Exhibit 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








                            MADE ON 28 SEPTEMBER 2001


<PAGE>



1

                                                   CONTENTS

CLAUSE        SUBJECT MATTER                                            PAGE


              Recitals.............................................        2

1.            Interpretation.......................................        3
2.            Amendment and treatment of Existing Licences.........        4
3.            New Standard Conditions..............................        4
4.            Distribution licensee and Supply licensee............        4
5.            Continuing effect....................................        5
Annex 1       The Electricity Distribution Licence.................        6

              Part I: The Terms of the licence.....................        7

              Part II: The Standard Conditions.....................        8

              Part III: Amendments to the Standard Conditions......        9

              Part IV: The Special Conditions......................       10

              Schedule 1: Specified Area...........................       51

              Schedule 2: Revocation...............................       52
              Schedule 3: Distribution Services Area...............       54

 Annex 2      The Electricity Supply Licence.......................       55

              Part I: The Terms of the licence.....................       56

              Part II: The Standard Conditions.....................       57

              Part III: Amendments to the Standard Conditions......       59

              Part IV: The Special Conditions......................       60

              Schedule 1: Specified Area...........................       90
              Schedule 2: Revocation...............................       93
              Schedule 3: supply Services Area.....................       95

                                      -1-
<PAGE>
                                   THE SCHEME



Pursuant to  paragraphs  13 and 17 of Schedule 7 to the Utilities Act 2000 ("the
2000 Act") and  having  regard to the  transfer  scheme  described  in Recital 5
below, the Secretary of State hereby makes the following Scheme which shall come
into operation on the determination day:

RECITALS

WHEREAS:

1.   Immediately prior to the determination day Yorkshire  Electricity Group plc
     (company  registered  no.  2366995)(the   "Company")  holds  the  following
     licences:

1.1  a public  electricity  supply licence  granted on 26 March 1990 pursuant to
     section 6(1)(c) of the Electricity Act 1989 (the "PES Licence");

1.2  a supply  licence  granted on 8 June 1990  pursuant to section  6(2) of the
     Electricity  Act 1989 in  relation  to  premises  in England and Wales (the
     "Second Tier Licence"); and

1.3  a supply  licence  granted on 25 March 1991 pursuant to section 6(2) of the
     Electricity  Act 1989 in relation to premises in Scotland (the "Second Tier
     (Scotland) Licence"),

           (together called the "Existing Licences").

2.   Paragraph  1 of  Schedule 7 to the 2000 Act  ("Schedule  7") applies to the
     Company as the holder of the PES Licence referred to in Recital 1 above and
     each of the Existing  Licences is an existing  supply licence under section
     6(1)(c) or  section  6(2) of the  Electricity  Act 1989 held by a holder to
     whom paragraph 1 of Schedule 7 applies.

3.   Pursuant to Part I of Schedule 7 the Company has nominated  the  associates
     (as defined in  paragraph 12 of Schedule 7) which will hold the licences to
     have effect on and after the  determination  day as a distribution  licence
     under  section  6(1)(c)  of the  Electricity  Act  1989  (the  "Electricity
     Distribution  Licence") and in the case of the other  relevant parts of the
     PES  Licence and the Second  Tier  Licence  and the Second Tier  (Scotland)
     Licence as a single electricity supply licence under section 6(1)(d) of the
     Electricity Act 1989 (the  "Electricity  Supply  Licence").

4.   The persons  nominated,  pursuant to  paragraph  2(1)(b) of Schedule 7, are
     Npower Yorkshire Supply Limited (the  "Electricity  Supply licensee") being
     an  associate  of the Company as defined in  paragraph  12 of Schedule 7 to
     hold the Electricity Supply Licence and Yorkshire Electricity  Distribution
     plc (the  "Electricity  Distribution  licensee")  being an associate of the
     Company as defined in  paragraph  12 of Schedule 7 to hold the  Electricity
     Distribution Licence.

5.   The  Company  has made and  submitted  to the  Secretary  of State  for his
     approval a transfer scheme (as defined in paragraph 2(2) of Schedule 7) for
     the  purpose of  dividing  the  property,  rights and  liabilities  therein
     specified  between the Company and each of the Electricity  Supply licensee
     and the  Electricity  Distribution  licensee and for giving effect to other
     matters within the provisions of paragraph 2 of Schedule 7.

                                      -2-
<PAGE>

6.   The  Secretary  of State has  approved  the  transfer  scheme  described in
     Recital  5 above as  provided  for in  paragraph  5 of  Schedule  7.

7.   The  purpose  of this  Scheme,  which  is made by the  Secretary  of  State
     pursuant to paragraph 13 of Schedule 7, is to provide for:

     7.1  the relevant parts of the PES Licence  relating to  distribution to be
          amended   and  as  so  amended  to  have   effect  on  and  after  the
          determination day as an Electricity  Distribution Licence on the terms
          of this Scheme held by the Electricity Distribution licensee; and

     7.2  the relevant  parts of the PES Licence  relating to supply and each of
          the  Second  Tier  Licence  and the  Second  Tier  (Scotland)  Licence
          together  to be amended  and as so amended to have effect on and after
          the determination day as an Electricity Supply Licence on the terms of
          this Scheme held by the Electricity Supply licensee.


1. INTERPRETATION

1.1  In  this  Scheme  unless  the  context  otherwise  requires  the  following
     expressions shall bear the meanings ascribed to them below:

     "the Authority"             means   the   Gas   and   Electricity   Markets
                                 Authority  established  pursuant  to  section 1
                                 of the 2000 Act;

     "determination day"         means   the   date  on   which   the   standard
                                 conditions  of  the  electricity   distribution
                                 licences  and   electricity   supply   licences
                                 respectively  (determined  by the  Secretary of
                                 State by  virtue of  section  33(1) of the 2000
                                 Act) take effect;

     "PES Distribution Licence   means all the terms and  conditions  of the PES
     Terms and Conditions"       Licence  relating  to  the  activities  of  the
                                 holder of a  distribution  licence  (within the
                                 meaning of the Electricity Act 1989); and

     "PES Supply Licence Terms   means all the terms and  conditions  of the PES
     and Conditions"             Licence  relating  to  the  activities  of  the
                                 holder  of  a  supply   licence   (within   the
                                 meaning of the Electricity Act 1989).

1.2  Without prejudice to sections 11 and 23(1) of the  Interpretation Act 1978,
     this Scheme shall be interpreted  and construed in like manner as an Act of
     Parliament passed after the commencement of the Interpretation Act 1978.

                                      -3-
<PAGE>

1.3  Unless the context otherwise requires, words and expressions used in Part I
     of  the  Electricity  Act  1989  (as  in  force   immediately   before  the
     determination  day,  or as the  context  requires,  as in  force  from  the
     determination  day) and the 2000 Act shall  bear the same  meaning  in this
     Scheme.

2.   AMENDMENT AND TREATMENT OF EXISTING LICENCES

     On the determination day, the Existing Licences shall be amended so that -

(a)  the PES Distribution Licence Terms and Conditions as amended by this Scheme
     shall take effect as an  electricity  distribution  licence in the form set
     out in Annex 1  hereto  and as if such  licence  had  been  granted  by the
     Authority under section 6(1)(c) of the Electricity Act 1989; and

(b)  the PES Supply  Licence Terms and  Conditions,  the Second Tier Licence and
     the Second Tier (Scotland)  Licence in each case as amended by this Scheme,
     shall take effect as a single  electricity  supply  licence in the form set
     out in Annex 2  hereto  and as if such  licence  had  been  granted  by the
     Authority under section 6(1)(d) of the Electricity Act 1989.

3.   NEW STANDARD CONDITIONS

3.1  Each condition of the standard  conditions  determined and published by the
     Secretary  of  State  under  section  33(1)  of the  2000  Act as  standard
     conditions  for the purposes of  electricity  distribution  licences  under
     section 6(1)(c) of the Electricity Act 1989 shall on the  determination day
     be  incorporated  in Part II of the  Electricity  Distribution  Licence  in
     substitution for all the licence conditions in the PES Distribution Licence
     Terms and Conditions excluding those licence conditions which are saved, as
     amended,  as special conditions in Part IV of the Electricity  Distribution
     Licence.

3.2  Each condition of the standard  conditions  determined and published by the
     Secretary  of  State  under  section  33(1)  of the  2000  Act as  standard
     conditions  for the purposes of electricity  supply  licences under section
     6(1)(d)  of the  Electricity  Act 1989  shall on the  determination  day be
     incorporated in Part II of the  Electricity  Supply Licence in substitution
     for:

     (a)  all  the  licence  conditions  in the PES  Supply  Licence  Terms  and
          Conditions;

     (b)  all the licence conditions in the Second Tier Licence; and

     (c)  all the licence conditions in the Second Tier (Scotland) Licence,

     in each  case  excluding  those  licence  conditions  which are  saved,  as
     amended,  as  special  conditions  in  Part  IV of the  Electricity  Supply
     Licence.

4.       DISTRIBUTION LICENSEE AND SUPPLY LICENSEE

4.1      The Scheme  shall take effect as a scheme made under  paragraph  13 of
         Schedule 7 and on the basis that the Electricity  Distribution Licence
         and the  Electricity  Supply Licence shall by virtue of this Scheme as
         from the  determination  day be held  respectively  by the Electricity
         Distribution licensee and by the Electricity Supply licensee.

                                      -4-
<PAGE>

5.   CONTINUING EFFECT

5.1  In so far as  permitted  by or in  pursuance  of  the  relevant  set of new
     standard  conditions  and the special  conditions set out in Part IV of the
     Electricity  Supply  Licence,  or as  the  case  may  be,  the  Electricity
     Distribution  Licence,  anything  done  under or by virtue of the  Existing
     Licences which is in effect  immediately before the determination day shall
     have continuing effect as if it were done under or by virtue of -

     (a)  the Electricity Supply Licence,

     (b)  the Electricity Distribution Licence, or

     (c)  both those licences,

     according to the nature of activities to which the thing done relates.


5.2  In so far as  permitted  by or in  pursuance  of  the  relevant  set of new
     standard  conditions  and the special  conditions set out in Part IV of the
     Electricity  Supply  Licence,  or as  the  case  may  be,  the  Electricity
     Distribution Licence, and without prejudice to the generality of sub-clause
     5.1 above,

     (a)  every  statement,  code or  other  document  prepared  pursuant  to an
          obligation in the Existing Licences; and

     (b)  every direction,  consent,  determination or other instrument given by
          the Authority under the Existing Licences,

     which is in effect  immediately  prior to the  determination day shall have
     continuing effect as if prepared or given pursuant to -

     (i)  the Electricity Supply Licence,

     (ii) the Electricity Distribution Licence, or

     (iii) both those licences,

     according to the nature of the activities to which the instrument relates.

5.3  Any dispute arising as to the allocation of a particular thing, document or
     instrument to the  Electricity  Supply Licence or Electricity  Distribution
     Licence  pursuant  to  sub-clauses  5.1  or  5.2  may  be  referred  by the
     Authority,  the Electricity  Distribution  licensee or, as the case may be,
     the Electricity  Supply licensee to an independent  expert appointed by the
     Authority.


On this the  28th  day of September 2001



.................................................................
An official of the Department of Trade and Industry
authorised to act on behalf of the Secretary of State.

                                      -5-

<PAGE>

                                     ANNEX 1




                              ELECTRICITY ACT 1989
                                 SECTION 6(1)(C)






                        ELECTRICITY DISTRIBUTION LICENCE

                                       FOR

                     YORKSHIRE ELECTRICITY DISTRIBUTION PLC


                                      -6-


<PAGE>

                          PART I - TERMS OF THE LICENCE

1.   This licence,  treated as granted under section  6(1)(c) of the Electricity
     Act 1989 ("the Act"), authorises Yorkshire Electricity  Distribution plc (a
     company  registered  in  England  and Wales  under  number  4112320)  ("the
     licensee")  whose  registered  office is situated at Carliol House,  Market
     Street,  Newcastle  Upon Tyne, NE1 6NE, to distribute  electricity  for the
     purpose  of  giving a  supply  to any  premises  in the  specified  area in
     Schedule 1 or enabling a supply to be so given during the period  specified
     in paragraph 3 below, subject to:

     (a)  the standard conditions of electricity  distribution licences referred
          to in Part II below, which shall have effect in the licence subject to
          such  amendments  (if any) as are set out in Part III below  (together
          "the conditions");

     (b)  the special conditions, if any, set out in Part IV below ("the special
          conditions");

     (c)  such Schedules hereto, if any, as may be referenced in the conditions,
          the special conditions or the terms of the licence.

2.   This  licence  is  subject  to  transfer,   modification  or  amendment  in
     accordance  with the  provisions of the Act, the special  conditions or the
     conditions.

3.   This licence,  unless  revoked in accordance  with the terms of Schedule 2,
     shall  continue  until  determined  by not less  than 25  years'  notice in
     writing given by the Authority to the licensee.

4.   The  provisions of section  109(1) of the Act (Service of documents)  shall
     have  effect as if set out herein and as if for the words  "this Act" there
     were substituted the words "this licence".

5.   Without prejudice to sections 11 and 23(1) of the  Interpretation Act 1978,
     Parts I to IV inclusive  of, and the  Schedules  to, this licence  shall be
     interpreted  and  construed in like manner as an Act of  Parliament  passed
     after the commencement of the Interpretation Act 1978.

6.   References in this licence to a provision of any enactment, where after the
     date of this licence -

     (a)  the enactment has been replaced or supplemented by another  enactment,
          and

     (b)  such enactment  incorporates a corresponding  provision in relation to
          fundamentally the same subject matter,

     shall be construed, so far as the context permits, as including a reference
     to the corresponding provision of that other enactment.

7.   Pursuant to paragraph 5 of standard  condition 2 (Application  of Section C
     (Distribution  Services  Obligations))  of  the  Electricity   Distribution
     Licence the "distribution services area" is specified in Schedule 3 hereto.

Pursuant to a licensing  scheme made by the  Secretary of State under Part II of
Schedule 7 to the Utilities Act 2000 on 28 September  2001 this licence was made
and is treated as granted under section 6(1)(c) of the Electricity Act 1989.

                                      -7-
<PAGE>

                        PART II - THE STANDARD CONDITIONS

                  STANDARD CONDITIONS IN EFFECT IN THIS LICENCE



SECTION A                 SECTION B                     SECTION C


Standard condition 1      Standard condition 4          Standard condition 32


Standard condition 2      Standard condition 4A         Standard condition 32A


Standard condition 3      Standard condition 4B         Standard condition 34

                          Standard condition 4C         Standard condition 35

                          Standard condition 5          Standard condition 36

                          Standard condition 6          Standard condition 36A

                          Standard condition 7          Standard condition 36B

                          Standard condition 8          Standard condition 36C

                          Standard condition 9          Standard condition 37

                          Standard condition 9A         Standard condition 38

                          Standard condition 10         Standard condition 39

                          Standard condition 11         Standard condition 40

                          Standard condition 12         Standard condition 41

                          Standard condition 12A        Standard condition 42

                          Standard condition 13         Standard condition 42A

                          Standard condition 14         Standard condition 43

                          Standard condition 15         Standard condition 44

                          Standard condition 16         Standard condition 45

                          Standard condition 17         Standard condition 46

                          Standard condition 18         Standard condition 47

                          Standard condition 19         Standard condition 48

                          Standard condition 20         Standard condition 49

                          Standard condition 21

                          Standard condition 22

                          Standard condition 23

                          Standard condition 24

                          Standard condition 25

                          Standard condition 26

                          Standard condition 29

Note: A copy of the current  standard  conditions  of  electricity  distribution
licences can be inspected at the principal  office of the  Authority.  The above
list is correct  at the date of this  licence  but may be changed by  subsequent
amendments or modifications to the licence. The authoritative up-to-date version
of this licence is available for public  inspection  at the principal  office of
the Authority.

                                      -8-

<PAGE>

                PART III - AMENDMENTS TO THE STANDARD CONDITIONS

There are no amendments to the standard conditions of electricity distribution
licences.

                                      -9-
<PAGE>

                          PART IV - SPECIAL CONDITIONS

SPECIAL CONDITION A:  DEFINITIONS AND INTERPRETATION
----------------------------------------------------

1.   Unless the context  otherwise  requires,  words and expressions used in the
     standard  conditions  of this licence  shall bear the same meaning in these
     Special Conditions.


2.   Special  Conditions  B to F and Schedule A to those  Conditions  shall only
     apply to the distribution services area (as defined in standard condition 1
     (Definitions and Interpretation)) of the licensee.

3.   In Special Conditions B to F and Schedule A to those Conditions:


     "attributed"

                    means when used in relation to transmission connection point
                    charges or remote transmission asset rentals or distribution
                    losses, attributed in accordance with the principles set out
                    in  Part  A  of  Schedule  A  and   attribute,   attributed,
                    attributable and attribution shall be construed accordingly.


     "average charge per
     unit distributed"

                    means the distribution  revenue in the relevant year divided
                    by the regulated quantity distributed in that year.

     "average specified rate"

                    means the average of the daily base rates of  Barclays  Bank
                    plc  current  from time to time during the period in respect
                    of which the calculation falls to be made.


     "charge restriction
       conditions"

                    means  Special  Conditions  A to F inclusive  together  with
                    Schedule A to this licence, as from time to time modified or
                    replaced in accordance with the provisions of the Act.

     "distribution losses"

                    means units  unaccounted for on the licensee's  distribution
                    system,  measured as being the difference  between the units
                    metered on entry  into the  system and the units  metered on
                    leaving the system.

     "distribution revenue"

                    means the revenue (measured on an accruals basis) derived by
                    the licensee from the provision of distribution  services in
                    the relevant year, after deduction of:


                    (i)  an  amount  equal  to  such  part of the  total  amount
                         payable  in  that  relevant  year  to the  transmission
                         company  (measured on an accruals  basis) in respect of
                         transmission   connection   point  charges  and  remote
                         transmission asset rentals and which would otherwise be
                         included  in  distribution  revenue  by reason of being
                         recovered in that  relevant year by the licensee in its
                         use of system charges, as falls to be attributed to the
                         regulated  quantity  distributed in that relevant year;
                         and

                                      -10-
<PAGE>

                    (ii) value  added  tax (if any) and any  other  taxes  based
                         directly on the amounts so derived.


     "distribution
      services"

                    means all  services  provided by the licensee as part of its
                    distribution business other than excluded services.

     "EHV premises"

                    means those  premises to which  units are  delivered  by the
                    licensee  which  fall  to be  treated  as  EHV  premises  in
                    accordance with Part B of Schedule A.

     "EHV units"

                    means units  distributed by the licensee which are delivered
                    or deemed to be delivered to EHV premises.


     "eleventh relevant
      year"

                    means the relevant year commencing 1st April 2000.

     "excluded services"

                    means  those  services  provided  by the  licensee  which in
                    accordance with the principles set out in Part C of Schedule
                    A fall to be treated as excluded services.

     "HV units"

                    means  units  (other  than  EHV  units)  distributed  by the
                    licensee  which are  delivered to premises  connected to the
                    licensee's  distribution  system at a  voltage  at or higher
                    than 1000 volts.

     "LV units"

                    means units  distributed by the licensee which are delivered
                    to premises connected to the licensee's  distribution system
                    at a voltage less than 1000 volts.

     "LV1 units"

                    means LV units which are distributed by the licensee outside
                    night-time  periods to domestic  premises or small  premises
                    (other than domestic  premises) where the appropriate use of
                    system charges apply different  rates in night-time  periods
                    as opposed to other times of day, for the avoidance of doubt
                    including  the  use of  system  charges  under  the  tariffs
                    specified in paragraph D2 of Part D of Schedule A.

     "LV2 units"

                    means LV units  which are  distributed  by the  licensee  to
                    domestic  premises or small  premises  (other than  domestic
                    premises):

                                      -11-
<PAGE>

                    (a)  during night-time periods, where the appropriate use of
                         system  charges  apply  different  rates in  night-time
                         periods as opposed to other times of the day; or


                    (b)  where  the   appropriate  use  of  system  charges  are
                         incorporated  into tariffs which restrict  availability
                         of supply to specified off-peak periods,


                    for the  avoidance  of  doubt  including  the use of  system
                    charges under the tariffs  specified in paragraph D3 of Part
                    D of Schedule A.

     "LV3 units"

                    means  LV  units  other  than  LV1  and LV2  units,  for the
                    avoidance of doubt  including  units  distributed  under the
                    tariffs specified in paragraph D4 of Part D of Schedule A.

     "maximum average charge
      per unit distributed"

                    means the charge  calculated in accordance  with the formula
                    in  paragraph  1 of  Special  Condition  B  (Restriction  of
                    distribution charges).

     "metered"

                    means, in relation to any quantity distributed,  as measured
                    by a meter  installed  for such  purpose  or  (where no such
                    meter is installed or it is not  reasonably  practicable  to
                    measure the quantity by such meter) as otherwise  reasonably
                    calculated.

     "regulated distribution
      unit category"

                    means as the case may be HV units or LV1  units or LV2 units
                    or LV3 units.

     "regulated quantity
      distributed"

                    means the aggregate  quantity of units  distributed (for any
                    person  under use of system)  by the  licensee  through  the
                    licensee's   distribution  system  in  relevant year t
                    metered   at  exit   points  on   leaving   the   licensee's
                    distribution system but excluding for this purpose:

                    (a)  Units distributed for the purpose of supply to premises
                         outside the licensee's distribution services area; and

                    (b)  EHV units.

     "relevant year"

                    means a  financial  year  commencing  on or after  1st April
                    1990.

     "relevant year t"

                    means  that  relevant  year for the  purposes  of which  any
                    calculation falls to be made;  "relevant year t-1" means the

                                      -12-
<PAGE>
                    relevant  year  preceding  relevant year t or, in respect of
                    the  period  prior  to 1st  April  1990,  the  period  of 12
                    calendar  months  commencing on 1st April 1989;  and similar
                    expressions shall be construed accordingly.

     "remote transmission
      asset rental"

                    means  any rent or other  periodic  payment  payable  by the
                    distribution  business of the  licensee to the  transmission
                    company  in respect of remote  transmission  assets  forming
                    part of the licensee's distribution system.

     "transmission connection
     point charges"


                    means  charges  levied  by  the   transmission   company  as
                    connection  charges  by direct  reference  to the  number or
                    nature   of   the   connections   between   the   licensee's
                    distribution  system and the transmission system and payable
                    by the distribution business of the licensee.


     "unit"

                    means a kilowatt hour.

3.   Any reference in these Special Conditions to -


     (a)  a provision thereof;

     (b)  a provision of the standard  conditions  of  electricity  distribution
          licences;

     (c)  a provision of the standard conditions of electricity supply licences;

     (d)  a provision  of the  standard  conditions  of  electricity  generation
          licences;

     (e)  a provision of the standard  conditions  of  electricity  transmission
          licences;

     shall, if these or the standard conditions in question come to be modified,
     be  construed,  so  far as  the  context  permits,  as a  reference  to the
     corresponding  provision of these or the standard conditions in question as
     modified.

                                      -13-

<PAGE>

SPECIAL CONDITION B: RESTRICTION OF DISTRIBUTION CHARGES
--------------------------------------------------------

Basic Formula
-------------

1.   Without  prejudice to Special Condition E (Allowance in respect of security
     costs),  the  licensee  shall in setting its charges for the  provision  of
     distribution  services  use  its  best  endeavours  to  ensure  that in any
     relevant year the average charge per unit distributed  shall not exceed the
     maximum average charge per unit  distributed  calculated in accordance with
     the following formula:

          Mdt =  Pdt  +  PNdt  -  PMdt  -  Kdt


2.   For the purposes of paragraph 1, Mdt means the maximum  average  charge per
     unit distributed in relevant year t.


Formula for Pdt as used in paragraph 1
--------------------------------------


3.   For the purposes of paragraph 1, Pdt is derived from the following formula:

          Pdt =   (PUM x GRt x PIDt) + (PL x (ALt-Lt) x PILt)
                  -------------------------------------------
                              Dt


                 where:


     PUM         means the amount set against that term in the part of Annex A
                 to this Condition that applies to the licensee.


     GRt         in the eleventh relevant year has the value of 1 and in each
                 subsequent relevant year is derived from the following formula:

                             the sum of Poi x Dit         Cdt
                 GRt = 0.5 ( ------------------------ +   ----- )  GRt-1
                             the sum of Poi x Dit-1      Cdt-1


                 where
                                      -14-
<PAGE>


     sum of (sign)
                    means the summation across all regulated  distribution  unit
                    categories i as described in the definition of the term Poi.

     Poi
                    means,  in  respect  of  each  regulated  distribution  unit
                    category  i set out in column 1 under  that term in the part
                    of Annex A to this Condition  which applies to the licensee,
                    the value opposite that category in column 2.

     Dit
                    means that  number of units in each  regulated  distribution
                    unit category i distributed in relevant year t.


     Dit-1
                    means that  number of units in each  regulated  distribution
                    unit category i distributed in relevant year t-1.


     Cdt
                    means  a  notional   figure,   representing  the  number  of
                    customers in the distribution services area (for the purpose
                    of this term Cdt only) for each relevant year,  given in the
                    table  appearing  under  that term in the part of Annex A to
                    this Condition that applies to the licensee.


     Cdt-1
                    means the number equal to Cdt in relevant year t-1.


     PIDt
                    in the eleventh relevant year has the value of 1 and in each
                    subsequent  relevant  year is  derived  from  the  following
                    formula:

                                  RPIt - Xdt
                      PIDt = (1 + ---------- ) PIDt-1
                                      100

                 where


     RPIt
                    means the  percentage  change  (whether  of a positive  or a
                    negative  value) in the  arithmetic  average  of the  Retail
                    Price Index numbers  published or determined with respect to
                    each  of the six  months  July to  December  (inclusive)  in
                    relevant year t-1 and the  arithmetic  average of the Retail
                    Price Index numbers  published or determined with respect to
                    the same months in relevant year t-2.


     Xdt
                    shall equal 3.


     PL
                    means an amount equal to 2.9p.


                                      -15-
<PAGE>


     ALt
                    means an amount (in units) representing allowed distribution
                    losses in relevant  year t, being the allowed  percentage of
                    the adjusted  units  distributed  (calculated as provided in
                    paragraph  E5 of Part E of Schedule A) where,  in respect of
                    each  relevant  year t, the allowed  percentage  shall equal
                    that percentage which the aggregate of adjusted distribution
                    losses  (calculated  as provided in  paragraphs  E2 to E5 of
                    Part E of Schedule A) over the 10 preceding  relevant  years
                    bears  to  the  aggregate  of  adjusted  units   distributed
                    (calculated as aforesaid)  over the  corresponding  relevant
                    years.

     Lt
                    means in respect of relevant  year t,  adjusted  grid supply
                    point purchases less adjusted units distributed  (calculated
                    as provided in paragraphs E2 to E5 of Part E of Schedule A).


     PILt
                    is derived from the following formula:

                                RPIt
                    PILt = (1 + ---- ) PILt-1
                                100

                    where, for the eleventh relevant year, PILt-1 equals 1.

     Dt
                    means the regulated quantity distributed in relevant year t.


Formula for PNdt as used in paragraph 1
---------------------------------------

4.   For the purposes of Paragraph  1, in the eleventh and  subsequent  relevant
     years the term PNdt shall be calculated  in  accordance  with the following
     formula:

                             (PS + PR) PIRt
                  PNdt  =    --------------
                                   Dt

     where:


     PS
                    means an amount equal to (pound)3.25 million for each of the
                    eleventh to the fifteenth  relevant  years,  and  thereafter
                    shall be 0.

     PR
                    means,  in the eleventh and all subsequent  relevant  years,
                    the amount given against the  licensee's  name in Annex B to
                    this Condition.

     PIRt
                    is derived from the following formula:

                                      -16-

<PAGE>
                                 RPIt
                     PIRt = (1 + -----) PIRt-1
                                  100

                    where for the ninth relevant year PIRt-1 equals 1


Formula for PMdt as used in Paragraph 1
---------------------------------------

5.   For the  purposes  of  paragraph  1,  PMdt is  derived  from the  following
     formula:

                             RMdt
                     PMdt =  -----
                               Dt

     where:

     RMdt
                    means an amount equal to the licensee's  relevant  reduction
                    in costs in relevant  year t,  resulting  from the fact that
                    the licensee has ceased to provide meter provision  services
                    and meter  operation  services (as defined in paragraph 1 of
                    standard  condition 36B  (Requirement to Offer Terms for the
                    Provision of  Distributor  Metering and Data  Services))  in
                    respect of  customers  in respect of whom it provided  meter
                    provision  services and meter operation services at 31 March
                    2000.  The licensee's  relevant  reduction in costs shall be
                    calculated in real terms,  and shall be the amount,  if any,
                    by which the  licensee's  cash  operating  costs  (excluding
                    costs of a non-recurring  nature) of providing such services
                    in the  relevant  year t fall  short of its  cash  operating
                    costs  (excluding  costs  of  a  non-recurring   nature)  of
                    providing  such services in the tenth  relevant year, to the
                    extent that such shortfall is  attributable to the fact that
                    the  licensee  has ceased,  since 31 March 2000,  to provide
                    (whether  directly or through an agent acting on its behalf)
                    meter  provision  services and meter  operation  services in
                    respect of such customers. The licensee's relevant reduction
                    in costs shall  exclude the amount of any reduction in costs
                    in  providing  any  services   which   constitute   excluded
                    services.


Formula for Kdt as used in Paragraph 1
--------------------------------------

6.   For the purposes of paragraph 1, Kdt means the  correction  factor per unit
     (whether of a positive or a negative value) derived, subject to paragraph 3
     of Special Condition C (Restriction of distribution charges:  adjustments),
     from the following formula: provided that the value of Kdt for the eleventh
     relevant  year  shall be the  value of Kdt  arising  for that year from the

                                      -17-

<PAGE>

     application  of the formula  applicable  under Licence  Condition 3A of the
     Public   Electricity   Supply  licence   previously  granted  to  Yorkshire
     Electricity  Group plc in the form of that  condition  in force on 31 March
     2000,  but  adjusted  by adding the  amount of TAdt for the tenth  relevant
     year, calculated by the application of the formula applicable under Licence
     Condition 3A of that Public Electricity Supply licence as then in force:


                  Rdt-1 - (Dt-1 x Mdt-1)       Idt
          Kdt =   ---------------------- (1 +  ---)
                        Dt                     100


     where:

     Rdt-1
                    means the distribution revenue in relevant year t-1.

     Dt-1
                   means the regulated  quantity  distributed  in relevant year
                    t-1.

     Mdt-1
                    means  maximum  average  charge  per  unit   distributed  in
                    relevant year t-1.


     Idt
                    means that  interest  rate in relevant year t which is equal
                    to,  where Kdt  (taking no account of Idt for this  purpose)
                    has a positive value, the average  specified rate plus 4, or
                    where Kdt (taking no account of Idt for this  purpose) has a
                    negative value, the average specified rate.


                                      -18-
<PAGE>


ANNEX A TO SPECIAL CONDITION B (RESTRICTION OF DISTRIBUTION CHARGES)
--------------------------------------------------------------------

EASTERN ELECTRICITY LIMITED

                                                     (pound)m
                                                     --------

         PUM                                         287.9

         Cdt for relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       3249
                  1 April 2001                       3281
                  1 April 2002                       3314
                  1 April 2003                       3347
                  1 April 2004                       3381
         every subsequent relevant year     3415

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.0009
                  LV2                                0.3031
                  LV3                                1.3431
                  HV                                 0.4584

                                      -19-
<PAGE>

EAST MIDLANDS ELECTRICITY DISTRIBUTION PLC
                                                     (pound)m
                                                     --------

         PUM                                         240.3

         Cdt for relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       2376
                  1 April 2001                       2400
                  1 April 2002                       2424
                  1 April 2003                       2448
                  1 April 2004                       2472
         every subsequent relevant year     2497

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                1.6131
                  LV2                                0.5557
                  LV3                                1.5711
                  HV                                 0.6350

                                      -20-

<PAGE>

LONDON POWER NETWORKS PLC
                                                     (pound)m
                                                     --------

         PUM                                         220.8

         Cdt for  relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       2072
                  1 April 2001                       2093
                  1 April 2002                       2114
                  1 April 2003                       2135
                  1 April 2004                       2156
         every subsequent relevant year     2178

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.2073
                  LV2                                0.4057
                  LV3                                1.5912
                  HV                                 0.5932

                                      -21-

<PAGE>

MANWEB PLC
                                                     (pound)m
                                                     --------
         PUM                                         158.0


         Cdt for relevant year beginning on

                                                     '000s
                                                     -----
                  1 April 2000                       1423
                  1 April 2001                       1437
                  1 April 2002                       1452
                  1 April 2003                       1466
                  1 April 2004                       1481
         every subsequent relevant year     1496

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.1041
                  LV2                                0.4323
                  LV3                                1.7558
                  HV                                 0.5097


                                      -22-
<PAGE>

GPU POWER NETWORKS (UK) PLC
                                                     (pound)m
                                                     --------

         PUM                                         243.5

         Cdt for relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       2303
                  1 April 2001                       2326
                  1 April 2002                       2349
                  1 April 2003                       2373
                  1 April 2004                       2397
         every subsequent relevant year     2420

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                1.9729
                  LV2                                0.3966
                  LV3                                1.6108
                  HV                                 0.5992


                                      -23-

<PAGE>

NORTHERN ELECTRIC DISTRIBUTION LIMITED
                                                     (pound)m
                                                     --------
         PUM                                         152.6


         Cdt for relevant year beginning on

                                                     '000s
                                                     -----
                  1 April 2000                       1500
                  1 April 2001                       1515
                  1 April 2002                       1530
                  1 April 2003                       1545
                  1 April 2004                       1561
         every subsequent relevant year     1577

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.0911
                  LV2                                0.3273
                  LV3                                1.9284
                  HV                                 0.4723


                                      -24-

<PAGE>


NORWEB PLC
                                                     (pound)m
                                                     --------
         PUM                                         208.9


         Cdt for relevant year beginning on

                                                     '000s
                                                     -----
                  1 April 2000                       2250
                  1 April 2001                       2272
                  1 April 2002                       2295
                  1 April 2003                       2318
                  1 April 2004                       2341
         every subsequent relevant year     2365

     P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.1750
                  LV2                                0.2821
                  LV3                                1.6304
                  HV                                 0.5335

                                      -25-

<PAGE>

SEEBOARD POWER NETWORKS PLC
                                                     (pound)m
                                                     --------
         PUM                                         159.1

         Cdt for relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       2153
                  1 April 2001                       2175
                  1 April 2002                       2196
                  1 April 2003                       2218
                  1 April 2004                       2240
         every subsequent relevant year     2263

P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                1.8735
                  LV2                                0.3213
                  LV3                                1.4098
                  HV                                 0.5892


                                      -26-

<PAGE>



SOUTHERN ELECTRIC POWER DISTRIBUTION PLC
                                                     (pound)m
                                                     --------
         PUM                                         297.7


         Cdt for relevant year beginning on

                                                     '000s
                                                     -----
                  1 April 2000                       2728
                  1 April 2001                       2755
                  1 April 2002                       2783
                  1 April 2003                       2811
                  1 April 2004                       2839
         every subsequent relevant year     2867

     P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.0600
                  LV2                                0.3816
                  LV3                                1.4815
                  HV                                 0.5560


                                      -27-
<PAGE>

WESTERN POWER DISTRIBUTION (SOUTH WALES) PLC
                                                     (pound)m
                                                     --------
         PUM                                         125.6

         Cdt for relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       998
                  1 April 2001                       1008
                  1 April 2002                       1018
                  1 April 2003                       1028
                  1 April 2004                       1039
         every subsequent relevant year     1049

     P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.4442
                  LV2                                0.3641
                  LV3                                2.2009
                  HV                                 0.7272

                                      -28-
<PAGE>

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC
                                                     (pound)m
                                                     --------
         PUM                                         171.0

         Cdt for relevant year beginning on
                                                     '000s
                                                     -----
                  1 April 2000                       1369
                  1 April 2001                       1383
                  1 April 2002                       1397
                  1 April 2003                       1410
                  1 April 2004                       1425
         every subsequent relevant year     1439

     P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                2.3889
                  LV2                                0.6679
                  LV3                                1.8707
                  HV                                 0.5072

                                      -29-

<PAGE>

YORKSHIRE ELECTRICITY DISTRIBUTION PLC
                                                     (pound)m
                                                     --------
         PUM                                         215.4


         Cdt for relevant year beginning on

                                                     '000s
                                                     -----
                  1 April 2000                       2129
                  1 April 2001                       2150
                  1 April 2002                       2172
                  1 April 2003                       2194
                  1 April 2004                       2215
         every subsequent relevant year     2238

     P0i
         Column 1                                    Column 2
         unit category i                             value (p)
         ---------------                             ---------
                  LV1                                1.9497
                  LV2                                0.3271
                  LV3                                1.6654
                  HV                                 0.5750

                                      -30-
<PAGE>

ANNEX B TO SPECIAL CONDITION B (RESTRICTION OF DISTRIBUTION CHARGES)
--------------------------------------------------------------------



                                                                 PR(pound)M
                                                                 ----------

           EASTERN ELECTRICITY LIMITED                                2.97

           EAST MIDLANDS ELECTRICITY DISTRIBUTION PLC                 2.35

           GPU POWER NETWORKS (UK) PLC                                2.34

           LONDON POWER NETWORKS PLC                                  2.14

           MANWEB PLC                                                 1.69

           NORTHERN ELECTRIC DISTRIBUTION LIMITED                     1.76

           NORWEB PLC                                                 2.28

           SCOTTISH HYDRO-ELECTRIC POWER DISTRIBUTION POWER           1.16
           LIMITED

           SP DISTRIBUTION LIMITED                                    2.01

           SEEBOARD POWER NETWORKS PLC                                2.15

           SOUTHERN ELECTRIC POWER DISTRIBUTION PLC                   2.64

           WESTERN POWER DISTRIBUTION (SOUTH WALES) PLC               1.38

           WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC                1.65

           YORKSHIRE ELECTRICITY DISTRIBUTION PLC                     2.19



                                      -31-
<PAGE>

 SPECIAL CONDITION C: RESTRICTION OF DISTRIBUTION CHARGES: ADJUSTMENTS
 ---------------------------------------------------------------------


1.   If,  in  respect  of  any  relevant  year,  the  average  charge  per  unit
     distributed exceeds the maximum average charge per unit distributed by more
     than 3 per cent, the licensee shall furnish an explanation to the Authority
     and in the next  following  relevant year the licensee shall not effect any
     increase  in  charges  unless  it  has   demonstrated   to  the  reasonable
     satisfaction of the Authority that the average charge per unit  distributed
     would not be likely to exceed the maximum  charge per unit  distributed  in
     that next following relevant year.


2.   If, in respect of any two successive relevant years, the sum of the amounts
     by which the average charge per unit  distributed  has exceeded the maximum
     average charge per unit  distributed  is more than 4 per cent,  then in the
     next  following  relevant  year the  licensee  shall,  if  required  by the
     Authority,  adjust  its  charges  such  that the  average  charge  per unit
     distributed  would not be likely,  in the  judgement of the  Authority,  to
     exceed the maximum average charge per unit in that next following  relevant
     year.


3.   If, in respect of two  successive  relevant  years,  the average charge per
     unit distributed is less than 90 per cent of the maximum average charge per
     unit distributed,  the Authority, after consultation with the licensee, may
     direct that in  calculating  Kdt for the purposes of paragraph 6 of Special
     Condition B (Restriction  of  distribution  charges) in respect of the next
     following  relevant  year,  there  shall be  substituted  for  Rdt-1 in the
     formula at paragraph 6 of Special  Condition B (Restriction of distribution
     charges) such figure as the Authority may specify being not less than Rdt-1
     and not more than 0.90 (Dt-1.Mdt-1).


                                      -32-
<PAGE>

SPECIAL  CONDITION D:  INFORMATION TO BE PROVIDED TO THE AUTHORITY IN CONNECTION
--------------------------------------------------------------------------------
WITH THE CHARGE  RESTRICTION CONDITIONS
---------------------------------------

1.   Where the  licensee  is  intending  to make any change in  charges  for the
     provision of  distribution  services  regulated  under Special  Condition B
     (Restriction of distribution  charges) the licensee shall (unless otherwise
     agreed by the  Authority)  not later than the date of  publication  of such
     charges provide the Authority with:


     (a)  written  forecast of the maximum average charge per unit  distributed,
          together  with its  components,  in respect of the relevant  year t in
          which  such a change  is to take  effect  and in  respect  of the next
          following relevant year t+1; and


     (b)  a written estimate of the maximum average charge per unit distributed,
          together  with its  components,  in respect of the  relevant  year t-1
          immediately preceding the relevant year in which the change is to take
          effect  unless a statement  complying  with  paragraph 7 in respect of
          relevant  year t-1 has been  furnished  to the  Authority  before  the
          publication of the proposed change.

2.       [No longer used]

3.   If within  three  months of the  commencement  of any  relevant  year t the
     licensee  has not made any such  change in  charges  as is  referred  to in
     paragraph  1, the  licensee  shall  provide  the  Authority  with a written
     forecast of the maximum average charge per unit distributed,  together with
     its components, in respect of the relevant year t.


4.   The Authority may issue directions  providing that any forecast or estimate
     provided in accordance  with paragraphs 1 or 3 shall be accompanied by such
     information as regards the assumptions  underlying the forecast or estimate
     as may be  necessary  to enable  the  Authority  to be  satisfied  that the
     forecast or estimate has been properly prepared on a consistent basis.


5.   Not later than six weeks after the  commencement  of each  relevant year t,
     the licensee shall send to the Authority a statement as to:


     (a)  whether or not the provisions of Special  Condition C (Restriction  of
          distribution  charges:  adjustments)  are likely to be  applicable  in
          consequence  of  the  average  charge  per  unit  distributed  in  the
          preceding  relevant year t-1 or the two preceding  relevant  years t-1
          and t-2; and


     (b)  its best  estimate  as to the  relevant  correction  factor  Kdt to be
          applied in calculating the maximum average charge per unit distributed
          in respect of the relevant year t.


6.       [No longer used]

                                      -33-
<PAGE>

7.   Not later than three months  after the end of a relevant  year the licensee
     shall send to the Authority a statement,  in respect of that relevant year,
     showing the specified items referred to in paragraph 9.


8.   The statement referred to in the preceding paragraph shall be:


     (a)  accompanied  by a report from the Auditors  that in their  opinion (i)
          such statement fairly presents each of the specified items referred to
          in  paragraph  9 in  accordance  with the  requirements  of the charge
          restriction  conditions  and (ii) the amounts shown in respect of each
          of  those  specified  items  are in  accordance  with  the  licensee's
          accounting  records  which  have been  maintained  in  respect  of the
          distribution   business  in  accordance  with  standard  condition  42
          (Regulatory Accounts) of this licence; and


     (b)  certified by a director of the licensee on behalf of the licensee that
          to the best of his knowledge,  information  and belief having made all
          reasonable enquiries:


     (i)  there  is  no  amount  included  in  its  calculations  under  Special
          Condition B (Restriction of distribution charges) and Schedule A which
          represents other than:


          (aa) bona  fide   consideration  for  the  provision  of  distribution
               services in the course of its distribution business; or


          (bb) an amount permitted under the charge restriction conditions to be
               so included;


     (ii) there is no amount included in its  calculations  of allowed  security
          costs  under  Special  Condition E  (Allowance  in respect of security
          costs)  which  represents  other  than an amount  permitted  under the
          charge restriction conditions to be so included;

     (iii)no service  has been  treated  as an  excluded  service  which was not
          properly so treated and no amount  included in the revenues in respect
          thereof   represents  other  than  bona  fide  consideration  for  the
          provision of the excluded service to which it relates;

     (iv) all  amounts  which  should  properly  be taken into  account  for the
          purposes  of the charge  restriction  conditions  have been taken into
          account.

9.   The  specified  items  to be  contained  in the  statement  referred  to in
     paragraph 7 shall be the following:


     (a)  the regulated quantity distributed;

     (b)  the quantity distributed in each regulated distribution unit category;

     (c)  the average charge per unit distributed;

                                      -34-
<PAGE>


     (d)  the  amount in  respect  of the Terms  ALt and Lt, in  paragraph  3 of
          Special Condition B (Restriction of distribution  charges)  calculated
          as therein provided;

     (e)  the value of the term TAdt in respect of the tenth relevant year only,
          together with the value of each of its component parts, as detailed in
          paragraph  4 of  Special  Condition  B  (Restriction  of  distribution
          charges) in the form of the licence in force on 31 March 2000";

     (f)  the  information  referred to at  paragraph  8 of Special  Condition E
          (Allowance in respect of security costs);

     (g)  the statements and  information  referred to in paragraphs A5, B2, C7,
          D1 and E10 of Schedule A.

10.  Where the Authority  issues  directions in accordance  with  paragraph 9 of
     Special  Condition E (Allowance in respect of security costs) or paragraphs
     A6, B3, C8, D5 or E11 of  Schedule  A then such  directions  shall not have
     effect from a date earlier than the  commencement  of the relevant  year to
     which the statement last furnished to the Authority pursuant to paragraph 7
     prior to the issue of the directions related, unless such statement (or the
     accompanying  report or  certificate  under  paragraph 8) or any statement,
     report or certificate in respect of an earlier  relevant year was incorrect
     or was misleading in any material respect.


11.  Where the  Authority  issues  such  directions  as are  referred  to in the
     preceding  paragraph  the  Authority  may require the licensee to provide a
     revised  statement  in  respect  of such of the  specified  items as may be
     affected  by the  directions,  and the  licensee  shall  comply  with  such
     request.

                                      -35-
<PAGE>

SPECIAL CONDITION E: ALLOWANCE IN RESPECT OF SECURITY COSTS
-----------------------------------------------------------

1.   At any time  during a security  period,  the  licensee  may give  notice in
     writing to the Authority  suspending,  with effect from the date of receipt
     of  the  notice  by the  Authority,  application  of  such  of  the  charge
     restriction  conditions as may be specified in the notice for the unexpired
     term of the security period.


2.   At any time during a security  period,  the Authority may (having regard to
     its  duties  under  the Act or under  the  Utilities  Act 2000) by means of
     directions:


     (a)  suspend or modify for the  unexpired  term of the security  period the
          charge restriction conditions or any part or parts thereof; or


     (b)  introduce  for the  unexpired  term of the security  period new charge
          restriction conditions


     in either  case,  so as to  make  such  provision  as in the  opinion  or
     estimation of the Authority is requisite or appropriate:


     (i)  to enable the  licensee  to recover by means of  increased  charges an
          amount  estimated as being equal to the  licensee's  allowed  security
          costs during such period;


     (ii) to ensure that such part of the amount  referred  to in  sub-paragraph
          (i) above as is estimated as being equal to the allowed security costs
          incurred by the  licensee as costs in its  distribution  business  are
          recovered by means of appropriate  equitable  increases on the charges
          made by the licensee in its distribution business

     and the licensee shall comply with the terms of any directions so issued.


     3.   At any time following a security period,  the Authority may (following
          such  consultation  with the licensee and others as the  Authority may
          consider  appropriate)  issue  directions  suspending or modifying the
          charge  restriction  conditions  or  any  part  or  parts  thereof  or
          replacing  such  directions  as may have been made during the security
          period and introducing  such new charge  restriction  conditions as in
          the opinion of the Authority are appropriate in all the  circumstances
          (including at the  Authority's  discretion an  appropriate  adjustment
          having regard to any profit  gained or forgone by the licensee  during
          the  security  period),   and  the  licensee  shall  comply  with  any
          directions so issued.


     4.   At any time within three months after the issue of  directions  by the
          Authority under paragraph 3, the licensee may serve on the Authority a
          disapplication  request in  respect of such of the charge  restriction
          conditions  or any  part or  parts  thereof  as are  specified  in the
          request.


     5.   If  within  three  months  of  the  receipt  by the  Authority  of the
          disapplication  request  referred to in paragraph 4, the Authority has
          either not agreed in writing to such disapplication request or has not
          made a reference to the Competition Commission under Section 12 of the
          Act relating to the modification of the charge restriction conditions,
          the licensee may deliver one month's  written

                                      -36-

<PAGE>

          notice to the  Authority  terminating  the  application  of the charge
          restriction  conditions  (or  any  part  or  parts  thereof)  as  were
          specified in the disapplication request.


     6.   Subject to paragraphs 7 and 9, the licensee shall in any relevant year
          be  entitled  to  recover an  aggregate  amount  equal to its  allowed
          security costs in that year or (insofar as not  previously  recovered)
          any previous year, by means of appropriate  equitable increases on the
          charges made by the licensee in its distribution business.

     7.   Paragraph 6 shall not apply in so far as such allowed security costs:

          (a)  were otherwise recovered by the licensee; or


          (b)  were  taken  into  account by the  Authority  in  setting  charge
               restriction  conditions  by  means  of  directions  issued  under
               paragraph 3 above.

     8.   The licensee shall  following the end of each relevant year provide to
          the Authority,  as being one of the specified items to be contained in
          the  statement  referred  to at  paragraph  7 of Special  Condition  D
          (Information  to be provided to the Authority in  connection  with the
          charge  restriction  conditions),  details in respect of that relevant
          year of:

          (a)  the amount of the licensee's allowed security costs; and


          (b)  the aggregate amounts charged under paragraph 6 on account of the
               licensee's allowed security costs; and


          (c)  the bases and  calculations  underlying  the increases in charges
               made by the licensee in its distribution business under paragraph
               6.


     9.   Where the  Authority  is satisfied  that the  licensee  has  recovered
          amounts in excess of the allowed  security  costs,  the  Authority may
          issue  directions  requiring the licensee to take such steps as may be
          specified to reimburse  purchasers from the distribution  business for
          the excess amounts charged to them, and the licensee shall comply with
          any directions so issued provided that if the excess amounts relate to
          allowed  security costs paid to any authorised  electricity  operator,
          the  licensee  shall  not be  obliged  to make any such  reimbursement
          unless  and  until it has  recovered  such  costs  from  the  relevant
          authorised electricity operator.


     10.  No amounts  charged by the licensee under this  Condition  (whether or
          not  subsequently  required  to be  reimbursed)  shall be  taken  into
          account for the purpose of applying the charge restriction  provisions
          of Special Condition B (Restriction of distribution charges).


     11.  In this Condition:


          "allowed security     shall have the meaning ascribed to that term
            cost"               in the Fuel Security Code.

                                      -37-
<PAGE>

          "security period"     means a period commencing on the date on which
                                any direction issued by the Secretary of State
                                under Section 34 (4)(b) of the Act enters into
                                effect and terminating on the date (being not
                                earlier than the date such direction, as varied,
                                is revoked or expires) as the Authority, after
                                consultation with such persons (including,
                                without limitation, licence holders liable to be
                                principally affected) as it shall consider
                                appropriate, may with the consent of the
                                Secretary of State by notice to all licence
                                holders determine after having regard to the
                                views of such persons.

                                      -38-
<PAGE>

SPECIAL CONDITION F: DURATION OF CHARGE RESTRICTION CONDITIONS
--------------------------------------------------------------

1.   The  charge  restriction  conditions  shall  apply so long as this  licence
     continues in force but shall cease to have effect (in whole or in part,  as
     the case may be) if the licensee delivers to the Authority a disapplication
     request made in accordance with paragraph 2 and:


     (a)  the Authority agrees in writing to the disapplication request; or


     (b)  their  application (in whole or in part) is terminated by notice given
          by the licensee in accordance with either paragraph 4 or paragraph 5.


2.   A disapplication  request pursuant to this Special Condition F shall (a) be
     in writing addressed to the Authority,  (b) specify the charge  restriction
     conditions (or any part or parts thereof) to which the request  relates and
     (c) state the date from which the  licensee  wishes the  Authority to agree
     that  the  specified  charge  restriction  conditions  shall  cease to have
     effect.


3.   Save where the Authority  otherwise  agrees,  no  disapplication  following
     delivery of a disapplication  request pursuant to this Special  Condition F
     shall have effect earlier than that date which is the later of:


     (a)  a  date  being  not  less  than  18  months  after   delivery  of  the
          disapplication request; and


     (b)  31st March 2005.

4.   If the  Authority  has not made a reference to the  Competition  Commission
     under  Section 12 of the Act  relating  to the  modification  of the charge
     restriction  conditions  before  the  beginning  of the period of 12 months
     which will end with the  disapplication  date,  the  licensee  may  deliver
     written notice to the Authority  terminating the application of such of the
     charge  restriction  conditions  (or any  part  or  parts  thereof)  as are
     specified in the disapplication request with effect from the disapplication
     date or a later date.


5.   If the  Competition  Commission  makes a report on a reference  made by the
     Authority relating to the modification of the charge restriction conditions
     (or any part or parts thereof) specified in the disapplication  request and
     such report does not include a conclusion that the cessation of such charge
     restriction conditions, in whole or in part, operates or may be expected to
     operate against the public interest,  the licensee may within 30 days after
     the  publication of the report by the Authority in accordance  with Section
     13 of the Act  deliver to the  Authority  written  notice  terminating  the
     application  of such  charge  restriction  conditions  with effect from the
     disapplication date or later.

6.   A  disapplication  request or notice  served  under this  Condition  may be
     served in respect of a specified geographic area.

                                      -39-
<PAGE>


SCHEDULE A: SUPPLEMENTARY PROVISIONS OF THE CHARGE RESTRICTION CONDITIONS
-------------------------------------------------------------------------

Part A. Principles for Attribution
----------------------------------

General Principles
------------------

A1.  Where for the  purposes of the charge  restriction  conditions,  a share of
     costs borne by the licensee  requires to be  attributed  to any part of the
     market,  the licensee shall make that  attribution on a basis which ensures
     that no more than a fair  proportion of those costs,  reflecting  the costs
     incurred by the  licensee  in  supplying  that part of the  market,  are so
     attributed.


A2.  The following  paragraphs of this Part of Schedule A are without  prejudice
     to paragraph A1.


Transmission connection point charges and remote transmission asset rentals
---------------------------------------------------------------------------


A3.  The  transmission  connection point charges and remote  transmission  asset
     rentals  requiring  to  be  attributed   between  the  regulated   quantity
     distributed  and  other  quantities  distributed  shall  be  attributed  in
     proportion to the  transmission  connection  point and remote  transmission
     asset capacity required for the purpose of distributing those quantities.

Distribution losses
-------------------

A4.  Where an amount (in units) in respect of distribution losses requires to be
     calculated and attributed in respect of EHV units and units  distributed by
     the licensee for the purpose of supply to premises  outside the  licensee's
     distribution  services area, such calculation and attribution shall be made
     consistently  with the  principles  underlying  the schedule of  adjustment
     factors  referred to at  sub-paragraph  (b) of  paragraph 2 of  Condition 4
     (Basis of Charges for Use of System and Connection to System:  Requirements
     for Transparency).

Information to be provided by licensee
--------------------------------------


A5   The licensee  shall  following the end of each relevant year furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the  Authority  in  connection  with the charge  restriction
     conditions),   a  statement   confirming   that  the   calculation  of  the
     transmission  connection  point  charges,  the  remote  transmission  asset
     rentals  and of  distribution  losses  was  made  in  accordance  with  the
     provisions of this Part of Schedule A.


A6   Where  the  Authority  is  satisfied  that  the  basis  of  calculation  or
     attribution  (as the case may be) used by the licensee is not in conformity
     with  paragraph  A1,  the  Authority  may issue  directions  specifying  an
     alternative  basis  of  calculation  or  attribution,   and  the  basis  of
     calculation  or  attribution  by the licensee (as the case may be) shall be
     adjusted  accordingly  with effect from the date of issue of the directions
     or (subject to  paragraph  10 of Special

                                      -40-

<PAGE>

     Condition D (Information to be provided to the Authority in connection with
     the charge restriction  conditions)) such other date as may be specified in
     those directions.

                                      -41-
<PAGE>

Part B. EHV premises
--------------------

B1.  EHV premises shall comprise:


     (a)  in relation  to  premises  connected  to the  licensee's  distribution
          system as at the date this licence  enters into force,  those premises
          specified  in the list of EHV  premises  notified  in  writing  to the
          Authority by the licensee within  twenty-eight days after this licence
          enters into force; and


     (b)  in relation  to  premises  connected  to the  licensee's  distribution
          system  which are either first  connected  or (having been  previously
          connected) have had their connections materially altered following the
          date this licence enters into force,  means premises  connected to the
          licensee's  distribution  system  at a voltage  at or  higher  than 22
          kilovolts or at a sub-station  with a primary  voltage of 66 kilovolts
          or above.


B2.  The licensee  shall  following the end of each relevant year furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the  Authority  in  connection  with the charge  restriction
     conditions),  a statement listing any changes in the premises falling to be
     treated as EHV premises.


B3.  Where the Authority is satisfied that any premises  treated by the licensee
     as EHV premises should not in conformity with sub-paragraph  B1(b) above be
     so treated,  the  Authority may issue  directions to that effect,  and such
     premises  shall cease to be treated as EHV premises  from the date of issue
     of the  directions  or  (subject  to  paragraph  10 of Special  Condition D
     (Information  to be provided to the Authority in connection with the charge
     restriction  conditions))  such  other  date as may be  specified  in those
     directions.

                                      -42-
<PAGE>

Part C. Excluded services
-------------------------

C1.  There may be treated as excluded  services  provided by the licensee in its
     distribution  business  such  services in respect of which charges are made
     which:


     (a)  do not fall within paragraph C2 of this Part; and


     (b)  may (subject to paragraph C8) be determined by the licensee as falling
          under one of the  principles  set out in  paragraphs  C3 to C6 of this
          Part.


C2.  No service  provided by the licensee as part of its  distribution  business
     shall be treated as an  excluded  service in so far as it  consists  of the
     provision  of  services  remunerated  under  the use of system  charges  in
     accordance  with  paragraph  2 of standard  condition 4 including  (without
     prejudice to the foregoing):


          (i)  (subject  to  paragraph  C3  of  this  Part)  the   transport  of
               electricity;


          (ii) the carrying out of works for the  installation of electric lines
               or  electrical  plant  (not  otherwise  payable  in the  form  of
               connection charges);


          (iii)the carrying  out of works or the  provision  of  maintenance  or
               repair or other services for the purpose of enabling the licensee
               to  comply  with  standard  conditions  5,  9,  9A  and  15,  the
               Electricity Supply Regulations 1988 or any regulations made under
               Section 29 of the Act or any other  enactment  relating to safety
               or standards applicable in respect of the distribution  business;
               and


          (iv) (subject to paragraph C5 of this Part) the provision,
               installation  and maintenance of any meters,  switchgear or other
               electrical plant (not being part of connection charges).


C3.  The licensee may treat as being an excluded service for the purposes of its
     distribution business the transport of:


     (a)  units of  electricity  not  consumed  in the  licensee's  distribution
          services area


     (b)  EHV units,  provided that the licensee's  charges for the distribution
          of  such  units  do not  exceed  the  charging  rates  underlying  the
          information as to EHV revenue and EHV units  distributed  given by the
          licensee to the  Authority  and used by it for the purposes of setting
          the term PUM in  Special  Condition  B  (Restriction  of  distribution
          charges),  subject only to such  adjustments  as may be appropriate in
          the reasonable opinion of the Authority to reflect material variations
          between the
                                      -43-
<PAGE>

         actual charges made and the charging rates  underlying the
         information  as to  EHV  revenue  provided  to  the  Authority  by the
         licensee.

C4.  Charges of the type  described in  paragraph 3 of standard  condition 4 and
     charges in respect of the statements referred to in paragraph 5 of standard
     condition  4, may each be treated as excluded  services for the purposes of
     the distribution business.


C5.  A service provided by the licensee as part of its distribution business may
     be treated as an excluded service in so far as it consists in the provision
     of services  (including  metering,  electric lines or electrical plant) for
     the specific  benefit of any third party  requesting  the same and not made
     available  by the  licensee as a normal part of its  distribution  business
     remunerated by use of system charges  including  (without  prejudice to the
     foregoing):


     (i)  special  metering  (including  "time of day"  metering) to  facilitate
          energy saving  programmes for the benefit of customers  requesting the
          same;


     (ii) charges  for moving  mains,  services  or meters  forming  part of the
          licensee's distribution system to accommodate extension,  re-design or
          re-development  of any  premises  on which the same are  located or to
          which they are connected;


     (iii)the provision of electric  lines and  electrical  plant (a) insofar as
          the same  are  required  for the  specific  purpose  of  enabling  the
          provision of top-up or standby supplies or sales of electricity or (b)
          to  provide  a higher  degree of  security  than is  required  for the
          purposes of complying with standard condition 5;


     (iv) the amount by which charges for the provision of prepayment  meters to
          customers exceed charges for the provision of standard meters for such
          customers,  in  respect of which the amount  receivable  per  customer
          shall not exceed  that used by the  Authority  in  formulating  PUM in
          Special Condition B (Restriction of distribution charges); and


     (v)  special  metering or telemetry or data  processing  equipment  for the
          purposes of enabling  any person which is a party to the BSC to comply
          with its  obligations  in respect of metering  thereunder,  or for the
          performance by the licensee of any service in relation thereto.


C6.  There  may be  treated  as an  excluded  service  for the  purposes  of the
     distribution  business,  charges for the  relocation  of electric  lines or
     electrical  plant  and  the  carrying  out of  works  associated  therewith
     pursuant  to a  statutory  obligation  (other  than under  Section  9(1) or
     Section 16 of the Act) imposed on the licensee.

Information to be provided to the Authority
-------------------------------------------


C7.  The licensee  shall  following the end of each relevant year furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the  Authority  in  connection  with the

                                      -44-
<PAGE>

     charge restriction conditions), details specifying separately the nature of
     all services  provided as part of its distribution  business and treated as
     excluded  services  by the  licensee  during  the  course  of such year and
     stating  the  revenues  derived  by the  licensee  in  respect of each such
     service so treated.


C8.  Where the Authority is satisfied that in light of the principles set out in
     paragraphs  C2 to C6  inclusive  any service  treated by the licensee as an
     excluded  service  should not be so  treated,  the  Authority  shall  issue
     directions  to that  effect,  and the service or services  specified in the
     directions shall cease to be treated as excluded  services from the date of
     issue of the directions or (subject to paragraph 10 of Special  Condition D
     (Information  to be provided to the Authority in connection with the charge
     restriction  conditions))  such  other  date  as  may be  specified  in the
     directions.

                                      -45-
<PAGE>

Part D.  Regulated distribution unit categories
-----------------------------------------------

D1.  The licensee  shall  following the end of each relevant year furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the  Authority  in  connection  with the charge  restriction
     conditions),  details specifying  separately those use of system charges in
     respect of which the  licensee  has during the course of such year  treated
     the units distributed as falling within the definition of each of LV1 units
     and LV2 units and LV3 units respectively.


D2.  The definition of LV1 units includes units  distributed under the following
     tariffs:


     Domestic Economy 7, day rate
     Quarterly non domestic Economy 7, day rate
     Quarterly non domestic 3-rate evening, weekend and night tariff: day,
     evening and weekend units only.

D3.  The definition of LV2 units includes units  distributed under the following
     tariffs:

     Domestic Economy 7, night rate
     Quarterly non domestic Economy 7, night rate
     Quarterly non domestic 3-rate evening, weekend and night tariff:  night
     units only
     Off peak tariffs

D4.  The definition of LV3 units includes units  distributed under the following
     tariffs:

     General domestic
     Quarterly unrestricted non domestic
     Quarterly non domestic two rate evening and weekend tariffs
     Monthly billed maximum demand tariffs
     STOD tariffs.
     Public lighting

D5.  Notwithstanding  the  provisions of  paragraphs  D2 to D4 above,  where the
     Authority  is  satisfied  that a tariff or  tariffs in respect of which the
     licensee  has treated the units  distributed  as falling  within one of the
     categories  in  paragraphs  D2 to D4 above  should not be so  treated,  the
     Authority  shall issue  directions to that effect and the tariff or tariffs
     specified in the  directions  shall cease to be so treated from the date of
     issue of the directions or (subject to paragraph 10 of Special  Condition D
     (Information  to be provided to the Authority in connection with the charge
     restriction  conditions))  such  other  date  as  may be  specified  in the
     directions  and shall with  effect from such date be treated in such manner
     as may be specified in the directions.

                                      -46-
<PAGE>

Part E. Calculation of factor in respect of distribution losses
---------------------------------------------------------------


E1.  The terms ALt and Lt, which are used in paragraph 3 of Special  Condition B
     (Restriction  of  distribution  charges),  shall  each be  determined,  for
     relevant  years  commencing  on or after  the 1st  April  1995,  using  the
     consistent methodological basis set out in paragraphs E2 to E5 below.


Consistent methodological basis for determination of ALt and Lt
---------------------------------------------------------------

E2.  Adjusted  distribution  losses shall be deemed to be the difference between
     adjusted grid supply point purchases and adjusted units distributed.


E3.  Units  metered  on entry to the  licensee's  distribution  system  shall be
     adjusted to obtain adjusted grid supply point purchases by:


     (a)  excluding that number of units which is equal to the sum of:


          (i)  EHV units; and


          (ii) units  distributed  by the  licensee for the purpose of supply to
               premises outside the licensee's distribution services area; and


          (iii)an amount in  respect of  distribution  losses  between  the grid
               supply  point  and  the  exit  point  attributable  to the  units
               referred to in (i) and (ii) above,  as  determined  in accordance
               with paragraph A4 in Part A of Schedule A; and


     (b)  including  an amount  (in  units)  to  represent  the  effect of units
          entering the  licensee's  distribution  system  otherwise than at grid
          supply  points,  being the  difference  between the number of units so
          entering and the number of units that would have been required to have
          entered at grid supply  points in their absence (such latter number of
          units being calculated consistently with the principles underlying the
          schedule  of  adjustment  factors in respect  of  distribution  losses
          referred to at sub-paragraph (b) of paragraph 2 of standard  condition
          4).


E4.  For so long as units are  metered on entry to the  licensee's  distribution
     system at bulk supply points instead of at grid supply  points,  such units
     shall be calculated by:


     (i)  applying the  procedures in paragraph E3 as if all references to units
          metered at grid  supply  points  were to units  metered at bulk supply
          points; and


     (ii) grossing-up  units  metered at the bulk supply  points by the relevant
          grid supply point conversion factor being either:


          (a)  0.5 per cent of the units metered at the bulk supply points; or

                                      -47-
<PAGE>

          (b)  such other factor to take account of losses occurring between the
               grid supply points and the bulk supply points as the licensee may
               with  the  prior  approval  of  the  Authority  determine  to  be
               appropriate.

E5.  Adjusted units distributed shall be obtained by:


     (a)  calculating  all units  distributed  by the  licensee  metered at exit
          points on leaving the licensee's distribution system; and


     (b)  deducting therefrom EHV units and units distributed for the purpose of
          supply to premises outside the licensee's  distribution services area;
          and


     (c)  adding thereto an amount equal to the units consumed on the licensee's
          premises in the  distribution  services area (insofar as not otherwise
          taken   into   account  in   determining   units   distributed   under
          sub-paragraph (a) above).

Initial relevant loss percentage in the term ALt
------------------------------------------------

E6.  In the first  relevant year,  the initial  relevant loss  percentage in the
     term ALt shall  (consistently with the methodology set out in paragraphs E2
     to E5 above) be deemed to be:


adjusted GSP purchase units less adjusted units distributed
-----------------------------------------------------------
                  adjusted units distributed


     where  adjusted GSP purchase  units are calculated as provided in paragraph
     E7 and adjusted units  distributed  are calculated as provided in paragraph
     E8.

E7.  Adjusted GSP purchase  units shall be  calculated  in  accordance  with the
     procedures successively described in the following sub-paragraphs:


     (a)  the actual  losses in each of  relevant  years  t-1,  t-2 and t-3 (the
          "historical  losses") shall be calculated as the difference in each of
          those years between units  purchased at entry points to the licensee's
          distribution system and units sold;


     (b)  the historic loss  percentage  shall be  calculated as the  proportion
          (expressed as a percentage) which the aggregate historical losses were
          of the  aggregate  units  purchased at entry points to the  licensee's
          distribution system, in each case over the three relevant years t-1 to
          t-3;


     (c)  the total  number of units sold in relevant  year t-1 shall be grossed
          up by the historical loss percentage ("BSP purchase units"); and


     (d)  the figure for BSP purchase  units  resulting from  sub-paragraph  (c)
          shall be adjusted to obtain  adjusted GSP purchase units in accordance
          with the provisions of paragraphs E3 and E4 above.

                                      -48-
<PAGE>

E8.  Adjusted units  distributed shall be calculated by applying the methodology
     of paragraph E5 in respect of those units referred to in sub-paragraphs (a)
     to (c) of paragraph E5 in relevant year t-1.

Information to be provided to the Authority
-------------------------------------------

E9.  The  licensee  shall within three months after the entry into force of this
     licence furnish to the Authority a statement  showing the initial  relevant
     loss percentage and the underlying calculations.

E10. The licensee shall, following the end of each relevant year, furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the  Authority  in  connection  with the charge  restriction
     conditions),  a statement  showing  adjusted  distribution  losses for that
     relevant  year,  accompanied  by the  underlying  calculations  and  (where
     appropriate)  an  explanation of any changes in the basis of calculation or
     estimation thereof.

E11. Where  the  Authority  is  satisfied   that  any  statement  or  underlying
     calculation provided has not been drawn up in conformity with paragraphs E2
     to E8 above,  the  Authority  may issue  directions,  and the  statement or
     underlying calculation shall be adjusted with effect from the date of issue
     of the  directions  or  (subject  to  paragraph  10 of Special  Condition D
     (Information  to be provided to the Authority in connection with the charge
     restriction  conditions))  such  other  date  as  may be  specified  in the
     directions.

                                      -49-


<PAGE>


                                   SCHEDULE 1

                                 SPECIFIED AREA

                                  Great Britain




                                      -50-

<PAGE>

                                   SCHEDULE 2

                                   REVOCATION


1.   The  Authority may at any time revoke the licence by giving no less than 30
     days'  notice  (24  hours'  notice,  in  the  case  of a  revocation  under
     sub-paragraph 1(f)) in writing to the licensee:

     (a)  if the licensee  agrees in writing with the Authority that the licence
          should be revoked;

     (b)  if any amount  payable  under  standard  condition 3 (Payments  by the
          licensee to the  Authority)  is unpaid 30 days after it has become due
          and  remains  unpaid for a period of 14 days after the  Authority  has
          given the licensee  notice that the payment is overdue - provided that
          no such notice shall be given earlier than the sixteenth day after the
          day on which the amount payable became due;

     (c)  if the licensee fails:

          (i)  to comply with a final order (within the meaning of section 25 of
               the Act) or with a provisional  order (within the meaning of that
               section)  which has been  confirmed  under that  section  and (in
               either case) such failure is not rectified to the satisfaction of
               the  Authority  within three months after the Authority has given
               notice in writing of such failure to the licensee - provided that
               no such  notice  shall  be  given  by the  Authority  before  the
               expiration  of the  period  within  which  an  application  under
               section 27 of the Act could be made  questioning  the validity of
               the final or provisional order or before the proceedings relating
               to any such application are finally determined; or

          (ii) to pay any financial  penalty  (within the meaning of section 27A
               of the Act) by the due date for such  payment and such payment is
               not made to the Authority within three months after the Authority
               has given  notice in  writing of such  failure to the  licensee -
               provided  that no such  notice  shall be  given by the  Authority
               before the  expiration of the period within which an  application
               under  section  27E of the  Act  could  be made  questioning  the
               validity  or  effect  of the  financial  penalty  or  before  the
               proceedings   relating  to  any  such   application  are  finally
               determined;

     (d)  if the licensee fails to comply with:

          (i)  an order made by the  Secretary of State under section 56, 73, 74
               or 89 of the Fair Trading Act 1973;  or

          (ii) an order made by the court  under  section 34 of the  Competition
               Act 1998;

     (e)  if the licensee:

          (i)  has ceased to carry on the distribution business;

          (ii) has not commenced carrying on the distribution  business within 5
               years of the date on which the licence comes into force;

                                      -51-
<PAGE>

     (f)  if the licensee:

          (i)  is unable to pay its debts (within the meaning of section  123(1)
               or (2) of the  Insolvency  Act 1986,  but subject to paragraphs 2
               and 3 of this schedule) or has any voluntary arrangement proposed
               in relation to it under  section 1 of that Act or enters into any
               scheme  of   arrangement   (other   than  for  the   purpose   of
               reconstruction  or amalgamation upon terms and within such period
               as  may   previously   have  been  approved  in  writing  by  the
               Authority);

          (ii) has a receiver (which  expression shall include an administrative
               receiver  within the meaning of section 251 of the Insolvency Act
               1986)  of the  whole  or any  material  part  of  its  assets  or
               undertaking appointed;

          (iii)has an  administration  order under  section 8 of the  Insolvency
               Act 1986 made in relation to it;

          (iv) passes any  resolution  for  winding-up  other than a  resolution
               previously approved in writing by the Authority; or

          (v)  becomes  subject  to  an  order  for  winding-up  by a  court  of
               competent jurisdiction; or

     (g)  if the  licensee is convicted  of having  committed  an offence  under
          section 59 of the Act in making its application for the licence.

2.   For  the  purposes  of  sub-paragraph  1(f)(i),  section  123(1)(a)  of the
     Insolvency  Act 1986 shall  have  effect as if for  "(pound)750"  there was
     substituted  "(pound)100,000"  or such higher  figure as the  Authority may
     from time to time determine by notice in writing to the licensee.

3.   The  licensee  shall  not be  deemed  to be unable to pay its debts for the
     purposes of  sub-paragraph  1(f)(i) if any such demand as is  mentioned  in
     section  123(1)(a) of the  Insolvency  Act 1986 is being  contested in good
     faith  by the  licensee  with  recourse  to all  appropriate  measures  and
     procedures or if any such demand is satisfied before the expiration of such
     period  as may be  stated  in  any  notice  given  by the  Authority  under
     paragraph 1.

                                      -52-
<PAGE>


                                   SCHEDULE 3

                           DISTRIBUTION SERVICES AREA


The distribution services area shall comprise that area which is outlined on the
attached map and shall additionally include those premises listed in List A (the
"Additional  Premises")  but shall not include those  premises  listed in List B
(the "Excluded Premises").




A:       ADDITIONAL PREMISES


         Address                          Grid Ref:
         -------                          ---------

         Mine                             SE 6040 4045
         Stillingfleet Moor
         Stillingfleet
         Near York
         YO4 6HX

         Mine                             SE 6475 4431
         North Selby
         New Road
         Escrick
         YO4 6EY


B:       EXCLUDED PREMISES

         Address                          Grid Ref:
         -------                          ---------

         None


                                      -53-
<PAGE>


                                     ANNEX 2



                              ELECTRICITY ACT 1989

                                 SECTION 6(1)(D)





                           ELECTRICITY SUPPLY LICENCE

                                       FOR

                         NPOWER YORKSHIRE SUPPLY LIMITED

                                      -54-
<PAGE>


                          PART I - TERMS OF THE LICENCE

1.   This licence,  treated as granted under section  6(1)(d) of the Electricity
     Act 1989 ("the Act"), authorises Npower Yorkshire Supply Limited (a company
     registered  in England and Wales under number  04212116)  ("the  licensee")
     whose  registered  office is situated at Wetherby Road,  Scarcroft,  Leeds,
     LS14  3HS to  supply  electricity  to  premises  in the area  specified  in
     Schedule 1 during the period specified in paragraph 3 below, subject to:

     (a)  the standard  conditions of electricity supply licences referred to in
          Part II below which  shall have effect in the licence  subject to such
          amendments  (if any) as are set out in Part III below  (together  "the
          conditions");

     (b)  the special conditions, if any, set out in Part IV below ("the special
          conditions");

     (c)  such schedules hereto, if any, as may be referenced in the conditions,
          the special conditions or the terms of the licence.

2.   This  licence  is  subject  to  transfer,   modification  or  amendment  in
     accordance  with the  provisions of the Act, the special  conditions or the
     conditions.

3.   This licence,  unless  revoked in accordance  with the terms of Schedule 2,
     shall  continue  until  determined  by not less  than 25  years'  notice in
     writing given by the Authority to the licensee.

4.   The  provisions of section  109(1) of the Act (Service of documents)  shall
     have  effect as if set out herein and as if for the words  "this Act" there
     were substituted the words "this licence".

5.   Without prejudice to sections 11 and 23(1) of the  Interpretation Act 1978,
     Parts I to IV inclusive  of, and the  Schedules  to, this licence  shall be
     interpreted  and  construed in like manner as an Act of  Parliament  passed
     after the commencement of the Interpretation Act 1978.

6.   References in this licence to a provision of any enactment, where after the
     date of this licence -

     (a)  the enactment has been replaced or supplemented by another  enactment,
          and

     (b)  such enactment  incorporates a corresponding  provision in relation to
          fundamentally the same subject matter,

     shall be construed, so far as the context permits, as including a reference
     to the corresponding provision of that other enactment.

7.   Pursuant to paragraph 5 of standard  condition 3 (Application  of Section D
     (Supply  Services  Obligations))  of the  Electricity  Supply  Licence  the
     "supply services area" is specified in Schedule 3 hereto.

Pursuant to a licensing  scheme made by the  Secretary of State under Part II of
Schedule 7 to the Utilities Act 2000 on 28 September  2001 this licence was made
and is treated as granted under section 6(1)(d) of the Electricity Act 1989.

                                      -55-

<PAGE>

                        PART II - THE STANDARD CONDITIONS

STANDARD CONDITIONS IN EFFECT IN THIS LICENCE
---------------------------------------------
<TABLE>
<CAPTION>


SECTION A                  SECTION B                  SECTION C                   SECTION D


<S>                <C>                        <C>                        <C>                         <C>
Standard condition 1       Standard condition 5       Standard condition 31       Standard condition 51
Standard condition 2       Standard condition 6       Standard condition 32       Standard condition 52
Standard condition 3       Standard condition 7       Standard condition 33       Standard condition 52A
Standard condition 4       Standard condition 8       Standard condition 35       Standard condition 53
                           Standard condition 8A      Standard condition 36       Standard condition 53A
                           Standard condition 8B      Standard condition 37       Standard condition 53B
                           Standard condition 9       Standard condition 38       Standard condition 53C
                           Standard condition 10      Standard condition 39       Standard condition 54
                           Standard condition 11      Standard condition 40
                           Standard condition 12      Standard condition 41
                           Standard condition 12A     Standard condition 42
                           Standard condition 12B     Standard condition 43
                           Standard condition 13      Standard condition 44
                           Standard condition 14      Standard condition 45
                           Standard condition 15      Standard condition 46
                           Standard condition 16      Standard condition 47
                           Standard condition 17      Standard condition 48
                           Standard condition 18      Standard condition 49
                           Standard condition 19      Standard condition 50
                           Standard condition 20
                           Standard condition 21
                           Standard condition 22
                           Standard condition 22A
                           Standard condition 23
                           Standard condition 24
                           Standard condition 25
                           Standard condition 26
                           Standard condition 27
                           Standard condition 28
                           Standard condition 29
                           Standard condition 29A
                           Standard condition 29B
</TABLE>

Note: A copy of the current standard  conditions of electricity  supply licences
can be inspected at the  principal  office of the  Authority.  The above list is
correct at the date of this licence but may be

                                     -56-

<PAGE>

changed  by  subsequent   amendments  or  modifications  to  the  licence.   The
authoritative  up-to-date  version  of this  licence  is  available  for  public
inspection at the principal office of the Authority.

                                      -57-
<PAGE>

                PART III - AMENDMENTS TO THE STANDARD CONDITIONS

There are no amendments to the standard conditions of electricity supply
licences.


                                      -58-
<PAGE>


                          PART IV - SPECIAL CONDITIONS

SPECIAL CONDITION A:  DEFINITIONS AND INTERPRETATION
----------------------------------------------------

1.   Unless the context  otherwise  requires words and  expressions  used in the
     standard  conditions  of this licence  shall bear the same meaning in these
     Special Conditions.

2.   Special  Conditions B to F and Schedule A only apply to the supply services
     area of the licensee. (such area is referred to in these Special Conditions
     as the "Yorkshire area").

3.   In Special Conditions B to F and in Schedule A to those Special Conditions:

     "attributed"               means when used in relation to the fossil fuel
                                levy or payments in lieu thereof, or in relation
                                to attributing electricity purchase or sale
                                contracts and electricity purchase costs to
                                domestic customers and, attributed in accordance
                                with the principals set out in Part A of
                                Schedule A and attribute, attributed,
                                attributable and attribution shall be construed
                                accordingly.

     "charge restriction        means Special Condition G to F together with
      conditions"               Schedule A to this licence, as from time to time
                                modified or replaced in accordance with the
                                provisions of the Act.


     "electricity purchase      means the licensee's purchase costs of
      costs"                    electricity calculated in accordance with the
                                principles in Part F of Schedule 3 of the
                                Public Electricity Supply Licence previously
                                granted to Yorkshire Electricity Group plc in
                                force on 31 March 1998.


     "eleventh relevant year"   means the relevant year commencing 1 April 2000.

     "excluded services"        means those services provided by the licensee
                                which in accordance with the principles set out
                                in Part B of Schedule A fall to be treated as
                                excluded services.


     "metered"                  means, in relation to any quantity supplied, as
                                measured by a meter installed for such purpose
                                or (where no such meter is installed or it is
                                not reasonably practicable to measure the
                                quantity by such meter) as otherwise reasonably
                                calculated.

     "quantity supplied"        means the aggregate quantity of units supplied
                                by the licensee in the relevant year metered at
                                the points of supply (whether or not in the
                                Yorkshire area of the licensee).

     "relevant year"            means a financial year commencing on or after
                                1st April 1990.

                                      -59-

<PAGE>

     "relevant year t"          means that relevant year for the purposes of
                                which any calculation falls to be made;
                                "relevant year t-1" means the relevant year
                                preceding relevant year t or, in respect of the
                                period prior to 1st April 1990, the period of 12
                                calendar months commencing on 1st April 1989;
                                and similar expressions shall be construed
                                accordingly.

     "supply"                   means supply in the Yorkshire area; and
                                "supplied" and similar expressions shall be
                                construed accordingly.

     "supply charges"           means all charges (including charges for the use
                                of any distribution or transmission system and
                                standing charges) made by the licensee in
                                respect of electricity supplied by the
                                licensee other than charges for the provision of
                                excluded services by the licensee.

     "supply revenue"           means the revenue (measured on accruals basis)
                                derived by the licensee from supply charges
                                after deductions of value added text (if any)
                                and any other taxes based directly on the
                                amounts so derived.

     "twelfth relevant year"    means the relevant year commencing 1 April 2001.

     "unit"                     means a kilowatt hour.


4.   Any reference in these Special Conditions to -

     (a)  a provision thereof;

     (b)  a provision of the standard conditions of electricity supply licences;

     (c)  a provision of the standard  conditions  of  electricity  distribution
          licences;

     (d)  a provision  of the  standard  conditions  of  electricity  generation
          licences;

     (e)  a provision of the standard  conditions  of  electricity  transmission
          licences;

     shall, if these or the standard conditions in question come to be modified,
     be  construed,  so  far as  the  context  permits,  as a  reference  to the
     corresponding  provision of these or the standard conditions in question as
     modified.

                                      -60-
<PAGE>

SPECIAL CONDITION B: RESTRAINTS ON SUPPLY CHARGES
-------------------------------------------------


Availability of Restricted Charges
----------------------------------

1.   The licensee  shall make  available  and continue to make  available to all
     Domestic  Customers the Standard Domestic Charge and the Domestic Economy 7
     Charge.

2.   The licensee  shall not,  without the consent in writing of the  Authority,
     change the terms (other than price,  which shall be regulated in accordance
     with this Condition) of any Restricted  Charge, and the terms to which this
     prohibition  applies  include,   for  example,   the  hours  between  which
     particular  prices  apply  and the  level of  consumption  at which  prices
     change.

Restraints on Prices for Restricted Charges
-------------------------------------------

3.   Without  prejudice to Special Condition E (Allowance in respect of security
     costs),  and subject to paragraph  16, the licensee  shall,  in addition to
     complying  with  paragraphs 10, 11, 12 and (where  appropriate)  13, ensure
     that at any point in time in the eleventh  relevant  year the prices set by
     the licensee for the Standard  Domestic  Charge and the Domestic  Economy 7
     Charge  shall not exceed  limits  imposed by  paragraph  6 and  paragraph 8
     respectively.

4.   Without  prejudice to Special Condition E (Allowance in respect of security
     costs),  and subject to paragraph  16, the licensee  shall,  in addition to
     complying with paragraphs 10 to 15, ensure that at any point in time in the
     twelfth  relevant  year the prices  set by the  licensee  for the  Standard
     Domestic  Charge and the Domestic  Economy 7 Charge shall not exceed limits
     imposed by paragraph 7 and paragraph 9 respectively.

5.   Without  prejudice to Special Condition E (Allowance in respect of security
     costs),  and subject to paragraph  16, the licensee  shall,  in addition to
     complying with paragraphs 12 to 15, ensure that at any point in time in the
     thirteenth and subsequent  relevant  years,  the prices set by the licensee
     for the Standard  Domestic  Charge and the Domestic  Economy 7 Charge shall
     not exceed the limits imposed by paragraph 7 and paragraph 9  respectively,
     and the limits imposed by paragraph 15;

     where in paragraphs 7, 9, and 15 :

     references to the `twelfth  relevant year' are replaced by reference to the
     relevant subsequent relevant year

     references  to `t+1' are to be  construed  as  references  to the  relevant
     subsequent relevant year

     references to `t' are to be construed as  references to the year  preceding
     the relevant subsequent relevant year

Restraint on Standard Domestic Charge
-------------------------------------

6.   The Standard  Domestic  Charge shall be set so that at any point in time in
     the eleventh  relevant year the weighted  average unit price of that charge
     represented by the term WPSDt does not exceed the lower of the two formulae
     given under (a) and (b:

                                      -61-
<PAGE>

     (a) ( (BSDt+DSDt+TSDt ) x 1.015 ) x (1+(Ft/100))

     (b) WPSDt-1 x ((1+(Ft/100))/(1+(Fd/100))) x (1+(RPIt/100))


     Where:

     WPSDt is set equal to

              (WSD x PSDt ) + ( (1-WSD) x PPPSDt )

     WSD
                    means the weighting  factor specified for the Yorkshire area
                    in Column 2 of Annex D to this Condition

     PSDt
                    means the  average  unit price for the  licensee's  Standard
                    Domestic Charge calculated as follows,  using the licensee's
                    published rates for that charge,  and without taking account
                    of any Prompt Payment Discount available under that charge :

                    (Annual  Standing  Charge  + (B1SD x  Primary  Unit  rate) +
                    ((3300-B1SD) x Secondary Unit rate)) / 3300

     B1SD
                    has the value  specified for the Yorkshire  area in Column 2
                    of Annex E to this Condition

     PPPSDt
                    means the  average  unit price for the  licensee's  Standard
                    Domestic Charge calculated as follows,  using the licensee's
                    published rates for that charge, and after taking account of
                    any Prompt Payment Discount available under that charge:

                    (Annual  Standing  Charge  + (B1SD x  Primary  unit  rate) +
                    ((3300-B1SD) x Secondary unit rate)) / 3300

     BSDt
                    means the base  allowance,  subject  to  paragraph  16,  (in
                    respect of generation,  supply and transmission services use
                    of system)  specified for the Yorkshire  area in Column 2 of
                    Annex B to this Condition

     DSDt
                    means a sum  representing  the  distribution  use of  system
                    charges  incurred by the licensee in the  eleventh  relevant
                    year in supplying a customer on a Standard  Domestic Charge,
                    represented by the formula :

                    ( D1SDt + (3300 x D2SDt ) + D3SDt ) / 3300

     D1SDt
                    is the  distribution  use of system charge  annual  standing
                    charge for supplying that customer

     D2SDt
                    is the  distribution use of system charge in respect of each
                    unit consumed by that customer

     D3SDt
                    is the aggregate of all other relevant  distribution charges
                    for supplying that customer

     TSDt
                    is  calculated in  accordance  with the  following  formula,
                    provided that if the transmission  company changes the basis
                    upon which it calculates or charges for transmission network
                    use of system charges,  the Authority may by direction amend
                    the formula to produce a

                                      -62-
<PAGE>

                    value of TSDt such that the  licensee is neither  advantaged
                    nor disadvantaged by the change:

                    TNUOS x 0.1859 x Loss Adjustment Factor

                    Where

                    "TNUOS" is the  transmission  network  use of system  charge
                    (expressed  in pence  per kWh)  published  for the  eleventh
                    relevant year and for the zone relevant to the licensee,  as
                    set out in the statement  provided for in standard condition
                    C7 (Use of System) of the Transmission Licence.

                    "Loss Adjustment  Factor" means the factor specified for the
                    Yorkshire area in column 2 of Annex C to this Condition

     WPSDt-1
                    is set equal to

                     (WSD x PSDt-1 ) + ((1-WSD) x PPPSDt-1)

     PSDt-1
                    means the  average  unit price for the  licensee's  Standard
                    Domestic Charge calculated as follows,  using the licensee's
                    published  rates for that  charge as at the end of the tenth
                    relevant  year,  and  without  taking  account of any Prompt
                    Payment Discount available under that charge:

                    (Annual  Standing  Charge  + (B1SD x  Primary  Unit  rate) +
                    ((3300-B1SD) x Secondary Unit rate)) / 3300

     PPPSDt-1
                    means the  average  unit price for the  licensee's  Standard
                    Domestic Charge calculated as follows,  using the licensee's
                    published  rates for that  charge as at the end of the tenth
                    relevant  year,  and  after  taking  account  of any  Prompt
                    Payment Discount available under that charge :

                    (Annual  Standing  Charge  + (B1SD x  Primary  unit  rate) +
                    ((3300-B1SD) x Secondary unit rate)) / 3300

7.   The Standard  Domestic  Charge shall be set so that at any point in time in
     the twelfth  relevant  year the weighted  average unit price of that charge
     represented by the term WPSDt+1 does not exceed :

              ((BSDt+1+DSDt+1+TSDt+1 ) x 1.015) x (1+(Ft+1/100))

          Where:

               WPSDt+1 is set equal to

              (WSD x PSDt+1 ) + ((1-WSD) x PPPSDt+1)

     WSD
                    means the weighting  factor specified for the Yorkshire area
                    in Column 2 of Annex D to this Condition

     PSDt+1
                    means the  average  unit price for the  licensee's  Standard
                    Domestic Charge in the twelfth relevant year,  calculated as
                    follows using the licensee's

                                      -63-
<PAGE>

                    published rates for that charge,  and without taking account
                    of any Prompt Payment Discount available under that charge :

                    (Annual  Standing  Charge  + (B1SD x  Primary  Unit  rate) +
                    ((3300-B1SD) x Secondary Unit rate)) / 3300

     B1SD

                    has the value  specified for the Yorkshire  area in Column 2
                    of Annex E to this Condition

     PPPSDt+1

                    means the  average  unit price for the  licensee's  Standard
                    Domestic Charge in the twelfth relevant year,  calculated as
                    follows,  using  the  licensee's  published  rates  for that
                    charge,  and after  taking  account  of any  Prompt  Payment
                    Discount available under that charge:

                    (Annual  Standing  Charge  + (B1SD x  Primary  unit  rate) +
                    ((3300-B1SD) x Secondary unit rate)) / 3300

     BSDt+1         is set equal to

                     BSDt x (1+(RPIt+1/100))

     DSDt+1
                    means a sum  representing  the  distribution  use of  system
                    charges  incurred by the  licensee  in the twelfth  relevant
                    year in supplying a customer on a Standard  Domestic Charge,
                    represented by the formula:

                    ( D1SDt+1 + (3300 x D2SDt+1 ) + D3SDt+1 ) / 3300

     D1SDt+1
                    is the  distribution  use of system charge  annual  standing
                    charge for supplying that customer

     D2SDt+1
                    is the  distribution use of system charge in respect of each
                    unit consumed by that customer

     D3SDt+1
                    is the aggregate of all other relevant  distribution charges
                    for supplying that customer

     TSDt+1
                    is  calculated in  accordance  with the  following  formula,
                    provided that if the transmission  company changes the basis
                    upon which it calculates or charges for transmission network
                    use of system charges,  the Authority may by direction amend
                    the  formula  to  produce  a value of  TSDt+1  such that the
                    licensee  is neither  advantaged  nor  disadvantaged  by the
                    change:

                    TNUOS x 0.1859 x Loss Adjustment Factor

                    Where

                    "TNUOS" is the  transmission  network  use of system  charge
                    (expressed  in pence  per  kWh)  published  for the  twelfth
                    relevant year and for the zone relevant to the licensee,  as
                    set out in the statement  provided for in standard condition
                    C7 (Use of System) of the Transmission Licence.

                                      -64-
<PAGE>

                    "Loss Adjustment  Factor" means the factor specified for the
                    Yorkshire Area in column 2 of Annex C to this Condition

                    For the purposes of this  paragraph 7, any cross  references
                    to it and this  Condition  generally the terms BSDt, DSDt,
                    and TSDt  shall have the  meanings  given  respectively,  in
                    paragraph 6 above.

Restraint on Domestic Economy 7 Charge
--------------------------------------

8.   The Domestic  Economy 7 Charge shall be set so that at any point in time in
     the eleventh  relevant year the weighted  average unit price of that charge
     represented by the term WPE7t does not exceed the lower of the two formulae
     given under (a) and (b):

              (a)       ((BE7t+DE7t+TE7t ) x 1.015) x (1+(Ft/100))

              (b)       WPE7t-1 x ((1+(Ft/100))/(1+(Fd/100))) x (1+(RPIt/100))

              Where:

     WPE7t    is set equal to

              (WE7 x PE7t ) + ((1-WE7) x PPPE7t)

     WE7
                    means the weighting  factor specified for the Yorkshire area
                    in Column 3 of Annex D to this Condition

     PE7t
                    means the  average  unit price for the  licensee's  Domestic
                    Economy 7 Charge calculated as follows, using the licensee's
                    published rates for that charge,  and without taking account
                    of any Prompt Payment Discount available under that charge:

                    (Annual  Standing  Charge + (B1E7 x Day Primary Unit Rate) +
                    ((3000 - B1E7) x Day  Secondary  Unit Rate ) + (3600 x Night
                    Unit Rate)) / 6600

     B1E7
                    has the value  specified for the Yorkshire  area in Column 3
                    of Annex E to this Condition

     PPPE7t
                    means the  average  unit price for the  licensee's  Domestic
                    Economy 7 Charge calculated as follows, using the licensee's
                    published rates for that charge, and after taking account of
                    any Prompt Payment Discount available under that charge :

                    ((Annual  Standing Charge + (B1E7 x Day Primary Unit Rate) +
                    ((3000 - B1E7) x Day  Secondary  Unit  Rate) + (3600 x Night
                    Unit Rate))) / 6600

     BE7t
                    means the base  allowance,  subject  to  paragraph  16,  (in
                    respect of generation,  supply and transmission services use
                    of system)  specified for the Yorkshire  area in Column 3 of
                    Annex B to this Condition

     DE7t
                    means a sum  representing  the  distribution  use of  system
                    charges  incurred by the licensee in the  eleventh  relevant
                    year in supplying a customer on a Domestic Economy 7 Charge,
                    represented by the formula:

                    (D1E7t + (3000 x D2E7t) + (3600 x D3E7t) + D4E7t) / 6600

                                      -65-
<PAGE>


     D1E7t
                    is the  distribution  use of system charge  annual  standing
                    charge for supplying that customer

     D2E7t
                    is the  distribution use of system charge in respect of each
                    day unit consumed by that customer

     D3E7t
                    is the  distribution use of system charge in respect of each
                    night unit consumed by that customer

     D4E7t
                    is the aggregate of all other relevant  distribution  use of
                    system charges for supplying that customer

     TE7t
                    is  calculated in  accordance  with the  following  formula,
                    provided that if the transmission  company changes the basis
                    upon which it calculates or charges for transmission network
                    use of system charges,  the Authority may by direction amend
                    the  formula  to  produce  a value  of TE7t  such  that  the
                    licensee  is neither  advantaged  nor  disadvantaged  by the
                    change:

                    TNUOS x 0.1162 x Loss Adjustment Factor

                    where

                    "TNUOS" is the  transmission  network  use of system  charge
                    (expressed  in pence  per kWh)  published  for the  eleventh
                    relevant year and for the zone relevant to the licensee,  as
                    set out in the statement  provided for in standard condition
                    C7 (Use of System) of the Transmission Licence.

                    "Loss Adjustment  Factor" means the factor specified for the
                    Yorkshire area in column 3 of Annex C to this Condition

     WPE7t-1        is set equal to

                    (WE7 x PE7t-1 ) + ((1-WE7) x PPPE7t-1)

     PE7t-1
                    means the  average  unit price for the  licensee's  Domestic
                    Economy 7 Charge calculated as follows, using the licensee's
                    published  rates for that  charge as at the end of the tenth
                    relevant  year,  and  without  taking  account of any Prompt
                    Payment Discount available under that charge:

                    (Annual  Standing  Charge + (B1E7 x Day Primary Unit Rate) +
                    ((3000 - B1E7) x Day  Secondary  Unit  Rate) + (3600 x Night
                    Unit Rate)) / 6600

     B1E7
                    has the value  specified for the Yorkshire  area in Column 3
                    of Annex E

     PPPE7t-1

                    means the  average  unit price for the  licensee's  Domestic
                    Economy 7 Charge calculated as follows, using the licensee's
                    published  rates  for that  charge  at the end of the  tenth
                    relevant  year,  and  after  taking  account  of any  Prompt
                    Payment Discount available under that charge:

                    (Annual  Standing  Charge + (B1E7 x Day Primary Unit Rate) +
                    ((3000 - B1E7) x Day  Secondary  Unit  Rate) + (3600 x Night
                    Unit Rate)) / 6600

                                      -66-

<PAGE>

9.   The Domestic  Economy 7 Charge shall be set so that at any point in time in
     the twelfth  relevant  year the weighted  average unit price of that charge
     represented by the term WPE7t+1 does not exceed :

          ((BE7t+1 + DE7t+1 + TE7t+1) x 1.015 ) x (1+(Ft+1/100))

          Where:

     WPE7t+1   is set equal to

                    (WE7 x PE7t+1 ) + ((1-WE7) x PPPE7t+1)

     WE7
                    means the weighting  factor specified for the Yorkshire area
                    in Column 3 of Annex D to this Condition

     PE7t+1
                    means the  average  unit price for the  licensee's  Domestic
                    Economy 7 Charge in the twelfth  relevant year calculated as
                    follows,  using  the  licensee's  published  rates  for that
                    charge,  and without  taking  account of any Prompt  Payment
                    Discount available under that charge:

                    (Annual  Standing  Charge + (B1E7 x Day Primary Unit Rate) +
                    ((3000 - B1E7) x Day  Secondary  Unit  Rate) + (3600 X Night
                    Unit Rate)) / 6600

     B1E7
                    has the value  specified for the Yorkshire  area in Column 3
                    of Annex E to this Condition

     PPPE7t+1
                    means the  average  unit price for the  licensee's  Domestic
                    Economy 7 Charge in the twelfth  relevant year calculated as
                    follows,  using  the  licensee's  published  rates  for that
                    charge,  and after  taking  account  of any  Prompt  Payment
                    Discount available under that charge:

                    (Annual  Standing  Charge + (B1E7 x Day Primary Unit Rate) +
                    ((3000 - B1E7) x Day  Secondary  Unit  Rate) + (3600 x Night
                    Unit Rate)) / 6600

                    BE7t+1 is set equal to

                    BE7t x (1+(RPIt+1/100))


     DE7t+1
                    means a sum  representing  the  distribution  use of  system
                    charges  incurred by the  licensee  in the twelfth  relevant
                    year in supplying a customer on a Domestic Economy 7 Charge,
                    represented by the formula:

                    (D1E7t+1 + (3000 x D2E7t+1) + (3600 x D3E7t+1) + D4E7t+1)
                     / 6600

     D1E7t+1
                    is the  distribution  use of system charge  annual  standing
                    charge for supplying that customer

     D2E7t+1
                    is the  distribution use of system charge in respect of each
                    day unit consumed by that customer

     D3E7t+1
                    is the  distribution use of system charge in respect of each
                    night unit consumed by that customer

                                      -67-
<PAGE>


     D4E7t+1
                    is the aggregate of all other relevant  distribution charges
                    for supplying that customer

     TE7t+1
                    is  calculated in  accordance  with the  following  formula,
                    provided that if the transmission  company changes the basis
                    upon which it calculates or charges for transmission network
                    use of system charges,  the Authority may by direction amend
                    the  formula  to  produce  a value of  TE7t+1  such that the
                    licensee  is neither  advantaged  nor  disadvantaged  by the
                    change:

                    TNUOS x 0.1162 x Loss Adjustment Factor

                    where

                    "TNUOS" is the  transmission  network  use of system  charge
                    (expressed  in pence  per  kWh)  published  for the  twelfth
                    relevant year and for the zone relevant to the licensee,  as
                    set out in the statement  provided for in standard condition
                    C7 (Use of System) of the Transmission Licence.

                    "Loss Adjustment  Factor" means the factor specified for the
                    Yorkshire area in column 3 of Annex C to this Condition

                    For the purposes of this  paragraph 9, any cross  references
                    to it and this  Condition  generally the terms BE7t, DE7t,
                    and TE7t  shall have the  meanings  given  respectively,  in
                    paragraph 8 above.

Supplementary Restrictions
--------------------------

10.  Without  prejudice to Special Condition E (Allowance in respect of security
     costs),  at the beginning of the eleventh  relevant year the licensee shall
     set its prices on the  Restricted  Charges so that,  except  with the prior
     written consent of the Authority, in addition to complying with paragraph 6
     or,  as the case may be,  paragraph  8, the  limits in  paragraph  11 shall
     apply.

11.  The  standing  charge and unit rates for the Standard  Domestic  Charge and
     Domestic  Economy 7 Charge  shall not at any point in time in the  eleventh
     relevant  year exceed in each case the charges made at the end of the tenth
     relevant year, multiplied by the formula :

              (1+(RPIt / 100) ) x ((1+(Ft/100))/(1+(Fd/100)))

12.  Without  prejudice to Special Condition E (Allowance in respect of security
     costs), throughout the eleventh and subsequent relevant years, the licensee
     shall set its prices on all charges available to domestic  customers (other
     than the  Restricted  Charges) so that the  standing  charge,  unit rate or
     rates and any other  component  parts of the charges shall not, except with
     prior written consent of the Authority in the relevant year t exceed:

              Cpt x (1 + (RPIt / 100 ) ) x ((1+(Ft/100))/(1+(Fd/100)))

              Where

              Cpt means each of the standing charge, unit rate or rates, and
              other component parts of the charge, approved by the Authority,
              prevailing on 31 March of the previous relevant year. Hence
              for the purposes of the eleventh relevant year, Cpt means each of
              the

                                      -68-
<PAGE>

               standing charge, unit rate or rates, and other component parts of
               the charge, prevailing at the end of the tenth relevant year.

Prepayment Meter Charges
------------------------

13.  In the  eleventh and  subsequent  relevant  years,  the total charge in any
     domestic prepayment meter charge,  including charges made for the provision
     of the  prepayment  meter,  shall not exceed the total  charge  made in the
     equivalent  domestic  charge  by more  than the  amount  specified  for the
     Yorkshire area in column 2 of Annex F.

14.  The  Authority  may by  direction  specify  which  charges are to be deemed
     prepayment  meter charges and which charges are their  equivalent  domestic
     charges.

Standing charges and unit rates
-------------------------------

15.  (a)  Without  prejudice to Special Condition E (Allowance in respect of
          security  costs),  throughout  the  twelfth  relevant  year and  every
          subsequent  relevant  year,  the licensee shall set its prices for the
          Standard  Domestic  Charge and the Domestic  Economy 7 Charge so that,
          except with the prior written  consent of the Authority,  the standing
          charge,  unit  rate or rates  and any  other  component  part of those
          charges shall not exceed the formula given in sub-paragraph (b),

          Provided  that if in the  application  of the formulae in paragraphs 7
          and 9 in relevant year to :

          the  value of DSDt+1  in  relation  to the  Standard  Domestic  Charge
          exceeds

          DSDt x (1 + (RPIt / 100 ) )

          or the value of TSDt+1 in relation  to the  Standard  Domestic  Charge
          exceeds

          TSDt x (1+ (RPIt / 100 ) )

          or the value of DE7t+1 in  relation to the  Domestic  Economy 7 Charge
          exceeds

          DE7t x (1 + (RPIt / 100 ) )

          or the value of TE7t+1 in  relation to the  Domestic  Economy 7 Charge
          exceeds

          TE7t x (1+ (RPIt / 100 ) )

          then the licensee may increase that Restricted  Charge up to the level
          allowed by the paragraphs 7 or 9 as appropriate.


     (b)  The formula referred to in paragraph (a) is :

          RTCpt x (1+(RPIt/100)) x ((1+(Ft/100))/(1+(Fd/100)))

          Where

RTCpt     means  each of the  standing  charge,  unit rate or  rates,  and other
          component parts of the relevant  Restricted Charge,  prevailing at the
          end of relevant year t-1.

                                      -69-
<PAGE>


Generation, Supply Business, and Transmission Services Use of System Costs
--------------------------------------------------------------------------

16.  If the costs to the licensee of procuring or providing  generation,  supply
     or  transmission  services  use of  system  increase  substantially  in the
     aggregate due to factors  outside the licensee's  control and for which the
     licensee would not  reasonably  have been expected to have provided so that
     the amount allowed for under the terms BSD and BE7 in the formulae given in
     paragraphs  6 to 9 no longer  remunerate  the licensee  appropriately,  the
     Authority may direct that, in the eleventh or any subsequent  relevant year
     (including  any year to which  paragraph 5 applies),  the limits imposed by
     paragraphs 6 to 9 shall be raised to the extent specified in the direction.

Fossil fuel levy
----------------

17.  If at any time after the  licensee  has set its prices for a relevant  year
     the  value  of Ft is  changed  by an  amount  which  is  less  than  half a
     percentage  point in the value of the then  prevailing  rate for Ft,  after
     taking  account  of all other  changes  in the value of Ft since its prices
     were set, the licensee  shall not be required,  solely on that account,  to
     change the prices it has set.

Reporting requirements
----------------------

18.  Every three months, in each of the eleventh and subsequent  relevant years,
     the licensee shall submit to the Authority statements summarising the costs
     of purchasing electricity for its supply business. Such statements shall be
     in a form approved by the Authority,  and shall as a minimum  include total
     and  average  costs under  electricity  purchase  contracts  for the supply
     business,  and that part to be attributed to the domestic  sector,  for the
     relevant year to date and forecast for the relevant year as a whole.

Timing
------

19.  (a) This paragraph applies where :

          (i)  a reduction has been or is to be made in charges for distribution
               use of system or transmission network use of system;

          (ii) the effect of the  reduction  is or would be, if the licensee did
               not reduce its Restricted Charges, to cause the prices set by the
               licensee  to  exceed  the  limits  on  prices   imposed  by  this
               Condition; and

          (iii)the licensee  reasonably  expects  further  changes to be made to
               the  charges  for  distribution  use of  system  or  transmission
               network  use of system  which  will  further  alter the limits on
               prices imposed by this Condition.

     (b)  Where this  paragraph  applies,  the  licensee  may give notice to the
          Authority:

          (i)  specifying  the  reduction  in charges  for  distribution  use of
               system or  transmission  network use of system which have been or
               are to be made;

          (ii) describing  the effect of the  reduction  on the limits on prices
               imposed by this Condition; and

          (iii)giving  particulars of the further changes which it expects to be
               made in charges for  distribution  use of system or  transmission
               network use of system,  including  particulars of the grounds for
               that expectation.

                                      -70-
<PAGE>

     (c)  If the licensee  gives such notice to the  Authority,  and the grounds
          for the explanation  given in the notice are reasonable,  the licensee
          shall be deemed  not to be in  breach  (to the  extent  only that such
          breach is  attributable  to the reduction in charges  specified in the
          notice) of any limit on prices  imposed by this  Condition  during the
          period  beginning  with the date on which the  Authority  receives the
          notice  and  ending  with  the date  specified  in a  direction  given
          pursuant to  sub-paragraph  (d) or, if no such direction is given,  28
          days after the reduction in prices referred to in sub-paragraph (b)(i)
          takes effect.

     (d)  The Authority may give a direction

          (i)  specifying  the end of the period  during  which the  licensee is
               deemed  not to be in breach of the  limits on prices  imposed  by
               this  Condition on account of the change in charges  specified in
               the notice  (which  period may be shorter or longer  than 28 days
               from when the change in charges takes effect); and / or

          (ii) requiring the licensee to make such  reductions in its Restricted
               Charges  during such period as is specified  in the  direction as
               will  secure that the  licensee  makes no  significant  gain as a
               result  of its being  deemed  not to be in breach of any limit on
               prices imposed by this Condition.

Interpretation
--------------

20. In this Condition -

          (a)  all prices and revenue shall exclude value added tax (if any);

          (b)  where published prices do not include an allowance for the fossil
               fuel levy,  for the purposes of this  condition such prices shall
               be adjusted to include the relevant fossil fuel levy;

          (c)  any reference to the first  relevant year means the relevant year
               commencing 1 April 1990 and any reference to the second  relevant
               year and so on shall be construed accordingly;

          (d)  in addition to the  definitions  given within this  Condition the
               following term(s) shall have the following meaning :

               "Standard  Domestic  Charge" means that charge  determined by the
               licensee  during the tenth  relevant  year as  specified  for the
               Yorkshire area in Column 2 of Annex A to this Condition;

               "Domestic  Economy 7 Charge" means that charge  determined by the
               licensee  during the tenth  relevant  year as  specified  for the
               Yorkshire area in Column 3 of Annex A to this Condition;

               "Restricted  Charges" means the Standard  Domestic Charge and the
               Domestic Economy 7 Charge taken together;

               "Prompt Payment Discount" means any discount or reduction,  given
               in respect of the relevant year  (quantified on the assumption of
               3300 kWh annual  consumption for a Standard Domestic Charge,  and
               on the  basis  of 6600  kWh  annual  consumption  for a  Domestic
               Economy 7 Charge),  for the prompt or timely  payment of bills by
               cash or
                                      -71-
<PAGE>
               cheque,  compared  with the  charge  which  would  be made  where
               payment is not made promptly or on time.


               "RPIt"  means the  percentage  change  (whether  of positive or a
               negative  value) in the  arithmetic  average of the Retail  Price
               Index numbers published or determined with respect to each of the
               six months July to December  (inclusive) in relevant year t-1 and
               the  arithmetic   average  of  the  Retail  Price  Index  numbers
               published  or  determined  with  respect  to the same  months  in
               relevant year t-2.


               Ft   means the rate of the fossil fuel levy  prevailing from time
                    to time


               Fd   means the fossil  fuel levy rate  prevailing  at 31 March in
                    the previous  relevant  year.  Hence for the purposes of the
                    eleventh relevant year, Fd means 0.3.


                                      -72-

<PAGE>


ANNEX A

The Restricted Charges

<TABLE>
<CAPTION>

                                   COLUMN 2                                 COLUMN 3
     COLUMN 1               STANDARD DOMESTIC CHARGE                 DOMESTIC ECONOMY 7 CHARGE
     --------               ------------------------                 -------------------------

  <S>                     <C>                                       <C>
  EASTERN AREA            Domestic General Tariff: Table 2          Domestic Economy 7 Tariff: Table 2

  EAST MIDLANDS AREA      Standard Tariff                           Economy 7 Tariff

  LONDON AREA             General Purpose Rate (Quarterly)          Economy 7 Rate (Quarterly)

  MANWEB AREA             Domestic `S'                              Economy 7

  MIDLANDS AREA           D1 Domestic Credit Meter Tariff           D5 Domestic Economy 7 Tariff

  NORTHERN AREA           Standard Domestic Tariff (D1)             Economy 7 Domestic Tariff (D1T)

  NORWEB AREA             D13 Domestic Tariff                       D56 Economy 7 Tariff

  SEEBOARD AREA           Standard Domestic                         Economy 7 Domestic

  SOUTHERN AREA           General Tariff (Quarterly)                Economy 7 Tariff (Quarterly)

  SOUTH WALES AREA        Domestic Standard Tariff (Quarterly)      Domestic Economy 7 Tariff (Quarterly)

  SOUTH WESTERN AREA      Domestic Tariff                           Economy  7 Tariff

  YORKSHIRE AREA          General Domestic (GD)                     Economy 7 (E7)

</TABLE>

                                      -73-

<PAGE>


ANNEX B

Base Allowances


Pence per kWh (2000/01 prices)


                                COLUMN 2             COLUMN 3
    COLUMN 1                      BSD                  BE7
    --------                    --------             --------

  EASTERN AREA                   4.867                 3.766

  EAST MIDLANDS AREA             4.910                 3.767

  LONDON AREA                    4.953                 3.799

  MANWEB AREA                    5.158                 3.956

  MIDLANDS AREA                  4.917                 3.769

  NORTHERN AREA                  5.012                 3.833

  NORWEB AREA                    4.935                 3.799

  SEEBOARD AREA                  4.956                 3.812

  SOUTHERN AREA                  4.961                 3.805

  SOUTH WALES AREA               5.128                 3.893

  SOUTH WESTERN AREA             5.010                 3.833

  YORKSHIRE AREA                 4.968                 3.808

                                      -74-
<PAGE>


ANNEX C

Peak loss adjustment factors


                                    COLUMN 2                    COLUMN 3
    COLUMN 1               STANDARD DOMESTIC CHARGE    DOMESTIC ECONOMY 7 CHARGE
    --------               ------------------------    -------------------------
  EASTERN AREA                     1.0877                      1.0875

  EAST MIDLANDS AREA               1.0893                      1.0891

  LONDON AREA                      1.0931                      1.0928

  MANWEB AREA                      1.1487                      1.1481

  MIDLANDS AREA                    1.0880                      1.0876

  NORTHERN AREA                    1.0938                      1.0936

  NORWEB AREA                      1.0933                      1.0932

  SEEBOARD AREA                    1.0975                      1.0973

  SOUTHERN AREA                    1.0870                      1.0867

  SOUTH WALES AREA                 1.0915                      1.0913

  SOUTH WESTERN AREA               1.0839                      1.0838

  YORKSHIRE AREA                   1.1016                      1.1012

                                      -75-

<PAGE>

ANNEX D

Prompt payment discount weightings

                                     COLUMN 2            COLUMN 3
  COLUMN 1                             WSD                 WE7
  --------                             ---                 ---

  EASTERN AREA                        0.902               0.886

  EAST MIDLANDS AREA                  1.000               1.000

  LONDON AREA                         1.000               1.000

  MANWEB AREA                         0.424               0.401

  MIDLANDS AREA                       1.000               1.000

  NORTHERN AREA                       0.223               0.263

  NORWEB AREA                         1.000               1.000

  SEEBOARD AREA                       1.000               1.000

  SOUTHERN AREA                       0.495               0.503

  SOUTH WALES AREA                    1.000               1.000

  SOUTH WESTERN AREA                  0.520               0.520

  YORKSHIRE AREA                      0.314               0.262

                                      -76-

<PAGE>

ANNEX E

Band blocks


                                COLUMN 2                COLUMN 3
   COLUMN 1                      B1SD                     B1E7
   --------                      ----                     ----

  EASTERN AREA                   2283                     2076

  EAST MIDLANDS AREA             3300                     3000

  LONDON AREA                    3300                     3000

  MANWEB AREA                    3300                     3000

  MIDLANDS AREA                  3300                     3000

  NORTHERN AREA                  2272                     1344

  NORWEB AREA                    3300                     3000

  SEEBOARD AREA                  728                      1096

  SOUTHERN AREA                  2809                     3000

  SOUTH WALES AREA               3300                     3000

  SOUTH WESTERN AREA             3300                     3000

  YORKSHIRE AREA                 3300                     3000

                                      -77-
<PAGE>


ANNEX F

Prepayment meter surcharge


                                 COLUMN 2
    COLUMN 1                      (POUND)
    --------                      -------

  EASTERN AREA                     11.22

  EAST MIDLANDS AREA               15.00

  LONDON AREA                      15.00

  MANWEB AREA                      15.00

  MIDLANDS AREA                    15.00

  NORTHERN AREA                    15.00

  NORWEB AREA                      15.00

  SEEBOARD AREA                    15.00

  SOUTHERN AREA                    15.00

  SOUTH WALES AREA                 15.00

  SOUTH WESTERN AREA               15.00

  YORKSHIRE AREA                   15.00


                                      -78-

<PAGE>

SPECIAL CONDITION C:       [NO LONGER USED]
-------------------------------------------

                                      -79-

<PAGE>


SPECIAL CONDITION D:  INFORMATION  TO BE  PROVIDED  TO THE  AUTHORITY  IN
-------------------------------------------------------------------------
CONNECTION  WITH  THE  CHARGE RESTRICTION CONDITIONS
----------------------------------------------------

1.   [No longer used]


2.   [No longer used]


3.   Not later than three months  after the end of a relevant  year the licensee
     shall send the  Authority a statement,  in respect of that  relevant  year,
     showing the specified items referred to in paragraph 5.


4.   The statement referred to in the preceding paragraph shall be:


     (a)  accompanied  by a report from the  Auditors  that in their opinion (i)
          such statement fairly presents each of the specified items referred to
          in  paragraph  5 in  accordance  with the  requirements  of the charge
          restriction conditions and (ii) the amounts shown in respect of each
          of those specified items are in accordance with the licensee's
          accounting records which have been maintained in respect of each of
          the relevant separate business in accordance with standard condition
          52 (Regulatory Accounts); and

     (b)  certified by a director of the licensee on behalf of the licensee that
          to the best of his knowledge,  information  and belief having made all
          reasonable enquiries:


          (i)  [No longer used]

          (ii) there  is no  amount  included  in its  calculations  of  allowed
               security costs under Special Condition E (Allowance in respect of
               security costs) which  represents  other than an amount permitted
               under the charge restriction conditions to be so included;

          (iii)no service has been treated as an excluded  service which was not
               properly  so treated and no amount  included  in the  revenues in
               respect thereof represents other than bona fide consideration for
               the provision of the excluded service to which it relates;

          (iv) all amounts  which should  properly be taken into account for the
               purposes  of the charge  restriction  conditions  have been taken
               into account; and


          (v)  [No longer used].

5.   The  specified  items  to be  contained  in the  statement  referred  to in
     paragraph 3 shall be the following:

                                      -80-
<PAGE>

     (a)  the  information  referred to at  paragraph  8 of Special  Condition E
          (Allowance in respect of security costs);


     (b)  the statements and  information  referred to in paragraph A4 and B2 of
          Schedule A;

6.   Where the Authority  issues  directions in accordance  with  paragraph 9 of
     Special  Condition E (Allowance in respect of security costs) or paragraphs
     A5 and B3 of Schedule A then such  directions  shall not have effect from a
     date  earlier  than the  commencement  of the  relevant  year to which  the
     statement last furnished to the Authority  pursuant to paragraph 3 prior to
     the  issue  of the  directions  related,  unless  such  statement  (or  the
     accompanying  report or  certificate  under  paragraph 4) or any statement,
     report or certificate in respect of an earlier  relevant year was incorrect
     or was misleading in any material respect.

7.   Where the  Authority  issues  such  directions  as are  referred  to in the
     preceding  paragraph  the  Authority  may require the licensee to provide a
     revised  statement  in  respect  of such of the  specified  items as may be
     affected  by the  directions,  and the  licensee  shall  comply  with  such
     request.

                                      -81-
<PAGE>


SPECIAL CONDITION E: ALLOWANCE IN RESPECT OF SECURITY COSTS
-----------------------------------------------------------

1.   At any time  during a security  period,  the  licensee  may give  notice in
     writing to the Authority  suspending,  with effect from the date of receipt
     of  the  notice  by the  Authority,  application  of  such  of  the  charge
     restriction  conditions as may be specified in the notice for the unexpired
     term of the security period.


2.   At any time during a security  period,  the Authority may (having regard to
     its  duties  under  the Act or under  the  Utilities  Act 2000) by means of
     directions:


     (a)  suspend or modify for the  unexpired  term of the security  period the
          charge restriction conditions or any part or parts thereof; or


     (b)  introduce  for the  unexpired  term of the security  period new charge
          restriction conditions;


     (c)  in either  case,  so as to make such  provision  as in the  opinion or
          estimation of the Authority is requisite or appropriate:


          (i)  to enable the licensee to recover by means of  increased  charges
               an amount  estimated  as being  equal to the  licensee's  allowed
               security costs during such period; and


          (ii) to  ensure   that  such  part  of  the  amount   referred  to  in
               sub-paragraph  (i) above as is  estimated  as being  equal to the
               allowed  security  costs incurred by the licensee as costs in its
               supply business is recovered by appropriate  equitable  increases
               in the charges made by the licensee in that business

     and the licensee shall comply with the terms of any directions so issued.

3.   At any time following a security period,  the Authority may (following such
     consultation  with the  licensee and others as the  Authority  may consider
     appropriate)   issue   directions   suspending   or  modifying  the  charge
     restriction  conditions  or any part or parts  thereof  or  replacing  such
     directions as may have been made during the security period and introducing
     such new charge  restriction  conditions as in the opinion of the Authority
     are  appropriate  in all the  circumstances  (including at the  Authority's
     discretion an appropriate  adjustment having regard to any profit gained or
     foregone by the  licensee  during the  security  period),  and the licensee
     shall comply with any directions so issued.


4.   At any time  within  three  months  after  the issue of  directions  by the
     Authority  under  paragraph 3, the  licensee  may serve on the  Authority a
     disapplication  request  in  respect  of  such  of the  charge  restriction
     conditions or any part or parts thereof as are specified in the request.


5.   If  within   three   months  of  the  receipt  by  the   Authority  of  the
     disapplication request referred to in paragraph 4, the Authority has either
     not  agreed in  writing  to such  disapplication  request or has

                                      -82-
<PAGE>

     not made a reference to the Competition  Commission under Section 12 of the
     Act relating to the modification of the charge restriction conditions,  the
     licensee  may  deliver  one  month's   written   notice  to  the  Authority
     terminating  the application of the charge  restriction  conditions (or any
     part or parts thereof) as were specified in the disapplication request.

6.   Subject to  paragraphs 7 and 9, the licensee  shall in any relevant year be
     entitled to recover an aggregate amount equal to its allowed security costs
     in that year or (insofar as not previously recovered) any previous year, by
     means  of  appropriate  equitable  increases  on the  charges  made  by the
     licensee in its supply business.


7.   Paragraph 6 shall not apply in so far as such allowed security costs:

     (a)  were otherwise recovered by the licensee; or


     (b)  were taken into account by the Authority in setting charge restriction
          conditions by means of directions issued under paragraph 3 above.


8.   The licensee  shall  following the end of each relevant year provide to the
     Authority,  as being  one of the  specified  items to be  contained  in the
     statement referred to at paragraph 4 of Special Condition D (Information to
     be provided to the  Authority  in  connection  with the charge  restriction
     conditions), details in respect of that relevant year of:


     (a)  the amount of the licensee's allowed security costs; and


     (b)  the  aggregate  amounts  charged  under  paragraph 6 on account of the
          licensee's allowed security costs; and


     (c)  the bases and calculations underlying the increases in charges made by
          the licensee in its supply business under paragraph 6.

9.   Where the Authority is satisfied that the licensee has recovered amounts in
     excess of the allowed  security costs,  the Authority may issue  directions
     requiring  the licensee to take such steps as may be specified to reimburse
     customers of the supply  business for the excess  amounts  charged to them,
     and the licensee shall comply with any  directions so issued  provided that
     if the  excess  amounts  relate  to  allowed  security  costs  paid  to any
     authorised  electricity operator, the licensee shall not be obliged to make
     any such reimbursement unless and until it has recovered such costs.

10.  No amounts  charged by the licensee  under this  Condition  (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the supply  charge  restriction  provisions  of Special
     Condition B (Restraints on Supply Charges).

                                      -83-

<PAGE>


11. In this Condition:

    "allowed security cost"

                    shall  have the  meaning  ascribed  to that term in the Fuel
                    Security Code.

     "security period"

                    means a period commencing on the date on which any direction
                    issued by the Secretary of State under  Section  34(4)(b) of
                    the Act enters effect and terminating on the date (being not
                    earlier than the date such direction,  as varied, is revoked
                    or expires) as the Authority,  after  consultation with such
                    persons  (including  without  limitation,   licence  holders
                    liable  to be  principally  affected)  as he shall  consider
                    appropriate,  may with the consent of the Secretary of State
                    by notice to all  licence  holders  determine  after  having
                    regard to the views of such persons.

                                     -84-
<PAGE>

SPECIAL CONDITION F: DURATION OF CHARGE RESTRICTION CONDITIONS
--------------------------------------------------------------

1.   The  charge  restriction  conditions  shall  apply so long as this  licence
     continues in force but shall cease to have effect (in whole or in part,  as
     the case may be) if the licensee delivers to the Authority a disapplication
     request made in accordance with paragraph 2 and:


     (a)  the Authority agrees in writing to the disapplication request; or


     (b)  their  application (in whole or in part) is terminated by notice given
          by the licensee in accordance with either paragraph 4 or paragraph 5.


2.   A disapplication request pursuant to this Condition shall (a) be in writing
     addressed to the Authority,  (b) specify the charge restriction  conditions
     (or any part or parts  thereof) to which the request  relates and (c) state
     the date from which the  licensee  wishes the  Authority  to agree that the
     specified charge restriction conditions shall cease to have effect.


3.   Save where the Authority  otherwise  agrees,  no  disapplication  following
     delivery of a disapplication  request pursuant to this Condition shall have
     effect earlier than that date which is the later of:


     (a)  a  date  being  not  less  than  18  months  after   delivery  of  the
          disapplication request; and


     (b)  31st March 2002.

4.   If the  Authority  has not made a reference to the  Competition  Commission
     under  Section 12 of the Act  relating  to the  modification  of the charge
     restriction  conditions  before  the  beginning  of the period of 12 months
     which will end with the  disapplication  date,  the  licensee  may  deliver
     written notice to the Authority  terminating the application of such charge
     restriction  conditions  (or any part or parts thereof) as are specified in
     the disapplication  request with effect from the  disapplication  date or a
     later date.

5.   If the  Competition  Commission  makes a report on a reference  made by the
     Authority relating to the modification of the charge restriction conditions
     (or any part or parts thereof) specified in the disapplication  request and
     such report does not include a conclusion that the cessation of such charge
     restriction conditions, in whole or in part, operates or may be expected to
     operate against the public interest,  the licensee may within 30 days after
     the  publication of the report by the Authority in accordance  with Section
     13 of the Act  deliver to the  Authority  written  notice  terminating  the
     application  of such  charge  restriction  conditions  with effect from the
     disapplication date or later.

6.   A  disapplication  request or notice  served  under this  Condition  may be
     served in respect of a specified geographic area.

                                      -85-
<PAGE>

SCHEDULE A. SUPPLEMENTARY PROVISIONS OF THE CHARGE RESTRICTION CONDITIONS

Part A. Principles for Attribution
----------------------------------

General Principles
------------------

A1.  Where for the  purposes of the charge  restriction  conditions,  a share of
     costs borne by the licensee  requires to be  attributed  to any part of the
     market,  the licensee shall make that  attribution on a basis which ensures
     that no more than a fair  proportion of those costs,  reflecting  the costs
     incurred by the  licensee  in  supplying  that part of the  market,  are so
     attributed.


A2.  The following  paragraphs of this Part of Schedule A are without  prejudice
     to paragraph A1.


Fossil Fuel Levy and payments in lieu thereof
---------------------------------------------

A3.  The fossil fuel levy  requiring  to be  attributed  to supplies to domestic
     customers  shall  be  attributed  on the  basis of the  amount  of the levy
     incorporated  in  the  prices  actually  charged  or to be  charged  by the
     licensee on supplies to such  customers in the relevant  year in respect of
     which the attribution falls to be made.  Amounts in lieu of the fossil fuel
     levy in respect of purchases of electricity other than leviable electricity
     requiring  to be  calculated  and then  attributed  to supplies to domestic
     customers  in any  relevant  year for the  purposes of Special  Condition B
     (Restraints on Supply Charges) shall:


     (a)  be calculated as being such amounts as correspond to the lesser of:


          (i)  the premium actually  payable  (measured on an accruals basis) by
               the licensee during the relevant year on purchases of electricity
               other than leviable  electricity as  representing  the benefit to
               the  licensee  of being able to treat such  electricity  as being
               other than leviable electricity for the purposes of Section 33 of
               the Act and Regulations thereunder; and


          (ii) the additional  amount that would have been payable  (measured on
               an accruals  basis) by the licensee in respect of the fossil fuel
               levy pursuant to Regulations made under Section 33 of the Act had
               such electricity been leviable electricity; and


     (b)  be attributed to supplies to domestic customers pro rata to the amount
          which the quantity  supplied to domestic  customers bears to the total
          quantity  supplied  (in each case in the  relevant  year in respect of
          which the attribution  falls to be made) or on the basis of the amount
          referred  to in  paragraph  (a)  incorporated  in the prices  actually
          charged or to be charged by the licensee on supplies to such customers
          in the relevant year in respect of which the  attribution  falls to be
          made or on such

                                      -86-
<PAGE>

          other basis of  attribution  as the  licensee  shall  previously  have
          agreed with the Authority.

Information to be provided by licensee
--------------------------------------

A4.  The licensee  shall  following the end of each relevant year furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 3 of Special Condition D (Information to
     be  provided  to  the  Authority  in  connection  with  charge  restriction
     conditions), a statement confirming that the calculation of amounts in lieu
     of the fossil  fuel levy and the  attribution  of the fossil  fuel levy and
     amounts in lieu thereof was made in accordance  with the provisions of this
     Part of Schedule A, accompanied (where appropriate) by:

     (a)  a statement of the total amounts  attributed  to domestic  customers ;
          and

     (b)  copies of statements prepared under paragraph 1 of Special Condition D
          (Information to be provided to the Authority in connection with charge
          restriction conditions) and an explanation of the basis therefor.

A5.  Where  the  Authority  is  satisfied  that  the  basis  of  calculation  or
     attribution  (as the case may be) used by the licensee is not in conformity
     with  paragraph  A1,  the  Authority  may issue  directions  specifying  an
     alternative  basis  of  calculation  or  attribution,   and  the  basis  of
     calculation  or  attribution  by the licensee (as the case may be) shall be
     adjusted  accordingly  with effect from the date of issue of the directions
     or  (subject  to  paragraph 6 of Special  Condition  D  (Information  to be
     provided  to  the   Authority  in   connection   with  charge   restriction
     conditions)) such other date as may be specified in those directions.

                                     -87-

<PAGE>


Part B. Excluded services
-------------------------

B1.  Subject to paragraph B3, a service  provided by the licensee as part of its
     supply  business  may be  treated  as an  excluded  service in so far as it
     consists of the provision of services for the specific benefit of customers
     requesting the same and not made available by the licensee as a normal part
     of such business.  For the avoidance of doubt,  the provision of facilities
     for prepayment may not be treated as an excluded service.

Information to be provided to the Authority
-------------------------------------------

B2.  The licensee  shall  following the end of each relevant year furnish to the
     Authority,  as  being  one of the  specified  items to be  included  in the
     statement referred to at paragraph 3 of Special Condition D (Information to
     be  provided  to  the  Authority  in  connection  with  charge  restriction
     conditions),  details  specifying  separately  the  nature of all  services
     provided as part of its or supply  business by the  licensee and treated as
     excluded  services  by the  licensee  during  the  course  of such year and
     stating  the  revenues  derived  by the  licensee  in  respect of each such
     service so treated.

Directions
----------

B3.  Where the Authority is satisfied that in light of the principles set out in
     paragraph  B1 any service  treated by the  licensee as an excluded  service
     should not be so treated,  the  Authority  shall issue  directions  to that
     effect, and the service or services specified in the directions shall cease
     to be treated as excluded services from the date of issue of the directions
     or  (subject  to  paragraph 6 of Special  Condition  D  (Information  to be
     provided  to  the   Authority  in   connection   with  charge   restriction
     conditions)) such other date as may be specified in the directions.

                                      -88-
<PAGE>


SPECIAL CONDITION G: RESTRICTION ON SELF-SUPPLY
-----------------------------------------------

1.   The licensee shall not at any time after this Condition comes into effect:

     (a)  enter into any new electricity  purchase  contract or other equivalent
          agreement or arrangement  (directly or indirectly) with an electricity
          generator  which  is an  affiliate  or a  related  undertaking  of the
          licensee for the benefit of that part of the licensee's business which
          comprises the supply of  electricity  to former  designated  customers
          within the supply services area specified in Schedule 3; or


     (b)  make or  permit  (without  the prior  consent  of the  Authority)  any
          material  variation  of any  electricity  purchase  contract  or other
          equivalent  agreement or  arrangement  entered into for the benefit of
          that part of the licensee's  business referred to in paragraph 1(a) to
          which an  affiliate  or a related  undertaking  of the  licensee  is a
          party.

2.   For the purpose of this Condition:

          "former  designated  customer"  means a customer who would have fallen
          within the  definition  of  "designated  customer"  (as defined in the
          public  electricity  supply  licence  previously  granted to Yorkshire
          Electricity  Group  Plc in the  form of that  licence  in  force on 27
          September 2001) and who is supplied by the licensee.

3.   Subject to  paragraph  4, the  Authority  may in writing  direct  that this
     Condition shall cease to have effect in this licence on:

     (a)  the date on which any of Special  Conditions B to F is first  modified
          by the Authority; or

     (b)  any date  thereafter  which is specified  in a direction  given by the
          Authority to the licensee for the purpose of this paragraph.

4.   The  Authority  may not give a  direction  under  paragraph 3 unless it has
     first:

     (a)  given  not  less  than 28 days  notice  of its  intention  to give the
          direction in such a manner as the Authority considers  appropriate for
          the purpose of bringing the notice to the attention of persons  likely
          to be affected by it;

     (b)  sent a copy  of  such  notice  to the  licensee,  all  other  licensed
          suppliers, and the Consumer Council; and

     (c)  duly  considered  all  objections or  representations  received by the
          Authority  after the date of  publication  of the notice which are not
          withdrawn.

                                      -89-
<PAGE>



                                   SCHEDULE 1

                                 SPECIFIED AREA

                                  Great Britain


                                      -90-

<PAGE>


                                   SCHEDULE 2

                                   REVOCATION

1.   The  Authority may at any time revoke the licence by giving no less than 30
     days'  notice  (24  hours'  notice,  in  the  case  of a  revocation  under
     sub-paragraph 1(f)) in writing to the licensee:

     (a)  if the licensee  agrees in writing with the Authority that the licence
          should be revoked;

     (b)  if any amount  payable  under  standard  condition 4 (Payments  by the
          licensee to the  Authority)  is unpaid 30 days after it has become due
          and  remains  unpaid for a period of 14 days after the  Authority  has
          given the licensee  notice that the payment is overdue - provided that
          no such notice shall be given earlier than the sixteenth day after the
          day on which the amount payable became due;

     (c)  if the licensee fails:

          (i)  to comply with a final order (within the meaning of section 25 of
               the Act) or with a provisional  order (within the meaning of that
               section)  which has been  confirmed  under that  section  and (in
               either case) such failure is not rectified to the satisfaction of
               the  Authority  within three months after the Authority has given
               notice in writing of such failure to the licensee - provided that
               no such  notice  shall  be  given  by the  Authority  before  the
               expiration  of the  period  within  which  an  application  under
               section 27 of the Act could be made  questioning  the validity of
               the final or provisional order or before the proceedings relating
               to any such application are finally determined; or

          (ii) to pay any financial  penalty  (within the meaning of section 27A
               of the Act) by the due date for such  payment and such payment is
               not made to the Authority within three months after the Authority
               has given  notice in  writing of such  failure to the  licensee -
               provided  that no such  notice  shall be  given by the  Authority
               before the  expiration of the period within which an  application
               under  section  27E of the  Act  could  be made  questioning  the
               validity  or  effect  of the  financial  penalty  or  before  the
               proceedings   relating  to  any  such   application  are  finally
               determined;

     (d)  if the licensee fails to comply with:

          (i)  an order made by the  Secretary of State under section 56, 73, 74
               or 89 of the Fair Trading Act 1973; or

          (ii) an order made by the court  under  section 34 of the  Competition
               Act 1998;

     (e)  if the licensee:

          (i)  has ceased to carry on the supply business;

                                      -91-
<PAGE>

     (ii) has not commenced  carrying on the supply  business  within 5 years of
          the date on which the licence comes into force;

(f)      if the licensee:

          (i)  is unable to pay its debts (within the meaning of section  123(1)
               or (2) of the  Insolvency  Act 1986,  but subject to paragraphs 2
               and 3 of this schedule) or has any voluntary arrangement proposed
               in relation to it under  section 1 of that Act or enters into any
               scheme  of   arrangement   (other   than  for  the   purpose   of
               reconstruction  or amalgamation upon terms and within such period
               as  may   previously   have  been  approved  in  writing  by  the
               Authority);

          (ii) has a receiver (which  expression shall include an administrative
               receiver  within the meaning of section 251 of the Insolvency Act
               1986)  of the  whole  or any  material  part  of  its  assets  or
               undertaking appointed;

          (iii)has an  administration  order under  section 8 of the  Insolvency
               Act 1986 made in relation to it;

          (iv) passes any  resolution  for  winding-up  other than a  resolution
               previously approved in writing by the Authority; or

          (v)  becomes  subject  to  an  order  for  winding-up  by a  court  of
               competent jurisdiction; or

(g)  if the licensee is convicted of having  committed an offence  under section
     59 of the Act in making its application for the licence.

5.   For  the  purposes  of  sub-paragraph  1(f)(i),  section  123(1)(a)  of the
     Insolvency  Act 1986 shall  have  effect as if for  "(pound)750"  there was
     substituted  "(pound)100,000"  or such higher  figure as the  Authority may
     from time to time determine by notice in writing to the licensee.

6.   The  licensee  shall  not be  deemed  to be unable to pay its debts for the
     purposes of  sub-paragraph  1(f)(i) if any such demand as is  mentioned  in
     section  123(1)(a) of the  Insolvency  Act 1986 is being  contested in good
     faith  by the  licensee  with  recourse  to all  appropriate  measures  and
     procedures or if any such demand is satisfied before the expiration of such
     period  as may be  stated  in  any  notice  given  by the  Authority  under
     paragraph 1.

                                      -92-
<PAGE>

                                   SCHEDULE 3

                              SUPPLY SERVICES AREA


The supply  services  area shall  comprise  that area which is  outlined  on the
attached map and shall additionally include those premises listed in List A (the
"Additional  Premises")  but shall not include those  premises  listed in List B
(the "Excluded Premises").

A:   ADDITIONAL PREMISES


    Address                                 Grid Ref:
    -------                                 ---------

    Mine                                    SE 6040 4045
    Stillingfleet Moor
    Stillingfleet
    Near York
    YO4 6HX

    Mine                                    SE 6475 4431
    North Selby
    New Road
    Escrick
    YO4 6EY


B:  EXCLUDED PREMISES

    Address                                 Grid Ref:
    -------                                 ---------

    None

                                      -93-