SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 20-F

                                 JULY 12, 2002

(Mark One)                 -------------------------

[  ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      OR

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the year ended December 31, 2001
      OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period

                         Commission file number 1-14191
                          YORKSHIRE POWER GROUP LIMITED
             (Exact Name of Registrant as Specified in its Charter)

                                England and Wales
                 (Jurisdiction of Incorporation or Organization)
   Carliol House, Market Street, Newcastle upon Tyne, NE1 6NE, United Kingdom
                               011-44-191-210-2000
                         (Address of Principal Executive
               Offices) SECURITIES REGISTERED OR TO BE REGISTERED
                      PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class                    Name of Each Exchange On Which Registered
-------------------                    -----------------------------------------
8.08% Trust Securities of Yorkshire Capital Trust I,    New York Stock Exchange
guaranteed by Yorkshire Power Group Limited
--------------------------------------------------------------------------------

                    SECURITIES REGISTERED OR TO BE REGISTERED
                      PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                    SECURITIES FOR WHICH THERE IS A REPORTING
                     OBLIGATION PURSUANT TO SECTION 15(d) OF
                                    THE ACT:
                                      None
--------------------------------------------------------------------------------
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

440,000,002 Ordinary Shares Par Value (pound)1 Per Share

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                                                 Yes_X_ No__

Indicate by check mark which financial statement item the registrant has elected
to follow.
                                                       Item 17__  Item 18_X_

<PAGE>


                                TABLE OF CONTENTS

                                                                      Page
Explanatory Notes                                                       1
Cautionary Statement Regarding Forward-Looking Statements               1
PART I
Item 1          IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS   2
Item 2          OFFER STATISTICS AND EXPECTED TIMETABLE                 2
Item 3          KEY INFORMATION                                         2
Item 4          INFORMATION ON THE COMPANY                              8
Item 5          OPERATING AND FINANCIAL REVIEW AND PROSPECTS           27
Item 6          DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES             35
Item 7          MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS      37
Item 8          FINANCIAL INFORMATION                                  37
Item 9          THE OFFER AND LISTING                                  38
Item 10         ADDITIONAL INFORMATION                                 38
Item 11         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                   MARKET RISK                                         39
Item 12         DESCRIPTION OF SECURITIES OTHER THAN EQUITY
                   SECURITIES                                          43
PART II
Item 13         DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES        44
Item 14         MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
                   HOLDERS AND USE OF PROCEEDS                         44
Item 15         [RESERVED]                                             44
Item 16         [RESERVED]                                             44
PART III
Item 17         FINANCIAL STATEMENTS                                   45
Item 18         FINANCIAL STATEMENTS                                   45
Item 19         EXHIBITS                                               45
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES                       F-1
GLOSSARY OF SELECTED TERMS                                            G-1
SIGNATURES                                                          Sig-1

<PAGE>

Explanatory Notes

On April 3, 2001, Innogy Holdings plc ("Innogy") acquired 94.75% of the issued
share capital of Yorkshire Power Group Limited ("YPG") from its prior owners,
American Electric Power Company Inc. and Xcel Energy Inc. Xcel Energy Inc.
retained a 5.25% ownership interest. On September 21, 2001, CE Electric UK
Limited acquired 94.75% of the issued share capital of YPG from Innogy.

Please refer to the glossary beginning on page G-1 for definitions of selected
terms used herein.

We publish our financial statements in British pounds. Unless we note otherwise,
all amounts expressed in this annual report are expressed in British pounds. As
used herein, references to "US dollars", "dollars" or "$" and "cents" or "c" are
to US currency, references to "British pounds", "pounds", "Pounds Sterling" or
"(pound)" and "pence" or "p" are to UK currency and references to "euro" are to
the currency introduced at the start of the third stage of European economic and
monetary union pursuant to the Treaty establishing the European Community,
amended by the Treaty on European Union. For your convenience, unless otherwise
stated, this annual report contains translations of British pound amounts at the
rate of (pound)1.00 per $1.4543, the Noon Buying Rate in New York City for cable
transfers in British pounds as certified for customs purposes by the Federal
Reserve Bank of New York (the "Noon Buying Rate") on December 31, 2001. On July
9, 2002, the Noon Buying Rate was $1.5465. See "Item 3 - Key Information" for
certain historical exchange rate information regarding the Noon Buying Rate. You
should not construe these translations as representations that the amounts
referred to actually represent translated amounts or that you could convert
these amounts into the translated currency at the rates indicated.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements included in this annual report are forward-looking statements
made pursuant to the US Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current expectations and involve a
number of known and unknown risks and uncertainties that could cause the actual
results and performance of YPG Group to differ materially from any expected
future results or performance expressed or implied by the forward-looking
statements. These statements are often, but not always, made through use of
words or phrases such as "will likely result", "are expected to", "will
continue", "believe", "is anticipated", "estimated", "intends", "plans", "seek",
"projection" and "outlook". In connection with the safe harbor provisions of the
Reform Act, YPG Group has identified important factors that could cause actual
results to differ materially from such expectations, including, without
limitation:

o          general economic and business conditions in the UK, the Distribution
           Services Area and elsewhere;

o          currency fluctuations;

o          governmental, statutory, regulatory or administrative initiatives
           affecting YPG Group or the UK electricity industry;

o          general industry trends;

o          competition;

o          interest rates and hedging costs;

o          changes in business strategy, development plans or vendor
           relationships;

o          availability, terms and deployment of capital;

o          availability of qualified personnel;

o          increased rates of taxes or other changes in tax law; and

o        changes in, or the failure or inability to comply with, governmental
         regulation, including, without limitation, environmental regulations.

These forward-looking statements speak only as of the date of this annual
report. YPG assumes no responsibility to update the forward-looking information
contained herein. Because actual results could differ materially from those
expressed in forward-looking statements, you should not place undue reliance on
any of these forward-looking statements.

<PAGE>

PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3.  KEY INFORMATION

A.       Selected Financial Data

The selected financial data of YPG Group presented below has been derived from
the consolidated financial statements of YPG Group, prepared in accordance with
US GAAP and reported in this annual report and those for previous periods. The
consolidated financial statements of YPG Group reported in this annual report
and those for previous periods, and from which the selected financial data below
has been derived, have been audited by Deloitte & Touche, independent chartered
accountants. We have included a translation of the data as of and for the year
ended December 31, 2001 from British pounds into US dollars solely for
convenience. The translation rate is at the rate of (pound)1.00 per $1.4543, the
Noon Buying Rate on December 31, 2001.

The results, which are presented in accordance with US GAAP, show losses
from continuing operations (i.e. from the retained Distribution Business),
in each of the periods to December 31, 2001. In each period, the losses arise as
a result of the requirement to eliminate the effects of all transactions,
including those in respect of the retained Distribution Business, with YEG's
former Supply Business which was disposed of on July 31, 2001.

Going forward, however, the YPG Group in fact will receive revenues in respect
of the retained Distribution Business which were previously internal to the
Group.  These revenues will be received from the owner of YEG's former Supply
Business and/or from other third parties who may from time to time supply
electricity to the customers of YEG's former Supply Business. Reported historic
losses from continuing operations are therefore not necessarily reflective of
the future financial performance of YPG.

Footnote 2 on page 4 shows the effects of reinstating the transactions with the
former Supply Business, to the extent that those transactions relate to the
continuing operations of the YPG Group.

<PAGE>
<TABLE>
<CAPTION>
<S>                                                     <C>             <C>           <C>             <C>         <C>
                                                       Year ended       Year ended     Nine months    Year        Year ended
                                                       -----------      -----------    ------------   -----       ----------
                                                    December 31, 2001  December 31,       ended       ended       March 31,
                                                    -----------------  -------------      ------      ------      ---------
                                                                            2000       December 31,   March 31,      1998
                                                                            ----       -------------  ----------     ----
                                                                                         1999 (1)        1999
                                                                                         --------        ----
                                                                              (Amounts in millions)
                                                    $          (pound)         (pound)        (pound)     (pound)      (pound)
Consolidated Income Statement Data:
Operating revenues from continuing operations (2)       250       172             105             68          71           65
Operating income/(loss) (3) (7)                          11         7            (54)           (63)        (84)         (80)
Other income/(loss), net (4)                              -         -               1              6        (11)         (39)
Interest expense, net                                 (125)      (86)           (113)           (86)       (122)        (104)
Benefit for income taxes                                 31        21              51             47          85           77
Loss from continuing operations (2)                    (83)      (58)           (115)           (96)       (132)        (146)
Income from discontinued operations (2)                  61        42             162            129         195          163
(Loss)/gain    on   disposal    of    discontinued
operations (5), net of income taxes/  (benefit) of
($51), (pound)((pound)35), -, ((pound)8),(pound)31, - (100)      (68)               -              8          24            -
Cumulative  effect on prior years (to December 31,
1999)  of  changing  to a  different  depreciation        -         -               8              -           -            -
method
Extraordinary loss (6)                                    -         -               -              -           -        (134)
                                                          -         -               -              -           -        -----
Net (loss)/income (7)                                 (122)      (84)              55             41          87        (117)
                                                      =====      ====              ==             ==          ==        =====


                                                December, 31 2001       December 31,   December 31,     March 31,     March 31,
                                                -----------------       -------------  -------------    ----------    ---------
                                                                           2000            1999           1999          1998
                                                                           ----            ----           ----          ----
                                                              (Amounts in millions, except per share amounts)
                                                              -----------------------------------------------
                                                      $    (pound)        (pound)         (pound)       (pound)       (pound)
                                                      -    -------        -------         -------       -------       -------
Consolidated Balance Sheet Data:
Fixed assets                                      1,436        987          1,093           1,036           985         1,060
Total assets                                      2,412      1,658          2,606           2,395         2,347         2,462
Long-term debt                                    1,119        769          1,161             964         1,103         1,026
Short-term   debt  and  current   portion  of
long-term debt                                        -          -            110             305           150           488
Company  obligated   mandatorily   redeemable
Trust   Securities  of  junior   subordinated
deferrable interest debentures                      230        158            178             166           168             -
Net assets                                          620        426            506             451           410           323
Capital stock                                       640        440            440             440           440           440
Dividends per share                                   -          -              -               -             -             -

<PAGE>

(1)        The information presented above includes consolidated income
           statement data for the nine months ended December 31, 1999 following
           the change in YPG Group's accounting reference period in 1999 from
           March 31 to December 31.

(2)        YEG's Supply Business was disposed of during the year ended December
           31, 2001. The results for continuing operations have been reduced by
           transactions with the former Supply Business until the point of
           disposal. As the continuing Distribution Business is substantially a
           de facto regulated monopoly, sales will continue to be made to the
           former Supply Business. The following table shows the results if the
           transactions with the former Supply Business had not been eliminated.

                                                       Year ended           Year ended     Nine months    Year        Year ended
                                                       -----------          -----------    ------------   -----       ----------
                                                    December 31, 2001      December 31,       ended       ended       March 31,
                                                    -----------------      -------------      ------      ------      ---------
                                                                                2000       December 31,   March 31,      1998
                                                                                ----       -------------  ----------     ----
                                                                                               1999          1999
                                                                                               ----          ----
                                                                              (Amounts in millions)
                                                     $         (pound)         (pound)        (pound)     (pound)      (pound)
Operating revenues from continuing operations:
As reported                                             250       172             105             68          71           65
Sales to former Supply Business                         131        90             177            175         259          256
                                                        ---        --             ---            ---         ---          ---
Continuing operations restated                          381       262             282            243         330          321
                                                        ===       ===             ===            ===         ===          ===
Operating income/(loss):
As reported                                              11         7            (54)           (63)        (84)         (80)
Transactions with former Supply Business                116        80             154            147         209          203
                                                         --        --             ---            ---         ---          ---
Continuing operations restated                          127        87             100             84         125          123
                                                        ===       ===             ===             ==         ===          ===
</TABLE>

(3)        Operating income includes:

           Year ended December 31, 2001: the impact of the disposal of the
           Supply Business on July 31, 2001 and a charge of approximately
           (pound)5 million following the collapse of Independent Insurance.

           Year ended December 31, 2000: the effects of competition in the
           electricity supply market resulting in more Distribution Business
           revenues being derived from outside the YPG Group and a charge of
           approximately (pound)4.5 million for costs associated with business
           streamlining as a result of the impact of the distribution price
           control review.

           Nine months ended December 31, 1999: a charge of (pound)2 million for
           costs in relation to Year 2000 modifications.

           Year ended March 31, 1999: includes a charge of (pound)9 million for
           costs in relation to Year 2000 modifications, (pound)2 million for
           committed costs arising from delays in opening up the competitive
           market and (pound)5 million for restructuring charges.

           Year ended March 31, 1998: provision of (pound)4 million for
           committed costs arising from delays in opening up the competitive
           market and (pound)10 million for restructuring charges.
<PAGE>

(4)        Other income/(loss) These amounts include the following notable
           items:

           Year ended March 31, 1999: includes a loss of (pound)12 million
           before taxes was charged following the reduction in fair value of
           Yorkshire Group's investment in Ionica by (pound)11 million and a
           subsequent loss on sale of the investment of (pound)1 million.

           Year ended March 31, 1998: includes an unrealized loss of (pound)41
           million before taxes was charged following the reduction in fair
           value of Yorkshire Group's investment in Ionica.

(5)        YEG's Supply Business was disposed of during the year ended December
           31, 2001. The loss recognized on disposal resulted in a decrease in
           net income in the year ended December 2001 of (pound)68 million (net
           of related income taxes benefit of (pound)35 million).

           YEG's Generation Business was disposed of during the year ended March
           31, 1999. The gain recognized on disposal resulted in an increase in
           net income in the year ended March 31, 1999 of (pound)24 million (net
           of related income taxes of (pound)31 million). Provision was made in
           the year ended March 31, 1999 for income taxes arising on the gain.
           However, a favorable adjustment to tax liabilities of (pound)8
           million, in respect of the disposal, arose and was recognized in the
           income statement for the nine months ended December 31, 1999.

(6)        Represents the windfall tax imposed by the UK government, which was
           not deductible for UK corporation tax purposes.

(7)        YEG has revised the useful economic lives of its distribution network
           assets in order to provide a more accurate estimated life for each
           asset type. Such assets are now depreciated over a period between 10
           and 50 years. The previous policy was to depreciate such assets over
           a period of between 10 and 80 years. In the year ended December 31,
           2001 the effect of this change was to increase net income by (pound)4
           million.

Exchange Rate Information

Solely for the convenience of the reader, pounds sterling amounts in the
consolidated financial statements have been translated into US dollar amounts at
the Noon Buying Rate in New York on December 31, 2001 of $1.4543 = (pound)1.00.

The following tables set forth, for the periods indicated, certain information
concerning the Noon Buying Rate in New York City for cable transfers in British
pounds as certified for customs purposes by the Federal Reserve Bank of New
York, expressed in U.S. dollars per (pound)1.00. On July 9, 2002 the Noon Buying
Rate was $1.5465 per (pound)1.00.

<PAGE>
           Last six months        (U.S. dollars per British pound)
           ---------------
                                    High               Low
           2002
           June                     1.54              1.45
           May                      1.47              1.45
           April                    1.46              1.43
           March                    1.43              1.41
           February                 1.43              1.41
           January                  1.45              1.41

                                    High       Low    Average (1)  End of Period
                                        (U.S. dollars per British pound)
           Year ended December 31,
           2001                     1.50      1.37       1.44          1.46
           2000                     1.65      1.40       1.52          1.50
           1999                     1.68      1.55       1.62          1.62
           1998                     1.72      1.61       1.66          1.66
           1997                     1.70      1.58       1.64          1.64

(1)   The average of the Noon Buying Rate on the last business day of each month
      during the relevant period.

We publish our financial statements in British pounds. See "Basis of
Presentation" in note 1 to the consolidated financial statements in Item 18
which presents the year end rate used in the preparation of those consolidated
financial statements.

B.         Capitalization and Indebtedness

Not Applicable

C.         Reasons for the Offer and Use of Proceeds

Not Applicable

D.         Risk Factors

Credit Risk, Exchange Rate Risk and Interest Rate Risk

Reference is made to "Item 11 - Quantitative and Qualitative Disclosures About
Market Risk".

Regulation of the Distribution Business

YED's Distribution Business operates in a highly regulated industry and is thus
subject to regulations that may change from time to time. New or revised
regulations could have a material adverse effect on its operations in the
future. The principal legislation governing the structure and regulation of the
electricity industry in Great Britain is the Electricity Act, as amended by the
Utilities Act and related secondary legislation. The Electricity Act created the
<PAGE>
institutional framework under which the industry is currently regulated,
including the post of Director General of Electricity Supply (the "Regulator"),
who was appointed by the Secretary of State. The Regulator was replaced by GEMA
in November 2000 under the Utilities Act, with the then Director General of both
Electricity Supply and Gas Supply becoming chairman of GEMA. Revenue from the
Distribution Business is controlled by a formula set by Ofgem in connection with
each distribution price control review. This formula determines the maximum
average price per Unit of electricity distributed (in pence per kilowatt hour) a
licensed distributor is entitled to charge. For certain additional risks
relating to the regulated nature of YPG Group's business see "Item 4: Informa-
tion on the Company - Regulation under the Electricity Act" and "- UK
Environmental Legislation".

Holding Company Structure

YPG is a non-operating holding company, conducting substantially all of its
business through YEG and its subsidiaries. YPG will rely on dividends,
indirectly, from YED to meet its obligations. Under English law, YED can make
distributions only to the extent that it has Distributable Reserves. As at
December 31, 2001 YED's distributable reserves were (pound)10.8 million. At
December 31, 2001, the direct and indirect subsidiaries of YPG had total
indebtedness (excluding indebtedness owed to YPG) of approximately (pound)927
million and such subsidiaries may incur additional indebtedness in the future.

Yorkshire Finance and Yorkshire Finance 2 are special purpose entities formed
solely as financing vehicles for YPG and its affiliates. Therefore, Yorkshire
Finance and Yorkshire Finance 2's ability to make interest and other payments is
solely dependent upon YPG making payments on its obligations to Yorkshire
Finance and Yorkshire Finance 2 as and when required. At December 31, 2001, YPG
had (pound)927 million ($1,349 million) of unsecured and unsubordinated debt
outstanding. The terms and conditions of those bonds contain no restrictions on
the amount of additional indebtedness that may be incurred by YPG and its
subsidiaries, including Yorkshire Finance and Yorkshire Finance 2. However, the
terms and conditions of those bonds contain restrictions on the ability of
Yorkshire Finance, Yorkshire Finance 2, YPG and any significant subsidiaries to
incur secured indebtedness.

Substantial Leverage

At December 31, 2001, the ratio of YPG's consolidated debt (excluding the Trust
Securities) to total capitalization was approximately 64%. The degree to which
YPG is leveraged could affect its ability to service its indebtedness, to make
capital investments, to take advantage of certain business opportunities, to
respond to competitive pressures or to obtain additional financing. The ability
of YPF to pay amounts due is solely dependent upon YPG making payments to YPF as
and when required.

Any declines in YED's future business, increases in capital costs or the
inability to borrow additional funds could impair YPG's ability to meet its debt
service obligations and, therefore, could adversely affect YPF's ability to make
payments of principal and interest. No assurance can be given that additional
financing will be available when needed or, if available, will be obtainable on
terms that are favorable to YPG or YPF.

European Monetary Union

On January 1, 1999, 11 European Union countries formed an economic and monetary
union and agreed to introduce a single currency, the Euro. Euro notes and coins
were introduced into circulation in those countries on January 1, 2002. Although
the UK has not joined the monetary union at this time, the UK Government has
indicated that it may join in the future but has not, as yet, announced whether
its criteria for entry have been met. YPG Group is not exposed to any
significant currency risk and, therefore, management considers the exposure from
entering the monetary union to be limited to the costs of ensuring that YPG
Group's financial systems are Euro compliant. Management is currently assessing
the effort and cost required to prepare YPG Group's financial systems for the
potential introduction of the Euro in the UK.
<PAGE>

ITEM 4.  INFORMATION ON THE COMPANY

On April 3, 2001,  Innogy  acquired  94.75% of the issued share capital of YPG
from its prior owners, American Electric Power Company Inc. and Xcel Energy Inc.
Xcel Energy Inc. retained a 5.25% ownership interest.  On September 21, 2001, CE
acquired 94.75% of the issued share capital of YPG from Innogy.

YPG AND AFFILIATES

     YPG

     YPG was incorporated as a private company with limited liability under the
     laws of England and Wales in July 1996. In 1997, YPG acquired YEG, at the
     time one of the twelve RECs in England and Wales. YPG's primary asset is
     the outstanding shares of Yorkshire Holdings, a public limited company
     incorporated under the laws of England and Wales, which in turn
     beneficially owns all of the outstanding shares of YEG. Yorkshire Holdings
     was organized as a wholly-owned subsidiary of YPG solely for holding the
     share capital of YEG and has no other significant operations.

     On April 3, 2001, subsidiaries of AEP and Xcel sold 94.75% of the issued
     share capital of YPG to Innogy, an integrated energy company in the UK. AEP
     sold its entire interest in YPG, while Xcel retained a 5.25% interest.

     On September 21, 2001, CE, a company incorporated under the laws of England
     and Wales, acquired 94.75% of the issued share capital of YPG from Innogy.
     CE is indirectly owned by MEHC, a company incorporated in Iowa, United
     States of America.

     YORKSHIRE FINANCE AND YORKSHIRE FINANCE 2

     Yorkshire Finance and Yorkshire Finance 2 were incorporated under the laws
     of the Cayman Islands in August 1997 and January 2000, respectively, solely
     for the purpose of operating as financing vehicles for YPG and its
     affiliates.

     YEG

     YEG was one of twelve RECs in England and Wales licensed to distribute and
     supply electricity. YEG's two principal businesses were the Distribution
     Business and the Supply Business. YEG's Distribution Business consisted
     principally of the distribution of electricity to approximately two million
     domestic, commercial, agricultural and industrial customers in its
     Authorized Area. The majority of the Distribution Business is a regulated
     monopoly. YEG's Supply Business consisted of the purchase and supply of
     electricity and gas, primarily to customers within the Authorized Area, in
     the competitive market. YEG does not own a generation business.

     On July 31, 2001, YEG sold its Supply Business to Npower Yorkshire Limited,
     a wholly-owned subsidiary of Innogy. As of that date, therefore, YEG ceased
     to operate the Supply Business and all risks and liabilities associated
     therewith transferred to Innogy.

     On October 1, 2001, following the approval of the Department of Trade and
     Industry and the enactment of the relevant provisions of the Utilities Act,
     YEG's statutory transfer scheme took effect to transfer the assets and
     liabilities of YEG's Distribution Business to YED, a wholly-owned sub-
     sidiary of YEG. The Utilities Act permitted each of the former PESs to
     implement a transfer scheme by which the assets and liabilities of the
     Distribution and Supply Businesses were transferred to separate
     subsidiaries holding a distribution or supply license.

     YEG's transfer scheme had the effect of transferring any remaining assets
     and liabilities of YEG's electricity Supply Business to Npower Yorkshire
     Supply Limited, which is now a wholly-owned subsidiary of Innogy. This
     included all the Supply Business assets and liabilities, the legal title to
     which had not been transferred to Npower Yorkshire Limited on July 31,
     2001. As of October 1, 2001, therefore, YEG ceased to have any further
     legal or beneficial interest in the Supply Business.
<PAGE>

     Effective from October 1, 2001, under the terms of an asset transfer
     agreement, YEG transferred those distribution-related assets not
     transferred to YED under the transfer scheme to YEDSL, a wholly owned
     subsidiary of YEG. From October 1, 2001, YEG's principal activity was to
     act as a holding and investment company.

     In the accounting period commencing January 1, 2001, YEG changed its
     financial year end from December 31 to March 31. In the accounting period
     commencing April 1, 2001, YEG changed its financial year end from March 31
     to December 31.

     YED

     YED was incorporated under the laws of England and Wales on November 22,
     2000 and is a wholly owned subsidiary of YEG. On October 1, 2001, following
     the approval of the Secretary of State for Trade and Industry and the
     enactment of the relevant provisions of the Utilities Act 2000, YEG's
     transfer scheme took effect to transfer the assets and liabilities of YEG's
     Distribution Business to YED. Also on October 1, 2001, the licensing scheme
     under the Utilities Act 2000 took effect and YED, as the statutory
     transferee of YEG's Distribution Business, began to hold a standard
     electricity distribution license.

     YED's business is the distribution of electricity to industrial,
     commercial, agricultural and domestic customers in its Distribution
     Services Area. YED's business receives electricity primarily from the NGC
     transmission system and distributes it on behalf of suppliers to customers
     via its own network of transformers, switchgear and cables.

     YORKSHIRE TRUST

     Yorkshire Trust is a statutory business trust created under Delaware law
     pursuant to the filing of a certificate of trust with the Delaware
     Secretary of State on February 4, 1998. Yorkshire Trust will terminate in
     2043, but may dissolve earlier, as provided in the agreement. Yorkshire
     Trust exists exclusively to act as a financing vehicle for YPG, through its
     holding certain debt instruments issued by Yorkshire Finance and the
     issuance of its Trust Securities.

     YEDSL

     YEDSL was incorporated under the laws of England and Wales on November 22,
     2000 and is a wholly owned subsidiary of YEG. Effective from October 1,
     2001, under the terms of an asset transfer agreement, YEDSL purchased the
     distribution-related assets of YEG that had not been transferred to YED
     pursuant to the transfer scheme. YEDSL provides restoration and maintenance
     services in respect of the distribution network and head office
     administrative services to YED and during 2001 also provided new connection
     services to YED.

THE US PARENTS

     MEHC

     MEHC is a United States-based, privately owned, global energy company with
     publicly traded fixed income securities. MEHC is involved in the production
     of energy from diversified fuel sources including geothermal, natural gas,
     hydroelectric, nuclear, biomass, wind and coal. MEHC serves approximately 5
     million electricity and natural gas customers worldwide, has approximately
     10,000 megawatts of generation capacity either owned, contracted and in
     operation, under construction or in advanced development, and has
     approximately 10,200 employees.

     MEHC's revenues for the year ended December 31, 2001 were $5.3 billion and
     its assets as of that date were $12.6 billion.

     XCEL

     Xcel, a Minnesota corporation, is a registered holding company under the
     Public Utility Holding Company Act of 1935.
<PAGE>

     The revenues of Xcel and its subsidiaries are derived substantially from
     the generation, purchase, transmission, distribution and sale of
     electricity and from the purchase, transportation, distribution and sale of
     natural gas.

YPG GROUP'S BUSINESS

     BUSINESS SEPARATION

     On October 1, 2001, the licensing scheme under the Utilities Act 2000 took
     effect and YED, as the statutory transferee of YEG's Distribution Business,
     began to hold a standard electricity distribution license. See also the
     section below titled "Regulation under the Electricity Act".

     The costs of business separation were addressed by Ofgem in its review of
     the distribution and supply price controls. These controls became effective
     on April 1, 2000, and included an allowance for separation costs of
     (pound)7.5 million for YED's Distribution Business over the following 5
     years ending March 31, 2005 and an allowance of (pound)200,000 per year for
     YEG's former electricity supply business for the following 2 years.

     The Utilities Act provided for the separate licensing of electricity supply
     and distribution and, from October 1, 2001, introduced a bar on supply and
     distribution licenses being held by the same legal person. This led to the
     electricity supply and distribution businesses of the PESs being
     transferred into and conducted by separate companies when the relevant
     provision of the Utilities Act became effective on October 1, 2001.

     On October 1, 2001, following the approval of the Secretary of State for
     Trade and Industry and the enactment of the relevant provisions of the
     Utilities Act 2000, YEG's transfer scheme took effect to transfer the
     assets and liabilities of YEG's Distribution Business to YED.

     DISTRIBUTION BUSINESS

     The Distribution Business consists principally of the ownership, management
     and operation of YED's electricity distribution network within the
     Distribution Services Area. The primary activity of the Distribution
     Business is the receipt of electricity from the Grid and the distribution
     of electricity on behalf of suppliers to end users connected to YED's
     network. Because YED's Distribution Business is substantially a de facto
     regulated monopoly, virtually all electricity supplied to consumers in the
     Distribution Services Area is transported through its distribution network,
     thus providing YED with a stable distribution volume unaffected by customer
     choice of the supplier of the electricity. As a holder of a standard
     electricity distribution license, YED is subject to a revenue cap
     regulatory framework providing economic incentives to operate in a
     cost-effective manner. See the section below titled "The Electric Utility
     Industry in Great Britain".

           DISTRIBUTION BUSINESS CUSTOMERS, UNITS DISTRIBUTED, REVENUES AND
           OPERATING PROFIT
           ---------------------------------------------------------------------

           The Distribution Services Area covers approximately 10,000 square km
           (3,860 square miles) from the Pennine uplands in the west, and the
           cities of Leeds, Bradford and Sheffield, to the City of Hull, the
           ports of the Humber estuary and the eastern coastline. It encompasses
           the counties of West Yorkshire, East Yorkshire and almost all of
           South Yorkshire, together with parts of North Yorkshire, Derbyshire,
           Nottinghamshire, Lincolnshire and Lancashire. The regional economy is
           diverse. The traditional heavy industries of iron and steel, coal
           mining, textiles and engineering continue to contribute to the
           regional economy, but their overall significance has declined,
           particularly in the last decade. During this period, other
           industries, such as chemicals and food and drink, have expanded, as
           have service sector activities such as finance, retailing and
           leisure. The region is well served by road and rail networks, has
           three regional airports, and the seaports of the Humber estuary
           provide access to European markets.

           The following table sets out details of YED's distribution customers
           and the volume of electricity distributed, as well as distribution
           operating revenues and operating income at the dates and for the
           periods presented.
<PAGE>
<TABLE>
<CAPTION>
<S>                                                     <C>                      <C>                      <C>
                                                                            At December 31,
                                                                            ---------------
                                                        2001                     2000                     1999
Number of customers connected
             Domestic                                1,942,895               1,931,483                  1,922,091
             Small/Medium Business                     141,809                 134,253                    134,099
             Large Business/Other                        1,697                   1,656                      1,652
                                                     ----------              ---------                  ---------
                    Total                            2,086,401               2,067,392                  2,057,842
                                                     =========               =========                  =========

                                                        Year ended December 31,                  Nine months ended
                                                                                                 December 31, 1999
                                                       2001                      2000
Electricity distributed (GWh)
            Domestic                                  8,181                     7,883                       5,254
            Small/Medium Business                     5,996                     5,801                       4,220
            Large Business/Other                      9,851                     9,686                       7,092
                                                      -----                     -----                       -----
                   Total                             24,028                    23,370                      16,566
                                                     ======                    ======                      ======


                                                        Year ended December 31,                 Nine months ended
                                                                                                December 31, 1999
                                                       2001                      2000
                                                                   (pound) (in Millions)
           Distribution operating revenues              262                       282                        243
           Distribution operating income                115                       136                        111
</TABLE>
           The financial information presented above includes transactions with
           YPG Group companies.

           COMPETITION IN THE DISTRIBUTION BUSINESS

           YED, as successor to YEG under YEG's transfer scheme, has not
           experienced significant competition in its Distribution Business and
           believes that the cost of providing a duplicate distribution network
           connected to the Grid would be prohibitive. To the extent that a
           customer may invest in its own on-site electric generating plants,
           however, such a customer would no longer require distribution and
           related services from YED except for standby connection to YED's
           electric distribution network.

           Since 1995 certain elements of work to connect customers to YED's
           distribution network have become open to competition as customers are
           able to provide certain elements of their own network connections by
           employing an approved contractor. Since 1995, in the Authorized Area
           and, subsequently, the Distribution Services Area, approximately
           1,418 individual connections have been provided or are planned to be
           provided by contractors external to YPG Group. During the same
           period, the YPG Group provided approximately 59,000 connections.

          On July 24, 2000, Ofgem published proposals regarding competition in
          connections. These proposals included:

o         a significant reduction in work deemed to be non-contestable;
<PAGE>

o         the establishment of a nation-wide registration scheme for
          contractors; and

o         development of requirements for PES Distribution Businesses to ensure
          that they charge their own connections business on the same basis as
          third parties.

          A number of national working groups were established by Ofgem to
          develop the new processes that will be required. Ofgem has
          subsequently published two consultation documents to facilitate the
          introduction of competition in new connections. The introduction of
          competition in new connections could lead to reduced revenue if
          customers select third parties to perform the work necessary to
          connect to YED's distribution system.

          INSET NETWORKS

          The licensing regime introduced under the Utilities Act on October 1,
          2001, enables licensed distributors to own and operate networks
          anywhere in Great Britain under their existing licenses, and defines
          the circumstances in which new distributors would need to be licensed.
          This has created a situation in which new networks serving domestic
          customers can be constructed, owned and operated by licensed distri-
          butors in addition to the distributor in whose Distribution Services
          Area the development is located (the "incumbent distributor"). This
          presents both threats and opportunities for existing distributors. The
          threat is the possibility that new entrants may emerge in the distri-
          bution network business. Partially mitigating the threat is the fact
          that the systems necessary to facilitate the relevant commercial
          transactions associated with providing such services do not yet exist
          at either local or national level. The industry is currently engaged
          in jointly developing such systems.

           STRATEGY FOR THE DISTRIBUTION BUSINESS

           The Distribution Business continued its strategy of maintaining a
           reliable and safe distribution system, which meets customer
           expectations while maximizing its operating efficiency and fulfilling
           regulatory requirements. YED maintains a sufficient level of
           investment in the distribution network to ensure continued
           reliability and safety. During the year ended December 31, 2001,
           (pound)141 million was invested in the distribution system, of which
           (pound)93 million represented capital improvements, including new
           substations, cables and overhead lines and (pound)48 million
           represented expenditure of an operational, repair and maintenance
           nature.

           During the year ended December 31, 2001, YED restored services to
           93.1% of all end-users affected by faults within three hours and on
           average an end user was without power for only 47.56 minutes during
           the year.

           DISTRIBUTION FACILITIES

           Electricity is transported across the Grid at 400 kV or 275 kV to 20
           grid supply points within YED's distribution network, where NGC
           transforms the voltage to 132 kV, 66 kV and 33 kV for entry into
           YED's distribution system.

           At December 31, 2001 YED's distribution system consisted of:

                                             LV          11kV      Above 11kV
                                             --          ----      ----------
           Number of metered supplies     2,141,026      1,681          26
           Total length of circuits       30,506km     20,602km      5,077km
           Percentage underground           91.7%        52.4%        31.9%

           The primary distribution system consists of 20 grid supply points
           from the Grid, an additional 67 supply points and 365 primary
           substations. At December 31, 2001, the installed transformer capacity
           with a secondary voltage higher than 650 volts at these substations
           was 20,668,000 kVA, including 8,253,000 kVA at the grid supply
           points. Remote control facilities enable the real time monitoring and
           operation of most of these larger substations from one central
           control room.
<PAGE>

           YED's distribution substations consist of 13,611 indoor substations,
           2,299 outdoor substations and 16,824 pole-mounted substations. At
           December 31, 2001, the installed transformer capacity with a
           secondary voltage less than 650 volts was 9,502,000 kVA.

      SUPPLY BUSINESS

           ELECTRICITY SUPPLY

           YEG's electricity Supply Business consisted of selling electricity to
           customers, purchasing such electricity and arranging for its
           distribution to those customers. Under the licensing arrangements
           that then prevailed, YEG had an exclusive right to supply electricity
           to domestic customers in its Authorized Area between 1990 and 1998.
           The electricity supply business inside the Authorized Area has been
           fully open to competition since 1999. The Supply Business also
           provided Data Management Services to suppliers including data
           collection and meter operation. These services became fully competi-
           tive in April 2000.

           COMPETITION IN THE ELECTRICITY SUPPLY BUSINESS

           In September 1998, phased competition was introduced to the domestic
           and small business electricity markets in Great Britain. This process
           was completed for all PES customers in May 1999. OFFER, however,
           introduced transitional price regulation for Designated Customers for
           an initial period of two years from April 1, 1998. These price
           controls required a change from April 1, 1999, of 3% below the level
           of inflation and an adjustment to allow for changes to the Fossil
           Fuel Levy.

           GAS: SOURCING AND SUPPLY

           Recognizing the long-term opportunities in the competitive gas supply
           market, in April 1994, YEG acquired a 6.97% equity stake in the
           Armada off-shore gas-condensate field (the "Armada Field") for
           approximately (pound)27.8 million. As of December 31, 2000, the
           Armada Field, which had a productive life of approximately 10 years,
           had initial proven resources of approximately 1.2 trillion cubic feet
           (84 billion cubic feet net to YEG) of gas and 64 million barrels of
           oil and oil equivalents (4.4 million barrels net to YEG). Delivery of
           such gas from the Armada Field began in October 1997. The initial
           development costs associated with the Armada Field were lower than
           originally anticipated. The reduction of bottle-necks allowed the
           field to increase rates of production substantially. As of December
           31, 2000, YEG had invested (pound)60 million in the Armada Field
           including the initial acquisition costs. The net book value of the
           investment at December 31, 2000 was (pound)33.5 million and was
           accounted for by the full cost method. The asset was sold to Npower
           Yorkshire Limited as part of the disposal of the Supply Business.

           YEG marketed gas to all sectors of the gas market that has been
           totally open to competition since May 1998. By December 31, 2000, YEG
           had entered into contracts and supplied gas to more than 338,000
           residential customers. Gas was sourced from YEG's interest in the
           Armada Field, a purchase agreement with a major gas supplier, swing
           contracts and purchases on the spot market which were designed to
           give YEG a balanced gas purchase portfolio. YEG utilized risk
           management methods in relation to gas purchasing and supply,
           including storage and an interruptible customer portfolio, designed
           to maximize its return consistent with an acceptable level of risk. A
           system to evaluate and enable effective management of risk in gas
           trading was used by YEG. The system enabled greater control of all
           transactions including daily evaluation of key parameters such as
           value at risk and profit and loss positions for each business unit of
           YEG. Sale and purchase confirmations, invoicing and credit checking
           were also carried out or facilitated by this system.
<PAGE>
           RESULTS OF THE SUPPLY BUSINESS

           The following table sets forth the volume of electricity sold to
           greater than 100kW supply customers and less than 100kW supply
           customers, as well as electricity and gas supply operating revenues
           and operating income. The figures for the year ended December 31,
           2001 represent volumes sold and operating revenues and incomes for
           the period to July 31, 2001, when the business was sold:

                                                Year ended     Nine months ended
                                               December 31,    December 31, 1999
                                              2001      2000
           Volume (GWh):
                    >100kW supply customers  7,688    11,642         8,647
                    <100kW supply customers  5,532    10,573         7,981
                                             -----    ------         -----
                    Total                   13,220    22,215        16,628
                                            ======    ======        ======


                                                Year ended     Nine months ended
                                               December 31,    December 31, 1999
                                              2001      2000
                                                        (in Millions)
           Supply operating revenues      (pound)830 (pound)1,428    (pound)997
           Supply operating income        (pound) 13 (pound)   82    (pound) 39

           The financial information presented above includes transactions with
           YPG Group companies.

      YEG sold its electricity and gas supply business to Npower Yorkshire
      Limited on July 31, 2001. YEG no longer owns or operates a Supply
      Business.

THE ELECTRIC UTILITY INDUSTRY IN GREAT BRITAIN

      SUMMARY

      The electric utility industry is divided into the functions of generation,
      transmission, distribution, supply and metering.

      INDUSTRY STRUCTURE

      The generation, supply and distribution sectors are all subject to a
      licensing regime that exists for the electricity industry in England and
      Wales as well as in Scotland.

      Competition in generation has increased over the last decade as RECs and
      other new entrant generators have constructed new plants and as imports
      through the interconnections with Scotland and France have grown.

      In England and Wales electricity is transmitted through the Grid by NGC
      and distributed by the twelve electricity distributors in their respective
      Distribution Service Areas. The opening of the electricity supply market
      to full competition, which was completed in May 1999, means that customers
      have been free to choose their electricity supplier since that time.

      In Scotland there are two vertically integrated companies, ScottishPower
      and Scottish and Southern Energy, each generating, transmitting,
      distributing and supplying electricity within their respective
      distribution and supply service areas as well as competing to supply
      electricity elsewhere.
<PAGE>

      The interconnection between the transmission systems of England and
      Scotland, owned by ScottishPower and NGC, is capable of transferring
      electricity between Scotland and England. There is also an interconnection
      with France, owned by NGC and EdF, through which electricity can be
      transferred between France and England and Wales.

      The system of wholesale purchasing of electricity through the Pool in
      England and Wales was replaced by a new system of trading arrangements,
      known as NETA, on March 27, 2001. For further details of this review of
      trading arrangements see "The Electric Utility Industry in Great Britain -
      Regulation under the Electricity Act - New Electricity Trading
      Arrangements".

      There is no equivalent to NETA in Scotland, but ScottishPower and Scottish
      and Southern are obligated by their licenses to offer electricity for sale
      to second-tier suppliers. They are also required to provide access to
      their transmission and distribution systems on a non-discriminatory basis
      to competing suppliers and generators.

      The reconfiguration of the electricity industry and the resolution of the
      attendant regulatory and competitive issues may change the conduct of YPG
      Group's business in the future. The nature and magnitude of any such
      change cannot be determined at this time.

      In response to competitive and regulatory changes, YPG Group may, from
      time to time, consider various strategic initiatives. These may include
      combinations with other entities, internal restructuring and dispositions
      of assets or businesses or portions thereof. No assurance can be given as
      to whether any such initiative will be pursued or will occur or as to the
      ultimate effect of any such initiatives on the financial condition,
      liquidity, cash flows or competitive position of YPG Group.

      DISTRIBUTION OF ELECTRICITY

      LICENSED DISTRIBUTORS

      Anyone wishing to distribute electricity to customers in Great Britain
      must hold a license granted in accordance with the Electricity Act or be
      exempt from the requirement to hold such a license. Licensed distributors
      receive electricity from the Grid and transfer it on behalf of suppliers
      to end-user customers.

      ACCESSIBILITY REQUIREMENTS

      Each of the licensed electricity distributors is required to offer terms
      for connection to, and use of, its distribution system to any person. In
      providing use of its distribution system, a licensed electricity
      distributor must not discriminate between users; nor may its charges
      differ except where justified by differences in cost. Similar principles
      apply to the carrying out of connection works. Disputes over the terms of
      offers may be determined by GEMA.

      DISTRIBUTION PRICE REGULATION: BACKGROUND

      Revenue from the Distribution Business is controlled by a formula
      principally based on P x (1+(RPI-Xd)) where Xd is currently 3% (the
      "Distribution Price Control Formula"). P is the previous year's maximum
      average price per unit of electricity distributed. Therefore the maximum
      average price in any year is based in part on the maximum average price in
      the preceding year, such that a price reduction in any given year has an
      ongoing effect on the maximum average price for all subsequent years. The
      Retail Price Index ("RPI") is a measure of inflation, and equals the
      percentage change in the UK RPI between the six-month period from July to
      December of the two previous years. Because RPI is based on a weighted
      average of the prices of goods and services purchased by a typical
      household, which may bear little resemblance to the inputs contributing to
      a licensed distributor's business costs, the RPI calculation may not
      accurately reflect the price changes affecting the licensee. The Xd factor
      is established by Ofgem following review. This formula determines the
      maximum average price per Unit of electricity distributed (in pence per
      kilowatt hour) which a licensed distributor is entitled to charge.
<PAGE>

      The most recent distribution price control review took effect from April
      1, 2000, for the five-year period ending March 31, 2005. As a result of
      this review, YEG's allowed distribution revenue for the Regulatory
      Accounting Period commencing April 1, 2000 was reduced by 23% in real
      terms (the range of reductions for all distribution companies was between
      19% and 33%) from the level permitted in the final year of the previous
      price control which ended on March 31, 2000. In addition, for the second
      through fifth Regulatory Accounting Periods in the five-year price control
      review period, the Xd factor will be equal to 3%, which means that in each
      of these years regulated distribution prices are required to fall in real
      terms by a further 3% per annum.

      In setting the distribution charges to apply during each Regulatory
      Accounting Period, each licensed distributor must project the permitted
      maximum average charge per unit to be distributed in that Regulatory
      Accounting Period. The projection must take into account forecasts of
      Units distributed, distribution line losses, the actual change in RPI and
      NGC exit charges. Failure to forecast accurately may result in over-
      charging or undercharging, which is taken into account in the following
      Regulatory Accounting Period through a correction factor in the distribu-
      tion price control formula. If a licensee has overcharged in a given
      Regulatory Accounting Period, the maximum average charge per unit distri-
      buted in the following Regulatory Accounting Period is reduced by an
      amount to reflect the excess income received, to which is added interest
      at the average of the daily base rates of Barclays Bank plc during the
      period in respect of which the calculation falls plus 4%. In the event of
      undercharging, the Distribution Price Control Formula allows the licensee
      to recover the shortfall in income plus interest at the base rate.

      In certain instances, however, overcharging or undercharging by a licensee
      above specific percentage thresholds may result in adjustments by Ofgem.
      If in any Regulatory Accounting Period the average charge per Unit
      distributed exceeds the permitted maximum average charge per Unit
      distributed by more than 3%, then in the next following Regulatory
      Accounting Period the licensee may not increase distribution charges
      unless it has satisfied Ofgem that the average charge per unit in that
      next following Regulatory Accounting Period is not likely to exceed the
      permitted maximum average charge. If, with respect to any two successive
      Regulatory Accounting Periods, the sum of the amounts by which the average
      charge per unit distributed has exceeded the permitted maximum average
      charge per unit distributed is more than 4% of that permitted maximum
      average charge, then, in the next following year, the licensee may be
      required by Ofgem to adjust its charges so that they fall within the
      maximum permitted average charge. If, with respect to two successive
      Regulatory Accounting Periods, the licensee undercharges by more than 10%
      of the maximum average charge, Ofgem may limit the amount by which such
      undercharging may be recovered.

      Since April 2000, the distribution price control formula is no longer
      nationally divided into metering and non-metering components. The current
      structure contains a general distribution allowance taking into account
      movements of some metering services to electricity supply (e.g. data
      collection). Non-half hourly meter provision and meter maintenance
      activities relating to network connections, which became competitive on
      April 1, 2000, are remunerated under the distribution price control
      formula. As part of the latest price control review, provisions were added
      to the distribution price control formula, which ensure that any reduction
      in operating costs resulting from a decline in the provision of metering
      services is reflected in lower permitted revenues.

      Connection charges are levied when a customer first connects to a
      licensee's distribution system or makes a material change in electricity
      supply requirements. These charges are excluded from the distribution
      price control formula. Since 1994 there has been competition in providing
      connections to new customers and limitations on the extent to which, and
      the circumstances in which, customers wishing to be connected would be
      required to pay for the costs of reinforcement of the distribution system.
<PAGE>

      SUPPLY OF ELECTRICITY

      LICENSED SUPPLIERS

      Subject to minor exemptions, all electricity customers in Great Britain
      must be supplied by a licensed supplier. Licensed suppliers purchase
      electricity and make open access use of the transmission and distribution
      networks to deliver electricity to customers' premises.

      Prior to October 1, 2001, there were two types of licensed suppliers:
      public electricity (or first-tier) suppliers, also known as PESs, and
      second-tier suppliers. PESs included the RECs in England and Wales,
      ScottishPower and Scottish and Southern Energy. Second-tier suppliers
      included British Gas Trading, Innogy, PowerGen, Nuclear Electric,
      ScottishPower, Scottish and Southern Energy and the other PESs (including
      RECs supplying outside their Authorized Areas) and a number of independent
      second-tier suppliers.

      From October 1, 2001, pursuant to the changes brought about by the
      Utilities Act the conditions relating to electricity supply from the
      existing PES license and second tier licenses were combined into a new
      single supply license for each supplier, permitting such suppliers to
      supply electricity throughout Great Britain. The new supply licenses came
      into force on October 1, 2001 and coincided with the creation of separate
      legal entities for electricity supply and distribution.

      ELECTRICITY SUPPLY PRICE REGULATION: BACKGROUND

      Between 1990 and 1998 the supply of electricity to supply customers of
      PESs was subject to "pass-through" price control. The maximum average
      charge per unit of electricity supplied (in pence per kilowatt hour) was
      controlled by a formula principally based upon (P x (1 + (RPI-Xs)) + Y)
      (the "Supply Price Control Formula"). The initial value of Xs was set at 0
      for all the RECs on March 31, 1990. The Supply Price Control Formula was
      reviewed by OFFER with effect from April 1, 1994, when the Xs factor was
      set at 2% for all the RECs. This applied until March 31, 1998. P was the
      previous Regulatory Accounting Period's maximum average price per unit of
      electricity supplied (in pence per kilowatt hour) that related to the REC
      electricity supply business's own costs and margin. RPI was a measure of
      inflation, equaling the percentage change in the UK Retail Price Index
      between the six month period from July to December of the two previous
      years. Because RPI is based on a weighted average of the prices of goods
      and services purchased by a typical household, which may bear little
      resemblance to the inputs contributing to each REC's business costs, the
      RPI calculation may not have accurately reflected the price changes
      affecting each REC. The Y factor was a pass-through of certain costs which
      were either largely outside the management control of the REC or had been
      regulated elsewhere. The Y factor thus covered the REC's electricity
      purchase costs, including both direct Pool purchase costs and costs of
      hedging, transmission charges made by NGC, REC distribution charges and
      the fossil fuel levy (described below) or amounts equivalent thereto in
      respect of the purchase of non-leviable electricity which were
      attributable to franchise supply customers. The Supply Price Control
      Formula was therefore designed to focus downward pressure on costs and
      working capital, which were viewed as being within suppliers' direct
      control.

     There was a correction factor in the Supply Price Control Formula in the
     event of overcharging or undercharging. If a REC had overcharged in the
     previous regulatory accounting period, the maximum average charge per unit
     supplied was reduced by an amount to reflect the excess income received, to
     which was added interest. In the event of undercharging, the Supply Price
     Control Formula allowed the licensee to recover the shortfall in income
     plus interest.

     A revised supply price control was implemented on April 1, 1998, and was
     effective until March 31, 2000. This took the form of a series of price
     caps on the tariffs applicable to designated customers in the Authorized
     Area. These controls also required an additional 3% below inflation
     reduction which became effective on April 1, 1999. The automatic
     pass-through of costs previously passed through to domestic and business
     customers below 100kW, consisting primarily of purchased power costs and
     the correction factor, which annually adjusted prices for any imbalance
     between forecast and actual costs, were both discontinued from April 1,
     1998.
<PAGE>

REGULATION UNDER THE ELECTRICITY ACT

      THE REGULATOR

      The principal legislation governing the structure and regulation of the
      electricity industry in Great Britain is the Electricity Act, as amended
      by the Utilities Act and related secondary legislation. The Electricity
      Act created the institutional framework under which the industry is
      currently regulated, including the post of Director General (the
      "Regulator"), who was appointed by the Secretary of State. The Regulator's
      office and support staff were collectively known as OFFER. Both OFFER and
      OFGAS were replaced by Ofgem in June 1999 in anticipation of the formal
      merger of the electricity and gas regulatory offices under the Utilities
      Act. The posts of Director General of both Electricity and Gas Supply were
      replaced by GEMA in November 2000 under the Utilities Act, with the then
      Director General of both Electricity and Gas Supply  becoming chairman of
      GEMA. GEMA comprises a number of executive and non-executive members. The
      management committee of Ofgem reports to GEMA, which determines strategy
      and decides on major policy issues.

      GEMA's functions under the Electricity Act, as amended by the Utilities
      Act, include granting licenses to generate, transmit, distribute or supply
      electricity; proposing modifications to licenses and, in the case of
      non-acceptance of such proposals by licensees, making license modification
      references to the Competition Commission; enforcing compliance with
      license conditions; calculating the Fossil Fuel Levy rate and collecting
      the levy; determining certain disputes between electricity licensees and
      customers; setting standards of performance for electricity licensees; and
      liaising as appropriate with the GECC.

      Concurrently with the Director General of Fair Trading, GEMA exercises
      certain functions relating to monopoly situations and also to courses of
      conduct which have, or are intended or likely to have, the effect of
      restricting, distorting or preventing competition in the generation,
      transmission or supply of electricity under the Competition Act.

      The Electricity Act, as amended by the Utilities Act, confers a principal
      objective on GEMA and the Secretary of State to protect the interests of
      customers, wherever appropriate by promoting effective competition. In
      pursuing these functions, the Electricity Act requires GEMA and the
      Secretary of State to exercise their functions in the manner each
      considers is best calculated to ensure that all reasonable demands for
      electricity are met and to secure that license holders are able to finance
      their licensed activities.

      In performing their functions the Secretary of State and GEMA have a
      requirement to consider the interests of low income consumers, the
      chronically sick, the disabled, people of pensionable age and consumers in
      rural areas.

      In the exercise of its statutory functions, GEMA also has a duty to
      consider guidance issued by the Secretary of State on the social and
      environmental objectives relevant to the gas and electricity sectors.

      The Secretary of State has powers to make regulations covering a range of
      activities including regulations relating to electricity supply and
      safety, the promotion of energy efficiency and the generation of electri-
      city from renewable sources, and to provide for a cross-subsidy for the
      benefit of disadvantaged consumers.

      REGULATORY DEVELOPMENTS

      With effect from October 1, 2001, the Utilities Act introduced a
      prohibition on the activity of distributing electricity without a license
      or exemption. The supply and distribution of electricity became separate
      licensable activities with a bar on the same legal entity holding both an
      electricity supply and electricity distribution license. Standard license
      conditions were introduced into the separate electricity supply and
      distribution licenses. To comply with these requirements, YEG nominated
      YED to be the distribution license holder and Npower Yorkshire Supply
      Limited to be the electricity supply license holder within the YPG Group.
      Npower Yorkshire Supply Limited was then immediately sold to Innogy in
      accordance with the asset sale of the supply business which had taken
      place on July 31, 2001. As part of the nomination of YED as the
<PAGE>
      distribution license holder, there was a transfer, among other things, of
      certain assets of YEG constituting its distribution business and certain
      related liabilities, including those as principal obligor under the
      (pound)200 million Guaranteed Bonds due 2020, to YED on October 1, 2001
      (the "Bonds"). Payments of all amounts in respect of the Bonds are
      unconditionally and irrevocably guaranteed by YEG.

      INFORMATION & INCENTIVES PROGRAM ("IIP")

      The December 1999 distribution price control review proposals set out
      Ofgem's intention to commence an ongoing program on information and
      incentives.

      The stated objective for this program was to try to address some of the
      weaknesses which Ofgem believes have been associated with the existing
      framework of price regulation:

o     to reduce the emphasis on periodic negotiation with Ofgem;

o     to give clearer incentives in respect of quality of supply; and

o     to improve the incentive to achieve efficiency savings in both operating
      costs and capital costs.

      In order to ensure that the necessary information is available to operate
      the IIP, Ofgem has introduced a specific distribution license condition
      for the collection and audit of such information. Ofgem has decided,
      following consultation, to allow Distribution Businesses to adjust their
      regulated revenue by an amount equivalent to (pound)0.50 per customer for
      one year to cover certain costs required to be incurred to obtain accurate
      information with respect to low voltage customers. Such an allowance will
      mean an additional approximately (pound)1 million revenue for YED's
      Distribution Business, subject to a successful audit in 2002 by Ofgem's
      appointed auditors. Ofgem has proposed that failure to meet the accuracy
      standards for information provided under the information and incentives
      program could result in financial penalties for breach of a License
      condition. See Part I, Item 1, "The Electric Utility Industry in Great
      Britain - Regulation under the Electricity Act - Financial Penalties".

      FINANCIAL RINGFENCING

      The distribution licenses include financial ringfencing arrangements, some
      of which differ from those in the former PES licenses. The principal
      features of the financial ringfencing arrangements are as follows:

o    The licensee is not permitted to conduct any business or carry on any
     activity other than the Distribution Business and businesses that are
     "de-minimis".

o    The aggregate turnover of all "de-minimis" businesses must not exceed 2.5%
     of the licensee's Distribution Business and the amount invested in all such
     businesses by the licensee must not exceed 2.5% of the sum of the share
     capital in issue, share premium and consolidated reserves of the licensee.

o    The licensee may not hold shares in businesses that carry on activities
     that are not permitted  purposes of the distribution license.

o    The licensee must ensure that it has available to it the resources it
     requires to carry out the Distribution Business and comply with its
     statutory obligations. It must produce a certificate to GEMA on a periodic
     basis confirming that it has the necessary resources available to it and it
     may not declare a dividend without first certifying to GEMA that it is
     compliant with a number of license obligations including the ring fencing
     obligations.

o    The licensee must procure from its ultimate controller undertakings in a
     form specified by GEMA which are designed to ensure that those who may
     exercise control over the licensee will not cause it to breach its
     obligations.
<PAGE>

o    The licensee is required to use reasonable endeavors to ensure that the
     licensee maintains at all times an investment grade issuer credit rating.

o    The licensee is restricted in its ability to incur
     indebtedness, including any mortgage, charge, pledge, lien,
     or other form of security or to enter into any guarantee or
     any obligation other than on an arm's length basis, on
     normal commercial terms, and for a purpose which is
     permitted by the license.

o    The licensee may not transfer, lease, license, or lend any sum, asset,
     right or benefit to an affiliate except in accordance with the license
     condition which permits the following:

        -    A dividend or other distribution out of distributable reserves;

        -    Repayment of capital;

        -    Payment properly due for any goods, services or assets provided on
             an arm's length basis and on normal commercial terms;

        -    A transfer, lease, license or loan of any sum or sums, asset, right
             or benefit on an arm's length basis, on normal commercial terms and
             made in compliance with the payment condition, which requires the
             counter party to the transaction to pay in full when the
             transaction is entered into, unless the counter party or its
             guarantor benefits from an investment grade issuer credit rating;

        -    Repayment of, or payment of interest on, loans which have been
             properly undertaken;

        -    Certain payments relating to tax; or

        -    An acquisition of shares, provided it is an acquisition permitted
             by the terms of the ring fencing conditions.

o     The licensee must not allow any term of any agreement to exist which would
      mean that the licensee's liability to pay or repay any debt arises or is
      increased or accelerated because of the default of another person.

      REVIEW OF THE REGULATORY FRAMEWORK: THE UTILITIES ACT

      The Utilities Act was brought into effect by a series of commencement
      orders. Most sections of the Act took effect on October 1, 2001. The main
      provisions of the Utilities Act include:

o     the separation of the supply and distribution of electricity into separate
      licensable activities with a bar on the same legal entity holding both an
      electricity supply and electricity distribution license;

o     implementation of a statutory transfer scheme pursuant to which assets and
      liabilities related to the supply and distribution of electricity could be
      transferred by former PES licensees to the new supply and distribution
      licensees;

o     the establishment of GEMA in place of the individual regulators for gas
      and electricity.  The office to support GEMA is known as Ofgem;

o     a new principal objective for GEMA to protect the interests of consumers,
      wherever appropriate by promoting effective competition;

o     powers for GEMA to impose financial penalties on companies for breaches of
      license conditions and other specified statutory requirements (such
      penalties may not be in an amount to exceed 10% of the licensee's revenue)
      See "Financial Penalties" below;
<PAGE>

o     the establishment of an independent council, the Gas and Electricity
      Consumer Council (GECC), with responsibility for seeking to resolve
      complaints, providing information of use to consumers, and advocating the
      interests of all consumers to GEMA, government and others with an
      influence on regulation;

o     a requirement for price-regulated gas and electricity utilities to
      disclose links (if any) between directors' pay and customer service
      standards;

o     legislation to underpin NETA;

o     new `collective' license modification procedures enabling GEMA to modify
      standard license conditions without a Competition Commission reference,
      even if some companies disagree (although in certain circumstances a
      Competition Commission reference will still be necessary);

o     a duty on GEMA, in the exercise of its statutory functions, to have regard
      to guidance issued by the Secretary of State for Trade and Industry on the
      social and environmental objectives relevant to the gas and electricity
      sectors;

o     new powers for the Secretary of State for Trade and Industry to make
      regulations  to promote  energy  efficiency  and the generation  of
      electricity from renewable sources, and to provide for a cross-subsidy for
      the benefit of disadvantaged consumers; and

o     a requirement for GEMA to give reasons for certain key decisions and to
      publish and consult on significant future programs.

      FINANCIAL PENALTIES

      Under the Utilities Act, GEMA is able to impose financial penalties on
      license holders who contravene (or have in the past contravened) any
      relevant condition or requirement or who are failing (or have in the past
      failed) to achieve a satisfactory performance in relation to the
      individual standards of performance prescribed by GEMA. Any penalty
      imposed must be reasonable in all the circumstances of the case and may
      not exceed 10% of the licensee's revenue.

      The powers to impose penalties on licensees are in addition to GEMA's
      powers under the Competition Act. However, GEMA is prevented from imposing
      a Utilities Act financial penalty if it is satisfied that the most
      appropriate way of proceeding is under the Competition Act.

      The Utilities Act requires that GEMA prepare and publish a statement of
      policy on the imposition of financial penalties and the determination of
      their amount to which GEMA must have regard when deciding whether to
      impose a penalty. Following consultation, GEMA published the policy
      statement in April 2001.

      The policy statement outlines a number of factors that GEMA will consider
      in determining whether it would be appropriate for the imposition of a
      financial penalty:

o     compatibility of the imposition of a penalty with GEMA's principal
      objective to protect the interests of consumers, and other statutory
      duties;

o     the need to incentivize the licensee's compliance and to deter the
      licensee or other licensees from further contraventions or failures;

o     whether the contravention/failure had damaged consumers and/or market
      participants, for example by increasing costs;

o     whether the infringement was accidental, inadvertent or caused by factors
      outside the control of the licensee; and

o     other factors including the duration and extent of the contravention or
      failure.
<PAGE>

In calculating the level of the proposed penalty, a number of factors will be
taken into account, including:

o     the seriousness of the contravention or failure;

o     the harm or increased costs that the contravention or failure had caused
      to consumers and/or market participants;

o     any gain (financial or otherwise) made by the licensee as a result of the
      contravention or failure; and

o     the need to make any adjustments for:

      o   increases due to aggravating factors, such as repeated contraventions
          or failures, involvement of senior management, concealment of
          activities; and

      o   decreases due to mitigating factors, such as taking steps to remedy
          the contravention or failure and ensure compliance, and the licensee's
          cooperation with GEMA during the investigation.

      CONSUMERS' COMMITTEE

      The GECC was formally established under the Utilities Act on November 1,
      2000 and replaced the former Electricity Consumers Committees and the Gas
      Consumers Council and the former regional offices of Ofgem. The GECC has
      two main roles. The first is to act as a consumer advocate and to provide
      information and advice to the UK government, the media and others and also
      to consumers. The second function is to handle consumer complaints that
      have not been satisfactorily dealt with by the gas or electricity company
      concerned.

      EMBEDDED GENERATION

      In line with the UK Government's objective to increase the amount of
      energy produced by generating stations using renewable sources, which
      typically connect to distribution networks rather than to the Grid by
      virtue of their smaller size, a Distribution Generation Coordination Group
      ("DGCG") was established in December 2001 to take forward embedded
      generation issues, under the joint chairmanship of Ofgem and the
      Department of Trade and Industry ("DTI"). YED continues to lobby both the
      DTI and Ofgem for recognition and due allowance of the costs that will be
      incurred in reinforcing distribution networks to cope with the power flows
      that will result from the envisaged increase in embedded generation.

      LANE RENTAL

      The Government activated Section 74 of the New Roads and Street Works Act
      1991 ("NRSWA") with effect from April 1, 2001. Under this Section, highway
      authorities have the power to charge utilities when they fail to complete
      street works by a deadline agreed between the two parties. In addition,
      the Street Works (Charges for Occupation of the Highway) (England)
      Regulations 2001 have been made under Section 74A of NRSWA. These contain
      powers for highway authorities to levy a daily charge on utilities for
      street works activities ("lane rental"), and have been made at this time
      solely to enable the powers to be tested in certain parts of the country
      through pilot schemes. For this purpose, two local authorities - neither
      of them in YED's Distribution Services Area - are being allowed to operate
      lane rental pilot schemes in their areas. YED continues, with other
      licensed electricity distributors, to lobby the Government against the
      concurrent imposition of both Section 74 and Section 74A powers.

      LICENSE FEE COST RECOVERY

      Following a review of the principles governing the recovery of its costs
      through license fees, GEMA has determined that, with effect from
      Regulatory Accounting Period 2002, license fees will be recovered only
      from licensed monopoly network operators. This exclusion of suppliers and
      generators has caused licensed distributors' share of license fees to
<PAGE>
      increase. To compensate for this, GEMA has amended network operators'
      licenses to enable them to pass through to customers the full amount of
      any difference between actual license fees levied and the amounts included
      by GEMA within allowed revenue for license fees at the most recent
      distribution price control review. In addition, in recognition of the
      abnormally high level of license fees in Regulatory Accounting Period
      2001, GEMA has allowed licensed network operators to pass through to
      customers the difference between allowed and actual fees in respect of
      that period also.

      ENERGY EFFICIENCY

      The Utilities Act gave the Secretary of State the power to impose
      obligations on licensed gas and electricity suppliers, gas transporters,
      and electricity distributors to meet targets for the promotion of
      improvements in efficiency in consumers' use of energy. The obligations
      have, to date, only been imposed on suppliers.

      NEW ELECTRICITY TRADING ARRANGEMENTS

      In 1998, OFFER published a framework document describing the delivery and
      implementation of revised electricity trading arrangements based upon
      market trading arrangements in commodities markets elsewhere. In October
      1999, with the onset of the implementation phase, these new electricity
      trading arrangements became known as NETA. The arrangements were designed
      to better facilitate the development of competition, to ensure maximum
      transparency and to give all interested parties the opportunity to
      participate in the process. The overall aim of NETA is to reduce prices to
      end customers.

      NETA trading commenced and replaced the Pool on March 27, 2001.

      The Master Connection and Use of System Agreement was replaced with the
      Connection and Use of System Code ("CUSC") which was given contractual
      force through the CUSC Framework Agreement.

      Electricity supply businesses incurred significant costs to introduce and
      operate under NETA, while the financial impact on distributors was
      minimal.

      PES LICENSES

      On October 1, 2001, the statutory licensing scheme under the Utilities Act
      2000 took effect whereby YEG's PES license was converted into a standard
      electricity distribution license held by YED and a standard electricity
      supply license held by Npower Yorkshire Supply Limited. Consistent with
      and pursuant to the asset sale of the electricity and gas supply business
      of YPG Group to Innogy on July 31, 2001, Npower Yorkshire Supply Limited
      was immediately sold to Innogy on October 1, 2001. Between July 31, 2001
      and September 30, 2001, an agency agreement was in place between Innogy
      and YEG whereby Innogy acted as YEG's agent for the fulfillment of YEG's
      obligations under its PES License.

      ELECTRICITY DISTRIBUTION LICENSE

      YED's license contains a set of conditions that are standard to all
      distribution licenses. The license is structured around the key activities
      of YED by means of grouping together all of the standard conditions that
      relate to these key activities. Accordingly, the license groups together
      those standard conditions that apply to all licensees and are common
      across all license types, those that apply in general to all distribution
      licensees and those obligations falling on dominant licensees such as YED.
      The license also includes a set of special conditions, unique to YED, that
      mainly relates to the price control mechanism in respect of YED's DUoS
      income.

      TRANSMISSION LICENSES

      In England and Wales, NGC is the only transmission license holder. The
      transmission license imposes on NGC the obligation to operate the merit
      order system for the central dispatch of generating units and gives NGC
      responsibility for the economic purchasing of ancillary services from
      generators and suppliers. The transmission license requires NGC to offer
      terms on a non-discriminatory basis for the carrying out of works for
      connection to, and use of, the transmission system.
<PAGE>

      MODIFICATIONS TO LICENSES

      Subject to a power of veto by the Secretary of State, GEMA may modify
      license conditions with the agreement of the license holder. It must first
      publish the proposed modifications and consider representations or
      objections made. If GEMA fails to agree modifications to the special
      conditions of the license with a license holder, it may refer the matter
      to the Competition Commission. The price control conditions of the license
      are special conditions. If the Competition Commission finds that the
      matter referred to it has, or may be expected to have, specified effects
      adverse to the public interest which could be remedied or prevented by a
      license modification, GEMA is required to make modifications that appear
      to it requisite for the purpose of remedying or preventing the adverse
      effects identified by the Competition Commission. Modifications to license
      conditions may also be made by the Secretary of State as a consequence of
      monopoly, merger or other competition references under general UK
      competition law.

      Subject to the determination of relevant voting thresholds by the
      Secretary of State, the standard license conditions may be modified by a
      collective modification process whereby modifications can be made without
      the consent of individual licensees and without reference to the
      Competition Commission, provided GEMA has secured the agreement of a
      prescribed number of licensees.

      TERM AND REVOCATION OF ELECTRICITY DISTRIBUTION LICENSE

      By its terms, YED's electricity distribution license will continue in
      effect until terminated by not less than 25 years' notice in writing given
      by GEMA to YED. The Secretary of State for Trade and Industry may revoke
      an electricity distribution license by not less than 30 days' notice in
      writing to the licensee in certain specified circumstances. These
      circumstances include any failure to comply with a final order made by
      Ofgem requiring the license holder to comply with its license conditions
      or requirements, or the insolvency of the licensee.

UK ENVIRONMENTAL LEGISLATION

      YED's business is subject to numerous regulatory requirements with respect
      to the protection of the environment. The principal laws that have
      environmental implications for YED are the Electricity Act 1989, the
      Wildlife and Countryside Act 1981, the Water Industry Act 1991, the Water
      Resources Act 1991, the Environmental Protection Act 1990, the Statutory
      Nuisance Act 1993 and the Environment Act 1995.

      The Electricity Act requires YED to consider the preservation of natural
      beauty and the conservation of natural and man-made features of particular
      interest when it formulates proposals for development in connection with
      certain of its activities. Environmental assessments are required to be
      carried out in certain cases, including overhead line constructions at
      higher voltages and larger substation developments. YED has produced an
      environmental policy statement and an Electricity Act Schedule 9 Statement
      that set out the manner in which it intends to comply with its
      environmental obligations.

      Possible adverse effects of EMFs from various sources, including
      transmission and distribution lines, have been the subject of a number of
      studies and increasing public discussion. Although some current scientific
      research is indicating that EMFs do not cause adverse health effects,
      there is the possibility that the passage of legislation and changing
      regulatory standards would require measures to mitigate EMFs, with
      resulting increases in capital and operational costs. In addition, the
      potential exists for public liability with respect to lawsuits brought by
      plaintiffs alleging damages caused by EMFs. The only UK standards for
      exposure to power frequency EMFs are those promulgated by the National
      Radiological Protection Board and relate to the levels above which
      physiological effects have been observed. YED fully complies with these
      standards.
<PAGE>

      The Groundwater Regulations 1998 (Water Resources Act 1991) seek to
      prevent List I and List II substances entering groundwater and strengthens
      the UK Environment Agency's powers to require additional protective
      measures, especially in areas of important groundwater supplies. Mineral
      oils and hydrocarbons are included in the more tightly controlled List I
      substances. This affects the high voltage fluid filled electricity cable
      network incorporating an insulating fluid currently in the List I
      category. Further research may result in recategorization because of the
      biodegradable qualities of the cable fluid. The existing voluntary
      Operating Code of Practice, as agreed between the Environment Agency and
      the electricity supply industry, is undergoing revision through the
      services of the Electricity Association to address the regulatory changes.
      Helpful discussions with the Environment Agency continue.

      The Oil Storage Regulations started to come into force in 2002 and will
      require the introduction of secondary containment measures (bunding) for
      all above ground oil storage locations where the capacity is more than 200
      litres. The primary containers must be in sound condition, leak free, and
      positioned away from vehicle traffic routes. The secondary containment
      must be impermeable to water and oil (without drainage valve) and be
      subject to routine maintenance. The capacity of the bund must be
      sufficient to hold up to 110% of the largest stored vessel or 25% of the
      maximum stored capacity, whichever is the greater. The full impact of the
      regulations will be phased in over the next three years. The regulations
      come into effect as follows:

        o   March 1, 2002 for all new oil stores;

        o   September 1, 2003 for existing stores at "significant risk" (i.e.
            within 10 metres of a water course); and

        o   September 1, 2005 for all remaining stores.

      YED believes that it has taken, and intends to continue taking, measures
      to comply with the applicable law and UK government regulations for the
      protection of the environment. There are no material legal or
      administrative proceedings pending against YED or any member of the YPG
      Group with respect to any environmental matter.

UK AND EU COMPETITION LAW

      The Competition Act, which came into force on March 1, 2000, gives new
      concurrent powers to the Director General of Fair Trading and Ofgem to
      investigate and act against anti-competitive agreements and conduct. These
      new powers include fines of up to 10% of turnover over three years for
      companies that breach the prohibitions of the Act. In March 1999 the
      Office of Fair Trading issued formal guidelines on the concurrent
      application of the Competition Act to the regulated industries:
      "Concurrent Application to Regulated Industries".

      In 2001 Ofgem published the final form of its guidance document
      "Competition Act 1998: Application to the Energy Sectors". The document
      provides advice and information about the actions that Ofgem will take
      into account when considering whether, and if so, how, to exercise its
      powers under the Competition Act. The proposals do not raise any
      significant concerns for YED.

PROPERTIES

      YED owns the freehold of its principal offices in Leeds. YED has both
      network and non-network land and buildings.

      NETWORK LAND AND BUILDINGS

      At December 31, 2001, YED had interests in approximately 16,000 network
      properties, comprising principally sub-station sites.

      NON-NETWORK LAND AND BUILDINGS

      At December 31, 2001, YED had freehold and leasehold interests in
      non-network properties comprising chiefly offices, depots, warehouses and
      workshops. YEG still owns a number of former retail outlets. The net book
      value of non-network land and buildings at December 31, 2001, was
      approximately (pound)7 million.
<PAGE>

LEGAL PROCEEDINGS

     Litigation and arbitration may affect various companies in the YPG Group in
     the normal course of business. While the ultimate outcome of these
     proceedings cannot be predicted with certainty, we do not believe that any
     pending proceedings will have a material adverse effect on our results of
     operations or financial position.

     Litigation was concluded during the year ended December 31, 2001 with
     respect to NGC and International Power's use of actuarial surpluses
     declared in the ESPS.

     The Pension Ombudsman (a UK arbitrator appointed by statute) had issued a
     "final determination" in favor of complaints made by members of the ESPS
     relating to NGC's use of the ESPS surplus to offset its additional costs of
     early payment of pensions as a result of reorganization or redundancy,
     together with additional contributions required after a valuation. Under
     that determination the Pension Ombudsman directed NGC to pay into ESPS the
     amount of that use of the surplus plus interest. The Pension Ombudsman's
     final determination was challenged in the courts by NGC and International
     Power, who was also subject to a similar complaint. The High Court
     subsequently ruled that such use of surplus was permissible.

     On February 10, 1999, the Court of Appeal ruled that the particular
     arrangements made by NGC and International Power to dispose of the surplus,
     partly by canceling liabilities relating to pension costs resulting from
     early retirement, were invalid as they did not comply fully with the rules
     and procedures for dealing with surplus at that time. However, the Court of
     Appeal did uphold the High Court's ruling that NGC and International Power
     could benefit from pension scheme surplus provided that the scheme rules
     allow and that the interests of the members are taken into account.

     Following a further hearing on May 25 and May 26, 1999 the Court of Appeal
     ordered NGC and International Power to pay all sums properly payable by
     them to their group trustees. However, enforcement of the order was stayed
     pending the outcome of any appeals to the House of Lords, leave for which
     was granted.

     NGC and International Power initiated appeals in the House of Lords. NGC
     and International Power also executed amendments which purported to cancel
     their accrued contribution obligations arising from the Court of Appeal's
     judgment.

     As YPG Group had made similar use of actuarial surpluses a similar, retro-
     spective deed of amendment was executed on January 22, 2001.

     The appeals initiated by NGC and International Power in the House of Lords
     were heard in February 2001 and the House of Lords judgement confirmed the
     High Court judgement that such use of surplus was permissible.

     On May 16, 2000, the European Court of Justice ruled that UK legislation on
     the backdating of part-time employees' claims to pension scheme benefits on
     the grounds of sex discrimination was incompatible with EU law. As a
     result, part-time employees can claim for backdating of their pension
     scheme benefits to April 8, 1976. YPG Group is unable to quantify the
     effect if any of this ruling until such time as any claims are brought
     against YPG Group and allowed by the Court. To date no such claims have
     been brought.
<PAGE>
MATERIAL SUBSIDIARIES

      The following are material subsidiaries of YPG.

              Subsidiary                     Percentage        Country of
                                               Owned          Incorporation
      Yorkshire Holdings plc                    100%        England and Wales
      Yorkshire Power Finance Limited           100%        Cayman Islands
      Yorkshire Power Finance 2 Limited         100%        Cayman Islands
      Yorkshire Electricity Group plc           100%        England and Wales
      Yorkshire Electricity Distribution plc    100%        England and Wales
      Yorkshire Electricity Distribution
        Services Limited                        100%        England and Wales

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following is management's discussion and analysis of certain significant
factors that have affected YPG's financial condition and results of operations
during the periods included in the accompanying statements of operations.

INTRODUCTION

YPG is indirectly owned by MEHC and Xcel. YPG was incorporated as a limited
company under the laws of England and Wales in July 1996. Effective April 1,
1997, YPG, through its wholly owned subsidiary Yorkshire Holdings, gained
effective control of YEG. YPG's primary asset is the stock of Yorkshire
Holdings. Yorkshire Holdings, which beneficially owns all the outstanding stock
of YEG, has no significant operations outside of its investment in YEG. YEG
beneficially owns all the outstanding stock in YED and YEDSL.

SIGNIFICANT FACTORS AND KNOWN TRENDS

      COMPETITION AND INDUSTRY CHANGES

      The current distribution price control formula is effective for the
      five-year period beginning April 1, 2000. It includes a one time 23%
      reduction in allowed revenue for YEG's Distribution Business for the
      regulatory year ended March 31, 2001 compared to the previous price
      control.

      Effective from October 1, 2001, the Utilities Act introduced a prohibition
      on the activity of distributing electricity without a license or an
      exemption. The supply and distribution of electricity are now separate
      licensable activities with a bar on the same legal entity holding both an
      electricity supply and electricity distribution license. In addition, the
      PES and second tier supply licenses were brought together into a single
      supply license. In connection with these changes, on October 1, 2001, YEG
      transferred its Distribution Business to YED and legal title to its
      remaining Supply Business assets to Npower Yorkshire Supply Limited
      (beneficial interest of the assets having been transferred to Innogy on
      July 31, 2001). Npower Yorkshire Supply Limited was sold to Innogy on
      October 1, 2001. As part of the nomination of YED as the distribution
      license holder, there was a transfer, among other things, of certain
      assets of YEG constituting its distribution business and certain related
      liabilities, including those as principal obligor under the (pound)200
      million Guaranteed Bonds due 2020 (the "Bonds"), to YED on October 1,
      2001. In connection with the transfer of the primary liability on the
      bonds from YEG to YED, YEG unconditionally and irrevocably guaranteed
      payment of all amounts in respect of the Bonds.

      YED's license contains a set of conditions that are standard to all
      licenses. The license is structured around the key activities of YED that
      it governs by means of grouping together all of the standard conditions
      that relate to these key activities. Accordingly, the license groups
      together those standard conditions that apply to all licensees and are
<PAGE>
      common across all license types, those that apply in general to all
      distribution licensees and those obligations falling on dominant licensees
      such as YED, known as the Distribution Services Obligations. The license
      also includes a set of Special Conditions, unique to YED, that mainly
      relates to the price control mechanism in respect of YED's Distribution
      Use of System income.

      SEPARATION OF DISTRIBUTION AND ELECTRICITY SUPPLY

      YEG complied with the PES License modifications that became effective on
      April 1, 2000 and, from that date, treated its Distribution Business and
      Supply Business as separate businesses.

      The costs of business separation were addressed by Ofgem in its review of
      the distribution and supply price controls. These controls became
      effective on April 1, 2000, and included an allowance for separation costs
      of (pound)7.5 million for each REC's Distribution Business over the
      following 5 years ending March 31, 2005, and an allowance of
      (pound)200,000 per year for YEG's ex-electricity supply business for the
      following 2 years.

      FACTORS AFFECTING REVENUES

      Two principal factors determine the amount of revenues produced by YED's
      Distribution Business: the unit price of electricity distributed (which is
      controlled by the Distribution Price Control Formula that may be changed
      from time to time) and the number of electricity units distributed (which
      depends upon customer demand as influenced in part by economic activity
      and weather conditions).

      BUSINESS RESTRUCTURING

      On July 31, 2001 YEG sold its Supply Business to Npower Yorkshire Limited,
      a wholly-owned subsidiary of Innogy. As of that date, therefore, YEG
      ceased to operate the Supply Business. The majority of the cash received
      was used to reduce the debt of YPG.

      The results of the Supply Business have been excluded from the individual
      line items in the financial statements and have been shown as income from
      discontinued operations.

      As part of pre-existing plans to reduce debt, YEG's Generation Business
      was disposed of prior to March 31, 1999. Provision was made in the year
      ended March 31, 1999 for income taxes arising on the gain. However, a
      favorable adjustment to tax liabilities of (pound)8 million, in respect of
      the disposal, arose and was recognized in the income statement for the
      nine months ended December 31, 1999.

      BUSINESS STREAMLINING

      A voluntary programme of lay-offs for employees of YED and YEDSL is taking
      place in 2002. The costs of the voluntary redundancy programme of
      approximately (pound)5 million were charged against income in 2001.

      ENVIRONMENTAL FACTORS

      YED's business is subject to numerous regulatory requirements with respect
      to the protection of the environment. The principal laws that have
      environmental implications for YED are the Electricity Act 1989, the
      Wildlife and Countryside Act 1981, the Water Industry Act 1991, the Water
      Resources Act 1991, the Environmental Protection Act 1990, the Statutory
      Nuisance Act 1993 and the Environment Act 1995. There are no material
      legal or administrative proceedings pending against YPG Group with respect
      to any environmental matter.

      INFLATION

      Inflation has not had a significant impact on YPG Group in the last three
      years and is not expected to do so in the foreseeable future.
<PAGE>

      REVIEW OF POLICY ON DEPRECIATION OF OPERATIONAL ASSETS

      YEG has revised the useful economic lives of its distribution network
      assets in order to provide a more accurate estimated life for each asset
      type. Such assets are now depreciated over a period between 10 and 50
      years. In the year ended December 31, 2001 the effect of this change was
      to decrease net income by (pound)4 million. The previous policy was to
      depreciate such assets over a period of between 10 and 80 years.

     CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with accounting
     principles generally accepted in the US requires management to make
     judgements, assumptions and estimates that affect the amounts reported in
     the consolidated financial statements and accompanying notes. Note 1 to the
     consolidated financial statements in this annual report describes the
     significant accounting policies and methods used in the preparation of the
     consolidated financial statements. Estimates are used for, but not limited
     to, the accounting for revenues, contingent liabilities and impairment of
     long-lived assets. Actual results could differ from these estimates. The
     following critical accounting policies are impacted by judgements,
     assumptions and estimates used in the preparation of the consolidated
     financial statements. The discussion below should be read in conjunction
     with the full statement of accounting policies.

     Revenues in the continuing operations are recorded based upon electricity
     distributed and services provided to the end of the period. Where there is
     an over-recovery of distribution business revenues against the maximum
     regulated amount, revenues equivalent to the over-recovered amount are
     deferred. The deferred amount is deducted from revenue and included in
     other liabilities. Where there is an under-recovery, no anticipation of any
     potential future recovery is made.

     Tangible fixed assets, other than land, are generally depreciated on the
     straight line method over their estimated operational lives. Operational
     lives are estimated based on a number of factors including the expected
     usage of the asset, expected physical deterioration and technological
     obsolescence.

     Long-lived assets consist primarily of the distribution system and goodwill
     arising from business acquisitions. YPG believes that the useful lives
     assigned to these assets, which range from 10 to 50 years, are reasonable.
     YPG evaluates the long-lived assets for impairment when events or changes
     in circumstances indicate, in management's judgement, that the carrying
     value may not be recoverable. These computations utilise judgements and
     assumptions inherent in management's estimates of undiscounted future cash
     flows to determine recoverability of an asset. If management's assumptions
     about these assets change as a result of events or circumstances, and
     management believes that the assets may have declined in value, then YPG
     may record impairment charges, resulting in lower profits.

RESULTS OF OPERATIONS

      YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000

      Net income decreased by (pound)139 million from a (pound)55 million profit
      in the year ended December 31, 2000 to a (pound)84 million loss in the
      year ended December 31, 2001. This is primarily due to the disposal of the
      Supply Business operation and the full year impact of the distribution
      price control review in the year ended December 31, 2001.

      OPERATING REVENUES

      Operating revenues increased by (pound)67 million (64%) from (pound)105
      million in the year ended December 31, 2000 to (pound)172 million in the
      year ended December 31, 2001. The increase in the year ended December 31,
      2001 reflects the impact of the disposal of the Supply Business on July
      31, 2001.
<PAGE>

      GROSS MARGIN

      Gross margin increased by (pound)71 million (86%) from (pound)83 million
      in the year ended December 31, 2000 to (pound)154 million in the year
      ended December 31, 2001. The increase in the year ended December 31, 2001
      reflects the impact of the disposal of the Supply Business on July 31,
      2001.

      OPERATING COSTS

      The reduction in maintenance costs of (pound)4 million (8%) to (pound)48
      million in the year ended December 31, 2001 from (pound)52 million in the
      year ended December 31, 2000 reflects further efficiencies made.

      The increase in depreciation and amortization of (pound)7 million (15%)
      from (pound)48 million to (pound)55 million was primarily due to the
      revision of the useful economic lives of distribution network assets.

      Selling, general and administrative costs increased in the year ended
      December 31, 2001 by (pound)7 million (19%) from (pound)37 million to
      (pound)44 million due to the disposal of the Supply Business on July 31,
      2001.

      NET INTEREST EXPENSE

      The net interest expense decreased by (pound)27 million in the year ended
      December 31, 2001 to (pound)86 million due to lower interest expense on
      debts redeemed and interest earned on the proceeds from the disposal of
      the Supply Business invested in short term money market investments.

      INCOME TAXES

      YPG Group recognized a favorable tax settlement of (pound)3 million in
      respect of prior years' tax liabilities in the year ended December 31,
      2000. The effective rate of tax in the year ended December 31, 2001 was
      27% and in the year ended December 31, 2000 was 31%.

      DISCONTINUED OPERATIONS

      YEG's Supply Business was disposed of during the year ended December 31,
      2001.

      Income from discontinued operations after tax declined by (pound)120
      million (74%) from (pound)162 million in the year ended December 31, 2000
      to (pound)42 million in the year ended December 31, 2001 primarily due to
      the results for the year ended December 31, 2001 reflecting only seven
      months of operations.

      The loss recognized on disposal resulted in a decrease in net income in
      the year ended December 31, 2001 of (pound)68 million (net of related
      income taxes benefit of (pound)35 million).

<PAGE>

YEAR ENDED DECEMBER 31, 2000 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1999
---------------------------------------------------------------------------

                                                                  Year ended
                                                               December 31, 1999
                                                                  (unaudited)
                                                                       (pound)
                                                                      (millions)
      Operating revenues                                                    87
      Cost of sales                                                         23
                                                                            --
      Gross margin                                                          64
      Operating expenses
      Maintenance                                                           59
      Depreciation and amortization                                         52
      Selling, general and administrative expenses
                                                                            36
                                                                         -----
      Loss from operations                                                (83)
      Other income                                                           2
      Net interest expense                                               (114)
                                                                         -----
      Income from continuing operations before income taxes              (195)
      Benefit for income taxes                                              61
                                                                         -----
      Loss from continuing operations                                    (134)
      Income  from  discontinued  operations,  net of  income
      taxes of(pound)21                                                    177
      Gain on disposal of discontinued operations                            8
                                                                             -
      Net income                                                            51
                                                                            ==

      The year ended December 31, 1999, comprises audited financial information
      for the nine months from April 1 to December 31, 1999 and unaudited
      financial information for the three months from January 1 to March 31,
      1999.

      Net income increased by (pound)4 million (8%) from (pound)51 million in
      the year ended December 31, 1999 to (pound)55 million in the year ended
      December 31, 2000. This was primarily due to an increase in profit
      attributable to the gas and electricity supply businesses offset by the
      impact of the distribution price control review and the cumulative effect
      on prior years of a revised depreciation method offset by a gain on
      disposal of discontinued operations in the year ended December 31, 1999.

      OPERATING REVENUES

      Operating revenues increased by (pound)18 million (21%) from (pound)87
      million in the year ended December 31, 1999 to (pound)105 million in the
      year ended December 31, 2000, reflecting the effects of competition in the
      electricity supply market resulting in more Distribution Business revenues
      being derived from outside the YPG Group.
<PAGE>

      GROSS MARGIN

      Gross margin increased by (pound)19 million (30%) from (pound)64 million
      in the year ended December 31, 1999 to (pound)83 million in the year ended
      December 31, 2000, due to the effects of competition in the electricity
      supply market resulting in more Distribution Business revenues being
      derived from outside the YPG Group.

      OPERATING COSTS

      The reduction in maintenance costs of (pound)7 million (12%) from
      (pound)59 million in the year ended December 31, 1999 to (pound)52 million
      in the year ended December 31, 2000 was the result of a reduction in
      controllable costs and reflects further efficiencies made.

      Selling, general and administrative costs increased by (pound)1 million
      to (pound)37 million in the year ended December 31, 2000 from (pound)36
      million in the year ended December 31, 1999.

      The reduction in depreciation of (pound)4 million (8%) from (pound)52
      million in the year ended December 31, 1999 to (pound)48 million in the
      year ended December 31, 2000 was due to the revision of useful economic
      lives of distribution network assets and the change in depreciation method
      for distribution network assets.

      NET INTEREST EXPENSE

      Net interest expense reduced by (pound)1 million (1%) from (pound)114
      million in the year ended December 31, 1999 to (pound)113 million in the
      year ended December 31, 2000.

      INCOME TAXES

      YPG Group recognized a favorable tax settlement of (pound)3 million in
      respect of prior years' tax liabilities in the year ended December 31,
      2000. YPG recognized a favorable tax settlement of (pound)12 million in
      respect of prior years' tax liabilities in the year ended December 31,
      1999. The effective rate of tax in the year ended December 31, 2000 was
      31% and in the year ended December 31, 1999 was 31%.

      DISCONTINUED OPERATIONS

      After tax income from discontinued operations decreased by (pound)15
      million (8%) from (pound)177 million in the year ended December 31, 1999
      to (pound)162 million in the year ended December 31, 2000 due to the
      opening of competition in the electricity supply market.

      YEG's Generation Business was disposed of during the year ended March 31,
      1999. Provision was made in the year ended December 31, 1998 for income
      taxes arising on the gain. However, a favorable adjustment to tax
      liabilities of (pound)8 million, in respect of the disposal, has been
      recognized in the year ended December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

YPG's primary asset is the entire share capital of Yorkshire Holdings, which, in
turn, owns the entire share capital of YEG as its primary asset. YPG is
therefore dependent upon dividends from YEG for its cash flow.

      FINANCING

      Prior to the acquisition of YPG by CE, all of YPG Group's committed
      borrowing facilities including its commercial paper programme were
      cancelled. At December 31, 2001, YPG Group had a cash balance of
      (pound)220 million that satisfies its ongoing working capital
      requirements.

      AVAILABLE SOURCES OF CREDIT

      At December 31, 2001, in addition to cash flow from YEG's operations
      available for distribution indirectly to YPG, YPG had (pound)220 million
      of cash available as its primary source of liquidity.

      YPG will also be required to fund its ongoing capital expenditures, fund
      its debt service and cover its working capital needs. YPG expects to fund
      these ongoing cash requirements through a combination of available cash
      flow and the (pound)220 million cash balance.
<PAGE>

      USE AND SOURCE OF FUNDS

      The principal sources of funds of YPG Group during the year ended December
      31, 2001 were (pound)106 million from operations and (pound)710 million
      from the sale of the Supply Business. During this period, YPG Group
      utilized (pound)72 million for capital expenditures.  Proceeds from asset
      sales (excluding the sale of the Supply Business) totalled (pound)4
      million. The syndicated credit facility was reduced to nil during the
      period.

      The principal sources of funds of YPG Group during the year ended December
      31, 2000 were (pound)140 million from operations. YPG Group utilized
      (pound)104 million for capital expenditures. Proceeds from asset sales
      totalled (pound)1 million.

      The principal sources of funds of YPG Group during the nine months ended
      December 31, 1999 were (pound)70 million from operations. During this
      period, YPG Group utilized (pound)100 million for capital expenditures.
      Proceeds from asset sales totalled (pound)1 million.

     CAPITAL EXPENDITURES

     Since the disposal of the Supply Business, YPG Group's capital expenditures
     are all related to the Distribution Business and include expenditures for
     load-related, non-load-related and non-operational capital assets.
     Load-related capital expenditures are largely required by new business
     growth. Customer contributions are normally received where capital
     expenditures are made to extend or upgrade service to customers (except to
     the extent that such capital expenditures are made to enhance Yorkshire's
     distribution network generally). Non-load-related capital expenditures
     include asset replacement, which is expected to continue. Other
     non-load-related expenditures include system upgrade work that provides for
     load growth and has the additional benefit of improving network security
     and reliability. Non-operational capital expenditures are for assets such
     as fixtures and equipment. For the year ended December 31, 2001 and the
     year ended December 31, 2000 capital expenditures, net of customer
     contributions, were (pound)72 million and (pound)104 million, respectively.
     As part of the distribution price control review process, the five year
     period to March 31, 2005 was considered. For this period, YEG's
     distribution allowed revenues were based on Ofgem's capital projections for
     load and non-load related expenditure totalling (pound)454 million (in year
     ended March 31, 1998 prices).

     Management believes that cash flow from operations, together with its
     existing sources of cash and credit will provide sufficient financial
     resources to meet YPG Group's projected capital needs and other expenditure
     requirements for the foreseeable future.

     OBLIGATIONS AND COMMITMENTS

     YPG Group has contractual obligations and commercial commitments that may
     affect its financial condition. Based on management's assessment of the
     underlying provisions and circumstances of the material contractual
     obligations and commercial commitments of YPG Group, including structured
     finance arrangements, there is no known trend, demand, commitment, event or
     uncertainty that is reasonably likely to occur which would have a material
     effect on YPG Group's financial condition or results of operations.

<PAGE>

     CONTRACTUAL CASH OBLIGATIONS

                                                      Period payments are due
                                            Total  2002  2003/4  2005/6   After
                                                                          2006
                                                         (pound)
      Long term debt (1)                    762     -      -      155      607
      Company-obligated mandatory
         redeemable Trust Securities
         of junior subordinated
         deferrable interest debenture      156     -      -        -      156
      Operating leases (2)                    4     -      3        -        1
                                              -     -      -        -        -
      Total                                 922     -      3      155      764
                                            ===     =      =      ===      ===

        (1)  Excludes unamortized debt premiums, discounts and fair value
             purchase allocation adjustments

        (2)  Not reflected on the consolidated balance sheets.

      For details of principal amounts, maturity dates and interest rates see
      "Item 11 - Quantitative and Qualitative Disclosures About Market Risk".

      OTHER COMMERCIAL COMMITMENTS

      There are no other contractual commercial commitments.

      OFF BALANCE SHEET TRANSACTIONS

      There are no off balance sheet transactions.

RISK MANAGEMENT

Following the sale of YEG's Supply Business to Innogy on July 31, 2001, YPG
ceased to have any exposure to the risks associated with the Supply Business.
YED is exposed to a certain amount of risk of non-payment of its DUoS invoices
by counter-parties to those contracts. The counter-parties are electricity
supply companies supplying electricity to end-user customers in Great Britain.
Pursuant to an industry standard DUoS agreement with each counter-party,
counter-parties with an approved credit rating are not required to provide any
additional credit support for their DUoS payment obligations to YED. YED
requires each counter-party that does not possess such a credit rating to
provide a parent company guarantee, cash deposit or other acceptable credit
enhancement instruments. The terms and conditions of DUoS agreements may be
varied by agreement between the parties to the agreements and failing that
Ofgem may determine such disputes. In addition, YED has a credit insurance
policy in place covering, subject to the terms of the policy, up to an annual
maximum of (pound)7.5 million of DUoS revenue that has been billed and on which
payment is outstanding in the event of a counter-party ceasing to trade.

YED and YEDSL apply MEHC's corporate risk management philosophy to their
businesses which places great emphasis on personnel safety. Safety programs
include goals, awards, safety committees, and behavior-based safety. The
operations philosophy centers on maintaining high rates of service availability
and low rates of forced outages. Equipment is only operated within design limits
and is purchased only from recognized suppliers. Training through classroom
simulation and apprenticeship is monitored by management and technical support
staff. Key personnel participate in industry groups to maintain a current body
of knowledge on issues and developments. Technical support is available on-site
and off-site, augmented by engineering firms, consultants, and contractors, as
needed and root-cause analysis is required after significant events and lessons
learned are incorporated into operating practices.
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS
No. 142, "Goodwill and Other Intangible Assets" which establish accounting and
reporting for business combinations. SFAS No. 141 requires all business
combinations entered into subsequent to June 30, 2001, to be accounted for using
the purchase method of accounting. SFAS No. 142 provides that goodwill and other
intangible assets with indefinite lives will not be amortized but tested for
impairment on an annual basis. SFAS No. 142 is effective for the Company
beginning January 1, 2002. Under the current method of assessing goodwill for
impairment, which uses an undiscounted cash flow approach, no material
impairment existed at December 31, 2001. For 2002, YPG will begin to test
goodwill for impairment under the new rules, applying a fair-value-based
approach. YPG is in the process of quantifying the anticipated impact on its
financial condition and results of operations of adopting the provisions of SFAS
No. 142, which could be significant. The historical impact of not amortizing
goodwill would have been to increase net income for the years ended December 31,
2001 and 2000 and the nine month period ended December 31, 1999 by (pound)14
million, (pound)24 million and (pound)18 million, respectively assuming no
impairment had been required in those periods. However, impairment reviews may
result in future periodic write-downs.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which addresses the accounting for legal obligations associated
with the retirement of tangible, long-lived assets, and the associated asset
retirement costs. This pronouncement is effective for financial years beginning
after June 15, 2002. YPG is evaluating the impact that adoption of this standard
will have on its financial statements.

In October 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment
or Disposal of Long-Lived Assets".  The adoption of SFAS No. 144 on January 1,
2002 did not have any impact on YPG Group's financial statements.

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Management of YPG, Yorkshire Finance and Yorkshire Finance 2

The following table sets forth certain information with respect to the executive
officers and directors of YPG as of December 31, 2001:

Name                            Age        Position

Mr G E Abel                     39         Director, YPG

Mr P E Connor                   53         Director, YPG, Yorkshire Finance and
                                             Yorkshire Finance 2

Dr J M France                   44         Director, YPG

Mr P J Goodman                  35         Director, YPG

Mr K Linge                      52         Director, YPG, Yorkshire Finance and
                                             Yorkshire Finance 2

Mr J D Stallmeyer               44         Director, YPG

Mr J Elliott                    37         Company Secretary, YPG

The directors are not subject to retirement by rotation and may be appointed and
removed by persons holding at least 50 percent of the ordinary shares in the
Company. The appointment of the directors is not subject to a specific term.
Once appointed the directors continue in office until they either resign or are
removed.

Gregory E Abel. Has been a director of YPG since September 2001. Mr Abel joined
MidAmerican Energy Holdings Company in 1992 and is President and Chief Operating
Officer of MidAmerican Energy Holdings Company. Mr Abel is a Chartered
Accountant and from 1984 to 1992 he was employed by Price Waterhouse. In the San
Francisco office of Price Waterhouse, he was responsible for clients in the
energy industry.
<PAGE>

P Eric Connor. Has been a director of YPG and Yorkshire Finance and Yorkshire
Finance 2 since September 2001. Mr Connor is President and Chief Operating
Officer of Northern Electric plc and joined Northern Electric in 1992. Prior to
joining Northern Electric he was a director at NEI Reyrolle Limited. His
previous appointments included engineering and management posts with National
Nuclear Corporation, NEI and Marconi Space and Defence.

John M France. Has been a director of YPG since September 2001. Dr France has
worked for Northern Electric plc since 1989, during which time he has been
responsible for regulatory affairs. He is Director of Regulation for the CE
group of companies.

Patrick J Goodman. Has been a director of YPG since September 2001. Mr Goodman
is Senior Vice President and Chief Financial Officer of MidAmerican Energy
Holdings Company. Mr Goodman joined MidAmerican Energy Holdings Company in 1995
and served in various accounting positions including Chief Accounting Officer.
He was promoted to Senior Vice President and Chief Financial Officer in April
1999. Mr Goodman was Reinsurance and Financial Accounting Administrator for
National Indemnity Company from 1993 to 1995 and an auditor for Coopers &
Lybrand from 1989 to 1993.

Kenneth Linge. Has been a director of Yorkshire Finance and Yorkshire Finance 2
since September 2001 and of YPG since November 2001. Mr Linge has worked for
Northern Electric plc since 1968 and is Director of Finance for the CE group of
companies.

James D Stallmeyer. Has been a director of YPG since September 2001. Mr
Stallmeyer is General Counsel and Commercial Director of the CE group of
companies. Mr Stallmeyer joined MidAmerican Energy Holdings Company in August
1993. Prior to joining MidAmerican Energy Holdings Company he was an attorney in
the public finance and corporate finance departments at Chapman and Cutler in
Chicago (1984-1986; 1987-1993), in the public finance department of Skadden,
Arps, Slate, Meagher & Flom in Chicago (1986-1987), and an instructor of legal
writing at the University of Illinois College of Law (1987-1988).

John Elliott. Has been Company Secretary of YPG since September 2001. Mr Elliott
is a Chartered Secretary, has worked for Northern Electric plc since 1986 and is
Company Secretary for the CE group of companies.

EXECUTIVE COMPENSATION

Management Compensation of YPG, Yorkshire Finance and Yorkshire Finance 2

The officers and directors of YPG and Yorkshire Finance and Yorkshire Finance 2
listed above receive no cash or non-cash compensation as a result of their
services performed for YPG and Yorkshire Finance and Yorkshire Finance 2.

Transactions with Management and Others

None

Certain Business Relationships

See "Management of YPG" and "Executive Compensation" above.

Indebtedness of Management

None
<PAGE>

Employees

At the start of the year ended December 31, 2001, all employees in YPG Group
were employed under contracts held by YEG. On October 1, 2001 when YEG's
transfer scheme and asset transfer agreement with YED and YEDSL became
effective, YEG's employees were transferred to either YED or YEDSL. The numbers
of employees of YPG Group over the last three years are as follows

                              At December 31,
        2001                           2000                         1999
        ----                           ----                         ----
       1,484                          4,060                        4,275

YPG and Yorkshire Holdings have no employees because they are holding companies
with no operations.

Approximately 85% of YPG Group's employees are represented by labor unions. All
YPG Group's employees who are not party to a personal employment contract are
subject to collective bargaining agreements. These agreements may be amended by
agreement between YED or YEDSL, as appropriate, and the unions and are
terminable with 12 months' notice by either side. YED and YEDSL believe that
their relations with its employees are favorable.

Following the purchase of 94.75% of the issued share capital of YPG by CE, a
voluntary programme of lay-offs for employees of YED and YEDSL is planned to
take place in 2002. The costs of the voluntary redundancy programme of
approximately (pound)5 million were charged against income in 2001.

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

MAJOR SHAREHOLDERS

The major shareholders of YPG are as follows

Shareholder                                Number of Shares     Percentage

CE Electric UK Limited                       416,900,001          94.75

Xcel Energy International, Inc                23,100,001           5.25

On April 3, 2001, subsidiaries of AEP and Xcel sold 94.75% of the issued share
capital of YPG to Innogy, an integrated energy company in the UK. AEP sold its
entire interest in YPG, while Xcel retained a 5.25% interest.

On September 21, 2001, CE, a company incorporated under the laws of England and
Wales, acquired 94.75% of the issued share capital of YPG from Innogy. CE is
indirectly owned by MEHC, a company incorporated in Iowa, United States of
America.

CE and Xcel do not have different voting rights.

RELATED PARTY TRANSACTIONS

YPG has provided a loan to CE on which it receives interest based on short term
money market rates (5.4% at December 31, 2001). The amount outstanding, as at
July 9, 2002 was approximately (pound)23 million and the maximum amount
outstanding during the period was (pound)47 million.

ITEM 8.  FINANCIAL INFORMATION

See "Item 18 - Financial Statements".
<PAGE>

LEGAL PROCEEDINGS

Litigation and arbitration may affect various companies in the YPG Group in the
normal course of business. While the ultimate outcome of these proceedings
cannot be predicted with certainty, we do not believe that any pending
proceedings will have a material adverse effect on the results of operations or
financial position. See "Item 4 - Information on the Company - Legal
Proceedings".

SIGNIFICANT CHANGES

Except as otherwise disclosed in this annual report, there has been no
significant change in our financial position since December 31, 2001.

DIVIDEND POLICY

No dividends have been declared or paid in the periods covered by this annual
report.

ITEM 9.  THE OFFER AND LISTING

There is no established public trading market for YPG's common stock, all of
which is owned indirectly by MEHC and Xcel.

ITEM 10.  ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

A discussion of our Memorandum and Articles of Association is incorporated by
reference to our registration statement on Form S-1 filed on March 13, 1998.

MATERIAL CONTRACTS

Other than contracts described elsewhere in this annual report, there were no
material contracts entered into by a member of the YPG Group during the prior
two years outside the ordinary course of business.

EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

We are not restricted by any current UK law, decree or regulation from
distributing to or receiving capital from, or paying dividends or interest or
otherwise making payments to, persons who are neither residents nor nationals of
the UK.

Under UK law and our Memorandum and Articles of Association, persons who are
neither residents nor nationals of the UK may freely hold, vote and transfer
their ordinary shares in the same manner as UK residents or nationals.

DOCUMENTS ON DISPLAY

It is possible to read and copy the documents referred to in this annual report
that have been filed with the SEC at the SEC's public reference room located at

     451 Fifth Street, NW
     Washington DC 20549
     USA

Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room and their copy charges.
<PAGE>

In addition, documents referred to above are available at our headquarters,
located at

     Carliol House
     Market Street
     Newcastle upon Tyne
     NE1 6NE
     England

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

COMMODITY PRICE RISK

Prior to the sale of its Supply Business, YEG had certain market risks inherent
in its business activities. The purchase and sale of electricity and gas exposed
YEG to market risk. Market risk represented the risk of loss that may have
impacted YEG due to adverse changes in market prices.

YEG's electricity supply risk management efforts were intended to appropriately
hedge the risks associated with the purchase and sale of electricity resulting
from Pool price volatility. When the Pool was the wholesale electricity market,
virtually all electricity generated in England and Wales was sold by generators
and bought by suppliers through the Pool. The most common contracts for
electricity supply to business customers were for twelve-month terms and
contained fixed rates. Similarly, domestic and small business tariffs contained
fixed rates. YEG was exposed to purchase price risk (the risk associated with
fluctuations in the cost of purchased electricity relative to the price received
from the electricity supply customer) to the extent that it had not hedged such
risk. YEG substantially hedged purchase price risk by employing a variety of
risk management tools, including management of its electricity supply contract
portfolio, hedging contracts and other means which mitigated the risk of Pool
price volatility. YEG employed risk management methods to maximize its return
consistent with an acceptable level of risk.

Under its PES License, YEG had a price cap on the prices it could charge its
domestic customers in the Authorized Area. Because the maximum price was fixed
for these customers, YEG was at risk from upward movements in purchase costs.
This risk was mitigated by hedging purchase contracts, mainly through contracts
for differences and electricity forward agreements.

Contracts for differences and electricity forward agreements were contracts
predominantly between generators and suppliers, which fixed the major elements
of the price of electricity for a contracted quantity of electricity over a
specific time period. Differences between the actual price set by the Pool and
the agreed prices gave rise to difference payments between the parties to the
particular contract for differences or electricity forward agreement.

The system of wholesale purchasing through the Pool was replaced by NETA on
March 27, 2001. NETA requires participants to submit half hourly forecasts of
electricity supply and demand and endeavor to balance contract positions and
metered volumes. There are incentives, in the form of imbalance payments, for
generators and suppliers to balance their supply/demand position. YEG redefined
its business operations in order to effectively manage its position in the new
market by seeking to predict its customers' demand for electricity on a
short-term basis as accurately as possible and to maximize the trading
opportunities, while effectively managing the risk of imbalances.

Gas was sourced from YEG's interest in the Armada Field. A purchase agreement
with a major gas supplier was entered into to meet the majority of the
requirements of YEG's residential gas market and swing contracts and purchases
on the spot market were utilised to give YEG a balanced gas purchase portfolio.
YEG utilized risk management methods in relation to gas purchasing and supply,
including storage and an interruptible customer portfolio, designed to maximize
its return consistent with an acceptable level of risk. A system to evaluate and
enable effective management of risk in gas trading was used by YEG. The system
enabled greater control of all transactions including daily evaluation of key
parameters such as value at risk and profit and loss positions for each YEG
business unit.
<PAGE>

Following the sale of YEG's Supply Business to Innogy on July 31, 2001, YPG
Group ceased to have any exposure to the commodity price risk associated with
the Supply Business.

CREDIT RISK

Credit risk refers to the risk of financial loss that would result from the
failure of counter-parties to comply with the terms of their contractual
obligations with YPG Group.

YED is exposed to a certain amount of risk of non-payment of its DUoS invoices
by counter-parties to those contracts. The counter-parties are electricity
supply companies supplying electricity to end-user customers in Great Britain.
Pursuant to an industry standard DUoS agreement with each counter-party,
counter-parties with an approved credit rating are not required to provide any
additional credit support for their DUoS payment obligations to YED. YED
requires each counter-party that does not possess such a credit rating to
provide a parent company guarantee, cash deposit or other acceptable credit
enhancement instruments. In addition, YED has a credit insurance policy in place
covering, subject to the terms of the policy, up to an annual maximum of
(pound)7.5 million of DUoS revenue that has been billed and on which payment is
outstanding in the event of a counter-party ceasing to trade.

In the year ended December 31, 2001, Enron Direct Limited, an electricity
supplier, was declared insolvent and put into administration. At the time, Enron
Direct Limited owed YED approximately (pound)0.5 million in DUoS payments.
Discussions are on-going with Ofgem to reach an agreement whereby YED will be
allowed to recover a percentage of this amount through the distribution price
control mechanism. Some portion of the (pound)0.5 million may be recovered from
the administrators of Enron Direct Limited and the credit insurance policy.

In the year ended December 31, 2000, Independent Energy, an electricity
supplier, was declared insolvent and put into administration. At the time,
Independent Energy owed YED approximately (pound)1.5 million in DUoS payments.
Agreement was reached with Ofgem whereby YED will be allowed to recover 80% of
this outstanding amount through the distribution price control mechanism.

Ofgem has consulted on changes to the DUoS credit cover and payment regime that
potentially offer YED reduced risk in the event of insolvency of supply
companies. There is no assurance, however, that such changes will be
implemented.

FOREIGN CURRENCY EXCHANGE RATE RISK

YPG is partly capitalized by US dollar-denominated debt. Changes in the US
dollar/Pound Sterling exchange rate will affect the US Dollar value of YPG's
Pound Sterling cash flows and the Pound Sterling fair value of the US
dollar-denominated debt. YPG uses cross-currency swaps to manage the cash flow
and translation risks arising from its exposures to foreign currency exchange
rate movements associated with Pound Sterling cash flows and, US
dollar-denominated debt.

In connection with the agreement to sell YPG to CE, cross-currency swaps with a
value of $300 million were closed-out in 2001. The swaps were used to hedge
Yorkshire Finance $300 million Yankee bonds due 2008. Following completion of
the sale of YPG to CE in September 2001 new cross-currency swaps were taken out
to fully hedge this exposure.

In June 1998, YPG issued $275 million aggregate principal amount of 8.08% Trust
Securities which mature in 2038. In the absence of appropriate cover for this
maturity, cross-currency swaps maturing in June 2008 are used to manage the
foreign currency exchange rate risk arising from the trust securities
borrowings. The US dollar interest cash flows received under the cross-currency
swaps match the US dollar coupon payments under both bonds until 2008.

INTEREST RATE RISK

YPG is partly funded by long-term Pound Sterling-denominated debt bearing
variable and fixed interest rates and long-term US Dollar-denominated debt
bearing fixed interest rates. Changes in Pound Sterling and US Dollar interest
rates will affect the cash flows under debt bearing variable interest rates and
the fair value of debt bearing fixed interest rates.
<PAGE>

At December 31, 2001, fixed interest rates were payable on 83% of debt and the
average debt maturity was 17 years.

The following tables present the total principal cash repayments and related
weighted average interest rates of YPG's debt and the total principal amounts
and weighted average interest rates of YPG's cross currency swaps as of December
31, 2001 and December 31, 2000.

At December 31, 2001
<TABLE>
<CAPTION>
<S>                                 <C>      <C>     <C>       <C>      <C>       <C>            <C>      <C>

All amounts, millions                                               Maturity Date
                                    2002     2003    2004      2005     2006   Thereafter     Total      Fair Value
                                    ----     ----    ----      ----     ----   ----------     -----      ----------
Debt
Fixed  interest rate Pound
 Sterling - denominated debt
Amount                                -       -        -        -         -    (pound)400   (pound)400    (pound)488
Average interest rate                 -       -        -        -         -          8.3%         8.3%
Variable interest rate
Pound Sterling -
 denominated debt
Amount                                -       -        - (pound)155       -           -     (pound)155    (pound)164
Average interest rate                 -       -        -       5.8%       -           -           5.8%
Fixed interest rate
US dollar-denominated debt
Amount                                -       -        -        -         -         $557         $557           $546
Average interest rate                 -       -        -        -         -         7.2%         7.2%

Cross currency swaps                                                                                              $8
Receive fixed interest
 rate US dollars
Amount                                -       -        -        -         -         $555         $555              -
Average interest rate                 -       -        -        -         -         7.4%         7.4%
Vs,
Pay fixed interest rate
 Pounds Sterling
Amount                                -       -        -        -         -    (pound)363   (pound)363             -
Average interest rate                 -       -        -        -         -          8.3%         8.3%


<PAGE>
At December 31, 2000

All amounts, millions                                         Maturity Date
                                    2001      2002       2003     2004      2005   Thereafter     Total      Fair Value
                                    ----      ----       ----     ----      ----   ----------     -----      ----------
Debt
Fixed interest rate
 Pound Sterling -
 denominated debt
Amount                          (pound)4  (pound)4        -         - (pound)150   (pound)400   (pound)558  (pound)643
Average interest rate               7.4%      7.5%        -         -       8.6%         8.3%         8.3%
Variable interest rate
Pound Sterling -
 denominated debt
Amount                         (pound)106        -         -         - (pound)155          -     (pound)261 (pound)261
Average interest rate                6.1%        -         -         -       7.1%          -           6.7%
Fixed interest rate
US dollar-denominated debt
Amount                                -          -        $350       -        -           $565         $915       $841
Average interest rate                 -          -        6.2%       -        -           7.2%         6.8%

Cross currency swaps                                                                                             $(15)
Receive fixed interest
 rate US dollars
Amount                                -          -        $350       -        -           $556         $906          -
Average interest rate                 -          -        6.2%       -        -           7.4%         6.9%
Vs,
Pay fixed interest rate
 Pounds Sterling
Amount                                -          -  (pound)215       -        -     (pound)341   (pound)556          -
Average interest rate                 -          -        8.1%       -        -           8.8%         8.5%
Interest rate cap
Nominal amount                 (pound)40         -         -         -        -            -      (pound)40   (pound)-
Interest rate                       7.5%         -         -         -        -            -           7.5%
</TABLE>

The average interest rates shown are weighted average interest rates.

The average interest rate of debt is based on the coupon or interest rates of
the debt maturing in the period reported.

The variable interest rate Pound Sterling-denominated debt at December 31, 2001
consists of (pound)155 million Reset Senior Notes on which the interest rate is
reset semi-annually with the last reset being made on February 15, 2002.
<PAGE>

The weighted average term of the variable interest rate Pound
Sterling-denominated debt at December 31, 2001 was 3 years.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

<PAGE>

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS

None.

ITEM 15. [RESERVED]


ITEM 16. [RESERVED]

<PAGE>

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

See the financial statements beginning on page F-1.

The following financial statements and financial statement schedules are filed
as part of this annual report together with the report of the independent
auditors:

Financial Statements                                                       Page

Report of the Independent Auditors                                          F-1
Consolidated Statements of Income for the years ended December 31,
  2001 and 2000 and the nine months ended December 31, 1999                 F-2
Consolidated Balance Sheets as of December 31, 2001 and 2000                F-3
Consolidated Statements of Changes in Shareholders' Equity
 for the years ended December 31, 2001 and 2000 and the nine
 months ended December 31, 1999                                             F-5
Consolidated Statements of Cash Flows for the years ended
 December 31, 2001 and 2000 and the nine months ended
 December 31, 1999                                                          F-6
Supplemental Disclosure of Cash Flow Information for the
 years ended December 31, 2001 and 2000 and the nine months
 ended December 31, 1999                                                    F-7

Financial Statement Schedules
Report of the Independent Auditors                                         F-24
Schedule II - Valuation and Qualifying Accounts and Reserves               F-25

ITEM 19. EXHIBITS

The following documents are filed as a part of this annual report on this Form
20-F:

(1)        Financial Statements:

           The financial statements and the related reports of independent
           public accountants and auditors filed as a part of this annual report
           are under Item 18 herein.

(2)        Financial Statement Schedules:

           Consolidated Valuation and Qualifying Accounts and Reserves (Schedule
           II)

           All other schedules are omitted because they are not applicable or
           the required information is contained in the financial statements or
           notes thereto.

(3)        Exhibits:

Certain of the following exhibits, designated with an asterisk (*), are filed
herewith. The exhibits not so designated have heretofore been filed with the SEC
and, pursuant to 17 C.F.R. 229.10(d) and 240.12b-32, are incorporated herein by
reference to the documents indicated in parentheses following the descriptions
of such exhibits. Certain instruments which define the rights of holders of debt
securities of Yorkshire Power Group Limited and its subsidiaries are not filed
herewith pursuant to Item 601 (b)(4)(iii)(A) of Regulation S-K, 17 C.F.R. 229.
Yorkshire Power Group Limited agrees to furnish a copy of each such instrument
to the SEC upon request.
<PAGE>

   Exhibit      Description
   Number
     1.1        Memorandum and Articles of Association of Yorkshire Power Group
                Limited (Designated in Registration 333-47925 as Exhibit 3.1).
     1.2        Certificate of Incorporation of Yorkshire Power Group Limited
                (Designated in Registration 333-47925 as Exhibit 3.2).
     2.1        Subordinated Indenture dated as of June 1, 1998 among Yorkshire
                Power Group Limited, Yorkshire Power Finance Limited, Banque
                Generale du Luxembourg, and The Bank of New York (Annual Report
                on Form 10-K for the year ended March 31, 1998, File No.
                333-47925, Exhibit 4.1).
     2.2        First Supplemental Indenture dated as of June 1, 1998 among
                Yorkshire Power Group Limited, Yorkshire Power Finance Limited,
                Banque Generale du Luxembourg and The Bank of New York (Annual
                Report on Form 10-K for the year ended March 31, 1998, File No.
                333-47925, Exhibit 4.2).
     2.3        Certificate of Trust of Yorkshire Capital Trust I (Designated in
                Registration 333-47925 as Exhibit 4.4).
     2.4        Trust Agreement of Yorkshire Capital Trust I (Designated in
                Registration 333-47925 as Exhibit 4.5).
     2.5        Amended and Restated Trust Agreement of Yorkshire Capital Trust
                I dated as of June 1, 1998 (Annual Report on Form 10-K for the
                year ended March 31, 1998, File No. 333-47925, Exhibit 4.5).
     2.6        Trust Securities Guarantee Arrangement dated as of June 1, 1998
                between Yorkshire Power Group Limited and The Bank of New York
                (Annual Report on Form 10-K for the year ended March 31, 1998,
                File No. 333-47925, Exhibit 4.6).
     2.7        Deposit Agreement dated as of June 1, 1998 between Yorkshire
                Power Finance Limited and The Bank of New York (Annual Report on
                Form 10-K for the year ended March 31, 1998, File No. 333-47925,
                Exhibit 4.7).
     2.8        Indenture, dated as of February 1, 1998 among Yorkshire Power
                Finance Limited, Yorkshire Power Group Limited, The Bank of New
                York and Banque Generale du Luxembourg (Annual Report on Form
                10-K for the year ended March 31, 1998, File No. 333-47925,
                Exhibit 4.8).
     2.9        First Supplemental Indenture, dated as of February 25, 1998,
                among Yorkshire Power Finance Limited, Yorkshire Power Group
                Limited, The Bank of New York and Banque Generale du Luxembourg
                (Annual Report on Form 10-K for the year ended March 31, 1998,
                File No. 333-47925, Exhibit 4.9).
     2.10       Second Supplemental Indenture, dated as of February 25, 1998,
                among Yorkshire Power Finance Limited, Yorkshire Power Group
                Limited, The Bank of New York and Banque Generale du Luxembourg
                (Annual Report on Form 10-K for the year ended March 31, 1998,
                File No. 333-47925, Exhibit 4.10).
     2.11       Deposit Agreement, dated as of February 1, 1998 between The Bank
                of New York and Yorkshire Power Finance Limited (Annual Report
                on Form 10-K for the year ended March 31, 1998, File No.
                333-47925, Exhibit 4.11).
     2.12       Trust Deed, dated January 17, 1995, between Yorkshire
                Electricity Group plc and Bankers Trust Company Limited (Annual
                Report on Form 10-K for the year ended March 31, 1998, File No.
                333-47925, Exhibit 4.12).
     2.13       First Supplement, dated July 27, 1995, between Yorkshire
                Electric Group plc and Bankers Trust Company Limited (Annual
                Report on Form 10-K for the year ended March 31, 1998, File No.
                333-47925, Exhibit 4.13).
<PAGE>
     4.1        Master Agreement dated as of October 25, 1995 among The National
                Grid Holding plc, The National Grid Company plc, Yorkshire
                Electricity Group plc and the other RECs (Designated in
                Registration 333-47925 as Exhibit 10.8).
     4.2        Memorandum of Understanding among the National Grid Group plc,
                Yorkshire Electricity Group plc and the other RECs, dated
                November 17, 1995 (Designated in Registration 333-47925 as
                Exhibit 10.9).
     4.3        Master Registration Agreement dated as of June 1, 1998 among
                Yorkshire Electricity Group plc, Energy Pool Funds
                Administration Limited and other parties (Annual Report on Form
                10-K for the year ended March 31, 1998, File No. 333-47925,
                Exhibit 10.11).
     4.4        BSC Framework Agreement, dated as of August 14, 2000, among
                Yorkshire Electricity Group plc and other parties (Quarterly
                Report on Form 10-Q for the quarter ended September 30, 2000,
                File No 333-47925, Exhibit 10.17).
     4.5        Transfer Deed relating to the transfer of certain assets and
                liabilities of members of The Electricity Pool of England and
                Wales as of August 14, 2000, among the Members of The
                Electricity Pool of England and Wales (including Yorkshire
                Electricity Group plc) and Elexon Limited (Quarterly Report on
                Form 10-Q for the quarter ended September 30, 2000, File No
                333-47925, Exhibit 10.18).
     *4.6       Scheme made pursuant to paragraphs 13 and 17 of Schedule 7 to
                the Utilities Act 2000 in respect of the Public Electricity
                Supply licence and the other supply licences of Yorkshire
                Electricity Group plc, dated 28 September 2001.
     *4.7       Electricity distribution license: standard conditions under the
                Utilities Act 2000: Determination of standard licence conditions
                for electricity distribution licenses, dated 27 September 2001,
                as modified on March 28, 2002, April 4, 2002 and April 23, 2002.
     *8.1       List of subsidiaries of Yorkshire Power Group Limited

<PAGE>

YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
YORKSHIRE POWER GROUP LIMITED

We have audited the accompanying consolidated balance sheets of Yorkshire Power
Group Limited and its subsidiaries (the "Company") as of December 31, 2001 and
December 31, 2000, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the year ended December 31, 2001, the
year ended December 31, 2000 and for the nine month period ended December 31,
1999 (all expressed in pounds sterling). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Yorkshire Power Group Limited and
its subsidiaries as of December 31, 2001 and December 31, 2000, and the results
of their operations, changes in shareholders' equity and their cash flows for
the year ended December 31, 2001 and December 31, 2000 and for the nine month
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, in 2000 the
Company changed its method of computing depreciation for its distribution
network assets.

Our audit also comprehended the translation of the pounds sterling amounts into
US dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 1. Such US dollar amounts are presented
solely for the convenience of readers in the United States of America.






Deloitte & Touche
Gainsborough House
34-40 Grey Street
Newcastle upon Tyne
NE1 6AE
England

July 12, 2002

<PAGE>
                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                                  (In Millions)
<TABLE>
<CAPTION>
<S>                                                            <C>            <C>              <C>                   <C>
                                                    Year ended December 31, 2001             Year ended        Nine months ended
                                                    ----------------------------             -----------       -----------------
                                                                                          December 31, 2000     December 31, 1999
                                                                                          -----------------     -----------------
                                                             $              (pound)            (pound)               (pound)
                                                          (See Note 1)
Operating Revenues                                             250            172                105                   68
Cost Of Sales                                                   26             18                 22                   17
                                                                --             --                 --                   --
Gross Margin                                                   224            154                 83                   51
                                                               ---            ---                 --                   --
Operating Expenses
Maintenance                                                     70             48                 52                   44
Depreciation and amortization                                   80             55                 48                   41
Selling, general and administrative                             63             44                 37                   29
                                                                --             --                 --                   --
Income/(Loss) From Operations                                   11              7               (54)                 (63)
                                                                --              -               ----                 ----
Total Other Income, Net                                          -              -                  1                    6
                                                                 -              -                  -                    -
Net Interest Expense
Interest Expense                                             (138)           (95)              (116)                 (87)
Interest Income                                                 13              9                  3                    1
                                                                --              -                  -                    -
Net Interest Expense                                         (125)           (86)              (113)                 (86)
                                                             -----           ----              -----                 ----
Loss From Continuing Operations Before Income
Taxes
                                                             (114)           (79)              (166)                (143)
Benefit For Income Taxes                                        31             21                 51                   47
                                                                --             --                 --                   --
Loss From Continuing Operations Before
Discontinued Operations
                                                              (83)           (58)              (115)                 (96)
Income From Discontinued Operations Net of Income
Taxes of $28,(pound)19,(pound)77 and(pound)61
                                                                61             42                162                  129
Cumulative Effect on Prior Years (To December 31,
1999) of Changing to a Different Depreciation
Method                                                           -              -                  8                    -

Operations, Net of Income Taxes Charge (Benefit)
of ($51), ((pound)35),(pound)- and ((pound)8)                               (100)               (68)                    -
                                                                 8
                                                                 -          -----               ----                    -
Net (Loss)/Income                                            (122)           (84)                 55                   41
                                                             =====           ====                 ==                   ==


====================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>
                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                  (In Millions)

                                                                 December 31, 2001                 December 31, 2000
                                                                 -----------------                 -----------------
                                                                   $                        (pound)                 (pound)
                                                                   (See Note 1)
ASSETS
FIXED ASSETS                                                         1,436                    987                   1,093
                                                                     -----                    ---                   -----
CURRENT ASSETS
Cash and cash equivalents                                              320                    220                      11
Investments                                                              -                      -                      14
Accounts receivable, less provision for
uncollectibles of (pound)2 ($3) and (pound)19
                                                                       118                     81                     111
Unbilled revenue                                                        37                     26                     109
Electricity and gas trading contracts                                    -                      -                      76
Prepaids and other                                                       9                      6                      59
                                                                         -                      -                      --
Total current assets                                                   484                    333                     380
                                                                       ---                    ---                     ---
OTHER ASSETS
Goodwill, net of accumulated amortization of (pound)44
($64) and (pound)92
                                                                       473                    325                     873
Investments, long-term                                                   -                      -                      34
Prepaid pension asset                                                    -                      -                     133
Electricity and gas trading contracts                                    -                      -                      22
Other non-current assets                                                19                     13                      71
                                                                        --                     --                      --
Total other assets                                                     492                    338                   1,133
                                                                       ---                    ---                   -----
Total assets                                                         2,412                  1,658                   2,606
                                                                     =====                  =====                   =====
====================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>

                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

               (In Millions, except shares and per share amounts)

                                                                December 31, 2001                December 31, 2000
                                                                -----------------                -----------------
                                                                    $                     (pound)                 (pound)
                                                                         -                -------                 -------
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital,(pound)1 par value common shares,
440,000,100, authorized,
440,000,002 issued and outstanding                                     640                    440                     440
Accumulated other  comprehensive  income, net
                                                                         6                      4                       -
Retained (deficit)/profit                                             (26)                   (18)                      66
                                                                      ----                   ----                      --
Total shareholders' equity                                             620                    426                     506
                                                                       ---                    ---                     ---

Long-term debt                                                       1,119                    769                   1,161
 Company-Obligated Mandatorily Redeemable Trust
 Securities of Subsidiary Holding Solely Junior
 Subordinated Deferrable Interest Debentures

                                                                       230                    158                     178
OTHER NON-CURRENT LIABILITIES
Deferred income taxes                                                  305                    210                     220
Provision for uneconomic electricity and gas contracts
                                                                         -                      -                      21
Electricity and gas trading contracts                                    -                      -                      23
Other                                                                   19                     13                      15
                                                                        --                     --                      --
Total other non-current liabilities                                    324                    223                     279
                                                                       ---                    ---                     ---
CURRENT LIABILITIES
Current portion of long-term debt                                        -                      -                       4
Short-term debt                                                          -                      -                     106
Accounts payable                                                        15                     10                      78
Accrued liabilities and deferred income                                 94                     65                     115
Income taxes payable                                                    10                      7                      47
Electricity and gas trading contracts                                    -                      -                      76
Other current liabilities                                                -                      -                      56
                                                                       ---                     --                      --
Total current liabilities                                              119                     82                     482
                                                                       ---                     --                     ---
Commitments and Contingencies (Note 4)
Total shareholders' equity and liabilities                           2,412                  1,658                   2,606
                                                                     =====                  =====                   =====

====================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>

                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                          (In Millions, except Shares)


                                                  Share Capital                 Retained            Accumulated other   Total
                                                                                 Profit               comprehensive    (pound)
                                                                     Amount    (Deficit)               income, net
                                                     Shares         (pound)     (pound)                  (pound)
Balance, April 1, 1999                           440,000,002         440          (30)                       -           410
Net income for the period                                              -            41                       -            41
                                                 ------------        ---         -----                     ---           ---
                                                           -
Balance, December 31, 1999                       440,000,002         440            11                       -           451
Net income for the year                                                -            55                       -            55
                                                 -----------         ---         -----                     ---           ---
                                                           -
Balance, December 31, 2000                       440,000,002         440            66                       -           506
Change in fair value of cash flow                          -           -                                     4             4
hedges, net of tax of(pound)2
Net loss for the year                                      -           -          (84)                       -          (84)
                                                 -----------         ---         -----                     ---          ----

Balance, December 31, 2001                       440,000,002         440          (18)                       4           426
                                                 ===========         ===          ====                       =           ===

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>
                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (In Millions)

                                                                     Year ended               Year ended           Nine months
                                                                    December 31,             December 31,       ended December 31,
                                                                       2001                     2000                1999
                                                             $               (pound)           (pound)             (pound)
Cash flows from operating activities:
Net (loss)/income                                             (122)            (84)               55                   41
Adjustments  to reconcile net  (loss)/income  to net
cash provided by operating activities:
Cumulative   effect  of  a  change  in  depreciation
method, net of tax                                                -               -              (8)                    -
Depreciation     of    fixed    asset     investment
included in cost of sales                                         2               1               11                    7
Loss/(gain) on sale of discontinued operations                   89              61                -                  (8)
Depreciation                                                     91              63               52                   43
Amortization                                                     20              14               24                   18
Loss on redemption of debt                                       50              35                -                    -
Gain on sale of long-term investment                              -               -                -                  (3)
Deferred income taxes                                            24              17               17                 (11)
Changes in assets and liabilities:
Receivables and unbilled revenue                                (4)             (3)             (12)                 (24)
Prepaid pension asset                                             -               -             (18)                 (17)
Provisions  for  uneconomic   electricity   and  gas              -               -              (4)                  (1)
contracts
Accounts payable                                                  4               2              (1)                    2
Other                                                             -               -               24                   23
                                                                  -               -               --                   --
Net cash provided by operating activities                       154             106              140                   70
                                                                ---             ---              ---                   --

Cash flows from investing activities:
Proceeds from sale of discontinued operations
                                                              1,033             710                -                    -
Capital expenditures                                          (105)            (72)            (104)                (100)
Proceeds from sale of property, plant and equipment
                                                                  6               4                1                    1
Proceeds from sale of long-term investment
                                                                  -               -                -                    3
Reduction in short-term investments                              20              14                2                   10
Other                                                             -               -                -                  (1)
                                                                  -               -                -                  ---
Net cash provided by investing activities                       954             656            (101)                 (87)
                                                                ---             ---            -----                 ----
<PAGE>

                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                            (In Millions)

                                                           Year ended December 31, 2001       Year ended        Nine months ended
                                                                                           December 31, 2000    December 31, 1999
                                                            $                (pound)          (pound)              (pound)
Cash flows from financing activities:
Repayment of Trust Securities                                   (9)             (6)                -                    -
Proceeds from issuance of long-term debt
                                                                  -               -              165                    -
Repayments of long-term debt                                  (641)           (441)             (12)                (140)
Net change in short-term debt                                 (154)           (106)            (190)                  154
                                                              -----           -----            -----                  ---
Net cash (used in)/provided by financing activities
                                                              (804)           (553)             (37)                   14
                                                              -----           -----             ----                   --

Increase/(decrease) in cash and cash   equivalents
                                                                304             209                2                  (3)
Beginning of period cash and cash equivalents
                                                                 16              11                9                   12
                                                                 --              --                -                   --
End of period cash and cash equivalents                         320             220               11                    9
                                                                ===             ===               ==                    =


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

                                                             Year ended December 31, 2001     Year ended        Nine months ended
                                                                                           December 31, 2000    December 31, 1999

                                                               $              (pound)          (pound)              (pound)
Cash paid for interest                                          151             104              113                   74
                                                                ===             ===              ===                   ==
Cash paid for income taxes                                       25              17               14                    1
                                                                 ==              ==               ==                    =
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>

1.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           General

           Yorkshire Power Group Limited ("YPG") was incorporated as a private
           company with limited liability under the laws of England and Wales in
           July 1996. In 1997, YPG acquired Yorkshire Electricity Group plc
           ("YEG"), at the time one of the twelve Regional Electricity Companies
           in England and Wales. YPG's primary asset is the outstanding shares
           of Yorkshire Holdings plc, a public limited company incorporated
           under the laws of England and Wales, which, in turn, beneficially
           owns all of the outstanding shares of YEG.

           YPG, through its wholly-owned subsidiary Yorkshire Electricity
           Distribution plc ("YED") is primarily engaged in one industry
           segment: electricity distribution, which involves the distribution of
           electricity by YED across its network to end users.

           On April 3, 2001,  Innogy Holdings plc ("Innogy")  acquired 94.75% of
           the issued share capital of YPG from its prior owners, American
           Electric Power Company Inc. and Xcel Energy Inc. Xcel Energy Inc.
           retained a 5.25% ownership interest.  On September 21, 2001, CE
           Electric UK Limited acquired 94.75% of the issued share capital of
           YPG from Innogy.

           Basis of presentation

           The consolidated financial statements of YPG and its subsidiaries
           ("YPG Group") are presented in pounds sterling ((pound)) and in
           conformity with accounting principles generally accepted in the
           United States of America.

           The consolidated balance sheet, income statement, statement of cash
           flows and certain information in the notes to the consolidated
           financial statements are presented in Pounds Sterling ((pound)) and
           in US dollars ($) solely for the convenience of the reader, at the
           exchange rate of (pound)1 = $1.4543, the Noon Buying Rate in New York
           on December 31, 2001. This presentation has not been translated in
           accordance with Statement of Financial Accounting Standards No. 52,
           "Foreign Currency Translation". No representation is made that the
           pounds sterling amounts have been, could have been, or could be
           converted into US dollars at that or any other rate of exchange.

           YPG Group is not subject to cost-based rate regulation but, rather,
           is subject to price cap regulation and, therefore, the provisions of
           Statement of Financial Accounting Standards No. 71, "Accounting for
           the Effects of Certain Types of Regulation" ("SFAS 71") do not apply.

           Principles of consolidation

           The consolidated balance sheet includes the accounts of YPG and its
           wholly-owned and majority-owned subsidiaries and has been prepared
           from records maintained by YPG Group in the UK. Significant
           intercompany items are eliminated on consolidation.

           Use of estimates

           The preparation of the financial statements in conformity with
           generally accepted accounting principles requires management to make
           estimates and assumptions that affect the reported amounts of assets
           and liabilities and disclosure of contingent assets and liabilities
           at the date of the consolidated financial statements and the reported
           amounts of revenues and expenses during the reporting period. Actual
           results could differ from those estimates.

           Revenue Recognition

           Revenues are stated net of value added tax ("VAT") and include
           accrued revenues for service provided but unbilled at the end of each
           reporting period.
<PAGE>

           Financial instruments

           YPG Group enters into interest rate and cross currency swaps as a
           part of its overall risk management strategy and does not hold or
           issue material amounts of derivative financial instruments for
           trading purposes. If the interest rate and cross currency swaps were
           to be sold or terminated, any gain or loss would be recognized in the
           period of the transaction. If the debt instrument being hedged by the
           swaps were to be extinguished, any gain or loss attributable to the
           swap would be recognized in the period of the transaction.

           Contracts for differences ("CFDs") were used primarily to hedge the
           Supply Business against the price risk of electricity purchases from
           the Pool. Use of these CFDs was carried out within the framework of
           YPG Group's purchasing strategy and hedging guidelines. CFDs were
           accounted for as hedges and consequently, gains and losses were
           deferred and recognized over the same period as the item hedged.
           Gains and losses were recognised on CFDs when settlement was made,
           which was generally monthly. Gains and losses on CFDs were recognized
           as a decrease or increase to cost of sales based upon the difference
           between fixed prices in the CFD compared to variable prices paid to
           the Pool for the period. Gains and losses based upon the difference
           between fixed prices in the CFD compared to variable prices paid to
           the Pool for future electricity purchases were not recognized until
           the period of such settlements.

           On July 31, 2001, YEG sold its Supply Business to Npower Yorkshire
           Limited, a wholly-owned subsidiary of Innogy. As of that date,
           therefore, YEG ceased to operate the Supply Business and all risks
           and liabilities associated therewith transferred to Innogy.

           YPG Group considers the carrying amounts of financial instruments
           classified as current assets and liabilities to be a reasonable
           estimate of their fair value because of the short maturity of these
           instruments.

           On January 1, 2001, YPG Group adopted Statement of Financial
           Accounting Standards Nos. 133 and 138 (SFAS Nos.133/138) pertaining
           for the accounting for derivative instruments and hedging activities.
           SFAS Nos 133/138 require an entity to recognize all of its
           derivatives as either assets or liabilities in its statement of
           financial position and measure those instruments at fair value. If
           the conditions specified in SFAS Nos. 133/138 are met, those
           instruments may be designated as hedges. Changes in the value of
           hedge instruments would not impact earnings, except to the extent
           that the instrument is not perfectly effective as a hedge. Initial
           adoption of SFAS Nos. 133/138 did not have a material impact on the
           results of operations for YPG Group.

           Derivative commodity instruments

           YPG Group used derivative commodity instruments to reduce exposure to
           commercial risks associated with its gas supply business.

           If an instrument ceased to be accounted for as a hedge, for example,
           because the underlying hedged position was eliminated, the instrument
           was marked to market and any resulting profit or loss recognized at
           that time.

           In accordance with EITF 98-10 gains or losses arising from
           speculative trading, which were only undertaken within agreed risk
           parameters, were recognized in the income statement in the period in
           which they occurred.

           On July 31, 2001, YEG sold its Supply Business to Npower Yorkshire
           Limited, a wholly-owned subsidiary of Innogy. As of that date,
           therefore, YEG ceased to operate the Supply Business and all risks
           and liabilities associated therewith transferred to Npower Yorkshire
           Limited.

           Comprehensive income

           Differences between net income and comprehensive income relate to
           fair value adjustments on cash flow hedges.
<PAGE>

           Cash and cash equivalents

           YPG Group considers all short-term investments with an original
           maturity of three months or less to be cash equivalents.

           Property, plant and equipment

           Property, plant and equipment is recorded at fair market value as
           adjusted at April 1, 1997 in accordance with APB 16. Items
           capitalized subsequent to the acquisition are recorded at cost, which
           includes materials, labor and appropriate overhead costs. Customer
           contributions towards construction of distribution-related assets
           reduce the cost of such assets.

           YPG's policy is to record depreciation on a straight-line basis.
           Assets are depreciated using the following estimated useful lives:

                                                                  Years
           Distribution network                                   50
           Meters                                                 Up to 15
           Buildings                                              Up to 60
           Fixtures and equipment                                 Up to 15
           Vehicles and mobile plant                              Up to 10

           Customer contributions on distribution assets are credited to the
           income statement on a straight-line basis over a 50 year period.

           YPG has revised the estimated useful economic lives of its
           distribution network assets in order to provide a more accurate
           useful estimated life for each asset type. Distribution network
           assets are now depreciated over a period of 50 years. The previous
           policy was to depreciate such assets over a period of between 10 and
           80 years. Meters are depreciated over a period of between 10 and 15
           years. The effect of this change in the year ended December 31, 2001
           was to decrease net income by (pound)4 million gross of tax. This is
           included within depreciation in the consolidated statement of income.

           Capitalization of Interest and Deferred Financing Costs

           Prior to the commencement of operations, interest is capitalized on
           the costs of the construction projects and resource development to
           the extent incurred. Capitalized interest and other deferred charges
           are amortized over the lives of the related assets.

           Deferred financing costs are amortized over the term of the related
           financing using the effective interest method.

           Goodwill

           YPG's policy is to amortize acquisition costs in excess of fair value
           of net assets of the business acquired using the straight-line method
           over a period of 40 years. Recoverability (evaluated on the basis of
           undiscounted operating cash flow analysis) is reviewed when events or
           changes in circumstances indicate that the carrying amount may exceed
           fair value. Goodwill shown in the accompanying consolidated balance
           sheet relates to the acquisition of YEG.

           Investments

           YPG accounts for investments in marketable debt and equity securities
           in accordance with Statement of Financial Accounting Standards No.
           115, "Investments in Certain Debt and Equity Securities" ("SFAS
           115"). YPG's investments are classified as available-for-sale under
           SFAS 115. Securities whose fair market values are readily
           determinable are reported at fair value. Securities whose fair market
           values are not readily determinable are recorded at the lower of cost
           or net realizable value.
<PAGE>

           Income taxes

           YPG accounts for income taxes in accordance with Statement of
           Financial Accounting Standards No. 109, "Accounting for Income
           Taxes". This standard requires that deferred income taxes be recorded
           for temporary differences between the financial statement basis and
           the tax basis of assets and liabilities and loss carry-forwards and
           that deferred tax balances be based on enacted tax laws at rates that
           are expected to be in effect when the temporary differences reverse.

           New Accounting Pronouncements

           In July 2001, the FASB issued SFAS No. 141, "Business Combinations",
           and SFAS No. 142, "Goodwill and Other Intangible Assets" which
           establish accounting and reporting for business combinations. SFAS
           No. 141 requires all business combinations entered into subsequent to
           June 30, 2001, to be accounted for using the purchase method of
           accounting. SFAS No. 142 provides that goodwill and other intangible
           assets with indefinite lives will not be amortized but tested for
           impairment on an annual basis. SFAS No. 142 is effective for YPG
           beginning January 1, 2002. Under the current method of assessing
           goodwill for impairment, which uses an undiscounted cash flow
           approach, no material impairment existed at December 31, 2001. For
           2002, YPG will begin to test goodwill for impairment under the new
           rules, applying a fair-value-based approach. YPG is in the process of
           quantifying the anticipated impact on its financial condition and
           results of operations of adopting the provisions of SFAS No. 142,
           which could be significant. The historical impact of not amortizing
           goodwill would have been to increase net income for the years ended
           December 31, 2001 and 2000 and the nine months ended December 31,
           1999 by (pound)14 million, (pound)24 million and (pound)18 million,
           respectively assuming no impairment had been required in those
           periods. However, impairment reviews may result in future periodic
           write-downs.

           In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
           Retirement Obligations", which addresses the accounting for legal
           obligations associated with the retirement of tangible, long-lived
           assets, and the associated asset retirement costs. This pronouncement
           is effective for financial years beginning after June 15, 2002. YPG
           is evaluating the impact that adoption of this standard will have on
           its financial statements.

           In October 2001, the FASB issued SFAS No. 144, "Accounting for the
           Impairment or Disposal of Long-Lived  Assets".  The adoption of SFAS
           No. 144 on January 1, 2002 did not have any impact on YPG Group's
           financial statements.

2.         RETIREMENT BENEFITS

           Pension Plans

           YEG operated two plans, one based on defined contributions and a
           second based on defined benefits.

           Defined Contribution Plan

           The defined contribution plan was established on December 1, 1991.
           From April 1, 1995, only new employees were eligible to join this
           plan. This plan was transferred to Npower Yorkshire Limited under the
           agreement for the sale of YEG's Supply Business. The remaining YPG
           employees who were participants of this plan were transferred to a
           Northern Electric section of the plan. The assets of the defined
           contribution plan are held and administered by an independent
           trustee. The cost recognized for this plan for the year ended
           December 31, 2001, the year ended December 31, 2000 and the nine
           months ended December 31, 1999, was less than (pound)1 million in
           each accounting period.
<PAGE>

           Defined Benefit Plan

           YEG participated in the ESPS, which provides pension and other
           related defined benefits, based on final pensionable pay, to
           employees throughout the electricity supply industry in the UK. The
           YPG section of the ESPS was transferred to Npower Yorkshire Limited
           under the agreement for the sale of YEG's Supply Business. The
           remaining YPG employees who were participants of this plan
           transferred to the Northern Electric section of the ESPS.

           YEG used the projected unit credit actuarial method for accounting
           purposes. Amounts funded to the pension plan are primarily invested
           in equity and fixed income securities.


                                                           2001            2000
                                                        (Amounts in millions)
                                                    $       (pound)      (pound)
Reconciliation of Projected Benefit Obligation
Projected benefit obligation at January 1            1,183     813          818
Service cost                                             8       5            8
Interest cost                                           31      22           29
Participants' contributions                              1       1            1
Benefits paid                                         (51)    (35)         (35)
Actuarial gain                                           -       -          (8)
Amounts transferred to Npower Yorkshire Limited
                                                   (1,043)   (717)            -
                                                   -------   -----       ------
                                                       129      89          813
Northern Electric scheme                               845     581            -
                                                       ===     ===            =
Projected benefit obligation at December 31            974     670          813
                                                       ===     ===          ===

                                                           2001            2000
                                                       (Amounts in millions)
Reconciliation of Fair Value of Plan Assets         $        (pound)    (pound)
Fair value of plan assets at January 1               1,407     967          987
Actual return on plan assets                            54      37           12
Employer contributions                                   3       2            2
Participants' contributions                              1       1            1
Benefits paid                                         (51)    (35)         (35)
Amounts transferred to Npower Yorkshire Limited
                                                   (1,283)   (882)            -
                                                   -------   -----         ----
                                                       131      90          967
Northern Electric scheme                               940     646            -
                                                       ---     ---            -
Fair value of plan assets at December 31             1,071     736          967
                                                     =====     ===          ===
<PAGE>

                                                           2001            2000
                                                        (Amounts in millions)
                                                    $        (pound)     (pound)
Funded status                                           96      66          154
Unrecognized net actuarial loss                      (197)   (135)         (31)
Unrecognized prior service cost                          -       -           10
                                                         -       -           --
Prepaid pension cost                                   293     201          133
                                                       ===     ===          ===

The weighted average rates assumed in the actuarial calculations as of the
following dates were:
                                                           December 31,
                                            2001           2000            1999
                                             %               %              %
Discount rate                               4.75           4.75            4.75
Annual salary rate increase                 4.00           4.00            4.25
Expected long-term rate of
  return on plan assets                     6.75           7.00            7.50

The components of the plan's net periodic pension cost during the period are
shown below (in millions):

                                   Year ended       Year ended      Nine months
                                   December 31,     December 31,  ended December
                                      2001              2000          31, 1999
                                $         (pound)      (pound)         (pound)
Service cost                        8         5           11              8
Interest                           31        22           38             27
Curtailment loss                    -         -            1              -
Expected return on plan assets   (54)      (37)         (67)           (51)
Net amortization and deferral       -         -            1              1
                                    -         -            -              -
Net periodic pension credit      (15)      (10)         (16)           (15)
                                 ====      ====         ====           ====

3.         REGULATORY MATTERS

           The principal legislation governing the structure and regulation of
           the electricity industry in Great Britain is the Electricity Act, as
           amended by the Utilities Act and related secondary legislation. The
           Electricity Act created the institutional framework under which the
           industry is currently regulated, including the post of Director
           General (the "Regulator"), who was appointed by the Secretary of
           State. The Regulator's office and support staff were collectively
           known as OFFER. Both OFFER and OFGAS were replaced by Ofgem in June
           1999 in anticipation of the formal merger of the electricity and gas
           regulatory offices under the Utilities Act. The posts of Director
           General of both Gas and Electricity Supply were replaced by GEMA in
           November 2000 under the Utilities Act, with the then Director General
           of both Gas and Electricity Supply becoming chairman of GEMA. GEMA
           comprises a number of executive and non-executive members. The
           management committee of Ofgem reports to GEMA, which determines
           strategy and decides on major policy issues.
<PAGE>

           GEMA's functions under the Electricity Act (as amended by the
           Utilities Act) include granting licenses to generate, transmit,
           distribute or supply electricity; proposing modifications to licenses
           and, in the case of non-acceptance of such proposals by licensees,
           making license modification references to the Competition Commission;
           enforcing compliance with license conditions; calculating the Fossil
           Fuel Levy rate and collecting the levy; determining certain disputes
           between electricity licensees and customers; setting standards of
           performance for electricity licensees; and liaising as appropriate
           with the GECC.

           Revenue from the Distribution Business is controlled by a formula
           principally based on P x (1+(RPI-Xd)) where P is the previous year's
           maximum average price per Unit of electricity distributed, RPI is the
           percentage change in the UK Retail Price Index between the six-month
           period from July to December in the preceding year and the same
           period in the second preceding year and Xd is set by Ofgem in
           connection with each review (the "Distribution Price Control
           Formula"). Xd is currently 3%. Therefore the maximum average price in
           any year is based in part on the maximum average price in the
           preceding year, such that a price reduction in any given year has an
           ongoing effect on the maximum average price for all subsequent years.
           Because RPI is based on a weighted average of the prices of goods and
           services purchased by a typical household, which may bear little
           resemblance to the inputs contributing to a licensed distributor's
           business costs, the RPI calculation may not accurately reflect the
           price changes affecting the licensee. This formula determines the
           maximum average price per Unit of electricity distributed (in pence
           per kilowatt hour) which a licensed distributor is entitled to
           charge.

           At each price control review Ofgem has reviewed the costs and
           efficiency of each distribution license holder in Great Britain.
           Based upon an analysis of such costs and efficiencies, which takes
           into account a number of factors including operating and capital
           costs, the number and nature of customers and the nature and scale of
           the network serving those customers, Ofgem has determined a one-time
           adjustment to the distribution revenue of each distribution license
           holder.

           The most recent distribution price control review took effect from
           April 1, 2000 for the five-year period ending March 31, 2005. As a
           result of this review, YEG's allowed distribution revenue for the
           Regulatory Accounting Period commencing April 1, 2000 was reduced by
           23% in real terms (the range of reductions for all distribution
           companies was between 19% and 33%) from the level permitted in the
           final year of the previous price control which ended on March 31,
           2000. In addition, for the second through fifth Regulatory Accounting
           Periods in the five-year price control review period, the Xd factor
           will be equal to 3%, which means that in each of these years
           regulated distribution prices are required to fall in real terms by a
           further 3% per annum.

           In setting the distribution charges to apply during each Regulatory
           Accounting Period, each licensed distributor must project the
           permitted maximum average charge per Unit to be distributed in that
           Regulatory Accounting Period. The projection must take into account
           forecasts of Units distributed, distribution line losses, the actual
           change in RPI and NGC exit charges. Failure to forecast accurately
           may result in overcharging or undercharging, which is taken into
           account in the following Regulatory Accounting Period through a
           correction factor in the distribution price control formula. If a
           licensee has overcharged in a given Regulatory Accounting Period, the
           maximum average charge per Unit distributed in the following
           Regulatory Accounting Period is reduced by an amount to reflect the
           excess income received, to which is added interest at the average of
           the daily base rates of Barclays Bank plc during the period in
           respect of which the calculation falls plus 4%. In the event of
           undercharging, the Distribution Price Control Formula allows the
           licensee to recover the shortfall in income plus interest at the base
           rate.

           In certain instances, however, overcharging or undercharging by a
           licensee above specific percentage thresholds may result in
           adjustments by Ofgem. If in any Regulatory Accounting Period the
           average charge per Unit distributed exceeds the permitted maximum
           average charge per Unit distributed by more than 3%, then in the next
           following Regulatory Accounting Period the licensee may not increase
           distribution charges unless it has satisfied Ofgem that the average
           charge per Unit in that next following Regulatory Accounting Period
<PAGE>
           is not likely to exceed the permitted maximum average charge. If,
           with respect to any two successive Regulatory Accounting Periods, the
           sum of the amounts by which the average charge per Unit distributed
           has exceeded the permitted maximum average charge per Unit
           distributed is more than 4% of that permitted maximum average charge,
           then, in the next following year, the licensee may be required by
           Ofgem to adjust its charges so that they fall within the maximum
           permitted average charge. If, with respect to two successive
           Regulatory Accounting Periods, the licensee undercharges by more than
           10% of the maximum average charge, Ofgem may limit the amount by
           which such undercharging may be recovered.

           Since April 2000, the distribution price control formula is no longer
           notionally divided into metering and non-metering components. The
           current structure contains a general distribution allowance taking
           into account movements of some metering services to electricity
           supply (e.g. data collection). Non-half hourly meter provision and
           meter maintenance activities relating to network connections, which
           became competitive on April 1, 2000, are remunerated under the
           distribution price control formula. As part of the latest price
           control review, provisions were added to the distribution price
           control formula, which ensure that any reduction in operating costs
           resulting from a decline in the provision of metering services is
           reflected in lower permitted revenues.

           Connection charges are levied when a customer first connects to a
           licensee's distribution system or makes a material change in
           electricity supply requirements. These charges are excluded from the
           Distribution Price Control Formula. Since 1994 there has been compe-
           tition in providing connections to new customers and limitations on
           the extent to which, and the circumstances in which, customers
           wishing to be connected would be required to pay for the costs of
           reinforcement of the distribution system.

4.         COMMITMENTS AND CONTINGENCIES

           Electricity and gas purchase agreements

           As part of the sale of Regional Power Generators Limited during the
           year ended December 31, 1999, a number of contracts were
           renegotiated. This enabled YEG to release its balance sheet provision
           for uneconomic electricity and gas contracts. In the light of
           renegotiated contracts, a reduced provision of (pound)32 million was
           created. The provision related to a financial instrument, which
           compensated Regional Power Generators Limited in respect of gas
           purchases in excess of market price for a period up to the year ended
           December 31, 2008. The provision, for the net present value of
           expected future payments, reflected management's expectation of
           market prices of electricity (to which the contract was partially
           indexed) and future gas prices. The provision at December 31, 2000
           was (pound)20 million and represented the fair value of this
           financial instrument.

           In addition, YEG agreed to purchase portions of the output of
           Yorkshire Cogen Limited, a former subsidiary disposed of as part of
           the sale of the Generation Business, for up to 20 years.

           YEG entered into a medium-term gas purchase agreement with a major
           gas supplier, which had a potential end date of October 2003. However
           due to a change in market conditions this contract was terminated in
           January 2001. YEG also had a small number of swing contracts with
           other parties for the purchase of gas, all on normal commercial
           terms. There were three contracts in total, which were to terminate
           between 2002 and 2007.

           Following the sale of the Supply Business, YEG ceased to have an
           interest in any electricity and gas purchase agreements, including
           the foregoing agreements.

           Legal Proceedings

           Litigation and arbitration may affect various companies in the YPG
           Group in the normal course of business. While the ultimate outcome of
           these proceedings cannot be predicted with certainty, we do not
           believe that any pending proceedings will have a material adverse
           effect on our results of operations or financial position.
<PAGE>

           Operating Leases

           YPG has commitments under operating leases with various terms and
           expiration dates. Rental expenses incurred for operating leases in
           the year ended December 31, 2001, the year ended December 31, 2000
           and the nine months ended December 31, 1999 were (pound)5 million ($7
           million), (pound)7 million and (pound)6 million respectively.

           Future minimum commitments under these operating leases as of
           December 31, 2001 are as follows:

           Due during the year ended December 31:
                                                       (pound)
                                                      (millions)
                      2002                                 -
                      2003                                 2
                      2004                                 1
                      2005                                 -
                      2006                                 -
                      Thereafter                           1
                                                        ----
                      Total                                4
                                                        ====

           Labor Subject to Collective Bargaining Agreements

           A majority of YPG's employees are subject to one of three collective
           bargaining agreements. Such agreements are ongoing in nature, and
           YPG's employees participation level is consistent with that of the
           electric utility industry in the UK.

5.         INCOME TAXES

           YPG's income tax benefit from continuing operations is as follows:

                     Year ended       Year ended December     Nine months ended
                   December 31, 2001       31, 2000           December 31, 1999
                       $      (pound)      (pound)                  (pound)
           Current       58       40          69                       22
           Deferred    (27)     (19)        (18)                     (25)
                       ----     ----        ----                     ----
           Total         31       21          51                       47
                         ==       ==          ==                       ==

           The following is a reconciliation of the difference between the
           amount of income taxes from continuing operations computed by
           multiplying book income before income taxes by the statutory rate,
           and the amount of income taxes reported (in millions):
<PAGE>

                                         Year ended     Year ended   Nine months
                                        December 31,    December 31,  ended
                                           2001             2000    December 31,
                                                                       1999
                                      $       (pound)    (pound)      (pound)
Loss from continuing operations
before income taxes
                                       114        79       166          143
Income taxes computed at statutory
rate (tax rate 30%)                     34        23        50           43

Amortization of goodwill at 30%        (3)       (2)       (2)          (1)

Other                                    -         -         3            5
                                         -         -         -            -
Total income tax benefit
                                        31        21        51           47
                                        ==        ==        ==           ==

The tax effect of temporary differences between the carrying amounts of assets
and liabilities in the consolidated balance sheet and their respective tax
bases, which give rise to deferred tax assets and liabilities, are as follows
(in millions):

                                        December 31, 2001      December 31, 2000
                                        $         (pound)             (pound)
Deferred tax liabilities:
Property                                 305        210                 222
Pension                                    -          -                   5
Other                                      -          -                 (9)
                                           -          -                 ---
Net deferred tax liability               305        210                 218
Portion included in current assets         -          -                   2
                                           -          -                   -
Long-term deferred tax liability         305        210                 220
                                         ===        ===                 ===

The tax years since 1996 are currently under review by the Inland Revenue in the
UK. In the opinion of management, the settlement of open years will not have a
material adverse effect on results of operations, financial position or cash
flows of YPG Group.

6.         FINANCIAL INSTRUMENTS

           YPG Group may enter into interest rate and cross currency swaps as a
           part of its overall risk management strategy and does not hold or
           issue material amounts of derivative financial instruments for
           trading purposes. If any interest rate and cross currency swaps that
           may be entered into were to be sold or terminated, any gain or loss
           would be deferred and amortized over the remaining life of the debt
           instrument being hedged by the swaps. If the debt instrument being
           hedged by the swaps were to be extinguished, any gain or loss
           attributable to the swap would be recognized in the period of the
           transaction.
<PAGE>

           YPG Group considers the carrying amounts of financial instruments
           classified as current assets and liabilities to be a reasonable
           estimate of their fair value because of the short maturity of these
           instruments.

           Contracts for differences ("CFDs") were used primarily to hedge the
           Supply Business against the price risk of electricity purchases from
           the Pool. Use of these CFDs was carried out within the framework of
           YPG Group's purchasing strategy and hedging guidelines. CFDs were
           accounted for as hedges and consequently, gains and losses were
           deferred and recognized over the same period as the item hedged.
           Gains and losses were recognised on CFDs when settlement was made,
           which was generally monthly. Gains and losses on CFDs were recognized
           as a decrease or increase to cost of sales based upon the difference
           between fixed prices in the CFD compared to variable prices paid to
           the Pool for the period. Gains and losses based upon the difference
           between fixed prices in the CFD compared to variable prices paid to
           the Pool for future electricity purchases were not recognized until
           the period of such settlements. Following the disposal of the Supply
           Business, YEG is no longer a party to any CFDs.

           In February 1998, YPG issued $300 million aggregate principal amount
           of 6.496% Senior Notes due 2008. The dollar interest payments are
           hedged using cross-currency swaps maturing in 2008.

           In June 1998, YPG issued $275 million aggregate principal amount of
           8.08% Trust Securities due 2038. In the absence of appropriate cover
           for this maturity, cross currency swaps were taken out which mature
           in June 2008. The original nominal value of the cross-currency swaps
           was $265 million. YPG repurchased Trust Securities with a nominal
           value of approximately $8 million in the year ended December 31,
           2001, $6 million in the year ended December 31, 2000 and $3 million
           in the nine months ended December 31, 1999. The aggregate nominal
           value of the cross-currency swaps at December 31, 2001 was $256
           million.

           Payments to counter-parties in respect of cross-currency swaps are
           recorded as an interest expense.

           At December 31, 2001 and December 31, 2000 YPG was party to
           cross-currency swap agreements with a notional value of (pound)363
           million and (pound)556 million respectively.

           The estimated fair values of YPG's financial instruments are as
           follows (in millions):
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                      December 31, 2001                    December 31, 2000
                                             Carrying Amount         Fair Value        Carrying Amount  Fair Value
                                            $          (pound)    $           (pound)       (pound)       (pound)
           Long term debt (including        (1,349)     (927)     (1,494)     (1,027)       (1,343)       (1,361)
           Trust Securities)
           Cross currency swap
           agreements                            8         5           8           5             -          (10)

</TABLE>

           The fair value of long-term debt is estimated based on quoted market
           prices for the same or similar issues or the current rates offered to
           YPG for debt of the same remaining maturities. The fair values of any
           cross currency swap and interest rate cap agreements entered into are
           determined by reference to prices available from the markets on which
           these instruments are traded.
<PAGE>

7.         PROPERTY, PLANT AND EQUIPMENT

           Property, plant and equipment consisted of the following (in
           millions):

                                        December 31,2001       December 31, 2000
                                       $            (pound)           (pound)

Distribution network                    2,050        1,409             1,333
Non-network land and buildings             22           15                38
Other                                     114           79               213
Consumer contributions                  (529)        (364)             (328)
                                        -----        -----             -----
                                        1,657        1,139             1,256
Accumulated depreciation                (246)        (169)             (177)
                                        -----        -----             -----
Property, plant and equipment, net      1,411          970             1,079
Construction work in progress              25           17                14
                                           --           --                --
Net fixed assets                        1,436          987             1,093
                                        =====          ===             =====

8.         LONG TERM DEBT

           Long term debt consisted of the following (in millions):

                                                 December 31,       December 31,
                                                      2001              2000
                                               $          (pound)        (pound)

7.25% Eurobonds, due 2028                         274        189           198
8.625% Eurobonds, due 2005                          -          -           151
9.25% Eurobonds, due 2020                         303        208           206
6.154% Senior Notes, due 2003                       -          -           234
6.496% Senior Notes, due 2008                     300        206           201
8.08% Trust Securities, due 2038                  230        158           178
Floating Rate Reset Senior Notes, due 2005        242        166           167
European Investment Bank:
7.52% credit facility, due 1999-2002                -          -             8
                                                    -          -             -
Total                                           1,349        927         1,343
Less current maturities                             -          -           (4)
Less Trust Securities                           (230)      (158)         (178)
                                                -----      -----         -----
Long term debt, net of current maturities
 and Trust Securities                           1,119        769         1,161
                                                =====        ===         =====
<PAGE>

Long term debt outstanding at December 31, 2001 is payable as follows (in
millions):

                                                $                 (pound)
During the years ending December 31,
2002                                                 -                 -
2003                                                 -                 -
2004                                                 -                 -
2005                                               242               166
2006                                                 -                 -
Thereafter                                       1,107               761
                                                 -----               ---
Total                                            1,349               927
                                                 =====               ===

         Yorkshire Capital Trust I (the "Trust"), is a statutory business trust
         created for the sole purpose of issuing trust securities and investing
         the proceeds in an equivalent amount of Junior Subordinated Deferrable
         Interest Debentures, Series A due 2038 issued by Yorkshire Power
         Finance Limited (YPF), a subsidiary of YPG. On June 9, 1998 the Trust
         issued 11,000,000 shares of 8.08% Trust Securities at the liquidation
         amount of $25 per Trust Security. The Trust invested the $275 million
         proceeds in an equivalent amount of 8.08% Junior Subordinated
         Deferrable Interest Debentures, Series A due 2038 of YPF which in turn
         loaned the net proceeds to YPG. Substantially all of the Trust's assets
         will consist of the Junior Subordinated Deferrable Interest Debentures.
         YPG considers that the mechanisms and obligations relating to the Trust
         Securities issued for its benefit, taken together, constitute a full
         and unconditional guarantee by it of the Trust's payment obligations
         with respect to the Trust Securities.

         The issue raised net proceeds of (pound)162 million, which was used as
         working capital and for the repayment of short-term debt.

         Yorkshire Power Pass-Through Asset Trust 2000-1 (the "PATS Trust") is a
         New York common law trust, the sole assets of which consist of

        (i)   a 100% beneficial  interest in(pound)155 million principal amount
              of Reset Senior Notes due February 15, 2020 (the "Senior Notes")
              issued by Yorkshire Finance 2 ("YPF2"), a subsidiary of YPG; and

        (ii)  the rights of the PATS Trust under a currency swap with UBS AG,
              London Branch (the "Currency Swap") and an option granted to UBS
              AG, London Branch (the "Call Option").

9.         SHORT-TERM DEBT

           Short-term debt consisted of the following (in millions):

                                  December 31, 2001       December 31, 2000
                                $          (pound)            (pound)

Syndicated credit facility       -             -                 85
Bank loans                       -             -                 14
Loan notes                       -             -                  7
                                 -             -                ---
Total                            -             -                106
                                 =             =                ===
<PAGE>

10.        DISCONTINUED OPERATIONS

           YEG's Supply Business was disposed of during the year ended December
           31, 2001.

           The results, which are presented in accordance with US GAAP, show
           losses from continuing operations (i.e., from the retained Distri-
           bution Business), in each of the periods to December 31, 2001.  In
           each period, the losses arise as a result of the requirement to
           eliminate the effects of all transactions, including those in respect
           of the retained Distribution Business, with YEG's former Supply
           Business which was disposed of on July 31, 2001.

           Going forward, however, the YPG Group in fact will receive revenues
           in respect of the retained Distribution Business which were
           previously internal to the Group. These revenues will be received
           from the owner of YEG's former Supply Business and/or from other
           third parties who may from time to time supply electricity to the
           customers of YEG's former Supply Business.  Reported historic losses
           from continuing operations are therefore not necessarily reflective
           of the future financial performance of YPG.

           The following condensed financial information relates to the
           discontinued activities of the Supply Business.

                                     Year ended        Year ended   Nine months
                                    December 31,       December 31,    ended
                                        2001               2000     December 31,
                                                                        1999
                                      $        (pound)    (pound)     (pound)
Consolidated Statements of Income
Operating revenues                     1,190      818       1,407        969
Cost of Sales                          (902)    (620)     (1,025)      (700)
                                       -----    -----     -------      -----
Gross Margin                             288      198         382        269
Operating Costs                        (145)    (100)       (143)       (79)
                                       -----    -----       -----       ----
Income from operations                   143       98         239        190
Net interest expense                    (54)     (37)           -          -
                                        ----     ----           -          -
Income before income taxes                89       61         239        190
Provision for income taxes              (28)     (19)        (77)       (61)
                                        ----     ----        ----       ----
Income from discontinued operations       61       42         162        129
Loss on disposal, net of income
  taxes of ($51), (pound)35,  -, -     (100)     (68)           -          -
                                       -----     ----           -
Net (loss)/income                       (39)     (26)         162        129
                                        ====     ====         ===        ===

<PAGE>

                                              Year ended December 31, 2000
                                            $                      (pound)
Consolidated Balance Sheets
Fixed Assets                                   115                      79
Current Assets                                 468                     322
Other Assets (including Goodwill
 of (pound)534                               1,053                     724
                                             -----                     ---
Total Assets                                 1,636                   1,125
                                             =====                   =====

Other non-current liabilities                  111                      76
Current liabilities                            397                     273
Corporate Funding                            1,128                     776
                                             -----                     ---
Total shareholders' equity and liabilities   1,636                   1,125
                                             =====                   =====

           YEG's Generation Business was disposed of during the year ended
           March 31, 1999. Provision was made in the year ended March 31,
           1999 for income taxes arising on the gain. However, a favorable
           adjustment to tax liabilities of (pound)8 million, in respect of the
           disposal, has been recognized in the nine months ended December 31,
           1999.

           The information presented in the financial statements for continuing
           operations is stated net of transactions with the former Supply
           Business whilst that business was part of the YPG Group. As the
           continuing Distribution Business is substantially a de facto
           monopoly, sales will continue to be made to the former Supply
           Business. The following table shows the results if the transactions
           with the former Supply Business had not been eliminated.


                                     Year ended        Year ended   Nine months
                                    December 31,       December 31,    ended
                                        2001               2000     December 31,
                                                                        1999
                                                (Amounts in millions)
                                      $        (pound)    (pound)     (pound)
Operating revenues from
 continuing operations:
As reported                             250        172        105          68
Sales to former Supply Business         131         90        177         175
Continuing operations restated          381        262        282         243
Operating income/(loss):
As reported                              11          7       (54)        (63)
Transactions with former
 Supply Business                        116         80        154         147
Continuing operations restated          127         87        100          84
<PAGE>

11.        BUSINESS RESTRUCTURING

           A voluntary redundancy programme for employees of YED and YEDSL is
           taking place in 2002. The costs of the voluntary redundancy programme
           were charged against income in 2001.

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To The Shareholders and Board of Directors of Yorkshire Power Group Limited and
Subsidiaries

We have audited the consolidated financial statements of Yorkshire Power Group
Limited and its subsidiaries (the "Company") as of December 31, 2001 and
December 31, 2000, and for the years ended December 31, 2001 and December 31,
2000 and, for the nine month period ended December 31, 1999 and have issued our
report thereon dated July 12, 2002. Our audits also included the financial
statement schedule of the Company, listed in Item 18. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.




Deloitte & Touche
Gainsborough House
34-40 Grey Street
Newcastle upon Tyne
NE1 6AE
England


July 12, 2002

<PAGE>

                 YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES

          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
<S>     <C>                         <C>               <C>         <C>              <C>                <C>
        Column A                    Column B               Column C                Column D          Column E
                                                          Additions
Description                        Balance at      Charged to     Charged to       Deductions      Balance at End
                                  Beginning of     Costs and    Other Accounts                       of Period
                                     Period         Expenses
Year ended December 31, 2001
Deducted from Assets:
Accumulated Provision for                19             -          (17)(a)              -                2
                                         ==             =          =======              =                =
Uncollectible Accounts

Year ended December 31, 2000
Deducted from Assets:
Accumulated Provision for                 9            14                -           4(b)               19
                                          =            ==                =           ====               ==
Uncollectible Accounts

Nine months ended
December 31, 1999
Deducted from Assets:
Accumulated Provision for                 9             4                -           4(b)                9
                                          =             =                =           ====                =
Uncollectible Accounts
</TABLE>

a)    Amounts transferred to Npower Yorkshire Limited under the agreement for
      the sale of YEG's Supply Business

b)    Uncollectible accounts written off

<PAGE>

                           GLOSSARY OF SELECTED TERMS

When used in this report, the following terms will have the meanings indicated
below.

"AEP" means American Electric Power Company, Inc.

"Authorized Area" means YEG's service area as determined by its PES License

"British Energy" means British Energy plc

"CE" means CE Electric UK Limited

"Competition Act" means the UK Competition Act 1998

"Competition Commission" means the body created in the UK by the Competition Act
which performs the functions previously performed by the UK Monopolies and
Mergers Commission

"Data Management Services" means the metering and data services in support of
the electricity trading arrangements

"Distributable Reserves" means accumulated, realized profits so far as not
previously utilized by distribution or capitalization, less accumulated realized
losses and, in the case of public limited companies, unrealized losses, which
may be legally distributed by way of dividends

"Distribution Business" means the business of distributing electricity on behalf
of suppliers in the Distribution Services Area, including the business of
providing new connections to YED's electricity distribution network and the
business of providing distributor metering and data services

"Distribution Services Area" means YED's service area, as defined in its
electricity distribution license

"DUoS" means distribution use of system

"EdF" means Electricite de France

"Electricity Act" means the UK Electricity Act 1989

"Electricity Association" means the body that represents companies involved in
the generation, transmission, distribution or supply of electricity

"EMFs" means electromagnetic fields

"ESPS" means Electricity Supply Pension Scheme

"EU" means the European Union

"FASB" means the US Financial Accounting Standards Board

"GECC" means Gas and Electricity Consumer Council in Great Britain (also known
as energywatch)

"GEMA" means Gas and Electricity Markets Authority in Great Britain

"Generation Business" means the business of generating electricity at power
stations

"Grid" means the national electricity transmission system owned by the National
Grid Company in England and Wales

"GWh" means gigawatt hours

"Innogy" means Innogy Holdings Plc (the UK business of the company which
formerly was known as National Power plc)
<PAGE>

"International Power" means International Power plc (formerly known as National
Power plc)

"Ionica" means Ionica Group plc

"km" means kilometers

"kV" means kilovolts

"kW" means kilowatts

"kWh" means kilowatt hours

"LV" means low voltage

"MEHC" means MidAmerican Energy Holdings Company

"MW" means megawatt

"NETA" means the New Electricity Trading Arrangements, since March 27, 2001 the
means by which electricity is bought and sold on a bilateral basis in England
and Wales.

"NGC" means the National Grid Company plc, which is wholly-owned by NGG

"NGG" means the National Grid Group plc

"OFFER" means the Office of Electricity Regulation, being the office of the
Director General of Electricity Supply, the person appointed by the Government
of Great Britain to regulate the electricity industry in Great Britain, which
body has now been replaced by Ofgem

"OFGAS" means the Office of Gas Regulation, being the office of the Director
General of Gas Supply, the person appointed by the Government of Great Britain
to regulate the gas industry in Great Britain, which body has now been replaced
by Ofgem

"Ofgem" means the Office of Gas and Electricity Markets in Great Britain, being
the office of support staff of GEMA

"PES" means public electricity supplier

"PES License" means the public electricity supply license held by YEG prior to
October 1, 2001

"Pool" means the wholesale trading market for electricity in England and Wales
that was replaced by NETA on March 27, 2001

"Pooling and Settlement Agreement" means the agreement which governed the
constitution and operation of the Pool and the calculation of payments to and
from generators and suppliers

"PowerGen" means PowerGen plc

"REC" means one of the 12 regional electricity companies in England and Wales
licensed to supply electricity prior to October 1, 2001

"Regulatory Accounting Period" means the 12 month regulatory accounting period,
each ended March 31

"Scottish and Southern" means Scottish and Southern Energy plc

"ScottishPower" means Scottish Power plc

"SEC" means the US Securities and Exchange Commission
<PAGE>

"SFAS" means US Statement of Financial Accounting Standards

"Supply Business" means the supply of electricity and/or gas to end-user
customers

"UK" means the United Kingdom

"Unit" means kWh

"US" means the United States of America

"US GAAP" means Generally Accepted Accounting Principles in the United States of
America

"US Parents" means MEHC and Xcel

"Utilities Act" means the UK Utilities Act 2000

"YED" means Yorkshire Electricity Distribution plc

"YEDSL" means Yorkshire Electricity Distribution Services Limited

"YEG" means Yorkshire Electricity Group plc

"Yorkshire Finance" means Yorkshire Power Finance Limited, a subsidiary of
Yorkshire Power Group Limited

"Yorkshire Finance 2" means Yorkshire Power Finance 2 Limited, a subsidiary of
Yorkshire Power Group Limited

"YPF" means Yorkshire Finance and Yorkshire Finance 2 collectively

"YPG" means Yorkshire Power Group Limited

"YPG Group" means Yorkshire Power Group Limited and its subsidiaries

"Yorkshire Holdings" means Yorkshire Holdings plc, a subsidiary of Yorkshire
Power Group Limited

"Yorkshire Trust" means Yorkshire Capital Trust I

"Xcel" means Xcel Energy Inc.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Yorkshire Power Group Limited, certifies
that it has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on July 12, 2002.


                                    YORKSHIRE POWER GROUP LIMITED






                                     By:  /s/ Paul J. Leighton
                                              Paul J. Leighton
                          duly authorised by a power of attorney of the board of
                          directors dated June 27, 2002