Exhibit 10.2

                                PSNH FUNDING LLC,

                                    as Issuer

                                       and

                     PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE

                                   as Servicer





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                               SERVICING AGREEMENT

                           Dated as of April __, 2001

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                                TABLE OF CONTENTS
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<S>     <C>     <C>        <C>                                                                         <C>
Article 1       DEFINITIONS1

         Section 1.01.     Definitions..................................................................1

         Section 1.02.     Other Definitional Provisions................................................5

Article 2       APPOINTMENT AND AUTHORIZATION...........................................................6

         Section 2.01.     Appointment of Servicer; Acceptance of Appointment...........................6

         Section 2.02.     Authorization................................................................6

         Section 2.03.     Dominion and Control Over the RRB Property...................................6

Article 3       BILLING SERVICES........................................................................7

         Section 3.01.     Duties of Servicer...........................................................7

         Section 3.02.     Servicing and Maintenance Standards..........................................8

         Section 3.03.     Certificate of Compliance....................................................8

         Section 3.04.     Annual Report by Independent Public Accountants..............................8

Article 4       SERVICES RELATED TO PERIODIC ADJUSTMENTS; REMITTANCES...................................9

         Section 4.01.     Periodic Adjustments.........................................................9

         Section 4.02.     Limitation of Liability.....................................................11

         Section 4.03.     Remittances.................................................................11

Article 5       THE RRB PROPERTY.......................................................................12

         Section 5.01.     Custody of RRB Property Records.............................................12

         Section 5.02.     Duties of Servicer as Custodian.............................................12

         Section 5.03.     Instructions; Authority to Act..............................................14

         Section 5.04.     Effective Period and Termination............................................14

         Section 5.05.     Monitoring of Third Party Suppliers.........................................14

Article 6       THE SERVICER...........................................................................14

         Section 6.01.     Representations and Warranties of Servicer..................................14

         Section 6.02.     Indemnities of Servicer.....................................................16

         Section 6.03.     Limitation on Liability of Servicer and Others..............................18

         Section 6.04.     Merger or Consolidation of, or Assumption of the Obligations of, Servicer...18

         Section 6.05.     Public Service Company of New Hampshire Not to Resign as Servicer...........19
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                               TABLE OF CONTENTS
                                  (CONTINUED)

<S>     <C>     <C>        <C>                                                                         <C>
         Section 6.06.     Servicing Compensation......................................................19

         Section 6.07.     Compliance with Applicable Law..............................................20

         Section 6.08.     Access to Certain Records and Information Regarding RRB Property............20

         Section 6.09.     Appointments................................................................20

         Section 6.10.     No Servicer Advances........................................................21

         Section 6.11.     Maintenance of Operations...................................................21

Article 7       DEFAULT................................................................................21

         Section 7.01.     Servicer Default............................................................21

         Section 7.02.     Appointment of Successor....................................................22

         Section 7.03.     Waiver of Past Defaults.....................................................23

         Section 7.04.     Notice of Servicer Default..................................................23

Article 8       MISCELLANEOUS PROVISIONS...............................................................23

         Section 8.01.     Amendment...................................................................23

         Section 8.02.     Maintenance of Accounts and Records.........................................24

         Section 8.03.     Notices.....................................................................25

         Section 8.04.     Assignment..................................................................27

         Section 8.05.     Limitations on Rights of Third Parties......................................27

         Section 8.06.     Severability................................................................27

         Section 8.07.     Separate Counterparts.......................................................27

         Section 8.08.     Headings....................................................................27

         Section 8.09.     Governing Law...............................................................28

         Section 8.10.     Assignment to Trustee.......................................................28

         Section 8.11.     Nonpetition Covenants.......................................................28
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         This SERVICING AGREEMENT, dated as of April __, 2001, is between PSNH
Funding LLC, a Delaware limited liability company (together with any successor
thereto permitted under the Indenture, as hereinafter defined, the "ISSUER"),
and Public Service Company of New Hampshire, a New Hampshire corporation.

                                    RECITALS

         WHEREAS, pursuant to the Statute and the Finance Order, the Seller and
the Issuer are concurrently entering into the Sale Agreement pursuant to which
the Seller is selling to the Issuer the RRB Property created pursuant to the
Statute and the Finance Order.

         WHEREAS, in connection with its ownership of the RRB Property and in
order to collect the RRB Charge, the Issuer desires to engage the Servicer to
carry out the functions described herein. The Servicer currently performs
similar functions for itself with respect to its own charges to its customers.
In addition, the Issuer desires to engage the Servicer to act on its behalf in
obtaining Periodic Adjustments from the NHPUC. The Servicer desires to perform
all of these activities on behalf of the Issuer.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

                                   ARTICLE 1

                                   DEFINITIONS

         Section 1.01.     DEFINITIONS.  Whenever used in this Agreement, the
following words and phrases shall have the following meanings:

         "ADVICE LETTER" means any filing made with the NHPUC by the Servicer on
behalf of the Issuer to set or adjust the RRB Charge, including the Issuance
Advice Letter, a Routine Semiannual True-Up Letter, a Routine True-Up Letter or
a Non-Routine True-Up Letter.

         "AGREEMENT" means this Servicing Agreement, together with all Exhibits,
Schedules and Annexes hereto, as the same may be amended and supplemented from
time to time.

         "ANNUAL ACCOUNTANT'S REPORT" has the meaning set forth in Section 3.04.

         "APPLICABLE TPS" means, with respect to each customer, the TPS, if any,
billing the RRB Charge to that customer.

         "BILLS" means each of the regular monthly bills, summary bills and
other bills issued to customers or TPSs by Public Service Company of New
Hampshire on its own behalf and in its capacity as Servicer.

         "CERTIFICATE OF COMPLIANCE" has the meaning set forth in Section 3.03.
<PAGE>

         "CLOSING DATE" means April __ 2001.

         "EXPECTED AMORTIZATION SCHEDULE" means SCHEDULE 4.01(A) hereto.

         "FINANCE ORDER" means the order of the NHPUC, DE 99-099, issued on
September 8, 2000 (Order No. 23,550).

         "INDEMNIFIED PERSON" has the meaning assigned to such term in Section
6.02.

         "INSOLVENCY EVENT" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due.

         "INDENTURE" means the Indenture dated as of the date hereof between the
Issuer and the Trustee, as the same may be amended and supplemented from time to
time.

         "ISSUER" has the meaning set forth in the preamble to this Agreement.

         "ISSUANCE ADVICE LETTER" means the initial Issuance Advice Letter,
dated April __, 2001, filed with the NHPUC pursuant to the Finance Order.

         "LIEN" means a security interest, lien, charge, pledge or encumbrance
of any kind.

         "LOSSES" has the meaning assigned to that term in Section 6.02(b).

         "MONTHLY SERVICER CERTIFICATE" has the meaning assigned to that term in
Section 4.01(d)(2).

         "NHPUC" means the New Hampshire Public Utilities Commission and any
successor thereto.

         "NHPUC REGULATIONS" means all regulations, rules, tariffs and laws
applicable to public utilities or TPSs, as the case may be, and promulgated by,
enforced by or otherwise within the jurisdiction of the NHPUC.

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         "NON-ROUTINE PERIODIC ADJUSTMENT" has the meaning set forth in Section
4.01(c)(1).

         "NON-ROUTINE TRUE-UP LETTER" means a letter filed with the NHPUC in
accordance with the Finance Order with respect to any Non-Routine Periodic
Adjustment, pursuant to which the related Non-Routine Periodic Adjustment will
become effective within 60 days after filing of the Non-Routine True-Up Letter,
subject to the review and approval of the NHPUC.

         "OFFICER'S CERTIFICATE" means a certificate of the Servicer signed by a
Responsible Officer.

         "OPINION OF COUNSEL" means one or more written opinions of counsel who
may be an employee of or counsel to the party providing such opinion(s) of
counsel, which counsel shall be reasonably acceptable to the party receiving
such opinion(s) of counsel.

         "PERIODIC ADJUSTMENT" means each adjustment to the RRB Charge made
pursuant to the terms of the Finance Order and in accordance with Section 4.01
hereof.

         "PRINCIPAL BALANCE" means, as of any Payment Date, the sum of the
outstanding principal amount of the Bonds.

         "PROJECTED PRINCIPAL BALANCE" means, as of any Payment Date, the sum of
the projected outstanding principal amount of the Bonds for such Payment Date
set forth in the Expected Amortization Schedule.

         "QUARTERLY SERVICER CERTIFICATE" has the meaning assigned to that term
in Section 4.01(d)(3).

         "REMITTANCE" means each remittance pursuant to Section 4.03 of RRB
Charge Payments by the Servicer to the Trustee.

         "REMITTANCE DATE" means each Servicer Business Day on which a
Remittance is to be made by the Servicer pursuant to Section 4.03.

         "REMITTANCE PERIOD" means, in each year, each successive six-month
period commencing on April __ [I.E., INSERT ANNIVERSARY DATE OF CLOSING DATE]
and ending on October __ and commencing on October __ [I.E., INSERT SEMIANNUAL
ANNIVERSARY DATE OF CLOSING DATE] and ending on April __; provided, however,
that the initial Remittance Period shall commence on the Closing Date and end on
October __, 2001.

         "REQUIRED DEBT SERVICE" means, for any Remittance Period, the total
dollar amount calculated by the Servicer in accordance with Section 4.01(b)(1)
as necessary to be remitted to the Collection Account during such Remittance
Period (after giving effect to (a) the allocation and distribution of amounts on
deposit in the Reserve Subaccount at the time of calculation and which are
available for payments on the Bonds, (b) any shortfalls in Required Debt Service
for any prior Remittance Period and (c) any Remittances based upon the RRB
Charge in effect in the prior Remittance Period that are

                                      -3-
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expected to be realized in such Remittance Period) in order to ensure that, as
of the Payment Date immediately following the end of such period, (i) all
accrued and unpaid interest on the Bonds then due shall have been paid in full,
(ii) the Principal Balance of the Bonds is equal to the Projected Principal
Balance of the Bonds for that Payment Date, (iii) the balance on deposit in the
Interest Reserve Subaccount equals the aggregate Required Interest Reserve
Level, (iv) the balance on deposit in the Capital Subaccount equals the
aggregate Required Capital Level, (v) the balance on deposit in the
Overcollateralization Subaccount equals the aggregate Required
Overcollateralization Level and (vi) all other fees, expenses and indemnities
due and owing and required or allowed to be paid under Section 8.02 of the
Indenture as of such date shall have been paid in full; provided, however, that,
with respect to any Periodic Adjustment occurring after the last Scheduled
Maturity Date for any Bonds, the Required Debt Service shall be calculated to
ensure that sufficient amounts will be collected to retire such Bonds in full as
of the earlier of (x) the next Payment Date and (y) the Final Maturity Date for
such Bonds.

         "RESPONSIBLE OFFICER" means the chief executive officer, the president,
the chairman or vice chairman of the board, the any vice president, the
treasurer, any assistant treasurer, the secretary, the clerk, any assistant
secretary, and assistant clerk, the controller or the finance manager of the
Servicer.

         "RETIREMENT OF THE BONDS" means the day on which the final payment is
made to the Trustee in respect of the last outstanding Bond.

         "ROUTINE SEMIANNUAL TRUE-UP LETTER" means a letter filed with the
NHPUC, substantially in the form of EXHIBIT B hereto, not later than 30 days
prior to April __ [INSERT ANNIVERSARY DATE OF CLOSING DATE] and October __
[INSERT SEMIANNUAL ANNIVERSARY DATE OF CLOSING DATE] in each year, in respect of
a semiannual Periodic Adjustment. Absent manifest error in the Routine
Semiannual True-Up Letter, the resulting upward or downward adjustments to the
RRB Charge will be effective on the ensuing April __ [INSERT ANNIVERSARY DATE OF
CLOSING DATE] or October __ [INSERT SEMIANNUAL ANNIVERSARY DATE OF CLOSING
DATE].

         "ROUTINE TRUE-UP LETTER" means a letter filed with the NHPUC,
substantially in the form of EXHIBIT B hereto, as frequently as monthly, in
respect of a Periodic Adjustment. Absent manifest error in the Routine True-Up
Letter, the resulting upward or downward adjustments to the RRB Charge will be
effective immediately upon the filing of such Routine True-Up Letter.

         "RRB CHARGE" means the portion (which may become all) of the Seller's
"stranded cost recovery charge" designated pursuant to the Finance Order and RSA
369-B:2, XIII as the RRB Charge, as the same may be adjusted from time to time
as provided in the Finance Order.

         "RRB CHARGE COLLECTIONS" means the RRB Charge Payments remitted to the
Collection Account.

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         "RRB CHARGE PAYMENTS" means the actual payments received by the
Servicer, directly or indirectly (including through a TPS), from or on behalf of
customers, multiplied by the percentage of such collections which is calculated
in accordance with ANNEX II hereto to have been received in respect of the RRB
Charge.

         "RRB PROPERTY" means the RRB Property that exists under Approval Nos.
20 to 22 of the Finance Order and is sold by the Seller to the Issuer under the
Sale Agreement.

         "RRB PROPERTY RECORDS" has the meaning assigned to that term in Section
5.01.

         "SALE AGREEMENT" means the Purchase and Sale Agreement dated as of the
date hereof between Public Service Company of New Hampshire, as Seller, and the
Issuer, as the same may be amended and supplemented from time to time.

         "SELLER" means Public Service Company of New Hampshire, a New Hampshire
corporation, and its permitted successors and assigns under the Sale Agreement.

         "SERVICER" means Public Service Company of New Hampshire, as the
servicer of the RRB Property, or each successor (in the same capacity) pursuant
to Section 6.04 or Section 7.02.

         "SERVICER BUSINESS DAY" means any Business Day on which the Servicer's
offices in the State of New Hampshire are open for business.

         "SERVICER DEFAULT" means an event specified in Section 7.01.

         "SERVICING FEE" has the meaning set forth in Section 6.06(a).

         "STATUTE" means RSA Chapter 369-B.

         "TERMINATION NOTICE" has the meaning assigned to that term in Section
7.01.

         "TPS" means a third party supplier of energy who has entered into a TPS
Service Agreement with the Servicer.

         "TPS SERVICE AGREEMENT" means an agreement between a third party
supplier of energy and the Servicer pursuant to which such third party supplier
of energy bills and collects the RRB Charge to and from customers in accordance
with NHPUC Regulations, the Finance Order and the guidelines described in
SCHEDULE A TO ANNEX I.

         Section 1.02.     OTHER DEFINITIONAL PROVISIONS.

         (a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture.

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

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<PAGE>

         (c) 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, Schedule,
Exhibit and Annex references contained in this Agreement are references to
Sections, Schedules, Exhibits and Annexes in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."

         (d) 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 forms of such terms.

                                   ARTICLE 2

                          APPOINTMENT AND AUTHORIZATION

         Section 2.01.     APPOINTMENT OF SERVICER; ACCEPTANCE OF APPOINTMENT.
Subject to Section 6.05 and Article 7, 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 or any assignee thereof in accordance with the terms of this Agreement
and applicable law. 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 RRB Property, the Servicer shall be, and hereby is, authorized and empowered
by the Issuer to (a) execute and deliver, on behalf of itself and/or the Issuer,
as the case may be, any and all instruments, documents or notices, and (b) on
behalf of itself and/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 NHPUC. The Issuer shall execute and/or furnish the Servicer
with such documents as have been prepared by the Servicer for execution by the
Issuer, and with such other documents as may be in the Issuer's possession, as
the Servicer may determine to be necessary or appropriate to enable it to carry
out its servicing and administrative duties hereunder. Upon the Servicer's
written request, 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 THE RRB PROPERTY.
Notwithstanding any other provision herein, the Issuer shall have dominion and
control over the RRB Property, and the Servicer, in accordance with the terms
hereof, is acting solely as the servicing agent and custodian for the Issuer
with respect to the RRB Property and the RRB Property Records. The Servicer
shall not take any action that is not authorized by this Agreement or that shall
impair the rights of the Issuer or the Trustee in the RRB Property, in each case
unless such action is required by applicable law.

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                                   ARTICLE 3

                                BILLING SERVICES

         Section 3.01.     DUTIES OF SERVICER. The Servicer, as agent for the
Issuer, shall have the following duties:

             (a)  DUTIES OF SERVICER GENERALLY.

                  (1) GENERAL DUTIES. The Servicer's duties in general shall
include management, servicing and administration of the RRB Property; obtaining
meter reads, calculating electricity usage (including usage by customers of any
TPS), billing, collection and posting of all payments in respect of the RRB
Property; responding to inquiries by customers, the NHPUC, or any federal, local
or other state governmental authorities with respect to the RRB Property;
delivering Bills to customers and TPSs, investigating and handling
delinquencies, processing and depositing collections and making periodic
remittances; furnishing periodic reports to the Issuer, the Trustee and the
Rating Agencies; and taking all necessary action in connection with Periodic
Adjustments as set forth herein. Certain of the duties set forth above may be
performed by TPSs pursuant to TPS Service Agreements. Without limiting the
generality of this Section 3.01(a)(1), 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 and bill
calculation, billing, customer service functions, collection, payment processing
and remittance set forth in ANNEX I hereto.

                  (2) NHPUC REGULATIONS CONTROL. Notwithstanding anything to the
contrary in this Agreement, the duties of the Servicer set forth in this
Agreement shall be qualified in their entirety by any NHPUC Regulations as in
effect at the time such duties are to be performed.

             (b)  REPORTING FUNCTIONS.

                  (1) NOTIFICATION OF LAWS AND REGULATIONS. The Servicer shall
promptly notify the Issuer, the Trustee and the Rating Agencies in writing of
any laws or NHPUC Regulations hereafter promulgated that have a material adverse
effect on the Servicer's ability to perform its duties under this Agreement.

                  (2) OTHER INFORMATION. Upon the reasonable request of the
Issuer, the Trustee or any Rating Agency, the Servicer shall provide to such
Issuer, Trustee or the Rating Agencies, as the case may be, any public financial
information in respect of the Servicer, or any material information regarding
the RRB Property to the extent it is reasonably available to the Servicer, as
may be reasonably necessary and permitted by law for the Issuer, the Trustee ,
or the Rating Agencies to monitor the Servicer's performance hereunder.

                  (3) PREPARATION OF REPORTS TO BE FILED WITH THE SEC. The
Servicer shall prepare or cause to be prepared any reports required to be filed
by the

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Issuer under the securities laws, including a copy of each Quarterly Servicer
Certificate described in Section 4.01(d)(3), the annual Certificate of
Compliance described in Section 3.03 and the Annual Accountant's Report
described in Section 3.04.

         Section 3.02.     SERVICING AND MAINTENANCE STANDARDS. On behalf of the
Issuer, the Servicer shall (a) manage, service, administer and make collections
in respect of the RRB Property with reasonable care and in accordance with
applicable law, including all applicable NHPUC Regulations and guidelines, using
the same degree of care and diligence that the Servicer exercises with respect
to similar assets for its own account and, if applicable, for others; (b) follow
customary standards, policies and procedures for the industry in performing its
duties as Servicer; (c) use all reasonable efforts, consistent with its
customary servicing procedures, to bill and collect the RRB Charge; (d) file all
filings under the applicable Uniform Commercial Code or the Statute necessary or
desirable to maintain the perfected ownership or security interest of the Issuer
and the Trustee in the RRB Property; and (e) comply in all material respects
with all laws and regulations applicable to and binding on it relating to the
RRB 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 RRB Property, which, in the Servicer's judgment, may include
the taking of legal action, at the Issuer's expense.

         Section 3.03.     CERTIFICATE OF COMPLIANCE. The Servicer shall deliver
to the Issuer, the Trustee and the Rating Agencies on or before March 31 of each
year, commencing March 31, 2002 to and including the March 31 succeeding the
Retirement of the Bonds, an Officer's Certificate substantially in the form of
EXHIBIT A hereto (a "CERTIFICATE OF COMPLIANCE"), stating that: (i) a review of
the activities of the Servicer during the twelve months ended the preceding
December 31 (or, in the case of the first Certificate of Compliance to be
delivered on or before March 31, 2002, the period of time from the date of this
Agreement until December 31, 2001) and of its performance under this Agreement
has been made under such Responsible Officer's supervision, and (ii) to such
Responsible Officer's knowledge, based on such review, the Servicer has
fulfilled all of its obligations in all material respects under this Agreement
throughout such twelve months (or, in the case of the Certificate of Compliance
to be delivered on or before March 31, 2002, the period of time from the date of
this Agreement until December 31, 2001), or, if there has been a default in the
fulfillment of any such material obligation, specifying each such material
default known to such Responsible Officer and the nature and status thereof.

         Section 3.04.     ANNUAL REPORT BY INDEPENDENT PUBLIC ACCOUNTANTS.

             (a)  The Servicer, at the Issuer's expense, shall cause a firm of
independent certified public accountants (which may provide other services to
the Servicer) to prepare, and the Servicer shall deliver to the Issuer, the
Trustee and the Rating Agencies, a report addressed to the Servicer (the "ANNUAL
ACCOUNTANT'S REPORT"), which may be included as part of the Servicer's customary
auditing activities, for the information and use of the Issuer, the Trustee and
the Rating Agencies, on or before March 31 each year, beginning March 31, 2002
to and including the March 31 succeeding the Retirement of the Bonds, to the
effect that such firm has performed

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<PAGE>

certain procedures, agreed between the Servicer and such accountants, in
connection with the Servicer's compliance with its obligations under this
Agreement during the preceding twelve months ended December 31 (or, in the case
of the first Annual Accountant's Report to be delivered on or before March 31,
2002, the period of time from the date of this Agreement until December 31,
2001), identifying the results of such procedures and including any exceptions
noted.

             (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 Ethics of the American Institute of
Certified Public Accountants.

                                   ARTICLE 4

                    SERVICES RELATED TO PERIODIC ADJUSTMENTS;
                                   REMITTANCES

         Section 4.01.     PERIODIC ADJUSTMENTS. From time to time, until the
Retirement of the Bonds, the Servicer shall identify the need for Periodic
Adjustments and shall take all reasonable action to obtain and implement such
Periodic Adjustments, all in accordance with the following:

             (a)  EXPECTED AMORTIZATION SCHEDULE. The Expected Amortization
Schedule is attached hereto as SCHEDULE 4.01(A).

             (b)  ROUTINE PERIODIC ADJUSTMENTS AND SEMIANNUAL FILINGS.

                  (1) ROUTINE SEMIANNUAL PERIODIC ADJUSTMENTS AND FILINGS. For
the purpose of preparing a Routine Semiannual True-Up Letter, the Servicer
shall: (A) update the assumptions underlying the calculation of the RRB Charge,
including energy usage volume, the rate of charge-offs and estimated expenses
and fees of the Issuer to the extent not fixed, for the Remittance Period
beginning on April __ [INSERT ANNIVERSARY DATE OF CLOSING DATE] or October __
[INSERT SEMIANNUAL ANNIVERSARY DATE OF CLOSING DATE] (whichever is next to
occur) of each year; (B) determine the Required Debt Service for such Remittance
Period based upon such updated assumptions; and (C) determine the RRB Charge to
be charged during such Remittance Period based upon such Required Debt Service.
The Servicer shall file a Routine Semiannual True-Up Letter with the NHPUC no
later than 30 days prior to April __ [INSERT ANNIVERSARY DATE OF CLOSING DATE]
and October __ [INSERT SEMIANNUAL ANNIVERSARY DATE OF CLOSING DATE] of each
year.

                  (2) ROUTINE PERIODIC ADJUSTMENTS. The Servicer shall file a
Routine True-Up Letter at least 15 days before the end of any calendar month, at
each such time as the Servicer may reasonably determine is necessary to meet the
Required Debt Service for the then current Remittance Period.

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                  (3) The Servicer shall take all reasonable actions and make
all reasonable efforts to secure any Periodic Adjustments.

             (c)  NON-ROUTINE PERIODIC ADJUSTMENTS.

                  (1) Whenever the Servicer determines that the existing model
for calculating the RRB Charge should be amended or revised, subject to the
consent of the Issuer under the conditions set forth in Section 3.18 of the
Indenture, the Servicer shall file a Non-Routine True-Up Letter with the NHPUC
designating the adjustments to such model and any corresponding adjustments to
the RRB Charge (collectively, a "NON-ROUTINE PERIODIC Adjustment"), subject to
the review and approval of the NHPUC pursuant to the Finance Order.

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

                  (3) The Servicer shall implement any resulting adjustments to
the model and any resulting revised RRB Charge as of the effective date of the
Non-Routine True-Up Letter.

             (d)  REPORTS.

                  (1) NOTIFICATION OF ADVICE LETTER FILINGS AND PERIODIC
ADJUSTMENTS. Whenever the Servicer files an Advice Letter with the NHPUC, the
Servicer shall send a copy of such filing to the Issuer, the Trustee and the
Rating Agencies concurrently therewith. If any Periodic Adjustment requested in
any such Advice Letter filing does not become effective on the applicable date
as provided by the Finance Order, the Servicer shall notify the Issuer, the
Trustee and the Rating Agencies by the end of the second Servicer Business Day
after such applicable date.

                  (2) MONTHLY SERVICER CERTIFICATE. So long as any Bonds are
outstanding, not later than fifteen (15) days after the end of each month after
the Bonds are issued (excluding April, 2001), or if such day is not a Servicer
Business Day, the next succeeding Servicer Business Day, the Servicer shall
deliver a written report substantially in the form of EXHIBIT C hereto (the
"MONTHLY SERVICER CERTIFICATE") to the Issuer, the Trustee and the Rating
Agencies.

                  (3) QUARTERLY SERVICER CERTIFICATE. So long as any Bonds are
outstanding, not later than 11:00 a.m. (New York City time) on the Servicer
Business Day immediately preceding each Payment Date, the Servicer shall deliver
a written report substantially in the form of EXHIBIT D hereto (the "QUARTERLY
SERVICER CERTIFICATE") to the Issuer, the Trustee and the Rating Agencies.

(4) TPS REPORTS. The Servicer shall provide to the Rating Agencies, upon
request, any publicly available reports filed by the Servicer with the NHPUC (or
otherwise made publicly available by the Servicer) relating to TPSs and any
other non-confidential and non-proprietary information relating to TPSs
reasonably requested by the Rating Agencies.

                                      -10-
<PAGE>

             (e)  UNIFORMITY OF RRB CHARGE. The Servicer shall not take any
action to implement any Periodic Adjustment that would cause the RRB Charge to
vary among customer classes unless the Rating Agency Condition shall have been
satisfied.

         Section 4.02.     LIMITATION OF LIABILITY.

             (a)  The Issuer and the Servicer expressly agree and acknowledge
that:

                  (1) In connection with any Periodic Adjustment, the Servicer
is acting solely in its capacity as the servicing agent hereunder.

                  (2) Neither the Servicer nor the Issuer shall be responsible
in any manner for, and shall have no liability whatsoever as a result of, any
action, decision, ruling or other determination made or not made, or any delay
(other than any delay resulting from the Servicer's failure to file for Periodic
Adjustments or Non-Routine Periodic Adjustments required by Section 4.01 in a
timely and correct manner or other material breach by the Servicer of its duties
under this Agreement that materially and adversely affects any Periodic
Adjustments or Non-Routine Periodic Adjustments), by the NHPUC (or, in
connection with any Non-Routine Periodic Adjustment, by the Rating Agencies) in
any way related to the RRB Property or in connection with any Periodic
Adjustment or Non-Routine Periodic Adjustment, the subject of any filings under
Section 4.01, any proposed Periodic Adjustment or Non-Routine Periodic
Adjustment, or the approval of the RRB Charge and the adjustments thereto.

                  (3) The Servicer shall have no liability whatsoever relating
to the calculation of the RRB Charge and the adjustments thereto (including any
Non-Routine Periodic Adjustment), including as a result of any inaccuracy of any
of the assumptions made in such calculation regarding expected energy usage
volume, the rate of charge-offs, estimated expenses and fees of the Issuer, so
long as the Servicer has not acted in a negligent manner in connection
therewith, nor shall the Servicer have any liability whatsoever as a result of
any Person, including the Bondholders, not receiving any payment, amount or
return anticipated or expected in respect of any Bond generally, except only to
the extent that the Servicer is liable under Section 6.02 of this Agreement.

             (b)  Notwithstanding the foregoing, this Section 4.02 shall not
relieve the Servicer of any liability under Section 6.02 for any
misrepresentation by the Servicer under Section 6.01 or for any breach by the
Servicer of its obligations under this Agreement.

         Section 4.03.     REMITTANCES.

             (a)  Pursuant to the remittance methodology more fully described in
ANNEX II hereto, starting with collections that are received on the first
Servicer Business Day that is at least 45 days after the first day on which
Public Service Company of New Hampshire imposes the RRB Charge, the Servicer
will remit to the Trustee on each Servicer Business Day, within two Servicer
Business Days after receipt, by wire transfer of immediately available funds to
the General Subaccount of the Collection Account, an

                                      -11-
<PAGE>

amount equal to the RRB Charge Payments (as calculated in accordance with ANNEX
II hereto) received on such Servicer Business Day and on any prior day that was
not a Servicer Business Day for which a Remittance has not previously been made.
Prior to or simultaneous with each Remittance to the General Subaccount of the
Collection Account pursuant to this Section, the Servicer shall provide written
notice to the Trustee of each such Remittance (including the exact dollar amount
to be remitted).

             (b)  The Servicer may elect to make Remittances less frequently
than on a daily basis, and shall be permitted to do so, but in any event shall
make Remittances within one calendar month of collection thereof, provided that
the Servicer shall send written notice of such election to the Issuer and the
Trustee, together with (i) an Officer's Certificate stating that no Servicer
Default has occurred and is continuing under this Servicing Agreement, (ii)
evidence that the Rating Agency Condition has been satisfied, (iii) evidence of
the delivery by the Servicer to the Issuer or the Trustee, as applicable, of any
credit enhancement which may be required by the Rating Agencies in connection
therewith in form and substance satisfactory to the Issuer and the Trustee, as
applicable, the cost of which credit enhancement shall be borne solely by the
Servicer, and (iv) an executed copy of any appropriate amendment hereto or to
the Indenture or any other Basic Agreement as reasonably requested by the
Servicer, the Issuer or the Trustee in connection therewith.

             (c)  The Servicer agrees and acknowledges that it will remit RRB
Charge Payments in accordance with this Section 4.03 without any surcharge, fee,
offset, charge or other deduction except for late fees permitted by Section
6.06.

                                   ARTICLE 5

                                THE RRB PROPERTY

         Section 5.01.     CUSTODY OF RRB PROPERTY RECORDS. To assure uniform
quality in servicing the RRB Property and to reduce administrative costs, the
Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts
such appointment, to act as the agent of the Issuer and the Trustee as custodian
of any and all documents and records that the Servicer shall keep on file, in
accordance with its customary procedures, relating to the RRB Property,
including copies of the Finance Order and Advice Letters relating thereto and
all documents filed with the NHPUC in connection with any Periodic Adjustment or
Non-Routine Periodic Adjustment and computational records relating thereto
(collectively, the "RRB PROPERTY RECORDS"), which are hereby constructively
delivered to the Trustee, as pledgee of the Issuer with respect to all RRB
Property.

         Section 5.02.     DUTIES OF SERVICER AS CUSTODIAN.

             (a)  SAFEKEEPING. The Servicer shall hold the RRB Property Records
on behalf of the Issuer and the Trustee and maintain such accurate and complete
accounts, records and computer systems pertaining to the RRB Property Records on
behalf of the Issuer and the Trustee as shall enable the Issuer to comply with
this Agreement and the Indenture. In performing its duties as custodian the
Servicer shall act

                                      -12-
<PAGE>

with reasonable care, using that degree of care and diligence that the Servicer
exercises with respect to comparable assets that the Servicer services for
itself or, if applicable, for others. The Servicer shall promptly report to the
Issuer and the Trustee any failure on its part to hold the RRB Property Records
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 Trustee of the RRB Property Records. The Servicer's duties to hold
the RRB Property Records on behalf of the Issuer set forth in this Section 5.02,
to the extent such RRB Property Records have not been previously transferred to
a successor Servicer pursuant to Article 7, shall terminate one year and one day
after the earlier of the date on which (i) the Servicer is succeeded by a
successor Servicer in accordance with Article 7 and (ii) no Bonds are
outstanding.

             (b)  MAINTENANCE OF AND ACCESS TO RECORDS. The Servicer shall
maintain at all times records and accounts that permit the Servicer to identify
RRB Charges billed. The Servicer shall maintain the RRB Property Records in
Manchester, New Hampshire, Berlin, Connecticut or at such other office in the
United States as shall be specified to the Issuer and the Trustee by written
notice at least 30 days prior to any change in location. The Servicer shall make
available for inspection to the Issuer, the Trustee, the NHPUC or their
respective duly authorized representatives, attorneys or auditors the RRB
Property Records at such times during normal business hours as the Issuer, the
Trustee or the NHPUC shall reasonably request and which do not unreasonably
interfere with the Servicer's normal operations. Nothing in this Section 5.02(b)
shall affect the obligation of the Servicer to observe any applicable law
(including any NHPUC Regulations) prohibiting disclosure of information
regarding the customers, and the failure of the Servicer to provide access to
such information as a result of such obligation shall not constitute a breach of
this Section 5.02(b).

             (c)  RELEASE OF DOCUMENTS. Upon instruction from the Trustee in
accordance with the Indenture, the Servicer shall release any RRB Property
Records to the Trustee, the Trustee's agent or the Trustee's designee, as the
case may be, at such place or places as the Trustee may designate, as soon as
practicable.

             (d)  DEFENDING RRB PROPERTY AGAINST CLAIMS. The Servicer shall
institute any action or proceeding necessary to compel performance by the NHPUC
or the State of New Hampshire of any of their obligations or duties under the
Statute, the Finance Order or any Advice Letter, and the Servicer agrees to take
such legal or administrative actions, including 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 or the Finance
Order or the rights of holders of RRB Property by executive action, legislative
enactment or constitutional amendment or (if such means become available in the
future) referendum or initiative petition that would be adverse to Bondholders,
the Issuer or the Trustee. The costs of any such action shall be payable from
RRB Charge Collections as an Operating Expense in accordance with the priorities
set forth in Section 8.02(d) of the Indenture. The Servicer's obligations
pursuant to this Section 5.02 shall survive and continue notwithstanding the
fact that the

                                      -13-
<PAGE>

payment of Operating Expenses pursuant to Section 8.02(d) of the Indenture may
be delayed, it being understood that the Servicer may be required to advance its
own funds to satisfy its obligations hereunder. If the Servicer must incur costs
to satisfy its obligations hereunder and is required hereunder to advance its
own funds with respect to such costs but is unable to do so, the Servicer shall,
in accordance with the provisions of Section 8.02(j) of the Indenture, make
written request to the Trustee to pay such costs from amounts on deposit in the
Servicer Advance Subaccount. Amounts so paid by the Trustee from amounts on
deposit in the Servicer Advance Subaccount in accordance with the provisions of
Section 8.02(j) of the Indenture shall remain payable as Operating Expenses
advanced by the Servicer in accordance with this Section 5.02(d) and Section
8.02(j) of the Indenture.

         Section 5.03.     INSTRUCTIONS; AUTHORITY TO ACT. For so long as any
Bonds remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the RRB Property Records upon its receipt of
written instructions signed by a Responsible Officer (as defined in the
Indenture) of the Trustee.

         Section 5.04.     EFFECTIVE PERIOD AND TERMINATION. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section
5.04. If any Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of any Servicer shall
have been terminated under Section 7.01, the appointment of such Servicer as
custodian shall terminate upon appointment of a successor Servicer, subject to
the approval of the NHPUC, and acceptance by such successor Servicer of such
appointment.

         Section 5.05.     MONITORING OF THIRD PARTY SUPPLIERS. From time to
time, until the Retirement of the Bonds, the Servicer shall, using the same
degree of care and diligence that it exercises with respect to payments owed to
it for its own account, implement such procedures and policies as are necessary
to properly enforce the obligations of each TPS to remit RRB Charges, in
accordance with the terms and provisions of the Finance Order, the TPS Service
Agreement and SCHEDULE A TO ANNEX I hereto.

                                   ARTICLE 6

                                  THE SERVICER

         Section 6.01.     REPRESENTATIONS AND WARRANTIES OF SERVICER. The
Servicer makes the following representations and warranties, as of the Closing
Date, on which the Issuer is deemed to have relied in entering into this
Agreement relating to the servicing of the RRB Property.

             (a)  ORGANIZATION AND GOOD STANDING. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of the
State of New Hampshire, with the requisite corporate power and authority to own
its properties as such properties are currently owned and to conduct its
business as such business is now

                                      -14-
<PAGE>

conducted by it, and has the requisite corporate power and authority to service
the RRB Property and to hold the RRB Property Records as custodian.

             (b)  DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
RRB Property as required by this Agreement) shall require 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 or properties or
adversely affect the servicing of the RRB Property).

             (c)  POWER AND AUTHORITY. The Servicer has the requisite 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 all necessary corporate action on the part of the Servicer.

             (d)  BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Servicer enforceable against it in accordance with
its terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other laws relating to or affecting creditors' rights
generally from time to time in effect and to general principles of equity
(including concepts of materiality, reasonableness, good faith and fair
dealing), 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 do not:
(i) conflict with or 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 organization or by-laws of the Servicer, or any material indenture,
agreement or other instrument to which the Servicer is a party or by which it is
bound; (ii) result in the creation or imposition of any Lien upon any of the
Servicer's properties pursuant to the terms of any such indenture, agreement or
other instrument; nor violate any existing law or any existing 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, so as to adversely
affect the Servicer, the Issuer or the Bondholders.

             (f)  NO PROCEEDINGS. There are no proceedings pending and, to the
Servicer's knowledge, there are no proceedings threatened and, to the Servicer's
knowledge, there are no investigations pending or threatened, before any court,
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties
involving or relating to the Servicer or the Issuer or, to the Servicer's
knowledge, any other Person: (i) asserting the invalidity of this Agreement;
(ii) seeking to prevent the consummation of any of the transactions contemplated
by this Agreement; or (iii) seeking any determination or ruling that might

                                      -15-
<PAGE>

materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement.

             (g)  APPROVALS. 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 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 and those that the Servicer is required to make in the future
pursuant to Article 3 or Article 4 and post-closing filings in connection
therewith.

         Section 6.02.     INDEMNITIES OF SERVICER.

             (a)  The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Servicer and as
expressly provided under this Section 6.02.

             (b)  The Servicer shall indemnify the Issuer and the Bondholders
(each an "INDEMNIFIED PERSON" for purposes of Sections 6.02 (b) and (d)) for,
and defend and hold harmless each such Person from and against, any and all
liabilities, obligations, losses, damages, payments, claims, costs or expenses
of any kind whatsoever (collectively, "LOSSES") that may be imposed on, incurred
by or asserted against any such Person as a result of (i) the Servicer's willful
misconduct or negligence in the performance of its duties or observance of its
covenants under this Agreement (including the Servicer's willful misconduct or
negligence relating to the maintenance and custody by the Servicer, as
custodian, of the RRB Property Records) or (ii) the Servicer's breach in any
material respect of any of its representations or warranties in this Agreement;
provided, however, that the Servicer shall not be liable for any Losses
resulting from the willful misconduct or gross negligence of any such
Indemnified Person; and, provided, further, that the Bondholders shall be
entitled to enforce their rights and remedies against the Servicer under this
Section 6.02(b) solely through a cause of action brought for their benefit by
the Trustee; and, provided, further, that the Servicer shall not be liable for
any Losses, regardless of when incurred, after the Bonds have been paid in full,
except as provided in Section 6.02(c).

             (c)  The Servicer shall indemnify and hold harmless the Trustee,
the State of New Hampshire, the Treasurer of the State of New Hampshire,
agencies of the State of New Hampshire and any of their respective affiliates,
officials, officers, directors, employees, consultants, counsel and agents (each
an "Indemnified Person" for purposes of Section 6.02(c) and (d)) for, and defend
and hold harmless each such Person from and against, any and all Losses imposed
on, incurred by or asserted against any of such Indemnified Persons as a result
of: (i) the Servicer's willful misconduct or negligence in the performance of
its duties or observance of its covenants under this Agreement (including the
Servicer's willful misconduct or negligence relating to the maintenance and
custody by the Servicer, as custodian, of the RRB Property Records) or (ii) the
Servicer's breach in any material respect of any of its representations or

                                      -16-
<PAGE>

warranties in this Agreement; provided, however, that the Servicer shall not be
liable for any Losses resulting from the willful misconduct or gross negligence
of such Indemnified Person or resulting from a breach of a representation or
warranty made by such Indemnified Person in any of the Basic Documents that
gives rise to the Servicer's breach.

             (d)  The Servicer shall not be required to indemnify an Indemnified
Person for any amount paid or payable by such Indemnified Person pursuant to
Section 6.02(b) or Section 6.02(c) in the settlement of any action, proceeding
or investigation without the written consent of the Servicer, which consent
shall not be unreasonably withheld. Promptly after receipt by an Indemnified
Person of notice of its involvement in any action, proceeding or investigation,
such Indemnified Person shall, if a claim for indemnification in respect thereof
is to be made against the Servicer under Section 6.02(b) or Section 6.02(c),
notify the Servicer in writing of such involvement. Failure by an Indemnified
Person to so notify the Servicer shall relieve the Servicer from the obligation
to indemnify and hold harmless such Indemnified Person under Section 6.02(b) or
Section 6.02(c), as applicable, only to the extent that the Servicer suffers
actual prejudice as a result of such failure. With respect to any action,
proceeding or investigation brought by a third party for which indemnification
may be sought under Section 6.02(b) or Section 6.02(c), the Servicer shall be
entitled to assume the defense of any such action, proceeding or investigation.
Upon assumption by the Servicer of the defense of any such action, proceeding or
investigation, the Indemnified Person shall have the right to participate in
such action or proceeding and to retain its own counsel. The Servicer shall be
entitled to appoint counsel of the Servicer's choice at the Servicer's expense
to represent the Indemnified Person in any action, proceeding or investigation
for which a claim of indemnification is made against the Servicer under Section
6.02(b) or Section 6.02(c) (in which case the Servicer shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Indemnified Person except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding the Servicer's election to appoint counsel to represent the
Indemnified Person in an action, proceeding or investigation, the Indemnified
Person shall have the right to employ separate counsel (including local
counsel), and the Servicer shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the Servicer to
represent the Indemnified Person would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person and the Servicer and the Indemnified
Person shall have reasonably concluded that there may be legal defenses
available to it that are different from or additional to those available to the
Servicer, (iii) the Servicer shall not have employed counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person
within a reasonable time after notice of the institution of such action or (iv)
the Servicer shall authorize the Indemnified Person to employ separate counsel
at the expense of the Servicer. Notwithstanding the foregoing, the Servicer
shall not be obligated to pay for the fees, costs and expenses of more than one
separate counsel for the Indemnified Persons (in addition to local counsel). The
Servicer will not, without the prior written consent of the Indemnified Person,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in

                                      -17-
<PAGE>

respect of which indemnification may be sought under Section 6.02(b) or Section
6.02(c), as applicable, (whether or not the Indemnified Person is an actual or
potential party to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of the Indemnified Person from all
liability arising out of such claim, action, suit or proceeding.

             (e)  Indemnification under Section 6.02(b) and Section 6.02(c)
shall survive the resignation or removal of the Trustee and the termination of
this Agreement and shall include reasonable fees and out-of-pocket expenses of
investigation and litigation (including reasonable attorneys' fees and
expenses), except as otherwise provided in this Agreement.

             (f)  For purposes of Section 6.02(b) and Section 6.02(c), in the
event of the termination of the rights and obligations of Public Service Company
of New Hampshire (or any successor thereto pursuant to Section 6.04) as Servicer
pursuant to Section 7.01, or a resignation by such Servicer pursuant to this
Agreement, such Servicer shall be deemed to be the Servicer pending appointment
of a successor Servicer pursuant to Section 7.02.

         Section 6.03.     LIMITATION ON LIABILITY OF SERVICER AND OTHERS.
Except as otherwise provided under this Agreement, neither the Servicer nor any
of the directors, officers, employees or agents of the Servicer shall be liable
to the Issuer or any other Person for any action taken or for refraining from
the taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
director, officer, employee or agent of the Servicer against any liability that
would otherwise be imposed by reason of willful misconduct or negligence in the
performance of duties under this Agreement. The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on the advice
of counsel reasonably acceptable to the Trustee or on any document of any kind,
prima facie properly executed and submitted by any Person, respecting any
matters arising under this Agreement. Except as provided in this Agreement, the
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action relating to the RRB Property.

         Section 6.04.     MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SERVICER. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Servicer shall be a party or (c) which may succeed to the properties and
assets of the Servicer substantially as a whole, 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 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 and the Trustee
an Officers' Certificate stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent provided for in this Agreement relating to such transaction
have been complied with, (iii) the Servicer shall have delivered to the Issuer

                                      -18-
<PAGE>

and the Trustee an Opinion of Counsel stating that, in the opinion of such
counsel (A) such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent provided
for in this Agreement relating to such transaction have been complied and (B)
either (1) all filings to be made by the Servicer, including filings with the
NHPUC pursuant to the Statute and filings under the applicable Uniform
Commercial Code, have been executed and filed that are necessary to preserve and
protect fully the interests of the Issuer and the Trustee in the RRB Property
and reciting the details of such filings or (2) no such action shall be
necessary to preserve and protect such interests and (iv) the Rating Agencies
shall have received prior written notice of such transaction. When any Person
acquires the properties and assets of the Servicer substantially as a whole and
becomes the successor to the Servicer in accordance with the terms of this
Section 6.04, then upon satisfaction of all of the other conditions of this
Section 6.04, the Servicer shall automatically and without further notice be
released from all its obligations hereunder.

         Section 6.05.     PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOT TO RESIGN
AS SERVICER. Subject to the provisions of Section 6.04, Public Service Company
of New Hampshire shall not resign from the obligations and duties hereby imposed
on it as Servicer under this Agreement except upon either (a) a determination
that the performance of its duties under this Agreement shall no longer be
permissible under applicable law or (b) satisfaction of the following: (i) the
Rating Agency Condition shall have been satisfied (except that with respect to
Moody's it shall be sufficient to provide ten days prior notice) and (ii) the
NHPUC shall have approved such resignation. Notice of any such determination
permitting the resignation of Public Service Company of New Hampshire shall be
communicated to the Issuer, the Trustee and the Rating Agencies 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 that the performance of Public Service Company of New Hampshire's
duties under this Agreement shall no longer be permissible under applicable law
shall be evidenced by an Opinion of Counsel to such effect delivered by Public
Service Company of New Hampshire to the Issuer and the Trustee concurrently with
or promptly after such notice. No such resignation shall become effective until
a successor Servicer shall have assumed the responsibilities and obligations of
Public Service Company of New Hampshire in accordance with Section 7.02.

         Section 6.06.     SERVICING COMPENSATION.

             (a)  In consideration for its services hereunder, until the
Retirement of the Bonds, the Servicer shall receive an annual fee (the
"SERVICING FEE") in an amount equal to (i) one-quarter of one percent (0.25%) of
the outstanding principal balance of the Bonds for so long as the Servicer is
Public Service Company of New Hampshire or any successor Servicer that bills the
RRB Charge concurrently with other charges for services or (ii) up to one and
one-half percent (1.5%) of the outstanding principal balance of the Bonds for so
long as the Servicer is a successor Servicer that bills the RRB Charge
separately to customers (which amount shall be determined by a separate
agreement between the Issuer and the Servicer). The Servicing Fee shall be
payable in quarterly installments on each Payment Date. The Servicer also shall
be entitled to retain as

                                      -19-
<PAGE>

additional compensation (i) any interest earnings on RRB Charge Payments
received by the Servicer and invested by the Servicer pursuant to Section 6(c)
of ANNEX I hereto prior to remittance to the Collection Account and (ii) all
late payment charges, if any, collected from customers or TPSs.

             (b)  The Servicing Fee set forth in Section 6.06(a) and expenses
provided for in Section 6.06(c) shall be paid to the Servicer by the Trustee, on
each Payment Date in accordance with the priorities set forth in Section 8.02(d)
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 reasonable 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 Bondholders, subject to the
priorities set forth in Section 8.02(d) of the Indenture).

         Section 6.07.     COMPLIANCE WITH APPLICABLE LAW. The Servicer
covenants and agrees, in servicing the RRB Property, to comply in all material
respects with all laws applicable to, and binding upon, the Servicer and
relating to such RRB Property the noncompliance with which would have a material
adverse effect on the value of the RRB Property; provided, however, that the
foregoing is not intended to, and shall not, impose any liability on the
Servicer for noncompliance with any law that the Servicer is contesting in good
faith in accordance with its customary standards and procedures.

         Section 6.08.     ACCESS TO CERTAIN RECORDS AND INFORMATION REGARDING
RRB PROPERTY. The Servicer shall provide to the Bondholders, the Issuer and the
Trustee access to the RRB Property Records in such cases where the Bondholders,
the Issuer or the Trustee shall be required by applicable law to be provided
access to such records. Access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the respective offices of
the Servicer. Nothing in this Section shall affect the obligation of the
Servicer to observe any applicable law (including any NHPUC Regulation)
prohibiting disclosure of information regarding the customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section.

         Section 6.09.     APPOINTMENTS.

             (a)  The Servicer may at any time appoint any Person to perform all
or any portion of its obligations as Servicer hereunder; provided, however, that
the Rating Agency Condition shall have been satisfied in connection therewith
(except that with respect to Moody's it shall be sufficient to provide ten days
prior notice); and, provided, further, that the Servicer shall remain obligated
and be liable under this Agreement for the servicing and administering of the
RRB Property in accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of

                                      -20-
<PAGE>

such Person and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the RRB Property; and,
provided, further, however, that nothing herein (including the Rating Agency
Condition) shall preclude the execution by the Servicer of a TPS Service
Agreement with any TPS pursuant to applicable NHPUC Regulations. The fees and
expenses of any such Person shall be as agreed between the Servicer and such
Person from time to time and none of the Issuer, the Trustee, the Bondholders or
any other Person shall have any responsibility therefor or right or claim
thereto. Any such appointment shall not constitute a Servicer resignation under
Section 6.05.

             (b)  The Servicer has no employees. Therefore, in carrying out the
foregoing duties or any of its other obligations under this Agreement, the
Servicer may enter into transactions with or otherwise deal with any of its
Affiliates to obtain the services of employees of such Affiliates as is its
current practice; provided, however, that the terms of any such transactions or
dealings shall be no less favorable to the Issuer than would be available from
unaffiliated parties or that would be available if the Servicer were to hire its
own employees to perform such services.

         Section 6.10.     NO SERVICER ADVANCES.  The Servicer shall not make
any advances of interest on or principal of the Bonds.

         Section 6.11.     MAINTENANCE OF OPERATIONS. The Servicer agrees to
continue to operate its distribution system to provide service to its customers
so long as it is acting as the Servicer under this Agreement.

                                    ARTICLE 7

                                     DEFAULT

         Section 7.01.     SERVICER DEFAULT. If any one of the following events
(each a "SERVICER DEFAULT") shall occur and be continuing:

             (a)  any failure by the Servicer to remit to the Collection Account
on behalf of the Issuer any required Remittance that shall continue unremedied
for a period of five (5) Business Days after written notice of such failure is
received by the Servicer from the Issuer or the Trustee; or

             (b)  any failure on the part of the Servicer duly to observe or to
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement, which failure shall (a) materially and
adversely affect the rights of the Bondholders and (ii) continue unremedied for
a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given (A) to the Servicer by
the Issuer or (B) to the Servicer by the Trustee or by the Holders of Bonds
evidencing not less than 25 percent of the Outstanding Amount of the Bonds; or

             (c)  any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect in any material respect when made,
which

                                      -21-
<PAGE>

has a material adverse effect on the Bondholders and which material adverse
effect continues unremedied for a period of 60 days after written notice of such
failure is received by the Servicer from the Issuer or the 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, either the Trustee, or the Holders of Bonds evidencing not less
than 25 percent of the Outstanding Amount of the Bonds, by notice then given in
writing to the Servicer (and to the Trustee if given by the Bondholders) (a
"TERMINATION NOTICE") may terminate all the rights and obligations (other than
the obligations set forth in Section 6.02) of the Servicer under this Agreement.
In addition, upon a Servicer Default described in Section 7.01(a), each of the
following shall be entitled to apply to the NHPUC for sequestration and payment
of revenues arising with respect to the RRB Property in accordance with RSA
369-B:7, VI and VIII: (1) the Bondholders or the Trustee; (2) the Issuer or its
assignees; or (3) pledgees or transferees of the RRB Property. On or after the
receipt by the Servicer of a Termination Notice, and subject to the approval of
the NHPUC, all authority and power of the Servicer under this Agreement, whether
with respect to the Bonds, the RRB Property, the RRB Charge or otherwise, shall,
without further action, pass to and be vested in such successor Servicer as may
be appointed under Section 7.02; and, without limitation, the 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, whether to
complete the transfer of the RRB Property Records and related documents, or
otherwise. The predecessor Servicer shall cooperate with the successor Servicer,
the Issuer and the Trustee 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 shall at the time be held by the predecessor Servicer for remittance, or
shall thereafter be received by it with respect to the RRB Property or the RRB
Charge. In case a successor Servicer is appointed as a result of a Servicer
Default, all reasonable costs and expenses (including reasonable attorneys' fees
and expenses) incurred in connection with transferring the RRB Property Records
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. All
other reasonable costs and expenses incurred in transferring servicing
responsibilities to a successor servicer shall constitute Operating Expenses of
the Issuer.

         Section 7.02.     APPOINTMENT OF SUCCESSOR.

             (a)  Upon the Servicer's receipt of a Termination Notice pursuant
to Section 7.01 or the Servicer's resignation or removal 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 Fee and reimbursement of expenses as provided
herein, until a successor Servicer shall have assumed in writing the obligations
of the Servicer hereunder as

                                      -22-
<PAGE>

described below. In the event of the Servicer's termination hereunder, the
Issuer shall appoint, subject to the approval of the NHPUC, a successor Servicer
with the Trustee's prior written consent thereto (which consent shall not be
unreasonably withheld), and the successor Servicer shall accept its appointment
by a written assumption in form reasonably acceptable to the Issuer and the
Trustee. If within 30 days after the delivery of the Termination Notice, the
Issuer shall not have obtained such a new Servicer, the Trustee may appoint
(subject to the approval of the NHPUC) or petition the NHPUC or 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 NHPUC Regulations to perform the duties of the Servicer, (ii)
the Rating Agency Condition shall have been satisfied and (iii) such Person
assumes in writing the obligations of the Servicer hereunder or enters into a
servicing agreement with the Issuer having substantially the same provisions as
this Agreement.

             (b)  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 Fee and all the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement.

         Section 7.03.     WAIVER OF PAST DEFAULTS. The Holders of Bonds
evidencing not less than a majority of the Outstanding Amount of the Bonds may,
on behalf of all Bondholders, 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 Collection Account in
accordance with 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 7.04.     NOTICE OF SERVICER DEFAULT. The Servicer shall
deliver to the Issuer, the Trustee and the Rating Agencies, promptly after any
of its Responsible Officers having obtained actual knowledge thereof, but in no
event later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 7.01(a) or Section 7.01(b).

                                    ARTICLE 8

                            MISCELLANEOUS PROVISIONS

         Section 8.01.     AMENDMENT.

             (a)  This Agreement may be amended in writing by the Servicer and
the Issuer with ten Business Days' prior written notice given to the Rating
Agencies and the prior written consent of the Trustee (which consent shall not
be unreasonably withheld), but without the consent of any of the Bondholders, to
cure any ambiguity, to

                                      -23-
<PAGE>

correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Bondholders; provided, however, that such action shall not, as evidenced by an
Officer's Certificate delivered to the Issuer and the Trustee, adversely affect
in any material respect the interests of any Bondholder.

             (b)  This Agreement may also be amended in writing from time to
time by the Servicer and the Issuer with ten Business Days' prior written notice
given to the Rating Agencies and the prior written consent of the Trustee (which
consent shall not be unreasonably withheld) and the prior written consent of the
Holders of Bonds evidencing not less than a majority of the Outstanding Amount
of the Bonds, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Bondholders; provided, however, that any amendment
of the provisions of Section 4.01 or Section 4.03 shall satisfy the Rating
Agency Condition.

             (c)  If the written consent of Bondholders is required in
connection with an amendment hereof, approval by Bondholders of the substance of
any proposed amendment or consent shall constitute sufficient consent of the
Bondholders pursuant to this Section, and it shall not be necessary that
Bondholders approve of the particular form of any amendment or consent.

             (d)  Promptly after the execution thereof, the Issuer shall provide
each of the Rating Agencies with a copy of any amendment to this Agreement.

             (e)  Prior to its consent to any amendment to this Agreement, the
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.

         Section 8.02.     MAINTENANCE OF ACCOUNTS AND RECORDS.

             (a)  The Servicer shall maintain accounts and records as to the RRB
Property accurately and in accordance with its standard accounting procedures.

             (b)  The Servicer shall permit the Issuer and the Trustee and its
agents at any time during normal business hours, upon reasonable notice to the
Servicer and to the extent it does not unreasonably interfere with the
Servicer's normal operations, to inspect, audit and make copies of and abstracts
from the Servicer's records regarding the RRB Property and the RRB Charge.
Nothing in this Section 8.02(b) shall affect the obligation of the Servicer to
observe any applicable law (including any NHPUC Regulation) prohibiting
disclosure of information regarding the customers, and the failure of the
Servicer to provide access to such information as a result of such obligation
shall not constitute a breach of this Section 8.02(b).

                                      -24-
<PAGE>

         Section 8.03.     NOTICES. Unless otherwise specifically provided
herein, all notices, directions, consents and waivers required under the terms
and provisions of this Agreement shall be in English and in writing, and any
such notice, direction, consent or waiver may be given by United States mail,
courier service, facsimile transmission or electronic mail (confirmed by
telephone, United States mail or courier service in the case of notice by
facsimile transmission or electronic mail) or any other customary means of
communication, and any such notice, direction, consent or waiver shall be
effective when delivered, or if mailed, three days after deposit in the United
States mail with proper postage for ordinary mail prepaid:

             (a)  if to the Servicer, to

                        Public Service Company of New Hampshire
                        1000 Elm Street
                        Manchester, NH
                        Facsimile:  (860) 665-5457
                        Telephone:  (860) 665-3258
                        E-Mail: shoopra@nu.com (email)

                        with a copy to:

                        Public Service Company of New Hampshire
                        c/o Northeast Utilities Service Company

                        if by U.S. Mail:

                        P.O. Box 270
                        Hartford, CT  06141-0270

                        if by courier:

                        107 Selden Street
                        Berlin, CT  06037

                        Attention:  Assistant Treasurer - Finance
                        Facsimile:  (860) 665-5457
                        Telephone:  (860) 665-3258
                        E-Mail: shoopra@nu.com

             (b)  if to the Issuer, to

                        PSNH Funding LLC
                        c/o Public Service Company of New Hampshire
                        1000 Elm Street
                        Manchester, NH
                        Facsimile:  (860) 665-5457
                        Telephone:  (860) 665-3258
                        E-Mail: shoopra@nu.com (email)

                                      -25-
<PAGE>

                        with a copy to:

                        Public Service Company of New Hampshire
                        c/o Northeast Utilities Service Company

                        if by U.S. Mail:

                        P.O. Box 270
                        Hartford, CT  06141-0270

                        if by courier:

                        107 Selden Street
                        Berlin, CT  06037

                        Attention:  Assistant Treasurer - Finance
                        Facsimile:  (860) 665-5457
                        Telephone:  (860) 665-3258
                        E-Mail: shoopra@nu.com

             (c)  if to the Trustee, to

                        The Bank of New York
                        101 Barclay Street
                        Floor 12 East
                        New York, NY 10286
                        Attention: ABS Unit
                        Facsimile:  (212) 815-5563
                        Telephone:  (212) 815-5368

             (d)  if to Moody's, to

                        Moody's Investors Service, Inc.
                        99 Church Street
                        New York, NY 10007
                        Attention:  ABS Monitoring Department
                        Facsimile:  (212) 553-0573
                        Telephone:  (212) 553-3686

             (e)  if to S&P, to

                        Standard & Poor's
                        55 Water Street, 41st Floor
                        New York, NY 10041
                        Attention:  Asset Backed Surveillance Department
                        Facsimile:  (212) 438-2655
                        Telephone:  (212) 438-2000

                                      -26-
<PAGE>

             (f)  if to Fitch, to

                        Fitch, Inc.
                        One State Street Plaza
                        New York, NY 10004
                        Attention:  ABS Surveillance
                        Facsimile:  (212) 514-9879
                        Telephone:  (212) 908-0500
                        E-mail:     surv@fitchratings.com

             (g)  as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.

         Section 8.04.     ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.04 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.

         Section 8.05.     LIMITATIONS ON RIGHTS OF THIRD PARTIES. The
provisions of this Agreement are solely for the benefit of the Servicer, the
Issuer, the Bondholders, the Trustee, the State of New Hampshire, the Treasurer
of the State of New Hampshire, agencies of the State of New Hampshire and the
other Persons expressly referred to herein and such Persons shall have the right
to enforce the relevant provisions of this Agreement, except that the
Bondholders shall be entitled to enforce their rights against the Servicer under
this Agreement solely through a cause of action brought for their benefit by the
Trustee. 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 the RRB Property or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

         Section 8.06.     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 8.07.     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 8.08.     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.

                                      -27-
<PAGE>

         Section 8.09.     GOVERNING LAW. This Agreement shall be construed in
accordance with the substantive laws of the State of New Hampshire, without
giving effect to its conflict of law or other principles that would cause the
application of the laws of another jurisdiction, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.

         Section 8.10.     ASSIGNMENT TO TRUSTEE. The Servicer hereby
acknowledges and consents to the collateral assignment or pledge of, or grant of
a security interest in, any or all of the Issuer's rights and obligations
hereunder to the Trustee for the benefit of the holders of the Bonds.

         Section 8.11.     NONPETITION COVENANTS. Notwithstanding any prior
termination of this Agreement or the Indenture, but subject to the NHPUC's right
to order the sequestration and payment of revenues arising with respect to the
RRB Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the debtor, pledgor or transferor of the RRB
Property pursuant to RSA 369-B:7, VI and RSA 369-B:7, VIII, the Servicer shall
not, prior to the date which is one year and one day after the termination of
the Indenture with respect to the Issuer, petition or otherwise invoke or cause
the Issuer to invoke the process of any court or governmental authority for the
purpose of commencing or sustaining a case against the Issuer under any 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.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -28-
<PAGE>

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


                                     PSNH FUNDING LLC,
                                     Issuer


                                     By:
                                         ---------------------------------------
                                         Name:   Randy A. Shoop
                                         Title:  President


                                     PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE,
                                     Seller


                                     By:
                                         ---------------------------------------
                                         Name:   Randy A. Shoop
                                         Title:  Assistant Treasurer - Finance

                                      S-1

<PAGE>

                                    EXHIBIT A

                            CERTIFICATE OF COMPLIANCE

         The undersigned hereby certifies that he/she is the duly elected and
acting [________] of Public Service Company of New Hampshire, as servicer (the
"SERVICER") under the Servicing Agreement, dated as of April __, 2001 (the
"SERVICING AGREEMENT"), between the Servicer and PSNH Funding LLC (the
"ISSUER"), and further certifies on behalf of the Servicer that:

         1.       A review of the activities of the Servicer and of its
performance under the Servicing Agreement during the __________ months ended
December 31, 20[_] has been made under the supervision of the undersigned
pursuant to Section 3.03 of the Servicing Agreement; and

         2.       To the undersigned's knowledge, based on such review, the
Servicer has fulfilled all of its material obligations in all material respects
under the Servicing Agreement throughout the __________ months ended December
31, 20[_], except as listed on ANNEX A hereto.

         Executed as of this _______ day of ___________, 20__ .



                                       PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE,
                                       Servicer


                                       By: /s/
                                           -------------------------------------
                                           Name:
                                           Title:

                                     -A-1-
<PAGE>

                              ANNEX A TO EXHIBIT A

                            LIST OF SERVICER DEFAULTS


NATURE OF DEFAULT                           STATUS


                                     -A-2-
<PAGE>

                                    EXHIBIT B

                         FORM OF ROUTINE TRUE-UP LETTER

                                     [date]

ADVICE


NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION (THE "COMMISSION")

SUBJECT: Periodic RRB Charge True-Up Mechanism Advice Filing

Pursuant to the order of the Commission, DE 99-099 , issued on September 8, 2000
(Order No. 23,550) (the "FINANCE ORDER"), Public Service Company of New
Hampshire ("PSNH"), as servicer of the RRBs or any successor Servicer and on
behalf of the RRB trustee as assignee of the special purpose entity (the "SPE"),
shall apply for adjustment to the RRB Charge not later than 30 days prior to
each semiannual anniversary of the RRB transaction closing and at such
additional intervals, if necessary, as may be provided for in the Finance Order.
Any capitalized terms not defined herein shall have the meanings ascribed
thereto in the Finance Order.

PURPOSE

This filing establishes the revised RRB Charge to be assessed and collected from
retail users of PSNH's distribution system within PSNH's service territory,
whether or not energy is purchased from PSNH or third party supplier, and
whether or not such distribution system is being operated by PSNH or a successor
distribution company. The RRB Charge is a usage-based component of the stranded
cost recovery charge on each retail user's monthly bill until the Total RRB
Payment Requirements are discharged in full. In the Finance Order, the
Commission authorized PSNH to file Routine True-Up Letters not later than 30
days prior to each semiannual anniversary of the RRB transaction closing and at
such additional intervals, if necessary, as may be provided for in the Finance
Order. The purpose of such filings and resulting adjusted RRB Charges is to
ensure the timely recovery of revenues sufficient to provide for the payment of
an amount equal to the sum of the Periodic RRB Payment Requirements for the
upcoming period, which may include indemnity obligations of the SPE in the RRB
transaction documents for SPE officers and directors, trustee fees and other
liabilities of the SPE.

Using the methodology approved by the Commission in the Finance Order, this
filing modifies the variables used in the RRB Charge calculation and provides
the resulting modified RRB Charge. Table I shows the revised assumptions for
each of the variables used in calculating the RRB Charge for customers. The
assumptions underlying the current RRB Charges were filed in an Issuance Advice
Letter, dated ______________.

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

                                     -B-1-
<PAGE>

                                     TABLE I
                           INPUT VALUES FOR RRB CHARGE


Forecasted retail kWh sales for the period:
     January:________________________
     February:________________________
     March:________________________
     April:________________________
     May:________________________
     June:________________________
     July:________________________
     August:________________________
     September:________________________
     October:________________________
     November:________________________
     December:________________________
Percent of billed amounts expected to be charged-off:________
Weighted average days sales outstanding:_____
   (calculated as follows)


         Percent of billed amounts collected in current month:_____
         Percent of billed amounts collected in second month after billing:_____
         Percent of billed amounts collected in third month after billing:_____
         Percent of billed amounts collected in fourth month after billing:_____
         Percent of billed amounts collected in fifth month after billing:_____
Forecasted ongoing interest and transaction expenses (including any already
accrued but unpaid for the period):_____
Current Interest Reserve Subaccount balance:______
Scheduled Interest Reserve Subaccount balance at the end of the period:______
Current Overcollateralization Subaccount balance:______
Scheduled Overcollateralization Subaccount balance at the end of the period:____
Current Capital Subaccount balance:______
Initial Capital Subaccount balance:______
Current RRB outstanding balance:_____
Scheduled RRB outstanding balance at the end of the period:______
Current Reserve Subaccount balance:______


The adjusted RRB Charge calculated for retail users is as follows:_____
(cent)/kWh

                                     -B-2-
<PAGE>

EFFECTIVE DATE

In accordance with the Finance Order, Routine True-Up Letters for semiannual RRB
Charge adjustments shall be filed not later than 30 days prior to each
semiannual anniversary of the RRB transaction closing, with the resulting upward
or downward adjustments to the RRB Charge to be effective - absent manifest
error in the Routine True-Up Letters - on the ensuing semiannual anniversary. In
accordance with the Finance Order, Routine True-Up Letters may also be filed as
frequently as monthly, with the resulting upward or downward adjustments to the
RRB Charge to be effective - absent manifest error in the Routine True-Up
Letters - immediately upon the filing of the on the Routine True-Up Letters. No
approval by the Commission is required. Therefore, these RRB Charges shall be
effective as of ___________.

NOTICE

Copies of this filing are being furnished to the parties on the attached service
list. Notice to the public is hereby given by filing and keeping this filing
open for public inspection at PSNH's corporate headquarters.

Enclosures


                                     -B-3-
<PAGE>

                                    EXHIBIT C
                      FORM OF MONTHLY SERVICER CERTIFICATE

         Pursuant to Section 4.01(d)(2) of the Servicing Agreement, dated as of
April __, 2001 (the "AGREEMENT"), between Public Service Company of New
Hampshire, as servicer (the "Servicer"), and PSNH Funding LLC, the Servicer does
hereby certify as follows:

         Capitalized terms used herein have their respective meanings as set
forth in the Agreement.

For the Monthly Period:_____________

1.       BILLINGS:
a)       Monthly kWh Consumption:
b)       Applicable RRB Charge:
c)       Total RRB Charge Amount Billed this Month:
d)       Cumulative RRB Charge Amount Billed this Remittance Period:

2.       REMITTANCES:
a)       Total Amount Remitted this Month:
b)       Cumulative Amount Remitted this Remittance Period:
c)       "RRB %" (calculated in accordance with Annex II to the Agreement) for
         this Remittance Period:

3.       DRAWS ON SUBACCOUNTS:
a)       Reserve Subaccount Draw Amount this Month:
b)       Cumulative Reserve Subaccount Draw Amount this Remittance Period (net
         of funding):
c)       Overcollateralization Subaccount Draw Amount this Month:
d)       Cumulative Overcollateralization Subaccount Draw Amount this Remittance
         Period (net of funding):
e)       Capital Subaccount Draw Amount this Month:
f)       Cumulative Capital Subaccount Draw Amount this Remittance Period (net
         of funding):
g)       Interest Reserve Subaccount Draw Amount this Month:
h)       Cumulative Interest Reserve Subaccount Draw Amount this Remittance
         Period (net of funding):
i)       Servicer Advance Subaccount Draw Amount this Month:
j)       Cumulative Servicer Advance Subaccount Draw Amount this Remittance
         Period:

                                      -C-1-
<PAGE>

         Executed as of this _____________ day of ___________.

                                     PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE,
                                     Servicer


                                     By: /s/
                                         ---------------------------------------
                                         Name:
                                         Title:

                                     -C-2-
<PAGE>

                                    EXHIBIT D

                     FORM OF QUARTERLY SERVICER CERTIFICATE


         Pursuant to Section 4.01(d)(3) of the Servicing Agreement, dated as of
April __, 2001 (the "AGREEMENT"), between Public Service Company of New
Hampshire, as servicer (the "Servicer"), and PSNH Funding LLC, the Servicer does
hereby certify, for the current Payment Date (__________, __ 20[ ]) (the
"CURRENT PAYMENT DATE"), as follows:

         Capitalized terms used herein have their respective meanings as set
forth in the Agreement. References herein to certain sections and subsections
are references to the respective sections of the Agreement.

1.      RRB CHARGE COLLECTIONS AND AGGREGATE AMOUNTS AVAILABLE FOR THE CURRENT
        PAYMENT DATE:

        i.       Amount Remitted [Month] [Year]
        ii.      Amount Remitted [Month] [Year]
        iii.     Amount Remitted [Month] [Year]
        iv.      Amount Remitted [Month] [Year]
        v.       Amount Remitted [Month] [Year]
        vi.      Amount Remitted [Month] [Year]
        vii.     Amount Remitted [Month] [Year]
        viii.    Amount Remitted [Month] [Year]
        ix.      TOTAL AMOUNT REMITTED FOR THIS PERIOD (SUM OF i. THROUGH viii.
                 ABOVE):
        x.       Net Earnings on Collection Account:
        xi.      Expenses Paid to Date:
        xii.     GENERAL SUBACCOUNT BALANCE (SUM OF ix. AND x. ABOVE MINUS xi.):
        xiii.    Reserve Subaccount Balance
        xiv.     Overcollateralization Subaccount Balance
        xv.      Capital Subaccount Balance
        xvi.     Interest Reserve Subaccount Balance
        xvii.    Servicer Advance Subaccount Balance
        xviii.   COLLECTION ACCOUNT BALANCE (SUM OF xii. THROUGH xvii. ABOVE):

2.      OUTSTANDING PRINCIPAL BALANCE AS OF PRIOR PAYMENT DATE BY TRANCHE:

        i.       Class A-1 Principal Balance Outstanding Bond:
        ii.      Class A-2 Principal Balance Outstanding Bond:
        iii.     Class A-3 Principal Balance Outstanding Bond:
        iv.      TOTAL BOND PRINCIPAL BALANCE:

3.      REQUIRED FUNDING/PAYMENTS AS OF CURRENT PAYMENT DATE

        a)    PROJECTED PRINCIPAL BALANCES AND PAYMENTS

                                     -D-1-
<PAGE>

                                                    PROJECTED        QUARTERLY
                                                PRINCIPAL BALANCE  PRINCIPAL DUE
              i.    Class A-1 Bond
              ii.   Class A-2 Bond
              iii.  Class A-3 Bond
              iv.   TOTAL PROJECTED PRINCIPAL
                    AMOUNT:

        b)    REQUIRED INTEREST PAYMENTS
<TABLE>
<CAPTION>
<S>                                                                      <C>                    <C>
                                                        BOND                 DAYS IN            INTEREST
                                                    INTEREST RATE        APPLICABLE PERIOD         DUE
              i.    Class A-1 Bond
              ii.   Class A-2 Bond
              iii.  Class A-3 Bond
              iv.   TOTAL REQUIRED INTEREST AMOUNT:

        c)    PROJECTED SUBACCOUNT PAYMENTS AND LEVELS
                                                         SUBACCOUNT     PROJECTED LEVEL    FUNDING REQUIRED
              i.    Interest Reserve Subaccount:
              ii.   Capital Subaccount:
              iii.  Overcollateralization
                    Subaccount:
              iv.   Servicer Advance Subaccount:                                                  N/A
              v.    TOTAL SUBACCOUNT PAYMENTS AND
                    LEVELS:
</TABLE>

4.      ALLOCATION OF REMITTANCES AS OF CURRENT PAYMENT DATE PURSUANT TO SECTION
        8.02(d) OF INDENTURE:

        a)    QUARTERLY EXPENSES

              Net Expense Amount (Payable on Current Payment Date)

              i.    Trustee Fees and Expenses:
              ii.   Quarterly Servicing Fee:
              iii.  Quarterly Administration Fee:
              iv.   Operating Expenses (subject to $100,000 cap):
              v.    TOTAL EXPENSES:

                                     -D-2-
<PAGE>
<TABLE>
<CAPTION>

        b)    QUARTERLY INTEREST
<S>                                                    <C>                         <C>
                                                                                   AGGREGATE PRINCIPAL
                                                       PER $1000 OF ORIGINAL             AMOUNT
              i.    Class A-1 Bond
              ii.   Class A-2 Bond
              iii.  Class A-3 Bond
              iv.   TOTAL QUARTERLY INTEREST:

        c)    QUARTERLY PRINCIPAL
                                                                                   AGGREGATE PRINCIPAL
                                                       PER $1000 OF ORIGINAL             AMOUNT
              i.    Class A-1 Bond
              ii.   Class A-2 Bond
              iii.  Class A-3 Bond
              iv.   TOTAL QUARTERLY PRINCIPAL:
</TABLE>

        d)    OTHER PAYMENTS

              i.     Operating Expenses (in excess of $100,000):
              ii.    Funding of Interest Reserve Subaccount (to
                     required level):
              iii.   Funding of Capital Subaccount (to required
                     amount):
              iv.    Funding of Overcollateralization
                     Subaccount (to required level):
              v.     Deposits to Reserve Subaccount:
              vi.    Interest earnings on Capital Subaccount
                     Released to Issuer:
              vii.   Interest earnings on Servicer Advance
                     Subaccount Released to Issuer:
              viii.  Operating Expenses Paid From Servicer
                     Advance Subaccount at Request of Servicer:

        e)    AGGREGATE PAYMENTS PURSUANT TO SECTION 8.02(d)(i) OF INDENTURE

              i.    To Trustee:
              ii.   To other Persons indemnified under
                    Indenture or Fee and Indemnity Agreement:

                                     -D-3-
<PAGE>

5.      OUTSTANDING PRINCIPAL BALANCE AND COLLECTION ACCOUNT BALANCE AS OF
        CURRENT PAYMENT DATE (AFTER GIVING EFFECT TO PAYMENTS TO BE MADE ON SUCH
        DISTRIBUTION DATE):

        a)    PRINCIPAL BALANCE OUTSTANDING:

              i.    Class A-1 Principal Balance Outstanding Bond:
              ii.   Class A-2 Principal Balance Outstanding Bond:
              iii.  Class A-3 Principal Balance Outstanding Bond:
              iv.   TOTAL BOND PRINCIPAL BALANCE:

        b)    COLLECTION ACCOUNT BALANCES OUTSTANDING:

              i.    Interest Reserve Subaccount:
              ii.   Capital Subaccount:
              iii.  Overcollateralization Subaccount:
              iv.   Reserve Subaccount:
              v.    Servicer Advance Subaccount
              vi.   TOTAL SUBACCOUNT AMOUNT:

6.      SUBACCOUNT DRAWS AS OF CURRENT PAYMENT DATE (IF APPLICABLE, PURSUANT TO
        SECTION 8.02(e) OR 8.02(j) OF INDENTURE):

              i.    Interest Reserve Subaccount:
              ii.   Capital Subaccount:
              iii.  Overcollateralization Subaccount:
              iv.   Reserve Subaccount:
              v.    Servicer Advance Subaccount:
              vi.   TOTAL SUBACCOUNT DRAWS:

7.      SHORTFALLS IN INTEREST AND PRINCIPAL PAYMENTS AS OF CURRENT PAYMENT DATE
       (IF APPLICABLE):

        a)    QUARTERLY INTEREST SHORTFALL

              i.    Class A-1 Bond
              ii.   Class A-2 Bond
              iii.  Class A-3 Bond
              iv.   TOTAL QUARTERLY INTEREST SHORTFALL:

                                     -D-4-
<PAGE>

        b)    QUARTERLY PRINCIPAL SHORTFALL

              i.    Class A-1 Bond
              ii.   Class A-2 Bond
              iii.  Class A-3 Bond
              iv.   TOTAL QUARTERLY PRINCIPAL SHORTFALL:

8.      SHORTFALLS IN REQUIRED SUBACCOUNT LEVELS AS OF CURRENT DISTRIBUTION
        DATE:

              i.    Interest Reserve Subaccount
              ii.   Capital Subaccount
              iii.  Overcollateralization Subaccount:
              iv.   TOTAL SUBACCOUNT SHORTFALLS:

         IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Quarterly Servicer Certificate this ___ day of ____, ____.


                                    PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE,
                                    Servicer


                                    By: /s/
                                        ----------------------------------------
                                        Name:
                                        Title:


                                     -D-5-
<PAGE>

                                SCHEDULE 4.01(a)

                         EXPECTED AMORTIZATION SCHEDULE

                          OUTSTANDING PRINCIPAL BALANCE



                              -Schedule 4.01(a)-1-
<PAGE>

                                     ANNEX I


                              SERVICING PROCEDURES

         The Servicer agrees to comply with the following servicing procedures:

         SECTION 1.  DEFINITIONS

         (a)      Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Agreement.

         (b)      Whenever used in this Annex I, the following words and phrases
shall have the following meanings:

         "BILLED RRB CHARGES" means the dollar amounts billed to customers or
the Applicable TPS in respect of the RRB Charge, whether billed to customers or
the Applicable TPS by the Servicer or to customers by a TPS pursuant to a TPS
Service Agreement.

         "SERVICER POLICIES AND PRACTICES" means, with respect to the Servicer's
duties under this Annex I, 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 or others, as in effect from time to time and in
accordance with NHPUC Regulations. The Servicer shall provide ten days' prior
written notice to the Rating Agencies of any amendment to the Servicer Policies
and Practices that would adversely affect in any material respect the
Bondholders.

         SECTION 2.  DATA ACQUISITION

         (a)      INSTALLATION AND MAINTENANCE OF METERS. Except to the extent
that a TPS is responsible for such services pursuant to a TPS Service Agreement,
the Servicer shall cause to be installed, replaced and maintained meters in
accordance with the Servicer Policies and Practices.

         (b)      METER READING. In accordance with the Servicer Policies and
Practices, the Servicer shall obtain usage measurements for each customer;
provided, however, that the Servicer may determine any customer's usage on the
basis of estimates in accordance with applicable NHPUC Regulations; and,
provided, further, that the Servicer may obtain usage measurements from the
Applicable TPS for customers receiving meter reading services from such TPS if
the applicable TPS Service Agreement so provides.

         (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
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 TPS as a result of new metering and/or billing
technologies.

                                  -Annex I-1-
<PAGE>

         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 NHPUC Regulations) in
accordance with the Servicer Policies and Practices and shall determine
therefrom Billed RRB Charges; provided, however, that in the case of customers
served by a TPS pursuant to a TPS Service Agreement, the Servicer may obtain
usage measurements from the Applicable TPS for customers receiving meter reading
services from such TPS if the applicable TPS Service Agreement so provides and
shall determine therefrom Billed RRB Charges.

         SECTION 4.  BILLING

         (a)      The Servicer shall implement the RRB Charge as of the Closing
Date and shall thereafter bill each customer or the Applicable TPS for each
customer's Billed RRB Charges in accordance with the provisions of this Section
4.

         (b)      FREQUENCY OF BILLS; BILLING PRACTICES. In accordance with the
Servicer Policies and Practices, the Servicer shall generate and issue a Bill to
each customer, or, in the case of a customer who is being billed by a TPS, to
the Applicable TPS with respect to such customer's Billed RRB Charges. In the
event that the Servicer makes any material modification to the Servicer Policies
and Practices, it shall notify the Issuer, the Trustee and the Rating Agencies
as soon as practicable, and in no event later than 60 Servicer Business Days
after such modification goes into effect; provided, however, that the Servicer
may not make any modification that will materially adversely affect the
Bondholders.

         (c)      FORMAT.

                  (i)      Each Bill to a customer shall contain a stranded cost
recovery charge that shall include the RRB Charge owed by such customer for the
applicable billing period.

                  (ii)     Each Bill in which the stranded cost recovery charge
is listed as a line item shall contain a statement (as a footnote) to the effect
that all or a portion of the stranded cost recovery charge is owned by the
Issuer and not the Seller.

                  (iii)    The Servicer shall conform to such requirements in
respect of the format, structure and text of Bills delivered to customers and
TPSs as applicable NHPUC Regulations shall from time to time prescribe. To the
extent that Bill format, structure and text are not prescribed by applicable law
or by applicable NHPUC Regulations, the Servicer shall, subject to clauses (i)
and (ii) of this subsection (c), determine the format, structure and text of all
Bills in accordance with its reasonable business judgment, the Servicer Policies
and Practices and historical practice.

         (d)      DELIVERY. Except as provided in the next sentence, 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 or
(ii) by any other means, whether

                                  -Annex I-2-
<PAGE>

electronic or otherwise, that the Servicer may from time to time use in
accordance with the Servicer Policies and Practices. In the case of customers
that have elected to be billed by a TPS, the Servicer shall deliver all Bills to
the Applicable TPSs by such means as are mutually agreed upon by the Servicer
and the Applicable TPS in the TPS Service Agreement and which are consistent
with NHPUC Regulations. The Servicer or a TPS, as applicable, shall pay from its
own funds all costs of issuance and delivery of all Bills that it renders,
including printing and postage costs as the same may increase or decrease from
time to time.

         SECTION 5.  CUSTOMER SERVICE FUNCTIONS

         The Servicer or a TPS to the extent provided in the applicable TPS
Service Agreement shall handle all customer inquiries and other customer service
matters according to the Servicer Policies and Practices.

         SECTION 6.  COLLECTIONS; PAYMENT PROCESSING; REMITTANCE

         (a)      COLLECTION EFFORTS, POLICIES, PROCEDURES.

                  (i)      The Servicer shall collect Billed RRB Charges from
customers and TPSs as and when the same become due in accordance with such
collection procedures as it follows with respect to comparable assets that it
services for itself or others, including the following:

                  (A)      The Servicer shall prepare and deliver overdue
notices to customers and TPSs in accordance with applicable NHPUC Regulations
and the Servicer Policies and Practices.

                  (B)      The Servicer shall deliver past-due and shut-off
notices in accordance with applicable NHPUC Regulations and the Servicer
Policies and Practices.

                  (C)      The Servicer shall adhere to and carry out
disconnection policies and termination of billing by a TPS pursuant to a TPS
Service Agreement in accordance with RSA 369-B:4, IV, the Finance Order,
applicable NHPUC Regulations and the Servicer Policies and Practices.

                  (D)      The Servicer may employ the assistance of collection
agents in accordance with applicable NHPUC Regulations and the Servicer Policies
and Practices.

                  (E)      The Servicer shall apply customer and TPS deposits to
the payment of delinquent accounts in accordance with applicable NHPUC
Regulations and the Servicer Polices and Practices.

                  (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: (A) would be in accordance with the
Servicer Policies and Practices, (B) would

                                  -Annex I-3-
<PAGE>

not materially adversely affect the Bondholders, and (B) would comply in all
material respects with applicable law.

                  (iii)    The Servicer shall accept payment from customers in
respect of Billed RRB Charges in such forms and methods and at such times and
places in accordance with the Servicer Policies and Practices. The Servicer
shall accept payment from TPSs in respect of Billed RRB Charges in such forms
and methods and at such times and places as the Servicer and each TPS shall
mutually agree in accordance with the applicable TPS Service Agreement and
applicable NHPUC Regulations.

         (b)      PAYMENT PROCESSING, ALLOCATION, PRIORITY OF PAYMENTS. The
Servicer shall post all payments received to customer or TPS accounts as
promptly as practicable, and, in any event, substantially all payments shall be
posted no later than one Servicer Business Day after receipt.

         (c)      INVESTMENT OF RRB CHARGE PAYMENTS RECEIVED. Prior to
remittance on the applicable Remittance Date, the Servicer may invest RRB Charge
Payments 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. The Servicer shall be entitled to retain as additional
compensation any interest earnings on RRB Charge Payments invested by it.

         (d)      CALCULATION OF RRB CHARGE PAYMENTS; REMITTANCES. In accordance
with Section 4.03(a) of the Agreement, the Servicer shall remit to the Trustee
for deposit in the Collection Account an amount equal to the RRB Charge Payments
calculated in accordance with the methodology described in Annex II attached to
the Agreement.

         (e)      REMITTANCES.

                  (i)      The Issuer shall cause to be established the
Collection Account in the name of the Trustee in accordance with Section 8.02 of
the Indenture.

                  (ii)     The Servicer shall make or cause to be made
Remittances to the Collection Account in accordance with Section 4.03 of the
Agreement.

                  (iii)    Any change of account or change of institution
affecting the Collection Account shall not take effect until the Issuer has
provided at least fifteen (15) Servicer Business Days written notice thereof to
the Servicer.

         SECTION 7.  TPSs

         In the event a TPS performs services pursuant to a TPS Service
Agreement, the Servicer shall comply with the procedures set forth in Schedule A
to this Annex I.

                                  -Annex I-4-
<PAGE>

                                   SCHEDULE A
                                   TO ANNEX I

               Additional Servicing Procedures Applicable to TPSs

1.       Establishing TPS Relationship

         In addition to any actions required by the NHPUC or by applicable law,
for each TPS that is responsible for collecting Billed RRB Charges, the Servicer
shall take the following steps:

         (a) Maintain adequate records of the payment arrangement applicable to
         such TPS;

         (b) Maintain copies of all customer requests to convert to billing by a
         TPS;

         (c) Verify with the NHPUC that each TPS is licensed to supply
         electricity in New Hampshire;

         (d) Obtain information from the TPS including, but not limited to:
         name, contact, address, telephone facsimile transmission number and
         internet address;

         (e) Maintain and update records of customers to permit prompt reversion
         to dual-billing;

         (f) Maintain estimates of one month's maximum RRB Charge Payments for
         each TPS required to post a bond, letter of credit or cash deposit
         pursuant to the applicable TPS Service Agreement; and

         (g) Comply with credit conditions set out in the Finance Order and
         applicable TPS Service Agreement.

2.       Monitoring TPS Obligations

         (a) The Servicer shall require each TPS to pay all undisputed and all
         disputed Billed RRB Charges or make a financial arrangement for such
         payment according to the applicable TPS Service Agreement; and

         (b) For all TPSs subject to any remittance option where such TPS is
         liable for all amounts billed in respect of customers served thereby
         regardless of the amounts received therefrom, the Servicer shall
         monitor payment compliance and take all actions permitted by the NHPUC
         and the Finance Order in the event of a default in payment.

3.       Enforcing TPS Obligations

         The Servicer shall promptly take all actions specified by the Finance
Order with respect to amounts not remitted to the Servicer in accordance with
the payment terms specified by the Finance Order, in addition to any other
remedies available at law.

                                  -Annex I-5-
<PAGE>

                                    ANNEX II


                             REMITTANCE METHODOLOGY



                                  -Annex II-1-