Form of Servicing Agreement


     

    Exhibit
      10.2

     

    

      
        
          

        



       

      TRANSFERRED
        ENVIRONMENTAL CONTROL PROPERTY SERVICING AGREEMENT

       

      between

       

      PE
        ENVIRONMENTAL FUNDING LLC

       

      and

       

      THE
        POTOMAC EDISON COMPANY

       

      Servicer

       

      Dated
        as
        of [_________]

       

       

        
          

        

      

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF CONTENTS

       

      
        	
                ARTICLE
                  I       DEFINITIONS

              	
                1

              
	 	 
	
                  SECTION
                  1.01  DEFINITIONS

              	
                1

              
	 	 
	
                ARTICLE
                  II  APPOINTMENT
                  AND AUTHORIZATION OF SERVICER

              	
                2

              
	 	 
	
                  SECTION
                  2.01  APPOINTMENT
                  OF
                  SERVICER; ACCEPTANCE OF APPOINTMENT

              	
                2

              
	
                  SECTION
                  2.02  AUTHORIZATION

              	
                2

              
	
                  SECTION
                  2.03  DOMINION AND
                  CONTROL OVER TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY

              	
                2

              
	 	 
	
                ARTICLE
                  III  BILLING
                  SERVICES

              	
                2

              
	 	 
	
                  SECTION
                  3.01  DUTIES OF
                  SERVICER

              	
                2

              
	
                  SECTION
                  3.02  COLLECTION
                  OF
                  ENVIRONMENTAL CONTROL CHARGES

              	
                3

              
	
                  SECTION
                  3.03  SERVICING AND
                  MAINTENANCE STANDARDS

              	
                4

              
	
                  SECTION
                  3.04  MONTHLY AND
                  QUARTERLY SERVICER’S CERTIFICATES

              	
                4

              
	
                  SECTION
                  3.05  ANNUAL REPORTS
                  ON
                  SERVICING COMPLIANCE AND ATTESTATION, NOTICES OF SERVICER
                  DEFAULTS

              	
                4

              
	
                  SECTION
                  3.06  ANNUAL REPORT
                  BY
                  INDEPENDENT PUBLIC ACCOUNTANTS

              	
                5

              
	
                  SECTION
                  3.07  ADDITIONAL
                  SERVICER
                  REPORTING REQUIREMENTS

              	
                5

              
	
                  SECTION
                  3.08  TRANSFERRED
                  ENVIRONMENTAL CONTROL PROPERTY DOCUMENTATION

              	
                6

              
	
                  SECTION
                  3.09  COMPUTER RECORDS;
                  AUDITS OF DOCUMENTATION

              	
                6

              
	
                  SECTION
                  3.10  DEFENDING
                  TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY AGAINST CLAIMS

              	
                7

              
	
                  SECTION
                  3.11  OPINIONS OF
                  COUNSEL

              	
                7

              
	 	 
	
                ARTICLE
                  IV  TRUE-UP
                  ADJUSTMENTS

              	
                8

              
	 	 
	
                  SECTION
                  4.01  ROUTINE TRUE-UP
                  ADJUSTMENTS

              	
                8

              
	
                  SECTION
                  4.02  NON-ROUTINE
                  TRUE-UP
                  ADJUSTMENTS

              	
                9

              
	 	 
	
                ARTICLE
                  V  THE
                  SERVICER

              	
                9

              
	 	 
	
                  SECTION
                  5.01  REPRESENTATIONS
                  AND
                  WARRANTIES OF SERVICER

              	
                9

              
	
                  SECTION
                  5.02  INDEMNITIES
                  OF
                  SERVICER; RELEASE OF CLAIMS

              	
                11

              
	
                  SECTION
                  5.03  MERGER OR
                  CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
                  SERVICER

              	
                13

              
	
                  SECTION
                  5.04  ASSIGNMENT
                  OF
                  SERVICER’S OBLIGATIONS

              	
                13

              
	
                  SECTION
                  5.05  LIMITATION
                  ON
                  LIABILITY OF SERVICER AND OTHERS

              	
                13

              
	
                  SECTION
                  5.06  POTOMAC EDISON
                  NOT
                  TO RESIGN AS SERVICER

              	
                14

              
	
                  SECTION
                  5.07  DEFENDING
                  TRANSFERRED ENVIRONMENTAL CONTROL PROPERTY AGAINST CLAIMS

              	
                14

              
	
                  SECTION
                  5.08  SERVICING
                  FEE

              	
                15

              
	
                  SECTION
                  5.09  SERVICER
                  ADVANCES

              	
                15

              
	
                  SECTION
                  5.10  SUBSERVICING
                  

              	
                15

              
	
                  SECTION
                  5.11  REMITTANCES

              	
                16

              
	
                  SECTION
                  5.12  PAYMENT DATE
                  STATEMENTS

              	
                17

              
	
                  SECTION
                  5.13  SCHEDULE REVISION
                  DATE SCHEDULES

              	
                17

              
	
                  SECTION
                  5.14  PROTECTION
                  OF
                  TITLE

              	
                17

              
	 	 
	
                ARTICLE
                  VI  SERVICER
                  DEFAULT

              	
                18

              
	 	 
	
                  SECTION
                  6.01  SERVICER
                  DEFAULT

              	
                18

              
	
                  SECTION
                  6.02  NOTICE OF SERVICER
                  DEFAULT

              	
                19

              
	
                  SECTION
                  6.03  WAIVER OF PAST
                  DEFAULTS

              	
                19

              
	
                  SECTION
                  6.04  APPOINTMENT
                  OF
                  SUCCESSOR

              	
                19

              
	
                  SECTION
                  6.05  COOPERATION
                  WITH
                  SUCCESSOR

              	
                20

              
	
                  SECTION
                  6.06  SERVICER DEFAULT
                  UNDER RELATED TRANSACTION

              	
                20

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                ARTICLE
                  VII  MISCELLANEOUS
                  PROVISIONS

              	
                20

              
	 	 
	
                  SECTION
                  7.01  AMENDMENT

              	
                20

              
	
                  SECTION
                  7.02  NOTICES

              	
                22

              
	
                  SECTION
                  7.03  LIMITATIONS
                  ON
                  RIGHTS OF OTHERS

              	
                23

              
	
                  SECTION
                  7.04  SEVERABILITY

              	
                23

              
	
                  SECTION
                  7.05  SEPARATE
                  COUNTERPARTS

              	
                23

              
	
                  SECTION
                  7.06  HEADINGS

              	
                23

              
	
                  SECTION
                  7.07  GOVERNING
                  LAW

              	
                23

              
	
                  SECTION
                  7.08  ASSIGNMENT
                  TO
                  INDENTURE TRUSTEE

              	
                23

              
	
                  SECTION
                  7.09  NONPETITION
                  COVENANTS

              	
                23

              
	
                  SECTION
                  7.10  TERMINATION

              	
                24

              
	
                  SECTION
                  7.11  LIMITATION
                  OF
                  LIABILITY

              	
                24

              


      

      


      


      EXHIBITS

       

      EXHIBIT
        A       Servicing
        Obligations

      EXHIBIT
        B        Pending
        Litigation

      ANNEX
        1         
        Form
        of
        Routine Adjustment Request 

      ANNEX
        2         
        Form
        of
        Monthly Servicer’s Certificate

      ANNEX
        3         
        Form
        of
        Quarterly Servicer’s Certificate

      ANNEX
        4         
        Form
        of
        Officer’s Certificate

      ANNEX
        5         
        Form
        of
        Assessment of Servicing Criteria

      ANNEX
        6         
        Form
        of
        Regulation AB Compliance Certification

      


      APPENDIX
        A      Master
        Definitions

      


      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      ENVIRONMENTAL
        CONTROL PROPERTY SERVICING AGREEMENT dated as of [_________], between PE
        ENVIRONMENTAL FUNDING LLC, a Delaware limited liability company (the
“Issuer”),
        and
        THE POTOMAC EDISON COMPANY (“Potomac
        Edison”),
        a
        [_________] corporation, doing business as Allegheny Power, as the servicer
        of
        the Transferred Environmental Control Property (together with each successor
        to
        Potomac Edison (in the same capacity) pursuant to Section 5.03
        or
6.04,
        the
“Servicer”).
        

       

      WHEREAS
        the Servicer is willing to service the Transferred Environmental Control
        Property purchased from the Seller by the Issuer from time to time in accordance
        with the Sale Agreement;

       

      WHEREAS
        the Issuer, in connection with ownership of the Transferred Environmental
        Control Property, desires to engage the Servicer to carry out the functions
        described herein;

       

      WHEREAS
        the PSCWV or its attorney will enforce this Agreement pursuant to the Financing
        Order for the benefit of the Customers to the extent permitted by applicable
        Requirements of Law; 

       

      WHEREAS
        the Environmental Control Bonds will not be “asset-backed securities” within the
        meaning of Regulation AB, but the Issuer nevertheless has committed to comply
        with all substantive ongoing periodic disclosure requirements that would
        apply
        under Regulation AB if the Environmental Control Bonds were “asset-backed
        securities”; and 

       

      NOW,
        THEREFORE, in consideration of the premises and the mutual covenants herein
        contained and intending to be legally bound hereby, the parties hereto agree
        as
        follows:

       

      ARTICLE
        I

       

      DEFINITIONS

       

      SECTION
        1.01    Definitions. 

       

      (a)    “Agreement”
means
        this Transferred Environmental Control Property Servicing Agreement, together
        with all Exhibits, Annexes and Appendices hereto, as the same may be amended,
        supplemented or otherwise modified from time to time.

       

      (b)    Capitalized
        terms used but not otherwise defined in this Agreement have the meanings
        assigned to them in Appendix A to this Agreement.

       

      (c)    Non-capitalized
        terms used in this Agreement which are defined in the Statute, as the context
        requires, have the meanings assigned to such terms in the Statute, but without
        giving effect to amendments to the Statute after the date hereof which have
        a
        material adverse effect on the Issuer or the Environmental Control
        Bondholders.

       

      (d)    All
        terms
        defined in this Agreement have the defined meanings when used in any certificate
        or document made or delivered pursuant hereto unless otherwise defined
        herein.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (e)    The
        words
“hereof,”
        “herein,”
        “hereunder”
and
        words of similar import when used in this Agreement shall refer to this
        Agreement as a whole and not to any particular provision of this Agreement;
        Section, Annex, Schedule and Exhibit references contained in this Agreement
        are
        references to Sections, Annexes, Schedules and Exhibits in or to this Agreement
        unless otherwise specified; and the term “including”
shall
        mean “including
        without limitation.”

       

      (f)    The
        definitions contained in this Agreement are applicable to the singular as
        well
        as the plural forms of such terms and to the masculine as well as to the
        feminine and neuter genders of such terms.

       

      ARTICLE
        II

       

      APPOINTMENT
        AND AUTHORIZATION OF SERVICER

       

      SECTION
        2.01    Appointment
        of Servicer; Acceptance of Appointment. 
        Subject to Section 5.04
        and
        Article VI, the Issuer hereby appoints the Servicer, and the Servicer hereby
        accepts such appointment, to perform the Servicer’s obligations pursuant to this
        Agreement on behalf of and for the benefit of the Issuer in accordance with
        the
        terms of this Agreement. This appointment and the Servicer’s acceptance thereof
        may not be revoked except in accordance with the express terms of this
        Agreement.

       

      SECTION
        2.02    Authorization. 
        With respect to all or any portion of the Transferred Environmental Control
        Property, the Servicer shall be, and hereby is, authorized and empowered
        by the
        Issuer to (a) execute and deliver, on behalf of itself or the Issuer, as
        the case may be, any and all instruments, documents or notices, and (b) on
        behalf of itself or the Issuer, as the case may be, make any filing and
        participate in proceedings of any kind with any Governmental Authorities,
        including with the PSCWV. The Issuer shall furnish the Servicer with such
        documents as have been prepared by the Servicer for execution by the Issuer,
        and
        with the other documents as may be in the Issuer’s possession, as necessary or
        appropriate to enable the Servicer to carry out its duties hereunder. Upon
        the
        written request of the Servicer, the Issuer shall furnish the Servicer with
        any
        powers of attorney or other documents necessary or appropriate to enable
        the
        Servicer to carry out its duties hereunder.

       

      SECTION
        2.03    Dominion
        and Control Over Transferred Environmental Control Property. 
        Notwithstanding any other provision herein, the Servicer and the Issuer agree
        that the Issuer shall have dominion and control over the Transferred
        Environmental Control Property. The Servicer hereby agrees that it shall
        not
        take any action that is not authorized by this Agreement or applicable
        Requirements of Law, that is not consistent with its customary procedures
        and
        practices, or that shall impair the rights of the Issuer in the Transferred
        Environmental Control Property, in each case unless such action is required
        by
        applicable Requirements of Law.

       

      ARTICLE
        III

       

      BILLING
        SERVICES

       

      SECTION
        3.01    Duties
        of Servicer. 
        The Servicer shall have the following duties:

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (a)    Duties
        of Servicer Generally. 
        The Servicer will manage, service, administer and make collections in respect
        of
        the Transferred Environmental Control Property. The Servicer’s duties will
        include (i) calculating and billing the Environmental Control Charges,
        collecting Environmental Control Charge Payments, and remitting all
        Environmental Control Charge Collections; (ii) responding to inquiries by
        Customers, Third Parties, the PSCWV, or any Governmental Authority with respect
        to the Transferred Environmental Control Property, including the Environmental
        Control Charges; (iii) accounting for Environmental Control Charge
        Collections, investigating delinquencies, processing and depositing collections
        and making periodic remittances, furnishing periodic reports to the Issuer,
        the
        Indenture Trustee, the PSCWV and the Rating Agencies; (iv) selling
        defaulted or written off accounts in accordance with the Servicer’s usual and
        customary practices; and (v) taking action in connection with True-Up
        Adjustments according to the procedures set forth herein and in Exhibit A
        hereto. Anything to the contrary notwithstanding, the duties of the Servicer
        set
        forth in this Agreement shall be qualified in their entirety by applicable
        Requirements of Law as may be in effect at the time such duties are to be
        performed. Without limiting the generality of this Section 3.01(a), in
        furtherance of the foregoing, the Servicer hereby agrees that it shall also
        have, and shall comply with, the duties and responsibilities relating to
        data
        acquisition, usage, demand and bill calculation, billing, customer service
        functions, collections, payment processing and remittance set forth in
        Exhibit A hereto.

       

      (b)    Notification
        of Laws and Regulations. 
        The Servicer shall immediately notify the Issuer, the Indenture Trustee and
        the
        Rating Agencies in writing of Requirements of Law hereafter promulgated that
        have a material adverse effect on the Servicer’s ability to perform its duties
        under this Agreement.

       

      (c)    Other
        Information. 
        Upon the reasonable request of the Issuer, the Indenture Trustee, the PSCWV
        or
        any Rating Agency, the Servicer shall provide to the Issuer, the Indenture
        Trustee or such Rating Agency, as the case may be, any public financial
        information in respect of the Servicer, or any material information regarding
        the Transferred Environmental Control Property to the extent it is reasonably
        available to the Servicer, as may be reasonably necessary and permitted by
        applicable Requirements of Law, for the Issuer, the Indenture Trustee, the
        PSCWV
        or such Rating Agency to monitor the performance by the Servicer hereunder.
        In
        addition, so long as any of the Environmental Control Bonds of any Series
        are
        Outstanding, the Servicer shall provide the Issuer, the Indenture Trustee
        and
        the PSCWV within a reasonable time after written request therefor, any
        information available to the Servicer or reasonably obtainable by it that
        is
        necessary to calculate the Environmental Control Charges applicable to each
        Rate
        Schedule.

       

      (d)    Preparation
        of Reports to be Filed with the Commission. 
        The Servicer shall prepare or cause to be prepared any reports required to
        be
        filed by the Issuer under the securities laws, including without limitation,
        if
        so required, each Quarterly Servicer’s Certificate described in Section 3.04,
        the
        Officer’s Certificate of annual compliance described in Section 3.05,
        the
        Annual Accountant’s Report described in Section 3.06,
        and any
        certification required by Section 302
        of the
        Sarbanes-Oxley Act of 2002 and Item 601 of Regulation S-K under the Exchange
        Act.

       

      SECTION
        3.02    Collection
        of Environmental Control Charges. 

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (a)    The
        Servicer shall use all reasonable efforts consistent with its customary
        servicing procedures to collect all amounts owed in respect of Environmental
        Control Charges, as and when the same shall become due and shall follow such
        collection procedures as it follows with respect to collection activities
        that
        the Servicer conducts for itself or others. The Servicer shall not change
        the
        amount of or reschedule the due date of any scheduled payment of Environmental
        Control Charges, except as contemplated in this Agreement or as required
        by
        applicable Requirements of Law; provided, however, that the Servicer may
        take
        any of the foregoing actions to the extent that such action would be in
        accordance with customary billing and collection practices of the Servicer
        with
        respect to billing and collection activities that it conducts for
        itself.

       

      (b)    Upon
        a
        partial payment of amounts billed, including amounts billed under special
        contracts, such partial payments shall be allocated first to the Billed
        Environmental Control Charge, including any past-due Environmental Control
        Charges.

       

      SECTION
        3.03    Servicing
        and Maintenance Standards. 
        The Servicer shall (a) manage, service, administer and make collections in
        respect of the Transferred Environmental Control Property with reasonable
        care
        and in material compliance with applicable Requirements of Law using the
        same
        degree of care and diligence that the Servicer exercises with respect to
        billing
        and collection activities that the Servicer conducts for itself and others;
        (b) follow standards, policies and procedures in performing its duties as
        Servicer that are customary in the Servicer’s industry; (c) use all
        reasonable efforts, consistent with its customary servicing procedures, to
        enforce and maintain rights in respect of the Transferred Environmental Control
        Property; and (d) calculate Environmental Control Charges in compliance
        with applicable Requirements of Law, except where the failure to comply with
        any
        of the foregoing would not have a material adverse affect on the Issuer’s or the
        Indenture Trustee’s interest in the Transferred Environmental Control Property.
        The Servicer shall follow such customary and usual practices and procedures
        as
        it shall deem necessary or advisable in its servicing of all or any portion
        of
        the Transferred Environmental Control Property, which, in the Servicer’s
        judgment, may include the taking of legal action pursuant to Section 3.09
        hereof
        or otherwise.

       

      SECTION
        3.04    Monthly
        and Quarterly Servicer’s Certificates. 
        The Servicer will provide to the Issuer, the Indenture Trustee, the PSCWV
        and
        each of the Rating Agencies, so long as any Environmental Control Bonds of
        any
        Series are Outstanding, (a) not later than [15] days after the end of each
        month after the Environmental Control Bonds are issued (excluding _________,
        ____), or if such day is not a Business Day, the following Business Day,
        a
        written report substantially in the form of Annex 2 hereto (the
“Monthly
        Servicer’s Certificate”);
        and
        (b) not later than [15 days] following the end of each calendar quarter
        after the Environmental Control Bonds are issued, a written report substantially
        in the form of Annex 3
        hereto
        (the “Quarterly
        Servicer’s Certificate”). 

       

      SECTION
        3.05    Annual
        Reports on Servicing Compliance and Attestation, Notices of Servicer
        Defaults.

       

      (a)    On
        or
        before March 31 of each year beginning March 31,
        [    ], and including the March 31 following the Final
        Maturity Date of all Series of Environmental Control Bonds, the Servicer
        shall
        deliver: (i) to the Issuer, the Indenture Trustee, the PSCWV and
        each

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      Rating
        Agency, an Officers’ Certificate substantially in the form of Annex 4
        attached
        hereto, stating that (A) a review of the activities of the Servicer during
        the preceding calendar year (or relevant portion thereof) and of its performance
        under this Agreement has been made under such officers’ supervision and
        (B) to the best of such officers’ knowledge, based on such review, the
        Servicer has complied with all its obligations under this Agreement in all
        material respects throughout such period or, if there has been a Servicer
        Default, or an act or omission, which with either the passage of time or
        the
        giving of notice, could become a Servicer Default, specifying each such event
        of
        default or act or omission known to such authorized officer and the nature
        and
        status thereof; (ii) to the Issuer and the PSCWV, a report regarding the
        Servicer’s assessment of compliance with the servicing criteria during the
        immediately preceding calendar year, as required under Rules 13a-18 and 15d-18
        of the Exchange Act and Item 1122 of Regulation AB. Such report shall be
        addressed to the Issuer and the PSCWV and signed by an authorized officer
        of the
        Servicer, and shall address each of the servicing criteria specified on a
        certification substantially in the form of Annex 5
        hereto
        delivered to the Issuer concurrently with the execution of this agreement;
        (iii) to the Issuer and the PSCWV, a report of a registered public
        accounting firm reasonably acceptable to the Issuer that attests to, and
        reports
        on, the assessment of compliance made by the Servicer and delivered pursuant
        to
        the preceding clause (i), as described in Section 3.06
        hereof;
        and (iv) to the Issuer, the Administrator and any other person that will be
        responsible for signing the Regulation AB Compliance Certification, in the
        form
        attached hereto as Annex 6,
        as
        required by Rules 13a-14(d) and 15d-14(d) under the Exchange Act (pursuant
        to
        Section 302 of the Sarbanes-Oxley Act of 2002) on behalf of the Issuer. The
        Servicer acknowledges that the parties identified in this clause (a)(iii)
        may
        rely on the certification provided by the Servicer pursuant to such clause
        in
        signing a Sarbanes Certification and filing such with the PSCWV. In addition,
        pursuant to Section 5.10,
        the
        Servicer shall cause each subservicer “participating in the servicing function”
within the meaning of Item 1122 of Regulation AB to deliver to the Issuer
        an
        assessment of compliance and accountants’ attestation as and when provided in
        clauses (ii) and (iii) of this paragraph.

       

      The
        requirements of clauses (ii) through (iv) above shall be applicable only
        so long
        as the Issuer is required to make such filings under the Exchange
        Act.

       

      (b)    Each
        assessment of compliance provided by a subservicer pursuant to Section 3.05(a)
        shall
        address each of the servicing criteria specified on a certification
        substantially in the form of Annex
        5
        hereto
        delivered to the Issuer concurrently with the execution of this Agreement
        by
        such subservicer or, in the case of a subservicer subsequently appointed
        as
        such, on or prior to the date of such appointment. An assessment of compliance
        provided by a subservicer pursuant to Section 3.05(a)
        need not
        address any elements of the servicing criteria other than those specified
        by the
        Servicer pursuant to Section 5.10.

       

      (c)    The
        Servicer shall deliver to the Issuer, the Indenture Trustee, the PSCWV and
        each
        Rating Agency, promptly after having obtained knowledge thereof, but in no
        event
        later than five Business Days thereafter, written notice in an Officers’
Certificate of any Servicer Default and any event which with the giving of
        notice or lapse of time, or both, would become a Servicer Default under
Section 6.01.

       

      SECTION
        3.06    Annual
        Report by Independent Public Accountants. 

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      (a)    Servicer
        shall cause a firm of independent certified public accountants (which may
        also
        provide other services to the Servicer, Potomac Edison or the Seller) to
        prepare, and the Servicer shall deliver to the Issuer, the Indenture Trustee,
        the PSCWV and each Rating Agency, on or before March 31 of each year,
        beginning March 31, [_____] to and including the March 31 following
        the Final Maturity Date of all Series of Environmental Control Bonds, a report
        addressed to the Servicer (the “Annual
        Accountant’s Report”),
        which
        may be included as part of the Servicer’s customary auditing activities, to the
        effect that such firm has performed certain procedures agreed to between
        the
        Servicer and such firm in connection with the Servicer’s compliance with its
        obligations under this Agreement during the preceding calendar year ended
        December 31 (or, in the case of the first Annual Accountant’s Report, the
        period of time from the Transfer Date until [__________]), identifying the
        results of such procedures and including any exceptions noted. In addition,
        so
        long as the Issuer is required to make such filings under the Exchange Act,
        the
        Annual Accountant’s Report will include a report that attests to, and reports
        on, the assessment made by the Servicer as to its compliance with the servicing
        criteria set forth in (d) of Item 1122 of Regulation AB hereto and that such
        attestation of the assessment of compliance was in accordance with Rules
        1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the
        Exchange Act and was made in accordance with standards for attestation
        engagements issued or adopted by the Public Company Accounting Oversight
        Board.

       

      (b)    The
        Annual Accountant’s Report shall also indicate that the accounting firm
        providing such report is Independent of the Servicer within the meaning of
        the
        Code of Professional Conduct of the American Institute of Certified Public
        Accountants or any superseding or amended standard adopted by the Public
        Company
        Accounting Oversight Board.

       

      SECTION
        3.07    Additional
        Servicer Reporting Requirements. 
        The Servicer shall prepare, procure, deliver and/or file, or cause to be
        prepared, procured, delivered or filed, any reports, attestations, exhibits,
        certificates or other documents required to be delivered or filed with the
        SEC
        (and/or any other Governmental Authority) by the Issuer under the federal
        securities or other applicable laws or in accordance with the Basic Documents,
        including, but without limiting the generality of foregoing, filing with
        the
        SEC, if applicable, a copy or copies of (i) the Monthly Servicer’s Certificates
        described in Section
        3.04
        (under
        Form 10-D or any other applicable form), (ii) the Payment Date Statements
        described in Section 3 of Exhibit A hereto (under Form 10-D or any other
        applicable form), (iii) the annual statements of compliance, attestation
        reports
        and other certificates described in Section
        3.05,
        and
        (iv) the Annual Accountant’s Report (and any attestation required under
        Regulation AB) described in Section
        3.06.
        In
        addition, the appropriate officer or officers of the Servicer shall (in its
        separate capacity as Servicer) sign the Sponsor’s annual report on Form 10-K
        (and any other applicable SEC or other reports, attestations, certifications
        and
        other documents), to the extent that the Servicer’s signature is required by,
        and consistent with, the federal securities law and/or any other applicable
        law.

       

      SECTION
        3.08    Environmental
        Control Property Documentation. 
        To assure uniform quality in servicing the Transferred Environmental Control
        Property and to reduce administrative costs, the Servicer shall keep on file,
        in
        accordance with its customary procedures, all Environmental Control Property
        Documentation.

       

      SECTION
        3.09    Computer
        Records; Audits of Documentation. 

       

      
        
          
          

        

        
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      (a)    Safekeeping. 
        The Servicer shall maintain accurate and complete accounts, records and computer
        systems pertaining to the Transferred Environmental Control Property and
        the
        Transferred Environmental Control Property Documentation in accordance with
        its
        standard accounting procedures and in sufficient detail to permit the Annual
        Reconciliation between Estimated Environmental Control Charge Collections
        and
        Actual Environmental Control Charge Collections in accordance with Section
        5.11
        and to
        enable the Issuer to comply with this Agreement and the Indenture. The Servicer
        shall conduct, or cause to be conducted, periodic audits of the Transferred
        Environmental Control Property Documentation held by it under this Agreement
        and
        of the related accounts, records and computer systems, in such a manner as
        shall
        enable the Issuer and the Indenture Trustee, as pledgee of the Issuer, to
        verify
        the accuracy of the Servicer’s record keeping. The Servicer shall promptly
        report to the Issuer, the PSCWV and the Indenture Trustee any failure on
        the
        Servicer’s part to hold the Transferred Environmental Control Property
        Documentation and maintain its accounts, records and computer systems as
        herein
        provided and promptly take appropriate action to remedy any such failure.
        Nothing herein shall be deemed to require an initial review or any periodic
        review by the Issuer or the Indenture Trustee of the Transferred Environmental
        Control Property Documentation.

       

      (b)    Maintenance
        of and Access to Records. 
        The Servicer shall maintain the Transferred Environmental Control Property
        Documentation at 1310 Fairmont Avenue, Fairmont, West Virginia  26554
        or at such other office as shall be specified to the Issuer, the Indenture
        Trustee and the PSCWV by written notice not later than 30 days prior to any
        change in location. The Servicer shall permit the Issuer, the Indenture Trustee
        and the PSCWV or their respective duly authorized representatives, attorneys,
        agents or auditors at any time during normal business hours as the Issuer,
        the
        Indenture Trustee or the PSCWV shall reasonably request to inspect, audit
        and
        make copies of and abstracts from the Servicer’s records regarding the
        Transferred Environmental Control Property, including the Environmental Control
        Charges and the Transferred Environmental Control Property Documentation.
        The
        failure of the Servicer to provide access to such information as a result
        of an
        obligation or applicable Requirements of Law prohibiting disclosure of
        information regarding customers shall not constitute a breach of this
Section 3.09(b).

       

      SECTION
        3.10    Defending
        Transferred Environmental Control Property Against Claims. 
        The Servicer, on behalf of the Environmental Control Bondholders, shall
        institute any action or proceeding necessary to compel performance by the
        PSCWV
        or the State of West Virginia of any of their obligations or duties under
        the
        Statute or the Financing Order with respect to the Transferred Environmental
        Control Property. The costs of any such action shall be payable from the
        Collection Account as an Operating Expense in accordance with the priorities
        set
        forth in Section 8.02(e)
        of the
        Indenture at the time such costs are incurred. The Servicer’s obligations
        pursuant to this Section 3.10
        shall
        survive and continue notwithstanding the fact that the payment of Operating
        Expenses pursuant to the priorities set forth in Section 8.02(e)
        of the
        Indenture may be delayed (it being understood that the Servicer shall not
        be
        required to advance its own funds to satisfy its obligations
        hereunder).

       

      SECTION
        3.11    Opinions
        of Counsel. 
        With respect to each series of Environmental Control Bonds, the Servicer
        shall
        deliver to the Issuer, the PSCWV and the Indenture Trustee:

       

      
        
          
          

        

        
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      (a)    promptly
        after the execution and delivery of this Agreement and of each amendment
        hereto,
        promptly after the execution of the Sale Agreement and of each amendment
        thereto, promptly after the execution of the Transfer Agreement and of each
        amendment thereto, and on the Transfer Date, an Opinion of Counsel either
        (i) to the effect that, in the opinion of such counsel, all filings,
        including filings with the PSCWV pursuant to the Statute, that are necessary
        to
        fully preserve and protect the interests of the applicable Indenture Trustee
        in
        the Transferred Environmental Control Property have been executed and filed,
        and
        reciting the details of such filings or referring to prior Opinions of Counsel
        in which such details are given, or (ii) to the effect that, in the opinion
        of such counsel, no such action shall be necessary to preserve and protect
        such
        interest; and

       

      (b)    within
        90
        days after the beginning of each calendar year beginning with the first calendar
        year beginning more than three months after the Transfer Date, an Opinion
        of
        Counsel, dated as of a date during such 90-day period, either (i) to the
        effect that, in the opinion of such counsel, all filings with the PSCWV pursuant
        to the Statute, have been executed and filed that are necessary to preserve
        fully and protect fully the interest of the applicable Indenture Trustee
        in the
        Transferred Environmental Control Property, and reciting the details of such
        filings or referring to prior Opinions of Counsel in which such details are
        given, or (ii) to the effect that, in the opinion of such counsel, no such
        action shall be necessary to preserve and protect such interest.

       

      Each
        Opinion of Counsel referred to in clause (a) or (b) above shall specify any
        action necessary (as of the date of such opinion) to be taken in the following
        year to preserve and protect such interest.

       

      ARTICLE
        IV

       

      TRUE-UP
        ADJUSTMENTS

       

      SECTION
        4.01    Routine
        True-Up Adjustments.

       

      (a)    With
        respect to each series of Environmental Control Bonds, the Servicer shall
        file a
        True-Up Adjustment Filing with the PSCWV at the following times: (i) at
        least 15 days prior to each Semi-Annual True-Up Adjustment Date; and
        (ii) at least 15 days prior to each Quarterly True-Up Adjustment Date
        and each Monthly True-Up Adjustment Date.

       

      (b)    For
        the
        purpose of filing any Semi-Annual True-Up Adjustment Filing, the Servicer
        shall
        (i) update assumptions of projected future usage and demand of electricity
        by Customers, expected delinquencies and Write-offs and future expenses relating
        to Transferred Environmental Control Property and the Environmental Control
        Bonds; (ii) calculate the Periodic Bond Payment Requirement based upon such
        updated assumptions; and (iii) determine the Environmental Control Charge
        to be charged on and after the applicable True-Up Adjustment Date.

       

      (c)    Each
        True-Up Adjustment Filing shall be substantially in the form of Annex 1 to
        this
        Servicing Agreement.

       

      
        
          
          

        

        
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      (d)    The
        Servicer shall (i) take all reasonable actions and make all reasonable
        efforts in order to effectuate any Routine True-Up Adjustment to the
        Environmental Control Charge and (ii) promptly send to the Indenture
        Trustee copies of all material notices and documents relating to such Routine
        True-Up Adjustment.

       

      (e)    On
        the
        same date that the Servicer files any True-Up Adjustment Filing with the
        PSCWV,
        if the Routine True-Up Adjustment is intended to result in an increase in
        the
        amount of the Environmental Control Charge, the Servicer shall give public
        notice through the publication of a Class I legal advertisement in Kanawha
        County, will respond to any comments to such publication and will attend
        any
        hearing held in connection with any such True-Up Adjustment Filing.


       

      SECTION
        4.02    Non-Routine
        True-Up Adjustments. 

       

      (a)    Whenever
        the Servicer determines that the existing True-Up Mechanism should be amended
        or
        revised to more accurately project and generate adequate collections of
        Environmental Control Charge Payments, the Servicer shall file a Non-Routine
        True-Up Adjustment Filing with the PSCWV designating the adjustments to such
        True-Up Mechanism and any corresponding adjustments to the Environmental
        Control
        Charges, subject to the review and approval of the PSCWV pursuant to the
        Financing Order, and the Servicer shall notify the Rating Agencies as promptly
        as possible of the filing of any such Non-Routine True-Up Adjustment Filing.
        Subject to clause (c) below, the Servicer shall also file for a Non-Routine
        True-Up Adjustment Filing at the direction of the PSCWV.

       

      (b)    The
        Servicer shall take all reasonable actions and make all reasonable efforts
        to
        secure any Non-Routine True-Up Adjustments. 

       

      (c)    The
        Servicer shall implement any resulting adjustments to the True-Up Mechanism
        and
        any resulting revised Environmental Control Charges as of the effective date
        of
        the Non-Routine True-Up Adjustment Filing. If any Non-Routine True-Up Adjustment
        Filing is denied by the PSCWV, the Servicer shall notify the Issuer, the
        Indenture Trustee and the Rating Agencies (not later than five days after
        the
        Servicer’s receipt of the PSCWV’s order denying such Non-Routine True-Up
        Adjustment Filing). 

       

      (d)    The
        Servicer shall notify the Issuer, the Indenture Trustee and the Rating Agencies
        of any request for a Non-Routine True-Up Adjustment initiated by the PSCWV
        within five days of receipt of such request and shall take all necessary
        actions
        to prevent the implementation of such an adjustment if it would violate the
        State Pledge.

       

      ARTICLE
        V

       

      THE
        SERVICER

       

      SECTION
        5.01    Representations
        and Warranties of Servicer. 
        The Servicer makes the following representations and warranties as of the
        Transfer Date, on which the Issuer and the PSCWV (on behalf of the Customers)
        has relied and will rely in acquiring the Transferred Environmental Control
        Property. The representations and warranties shall survive the sale
        of

       

      
        
          
          

        

        
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      any
        of
        the Transferred Environmental Control Property to the Issuer and the pledge
        thereof to the Indenture Trustee pursuant to the Indenture.

       

      (a)    Organization
        and Good Standing. 
        The Servicer is a corporation duly organized, validly existing and in good
        standing under the laws of the state of its incorporation, with the corporate
        power and authority to own its properties and to conduct its business as
        such
        properties are currently owned and such business is presently conducted,
        and has
        the power, authority and legal right to service the Transferred Environmental
        Control Property.

       

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

       

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

       

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

       

      (e)    No
        Violation. 
        The consummation of the transactions contemplated by this Agreement and the
        fulfillment of the terms hereof shall not conflict with, result in any breach
        of
        any of the terms and provisions of, nor constitute (with or without notice
        or
        lapse of time) a default under, the articles of incorporation or by-laws
        of the
        Servicer, or any other material indenture, agreement or other instrument
        to
        which the Servicer is a party or by which it shall be bound; nor result in
        the
        creation or imposition of any Lien upon any of its properties pursuant to
        the
        terms of any such indenture, agreement or other instrument (except as
        contemplated in the Indenture and as set forth in the Sale Agreement); nor
        violate any law or any order, rule or regulation applicable to the Servicer
        of
        any court or of any federal or state regulatory body, administrative agency
        or
        other governmental instrumentality having jurisdiction over the Servicer
        or its
        properties.

       

      (f)    Approvals. 
        Except for filings with the PSCWV for revised Environmental Control Charges,
        pursuant to Article IV and Annex 1 hereto and the filing of financing statements
        or continuation statements under the UCC, no approval, authorization, consent,
        order or other action of, or filing with, any court, federal or state regulatory
        body, administrative agency or other governmental instrumentality is required
        in
        connection with the execution and

       

      
        
          
          

        

        
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      delivery
        by the Servicer of this Agreement, the performance by the Servicer of the
        transactions contemplated hereby or the fulfillment by the Servicer of the
        terms
        hereof, except those that have been obtained or made.

       

      (g)    No
        Proceedings. 
        Except as described in Exhibit B, to the Servicer’s knowledge, there are no
        proceedings or investigations pending or, to the Servicer’s best knowledge,
        threatened before any court, federal or state regulatory body, administrative
        agency or other governmental instrumentality having jurisdiction over the
        Servicer or its properties: (i) seeking to prevent issuance of the bonds or
        the consummation of the transactions contemplated by this Agreement, any
        other
        Basic Document or, if applicable, any Additional Indenture or subsequent
        sale
        agreement, (ii) seeking any determination or ruling that might materially
        and
        adversely affect the performance by the Servicer of its obligations under,
        or
        the validity or enforceability against the Servicer of, this Agreement, any
        other Basic Document or, if applicable, any Additional Indenture or subsequent
        sale agreement, or (iii) relating to the Servicer and which might have a
        material adverse affect on the federal or state income, gross receipts or
        franchise tax attributes of the Environmental Control Bonds.

       

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

       

      SECTION
        5.02    Indemnities
        of Servicer; Release of Claims. 

       

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

       

      (b)    The
        Servicer shall indemnify the Issuer and the Indenture Trustee, for itself
        and on
        behalf of the Environmental Control Bondholders for which it acts as Indenture
        Trustee, and each of their respective managers, members, officers, directors,
        employees and agents for, and defend and hold harmless each such Person from
        and
        against, any and all Losses that may be imposed upon, incurred by or asserted
        against any such Person as a result of (i) the Servicer’s willful
        misconduct, bad faith or negligence in the performance of its duties under
        this
        Agreement or (ii) the Servicer’s material breach of any of its obligations,
        duties, representations or warranties that results in a Servicer Default
        under
        this Agreement and (iii) litigation and related expenses relating to its
        status and obligations as Servicer.

       

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

       

      
        
          
          

        

        
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      Environmental
        Control Bondholders shall be entitled to enforce their rights and remedies
        against the Servicer under this Section 5.02
        solely
        through a case of action brought for their benefit by the Indenture Trustee.
        The
        Servicer’s indemnification under this Section 5.02(b)
        shall
        survive the termination of this Agreement, and any amounts paid with respect
        thereto shall be remitted and deposited with the Indenture Trustee for deposit
        into the Collection Account

       

      (c)    The
        Servicer shall indemnify the PSCWV, on behalf of the Customers, for any Losses
        they incur by reason of the Servicer’s willful misconduct, bad faith or
        negligence including without limitation Losses attributable to higher
        Environmental Control Charges imposed on customers by reason of additional
        Operating Expenses, for example the Issuer’s higher Servicing Fees payable to a
        Successor Servicer. The PSCWV shall be entitled to enforce Section 5.02(c)
        for the
        benefit of Customers, and Customers may not enforce this indemnity. The
        Servicer’s indemnification under this Section 5.02(c)
        shall
        survive the termination of this Agreement, and any amounts paid with respect
        thereto shall be remitted and deposited with the Indenture Trustee for deposit
        into the Collection Account, unless otherwise directed by the PSCWV.


       

      (d)    The
        Servicer shall indemnify the Indenture Trustee and its officers, directors
        and
        agents for, and defend and hold harmless each such Person from and against,
        any
        and all Losses that may be imposed upon, incurred by or asserted against
        any
        such Person as a result of the acceptance or performance of the trusts and
        duties contained herein and in the other Basic Documents to which the Indenture
        Trustee is a party, except to the extent that any such Loss shall be due
        to the
        willful misconduct, bad faith or negligence of the Indenture Trustee. The
        foregoing indemnity is extended to the Indenture Trustee solely in its
        individual capacity and not for the benefit of the Environmental Control
        Bondholders or any other Person. Such amounts shall be deposited and distributed
        in accordance with the Indenture.

       

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

       

      (f)    Except
        to
        the extent expressly provided for in this Agreement or the other Basic Documents
        (including the Servicer’s claims with respect to the Servicing Fees and the
        Seller’s claim for payment of the purchase price of the Transferred
        Environmental Control Property), the Servicer hereby releases and discharges
        the
        Issuer (including its respective managers, members, officers, directors and
        agents, if any) and the Indenture Trustee (including its officers, directors
        and
        agents) (collectively, the “Released
        Parties”)
        from
        any and all actions, claims and demands whatsoever, which the Servicer, in
        its
        capacity as Servicer, shall or may have against any such Person relating
        to the
        Transferred Environmental Control Property or the Servicer’s activities with
        respect thereto other than any actions, claims and demands arising out of
        the
        willful misconduct, bad faith or negligence of the Released
        Parties.

       

      (g)    If
        any
        action, claim, demand or proceeding (including any governmental investigation)
        shall be brought or asserted against an Indemnified Party entitled to
        any

       

      
        
          
          

        

        
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      indemnification
        provided for under this Section 5.02,
        such
        Indemnified Party shall promptly notify the Servicer in writing; provided,
        however, that failure to give such notification shall not affect the
        indemnification provided hereunder except to the extent the Servicer shall
        have
        been actually prejudiced as a result of such failure.

       

      SECTION
        5.03    Merger
        or Consolidation of, or Assumption of the Obligations of,
        Servicer. 
        Any Person (a) into which the Servicer may be merged or consolidated and
        which succeeds to any material part of the electric distribution business
        of the
        Servicer, (b) which results from the division of the Servicer into two or
        more Persons and which succeeds to any material part of the electric
        distribution business of the Servicer, (c) which may result from any merger
        or consolidation to which the Servicer shall be a party and which succeeds
        to
        any material part of the electric distribution business of the Servicer,
        (d) which may succeed to the properties and assets of the Servicer
        substantially as a whole and which succeeds to any material part of the electric
        distribution business of the Servicer or (e) which may otherwise succeed to
        any material part of the electric distribution business of the Servicer,
        which
        Person in any of the foregoing cases executes an agreement of assumption
        to
        perform every obligation of the Servicer hereunder, shall be the successor
        to
        the Servicer under this Agreement without further act on the part of any
        of the
        parties to this Agreement; provided, however, that (i) immediately after
        giving effect to such transaction, no representation and warranty made pursuant
        to Section 5.01
        shall
        have been breached and no Servicer Default, and no event which, after notice
        or
        lapse of time, or both, would become a Servicer Default, shall have occurred
        and
        be continuing, (ii) the Servicer shall have delivered to the Issuer, the
        PSCWV and the Indenture Trustee an Officers’ Certificate and an Opinion of
        Counsel stating that such consolidation, merger or succession and such agreement
        of assumption comply with this Section 5.03
        and that
        all conditions precedent provided for in this Agreement relating to such
        transaction have been complied with, (iii) the Rating Agencies shall have
        received prior written notice of such transaction, (iv) the Servicer shall
        have delivered to the Issuer, the Indenture Trustee, the PSCWV and each Rating
        Agency an Opinion of Counsel either stating that, in the opinion of such
        counsel, (A) all filings, including filings with the PSCWV pursuant to the
        Statute, have been executed and filed that are necessary to preserve fully
        and
        protect fully the interests of the Issuer in the Transferred Environmental
        Control Property and reciting the details of such filings or (B) no such
        action shall be necessary to preserve and protect such interests.
        Notwithstanding anything herein to the contrary, the execution of the above
        referenced agreement of assumption and compliance with clauses (i), (ii),
        (iii)
        and (iv) above shall be conditions precedent to the consummation of the
        transactions referred to in clause (a), (b), (c), (d) or (e) above.

       

      SECTION
        5.04    Assignment
        of Servicer’s Obligations. 
        The Servicer may not assign its obligations hereunder to any successor unless
        either (i) the Rating Agency Condition has been satisfied and the PSCWV has
        approved such assignment, or (ii) the Servicer is replaced by a Successor
        Servicer pursuant to Section 6.04.

       

      SECTION
        5.05    Limitation
        on Liability of Servicer and Others. 

       

      (a)    Neither
        the Servicer nor any of its directors, officers, employees or agents shall
        be
        liable to the Issuer or its managers, the Indenture Trustee, the Environmental
        Control Bondholders, the PSCWV or any other Person, except as provided under
        this Agreement, for any action taken or for refraining from the taking of
        any
        action pursuant to this Agreement or for

       

      
        
          
          

        

        
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      errors
        in
        judgment; provided, however, that this provision shall not protect either
        the
        Servicer or any other Person against any liability that would otherwise be
        imposed by reason of willful misconduct, bad faith or negligence in the
        performance of its duties or by reason of reckless disregard of obligations
        and
        duties under this Agreement and provided further that nothing in this
Section 5.05
        shall
        limit the Servicer’s liabilities or obligations of the Servicer to indemnify as
        set forth in Section 5.02
        of this
        Agreement. The Servicer and any of its directors, officers, employees or
        agents
        may rely in good faith on the advice of counsel reasonably acceptable to
        the
        Indenture Trustee or on any document of any kind, prima facie properly executed
        and submitted by any Person, respecting any matters arising under this
        Agreement.

       

      (b)    The
        Servicer acknowledges that the PSCWV has authority to enforce all provisions
        of
        this Agreement for the benefit of Customers, including without limitation
        the
        enforcement of Section
        5.02(c),
        provided that such enforcement is consistent with the State Pledge.


       

      (c)    Except
        as
        provided in this Agreement, the Servicer shall not be under any obligation
        to
        appear in, prosecute or defend any legal action that is not incidental to
        its
        duties to service the Transferred Environmental Control Property in accordance
        with this Agreement or related to its obligation to pay indemnification,
        and
        that in its reasonable opinion may cause it to incur any expense or
        liability.

       

      SECTION
        5.06    Potomac
        Edison Not To Resign as Servicer. 
        Subject to the provisions of Sections
        5.03
        and
5.04,
        Potomac
        Edison shall not resign from the obligations and duties hereby imposed on
        it as
        Servicer under this Agreement except upon a determination that the performance
        of its duties under this Agreement shall no longer be permissible under
        applicable Requirements of Law. Notice of any such determination permitting
        the
        resignation of Potomac Edison shall be communicated to the Issuer, the PSCWV,
        the Indenture Trustee and each Rating Agency at the earliest practicable
        time
        (and, if such communication is not in writing, shall be confirmed in writing
        at
        the earliest practicable time), and any such determination shall be evidenced
        by
        an Opinion of Counsel to such effect delivered to the Issuer, the PSCWV and
        the
        Indenture Trustee concurrently with or promptly after such notice. No such
        resignation shall become effective until a Successor Servicer has been approved
        by the PSCWV and shall have assumed the servicing obligations and duties
        hereunder of Potomac Edison in accordance with Section 6.04.

       

      SECTION
        5.07    Defending
        Transferred Environmental Control Property Against Claims. 
        The Servicer shall institute any action or proceeding necessary to compel
        performance by each Third Party (at the earliest possible time) of any of
        their
        respective obligations or duties under applicable Requirements of Law with
        respect to the Transferred Environmental Control Property. In addition, the
        Servicer shall institute any action or proceeding necessary to compel
        performance by the PSCWV or the State of West Virginia, or any political
        subdivision, agency or other instrumentality of the State of West Virginia,
        of
        any of their respective obligations or duties under applicable Requirements
        of
        Law with respect to the Transferred Environmental Control Property. The Servicer
        further agrees to take such legal or administrative actions, including without
        limitation defending against or instituting and pursuing legal actions and
        appearing or testifying at hearings or similar proceedings, as may be reasonably
        necessary to block or overturn any attempts to cause a repeal of, modification
        of or supplement to the Statute

       

      
        
          
          

        

        
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      or
        any
        Financing Order.  In any of the aforementioned actions or proceedings, the
        Servicer shall not be required to advance its own funds to institute any
        such
        actions or proceedings and the Servicer's obligations pursuant to this
Section 5.07 shall continue for only so long as the Servicer is
        being reimbursed on a current basis for its costs and expenses incurred in
        undertaking such obligations.  In
        any
        proceedings related to the exercise of the power of eminent domain by any
        municipality to acquire a portion of Potomac Edison’s electric distribution
        facilities, the Servicer shall assert that the court ordering such condemnation
        must treat such municipality as a successor to Potomac Edison under the Statute
        and Financing Order. The costs and expenses of any action described in this
        Section
        5.07
        shall be
        payable from the Collection Account as an Operating Expense in accordance
        with
Section
        8.02(e)
        of the
        Indenture.

       

      SECTION
        5.08    Servicing
        Fee.

       

      (a)    Issuer
        agrees to pay the Servicer, solely to the extent amounts are available therefor
        in accordance with the Indenture, the Servicing Fee with respect to all Series
        of Environmental Control Bonds issued by the Issuer. The Servicing Fee with
        respect to a Series for a Payment Date shall be as follows: so long as Potomac
        Edison acts as the Servicer, the Servicing Fee will be 0.05% per annum of
        the
        initial principal balance of the Environmental Control Bonds, payable
        semi-annually, in arrears; if a Successor Servicer is appointed, the Servicing
        Fee will be based on an amount approved by the PSCWV, but not in excess of
        a per
        annum rate equal to 1.25% of the initial principal balance of the Environmental
        Control Bonds. 

       

      (b)    The
        Servicing Fee set forth in Section 5.08(a)
        above
        and the expenses provided for in Section 5.08(c)
        below
        shall be paid to the Servicer by the Indenture Trustee, on each Payment Date
        in
        accordance with the priorities set forth in Section 8.02(e) of the
        Indenture, by wire transfer of immediately available funds from the Collection
        Account to an account designated by the Servicer. Any portion of the Servicing
        Fee not paid on such date shall be added to the Servicing Fee payable on
        the
        subsequent Payment Date.

       

      (c)    The
        Issuer shall pay all expenses incurred by the Servicer in connection with
        its
        activities hereunder (including any fees to and disbursements by accountants,
        counsel, or any other Person, any taxes imposed on the Servicer (other than
        taxes based on the Servicer’s net income) and any expenses incurred in
        connection with reports to Environmental Control Bondholders, subject to
        the
        priorities set forth in Section 8.02(e) of the Indenture). Except for
        filing fees and fees and expenses for attorneys, accountants, printing or
        other
        professional services retained by the Issuer, (or procured by the Servicer
        on
        behalf of the Issuer) to meet the Issuer’s obligations under the Basic
        Documents, the Servicer shall be required to pay all expenses incurred by
        the
        Servicer in performing its activities hereunder from the Servicer’s own
        resources, without additional reimbursement as Operating Expenses in accordance
        with Section 8.02(e) of the Indenture.

       

      SECTION
        5.09    Servicer
        Advances. 
        The Servicer shall not make any advances of interest on or principal of any
        series of the Bonds.

       

      SECTION
        5.10    Subservicing. 
        The Servicer may at any time appoint a subservicer to perform all or any
        portion
        of its obligations as Servicer hereunder; provided, however, that the Servicer
        shall not permit any Third Party to bill or collect Environmental Control
        Charges on

       

      
        
          
          

        

        
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      behalf
        of
        the Issuer except (a) as a subcontractor under the active supervision of
        the Servicer or (b) as required by applicable Requirement of Law and to the
        extent permitted by applicable Requirement of Law or regulation, after written
        notice of such appointment is furnished to the Rating Agencies; provided
        further, however, that the Servicer shall remain obligated and be liable
        to the
        Issuer, the Indenture Trustee, and the Environmental Control Bondholders
        and the
        PSCWV for the servicing and administering of the Transferred Environmental
        Control Property in accordance with the provisions hereof without diminution
        of
        such obligation and liability by virtue of the appointment of such subservicer
        and to the same extent and under the same terms and conditions as if the
        Servicer alone were servicing and administering the Transferred Environmental
        Control Property. The fees and expenses of the subservicer shall be as agreed
        between the Servicer and its subservicer from time to time, and none of the
        Issuer (or its members or managers), the Indenture Trustee, any Environmental
        Control Bondholder or the PSCWV shall have any responsibility
        therefor.

       

      SECTION
        5.11    Remittances. 

       

      (a)    Subject
        to Section 5.11(b),
        the
        Servicer shall remit daily all Estimated Environmental Control Charge
        Collections (from whatever source) and all proceeds of other Collateral of
        the
        Issuer, if any, received by the Servicer to the Indenture Trustee under the
        Indenture, for deposit pursuant to the Indenture.

       

      (b)    Notwithstanding
        the foregoing clause (a), as long as (i) Potomac Edison or any successor to
        Potomac Edison’s electric distribution business remains the Servicer,
        (ii) no Servicer Default has occurred and is continuing and
        (iii) (A) Potomac Edison or such successor maintains a long-term
        rating of [“A+”] or better by Standard & Poor’s, a long-term rating of
        [“A2”] or better by Moody’s and a long-term rating of [“A”] or better by Fitch,
        if rated by Fitch, or a short-term rating of “A-1” by Standard &
Poor’s, a short-term rating of “P-1” by Moody’s and a short-term rating of “F1”
by Fitch, if rated by Fitch or (B) the Rating Agency Condition shall have
        been satisfied with respect to all Rating Agencies (to which prior written
        notice will be sent) (and any conditions or limitations imposed by such Rating
        Agencies in connection therewith are complied with), the Servicer need not
        make
        the daily remittances required by such clause (a), but in lieu thereof, shall
        remit all Estimated Environmental Control Charge Collections (from whatever
        source) and all proceeds of other Collateral of such Issuer, if any, received
        by
        the Servicer during any Collection Period to the Indenture Trustee, for deposit
        pursuant to the Indenture, not later than the Business Day immediately preceding
        the [25th] day of each month. 

       

      (c)    On
        or
        before each Remittance Date where the Servicer is not remitting a fixed sum
        on
        each date during the Billing Period, the Servicer will prepare and furnish
        to
        the Issuer and the Indenture Trustee a statement setting forth the aggregate
        amount remitted or to be remitted by the Servicer to the Indenture Trustee
        for
        deposit on such Remittance Date pursuant to this Section 5.11
        and the
        Indenture.

       

      (d)    On
        or
        before each Reconciliation Date, the Servicer will reconcile Actual
        Environmental Control Charge Collections with Estimated Environmental Control
        Charge Collections in respect of the immediately preceding Reconciliation
        Period. The Servicer shall calculate the amount of any Remittance Shortfall
        or
        Excess Remittance for the immediately

       

      
        
          
          

        

        
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      preceding
        Reconciliation Period, shall allocate such Remittance Shortfall or Excess
        Remittance to each outstanding Series ratably based on the Environmental
        Control
        Charges billed for such Series for such Reconciliation Period, and (A) if
        a
        Remittance Shortfall exists, the Servicer shall make a supplemental remittance,
        to the applicable General Subaccount of the applicable Collection Account
        for
        each Series within two (2) Servicer Business Days, or (B) if an Excess
        Remittance exists, the Servicer shall be entitled either (i) to reduce the
        amount of (A) each Daily Remittance, or, (B) if Potomac Edison has satisfied
        the
        conditions of Section
        5.11(b),
        each
        Monthly Remittance, which the Servicer subsequently remits to the applicable
        General Subaccount of the applicable Collection Account for application to
        the
        amount of such Excess Remittance until the balance of such Excess Remittance
        has
        been reduced to zero, the amount of such reduction becoming the property
        of the
        Servicer or (ii) so long as such withdrawal would not cause the amounts on
        deposit in the applicable General Subaccount or the applicable Excess Funds
        Subaccount for any Series to be insufficient for the payment of the next
        installment of interest on the Environmental Control Bonds or principal due
        at
        maturity on the next Payment Date or upon acceleration on or before the next
        Payment Date, to be paid immediately from such General Subaccount or Excess
        Funds Subaccount such Series’ allocable share of the amount of such Excess
        Remittance, such payment becoming the property of the Servicer. If there
        is a
        Remittance Shortfall, the amount which the Servicer remits to the applicable
        General Subaccounts of the applicable Collection Accounts on the relevant
        date
        set forth above shall be increased by the amount of such Remittance Shortfall,
        provided that
        remittance of such increase will be the sole financial responsibility of
        the
        Servicer and shall neither be considered an Operating Expense nor be paid
        out of
        the Collection Account or included in the calculation of True-Up
        Adjustments.

       

      SECTION
        5.12    Payment
        Date Statements. 
        At least three Business Days before each Payment Date with respect to each
        Series of Environmental Control Bonds, the Servicer shall prepare and furnish
        to
        the Issuer and the Indenture Trustee a statement setting forth the amounts
        to be
        paid to Environmental Control Bondholders of such Series pursuant to
        Section 8.02(e) of the Indenture, as well as all other amounts to be paid
        pursuant to Section 8.02(e) of the Indenture, including the Capital Equity
        Return to be paid to the Seller.

       

      SECTION
        5.13    Schedule
        Revision Date Schedules. 
        Prior to each Schedule Revision Date, the Servicer shall deliver to the Issuer
        replacement Schedules A and replacement Schedules B to each Series
        Supplement to which such Schedule Revision Date applies, adjusted to reflect
        the
        event giving rise to such Schedule Revision Date and setting forth the Expected
        Sinking Fund Schedule for each Payment Date applicable thereto.

       

      SECTION
        5.14    Protection
        of Title. 
        The Servicer shall execute and file such filings, including filings with
        the
        PSCWV pursuant to the Statute, and cause to be executed and filed such filings,
        all in such manner and in such places as may be required by law fully to
        preserve, maintain, and protect the interests of the Issuer in the Transferred
        Environmental Control Property, including all filings required under the
        Statute
        relating to the transfer of the ownership or security interest in the
        Transferred Environmental Control Property by the Seller to the Issuer or
        any
        security interest granted by the Issuer in the Transferred Environmental
        Control
        Property. The Servicer shall deliver (or cause to be delivered) to the Issuer
        file-stamped copies of, or filing receipts for, any document filed as provided
        above, as soon as available following such filing.

       

      
        
          
          

        

        
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      ARTICLE
        VI

       

      SERVICER
        DEFAULT

       

      SECTION
        6.01    Servicer
        Default. 
        If any one of the following events (a “Servicer
        Default”)
        shall
        occur and be continuing:

       

      (a)    any
        failure by the Servicer to remit to the Indenture Trustee on behalf of the
        Issuer any required remittance that shall continue unremedied for a period
        of
        five Business Days after written notice of such failure is received by the
        Servicer from the Issuer or Indenture Trustee; or

       

      (b)    any
        failure by the Servicer or, so long as the Transferor and the Servicer are
        the
        same Person, the Transferor, as applicable, duly to observe or perform in
        any
        material respect any other covenant or agreement of the Servicer or the
        Transferor, as the case may be, set forth in this Agreement or any other
        Basic
        Document to which it is a party, which failure shall (i) materially and
        adversely affect the Transferred Environmental Control Property or the rights
        of
        Environmental Control Bondholders and (ii) continue unremedied for a period
        of 60 days after written notice of such failure shall have been given to
        the Servicer, the PSCWV or the Transferor, as the case may be, by the Issuer
        or
        the Indenture Trustee or after discovery of such failure by an officer of
        the
        Servicer, the PSCWV or the Transferor, as the case may be; or

       

      (c)    any
        representation or warranty made by the Servicer in this Agreement shall prove
        to
        have been incorrect in a material respect when made, which has a material
        adverse effect on the Issuer or the Environmental Control Bondholders and
        which
        material adverse effect continues unremedied for a period of 60 days after
        the
        date on which written notice thereof shall have been given to the Servicer
        by
        the Issuer, the PSCWV or the Indenture Trustee; or

       

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

       

      then,
        and
        in each and every case, so long as the Servicer Default shall not have been
        remedied, the Indenture Trustee, as assignee of the Issuer, may, or at the
        direction of the Environmental Control Bondholders of a majority of the
        Outstanding principal amount of the Environmental Control Bonds of all Series
        or
        by the PSCWV, by notice then given in writing to the Servicer (a “Termination
        Notice”)
        shall
        terminate all the Servicer’s rights and obligations (other than the
        indemnification obligations set forth in Section 5.02
        hereof
        and the Servicer’s obligation under Section 6.04
        to
        continue performing its functions as Servicer until a Successor Servicer
        is
        appointed) of the Servicer under this Agreement. In addition, upon a Servicer
        Default described in Section 6.01(a),
        the
        Issuer or the Indenture Trustee may apply to the PSCWV or any court of competent
        jurisdiction to order the sequestration and payment of Environmental Control
        Charge Collections arising with respect to the Transferred Environmental
        Control
        Property for the benefit of the Environmental Control Bondholders, the Issuer,
        the Indenture Trustee, and any other assignee and financing parties (each
        as
        defined in the Statute). The Trustee shall not give a Termination Notice
        upon
        instruction of the PSCWV unless the Rating Agency Condition is
        satisfied.

       

      
        
          
          

        

        
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      On
        or
        after the receipt by the Servicer of a Termination Notice, all authority
        and
        power of the Servicer under this Agreement, whether with respect to the
        Transferred Environmental Control Property, including the Environmental Control
        Charges, or otherwise, shall, upon appointment of a Successor Servicer pursuant
        to Section 6.04,
        without
        further action, pass to and be vested in such Successor Servicer and, without
        limitation, the Indenture Trustee is hereby authorized and empowered to execute
        and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
        otherwise, any and all documents and other instruments, and to do or accomplish
        all other acts or things necessary or appropriate to effect the purposes
        of such
        Termination Notice, including, but not limited to, completing the transfer
        of
        the Transferred Environmental Control Property Documentation and related
        documents. The predecessor Servicer shall cooperate with the Successor Servicer,
        the Indenture Trustee and the Issuer in effecting the termination of the
        responsibilities and rights of the predecessor Servicer under this Agreement,
        including the transfer to the Successor Servicer for administration by it
        of all
        cash amounts that are then held by the predecessor Servicer for remittance
        to
        the Collection Account or the Transferor, or that are thereafter be received
        by
        it. As soon as practicable after receipt by the Servicer of such Termination
        Notice, the Servicer shall deliver the Transferred Environmental Control
        Property Documentation to the Successor Servicer. 

       

      All
        reasonable costs and expenses (including attorneys fees and expenses) incurred
        in connection with transferring the Environmental Control Property Documentation
        to the Successor Servicer and amending this Agreement to reflect such succession
        as Servicer pursuant to this Section shall be paid by the predecessor
        Servicer upon presentation of reasonable documentation of such costs and
        expenses. Termination of Potomac Edison as Servicer shall not terminate Potomac
        Edison’s rights or obligations as Transferor under the Transfer Agreement.


       

      SECTION
        6.02    Notice
        of Servicer Default. 
        The Servicer shall deliver to the Issuer, the PSCWV, the Indenture Trustee
        and
        each Rating Agency promptly after having obtained knowledge thereof, but
        in no
        event later than five Business Days thereafter, written notice in an Officers’
Certificate of any event or circumstance (such as a breach of any representation
        or warranty made by the Servicer in this Agreement) which, if not remedied,
        would become a Servicer Default under Section 6.01.

       

      SECTION
        6.03    Waiver
        of Past Defaults. 
        The Indenture Trustee, with the written consent of the PSCWV and the
        Environmental Control Bondholders of a majority of the Outstanding principal
        amount of the Environmental Control Bonds of all Series, may waive, in writing,
        any default by the Servicer in the performance of its obligations hereunder
        and
        its consequences, except a default in making any required remittances to
        the
        Indenture Trustee of Environmental Control Charge Collections from Transferred
        Environmental Control Property in accordance with Section 5.11
        of this
        Agreement. Upon any such waiver of a past default, such default shall cease
        to
        exist, and any Servicer Default arising therefrom shall be deemed to have
        been
        remedied for every purpose of this Agreement. No such waiver shall extend
        to any
        subsequent or other default or impair any right consequent thereto.

       

      SECTION
        6.04    Appointment
        of Successor.

       

      (a)    In
        the
        event of the Servicer’s termination hereunder, the Indenture Trustee, as
        assignee of the Issuer, at the direction of the Environmental Control
        Bondholders of a majority

       

      
        
          
          

        

        
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      of
        the
        outstanding principal amount of the Environmental Control Bonds or the PSCWV,
        shall appoint a Successor Servicer, and the Successor Servicer shall accept
        its
        appointment by a written assumption in form acceptable to the Issuer and
        the
        Indenture Trustee. If, within 30 days after the delivery of the Termination
        Notice, a Successor Servicer shall not have been appointed and accepted such
        appointment, the Indenture Trustee may petition a court of competent
        jurisdiction to appoint a Successor Servicer under this Agreement. A Person
        shall qualify as a Successor Servicer only if (i) such Person is permitted
        under PSCWV Regulations to perform the duties of the Servicer pursuant to
        the
        Statute, the Financing Order and this Agreement, (ii) the Rating Agency
        Condition has been satisfied with respect to all Rating Agencies,
        (iii) such Person enters into a servicing agreement with the Issuer having
        substantially the same provisions as this Agreement, and (iv) if
        applicable, its compensation is approved or acquiesced to by the PSCWV pursuant
        to Section 5.08(a) hereof.

       

      (b)    Notwithstanding
        the Servicer’s receipt of a Termination Notice, pursuant to Section 6.01
        or the
        Servicer’s resignation in accordance with the terms of this Agreement, the
        predecessor Servicer shall continue to perform its functions as Servicer
        under
        this Agreement and shall be entitled to receive the requisite portion of
        the
        Servicing Fees, until a Successor Servicer shall have assumed, in writing,
        the
        obligations of the Servicer hereunder as described below.

       

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

       

      (d)    The
        Successor Servicer may not resign unless it is prohibited from serving as
        such
        by applicable Requirements of Law.

       

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

       

      SECTION
        6.06    Servicer
        Default Under Related Transaction. 
        If a “servicer default” shall occur under the Transferred Environmental Control
        Property Servicing Agreement dated
        [            ], between
        Monongahela Power Company, as servicer, and MP Environmental Funding LLC,
        as
        issuer, and it becomes necessary to find a successor servicer under such
        agreement, the Servicer agrees to assume such role as successor servicer
        under
        such servicing agreement in accordance with the terms thereof, including,
        for avoidance doubt, for the same servicing fee provided for
        thereunder.

       

      ARTICLE
        VII

       

      MISCELLANEOUS
        PROVISIONS

       

      SECTION
        7.01    Amendment.
        

       

      
        
          
          

        

        
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      (a)    Subject
        to Section
        7.01(b)
        below,
        this Agreement may be amended by the Servicer and the Issuer, with the consent
        of the Indenture Trustee and the satisfaction of the Rating Agency Condition.
        Promptly after the execution of any such amendment and consent, the Issuer
        shall
        furnish written notification of the substance of such amendment or consent
        to
        each of the Rating Agencies. Prior to the execution of any amendment to this
        Agreement, the Issuer and the Indenture Trustee shall be entitled to receive
        and
        rely upon an Opinion of Counsel stating that the execution of such amendment
        is
        authorized or permitted by this Agreement and the Opinion of Counsel referred
        to
        in Section
        3.10.
        Subject
        to paragraph (b) below, the Issuer and the Indenture Trustee may, but shall
        not
        be obligated to, enter into any such amendment which affects their own rights,
        duties or immunities under this Agreement or otherwise.

       

      (b)    Notwithstanding
        anything to the contrary in Section
        7.01(a),
        nor any
        waiver required by Section
        6.03
        hereof,
        no amendment or modification of this Agreement shall be effective except
        upon
        satisfaction of the conditions precedent in this Section
        7.01(b).

       

      (i)    PSCWV
        Condition. 
        At least 16 days prior to the effectiveness of any such amendment or
        modification, and after obtaining the other necessary approvals set forth
        in
Section 7.01(a),
        except
        for the consent of the Indenture Trustee and the Environmental Control
        Bondholders if the consent of the Environmental Control Bondholders is required
        or sought by the Indenture Trustee in connection with such amendment or
        modification, the Issuer shall have delivered to the PSCWV’s executive director
        and general counsel written notification of any proposed amendment or
        modification, which notification shall contain:

       

      (A)    a
        reference to Case Nos. 05-0402-E-CN and 05-0750-E-PC and any other case number
        under which a Financing Order has been issued;

       

      (B)    an
        Officer’s Certificate stating that the proposed amendment or modification has
        been approved by all parties to this Agreement; and

       

      (C)    a
        statement identifying the person to whom the PSCWV is to address any response
        to
        the proposed amendment or to request additional time.

       

      (ii)   The
        PSCWV
        or its authorized representative shall, within 15 days of receiving the
        notification complying with Section
        7.01(b)(i)
        above,
        either:

       

      (A)    provide
        notice of its determination that the proposed amendment or modification will
        not
        under any circumstances have the effect of increasing the ongoing qualified
        costs related to the Environmental Control Bonds,

       

      (B)    provide
        notice of its consent or lack of consent to the person specified in Section
        7.01(b)(i)(C)
        above,
        or

       

      
        
          
          

        

        
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      (C)    be
        conclusively deemed to have consented to the proposed amendment or
        modification,

       

      unless,
        within 15 days of receiving the notification complying with Section
        7.01(b)(i)
        above,
        the PSCWV or its authorized representative delivers to the office of the
        person
        specified in Section
        7.01(b)(i)(C)
        above
        with a written statement requesting an additional amount of time not to exceed
        15 days in which to consider whether to consent to the proposed amendment
        or
        modification. If the PSCWV or its authorized representative requests an
        extension of time in the manner set forth in the preceding sentence, then
        the
        PSCWV shall either provide notice of its consent or lack of consent or notice
        of
        its determination that the proposed amendment or modification will not under
        any
        circumstances increase ongoing qualified costs to the person specified in
        Section
        7.01(b)(i)(C)
        above
        not later than the last day of such extension of time or be conclusively
        deemed
        to have consented to the proposed amendment or modification on the last day
        of
        such extension of time. Any amendment or modification requiring the consent
        of
        the PSCWV shall become effective on the later of (i) the date proposed by
        the
        parties to such amendment or modification or (ii) the first day after the
        expiration of the 15-day period provided for in this Section
        7.01(b)(ii),
        or, if
        such period has been extended pursuant hereto, the first day after the
        expiration of such period as so extended.

       

      (c)    For
        the
        purpose of this Section
        7.01,
        an
“authorized representative” of the PSCWV means any person authorized to act on
        behalf of the PSCWV, as evidenced by an Opinion of Counsel (which may be
        the
        general counsel) to the PSCWV.

       

      SECTION
        7.02    Notices. 

       

      (a)    All
        demands, notices and communications upon or to the Servicer, the Issuer,
        the
        Indenture Trustee or the Rating Agencies under this Agreement shall be in
        writing, delivered personally, via facsimile, reputable overnight courier
        or by
        first class mail, postage prepaid, and shall be deemed to have been duly
        given
        upon receipt,

       

      (i)    in
        the
        case of the Servicer, to Potomac Edison, 800 Cabin Hill Drive, Greensburg,
        Pennsylvania 15601, Attention of [_____________]; 

       

      (ii)   in
        the
        case of the Issuer or the Indenture Trustee, at the address provided for
        notices
        or communications to such Person in the Indenture; 

       

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

       

      (iv)   in
        the
        case of Standard & Poor’s, to Standard & Poor’s Ratings
        Services, a division of The McGraw-Hill Companies, Inc., 55 Water Street,
        New York, New York 10041, Attention of Asset Backed Surveillance
        Department;

       

      (v)   in
        the
        case of Fitch, to Fitch, Inc., One State Street Plaza, New York, New York
        10004,
        Attention of ABS Surveillance; or, as to each of the foregoing, at such other
        address as shall be designated by written notice to the other parties; and
        

       

      
        
          
          

        

        
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      (vi)   in
        the
        case of the PSCWV, Public Service Commission of West Virginia, 201 Brooks
        Street, Charleston, West Virginia 25323, Attention:
        _______________.

       

      SECTION
        7.03    Limitations
        on Rights of Others. 
        The provisions of this Agreement are solely for the benefit of the Servicer,
        the
        Seller, the Issuer (including its managers and members), the Indenture Trustee,
        on behalf of itself and the Environmental Control Bondholders, and the PSCWV,
        on
        behalf of itself and the Customers, and nothing in this Agreement, whether
        express or implied, shall be construed to give to any other Person any legal
        or
        equitable right, remedy or claim in any Collateral or under or in respect
        of
        this Agreement or any covenants, conditions or provisions contained herein.
        Notwithstanding anything to the contrary contained herein, for the avoidance
        of
        doubt, any right, remedy or claim to which any Customer may be entitled pursuant
        to the Financing Order and this Agreement may be asserted or exercised only
        by
        the PSCWV for the benefit of such Customer.

       

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

       

      SECTION
        7.05    Separate
        Counterparts. 
        This Agreement may be executed by the parties hereto in separate counterparts,
        each of which when so executed and delivered shall be an original, but all
        such
        counterparts shall together constitute but one and the same
        instrument.

       

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

       

      SECTION
        7.07    GOVERNING
        LAW. 
        THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
        OF
        WEST VIRGINIA, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
        OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
        IN
        ACCORDANCE WITH SUCH LAWS.

       

      SECTION
        7.08    Assignment
        to Indenture Trustee.
         The Servicer hereby acknowledges and consents to the mortgage, pledge,
        assignment and grant of a security interest by the Issuer to the Indenture
        Trustee pursuant to the Indenture for the benefit of the Environmental Control
        Bondholders of all right, title and interest of the Issuer in, to and under
        the
        Transferred Environmental Control Property owned by the Issuer and the proceeds
        thereof and of any and all of the Issuer’s rights hereunder to the Indenture
        Trustee. In no event shall the Indenture Trustee have any liability for the
        representations, warranties, covenants, agreements or other obligations of
        the
        Issuer, hereunder or in any of the certificates, notices or agreements delivered
        pursuant hereto, as to all of which recourse shall be had solely to the assets
        of the Issuer.

       

      SECTION
        7.09    Nonpetition
        Covenants. 
        Notwithstanding any prior termination of this Agreement or the Indenture,
        but
        subject to a court of competent jurisdiction’s rights, upon

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      application
        by the Issuer or the Indenture Trustee, to order the sequestration and payment
        of Environmental Control Revenues arising with respect to the Transferred
        Environmental Control Property, notwithstanding any bankruptcy, reorganization
        or other insolvency proceedings with respect to the debtor, pledgor or
        transferor of the Transferred Environmental Control Property pursuant to
        Section 24-2-4e(k)(4) of the Statute, the Servicer shall not, prior to the
        date which is one year and one day after the termination of the Indenture,
        petition or otherwise invoke or cause the Issuer to invoke the process of
        any
        court or government authority for the purpose of commencing or sustaining
        an
        involuntary case against the Issuer under the federal or state bankruptcy,
        insolvency or similar law or appointing a receiver, liquidator, assignee,
        trustee, custodian, sequestrator or other similar official of the Issuer
        or any
        substantial part of the property of the Issuer, or ordering the winding up
        or
        liquidation of the affairs of the Issuer.

       

      SECTION
        7.10    Termination. 
        This Agreement shall terminate when all Environmental Control Bonds issued
        by
        the Issuer have been retired, redeemed or defeased in full, and all Operating
        Expenses and other amounts owed by the Issuer under the Indenture have been
        paid
        in full.

       

      SECTION
        7.11    Limitation
        of Liability. 
        It is expressly understood and agreed by the parties hereto that this Agreement
        is executed and delivered by [____________], not individually or personally
        but
        solely as Indenture Trustee for the benefit of the Environmental Control
        Bondholders, in the exercise of the powers and authority conferred and vested
        in
        it, and nothing herein contained shall be construed as creating any liability
        on
        [____________], individually or personally, to perform any covenant either
        expressed or implied contained herein, all such liability, if any, being
        expressly waived by the parties who are signatories to this Agreement and
        by any
        Person claiming by, through or under such parties; provided, however, that
        this
        provision shall not protect [___________] against any liability that would
        otherwise be imposed by reason of willful misconduct, bad faith or negligence
        in
        the performance of duties or by reason of reckless disregard of obligations
        or
        duties under this Agreement.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      


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

       

      
        	 	
                PE
                  ENVIRONMENTAL FUNDING LLC,

                Issuer

                 

                 

              
	 	
                by

              	 
	 	 	
                Title:

              
	 	 	
                 

                 

              
	 	
                THE
                  POTOMAC EDISON COMPANY,

                Servicer

                 

                 

              
	 	
                by

              	 
	 	 	
                Title:

              


      

      


      
        	
                Acknowledged
                  and Accepted:

                 

                [___________________],
                  not in its individual capacity

                but
                  solely as Indenture Trustee on behalf of the

                Environmental
                  Control Bondholders issued by the Issuer,

                 

                 

              	 
	
                by

              	 	 
	 	
                Title:

              	 


      

      


      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

       

      SERVICING
        OBLIGATIONS

       

      The
        Servicer agrees to comply with the following with respect to PE Environmental
        Funding LLC, as Issuer:

       

      SECTION
        1.  Definitions. 
        Capitalized
        terms used herein and not otherwise defined shall have the meanings set forth
        in
        Appendix A to the Indenture dated as of [ ] between the Issuer and [ ], as
        Indenture Trustee.

       

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

       

      SECTION
        3.  Payment
        Date Statements. 
At
        least one Business Day before each Payment Date, the Servicer shall provide
        to
        the Issuer, the Indenture Trustee and each Rating Agency, a statement
        indicating:

       

      
        	 	
                1.

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

              


      

       

      
        	 	
                2.

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

              


      

       

      
        	 	
                3.

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

              


      

       

      
        	 	
                4.

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

              


      

       

      
        	 	
                5.

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

              


      

       

      
        	 	
                6.

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

              


      

       

      
        
          
          

        

        
          Exhibit
            A-1

          
            

          

        

        
          
          

        

      

       

      
        	 	
                7.

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

              


      

       

      
        	 	
                8.

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

              


      

       

      
        	 	
                9.

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

              


      

       

      
        	 	
                10.

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

              


      

       

      
        	 	
                11.

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

              


      

       

      
        	 	
                12.

              	
                the
                  then-current Environmental Control Charge for each rate
                  class.

              


      

       

      SECTION
        4.  Remittance
        Date Statements.
        At least
        one Business Day before each Remittance Date, and in the case of Daily
        Remittances, on the last Remittance Date of such month, the Servicer shall
        prepare and furnish to the Issuer and the Indenture Trustee a statement setting
        forth the aggregate amount remitted or to be remitted by the Servicer to
        the
        Indenture Trustee (net of any payments owed to the Servicer in accordance
        with
        Section 5.11(d) of the Servicing Agreement) for deposit on such Remittance
        Date
        pursuant to the Indenture.

       

      SECTION
        5.  True-Up
        Adjustments.

       

      (a)   Prior
        to
        each Calculation Date, the Servicer shall calculate 

       

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

       

      (ii)    the
        revised Environmental Control Charge with respect to the Transferred
        Environmental Control Property in respect of each True-Up Adjustment Date
        such
        that the Servicer projects that Environmental Control Charge Collections
        therefrom allocable to the Issuer will be sufficient so that: 

       

      (A)   the
        Environmental Control Bond Balance on the Payment Date immediately preceding
        the
        next True-Up Adjustment Date will equal the Projected Environmental Control
        Bond
        Balance as of such date or, if earlier with respect to any Series or Class
        of
        Environmental Control Bonds, as of the Payment Date immediately preceding
        the
        Expected Final Payment Date therefor;

       

      
        
          
          

        

        
          Exhibit
            A-2

          
            

          

        

        
          
          

        

      

       

      (B)   the
        amount on deposit in the General Subaccount on the Payment Date immediately
        preceding the next True-Up Adjustment Date will equal the Periodic Bond Payment
        Requirement for such date or, if earlier with respect to any Series or Tranche
        of Environmental Control Bonds, as of the Payment Date immediately preceding
        the
        Expected Final Payment Date therefor;

       

      (C)   the
        amount on deposit in the Capital Subaccount on the Payment Date immediately
        preceding the next True-Up Adjustment Date will equal its required level
        for
        such date or, if earlier with respect to any Series or Tranche of Environmental
        Control Bonds, as of the Payment Date immediately preceding the Expected
        Final
        Payment Date therefor; 

       

      (D)   the
        amount on deposit in the Excess Funds Subaccount on the Payment Date immediately
        preceding the next True-Up Adjustment Date, will equal zero; and

       

      (E)   the
        Environmental Control Charge Collections will provide for (i) amortization
        of
        the remaining outstanding principal balance of each Series in accordance
        with
        the Expected Sinking Fund Schedule therefor, (ii) payment of interest on
        each
        Series when due and payment of any amounts (other than termination or breakage
        amounts) under each Swap Agreement, (iii) payment of all Operating Expenses
        of
        the Issuer when due in accordance with the Indenture and (iv) deposits to
        the
        General Subaccount such that the balance therein will equal the Periodic
        Bond
        Payment Requirement on each Payment Date.

       

      (b)   On
        each
        Calculation Date, the Servicer shall file a True-Up Adjustment Filing with
        the
        PSCWV. This filing shall include the data specified in the Statute and the
        Financing Order.

       

      (c)   On
        each
        True-Up Adjustment Date, the Servicer shall 

       

      (i)    take
        all
        reasonable actions and make all reasonable efforts to effectuate all adjustments
        to the Environmental Control Charge either approved by the PSCWV or effective
        on
        an interim basis pending final approval and

       

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

       

      
        
          
          

        

        
          Exhibit
            A-3

          
            

          

        

        
          
          

        

      

       

      (d)   [On
        each
        True-Up Adjustment Date, the Servicer shall provide Moody’s with a schedule
        indicating any changes to the Environmental Control Charge. ]

       

      (e)   If
        deemed
        appropriate by the Servicer to protect Environmental Control Bondholders
        and to
        remedy a significant and recurring variance between Actual Environmental
        Control
        Charge Collections and Estimated Environmental Control Charge Collections,
        as
        authorized by the Financing Order, the Servicer shall file Non-Routine True-Up
        Adjustments to the Environmental Control Charge (as defined in the Financing
        Order) to accommodate material changes to the True-Up Mechanism. Such filings
        shall be made at least 90 days prior to the proposed effective date of the
        proposed adjustments. The Servicer shall provide notice of such non-routine
        adjustment and resulting change to the Environmental Control Charge to
        Fitch.

       

      
        
          
          

        

        
          Exhibit
            A-4

          
            

          

        

        
          
          

        

         

      

      ATTACHMENT
        A


       

      SERVICING
        PROCEDURES

       

      The
        Servicer agrees to comply with the following servicing procedures to assess
        its
        compliance with applicable servicing criteria.

       

      SECTION
        1.  Definitions.

       

      (a)   Whenever
        used in this Attachment A, the following words and phrases shall have the
        following meanings:

       

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

       

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

       

      Billed
        Environmental Control Charges
        means
        the amounts billed to Customers pursuant to the Environmental Control Charge,
        whether billed directly to such Customers by the Servicer or indirectly through
        a Third Party. 

       

      Bills
        means
        each of the periodic bills and the Closing Bills issued to Customers or Third
        Parties by Potomac Edison.

       

      Budget
        Billing Plan
        means a
        levelized payment plan offered by Potomac Edison, which, if elected by a
        Customer, provides for level monthly Bill charges to such Customer. For
        residential Customers, this charge is calculated by calculating actual
        electricity charges for the previous year and dividing this amount by twelve.
        The number which results from this calculation is charged to the residential
        Customer each month. In the twelfth month, Potomac Edison bills the residential
        Customer for actual use in that month, adjusted for any excess or deficit
        the
        Customer has paid Potomac Edison over the prior eleven months. If the Customer
        owes Potomac Edison $4 or more over the normal budget amount, that Customer
        has
        the option of repaying the full amount in the twelfth month, or spreading
        the
        amount of this deficit in equal installments over the first four months of
        the
        Customer's next budget year. The procedure is similar for small industrial
        and
        commercial Customers.

       

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

       

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

       

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

       

      
        	 	
                ·

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

              


      

       

      
        	 	
                ·

              	
                the
                  total billed revenue attributable to such billing period.
                  

              


      

       

      
        
          
          

        

        
          Attachment
            A-1

          
            

          

        

        
          
          

        

      

       

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

       

      True-Up
        Adjustment Filing
        has,
        with respect to the Issuer, the meaning given to such term in Appendix
        A.

       

      Variables
        includes
        the following variables used in calculating True-Up Adjustments:

       

      
        	 	
                ·

              	
                the
                  estimated Net Write-Off Percent;
                  and

              


      

       

      
        	 	
                ·

              	
                the
                  projected billed consumption to which the Environmental Control
                  Charge
                  applies.

              


      

       

      Write-Offs
        means
        arrears that remain unpaid by Customers generally as of 45 days after the
        issuance of the Closing Bills containing such charges, unless payment
        arrangements are made and are being kept.

       

      SECTION
        2.  Data
        Acquisition.

       

      (a)   Installation
        and Maintenance of Meters.
        Except
        to the extent that a Third Party is responsible for such services, the Servicer
        shall use its best efforts to cause to be installed, replaced and maintained
        meters in such places and in such condition as will enable the Servicer to
        obtain usage measurements for each Customer approximately every thirty days
        or
        as provided in the applicable tariff.

       

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

       

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

       

      SECTION
        3.  Usage
        and Bill Calculation.

       

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

       

      
        
          
          

        

        
          Attachment
            A-2

          
            

          

        

        
          
          

        

      


      SECTION
        4.  Billing.

       

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

       

      (a)   Frequency
        of Bills; Billing Practices.
        In
        accordance with the Servicer’s then-existing Servicer Policies and Practices, as
        such Servicer Policies and Practices may be modified from time to time, the
        Servicer shall generate and issue a Bill to each Customer, or to an Applicable
        Third Party, for such Customer’s respective Environmental Control Charge as a
        general practice once approximately every 60 days or such other time period
        as
        allowed by the PSCWV, at the same time, with the same frequency and on the
        same
        Bill as that containing the Servicer’s own charges to such Customer or Third
        Party, as the case may be. In the event that the Servicer makes any material
        modification to these practices, it shall notify the Issuer, the Indenture
        Trustee and the Rating Agencies as soon as practicable, and in no event later
        than 60 Business Days after such modification goes into effect; provided,
        however, that

       

      (i)    the
        Servicer may not make any modification that will materially adversely affect
        the
        Environmental Control Bondholders and

       

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

       

      (b)   Format.

       

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

       

      (ii)   The
        Servicer shall deliver to the Applicable Third Party itemized charges for
        such
        Customer including the amount of such Customer’s Environmental Control Charge to
        be remitted by the Servicer to the Issuer.

       

      (iii)   The
        Servicer shall conform to such requirements in respect of the format, structure
        and text of Bills delivered to Customers and

       

      
        
          
          

        

        
          Attachment
            A-3

          
            

          

        

        
          
          

        

      

       

      Third
        Parties as applicable PSCWV Regulations shall from time to time prescribe.
        To
        the extent that Bill format, structure and text are not prescribed by the
        Statute, other applicable Requirements of Law, the Servicer shall, subject
        to
        clauses (i) and (ii) above, determine the format, structure and text of all
        Bills in accordance with its reasonable business judgment, its Servicer Policies
        and Practices with respect to its own charges and prevailing industry
        standards.

       

      (c)   Delivery.
        The
        Servicer shall deliver all Bills to Customers 

       

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

       

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

       

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

       

      SECTION
        5.  Customer
        Service Functions.

       

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

       

      SECTION
        6.  Collections;
        Payment Processing; Remittance.

       

      (a)   Collection
        Efforts; Policies; Procedures.

       

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

       

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

       

      
        
          
          

        

        
          Attachment
            A-4

          
            

          

        

        
          
          

        

      

       

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

       

      (C)   The
        Servicer shall deliver verbal and written final call notices in accordance
        with
        applicable PSCWV Regulations and Servicer Policies and Practices.

       

      (D)   The
        Servicer shall adhere to and carry out disconnection policies in accordance
        with
        the Competition Act, other applicable law and PSCWV Regulations and Servicer
        Policies and Practices.

       

      (E)   The
        Servicer may employ the assistance of collections agents in accordance with
        applicable PSCWV Regulations and Servicer Policies and Practices.

       

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

       

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

       

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

       

      
        
          
          

        

        
          Attachment
            A-5

          
            

          

        

        
          
          

        

      

       

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

       

      (B)   would
        not
        materially adversely affect the rights of the Environmental Control Bondholders;
        and

       

      (C)   would
        comply with applicable Requirements of Law;

       

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

       

      (iii)   The
        Servicer shall accept payment from Customers in respect of Billed Environmental
        Control Charges in such forms and methods and at such times and places as
        it
        accepts for payment of its own charges. The Servicer shall accept payment
        from
        Third Parties in respect of Billed Environmental Control Charges in such
        forms
        and methods and at such times and places as the Servicer and each Third Party
        shall mutually agree in accordance with applicable PSCWV
        Regulations.

       

      (b)   Payment
        Processing; Allocation; Priority of Payments.

       

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

       

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

       

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

       

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

       

      (v)   For
        Customers on a Budget Billing Plan, the Servicer shall treat Environmental
        Control Charge Collections received from such

       

      
        
          
          

        

        
          Attachment
            A-6

          
            

          

        

        
          
          

        

      

       

      Customers
        as if such Customers had been billed for the Environmental Control Charge
        in the
        absence of the Budget Billing Plan. Partial payment of a Budget Billing Plan
        payment shall be allocated according to clause (iii) above, and overpayment
        of a
        Budget Billing Plan payment shall be allocated according to clause (iv)
        above.

       

      (c)   Accounts;
        Records.

       

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

       

      (ii)   The
        Servicer shall maintain accounts and records as to Third Parties performing
        billing for Customers accurately and in accordance with its standard accounting
        procedures and in sufficient detail to permit reconciliation between payments
        or
        recoveries with respect to the Transferred Environmental Control Property
        and
        amounts owed by such Customers in respect of the Environmental Control
        Charge.

       

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

       

      (e)   Calculation
        of Collections; Determination of Aggregate Remittance Amount.

       

      (i)    On
        or
        before each Remittance Date, the Servicer shall calculate the Estimated
        Environmental Control Charge Collections received by the Servicer from or
        on
        behalf of Customers during prior Collection Periods in respect of all previously
        Billed Environmental Control Charges.

       

      (ii)   In
        accordance with Section
        4.01
        of the
        Servicing Agreement and Annex 1, the Servicer shall update the Variables
        and
        shall prepare True-Up Adjustment Filings to reflect the updated Variables
        when
        required to do so pursuant to Annex 1.

       

      (f)   Remittances.

       

      
        
          
          

        

        
          Attachment
            A-7

          
            

          

        

        
          
          

        

      

       

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

       

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

       

      
        	 	
                ·

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

              


      

       

      
        	 	
                ·

              	
                five
                  Business Days prior to the next applicable Remittance
                  Date.

              


      

       

      
        
          
          

        

        
          Attachment
            A-8

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        B


      


      PENDING
        LITIGATION


      


      None.

       

      
        
          
          

        

        
          Exhibit
            B-1

          
            

          

        

        
          
          

        

      


      ANNEX
        1 

       

      FORM
        OF ROUTINE ADJUSTMENT REQUEST

       

      DATE:

       

      [Executive
        Secretary]

      Public
        Service Commission of West Virginia 

      201
        Brooks Street, P.O. Box 812

      Charleston,
        WV 25323

       

      Re: 
        Case Nos. 05-0402-E-CN and 05-0750-E-PC

       

      Dear
        __________________:

       

      As
        required by Section 24-2-4e(e) of the West Virginia Code §§ 24-2-4e(a)
        through and including 24-2-4e(v) and pursuant to the order dated [_________]
        in
        Case Nos. 05-0402-E-CN and 05-0750-E-PC (the “Financing
        Order”),
        The
        Potomac Edison Company (the “Company”)
        as
        Servicer (or any Successor Servicer) of the Transferred Environmental Control
        Property, and on behalf of the Indenture Trustee under the Indenture, dated
        as
        of [_________] between the Issuer and the Indenture Trustee, as amended,
        modified or supplemented from time to time, as assignee of PE Environmental
        Funding LLC hereby proposes an adjustment to the Environmental Control Charges
        (the “ECC”
or
        “Environmental
        Control Charges”).
        Capitalized terms used but not otherwise defined herein have the meanings
        given
        such terms in the Servicing Agreement dated as of [_________] between the
        Issuer
        and the Company, as amended, modified or supplemented from time to time,
        or in
        Appendix A thereto.

       

      This
        proposed adjustment is intended to satisfy Section 24-2-4e(e) and the
        Financing Order by ensuring that the ECC will recover amounts sufficient
        to
        timely provide all payments of debt service and other required amounts and
        charges in connection with the Environmental Control Bonds during the upcoming
        Remittance Period. 

       

      Using
        the
        formula approved by the Public Service Commission of West Virginia (the
“PSCWV”)
        in the
        Financing Order, this filing modifies the variables used in the ECC and provides
        the resulting adjusted ECC. Attachments B-1 [and B-2] hereto show the resulting
        values of the ECC, as calculated in accordance with the Joint Stipulation,
        as
        modified by the Financing Order, such modified Environmental Control Charges
        to
        be effective as of the first day of the upcoming Remittance Period. The
        calculations of these values are appended to the Attachments
        hereto.

       

      In
        accordance with the Financing Order, the proposed adjustments to the charges
        will be effective automatically on the first day of the upcoming Remittance
        Period that, prior to the first day of the upcoming Remittance Period, it
        is
        determined by the PSCWV that a mathematical error in the application of the
        formula-based mechanism exists, the Company shall correct such error and
        make
        any necessary corrections to the adjustments of the Environmental Control
        Charges. These adjusted Environmental Control Charges, as corrected, shall
        in
        any event take effect on the first day of the upcoming Remittance Period.
        [For
        Quarterly True-Up Adjustments

       

      
        
          
          

        

        
          Annex
            1-1

          
            

          

        

        
          
          

        

      

       

      and
        Monthly True-Up Adjustments, on the first day of the quarter or month next
        succeeding the date of the Routine Adjustment Request.]

       

      Respectfully
        submitted,

       

      Attachment

      


      
        
          
          

        

        
          Annex
            1-2

          
            

          

        

        
          
          

        

      

       

      ATTACHMENT
        A TO ANNEX 1

       

      Table
        I
        below shows the current assumptions for each of the variables used in the
        Environmental Control Charge calculation.

       

      INPUT
        VALUES FOR ENVIRONMENTAL CONTROL CHARGE

       

      
        	
                (a)

              	
                Measure
                  Date

              


      

      
        	
                (b)

              	
                For
                  each Rate Schedule:

              


      

      
        	 	
                (i)

              	
                Weighted
                  average days outstanding data

              


      

      
        	 	
                (ii)

              	
                Estimated
                  Net Write-Off Percent

              


      

      
        	 	
                (iii)

              	
                Projected
                  billed revenue to which Environmental Control Charges
                  apply

              


      

      
        	 	
                (iv)

              	
                Annual
                  class generation level MWh energy

              


      

      
        	 	
                (v)

              	
                Forecasted
                  annual class customer level MWh
                  energy

              


      

      
        	 	
                (vi)

              	
                Annual
                  class generation level 12 CP MW
                  demand

              


      

      
        	 	
                (vii)

              	
                Forecasted
                  annual class customer level demand

              


      

      
        	
                (c)

              	
                Retail
                  energy weighting ratio

              


      

      
        	
                (d)

              	
                Retail
                  demand weighting ratio

              


      

      
        	
                (e)

              	
                Total
                  generation level MWh energy (excl.
                  wholesale)

              


      

      
        	
                (f)

              	
                Total
                  generation level 12 CP MW demand (excl.
                  wholesale)

              


      

      
        	
                (g)

              	
                Expected
                  annual Write-Offs

              


      

      
        	
                (h)

              	
                Annual
                  ongoing transaction expenses

              


      

      
        	
                (i)

              	
                Current
                  Environmental Control Bonds outstanding
                  balance

              


      

      
        	
                (j)

              	
                Expected
                  Environmental Control Bonds outstanding balance as of
                  __/__/__

              


      

      
        	
                (k)

              	
                Accrued
                  but unpaid Environmental Control Bonds
                  interest

              


      

      
        	
                (l)

              	
                Deferred
                  unpaid Environmental Control Bonds
                  principal

              


      

      
        	
                (m)

              	
                Unpaid
                  ongoing transaction cost

              


      

      
        	
                (n)

              	
                Capital
                  Subaccount balance as of __/__/__

              


      

      
        	
                (o)

              	
                Available
                  True-Up Excess Funds Amount

              


      

      
        	
                (p)

              	
                Accrued
                  but unpaid Capital Equity Return

              


      

      
        	
                (q)

              	
                federal
                  corporate income tax rate

              


      

      
        	
                (r)

              	
                Applicable
                  state and local tax rates

              


      

      


      
        
          
          

        

        
          Attachment
            A-1 to Annex 1

          
            

          

        

        
          
          

        

      

       

      ANNEX
        2

       

      FORM
        OF MONTHLY SERVICER’S CERTIFICATE

       

      PE
        Environmental Funding LLC

       

      $[____________]
        Environmental Control Bonds, Series 200[7]-[A]

       

      Pursuant
        to Section 3.04 of the Servicing Agreement dated as of [____________] (as
        the same may be amended, supplemented or otherwise modified from time to
        time,
        the “Servicing Agreement”) between The Potomac Edison Company, as Servicer, and
        PE Environmental Funding LLC, as Issuer, the Servicer does hereby certify
        as
        follows:

       

      Capitalized
        terms used in this Monthly Servicer’s Certificate have their respective meanings
        as set forth in the Servicing Agreement. References herein to certain sections
        and subsections are references to the respective sections of the Servicing
        Agreement.

       

      Billing
        Period: [____________]

       

      
        	
                1.

              	
                Current
                  Billing Period

              	
                [___________]

              
	 	
                CUSTOMER
                  CLASS [   ] of [   ]: [____________]

                 

              	 
	
                2.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                [___________]

              
	
                3.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                [___________]

              
	 	
                Environmental
                  Control Charge

              	 
	 	
                Billed
                  Environmental Control Charge Collections

                 

              	 
	
                4.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

                 

              	
                $[__________]

              
	 	
                Estimated
                  Environmental Control Charge Collections

                 

              	 
	
                5.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                6.

              	
                Total
                  Residential Net Write-offs

                as
                  % of Billed Environmental Control Charge Collections

                [  
                  ] CUSTOMER CLASS [   ] OF [   ]:
                  [___________]

              	
                  [__________]%

              
	 	 	 
	
                7.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                [___________]

              
	
                8.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                [___________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                9.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                [___________]

              
	
                10.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                [___________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                11.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                [___________]

              
	
                12.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                [___________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                13.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                [___________]

              
	
                14.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                [___________]

              
	 	
                Environmental
                  Control Charge

              	 
	 	
                Billed
                  Environmental Control Charge Collections

              	 


      

       

      
        
          
          

        

        
          Annex
            2-1

          
            

          

        

        
          
          

        

      

       

      
        	
                15.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                16.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                17.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                18.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                19.

              	
                Total
                  Commercial Billed Environmental Control Charge Collections

                 

              	
                $[__________]

              
	 	
                Estimated
                  Environmental Control Charge Collections

                 

              	 
	
                20.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                21.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                22.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                23.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

                 

              	
                $[__________]

              
	
                24.

              	
                Total
                  Commercial Environmental Control Charge Collections

              	
                $[__________]

              
	
                25.

              	
                Total
                  Commercial Net Write-offs as

                a
                  %
                  of Billed Revenues [   ]

                CUSTOMER
                  CLASS [   ] OF [   ]: [__________]

                 

              	
                 
                  [__________]%

              
	
                26.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                 
                  [__________]

              
	
                27.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

                 

              	 
	
                28.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                 
                  [__________]

              
	
                29.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                30.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                 
                  [__________]

              
	
                31.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                32.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                 
                  [__________]

              
	
                33.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                34.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                 
                  [__________]

              
	
                35.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                36.

              	
                Rate
                  Schedule #[   ] kWh Billed

              	
                 
                  [__________]

              
	
                37.

              	
                Rate
                  Schedule #[   ] Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

              	 
	
                38.

              	
                Street
                  Lighting Rate Schedules

              	
                 
                  [__________]

              
	
                39.

              	
                Street
                  Lighting Weighted Average

              	
                 
                  [__________]

              
	 	
                Environmental
                  Control Charge

              	 
	 	
                Billed
                  Environmental Control Charge Collections

                 

              	 
	
                40.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                41.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                42.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                43.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                44.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                45.

              	
                Rate
                  Schedule #[   ] Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                46.

              	
                Street
                  Lighting Rate Schedules Billed Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                 

                47.

              	
                 

                Total
                  Industrial Billed Environmental Control Charge Collections

                 

              	
                 

                $[__________]

              
	 	
                Estimated
                  Environmental Control Charge Collections

              	 


      

       

      
        
          
          

        

        
          Annex
            2-2

          
            

          

        

        
          
          

        

      

       

      
        	
                48.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                49.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                50.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                51.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                52.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                53.

              	
                Rate
                  Schedule #[   ] Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                54.

              	
                Street
                  Lighting Rate Schedules Environmental Control Charge
                  Collections

              	
                $[__________]

              
	
                 

                55.

              	
                 

                Total
                  Industrial Environmental Control Charge Collections

              	
                 

                $[__________]

              
	
                56.

              	
                Total
                  Industrial Net Write-offs as

                a
                  %
                  of Billed Environmental Control Charge Collections [  
                  ]

                 

              	
                 
                  [__________]%

              
	 	
                AGGREGATE
                  ESTIMATED ENVIRONMENTAL CONTROL CHARGE COLLECTIONS

                 

              	 
	 	
                Aggregate
                  Environmental Control Charge Remittances for [Month, Year] Billing
                  Period

                 

              	
                $[__________]

              
	 	
                Aggregate
                  Environmental Control Charge Remittances for [Month, Year] Billing
                  Period

              	
                $[__________]

              
	 	
                Aggregate
                  Environmental Control Charge Remittances for [Month, Year] Billing
                  Period

              	 
	 	
                Aggregate
                  Environmental Control Charge Remittances for [Month, Year] Billing
                  Period

              	 
	 	
                Aggregate
                  Environmental Control Charge Remittances to Date

              	
                $[__________]

              


      

      


      


      IN
        WITNESS HEREOF, the undersigned has duly executed and delivered this Monthly
        Servicer’s Certificate this [__] day of [________________].

       

      


      
        	 	 
	 	
                Name:

                Title:

              


      

      


      
        
          
          

        

        
          Annex
            2-3

          
            

          

        

        
          
          

        

         

      

      ANNEX
        3

       

      FORM
        OF QUARTERLY SERVICER’S CERTIFICATE

       

      Quarterly
        Servicer’s Certificate

       

      PE
        Environmental Funding LLC

      $[____________]
        Environmental Control Bonds, Series 200[7]-[A]

       

      Pursuant
        to Section 3.04 of the Servicing Agreement dated as of [_____________] (as
        the same may be amended, supplemented or otherwise modified from time to
        time,
        the “Servicing Agreement”) between The Potomac Edison Company, as Servicer and
PE
        Environmental
        Funding
        LLC, as Issuer, the Servicer does hereby certify as follows:

       

      Capitalized
        terms used in this Quarterly Servicer’s Certificate have their respective
        meanings as set forth in the Servicing Agreement. References herein to certain
        sections and subsections are references to the respective sections of the
        Servicing Agreement. 

       

      Billing
        Periods: [_____________]

      Payment
        Date: [_____________]

       

      
        	
                1.

              	
                Collections
                  Allocable and Aggregate Amounts Available for the Current Payment
                  Date:

              


      

    

    
       

      
        	 	
                i.

              	
                Balance
                  of Remittances for the [    ]
                  Collection Period

              	
                $[________]

              
	 	
                ii.

              	
                Remittances
                  for the [    ]
                  Collection Period

              	
                $[________]

              
	 	
                iii
                  a.

              	
                Remittances
                  for the [    ]
                  Collection Period

              	
                $[________]

              
	 	
                iii
                  b.

              	
                Part
                  [    ]
                  Remittance for 'Daily Remittance Provision'

              	
                $[________]

              
	 	
                iv.

              	
                Net
                  Earnings on General Subaccount

              	
                $[________]

              
	 	
                v.

              	
                Net
                  Earnings on Capital Subaccount

              	
                $[________]

              
	 	 	 	
                $[________]

              
	 	
                vi.

              	
                Net
                  Earnings on True-Up Excess Funds Subaccount

              	
                $[________]

              
	 	
                vii.

              	
                General
                  Subaccount Balance

              	
                $[________]

              


      

      


      
        	 	
                viii.

              	
                True-Up
                  Excess Funds Subaccount Balance

              	
                $[________]

              
	 	
                ix.

              	 	
                $[________]

              
	 	
                x.

              	
                Capital
                  Subaccount Balance

              	
                $[________]

              
	 	
                xi.

              	
                Collection
                  Account Balance

              	
                $[________]

              


      

    

     

    
      
        	
                2.

              	
                Outstanding
                  Principal Balance and Collection Account Balance as of Prior Payment
                  Date:

              


      

    

     

    
      
        	 	
                i.

              	
                Class
                  [  ]
                  Principal
                  Balance

              	
                $[________]

              
	 	
                ii.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                iii.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                iv.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                v.

              	
                Environmental
                  Control Bond Principal Balance

              	
                $[________]

              


      

    

    
       

      
        
          
          

        

        
          Annex
            3-1

          
            

          

        

        
          
          

        

      

       

      
        
          	 	
                  vi.

                	
                  True-Up
                    Excess Funds Subaccount Balance

                	
                  $[________]

                
	 	
                  vii.

                	
                  Capital
                    Subaccount Balance

                	
                  $[________]

                


        

      

       

      
        
          	
                  3.

                	
                  Required
                    Funding/Payments as of Current Payment
                    Date:

                


        

      

      

        
          	 	
                  i.

                	
                  Projected
                    Class [  ]
                    Environmental Control Bond Balance

                	
                  $[________]

                
	 	
                  ii.

                	
                  Projected
                    Class [  ]
                    Environmental Control Bond Balance

                	
                  $[________]

                
	 	
                  iii.

                	
                  Projected
                    Class [  ]
                    Environmental Control Bond Balance

                	
                  $[________]

                
	 	
                  iv.

                	
                  Projected
                    Class [  ]
                    Environmental Control Bond Balance

                	
                  $[________]

                
	 	
                  v.

                	
                  Projected
                    Environmental Control Bond Balance

                	
                  $[________]

                


        

      

      

        
          	 	
                  vi.

                	
                  Required
                    Class [  ]
                    Coupon ([  ]%
                    per annum rate)

                	
                  $[________]

                
	 	
                  vii.

                	
                  Required
                    Class [  ]
                    Coupon ([  ]%
                    per annum rate)

                	
                  $[________]

                
	 	
                  viii.

                	
                  Required
                    Class [  ]
                    Coupon ([  ]%
                    per annum rate)

                	
                  $[________]

                
	 	
                  ix.

                	
                  Required
                    Class [  ]
                    Coupon ([  ]%
                    per annum rate)

                	
                  $[________]

                


        

      

      


      
        	 	
                x.

              	
                Required
                  Capital Subaccount Funding

              	
                $[________]

              


      

      


      
        	
                4.

              	
                Allocation
                  of Remittances as of Current Payment Date Pursuant to Section 8.02(d)
                  of
                  the Indenture:

              


      

      

        
          	 	
                  i.

                	
                  Cumulative
                    Monthly Administration Fee during Relevant Quarter

                	
                  $[________]

                
	 	
                  ii.

                	
                  Indenture
                    Fees and Expenses                                              
                    *

                	
                  $[________]

                
	 	
                  iii.

                	
                  Independent
                    Director’s Fee                                             
**

                	
                  $[________]

                
	 	
                  iv.

                	
                  Servicing
                    Fee

                	
                  $[________]

                
	 	
                  v.

                	
                  Operating
                    Expenses (subject to $[  ]
                    cap)

                	
                  $[________]

                


        

      

      


      
        	 	
                vi.

              	
                Quarterly
                  Interest

              	
                $[________]

              


      

      
        	 	 	
                1.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              
	 	 	
                2.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              
	 	 	
                3.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              
	 	 	
                4.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              


      

      


      
        	 	
                vii.

              	
                Principal
                  Due and Payable

              	
                $[________]

              


      

      


      
        	 	
                viii.

              	
                Scheduled
                  Quarterly Principal

              	
                $[________]

              


      

      
        	 	 	
                1.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              
	 	 	
                2.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              
	 	 	
                3.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              
	 	 	
                4.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              


      

      


      
        	 	
                ix.

              	
                Operating
                  Expenses (in excess of $[  ])

              	
                $[________]

              
	 	
                x.

              	
                Funding
                  of Capital Subaccount (to required level)

              	
                $[________]

              


      

    

    
      
 

      
        
          
          

        

        
          Annex
            3-2

          
            

          

        

        
          
          

        

      

      
        	 	
                xi.

              	
                Required
                  Dividend Distributions to Potomac Edison

              	
                $[________]

              
	 	
                xii.

              	
                Deposits
                  to True-Up Excess Funds Subaccount

              	
                $[________]

              
	 	
                xiii.

              	
                Released
                  to Issuer upon Series Retirement: Collection Account

              	
                $[________]

              


      

      


      
        	
                5.

              	
                Outstanding
                  Principal Balance and Collection Account Balance as of Current
                  Payment
                  Date:

                (after
                  giving effect to payments to be made on such payment
                  date):

              


      

      


      
        	 	
                i.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                ii.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                iii.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                iv.

              	
                Class
                  [  ]
                  Principal Balance

              	
                $[________]

              
	 	
                v.

              	
                Environmental
                  Control Bond Principal Balance

              	
                $[________]

              


      

      


      
        	 	
                vi.

              	
                True-Up
                  Excess Funds Subaccount Balance

              	
                $[________]

              
	 	
                vii

              	
                Capital
                  Subaccount Balance

              	
                $[________]

              


      

      


      
        	 	 	
                *

              	
                $[
                  ]
                  per quarter, in advance plus expenses, in arrears.

              
	 	 	
                **

              	
                Independent
                  Director’s Fee is paid in advance, first quarter. ([Quarter/Year],
                  directly by Issuer to directors)

              


      

      


      
        	
                6.

              	
                Subaccount
                  Draws as of Current Payment Date (if applicable, pursuant to Section
                  8.02(d) of the Indenture):

              


      

      


      
        	 	
                i.

              	
                True-Up
                  Excess Funds Subaccount

              	
                $[________]

              
	 	
                ii.

              	
                Capital
                  Subaccount

              	
                $[________]

              
	 	
                iii.

              	
                Total
                  Draws

              	
                $[________]

              


      

      


      
        	
                7.

              	
                Shortfalls
                  In Interest and Principal Payments as of Current Payment
                  Date:

              


      

      


      
        	 	
                i.

              	
                Quarterly
                  Interest

              	
                $[________]

              


      

      
        	 	 	
                1.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              
	 	 	
                2.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              
	 	 	
                3.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              
	 	 	
                4.

              	
                Class
                  [  ]
                  Environmental Control Bond Coupon Payment

              	
                $[________]

              


      

      


      
        	 	
                ii.

              	
                Quarterly
                  Principal

              	
                $[________]

              


      

      
        	 	 	
                1.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              
	 	 	
                2.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              
	 	 	
                3.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              
	 	 	
                4.

              	
                Class
                  [  ]
                  Environmental Control Bond Principal Payment

              	
                $[________]

              


      

      


      
        	
                8.

              	
                Shortfalls
                  in Required Subaccount Levels as of Current Payment
                  Date:

              


      

       

      
        
          
          

        

        
          Annex
            3-3

          
            

          

        

        
          
          

        

      

       

      
        	 	
                i.

              	
                Capital
                  Subaccount

              	
                $[________]

              


      

      
 

      IN
        WITNESS HEREOF, the undersigned has duly executed and delivered this Quarterly
        Servicer’s Certificate this [__] day of [________________].

       

      
        	 	 
	 	
                Name:

                Title:

              


      

      


      
        
          
          

        

        
          Annex
            3-4

          
            

          

        

        
          
          

        

      

       

      ANNEX
        4

       

      FORM
        OF OFFICER’S CERTIFICATE

       

      $[________________]

       

      PE
        ENVIRONMENTAL FUNDING LLC

       

      ENVIRONMENTAL
        CONTROL BONDS, SERIES 200[7]-[A]

       

      THE
        POTOMAC EDISON COMPANY

       

      OFFICER’S
        CERTIFICATE

       

      Pursuant
        to Section 3.05(a) of the Servicing Agreement dated as of
        [________________] between PE
        Environmental
        Funding
        LLC, as Issuer, and The Potomac Edison Company (the “Company”), as Servicer (as
        the same may be amended, supplemented or otherwise modified from time to
        time,
        the “Servicing Agreement”; capitalized terms used but not defined herein have
        the meanings assigned thereto in the Servicing Agreement), each of the
        undersigned, [Authorized Officer], the duly elected [________________] of
        and
        [Authorized Officer], the [________________] of the Company, having carefully
        examined the Servicing Agreement including Section 3.05 thereof, and the
        definitions in the Servicing Agreement relating thereto and certain other
        corporate documents and records, and having made such examination or
        investigation as they consider necessary to enable the undersigned to express
        any informed opinion, certifies that:

       

      (i)    a
        review
        of the activities of the Company during the period from January 1, [____]
        through December 31, [____] and of its performance under the Servicing Agreement
        has been made under the supervision of the undersigned, and

       

      (ii)   to
        the
        best of the knowledge of the undersigned, based on such review, the Company
        has
        complied with all conditions and covenants under the Servicing Agreement
        throughout such period [or, if there has been an Event of Default, or an
        act or
        omission, which with either the passage of time or the giving of notice,
        could
        become an Event of Default, specify such event of default or act or omission
        known to such authorized officer and the nature and status
        thereof].

       

      IN
        WITNESS WHEREOF, the undersigned have executed this certificate this [__]
        day of
        [________________].

       

      
        	 	
                By:

              	 
	 	 	
                Name:

                Title:

                 

              
	 	 	 
	 	
                By:

              	 
	 	 	
                Name:

                Title:

              


      

       

      
        
          
          

        

        
          Annex
            4-1

          
            

          

        

        
          
          

        

      


      ANNEX
        5

       

      FORM
        OF ASSESSMENT OF SERVICING CRITERIA

       

      I,
        ________________________________, the _______________________ of the Servicer,
        am responsible for assessing the Servicer’s compliance with the servicing
        criteria set forth in Item 1122(d) of Regulation AB [that would apply if
        the
        Bonds were “asset-backed securities” under Item 1101(c) of Regulation AB] (the
“Servicing Criteria”).

       

      With
        respect to each of the Servicing Criteria, I have made the following assessment
        of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB,
        with
        such discussion regarding the performance of such Servicing Criteria during
        the
        fiscal year covered by the Issuer’s Form 10-K Report (such fiscal year, the
“Assessment Period”):

       

      [N.B.:
        the descriptions are for reference as to how the form will be used on an
        ongoing
        basis for filing with the SEC]

       

      
        	 	
                Servicing
                  Criteria

              	
                Applicable
                  Servicing Criteria

              
	
                Reference

              	
                Criteria

              	 
	 	
                General Serving Considerations

              	 
	
                1122(d)(1)(i)

              	
                Policies
                  and procedures are instituted to monitor any performance or other
                  triggers
                  and events of default in accordance with the transaction
                  agreements.

              	
                Applicable;
                  assessment below. [Assessment: cover true-up compliance
                  here]

              
	
                1122(d)(1)(ii)

              	
                If
                  any material servicing activities are outsourced to third parties,
                  policies and procedures are instituted to monitor the third party’s
                  performance and compliance with such servicing activities.

              	
                Not
                  applicable; no servicing activities were outsourced.

              
	
                1122(d)(1)(iii)

              	
                Any
                  requirements in the transaction agreements to maintain a back-up
                  servicer
                  for the environmental control property are maintained.

              	
                Not
                  applicable; documents do not provided for a back-up
                  servicer.

              
	
                1122(d)(1)(iv)

              	
                A
                  fidelity bond and errors and omissions policy is in effect on the
                  party
                  participating in the servicing function throughout the reporting
                  period in
                  the amount of coverage required by and otherwise in accordance
                  with the
                  terms of the transaction agreements.

              	
                Not
                  applicable; rules of the Commission govern performance requirements
                  of
                  persons handling customer collections. [Utility to confirm bonding
                  requirements under current rules and regulations.] 

              
	 	
                Cash
                  Collection and Administration

              	 
	
                1122(d)(2)(i)

              	
                Payments
                  on environmental control property are deposited into the appropriate
                  custodial bank accounts and related bank clearing accounts no more
                  than
                  two business days following receipt, or such other number of days
                  specified in the transaction agreements.

              	
                Applicable;
                  assessment below [Assessment: estimated collections were remitted
                  from the
                  Servicer to the Trustee each business day in accordance with
                  Section 5.10 of the Servicing
                  Agreement.]

              


      

       

      
        
          
          

        

        
          Annex
            5-1

          
            

          

        

        
          
          

        

      

       

      
        	
                1122(d)(2)(ii)

              	
                Disbursements
                  made via wire transfer on behalf of an obligor or to an investor
                  are made
                  only by authorized personnel.

              	
                Applicable;
                  assessment below.[Assessment: Wire transfers to the Trustee were
                  made by
                  authorized personnel.]

              
	
                1122(d)(2)(iii)

              	
                Advances
                  of funds or guarantees regarding collections, cash flows or distributions,
                  and any interest or other fees charged for such advances, are made,
                  reviewed and approved as specified in the transaction
                  agreements. 

              	
                Applicable,
                  but no current assessment required; no advances by the Servicer
                  or the
                  Trustee are permitted under the transaction documents. 

              
	
                1122(d)(2)(iv) 

              	
                The
                  related accounts for the transaction, such as cash reserve accounts
                  or
                  accounts established as a form of overcollateralization, are separately
                  maintained (e.g., with respect to commingling of cash) as set forth
                  in the
                  transaction agreements. 

              	
                Applicable,
                  but no current assessment is required; no reserve accounts are
                  held by the
                  Servicer. Excess funds and other transaction accounts are maintained
                  and
                  applied by the Trustee in accordance with the
                  Indenture.

              
	
                1122(d)(2)(v)

              	
                Each
                  custodial account is maintained at a federally insured depository
                  institution as set forth in the transaction agreements. For purposes
                  of
                  this criterion, “federally insured depository institution” with respect to
                  a foreign financial institution means a foreign financial institution
                  that
                  meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange
                  Act.

              	
                Applicable,
                  but no current assessment required; all “custodial accounts” were
                  maintained by the Trustee and invested in accordance with indenture
                  requirements.

              
	
                1122(d)(2)(vi)

              	
                Unissued
                  checks are safeguarded so as to prevent unauthorized
                  access.

              	
                Not
                  applicable; all transfers made by wire transfer.

              
	
                1122(d)(2)(vii)

              	
                Reconciliations
                  are prepared on a monthly basis for all asset-backed securities
                  related
                  bank accounts, including custodial accounts and related bank clearing
                  accounts. These reconciliations are (A) mathematically accurate;
                  (B)
                  prepared within 30 calendar days after the bank statement cutoff
                  date, or
                  such other number of days specified in the transaction agreements;
                  (C)
                  reviewed and approved by someone other than the person who prepared
                  the
                  reconciliation; and (D) contain explanations for reconciling items.
                  These
                  reconciling items are resolved within 90 calendar days of their
                  original
                  identification, or such other number of days specified in the transaction
                  agreements.

              	
                Partially
                  applicable; reconciliations of estimated remittances of environmental
                  control charge remittances with actual storm-recovery bond collections
                  are
                  made on an annual basis as required by Section 5.10 of the Servicing
                  Agreement.; assessment below.

              


      

       

      
        
          
          

        

        
          Annex
            5-2

          
            

          

        

        
          
          

        

      

       

      
        	 	
                Investor
                  Remittances and Reporting

              	 
	
                1122(d)(3)(i)

              	
                Reports
                  to investors, including those to be filed with the Commission,
                  are
                  maintained in accordance with the transaction agreements and applicable
                  Commission requirements. Specifically, such reports (A) are prepared
                  in
                  accordance with timeframes and other terms set forth in the transaction
                  agreements; (B) provide information calculated in accordance with
                  the
                  terms specified in the transaction agreements; (C) are filed with
                  the
                  Commission as required by its rules and regulations; and (D) agree
                  with
                  investors’ or the trustee’s records as to the total unpaid principal
                  balance and number of pledged assets serviced by the
                  Servicer.

              	
                Applicable;
                  assessment below.

              
	
                1122(d)(3)(ii)

              	
                Amounts
                  due to investors are allocated and remitted in accordance with
                  timeframes,
                  distribution priority and other terms set forth in the transaction
                  agreements.

              	
                Applicable;
                  assessment below. [Assessment: Servicer has provided applicable
                  instructions to the trustee to allocate and remit funds to
                  investors.]

              
	
                1122(d)(3)(iii)

              	
                Disbursements
                  made to an investor are posted within two business days to the
                  Servicer’s
                  investor records, or such other number of days specified in the
                  transaction agreements.

              	
                Not
                  applicable; transaction documents do not permit Servicer to disburse
                  payments to investors.

              
	
                1122(d)(3)(iv)

              	
                Amounts
                  remitted to investors per the investor reports agree with cancelled
                  checks, or other form of payment, or custodial bank
                  statements.

              	
                Not
                  applicable; bondholders are paid by the Indenture Trustee in accordance
                  with terms of the Indenture.

              
	 	
                Asset
                  Administration

              	 
	
                1122(d)(4)(i)

              	
                Collateral
                  or security on environmental control property is maintained as
                  required by
                  the transaction agreements or related documents.

              	
                Applicable;
                  assessment below. [Assessment: Servicer has performed true-up adjustments
                  of Environmental Control Charges in accordance with Section 4.01 of
                  the Servicing Agreement.]

              
	
                1122(d)(4)(ii)

              	
                Environmental
                  control property and related documents are safeguarded as required
                  by the
                  transaction agreements.

              	
                Applicable;
                  assessment below. [Assessment: Servicer has maintained custody
                  over all
                  environmental control property records in accordance with
                  Section 3.08 of the Servicing Agreement.]

              
	
                1122(d)(4)(iii) 

              	
                Any
                  additions, removals or substitutions to the assets are made, reviewed
                  and
                  approved in accordance with any conditions or requirements in the
                  transaction agreements.

              	
                Applicable
                  but no current assessment required; no removals or substitutions
                  of
                  pledged assets are contemplated or allowed under the transaction
                  documents.

              


      

       

      
        
          
          

        

        
          Annex
            5-3

          
            

          

        

        
          
          

        

      

       

      
        	
                1122(d)(4)(iv)

              	
                Payments
                  on pledged assets, including any payoffs, made in accordance with
                  the
                  related environmental control property documents are posted to
                  the
                  Servicer’s obligor records maintained no more than two business days after
                  receipt, or such other number of days specified in the transaction
                  agreements, and allocated to principal, interest or other items
                  (e.g.,
                  escrow) in accordance with the environmental control transaction
                  documents.

              	
                Applicable;
                  assessment below.[Assessment: The Servicer posted substantially
                  all
                  environmental control charge payments to customer accounts within
                  two
                  business days as required by Section 6(b) of Exhibit A—Payment
                  Processing: Allocation; Priority of Payments]

              
	
                1122(d)(4)(v)

              	
                The
                  Servicer’s records regarding the environmental control property agree with
                  the Servicer’s records with respect to an obligor’s unpaid principal
                  balance.

              	
                Not
                  applicable; because underlying obligation (environmental control
                  charge)
                  is not an interest bearing instrument

              
	
                1122(d)(4)(vi)

              	
                Changes
                  with respect to the terms or status of an obligor’s environmental control
                  property are made, reviewed and approved by authorized personnel
                  in
                  accordance with the transaction agreements and related asset
                  documents. 

              	
                Applicable;
                  assessment below [Assessment: Servicer has not waived or modified
                  term of
                  payment except in accordance with Section 6(a)(ii) of Exhibit
                  A-Servicing Procedures]

              
	
                1122(d)(4)(vii)

              	
                Loss
                  mitigation or recovery actions (e.g., forbearance plans, modifications
                  and
                  deeds in lieu of foreclosure, foreclosures and repossessions, as
                  applicable) are initiated, conducted and concluded in accordance
                  with the
                  timeframes or other requirements established by the transaction
                  agreements.

              	
                Applicable;
                  assessment below. [Assessment: Loss mitigation or recovery actions
                  have
                  been conducted in accordance with Section 6(a) of Exhibit A—
                  Collections: Payment Processing; Remittance]

              
	
                1122(d)(4)(viii)

              	
                Records
                  documenting collection efforts are maintained during the period
                  any
                  pledged asset is delinquent in accordance with the transaction
                  agreements.
                  Such records are maintained on at least a monthly basis, or such
                  other
                  period specified in the transaction agreements, and describe the
                  entity’s
                  activities in monitoring delinquent environmental control charges
                  including, for example, phone calls, letters and payment rescheduling
                  plans in cases where delinquency is deemed temporary (e.g., illness
                  or
                  unemployment).

              	
                Applicable,
                  but does not require assessment. No explicit documentation requirement
                  with respect to delinquent accounts are imposed under the transactional
                  documents due to availability of “true-up” mechanism; and any such
                  documentation is maintained in accordance with applicable PSCWV
                  rules and
                  regulations.

              
	
                1122(d)(4)(ix)

              	
                Adjustments
                  to interest rates or rates of return for environmental control
                  property
                  with variable rates are computed based on the related environmental
                  control property documents.

              	
                Not
                  applicable; environmental control charges are not interest bearing
                  instruments.

              


      

       

      
        
          
          

        

        
          Annex
            5-4

          
            

          

        

        
          
          

        

      

       

      
        	
                1122(d)(4)(x)

              	
                Regarding
                  any funds held in trust for an obligor (such as escrow accounts):
                  (A) such
                  funds are analyzed, in accordance with the obligor’s environmental control
                  property documents, on at least an annual basis, or such other
                  period
                  specified in the transaction agreements; (B) interest on such funds
                  is
                  paid, or credited, to obligors in accordance with applicable environmental
                  control property documents and state laws; and (C) such funds are
                  returned
                  to the obligor within 30 calendar days of full repayment of the
                  related
                  environmental control property, or such other number of days specified
                  in
                  the transaction agreements.

              	
                Applicable,
                  but does not require assessment; Servicer maintains customer deposits
                  in
                  accordance with the PSCWV rules and regulations.

              
	
                1122(d)(4)(xi)

              	
                Payments
                  made on behalf of an obligor (such as tax or insurance payments)
                  are made
                  on or before the related penalty or expiration dates, as indicated
                  on the
                  appropriate bills or notices for such payments, provided that such
                  support
                  has been received by the Servicer at least 30 calendar days prior
                  to these
                  dates, or such other number of days specified in the transaction
                  agreements.

              	
                Not
                  applicable.

              
	
                1122(d)(4)(xii)

              	
                Any
                  late payment penalties in connection with any payment to be made
                  on behalf
                  of an obligor are paid from the Servicer’s funds and not charged to the
                  obligor, unless the late payment was due to the obligor’s error or
                  omission. 

              	
                Not
                  applicable; Servicer cannot make advances of its own funds on behalf
                  of
                  customers under the transactional documents.

              
	
                1122(d)(4)(xiii)

              	
                Disbursements
                  made on behalf of an obligor are posted within two business days
                  to the
                  obligor’s records maintained by the Servicer, or such other number of days
                  specified in the transaction agreements.

              	
                Not
                  applicable; Servicer cannot make advances of its own funds on behalf
                  of
                  customers to pay principal or interest on the bonds. [See
                  Section 5.09. these costs are borne by the Servicer, not advanced by
                  the Servicer.]

              
	
                1122(d)(4)(xiv)

              	
                Delinquencies,
                  charge-offs and uncollectible accounts are recognized and recorded
                  in
                  accordance with the transaction agreements.

              	
                Applicable;
                  assessment below. [Assessment: Servicer has reconciled actual collections
                  of environmental control charges and estimated remittances on or
                  before
                  March 1 of the following year, per Section 5.11 of the Servicing
                  Agreement [need to include]. Servicer has applied partial payments
                  in
                  accordance with Section 3.02(b) and Section 6(b) of Exhibit A—
                  Payment Processing: Allocation; Priority of Payments]

              
	
                1122(d)(4)(xv) 

              	
                Any
                  external enhancement or other support, identified in Item 1114(a)(1)
                  through (3) or Item 1115 of Regulation AB, is maintained as set
                  forth in
                  the transaction agreements.

              	
                Not
                  Applicable: No external credit support or derivatives were employed
                  [or:
                  Applicable; assessment below.]

              


      

       

      
        
          
          

        

        
          Annex
            5-5

          
            

          

        

        
          
          

        

      

       

      With
        respect to each of the applicable Servicing Criteria, I have made the following
        assessment in accordance with Item 1122(d) of Regulation AB, with such
        discussion regarding the performance of such Servicing Criteria during the
        fiscal year covered by the Issuer’s Form 10-K Report (such fiscal year the
“Assessment Period”).

       

      1.   Item
        1122(d)(1)(i) : [include narrative of assessment]

       

      2.   [Continue
        enumeration of applicable Servicing Criteria with appropriate narrative of
        assessment]

       

      Based
        on
        the aforementioned Servicing Criteria, I find that the Servicer has fulfilled
        all of the applicable servicing obligations under the Servicing Agreement
        in all
        material respects through the Assessment Period, with the exception of the
        following instance(s) of material noncompliance:

       

      1.   [Include
        narrative of any material noncompliance with servicing obligations]

       

      A
        registered public accounting firm has issued an attestation report on the
        party’s assessment of compliance with the applicable servicing criteria as of
        and for the period ending the end of the Assessment Period.

       

      
        	 	
                Date:

                 

              
	 	
                By:

              	 
	 	 	
                Name:

              


      

      


      
        
          
          

        

        
          Annex
            5-6

          
            

          

        

        
          
          

        

      

       

      ANNEX
        6

       

      FORM
        OF REGULATION AB COMPLIANCE CERTIFICATION

       

      
        	 	
                Re:
                  

              	
                Servicing
                  Agreement dated as of ____, 2006 (the “Servicing
                  Agreement”),

                between
                  PE
                  Environmental
                  Funding LLC, as issuer (the “Issuer”), and

                The
                  Potomac Edison Company (the
“Servicer”).

              


      

       

      I,
        ________________________________, the _______________________ of the Servicer,
        certify to Issuer and the Administrator, [and other required parties] and
        their
        officers, with the knowledge and intent that they will rely upon this
        certification, that:

       

      1.   I
        have
        reviewed the servicer compliance statement of the Servicer provided in
        accordance with Item 1123 of Regulation AB as it would apply if the
        Environmental Control Bonds were ‘asset-backed securities” under Item 1101(c) of
        Regulation AB (the “Compliance Statement”) and Section 3.05(a)(iv) of the
        Servicing Agreement, the report on assessment of the Company’s compliance with
        the servicing criteria set forth in Item 1122(d) of Regulation AB (the
“Servicing Criteria”), provided in accordance with Rules 13a-18 and 15d-18 under
        Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 1122
        of Regulation AB (the “Servicing Assessment”), the registered public accounting
        firm’s attestation report provided in accordance with Rules 13a-18 and 15d-18
        under the Exchange Act and Section 1122(b) of Regulation AB (the
“Attestation Report”), and all servicing reports, officer’s certificates and
        other information relating to the servicing of the Environmental Control
        Property during 200[ ] that were delivered by the Servicer to the [Issuer]
        [Administrator] [Indenture Trustee] pursuant to the Agreement (collectively,
        the
“ Servicing Information”);

       

      2.   Based
        on
        my knowledge, the Servicing Information, taken as a whole, does not contain
        any
        untrue statement of a material fact or omit to state a material fact necessary
        to make the statements made, in the light of the circumstances under which
        such
        statements were made, not misleading with respect to the period of time covered
        by the company Servicing Information;

       

      3.   Based
        on
        my knowledge, all of the Servicing Information required to be provided by
        the
        Servicer under the Agreement has been provided to the [Issuer] [Administrator]
        [Indenture Trustee];

       

      4.   I
        am
        responsible for reviewing the activities performed by the Servicer as servicer
        under the Agreement, and based on my knowledge and the compliance review
        conducted in preparing the Compliance Statement and except as disclosed in
        the
        Compliance Statement, the Servicing Assessment or the Attestation Report,
        the
        Servicer has fulfilled its obligations under the Agreement in all material
        respects; and

       

      
        
          
          

        

        
          Annex
            6-1

          
            

          

        

        
          
          

        

      


      5.   The
        Compliance Statement required to be delivered by the Servicer pursuant to
        the
        Agreement, and the Servicing Assessment and Attestation Report required to
        be
        provided by the Servicer and by any subservicer pursuant to the Agreement,
        have
        been provided to the [Issuer] [Administrator] [Indenture Trustee]. Any material
        instances of noncompliance described in such reports have been disclosed
        to the
        [Issuer] [Administrator] [Indenture Trustee]. Any material instance of
        noncompliance with the Servicing Criteria has been disclosed in such
        reports.


       

      
        	 	
                Date:

                 

              
	 	
                By:

              	 
	 	 	
                Name:

                Title:

              


      

      


      
        
          
          

        

        
          Annex
            6-2

          
            

          

        

        
          
          

        

         

      

      APPENDIX
        A 

       

      to

       

      SERVICING
        AGREEMENT

       

      Master
        Definitions

       

      
        
          
          

        

        
          Appendix
            A-1