable/give details]30.
    
    Details relating to Instalment Instruments:
    
    [Not Applicable/give details]
    
    Amount of each instalment:
    
    [     ]
    
    Date on which each payment is to be
made:
    
    [     ]
    
    Maximum Instalment Amount:
    
    `
    
    Minimum Instalment Amount:
    
    [     ]31.
    
    Redenomination, renominalisation and
reconventioning provisions:
    
    [Not Applicable/ give details]32.
    
    Consolidation provisions:
    
    [Not Applicable/ give details]33.
    
    Other final terms:
    
    [Not Applicable/give details](When adding any other final terms consideration
should be given as to whether such terms constitute a
significant new factor and consequently trigger the
need for a supplement to the Prospectus under Article
16 of the Prospectus Directive.)DISTRIBUTION34.
    
    (i)
    
    If syndicated, names of Managers:
    
    [Not Applicable/give names](ii)
    
    Stabilising Manager(s) (if any):
    
    [Not Applicable/give name]35.
    
    If non-syndicated, name of Dealer:
    
    [Not Applicable/give name]36.
    
    Additional selling restrictions:
    
    [Not Applicable/give details]
 74




---



##### 



[PURPOSE OF FINAL TERMSThese Final Terms comprise the final terms required to list and have admitted to trading the
issue of Instruments described herein pursuant to the Euro Medium Term Note Programme of
National Grid USA.]RESPONSIBILITYThe Issuer accepts responsibility for the information contained in these Final Terms. [[] has
been extracted from []. The Issuer confirms that such information has been accurately
reproduced and that, so far as it is aware, and is able to ascertain from information published
by [], no facts have been omitted which would render the reproduced information inaccurate or
misleading.]Signed on behalf of the Issuer:By: ............................................Duly authorised
 75




---



##### 



PART
B  OTHER INFORMATION *
 1
    
    Listing(i)
    
    Listing:
    
    [London/other (specify)/None](ii)
    
    Admission to trading:
    
    [Application has been made for the
Instruments to be admitted to trading on
the London Stock Exchange plcs Regulated
Market with effect from [     ].] [Not Applicable.](iii)
    
    Estimate of total
expenses related to admission
to trading:
    
    [     ]2
    
    RatingsRatings:
    
    The Instruments to be issued have been rated:[S & P: [     ]][Moodys: [     ]][[Other]: [     ]](The above disclosure should reflect the rating allocated to
Instruments of the type being issued under the Programme
generally or, where the issue has been specifically rated, that
rating.)
 3
    
    [NotificationThe Financial Services Authority [has been requested to provide/has provided  include first
alternative for an issue which is contemporaneous with the update of the Programme and the
second alternative for subsequent issues] the [include names of competent authorities of host
Member States] with a certificate of approval attesting that the Prospectus has been drawn up
in accordance with the Prospectus Directive.]**4
    
    [Interests of Natural and legal Persons involved in the IssueNeed to include a description of any interest, including conflicting ones, that is material to
the issue/offer, detailing the persons involved and the nature of the interest. May be
satisfied by the inclusion of the following statement:So far as the Issuer is aware, no person involved in the offer of the Instruments has an
interest material to the offer.][(When adding any other description, consideration should be given as to whether such matters
described constitute significant new factors and consequently trigger the need for a
supplement to the Prospectus under Article 16 of the Prospectus Directive.)]
 
 *
    
    If an issue of Instruments is (i) NOT admitted to
trading on a regulated market within the European Economic Area and (ii)
only offered in the European Economic Area in circumstances where a
prospectus is not required to be published under the Prospectus Directive
the Issuer may elect to amend and/or delete certain of the above
paragraphs of Part B.**
    
    Required for derivative securities to which Annex XII to the
Prospectus Directive Regulation applies. 76




---



##### 



5
    
    [Reasons for the Offer, Estimated Net Proceeds and Total Expenses(i)
    
    [Reasons for the offer
    
    [     ](See [Use of Proceeds] wording in
Prospectus  if reasons for offer
different fromgeneral corporate purposes
will need to include those reasons here.)](ii)
    
    [Estimated net proceeds:
    
    [     ](If proceeds are intended for more than
one use will need to split out and present
in order of priority. If proceeds
insufficient to fund all proposed uses
state amount and sources of other
funding.)(iii)
    
    [Estimated total
expenses:
    
    [     ] [Include breakdown of expenses.]([If the Instruments are derivative
securities for which Annex XII of the
Prospectus Directive Regulation applies it
is] only necessary to include disclosure
of net proceeds and total expenses at (ii)
and (iii) above where disclosure is
included at (i) above.)]*6
    
    [Fixed Rate
Instruments only  YIELDIndication of yield:
    
    [             ]The yield is calculated at the Issue Date on the
basis of the Issue Price. It is not an indication of
future yield. ]7
    
    [Dual Currency
Instruments only  PERFORMANCE OF RATE[S] OF EXCHANGENeed to include details of where past and future performance and volatility of the relevant
rate[s] can be obtained.]*[(When completing this paragraph, consideration should be given as to whether such matters
described constitute significant new factors and consequently trigger the need for a
supplement to the Prospectus under Article 16 of the Prospectus Directive.)]
 8
    
    OPERATIONAL INFORMATIONISIN Code:
    
    [     ]Common Code:
    
    [     ]Any clearing
system(s) other
than Euroclear Bank
S.A./N.V. and
Clearstream Banking
société anonyme
and the relevant
identification
number(s):
    
    [Not Applicable/give name(s) and number(s) [and address(es)]]Delivery:
    
    Delivery [against/free of] paymentNames and addresses
of additional
Paying Agent(s) (if
any):
    
    [     ]Intended to be held
in a manner which
would allow
Eurosystem
    
    [Yes][No] [Note that the designation Yes simply means that
the Instruments are intended upon issue to be deposited with
Euroclear or Clearstream, Luxembourg as Common Safekeeper
and does not
 
  *
    
    Required for derivative securities to which Annex XII
to the Prospectus Directive Regulation applies. 77




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eligibility:
    
    necessarily mean that the Instruments will be recognised as eligible collateral for Eurosystem monetary
policy and intra-day credit operations by the Eurosystem
either upon issue or at any or all times during their life.
Such recognition will depend upon satisfaction of the
Eurosystem eligibility criteria.][Include this text if Yes
selected in which case the Instruments must be issued in NGN
form]9
    
    GeneralThe aggregate principal amount of
Instruments issued has been translated into
Euro at the rate of [], producing a sum of
(for Instruments not denominated in Euro):
    
    [Not Applicable/[[Euro]][]]Additional steps that may only be taken
following approval by an Extraordinary
Resolution in accordance with Condition
10.1:
    
    [Not Applicable/give details]
 78




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GENERAL INFORMATION
 1.
    
    The admission of the Programme to listing on the Official List of the U.K. Listing
Authority and to trading on the Market is expected to take effect on or about 3 December
2008. The listing of the Instruments on the Official List will be expressed as a
percentage of their nominal amount (exclusive of accrued interest). Any Tranche of
Instruments intended to be admitted to listing on the Official List of the U.K. Listing
Authority and admitted to trading on the Market will be so admitted to listing and trading
upon submission to the U.K. Listing Authority and the Market (in accordance with their
rules and procedures) of the relevant Final Terms and any other information required by
the U.K. Listing Authority and the Market, subject in each case to the issue of the
relevant Instruments. Prior to official listing, dealings will be permitted by the Market
in accordance with its rules. Transactions will normally be effected for delivery on the
third working day in London after the day of the transaction.However, Instruments may be issued pursuant to the Programme which will not be admitted
to listing and/or trading by the U.K. Listing Authority or the Market or any other
listing authority, stock exchange and/or quotation system or which will be admitted to
listing, trading and/or quotation by such listing authority, stock exchange and/or
quotation system as the Issuer and the relevant Dealer(s) may agree.2.
    
    The Issuer has obtained all necessary consents, approvals and authorisations in the
United States of America in connection with the issue and performance of the Instruments.3.
    
    The establishment of the Programme was authorised by a resolution of the Executive
Committee of the Board of Directors of the Issuer passed on 14 November 2007 and the
update of the Programme was authorised by a written consent in lieu of a special meeting
of the Board of Directors of the Issuer passed on 20 November 2008.4.
    
    The Instruments have been accepted for clearance through the Euroclear and
Clearstream, Luxembourg. The appropriate common code and the International Securities
Identification Number in relation to the Instruments of each Series will be specified in
the Final Terms relating thereto. The relevant Final Terms shall specify any other
clearing system(s) as shall have accepted the relevant Instruments for clearance together
with any further appropriate information.5.
    
    Neither the Issuer nor any of it subsidiaries is or has been involved in any
governmental, legal or arbitration proceedings (including any such proceedings which are
pending or threatened of which the Issuer is aware) during the 12 months preceding the
date of this Prospectus which may have, or have in such period had, significant effects on
the financial position or profitability of the Issuer or of the Group.6.
    
    There has been no significant change in the financial or trading position of the
Issuer or the Group since 31 March 2008 and no material adverse change in the prospects of
the Issuer since 31 March 2008.7.
    
    PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm of 300
Madison Avenue, New York NY 10017 (members of the American Institute of Certified Public
Accountants), have audited, and rendered unqualified audit reports on, the consolidated
financial statements prepared under U.S. GAAP of the Issuer for the years ended 31 March
2008 and 31 March 2007.8.
    
    Each Instrument having a maturity of more than one year, Receipt, Coupon and Talon
will bear the following legend: Any United States person who holds this obligation will
be subject to limitations under the United States income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code.
 79




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##### 



9.
    
    For so long as the Programme remains in effect or any Instruments are outstanding,
copies of the following documents may be inspected during usual business hours on any
weekday (Saturdays, Sundays and public holidays excepted), at the registered offices of
the Issuer and the specified office in London of the Issuing and Paying Agent:
 (a)
    
    a copy of this Prospectus together with any supplement to this Prospectus
or further Prospectus;(b)
    
    the constitutional documents of the Issuer; and(c)
    
    the audited consolidated accounts of the Issuer for the financial years
ended 31 March 2007 and 31 March 2008, respectively, and any consolidated interim
accounts of the Issuer published subsequently to such accounts.
 In addition, this Prospectus is and, in the case of Instruments to be admitted to the
Official List and admitted to trading on the Market, the relevant Final Terms will be,
available on the website of the Regulatory News Service operated by the London Stock
Exchange at www.londonstockexchange.com/en-gb/pricesnews/marketnews.
 80




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##### 



REGISTERED OFFICE OF THE ISSUER
 National Grid USA
 THE ARRANGER
 HSBC Bank plc
 DEALERS
 Commerzbank Aktiengesellschaft
60 Gracechurch Street 
London EC3V 0HR 
United Kingdom
    
    Deutsche Bank AG, London Branch
Winchester House
1 Great Winchester Street
London EC2N 2DB
United KingdomHSBC Bank plc
8 Canada Square 
London E14 5HQ 
United Kingdom
    
    Morgan Stanley & Co. International plc
25 Cabot Square
Canary Wharf
London E14 4QA
United Kingdom
 LEGAL ADVISERS
 To the Dealers as to English law and United States law and to the Trustee as to English law
 Clifford Chance LLP
 To the Issuer as to English and United States law
 Linklaters LLP
 THE TRUSTEE
 The Law Debenture Trust Corporation p.l.c.
 ISSUING AND PAYING AGENT
 The Bank of New York Mellon
 PAYING AGENT
 KBL European Private Bankers S.A.
 REGISTERED AUDITORS TO THE ISSUER
 PricewaterhouseCoopers LLP
 81