<PAGE>

                                                                    EXHIBIT 10.5
                                                                  Execution Copy

                              POWER SALES AGREEMENT

                            Dated as of June 30, 2000


                                     Between

                      Aquila Energy Marketing Corporation,

                              UtiliCorp United Inc.
                                     (Buyer)
                                       and

                             Elwood Energy III, LLC
                                   (Seller)
<PAGE>

                                Table of Contents
<TABLE>

<S>                                                                                                              <C>
1.    DEFINITIONS AND INTERPRETATION..............................................................................1
   1.1   Definitions..............................................................................................1
   1.2   Interpretation..........................................................................................13
   1.3   Legal Representation of Parties.........................................................................14
   1.4   Titles and Headings.....................................................................................15
   1.5   Order of Precedence.....................................................................................15
2.    TERM AND SURVIVAL..........................................................................................15
   2.1   Term....................................................................................................15
   2.2   Survival................................................................................................15
3.    PROJECT IMPLEMENTATION AND ACHIEVEMENT OF COMMERCIAL OPERATIONS............................................16
   3.1   Development and Construction............................................................................16
   3.2   Conditions to Commercial Operations.....................................................................16
   3.3   Late Commercial Operations Date.........................................................................17
   3.4   Commissioning and Test Power............................................................................19
4.    ELECTRIC ENERGY DELIVERY, DISPATCH AND FORCED OUTAGES......................................................20
   4.1   Delivery of Electric Energy.............................................................................20
   4.2   Point of Sale...........................................................................................20
   4.3   Dispatch Rights of Buyer................................................................................20
   4.4   Incremental Energy......................................................................................23
   4.5   Forced Outages..........................................................................................24
   4.6   Access to Facility......................................................................................26
   4.7   Delivery of Replacement Power and Substitute Power......................................................26
   4.8   Emergency Conditions....................................................................................27
5.    METERING; BILLING; PAYMENT.................................................................................27
   5.1   Metering Electricity....................................................................................28
   5.2   Adjustment for Inaccurate Meters........................................................................29
   5.3   Billing.................................................................................................30
   5.4   Payments................................................................................................31
   5.5   Offsets.................................................................................................31
   5.6   Billing Disputes........................................................................................31
6.    OPERATION AND MAINTENANCE OF THE FACILITY..................................................................31
   6.1   Standard of Operation...................................................................................31
   6.2   Permits and Licenses....................................................................................32
   6.3   Sole Remedy.............................................................................................32
   6.4   Scheduled Maintenance...................................................................................32
   6.5   Compressor Wash.........................................................................................33
   6.6   Operating Characteristics...............................................................................33
   6.7   Records.................................................................................................34
7.    COMPENSATION...............................................................................................34
   7.1   Capacity Charge.........................................................................................34
   7.2   Energy Charge...........................................................................................36
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                              <C>
   7.3   Adjustment to Actual Heat Rate for Failure to Meet Guaranteed Heat Rate.................................38
   7.4   Start Up Charge.........................................................................................39
   7.5   Imbalance Charges.......................................................................................39
   7.6   Rates Not Subject to Review.............................................................................40
8.    PERFORMANCE TESTS..........................................................................................40
   8.1   Test Procedures.........................................................................................40
   8.2   Buyer's Right to Retest.................................................................................40
   8.3   Seller Right to Retest..................................................................................41
   8.4   Conditions for Testing..................................................................................41
   8.5   Scheduling of Testing...................................................................................41
9.    ANCILLARY SERVICES.........................................................................................41
   9.1   Availability of Ancillary Services......................................................................41
   9.2   Operational Considerations..............................................................................41
   9.3   Future Enhancements.....................................................................................41
10.   LIMITATION OF LIABILITY AND EXCLUSIVE REMEDIES.............................................................41
   10.1     CONSEQUENTIAL DAMAGES................................................................................41
   10.2     SOLE REMEDIES FOR FAILURE TO DELIVER OR RELATED BREACHES.............................................42
   10.3     SOLE REMEDY FOR LATE COMMERCIAL OPERATIONS...........................................................42
   10.4     SOLE TERMINATION FOR DEFAULT REMEDIES................................................................42
   10.5     DIRECT DAMAGES FOR OTHER BREACHES....................................................................42
11.   DISAGREEMENTS..............................................................................................43
   11.1     Negotiations.........................................................................................43
   11.2     Arbitration..........................................................................................43
   11.3     Costs................................................................................................44
   11.4     Settlement Discussions...............................................................................44
   11.5     Preliminary Injunctive Relief........................................................................45
   11.6     Obligations to Pay Charges and Perform...............................................................45
12.   ASSIGNMENT; PROJECT FINANCING; AND TRANSFER OF UNITS.......................................................45
   12.1     Assignment...........................................................................................45
   12.2     Transfers and Change of Control......................................................................45
   12.3     Consent to Assignment to Lender......................................................................46
   12.4     Potential Changes in Ownership or Control of Aquila..................................................47
   12.5     Transfers Not in Accordance Herewith.................................................................47
13.   DEFAULT, TERMINATION AND REMEDIES; NOTICE OF DEFAULT.......................................................47
   13.1     Events of Default of Seller..........................................................................47
   13.2     Buyer Default........................................................................................48
   13.3     Remedies.............................................................................................49
   13.4     Special Termination for Chronic Poor Availability....................................................49
14.   REPRESENTATIONS AND WARRANTIES.............................................................................49
   14.1     Representations and Warranties of Seller.............................................................49
   14.2     Representations and Warranties of Buyer..............................................................50
15.   INDEMNIFICATION............................................................................................51
16.   NOTICES....................................................................................................51
17.   CONFIDENTIALITY............................................................................................52
18.   SECURITY...................................................................................................53
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                                                              <C>
   18.1     Seller Guarantees....................................................................................53
   18.2     Buyer Security.......................................................................................53
19.   FORCE MAJEURE..............................................................................................54
   19.1     Definition...........................................................................................54
   19.2     Obligations Under Force Majeure......................................................................55
   19.3     Force Majeure Not Forced Outage......................................................................55
   19.4     No Economic Force Majeure............................................................................55
   19.5     Continued Payment Obligation.........................................................................56
   19.6     Extended Force Majeure Event After Commercial Operations.............................................56
20.   INTERCONNECTION AND TRANSMISSION...........................................................................57
   20.1     Facilities...........................................................................................57
   20.2     Transmission.........................................................................................57
21.   TAXES......................................................................................................57
   21.1     Applicable Taxes.....................................................................................57
   21.2     Contested Taxes......................................................................................58
   21.3     Other Charges........................................................................................58
22.   MISCELLANEOUS PROVISIONS...................................................................................58
   22.1     Non-Waiver...........................................................................................58
   22.2     Relationship of Parties..............................................................................58
   22.3     Successors and Assigns...............................................................................58
   22.4     Governing Laws.......................................................................................58
   22.5     Counterparts.........................................................................................59
   22.6     Third Party Beneficiaries............................................................................59
   22.7     Financial Information................................................................................59
23.   APPOINTMENT OF AQUILA AS UCU'S AGENT.......................................................................59
   23.1     Appointment..........................................................................................59
   23.2     Presumption of Authority.............................................................................59
24.   ENTIRE AGREEMENT AND AMENDMENTS............................................................................59
</TABLE>

APPENDICES

Appendix A     Design Limits and Other Dispatch Restrictions
Appendix B     Testing
Appendix C     Communications
Appendix D     Reporting Forms
Appendix E     Equivalent Availability Calculations
Appendix F     Output and Heat Rate Adjustment Curve
Appendix G     Non-Billable Generation
Appendix H     Forms of Guarantees
Appendix I     Scheduled Maintenance Outages
Appendix J     Heat Rate Boundary Diagram and Site/Switchyard Map
Appendix K     Not Used
Appendix L     One Line Diagram
Appendix M     Milestone Schedule


                                      iii
<PAGE>

                              POWER SALES AGREEMENT

         THIS POWER SALES AGREEMENT (including Appendices, this "Agreement")
dated as of June 30, 2000, is entered into between Aquila Energy Marketing
Corporation ("Aquila"), and UtiliCorp United Inc. ("UCU") (Aquila and UCU
referred to herein collectively as "Buyer"), and Elwood Energy III, LLC, a
Delaware limited liability company ("Seller"); Buyer and Seller are sometimes
referred to herein individually as a "Party" and collectively as the "Parties");

                             W I T N E S S E T H:

         WHEREAS, Seller owns and operates an electric generating facility in
Elwood, Illinois and is engaged in the generation and sale of Electric Energy,
Capacity and associated Ancillary Services; and

         WHEREAS, Seller is building the Facility which will be located at the
Elwood Station; and

         WHEREAS, Seller anticipates the Commercial Operations Date of Units 7
and 8 of the Facility will occur on or prior to July 1, 2001; and

         WHEREAS, Buyer desires to receive and purchase, and Seller desires to
deliver and sell the Electric Energy, Capacity and associated Ancillary Services
from Units 7 and 8 of the Facility and Replacement Power, pursuant to this
Agreement; and

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, the Parties hereto agree as follows:

         1.    Definitions and Interpretation.
               ------------------------------

               1.1   Definitions. As used in this Agreement, the terms set forth
                     -----------
below in this Section 1 shall have the respective meanings so set forth.

         "ASME" means the American Society of Mechanical Engineers.

         "Actual Heat Rate" for any period shall be the Heat Rate which is
determined based upon actual performance of the Facility and the Elwood II Units
during such period and calculated by the quotient of the aggregate gas energy
consumption in Btus for Units 7 and 8 (not including gas consumed to generate
Test Energy, incremental gas consumed (at a Heat Rate above the Net Heat Rate)
to generate Incremental Energy to the extent used to offset what would otherwise
be a Forced Derating, or gas consumed during Failed Starts), and the Elwood II
Units as measured by the Station Fuel Meter divided by the Electric Energy
output (in kWh) produced by the same Units and the Elwood II Units during the
identical period as measured by the Revenue Meter.

         "Affected Party" has the meaning set forth in Section 19.1.
<PAGE>

         "Affiliate" means, when used with respect to any Person, any Person
controlling, controlled by or under common control with such Person. For the
purposes of this definition, the term "controlling" (and, with correlative
meanings, the terms "controlled by" and "under common control with") shall mean
the possession of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or agency or otherwise.

         "Aggregate Delay LD Cap" means $ 21,215,800, less any Delay Book Out
Charges paid by Seller.

         "Ancillary Services" has the meaning set forth in Section 9.

         "Availability Adjustment" has the meaning set forth in Section 7.1.3.

         "Available" means a state in which the Facility is capable of providing
full service, whether or not it is actually in operation or in service.

         "Average Summer Partial Peak Availability" means the Equivalent
Availability during Partial Peak Hours averaged over all months of a given
Summer Period, calculated as:

         1 - [(sum total of FOH + EFDH)/(sum total of Partial Peak period
hours)].

         "Average Summer Super Peak Availability" means the Equivalent
Availability during Super Peak Hours averaged over all months of a given Summer
Period, calculated as:

         1 - [(sum total of FOH + EFDH)/(sum total of Super Peak period hours)].

         "Bankruptcy" means any case, action or proceeding under any bankruptcy,
reorganization, debt arrangement, insolvency or receivership law or any
dissolution or liquidation proceeding commenced by or against a Person and, if
such case, action or proceeding is not commenced by such Person, such case or
proceeding shall be consented to or acquiesced in by such Person or shall result
in an order for relief or shall remain undismissed for 90 days.

         "Bankruptcy Event" means with respect to a Party, an assignment by such
Party for the benefit of creditors or the filing of a case in Bankruptcy or any
proceeding under any other insolvency law under which such Party is debtor in
bankruptcy.

         "Base Fuel Charge" means the Fuel Index plus either 10 cents/MMBTU or
15 cents/MMBTU, as applicable under Section 7.2.5.1 or Section 7.2.5.2.

         "Btu" means British thermal unit.

         "Business Day" means each weekday (Monday through Friday) excluding
NERC Holidays.

         "Buyer Event of Default" has the meaning specified in Section 13.2.

                                       2
<PAGE>

         "Cap Date" has the meaning specified in Section 3.3.5.

         "Capacity" means the capability measured in kW of Seller to produce
Electric Energy at the Facility or deliver Replacement Power to the Point of
Delivery or the Replacement Power Delivery Point, as applicable.

         "Capacity Bonus" has the meaning set forth in Section 7.1.4.

         "Capacity Charge" has the meaning set forth in Section 7.1.

         "Capacity Rate" has the meaning set forth in Section 7.1.2

         "Capacity Rate Reduction Amount" has the meaning set forth in Section
3.3.6.

         "Cap Date" has the meaning set forth in Section 3.3.5.

         "Change in Law" means, after the Effective Date, the enactment,
adoption, promulgation, modification or repeal or a material modification or
change in the administrative or judicial application by any Governmental Agency
of any applicable Requirement of Law.

         "ComEd" means Commonwealth Edison Company or its successors and
assigns.

         "ComEd/Elwood Switchyard" means that switchyard that provides
interconnection services to the Facility as identified Appendix J.

         "Commercial Operations" means that a Unit or the Facility shall have
achieved all of the conditions specified in Section 3.2.

         "Commercial Operations Date" means the day on which a Unit or the
Facility achieves Commercial Operations.

         "Commercial Operations Delay Period" is the period of time, if any,
between the Target COD and the Commercial Operations Date.

         "Commission" or "Commissioning" as applicable, means the test and start
up process leading up to Commercial Operations.

         "Compressor Wash" has the meaning set forth in Section 6.5.

         "Confidential Information" has the meaning specified in Section 17.

         "Contract Year" means (i) for the first Contract Year, the period
commencing on July 1, 2001 and ending on the December 31 occurring immediately
thereafter, and (ii) for all other Contract Years (other than the final Contract
Year), the calendar year, except that the final Contract Year shall be the
period from the first day of the calendar year (during which the Term will
expire) through the expiration of the Term.

                                       3
<PAGE>

         "Cover Period" means a period during which the Seller is permitted
pursuant to this Agreement to deliver or cause to be delivered Replacement Power
or Substitute Power to Buyer. Such periods shall include only the following: (i)
any time during Commercial Operations Delay Period; (ii) a Forced Outage or a
Forced Derating; (iii) a period that could reasonably be likely to result in a
Forced Outage or Forced Derating, as a result of which Seller determines, in
accordance with Prudent Industry Practices, that safety concerns, potential
equipment breakdowns or Unit vibration alarms require the Units to be made
unavailable for a period of time necessary to diagnose and remedy such
operational problems; or (iv) a Force Majeure Period.

         "Day Ahead Schedule" means Buyer's hour by hour Dispatch schedule for
the next calendar day or days, as applicable, as provided to Seller pursuant to
Section 4.3.2.1.

         "Default Rate" means (a) the one-month "LIBOR" as published from time
to time in the "Money Rates" section of The Wall Street Journal, plus (b) 4.5%
(450 basis points) per annum.

         "Degradation Curves" means the combustion turbine degradation curve(s)
as represented by General Electric Bulletin No. 519HA772, Rev. A, dated February
9, 1995.

         "Delay Book Out Charge" has the meaning specified in Section 3.3.2

         "Delay Election" has the meaning specified in Section 3.3.1

         "Delay LDs" has the meaning specified in Section 3.3.3.

         "Design Limits" means the operating specifications listed in Appendix
                                                                      --------
A.
-

         "Diagnostic Period" has the meaning specified in Section 4.5.3.

         "Differential Transmission Adjustment" means the difference between the
cost to Buyer to have Replacement Power delivered from the Replacement Power
Delivery Point to Buyer's ultimate customer and the cost Buyer would have
incurred to transmit such power from the Point of Delivery to such customer.
Such amount may be a negative or positive number and shall be determined in
accordance with Section 7.2.4.3.

         "Dispatch" means Buyer's rights to schedule the designated Electric
Energy output of the Facility pursuant to Section 4.3 or to schedule the
delivery of Replacement Power pursuant to Section 4.7.

         "Dispatch Notification" means that Buyer has notified Seller by
telephone conversation of Buyer's Dispatch order in accordance with Appendix C.

         "Dispatcher" means Buyer's authorized representative for Dispatch under
this Agreement.

         "DLD Escrow" has the meaning set forth in Section 3.3.5.


                                       4
<PAGE>

         "Dominion" means Dominion Energy, Inc., a Virginia corporation.

         "Downgrade Event" means (i) with respect to a Buyer or Seller Guarantor
whose long term unsecured indebtedness is rated by one or both of Standard &
Poor's or Moody's, a downgrade in such ratings such that both fall below
Investment Grade, and (ii) with respect to a Seller Guarantor that is not rated,
a value below $600,000,000 in owner's equity or a ratio of total liabilities to
total assets for Dominion that exceeds 72%.

         "EPC Contractor" means the party under contract to Seller to design,
engineer, procure, and construct the Facility.

         "Effective Date" means the date of this Agreement.

         "Electric Energy" means all electric energy output from the Facility
(net of Facility station service and auxiliaries for the Units and the Elwood II
Units) delivered to Buyer by Seller from and after the Commercial Operations
Date in accordance with the terms of this Agreement.

         "Elwood Station" means the multi-unit power generation station that
includes the Facility and other units, located in Elwood, Illinois owned by
Seller and its Affiliates.

         "Elwood II Units" means Units 5 and 6 at Elwood Station.

         "Emergency Condition" means a condition or situation which (i) in the
sole judgment of the Interconnected Utility presents an imminent physical threat
of danger to life, or significant threat to health or property (including in the
ComEd/Elwood Switchyard), (ii) in the sole judgment of the Interconnected
Utility could cause a significant disruption on or significant damage to the
Interconnected Utility's System (or any material portion thereof) or the
transmission system of a third party (or any material portion thereof), (iii) in
the reasonable judgment of Seller presents an imminent physical threat of danger
to life, or significant threat to health or property (including in the
ComEd/Elwood Switchyard) or (iv) in the reasonable judgment of Seller could
cause significant damage to the Facility (or any material portion thereof).

         "Energy Charge" has the meaning set forth in Section 7.2.

         "Energy Rate" means, individually or collectively, as the context
requires, the Replacement Power Energy Rate, the Incremental Energy Rate, the
Facility Electric Energy Rate, or the Test Energy Rate.

         "Equivalent Availability" has the meaning set forth in Appendix E.
                                                                ----------

         "Equivalent Forced Derated Hours" or "EFDH" has the meaning set forth
in Appendix E.

         "Escrow Agreement" has the meaning specified in Section 3.3.5.

         "Extension Term" has the meaning set forth in Section 2.1.

                                       5
<PAGE>

         "Facility" means the natural gas fueled electric generation plant
consisting of two GE Frame 7 FA combustion turbines designated as Units 7 and 8,
together with appurtenant facilities, and having a total net output estimated to
be approximately 303,560 kWs located at the Elwood Station.

         "Facility Electric Energy Rate" has the meaning set forth in Section
7.2.

         "Failed Start" means an attempted start up of a Unit whereby Seller
initiates the Start Up Sequence but does not achieve a Start Up.

         "FERC" means the Federal Energy Regulatory Commission.

         "Final Commercial Operations Date" means June 1, 2002, as such date may
be extended pursuant to Section 19, in which case such date shall be extended by
the period during which a Force Majeure Event impairs or precludes the
performance by a Party of its obligations hereunder, but in no event beyond June
1, 2003.

         "First Outage Notice" has the meaning set forth in Section 4.5.1.

         "Force Majeure Event" has the meaning set forth in Section 19.1.

         "Force Majeure Period" means any period during which a Force Majeure
Event affecting Seller occurs that precludes wholly or in part the capability of
the Facility to deliver Electric Energy and Capacity as required hereunder.

         "Forced Derating" has the meaning set forth in Appendix E.
                                                        ----------

         "Forced Outage" has the meaning set forth in Appendix E.
                                                      ----------

         "Forced Outage Hours" or "FOH" has the meaning set forth in Appendix E.
                                                                     ----------

         "Four Month Date" has the meaning set forth in Section 3.3.6.

         "Fuel Charge" means the Base Fuel Charge plus the applicable surcharge,
if any, imposed pursuant to Section 7.2.5.3.

         "Fuel Index" means the index as published in Gas Daily - "Midpoint,
                                                      ---------
Chicago-LDCs, Large e-us" - for the day of Energy delivery to Buyer. If this
index ceases to be published the Parties shall select a mutually agreeable
substitute index designed to track the market price of gas in the Chicago area
for large end users for next day service.

         "Fuel Metering Point "means the Station Fuel Meter identified in
Appendix J.

         "GDP-IPD" means the Gross Domestic Product - Implicit Price Deflator as
published in the National Income and Product Account by the U.S. Department of
Commerce.

                                       6
<PAGE>

         "Government Agency" means any federal, state, local, territorial or
municipal government, governmental department, commission, board, bureau,
agency, instrumentality, judicial or administrative body (or any agency,
instrumentality or political subdivision thereof) having jurisdiction over the
Buyer, Seller, the Facility, or the Interconnected Utility.

         "Governmental Approval" means any authorization, consent, approval,
license, ruling, permit, exemption, filing, variance, order, judgment, decree,
publication, notice to, declarations of or with or regulation by or with any
Government Agency relating to the acquisition, ownership, occupation,
construction, Commissioning , operation or maintenance of the Units and the
Facility or to the execution, delivery or performance of this Agreement.

         "Gross Margin" shall mean the reasonable documented actual sales
proceeds at Prevailing Market Prices for energy and/or capacity, less
Transaction Costs, less (i) the Facility Electric Energy Rate or (ii) in the
case of Incremental Energy, $100/MWh.

         "Guaranteed Availability" means the Guaranteed Non-Summer On Peak
Availability, the Guaranteed Summer Partial Peak Availability or the Guaranteed
Summer Super Peak Availability for the applicable period.

         "Guaranteed Heat Rate" means 10,787 Btu/kWh (HHV), new and clean at
Reference Conditions.

         "Guaranteed Non-Summer On Peak Availability" shall be equal to 97%.

         "Guaranteed Ramp Rate" has the meaning set forth in Appendix A.
                                                             ----------

         "Guaranteed Start-Up Time" has the meaning set forth in Appendix A.
                                                                 ----------

         "Guaranteed Summer Partial Peak Availability" shall be equal to 97%.

         "Guaranteed Summer Super Peak Availability" shall be equal to 97%.

         "Heat Rate" means the efficiency expressed as the amount of Btus of
natural gas consumed to generate a kwh of electric energy.

         "Heat Rate Credits" has the meaning set forth in Section 7.3.2.

         "ISO" or "Independent System Operator" means any Person, other than
ComEd, that becomes responsible as system operator for the Interconnected
Utility System.

         "Imbalance Charge" means a charge for oversupply or undersupply of
Electric Energy incurred pursuant to Schedule 4 of ComEd's Open Access
Transmission Tariff or the Interconnection Agreement.

         "Incremental Energy" has the meaning set forth in Section 4.4.

         "Incremental Energy Rate" has the meaning set forth in Section 7.2.

                                       7
<PAGE>

         "Individual Fuel Meter" means the meter located as indicated in
Appendix J, measuring gas consumption of an individual Unit or similar meters on
the Elwood II Units.

         "Initial Net Heat Rate" means the Net Heat Rate as tested in the final
performance testing for each Unit under the contract with the EPC Contractor
averaged over the Units and the Elwood II Units with evaporative coolers in
service as corrected to Reference Conditions in accordance with Appendix B.

         "Initial Term" has the meaning set forth in Section 2.1.

         "Interconnection Facilities" means the interconnection facilities that
will connect the Facility with the Interconnected Utility System, as more fully
described in the Interconnection Agreement.

         "Interconnected Utility" means ComEd or its successors and assigns;
such assigns may include an ISO or any other entity operating a control area
that includes the Interconnected Utility System.

         "Interconnected Utility System" means the electric transmission and
distribution system owned by ComEd and its Affiliates, or their successors and
assigns; such assigns may include assignment of operations to an ISO which shall
then mean that Interconnected Utility System operated by such ISO.

         "Interconnection Agreement" means the Interconnection Agreement to be
agreed to and executed between the Interconnected Utility and Seller with
respect to the Facility.

         "Interconnection Facilities" means the interconnection facilities that
will connect the Facility with the Interconnected Utility System, as more fully
described in the Interconnection Agreement.

         "Investment Grade" means a rating on the long term unsecured
indebtedness of an entity of at least Baa3 from Moody's or at least BBB- from
Standard & Poor's.

         "kW" means kiloWatt

         "KWh" means kiloWatthour.

         "Lenders" means with respect to the Seller (i) any person or entity
that, from time to time, has made loans to the Seller, its permitted successors
or permitted assigns for the financing or refinancing of the Facility or the
marketing of the Electric Energy, Capacity or Ancillary Services of the Facility
or which are secured by the Facility, (ii) any holder of indebtedness of the
Seller, (iii) any person or entity acting on behalf of such holder(s) to which
any holders' rights under financing documents have been transferred, any trustee
or agent on behalf of any such holders, or (iv) any Person who purchases the
Facility in connection with a sale-leaseback or other lease arrangement in which
the Seller is the lessee of the Facility pursuant to a net lease.


                                       8
<PAGE>

         "Liabilities" has the meaning set forth in Section 15.

         "MMBtu" means million Btus.

         "MW" means megaWatt.

         "MWh" means megaWatthour.

         "MAIN" means the Mid-America Interconnected Network, or its successors.

         "Monthly Adjustment Factor" means, with respect to the calculation of
the Availability Adjustment, 18% for the month of June, 32% for the month of
July and 32% for the month of August, except that for the first Contract Year
only, the Monthly Adjustment Factor shall be 0% for the month of June, and 41%
for each of the months of July and August.

         "Moody's" means Moody's Investors Service, or its successor.

         "NERC" means the North American Electric Reliability Council, or its
successor.

         "NERC Holidays" means New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day, and other holidays observed by
NERC.

         "Net Dependable Capacity" means the net aggregate generating capacity
measured in kWs of both Units of the Facility, based upon demonstrated output
(net of station service and auxiliaries for the Units and the Elwood II Units)
achieved during capacity testing of the Facility pursuant to Section 8.1 and
Appendix B, adjusted by the Degradation Curves and to Reference Conditions;
----------
provided, however, that prior to the Commercial Operations Date, the Net
Dependable Capacity of the Facility shall be deemed to be 303,560 kW, at
Reference Conditions. If one Unit achieves Commercial Operations prior to the
other Unit, then for the period when only one Unit is in Commercial Operations,
Net Dependable Capacity for all purposes other than calculation of Capacity
Charges shall mean the net dependable capacity of such Unit.

         "Net Heat Rate" means the Heat Rate established by periodic testing of
the Units and the Elwood II Units as corrected with the Degradation Curve to
Reference Conditions pursuant to Appendix B.

         "Nicor" means Northern Illinois Gas Company, or its successors.

         "Non-Billable Generation" has the meaning specified in Section 5.1 and
shall be calculated in accordance with Appendix O.

         "Non-Summer On Peak Hours" means during the Non-Summer Period, the hour
ending 0700 Central Time through the hour ending 2200 Central Time, Monday
through Friday, excluding NERC holidays.

         "Non-Summer Period" means September 1 through May 31.

                                       9
<PAGE>

         "OEM" means the original equipment supplier.

         "On Peak Hours" means (i) during the Summer Period, the hour ending
0700 Central Time through the hour ending 2200 Central Time, Monday through
Saturday, excluding NERC Holidays and (ii) during the Non-Summer Period, the
hour ending 0700 Central Time through the hour ending 2200 Central Time, Monday
through Friday, excluding NERC Holidays.

         "Outage Book Out Charge" has the meaning set forth in Section 4.5.1.

         "Outage Election" means Seller's election during any Cover Period
either to provide Replacement Power or cause to be provided Substitute Power in
accordance with Section 4.7.3.

         "Partial Peak Hours" means, during the Summer Period, the hour ending
0700 through the hour ending 1100 and the hour ending 2000 through the hour
ending 2200, Central Time, Monday through Saturday, excluding NERC holidays.

         "Pecorp" means Peoples Energy Corporation, an Illinois corporation.

         "Period Hours" or "PH" has the meaning set forth in Appendix E.

         "Permitted Assignee" means a Person having at least five (5) years
experience in the operations and maintenance of electrical generation facilities
similar to the Facility and having a level of creditworthiness equivalent to
Seller and Seller Guarantors, which Person shall be reasonably acceptable to
Buyer.

         "Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint stock company, trust,
unincorporated organization, entity, government or other political subdivision.

         "Per Unit Delay LD Cap" means $ 10,607,900, less any Delay Book Out
Charges paid by Seller in respect of the applicable Unit.

         "Point of Delivery" means, for Electric Energy delivered from a Unit,
the point of interconnection between the Facility and the Interconnected Utility
System in the ComEd/Elwood Switchyard, as identified in Appendix J.

         "Post COD Test Energy" means Test Energy generated on and after the
Commercial Operations Date.

         "Pre COD Test Energy" means Test Energy generated before the Commercial
Operations Date.

         "Prevailing Market Price" means the best price available to Buyer
(i.e., highest price when Buyer markets Test Energy and Incremental Energy and
lowest price when Buyer procures Substitute Power) actually obtained for energy
or capacity (taking into account the type, reliability, and duration and other
relevant attributes of such energy or capacity), which shall be obtained through
commercially reasonable efforts, as evidenced, upon request of Seller, by

                                      10
<PAGE>

documentation of such price, unless and until an index or other mechanism
mutually acceptable to the Parties is created and agreed upon by the Parties to
serve as the Prevailing Market Price.

     "Prudent Industry Practice" means any of the practices, methods, standards
and acts required or approved by any ISO or engaged in or approved by a
significant portion of the electric generation industry in the geographic region
covered by MAIN during the relevant time period, or any of the practices,
methods, standards and acts which, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good business practices, reliability, safety and expedition. "Prudent Industry
Practice" is not intended to be limited to the optimum practice, method or act
to the exclusion of all others, but rather to be acceptable practices, methods
or acts generally accepted in the geographic region covered by MAIN and which
generally conform to operation and maintenance standards recommended by the OEM,
the Design Limits, and Government Approvals.

     "Rating Category" means a letter category rating for long term unsecured
indebtedness of an entity (e.g. Aaa, Aa, A, Baa, Ba, and so on in the case of
Moody's and AAA, AA, A, BBB and so on in the case of Standard & Poor's),
disregarding in each case any numerals or other modifiers appended to such
rating.

     "Reference Conditions" means ambient atmospheric temperature of 95 degrees
Fahrenheit (dry-bulb), 60% relative humidity, adjusted for elevation above mean
sea level.

     "Reference Heat Rate" shall be determined for each hour using the turbine
OEM's heat rate performance curves adjusted to site elevation, ambient
conditions, load factor and Degradation Curves and as provided in Appendix F.

     "Replacement Power" (i) prior to the Commercial Operations Date, means
electric Capacity and electric energy provided by Seller from time to time to
Buyer from sources (including from other units at the Elwood Station) other than
the Facility and (ii) after the Commercial Operations Date, means electric
energy provided by Seller from time to time to Buyer from sources (including
other units at the Elwood Station) other than the Facility.

     "Replacement Power Delivery Point" means the point where Replacement Power
is delivered to Buyer, at a point or points that are acceptable to Buyer, such
acceptance not to be unreasonably withheld or delayed, unless the Replacement
Power Delivery Point shall be the same as the Point of Delivery, in which case
it shall be deemed to be acceptable to Buyer.

     "Replacement Power Energy Rate" has the meaning set forth in Section 7.2.2

     "Requested Load Delivery Time" means the designated time in Buyer's
Dispatch schedule for a Unit to be generating at a specified level.

     "Requirement of Law" means any applicable federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any federal,

                                      11
<PAGE>

state, local or other Governmental Agency (including those pertaining to
electrical, building, zoning, environmental and occupational safety and health
requirements).

     "Revenue Meter" means the meter which measures power flow into the main
step up transformer of each Unit and similar meters on the Elwood II Units at a
point after auxiliary loads are withdrawn from the bus.

     "Scheduled Maintenance Outage" means the time period during which a Unit or
any portion of the Facility is removed from service to perform work on specific
components based upon manufacturer's recommended schedules in accordance with
Section 6.4.

     "Scheduling Fees" means the charge of Buyer to Seller for scheduling Test
Energy and Incremental Energy, which shall equal $1.00 per MWh.

     "Second Outage Notice" has the meaning set forth in Section 4.5.3.

     "Seller Event of Default" has the meaning specified in Section 13.1.

     "Seller Guarantees" has the meaning specified in Section 18.1.

     "Seller Guarantor" means Dominion or Pecorp.

     "Site" means the real property on which the Units are located.

     "Size of Reduction" has the meaning set forth in Appendix E.

     "Standard & Poor's" means Standard & Poor's Rating Group a division of
McGraw-Hill, Inc. or its successor.

     "Start Up" means the initiation of the Start Up Sequence followed by the
applicable Unit's generating at least 60% of the Net Dependable Capacity.

     "Start Up Charge" has the meaning set forth in Section 7.4.

     "Start Up Sequence" means the normal sequence of events, beginning with the
cranking process, in order to achieve Start Up.

     "Station Fuel Meter" means the Nicor fuel meter common to Units 7 and 8 and
to the Elwood II Units.

     "Substitute Power" (i) prior to the Commercial Operations Date means
electric energy and capacity (ii) after the Commercial Operations Date, electric
energy, in each case obtained by Buyer at the direction of Seller in accordance
with Section 4.7.3.

     "Substitute Power Cost Credit" is a credit adjustment to Buyer for its
reasonable costs to acquire Substitute Power at the direction of Seller and as
calculated in accordance with Section 7.2.4.3.

                                      12
<PAGE>

     "Summer Average Availability" means the Equivalent Availability for all
Summer On Peak Hours in each month during the Summer Period of any given
Contract Year, averaged over such three months.

     "Summer Period" means the period from June 1 through August 31 of each
Contract Year.

     "Summer Off Peak Hours" means all hours in the Summer Period other than On
Peak Hours.

     "Summer  On Peak Hours" means all Super Peak Hours and Partial Peak Hours.

     "Super Peak Hours" means, during the Summer Period, the hour ending at 1200
Central Time and through the hour ending 1900 Central Time, Monday through
Saturday, excluding NERC holidays.

     "Target COD" means July 1, 2001, as such date may be extended day-for-day
due to Force Majeure Events as and to the extent permitted by Section 19 or for
days covered by a Delay Book Out Charge pursuant to Section 3.3.3.

     "Term" has the meaning specified in Section 2.1.

     "Test Energy" means electricity generated during a test at a time when the
tested Unit would not be Dispatched by Buyer to generate but for the running of
the test.

     "Third Party Damages" has the meaning set forth in Section 4.7.4.

     "Threshold Heat Rate" is 10,759 Btu/KWh, new and clean at Reference
Conditions.

     "Transaction Costs" means reasonable documented transaction costs
associated with the sale and marketing of Electric Energy or Test Energy, as
applicable, including and limited to transmission costs (or fees or charges
imposed by a third party in lieu of or in addition to such transmission costs in
accordance with common industry practice), transmission line losses, Scheduling
Fees and ancillary service charges.

     "Unit" means either of the GE frame 7FA gas-fired turbine generator units
of the Facility subject to Dispatch by Buyer under this Agreement, i.e., numbers
seven (7) and eight (8).

     "Variable O&M Rate" means $1.00/MWh (as of June 1, 1999), and as adjusted
on the anniversary of the first and each subsequent Contract Year by the annual
change in the GDP-IPD.

          1.2  Interpretation. In this Agreement, unless a clear contrary
               --------------
intention appears:

               1.2.1   the singular number includes the plural number and vice
versa;

                                      13
<PAGE>

               1.2.2   reference to any Person includes such Person's successors
     and assigns but, in the case of a Party, only if such successors and
     assigns are permitted by this Agreement, and reference to a Person in a
     particular capacity excludes such Person in any other capacity or
     individually;

               1.2.3   reference to any gender includes each other gender;

               1.2.4   reference to any agreement (including this Agreement),
     document, instrument or tariff means such agreement, document, instrument
     or tariff as amended or modified and in effect from time to time in
     accordance with the terms thereof and, if applicable, the terms hereof;

               1.2.5   reference to any Requirement of Law means such
     Requirement of Law as amended, modified, codified or reenacted, in whole or
     in part, and in effect from time to time, including, if applicable, rules
     and regulations promulgated thereunder;

               1.2.6   reference to any Section or Appendix means such Section
     of this Agreement or such Appendix to this Agreement, as the case may be,
     and references in any Section or definition to any clause means such clause
     of such Section or definition;

               1.2.7   "hereunder", "hereof", "hereto" and words of similar
     import shall be deemed references to this Agreement as a whole and not to
     any particular Section or other provision hereof or thereof;

               1.2.8   "including" (and with correlative meaning "include")
     means including without limiting the generality of any description
     preceding such term;

               1.2.9   relative to the determination of any period of time,
     "from" means "from and including", "to" means "to but excluding" and
     "through" means "through and including"; and

               1.2.10  reference to time shall always refer to prevailing
     Central Time, i.e., standard time or daylight time as applicable in Elwood,
     Illinois.

               1.2.11  wherever this Agreement speaks in terms of both Units (or
     the Facility), and the context of a provision requires application to only
     one Unit, then such provision and operative terms or amounts relating
     thereto shall be appropriately construed or prorated, as appropriate.

          1.3  Legal Representation of Parties. This Agreement was negotiated by
               -------------------------------
     the Parties with the benefit of legal representation and any rule of
     construction or interpretation otherwise requiring this Agreement to be
     construed or interpreted against any Party shall not apply to any
     construction or interpretation hereof or thereof.

                                      14
<PAGE>

          1.4  Titles and Headings. Section and Appendix titles and headings in
               -------------------
     this Agreement are inserted for convenience of reference only and are not
     intended to be a part of, or to affect the meaning or interpretation of,
     this Agreement.

          1.5  Order of Precedence. In the event of a conflict between any of
               -------------------
the terms of this Agreement, the conflict shall be resolved by giving priority
to the terms in the following order of precedence: (1) Sections 1-23, (2)
Appendix E, (3) Appendix A, and (4) the remaining Appendices in the order in
which they appear in this Agreement.

     2.   Term and Survival
          -----------------

          2.1  Term. This Agreement shall have a term (the "Term") commencing on
               ----
     the Effective Date and ending on August 31, 2017 (the "Initial Term")
     unless otherwise extended or terminated in accordance with the provisions
     of this Agreement. The Buyer shall have the unilateral right to extend the
     Initial Term for a five (5) year period (or such other period as the
     Parties mutually agree) (the "Extension Term") provided the Buyer notifies
     Seller in writing by September 1, 2015 of its desire to so extend.

          2.2  Survival. The provisions of Section 1 (Definitions and
               --------
     Interpretation), Section 6.7 (Records), Section 10 (Limitation of Liability
     and Exclusivity of Remedies), Section 11 (Disagreements), Section 13
     (Default, Termination and Remedies), Section 15 (Indemnification), Section
     17 (Confidentiality), Section 18 (Security), Section 22 (Miscellaneous),
     and Section 24 (Entire Agreement and Amendments) shall survive the
     termination of this Agreement.

                                      15
<PAGE>

     3.   Project Implementation and Achievement of Commercial Operations.
          ---------------------------------------------------------------

          3.1  Development and Construction Development. Seller shall (i) use
               ----------------------------------------
     all commercially reasonable efforts to develop, engineer, procure,
     construct, and Commission the Facility, (ii) achieve the Commercial
     Operations Date on or prior to the Target COD, and (iii) apply for and
     obtain all Governmental Approvals and all renewals thereof as are required
     for Seller to perform its obligations under this Agreement, including air
     emissions permits.

               3.1.2   Construction. Seller shall complete, or cause the
                       ------------
     completion of, the design, construction, installation, and Commissioning of
     the Facility in a manner consistent with Prudent Industry Practices.

               3.1.3   Status Report. Starting thirty (30) days after the
                       -------------
     Effective Date, Seller shall report to Buyer, each month, on the
     construction status, fuel supply and transportation status, and shall
     provide a report on Seller's progress toward achieving the milestone
     schedule included in Appendix M. Such report shall, at a minimum, provide a
     schedule showing Facility permit status, items completed and to be
     completed, the expected Commercial Operations Date, and the estimated
     percentage of completion for the Facility.

          3.2  Conditions to Commercial Operations. The occurrence of Commercial
               -----------------------------------
Operations of a single Unit or the Facility is contingent upon Seller providing
evidence reasonably acceptable to Buyer of the satisfaction or occurrence of all
of the following conditions:

               3.2.1   Communications. The Facility (or single Unit as
                       --------------
     applicable) has demonstrated the reliability of any communications systems
     and equipment for communications with the Interconnected Utility's system
     control center required to be provided by Seller pursuant to this Agreement
     prior to the Commercial Operations Date.

               3.2.2   Tests. Seller shall perform a heat rate and capacity test
                       -----
     in accordance with Appendix B of a Unit or Units. In conjunction with such
     test each tested Unit shall operate continuously for a minimum of four (4)
     consecutive hours synchronized to the Interconnected Utility System at a
     level equal to at least 288 MW if for both Units and 144 MW if for one
     Unit, and each Unit has successfully completed five (5) consecutive Start
     Ups and shutdowns.

               3.2.3.  Security. Seller security arrangements meeting the
                       --------
     requirements of Section 18.1 shall have been established.

               3.2.4   Fuel Supply and Transportation. Seller shall have entered
                       ------------------------------
     into fuel supply and transportation arrangements of a sufficient level of
     firmness so as to permit Buyer to Dispatch the Unit or Units in accordance
     with the terms of this Agreement.

                                      16
<PAGE>

     Seller shall be deemed to satisfy this condition if Seller has in place an
     agreement for balancing services similar in all material respects to the
     NICOR Transportation and Balancing Agreement for units 1-4 at the Elwood
     Station. Construction of pipeline facilities and improvements necessary for
     operation of the Facility has been completed.

               3.2.5   Seller Certification. Seller has delivered a certificate
                       --------------------
     stating that (1) the Unit has been completed in all material respects
     (excepting, e.g., punch list items that do not materially adversely affect
     the ability of the Unit or Units to operate in accordance with Prudent
     Industry Practice), (2) the Unit or Units has been designed and constructed
     and all conditions have been satisfied so as to permit Buyer to Dispatch
     the Unit or Units pursuant to the terms of the Agreement, and (3) that
     adequate levels of insurance coverage of the types and with the limits for
     electrical generation facilities similar to the Facility have been
     purchased by Seller that are usual and customary in accordance with Prudent
     Industry Practice.

               3.2.6   Opinion of Counsel. An opinion of Seller's counsel has
                       ------------------
     been rendered that all permits, licenses, approvals, and other Governmental
     Approvals required for the construction and operation of the Facility in
     accordance with this Agreement have been obtained.

               3.2.7   Interconnection. The electrical interconnection of the
                       ---------------
     Facility to the Interconnected Utility System has been completed in
     accordance with Prudent Industry Practice sufficient to permit Buyer to
     Dispatch the Unit or Units in accordance with this Agreement.

          3.3  Late Commercial Operations Date. Seller anticipates that the
               -------------------------------
Commercial Operations Date for each Unit will occur no later than the Target
COD.

               3.3.1   COD Delays. If the Commercial Operations Date for a Unit
                       ----------
     does not occur prior to 1000 Central Time on the Target COD and if Seller
     fails to deliver or cause to be delivered Replacement Power or Substitute
     Power in accordance with Section 4.7.3 or to agree to Buyer's Delay Book
     Out Charge as described in Section 3.3.2, Seller shall be liable to Buyer
     for Delay LDs per Unit per day for the period of the delay.

               3.3.2   Delay Book Out Charge. Seller may request that Buyer
                       ---------------------
     provide Seller a Delay Book Out Charge, which request shall be made by
     Seller no later than noon sixteen (16) Business Days prior to the Target
     COD, and by noon every seventh (7th) day thereafter, if necessary. Within
     twenty four (24) hours of Seller's request, Buyer shall provide Seller a
     quote in dollars at a mutually agreeable time for the first seven (7) days
     of the Commercial Operations Delay Period (a "Delay Book Out Charge").
     Immediately upon Seller's receipt of the quoted Delay Book Out Charge,
     Seller shall notify Buyer as to whether Seller elects to pay Delay LDs,
     provide Replacement Power, request Buyer to procure Substitute Power or
     accept the Delay Book Out Charge (the "Delay Election"). Upon acceptance
     and payment of the Delay Book Out Charge by Seller, Seller shall be
     released from any liability for Delay LDs for the first seven (7) days of
     the Commercial Operations Delay Period and the Target COD shall be delayed

                                      17
<PAGE>

     by seven (7) days for all purposes other than initiation of Capacity
     Charges. Seller shall pay Buyer the Delay Book Out Charge within ten (10)
     days thereafter and may offset such amount against the Capacity Charges due
     for the period to which the Delay Book Out Charge applies, with such offset
     discharging Buyer's obligation to pay Capacity Charges to the extent so
     offset. Subsequent to the Delay Election, if Seller anticipates that the
     Commercial Operations Date will not occur by the Target COD, Seller may
     repeat the process for the Delay Election set forth above. If Seller
     rejects the Delay Book Out Charge, then Seller shall be liable for Delay
     LDs until the earlier to occur of (a) the time at which Seller begins to
     deliver or causes to be delivered Replacement Power, (b) the Commercial
     Operations Date, or (c) the first day of the seven (7) day period to which
     a subsequent Delay Book Out Charge applies. Any amounts paid by Seller for
     Delay Book Out Charges shall be deducted from both the Aggregate LD Cap and
     pro rata from the Per Unit LD Cap for the applicable Unit(s). To the extent
     that a Unit is capable of delivering and delivers any Electric Energy
     during a period covered by a Delay Book Out Charge, such Electric Energy
     shall be purchased by Buyer at a price equal to the Facility Electric
     Energy Rate plus 80% of the Gross Margin, if the Prevailing Market Price
     less Transaction Costs exceeds the Facility Electric Energy Rate.

               3.3.3  Amounts of Delay LDs. Liquidated damages ("Delay LDs")
                      --------------------
     shall accrue at the rate of $100,000 per Unit per day during June, $225,000
     per Unit per day during July, $200,000 per Unit per day during August; and
     for all other months, the prorated daily portion of the applicable month's
     Capacity Charges per Unit per day, provided however, in no event shall
     Delay LDs (x) be assessed for the day on which the Commercial Operations
     Date occurs if it occurs prior to 10:00 a.m. on such day or (y) exceed Per
     Unit LD Cap, or the Aggregate LD Cap as applicable. Delay LDs shall be
     offset against Capacity Charges as they come due.

               3.3.4  Interest on Deferred Amounts and Offsets. To the extent
                      ----------------------------------------
     that accrued Delay LDs exceed the Capacity Charges that would have been
     paid currently if the Facility or a Unit had achieved Commercial Operations
     on the Target COD, such amounts shall accrue interest at the Default Rate
     until recovered by Buyer through offsets against Capacity Charges as they
     come due.

               3.3.5  DLD Escrow. Notwithstanding the foregoing, if the
                      ----------
     Commercial Operations Date for one or both Units has not occurred on or
     before the date (the "Cap Date") that Seller has incurred an aggregate
     amount of Delay LDs equal to the Per Unit Delay LD Cap (in the case of one
     Unit) or the Aggregate Delay LD Cap (in the case of both Units), then
     Seller shall, within seven (7) Business Days after the Cap Date, establish
     and fund (in cash) an escrow with an A-rated bank (the "DLD Escrow") in an
     initial amount equal to the gross amount of accrued Delay LDs, plus
     interest accrued at the Default Rate less offsets of Capacity Charges
     accrued as of the date the DLD Escrow is funded. If and to the extent
     Seller fails to establish and/or fully fund the DLD Escrow, the Buyer may
     draw on the Seller Guarantees for the amount of Delay LDs (plus interest
     accrued thereon at the Default Rate) not paid or placed in escrow as
     required by this Section 3.3.5. Upon the Commercial Operations Date, Seller
     shall be entitled to

                                      18
<PAGE>

     withdraw from the DLD Escrow an amount equal to the Capacity Charges that
     accrued from and after the date the DLD Escrow was funded up to and
     including the Commercial Operations Date. Seller may make subsequent
     withdrawals each month in an amount equal to such month's Capacity Charges
     that would be due from Buyer but for offsets pursuant to Section 3.3 until
     the principal balance in the DLD Escrow is zero. Upon the closing of the
     account by Seller, Seller shall pay to Buyer an amount equal to the
     interest that would have been earned on such account at the Default Rate of
     interest and any funds remaining in the account shall exclusively belong to
     Seller. At no time shall Buyer be entitled to receive the funds in the
     account.

               3.3.6  Extended COD Delays. If the Commercial Operations Date for
                      -------------------
     a Unit has not occurred on or before the date that is 120 days after the
     Target COD (as extended day-for-day for a Force Majeure Event) (the "Four
     Month Date"), then the applicable Capacity Rate shall be reduced (the
     "Capacity Rate Reduction") by an amount equal to $.01 KW-month multiplied
     by a fraction, the numerator of which is the number of days from the Four
     Month Date to the Commercial Operations Date and the denominator of which
     is thirty (30) days. The Capacity Rate Reduction shall take effect
     beginning with the later to occur of (i) June 1 of the second Contract Year
     and (ii) the Commercial Operations Date, and continue for the remainder of
     the Term.

               3.3.7  Termination for Extended Delay. Buyer may terminate this
                      ------------------------------
     Agreement with regard to a Unit if the Commercial Operations Date for such
     Unit is not achieved by June 1, 2002, except to the extent such delay is
     caused by a Force Majeure Event, in which case such termination date shall
     be extended by the Force Majeure Period, but in no event beyond June 1,
     2003 (provided, however, that Buyer may terminate this Agreement following
           --------  -------
     a Force Majeure Period lasting twelve months or more, unless Seller closes
     on financing for the Facility by May 31, 2002). If this Agreement is
     terminated with regard to a Unit(s) pursuant to this Section 3.3.7 for
     failure to achieve the Commercial Operations Date by June 1, 2002, (i)
     Buyer's sole remedy for damages and Seller's sole liability for damages
     shall be for Buyer to offset Delay LDs against Capacity Charges accrued and
     not paid to Seller prior to termination and to receive the Default Rate of
     interest on Delay LDs accrued in excess of Capacity Charges due at any
     given time until such Delay LDs are received by Buyer through offsets
     against Capacity Charges and (ii) Seller shall have no obligation to pay
     Delay LDs accrued during any Commercial Operations Delay Period except as
     an offset against Capacity Charges due from Buyer. If this Agreement is
     terminated pursuant to this Section 3.3.7, neither Party shall have any
     liability to the other Party whatsoever (including liability for previously
     accrued Delay LDs or Capacity Charges, but excluding liability in respect
     of Delay Book Out Charges and interest accrued on the DLD Escrow at the
     Default Rate).

          3.4  Commissioning and Test Power. Seller anticipates that prior to
               ----------------------------
its Commercial Operations Date each Unit will require between 50-100 hours for
Commissioning purposes during which Seller will generate Pre COD Test Energy.
Buyer shall purchase all Pre COD Test Energy at Pre COD Test Energy Rates as
provided in Section 7.2.4. Seller will provide a test schedule prior to each
test, and Buyer will advise Seller its estimate of Prevailing

                                      19
<PAGE>

Market Prices for Pre COD Test Energy prior to the scheduled start of the
testing. Seller shall have no right to sell the Pre COD Test Energy to third
parties.

     4.   Electric Energy Delivery, Dispatch and Forced Outages, Delivery of
          ------------------------------------------------------------------
     Electric Energy. Subject to the terms and conditions of this Agreement,
     ---------------
Seller shall sell, make available and deliver at the Point of Delivery and Buyer
shall receive and purchase from Seller at the Point of Delivery, Electric Energy
as Dispatched by Buyer. Consistent with the terms of this Agreement, Electric
Energy shall be generated and delivered from the Facility and may include
Incremental Energy.

               4.1.1  Operation in Accordance with Buyer Dispatch. Buyer shall
                      -------------------------------------------
     not be obligated to receive or purchase any Electric Energy from Seller
     except (a) such Electric Energy as is Dispatched by Buyer and (b) Test
     Energy. Seller shall not operate either Unit except in response to a
     Dispatch order from Buyer other than (i) for testing purposes prior to the
     Commercial Operations Date pursuant to Section 3.4, (ii) for testing
     purposes after the Commercial Operations Date scheduled in accordance with
     Section 8.1, or in connection with a Scheduled Maintenance Outage, Forced
     Derating or Forced Outage or to analyze performance of a Unit or its
     components; (iii) for Seller's rights to sell to third parties pursuant to
     Section 13.3.2 or (iv) pursuant to instructions from the Interconnected
     Utility in accordance with Section 6.6.2 and the Interconnection Agreement.
     Notwithstanding the above, when a Unit is operating, Seller or its
     Affiliates may consume electric energy from that Unit for Start-Up of the
     other Unit of the Facility or other units at the Elwood Station, subject to
     a credit for the value of such electric energy as set forth in Section 5.1.
     Seller shall not sell Electric Energy or Capacity to any Person other than
     (a) Buyer, (b) Interconnected Utility pursuant to the requirements of the
     Interconnection Agreement, or (c) third parties as permitted under Section
     13.3.2.

               4.1.2  Quality of Electric Energy. All Electric Energy shall be
                      --------------------------
     measured by the Revenue Meter and shall meet the specifications of the
     Interconnected Utility. In the event that electricity delivered by Seller
     hereunder fails to conform to the specifications of the Interconnected
     Utility, Seller shall (as soon as reasonably practicable after becoming
     aware thereof) notify Buyer of the same and of its best good faith estimate
     of the duration and extent of such failure to conform, and Seller shall
     attempt to cure such failure as soon as reasonably practicable thereafter.
     If Seller is unable to deliver electricity to Buyer in accordance with the
     terms of this Agreement due to such failure to conform to such
     specifications, such inability to deliver shall be considered a Forced
     Outage.

          4.2  Point of Sale. The point where sale of Electric Energy and
               -------------
Replacement Power will take place and title to and risk of loss with respect to,
such Electric Energy and Replacement Power shall transfer is at the Point of
Delivery for Electric Energy and the Replacement Power Delivery Point for
Replacement Power. Buyer shall be responsible for any transmission beyond the
Point of Delivery or the Replacement Power Delivery Point, as applicable.

          4.3  Dispatch Rights of Buyer.
               ------------------------

                                      20
<PAGE>

               4.3.1   Buyer Dispatch. Beginning on the earlier of the
                       --------------
     Commercial Operations Date and the Target COD and provided that Buyer
     complies with the mandatory notification obligations in Section 4.3.2,
     Buyer may Dispatch the delivery of Electric Energy and Replacement Power
     (if applicable) in accordance with the provisions set forth in this
     Agreement up to the total Net Dependable Capacity of the Units and may
     Dispatch Incremental Energy as provided in Section 4.4; provided, however,
                                                             --------  -------
     Buyer agrees that Seller may, at its sole discretion but also subject to
     Prudent Industry Practices, operate any combination of Units 7 and 8
     (including overfiring of a Unit to compensate for what would otherwise be a
     Forced Derating on another Unit), or, during a Cover Period may deliver
     Replacement Power through other sources (including the Elwood II Units as
     permitted by the agreement between the owner of the Elwood II Units and the
     Buyer thereunder) or cause to be delivered Substitute Power to meet Buyer's
     Dispatch under this Agreement. Notwithstanding the above, except to the
     extent Seller has notified Buyer that Seller has arranged for delivery of
     Replacement Power consistent with the terms of this Agreement, Seller shall
     be obligated to comply with any Dispatch order issued by Buyer except: (1)
     during any Scheduled Maintenance Outage or Compressor Wash or (2) to the
     extent that a Force Majeure Event causes a reduction in the level of the
     Facility's Available Capacity. Failures by Seller to comply with Buyer's
     Dispatch orders shall be subject to the provisions of Appendix E for
     calculation of the Equivalent Availability.

               4.3.2   Dispatch Notifications
                       ----------------------

               4.3.2.1 Day Ahead Schedule Notification. Buyer shall provide to
                       -------------------------------
          Seller, by no later than 0900 Central Time each day, Buyer's schedule
          for Dispatch for each hour of the following day (such schedule, the
          "Day Ahead Schedule"). Buyer may subsequently alter its Dispatch
          schedule set forth in the Day Ahead Schedule in accordance with
          Section 4.3.2.3 during Summer Period On-Peak Hours and Section 4.3.2.4
          for all other hours.

               4.3.2.2 Facility Availability Notification. Seller shall, by noon
                       ----------------------------------
          Central Time each day, inform Buyer of the estimated Capacity (taking
          into account the effect of any expected deratings) that will be
          available to Buyer for the following three (3) days. These estimates
          shall not be binding upon Seller and Seller may subsequently alter its
          estimates. Seller shall advise Buyer of any changes in its estimated
          Capacity as soon as practicable.

               4.3.2.3 Mandatory Notification Obligation-Summer On Peak Hours.
                       ------------------------------------------------------
          Buyer must provide Seller its Dispatch request and such request must
          be confirmed by Seller's operator, for any Summer On Peak Hours a
          minimum of one hour and twenty five (25) minutes prior to the
          Requested Load Delivery Time of one or both Units, and if Buyer is
          also dispatching one or both of the Elwood II Units, one hour and
          thirty five (35) minutes prior to the Requested Load Delivery Time for
          all Units Dispatched (including Elwood II Units). Units will be
          started in accordance with the procedure described in Appendix A.
          Units will ramp to

                                      21
<PAGE>

          the requested Dispatch level in accordance with the provisions of
          Appendix A. Seller shall use reasonable commercial efforts to change
          Dispatch levels at the request of Buyer while a Unit is running. Buyer
          must provide one hour's notice, confirmed by Seller's operator, to
          stop Dispatch (reduce Electric Energy to zero) or to change a Dispatch
          order during the Summer On Peak Hours. Seller shall not be obligated
          to comply with any Dispatch order issued for generation during Summer
          On Peak Hours unless issued with the minimum notice required by this
          Section, but shall use commercially reasonable efforts to do so.
          Notwithstanding the above, however, any failure to comply with a non-
          complying Dispatch order between the time of issuance of Buyer's
          Dispatch order and the expiration of the applicable mandatory
          notification period for such Dispatch order shall not be taken into
          account for calculation of the Availability Adjustment. For example,
          if Buyer's Dispatch order for one Unit was given 75 minutes prior to
          the Requested Load Delivery Time of 1200 and Seller delivers Electric
          Energy at the requested load by 1210 such delay beyond the Requested
          Load Delivery Time shall not be taken into account in calculation of
          an Availability Adjustment; however, deliveries after 1210 shall be
          taken into account for calculation of the Availability Adjustment.

               4.3.2.4 Mandatory Notification Obligation-Non-Summer Period and
                       -------------------------------------------------------
          Summer Off Peak Hours. Buyer must provide Seller its Day Ahead
          ---------------------
          Schedule request for Dispatch for any Non-Summer Period and for all
          Summer Off Peak Hours in accordance with Section 4.3.2.1 above;
          provided, however, that (a) during the month of September, such Day
          --------  -------
          Ahead Schedule shall not become binding until five (5) hours prior to
          the scheduled time for a Dispatched Start Up. If Buyer requests to
          change the Day Ahead Schedule after 0900 on the day covered by such
          schedule (i.e. the day after the day of its issuance), and if the Unit
          is on turning gear, Buyer may provide as little as three hours notice
          prior to its changed Requested Load Delivery Time, with details of the
          changes to the schedule. Within thirty minutes of Seller's receipt of
          such notice, Seller shall quote the fee pursuant to Section 7.2.5 in
          which Seller shall provide Buyer with an expected time at which Seller
          can achieve the .generation level requested by Buyer in its Dispatch
          order. For the Electric Energy to be delivered between the time of
          issuance of Buyer's Dispatch order and the expiration of the
          applicable mandatory notification period for such Dispatch order,
          Seller shall not be obligated to comply with any Dispatch order issued
          for generation during the Non-Summer Period or during Summer Off Peak
          Hours unless either (a) such notice was issued with the minimum notice
          required by this Section, or (b) Buyer accepts the surcharge above the
          Base Fuel Charge or a fixed change fee as applicable quoted by Seller
          pursuant to Section 7.2.5. Immediately upon receipt of Seller's quoted
          surcharge, Buyer shall either accept such surcharge or the Day Ahead
          Schedule will remain unchanged. If Buyer accepts such surcharge,
          Seller shall comply with the revised Dispatch schedule.
          Notwithstanding the above, however, Buyer must provide one hour's
          notice to stop Dispatch (reduce Electric Energy to zero).

                                      22
<PAGE>

               4.3.2.5 Cancellation of Start Up. If Buyer requests Seller to
                       ------------------------
          cancel a scheduled Start Up with less than the applicable mandatory
          notification period (required pursuant to Section 4.3.2 remaining
          prior to the scheduled Start Up, Seller shall use reasonable
          commercial efforts to stop or modify its Start Up of the applicable
          Units and Buyer shall be obligated to pay all of Seller 's reasonable
          documented out of pocket costs incurred, if any (other than fuel
          related costs covered in Section 7.2.5) as a result of such
          cancellation. In addition, if Seller has begun the Start Up Sequence
          during Summer On Peak Hours or has put the Unit on turning gear during
          any other hours prior to receipt of Buyer's cancellation request,
          Buyer shall pay to Seller the Start Up Charge for such Unit.

               4.3.2.6 Communications. The Parties have developed mutually
                       --------------
          acceptable procedures for communications between Seller's control room
          and Buyer's Dispatcher included herewith as Appendix C-Dispatch
          Communications Guidelines to this Agreement and the Parties shall
          develop mutually acceptable associated reporting forms for such
          communications to be appended to this Agreement as Appendix D-
          Reporting Forms.

               4.3.2.7 Remote Monitoring. Seller shall furnish data
                       -----------------
          communication ports on its control system(s), the Revenue Meters, and
          the Station Fuel Meter such that Buyer may remotely monitor (read
          only) selected meter and operating data for the Facility and the
          Elwood II Units. Buyer shall be responsible for all data communication
          equipment from the data communications port interface to the point of
          remote monitoring, including the cost of equipment purchase,
          installation, operations, maintenance and upkeep. Seller shall furnish
          or shall cause to be furnished in a timely fashion the necessary
          interface protocol requirements and specifications of its control
          system and metering equipment such that Buyer may specify its
          compatible equipment. Seller shall have the right and opportunity to
          review and approve the specification of the first interface and
          protective devices of the Buyer to assure that such devices are
          compatible with and shall not interfere with Seller's control
          system(s) and metering equipment, and such approval shall not be
          unreasonably withheld. The data to be sampled, transmitted, and
          monitored shall include everything that is essential to Buyer's
          Dispatch. Such data shall include, but may not be necessarily limited
          to, the meter outputs and process control system data points set forth
          in Appendix K, which Seller shall use commercially reasonable efforts
          to make available to Buyer at Seller's data communications ports on
          its control system(s), the Revenue Meters, and the Station Fuel Meter.

          4.4  Incremental Energy. The Facility may through limited over-firing
               ------------------
of the Units, have a generation capability that is higher than Net Dependable
Capacity of up to approximately five (5) MW per Unit higher than its Net
Dependable Capacity. "Incremental Energy" means Electric Energy generated
through limited over-firing of the Units (as installed as of the Commercial
Operations Date). Buyer may Dispatch Incremental Energy if and to the

                                      23
<PAGE>

extent available in an amount of up to 250 hours per Contract Year in accordance
with this Section 4.4, if and to the extent that Seller is not generating
Incremental Energy to offset a Forced Derating. Buyer shall not be obligated to
purchase Incremental Energy at the Incremental Energy Rate to the extent
generated by Seller to offset a Forced Derating.

          4.5  Forced Outages
               --------------

               4.5.1   First Outage Notice. Seller must notify Buyer within
                       -------------------
     fifteen (15) minutes (the "First Outage Notice") after discovering that a
     Unit(s) is (a) unable to deliver all or part of the Electric Energy
     required during a Dispatch schedule or (b) unavailable for future Dispatch
     schedules. In such notice Seller shall provide its best estimate of the
     duration of the Forced Outage or Forced Derating. Within fifteen (15)
     minutes (but not less than ten (10) minutes) of receipt of such notice,
     Buyer shall provide to Seller a quote, (such price, the "Outage Book Out
     Charge") for the remainder of the day of such notice.

               4.5.2   Seller Election. Immediately upon receipt of Buyer's
                       ---------------
     Outage Book Out Charge, Seller must elect at its sole option, to either:

               4.5.2.1 provide Replacement Power on its own behalf as soon as
          commercially practicable but not later than beginning at the top of
          the next hour (unless commercial practices permit earlier delivery);
          or

               4.5.2.2 accept Buyer's quoted Outage Book Out Charge; if Seller
          elects this option then Seller shall pay the quoted and accepted
          Outage Book Out Charge and upon such payment, Seller shall be released
          from any further obligation or liability (including Availability
          Adjustment) associated with the applicable Dispatch order for the
          remainder of the day covered by such Outage Book Out Charge.

               4.5.2.3 Seller's election pursuant to Section 4.5.2 will remain
          in effect until the earliest to occur of: (a) the expiration of
          Buyer's anticipated Dispatch schedule in effect for that day, (b) the
          end of the Forced Outage or Forced Derating, or (c) the end of the day
          of such notice.

               4.5.3   Second Outage Notice. As soon as practicable, but by no
                       --------------------
     later than two (2) hours after the start of the Forced Outage or Forced
     Derating (the "Second Outage Notice"), Seller must notify Buyer of (a) the
     cause of the Forced Outage or Forced Derating, if known, (b) the proposed
     corrective action, and (c) Seller's best estimate of the expected duration
     of the Forced Outage or Forced Derating period. Seller shall in such Second
     Outage Notice elect to either:

               4.5.3.1 provide Replacement Power on its own behalf; or

               4.5.3.2 request Buyer to procure Substitute Power in accordance
          with Section 4.7.3.

                                      24
<PAGE>

               4.5.3.3  Seller's election under this Section 4.5.3 will become
          effective beginning at 0001 on the next day, and will remain in effect
          until the earlier to occur of: (a) the end of the Forced Outage or
          Forced Derating or (b) 2300 on the third Business Day after the day on
          which the Forced Outage or Forced Derating began (the "Diagnostic
          Period").

               4.5.4    Consequences for Availability Adjustment. If Seller
                        ----------------------------------------
     fails to timely notify Buyer if its election under Section 4.5.2, or its
     Outage Election or fails to deliver or cause to be delivered either
     Replacement Power or Substitute Power, such incident shall be included as a
     Forced Outage or Forced Derating (as applicable) for purposes of the
     calculation of the Availability Adjustment.

               4.5.5    Incidents Longer than Diagnostic Period. If Seller
                        ---------------------------------------
     determines that the incident is expected to extend beyond the Diagnostic
     Period, then, Seller shall (as soon as practicable but no later than the
     expiration of the Diagnostic Period) make an Outage Election applicable to
     the remainder of the incident.

               4.5.6    Resumption of Delivery.
                        ----------------------

               4.5.6.1  From the  Facility.  Seller may resume  delivery of
                        ------------------
          Electric Energy from the Unit(s) as soon as the Units can produce
          Electric Energy (if it can be scheduled by Buyer on such short
          notice). Otherwise, Seller's election under Sections 4.5.2, as
          applicable above shall take effect no sooner than the top of the next
          hour provided Seller notifies Buyer 45 minutes in advance of such
          delivery (for example, if the incident occurs at 0810, Seller's
          provision of Replacement Power may begin at 0900, avoiding
          Availability Adjustments as of 0900 but subject to an Availability
          Adjustment for the period between 0810 and 0900). Seller shall incur
          an Availability Adjustment only in the event that the incident meets
          the definition of Forced Outage or Forced Derating and Seller fails to
          deliver or cause to be delivered Replacement Power or Substitute
          Power. If Seller is able to resume delivery of Electric Energy before
          any Outage Election is made, Seller may do so immediately without
          waiting until the top of the next hour, if it can be scheduled by
          Buyer on such short notice.

               4.5.6.2  When Substitute Power is Procured. If Seller is able to
                        ---------------------------------
          resume delivery of Electric Energy from the Unit(s) prior to the
          expiration of any arrangements (entered into based on Seller's
          instructions) where Buyer is procuring Substitute Power at Seller's
          direction in accordance with Section 4.7.3 then, at Seller's
          direction, Buyer shall use commercially reasonable efforts to
          liquidate or unwind the Substitute Power arrangements at Prevailing
          Market Prices and any gain or loss realized by Buyer will be for the
          Seller's own account.

               4.5.6.3  During an Outage Book Out. If Seller is able to resume
                        -------------------------
          delivery of Electric Energy during a period for which Seller has paid
          or agreed to pay an Outage Book Out Charge, Seller may resume
          operation of the applicable Unit(s) or portions thereof and Buyer will
          market the Electric Energy and pay to Seller

                                      25
<PAGE>

          50% of the Gross Margin associated with such transaction plus the
          Facility Electric Energy Rate, if the Prevailing Market Price less
          Transaction Costs exceeds the Facility Electric Energy Rate.

               4.5.7    Minimization of Outages. Consistent with Prudent
                        -----------------------
     Industry Practices, Seller shall use reasonable efforts to avoid Forced
     Outages and Forced Deratings and to minimize the length of any Forced
     Outages and Forced Deratings.

               4.5.8    Information Related to Outages. In addition to the
                        ------------------------------
     foregoing, Seller shall provide to Buyer information relating to outages of
     Capacity at the Units which could affect Seller's ability to deliver
     Electric Energy from such Units.

          4.6  Access to Facility. Seller authorizes Buyer and its authorized
               ------------------
agents, employees and inspectors to have access to the Facility, upon reasonable
prior notice (in light of the circumstances) and subject to the safety rules and
regulations of Seller, solely for the purpose of reading, testing, and
maintaining metering equipment, or examining, repairing or removing any of
Buyer's property.

          4.7  Delivery of Replacement Power and Substitute Power
               --------------------------------------------------

               4.7.1   Replacement Power. All Replacement Power must be
                       -----------------
     delivered in accordance with the following:

               4.7.1.1 Buyer shall issue Dispatch instructions to schedule
          Replacement Power not in excess of the Net Dependable Capacity for
          delivery at each hour, and Seller shall, at its expense, deliver or
          cause to be delivered, all scheduled Replacement Power to the
          Replacement Power Delivery Point.

               4.7.1.2 Buyer shall pay Capacity Charges for all such scheduled
          and delivered Replacement Power in accordance with Section 7.

               4.7.2   Pre-Commercial Operations Failure to Deliver.  If
                       --------------------------------------------
     Seller fails to deliver or fails to cause to be delivered all or any part
     of any Replacement Power or Substitute Power scheduled for delivery prior
     to the Commercial Operations Date, Seller shall pay to Buyer within ten
     (10) days of receipt of an invoice therefor an amount equal to Buyer's
     actual, reasonable documented direct damages incurred for the cost of cover
     as a result of such failure to deliver Replacement Power or Substitute
     Power. At the end of each month during the Commercial Operations Delay
     Period, Buyer shall invoice Seller for such cost of cover if any incurred
     during such month, and Seller shall pay such amount within ten (10) days of
     Buyer's invoice therefor, and if Seller fails to timely pay such amount,
     Buyer may draw on the Seller Guarantees for such amount.

               4.7.3   Substitute  Power.  Any request by Seller that Buyer
                       -----------------
     procure  Substitute Power shall be in accordance with the following:

                                      26
<PAGE>

               4.7.3.1 Seller shall request Buyer to obtain quotes for
          Substitute Power on Seller's behalf at Prevailing Market Prices, which
          instructions shall include information as to whether such Substitute
          Power shall be obtained on a block or hourly basis.

               4.7.3.2 Buyer shall use commercially reasonable efforts to obtain
          such Substitute Power at Prevailing Market Prices.

               4.7.3.3 Subject to Section 4.7.4 at the end of each month, in
          conjunction with regular billings, if Substitute Power arranged by
          Buyer is not delivered, Buyer shall pay or credit to Seller any cost
          of cover damages Buyer receives from the entity that is the source of
          such Substitute Power.

               4.7.4   Post Commercial Operations Failure to Deliver. If there
                       ---------------------------------------------
     is a failure to deliver energy to Buyer under any Substitute Power or
     Replacement Power arrangement by the entity that is the source of such
     Replacement Power or Substitute Power, then for the period of the failure
     until the applicable Unit(s) are able to resume operation in accordance
     with Buyer's Dispatch Seller shall pay to Buyer the greater of (i) the cost
     of cover damages ("or market LDs") Seller actually receives from such
     entity under the Replacement Power arrangement (or the amounts received by
     Buyer for Substitute Power pursuant to Section 4.7.3.3, (in either case
     "Third Party Damages") or (ii) the amount of any Availability Adjustment
     due as a result of such failure, if any.

               4.7.5   Characteristics of Replacement and Substitute Power. When
                       ---------------------------------------------------
     Seller is delivering Replacement Power to Buyer, Seller shall be obligated
     to deliver the amount of energy (at no cost to Seller, except to the extent
     required to deliver Replacement Power to the Replacement Power Delivery
     Point) scheduled by Buyer, up to the level necessary to comply with Buyer's
     Dispatch order (taking into account Electric Energy still being delivered
     by Seller during a Forced Derating) along with associated Ancillary
     Services in accordance with Section 9. Seller shall make appropriate power
     purchase and transmission arrangements to the Replacement Power Delivery
     Point to provide energy to Buyer which is of the same level of firmness
              -------
     (e.g. if unit contingent, an availability comparable to that of the
     Facility) or higher level of firmness (e.g., system firm, firm with
     liquidated damages, or as firm as utility native load) as the Net
     Dependable Capacity hereunder. Substitute Power procured by Buyer may be of
     a lower level of firmness.

          4.8  Emergency Conditions. During an Emergency condition, Seller may
               --------------------
increase, reduce, curtail or interrupt electrical generation at the Facility in
accordance with Prudent Industry Practice or take other appropriate action in
accordance with the applicable provisions of the Interconnection Agreement which
in the reasonable judgment of the Interconnected Utility may be necessary to
operate, maintain and protect the Interconnected Utility System or the
transmission system of another Person during an Emergency Condition or in the
reasonable judgment of Seller may be necessary to operate, maintain and protect
the Facility during an Emergency Condition.

     5.   Metering; Billing; Payment
          --------------------------

                                      27
<PAGE>

          5.1  Metering Electricity. All Electric Energy delivered by Seller to
               --------------------
Buyer from the Facility under this Agreement shall be metered by the Revenue
Meters and the readings therefrom, including calculated transformer and
transmission line losses between the Revenue Meters and the Point of Delivery,
shall be made in accordance with Prudent Industry Practice consistently applied.
All Replacement Power and Substitute Power delivered to Buyer from facilities
inside the Interconnected Utility System, shall be metered by the Interconnected
Utility. For all Replacement Power and Substitute Power from sources outside the
Interconnected Utility System, the delivered amount shall be the amount
scheduled as delivered to the Interconnected Utility System by the system
delivering such Replacement Power or Substitute Power into the Interconnected
Utility System. The Energy Charge for which Buyer will be billed for Electric
Energy also will be net of an adjustment for the value of the amount of
electricity consumed by other non-operating Units at the Facility (or the Elwood
II Units) during the billing period ("Non-Billable Generation") to yield the
"billable generation" for the billing period. To establish the value of kilowatt
hours of electricity provided by the Facility and consumed by the Elwood II
Units for a billing period, the total for each billing period of electricity
consumed by each Unit or unit will be determined from the individual Unit or
unit meter readings using the Facility's Revenue Meter(s) (for the Units) and
similar meters for the Elwood II Units which will then be summed for (both)
Units and the Elwood II Units. Samples of such calculations are set forth in
Appendix G.

               5.1.1  Fuel. Billings for the fuel component of the Energy Rate
                      ----
     shall be based on the Actual Heat Rate and the total consumption of gas as
     measured by the total Station Fuel Meter as prorated to Units 7 and 8 and
     the Elwood II Units based upon the Individual Fuel Meters, except where
     Replacement Power and Substitute Power is applicable, in which case the
     fuel component of the Energy Rate shall be derived in accordance with
     Section 7.2. Billings for the Variable O&M Rate component of the Energy
     Charge shall be derived from Revenue Meter information or, in the event
     Section 5.1.4 below is applicable, the best available data.

               5.1.2  Meter Testing. The Revenue Meters shall be tested by the
                      -------------
     Parties at least once each year at Seller's expense and at any other
     reasonable time upon request by either Party, at the requesting Party's
     expense; provided, however, Buyer shall have no obligation to pay for any
     such test if such test results in a recalibration of meters. Seller shall
     give Buyer at least fourteen (14) days notice of any testing of the Revenue
     Meters, Station Fuel Meters, and Individual Fuel Meters and Buyer shall
     have the right to be present during all testing and shall be furnished all
     testing results on a timely basis.

               5.1.3  Inaccurate Meters. If testing of the Revenue Meters
                      -----------------
     indicates that an inaccuracy of more than +/-.5% in measurement of Electric
     Energy has occurred, the affected Revenue Meter shall be recalibrated
     promptly to register accurately within the Revenue Meter manufacturer
     stated tolerances. Each Party shall comply with any reasonable request of
     the other concerning the sealing of meters, the presence of a
     representative of the other Party when the seals are broken and the tests
     are made, and other matters affecting the accuracy of the measurement of
     Electric Energy. If either

                                      28
<PAGE>

     Party believes that there has been a meter failure or stoppage, it shall
     immediately notify the other Party.

               5.1.4  Failed Meters. If, for any reason, any Revenue Meter is
                      -------------
     out of service or out of repair so that the amount of Electric Energy
     delivered cannot be ascertained or computed from the readings thereof, the
     Electric Energy delivered during the period of such outage shall be
     estimated and agreed upon by the Parties hereto upon the basis of the best
     data available, and any failure to agree shall be subject to resolution in
     accordance with Section 11.

               5.1.5  Examination of Records. Each Party (and its
                      ----------------------
     representative(s)) has the right, at its sole expense, upon reasonable
     notice and during normal working hours, to have an independent third party
     examine the records of the other Party to the extent reasonably necessary
     to verify the accuracy of any statement, charge or computation relating to
     the output of Electric Energy. If requested, a Party shall provide to the
     other Party statements evidencing the amounts of Electric Energy delivered
     at the Point of Delivery.

          5.2  Adjustment for Inaccurate Meters. If a Revenue Meter fails to
               --------------------------------
     register, or if the measurement made by a Revenue Meter is found upon
     testing to be inaccurate by more than or less than one half of one percent
     (.5%), an adjustment shall be made correcting all measurements by the
     inaccurate or defective Revenue Meter for both the amount of the inaccuracy
     and the period of inaccuracy, in the following manner:

               5.2.1  As may be agreed upon by the Parties, or

               5.2.2  In the event that the Parties cannot agree on the amount
     of the adjustment necessary to correct the measurements made by any
     inaccurate or defective Revenue Meter, the Parties shall use Seller's
     backup metering, if installed, to determine the amount of such inaccuracy;
     provided, however, that Seller's backup metering has been tested and
     --------  -------
     maintained in accordance with the provisions of this Section 5.2.2. In the
     event that Seller's backup metering also is found to be inaccurate by more
     than the allowable limits set forth in this Section 5.2.2, the Parties
     shall mutually agree to estimate the amount of the necessary adjustment on
     the basis of deliveries of Capacity and Electric Energy during periods of
     similar operating conditions when the Revenue Meter was registering
     accurately.

               5.2.3  In the event that the Parties cannot agree on the actual
     period during which the Revenue Meter(s) made inaccurate measurements, the
     period during which the measurements are to be adjusted shall be the
     shorter of (i) the last one-half of the period from the last previous test
     of the Revenue Meter to the test that found the Revenue Meter to be
     defective or inaccurate, or (ii) the one hundred eighty (180) days
     immediately preceding the test that found the Revenue Meter to be defective
     or inaccurate.

                                      29
<PAGE>

               5.2.4  To the extent that the adjustment period covers a period
     of deliveries for which payment has already been made by Buyer, Seller
     shall use the corrected measurements as determined in accordance with
     Sections 5.2.1, 5.2.2, or 5.2.3 hereof to recompute the amount due for the
     period of inaccuracy and shall subtract the previous payments by Buyer for
     this period from such recomputed amount. If the difference is a positive
     number, the difference shall be paid by Buyer to Seller; if the difference
     is a negative number, that difference shall be paid by Seller to Buyer in
     the form of an offset to payments due Seller by Buyer hereunder. Adjustment
     of such difference by the owing Party shall be made not later than thirty
     (30) days after the owing Party receives notice of the amount due, unless
     Buyer elects payment via an offset.

          5.3  Billing. Within ten (10) days after the last day of each month
               -------
     during the Term, Seller shall render a statement to Buyer for the amounts
     due in respect of such month under Section 7, which statement shall contain
     reasonable detail showing the manner in which the applicable charges were
     determined.

                                      30
<PAGE>

          5.4  Payments. The amount due to Seller as shown on any monthly
               --------
     statement rendered by Seller pursuant to Section 5.3 shall be paid by Buyer
     by electronic wire transfer to an account specified by Seller within ten
     (10) days after the date such statement is received by Buyer. Any amount
     not paid by Buyer when due shall bear interest at the Default Rate from the
     date that the payment was due until the date payment by Buyer is made.

          5.5  Offsets. Amounts due to Buyer as a result of late Commercial
               -------
     Operations Date pursuant to Section 3.3 or amounts due to Buyer pursuant to
     Section 7 shall be offset against current and future payments due from
     Buyer with interest accrued daily at the Default Rate until fully offset or
     paid.

          5.6  Billing Disputes.
               ----------------

               5.6.1  If a Party questions or contests any amount claimed by the
     other Party to be due under Section 7, the Party obligated to pay shall pay
     the entire invoiced amount including the disputed portion (except obvious
     typographical or administrative errors).

               5.6.2  In the event that either Party, by timely notice to the
     invoicing Party, questions or contests the correctness of any charge or
     payment claimed to be due by the invoicing Party, the invoicing Party shall
     promptly review the questioned charge or payment and shall notify the
     invoiced Party, within fifteen (15) Business Days following receipt by the
     invoicing Party of such notice , of the amount of any error and the amount
     of any reimbursement that the invoiced Party is entitled to receive in
     respect of such alleged error. Any disputes not resolved within fifteen
     (15) Business Days after the invoicing Party's receipt of notice from the
     invoiced Party shall be resolved in accordance with Section 11. Upon
     determination of the correct amount of any reimbursement, such amount shall
     be promptly paid by the invoicing Party to the invoiced Party.

               5.6.3  Reimbursements made under this Section 5.6 shall include
     interest at the Default Rate from the date the original payment was made
     until the date of such reimbursement.

     6.   Operation and Maintenance of the Facility
          -----------------------------------------

          6.1  Standard of Operation
               ---------------------

               6.1.1  Operation and Maintenance. Seller shall manage, control,
                      -------------------------
     operate and maintain the Facility in a manner consistent with Prudent
     Industry Practice, in accordance with (a) the practices, methods, acts,
     guidelines, standards and criteria of MAIN, NERC, the ISO and any
     successors to the functions thereof; (b) the requirements

                                      31
<PAGE>

      of the Interconnection Agreement; and (c) all applicable Requirements of
      Law and (d) permits taking into account Buyer's Dispatch rights under this
      Agreement.

               6.1.2  Fuel Arrangements. Seller shall obtain and maintain fuel
                      -----------------
     supply and transportation arrangements in a manner consistent with Prudent
     Industry Practice, taking into account Buyer's Dispatch rights under this
     Agreement.

               6.1.3  Insurance. Seller shall obtain and maintain appropriate
                      ---------
     insurance coverages typical for plants similar to the Facility, in
     accordance with Prudent Industry Practice.

          6.2  Permits and Licenses. Seller will obtain and maintain all
               --------------------
     certifications, permits, licenses and approvals necessary to operate and
     maintain the Facility and to perform its obligations under this Agreement
     during the Term.

          6.3  Sole Remedy. Buyer's sole and exclusive remedy (other than
               -----------
     specific performance) and Seller's sole and exclusive liability for breach
     of Section 6.1 shall be the Availability Adjustment and the termination
     rights provided in Section 13.4.

          6.4  Scheduled Maintenance. No later than March 1, 2001, Seller shall
               ---------------------
     submit to Buyer a proposed schedule of Scheduled Maintenance Outages
     scheduled by Seller for the following Contract Year for the Units, which
     schedule shall be updated by Seller by each March 31 and September 30
     thereafter to cover the twelve month period following each such update;
     provided, however, that no Scheduled Maintenance Outage may be scheduled to
     cover the period from May 15 to September 15. Parameters within which
     Scheduled Maintenance Outages must be planned are included as Appendix I.
     If the OEM issues recommendations for changes to the parameters in Appendix
     I, the parties shall negotiate in good faith to revise Appendix I
     accordingly. Such schedule, and each supplement thereto, shall indicate the
     planned start and completion dates for each Scheduled Maintenance Outage
     during the period covered thereby and the amount of the Net Dependable
     Capacity of a Unit that will be affected. Within thirty (30) days of
     receipt of such schedule or any supplement thereto, Buyer may request
     reasonable modifications in the Scheduled Maintenance Outage schedule
     contained therein. Both parties agree to use reasonable efforts to develop
     a mutually acceptable final schedule for such Scheduled Maintenance
     Outages. If within six months prior to the scheduled start of a Scheduled
     Maintenance Outage, Buyer desires to change the scheduled start or duration
     of such Scheduled Maintenance Outage, Buyer shall notify Seller of Buyer's
     requested change and Seller shall use reasonable efforts to accommodate
     Buyer's requested change. Seller may propose compensation from Buyer to
     Seller for such change. Buyer shall then have the right to either direct
     such change and pay Seller such compensation, or withdraw the request for
     such change. At least one week prior to any Scheduled Maintenance Outage,
     Seller shall orally notify Buyer of the expected start date of such
     Scheduled Maintenance Outage, the amount of Capacity at the Units that will
     not be available to Buyer during such Scheduled Maintenance Outage, and the
     expected completion date of such Scheduled Maintenance Outage. Seller shall
     orally notify Buyer of any subsequent changes in such Capacity not
     available or any subsequent changes in

                                      32
<PAGE>

     the Scheduled Maintenance Outage completion date. As soon as practicable,
     all such oral notifications shall be confirmed in writing. Scheduled
     Maintenance Outages may be taken in any number of non-contiguous periods,
     subject to Buyer's approval, which shall not be unreasonably withheld or
     delayed. Subject to the foregoing, the duration, frequency and timing of
     Scheduled Maintenance Outages shall be based on OEM recommendations and the
     age and operation of the Units generally plus up to five (5) days per Unit
     on a semi-annual basis for Non-Summer Period balance of plant maintenance.

          6.5  Compressor Wash. Buyer shall permit Seller to shut down each Unit
               ---------------
(either at the same time or at different times) for a compressor wash, (the
"Compressor Wash") at a mutually agreeable time that is not during On-Peak
Hours, approximately once per month in the Summer Period. Such Compressor Wash
requires that the Unit be off-line for an eighteen (18) hour cool down period
prior to the start of such Compressor Wash. Seller agrees that at any time
during such cool down period, Buyer may interrupt such cool down, Dispatch the
Unit on-line and cause Seller to reschedule the cool down and Compressor Wash
for the next mutually agreeable time. Buyer agrees that once the actual
Compressor Wash begins, the Compressor Wash must be completed without
interruption and that Buyer cannot Dispatch the Unit on-line until such
Compressor Wash is completed.

          6.6  Operating Characteristics
               -------------------------

               6.6.1  Design Limits. The operating characteristics of the
                      -------------
     Facility shall be consistent with the Design Limits set forth in Appendix A
     unless otherwise mutually agreed by the Parties. Any such agreed upon
     change must be in writing, signed by both Parties. If the OEM provides
     written direction for operations that requires a change to the Design
     Limits, the Parties will negotiate in good faith to modify the Design
     Limits accordingly.

               6.6.2  Interaction with Interconnected Utility System. Buyer
                      ----------------------------------------------
     understands that Seller may be required to increase, reduce, curtail or
     interrupt electrical generation at the Facility in accordance with Prudent
     Industry Practice or to take other appropriate action in accordance with
     the applicable provisions of the Interconnection Agreement which in the
     reasonable judgment of the Interconnected Utility may be necessary to
     operate, maintain and protect the Interconnected Utility System or the
     transmission system of another Person during an Emergency Condition or in
     the reasonable judgment of Seller may be necessary to operate, maintain and
     protect the Facility during an Emergency Condition. Any such curtailment
     shall be applied by Seller prorata across all units at the Elwood Station
     to the extent allowed by existing contracts (for electrical output from the
     Elwood Station) which terminate December 31, 2004 and in all cases shall be
     prorata for future power contracts. For purposes of calculating the
     Availability Adjustment, the Facility shall be considered Available during
     any such increase, reduction, curtailment, interruption or action, unless
     the order to increase, reduce, curtail, interrupt, or take other action
     with respect to generation at the Facility or the Emergency Condition is
     caused by a condition on Seller's side of the interconnection point between

                                      33
<PAGE>

     the Facility and the Interconnected Utility System. Buyer acknowledges that
     other conditions on the Interconnected Utility System (for example,
     transmission outages or interruptions) may impact Seller's ability to
     deliver Electric Energy into the Interconnected Utility System at the Point
     of Delivery. For purposes of calculating the Availability Adjustment, the
     Facility shall be considered Available during any time that the Facility
     would have been actually Available but for conditions (including, for
     example, transmission outages or interruptions) on the Interconnected
     Utility System.

          6.7  Records. Each Party shall keep and maintain all records as may be
               -------
     necessary or useful in performing or verifying any calculations made
     pursuant to this Agreement, or in verifying such Party's performance
     hereunder. All such records shall be retained by each Party for at least
     six (6) calendar years following the calendar year in which such records
     were created. Each Party shall make such records available to the other
     Party for inspection and copying at the other Party's expense, upon
     reasonable notice during such Party's regular business hours. Each Party
     shall have the right, upon thirty days written notice prior to the end of
     an applicable six (6) calendar year period to request copies of such
     records. Each Party shall provide such copies, at the other Party's
     expense, within thirty (30) days of receipt of such notice or shall make
     such records available to the other Party in accordance with the foregoing
     provisions of this Section 6.7.

     7.   Compensation
          ------------

          7.1  Capacity Charge. For each month, commencing July 1, 2001 (as such
               ---------------
     date is extended for Force Majeure Events pursuant to Section 19) and each
     month thereafter during the Term, Buyer shall owe Capacity Charges
     calculated pursuant to Section 7.1.1 (subject to offsets pursuant to
     Section 5.5).

               7.1.1  Computation. The Capacity Charge for each month shall be
     equal to the product of (a) the applicable Capacity Rate for such month
     times (b) the Net Dependable Capacity for such month, minus the
     Availability Adjustment, when applicable.

               7.1.2  Capacity Rates. The Capacity Rate during the Term shall
     be: (a) $7.39 per kW per month from July 1, 2001 to December 31, 2001, and
     (b) $5.11 per kW per month for the remainder of the Initial Term subject in
     each case to a Capacity Rate Reduction. The Capacity Rate for the Extension
     Term shall be $4.90 per kW per month, subject to a Capacity Rate Reduction.

               7.1.3  Availability Adjustment to Capacity Charge. From and after
                      ------------------------------------------
     the Commercial Operations Date, if the Facility does not achieve the
     Guaranteed Summer Super Peak Availability, Guaranteed Summer Partial Peak
     Availability or the Guaranteed Non-Summer On Peak Availability, as measured
     by Equivalent Availability in accordance with Appendix E, Seller shall be
                                                   ----------
     subject to the application of an Availability Adjustment as liquidated
     damages as provided in this Section 7.1.3.

                                      34
<PAGE>

                7.1.3.1 Summer Period. For each month in the Summer Period, the
                        -------------
          Availability Adjustment shall equal the sum of (a) the Availability
          Adjustment for the Super Peak Hours plus (b) the greater of zero and
          the Availability Adjustment for the Partial Peak Hours where:

          (i)   the Availability Adjustment for Super Peak Hours is the product
          of (a) the sum of the monthly Capacity Charges (before application of
          the Availability Adjustment) for the applicable Contract Year and (b)
          the applicable Monthly Adjustment Factor and (c) 75% and (d) the
          Guaranteed Summer Super Peak Availability less the actual Equivalent
          Availability for Super Peak Hours during such month; and

          (ii)  the Availability Adjustment for Partial Peak Hours is the
          product of (a) the sum of the monthly Capacity Charges (before
          application of the Availability Adjustment) for the applicable
          Contract Year and (b) the applicable Monthly Adjustment Factor and (c)
          25% and (d) the Guaranteed Summer Partial Peak Availability less the
          actual Equivalent Availability for Partial Peak Hours during such
          month.

          (iii) for purposes of the calculations in subsections (i) and (ii)
          above and Section 7.1.3.4 only, in the first Contract Year, the first
          Contract Year shall be deemed to be from July 1, 2001 through May 31,
          2002.

                7.1.3.2 Non-Summer Period For the Non-Summer Period the
                        -----------------
          Availability Adjustment shall equal the Availability Adjustment for
          Non-Summer On Peak Hours, where:

          The Availability Adjustment for Non-Summer On Peak Hours is the
          product of (a) the sum of the monthly Capacity Charges (before
          application of the Availability Adjustment) for the applicable
          Contract Year and (b) 18% and (c) the Guaranteed Non-Summer On Peak
          Availability less the actual Non-Summer On Peak Availability for such
          Non-Summer Period. This will be calculated once per Contract Year.

                7.1.3.3 Super Peak 80% or below. If the Equivalent Availability
                        -----------------------
          during Super Peak Hours in any month is less than or equal to 80%,
          then for purposes of calculating the Availability Adjustment during
          the Partial Peak Hours in the same month, the Equivalent Availability
          during Partial Peak Hours shall be deemed to be equal to the
          Equivalent Availability during Super Peak Hours for such month.

                7.1.3.4 Availability Adjustment Limit. In no event shall the
                        -----------------------------
          cumulative Availability Adjustment exceed (i) in the first Contract
          Year, $21,215,800, (ii) in all other Contract Years, other than the
          final Contract Year, $18,000,000 per year and (iii) in the final
          Contract Year $12,000,000.

                7.1.4   Capacity Bonus.
                        --------------

                                      35
<PAGE>

               7.1.4.1 Applicability of Bonus. Buyer shall pay Seller a Capacity
                       ----------------------
          Bonus if both (a) the Average Summer Super Peak Availability exceeds
          the Guaranteed Summer Super Peak Availability and (b) the Average
          Summer Partial Peak Availability exceeds the Guaranteed Partial Peak
          Availability; provided, however, if the Summer Super Peak Availability
          during any Summer Period month is less than or equal to 80%, then
          Seller shall not be entitled to a Capacity Bonus.

               7.1.4.2 Calculation of Bonus. The Capacity Bonus for each Unit
                       --------------------
          shall be equal to: [(Average Summer Super Peak Availability minus
          Guaranteed Summer Super Peak Availability)/.03 * maximum Capacity
          Bonus * .75] + [(Average Summer Partial Peak Availability minus
          Guaranteed Summer Partial Peak Availability)/.03 * maximum Capacity
          Bonus * .25]. If the Commercial Operations Date occurs during the
          first Contract Year, then for such first Contract Year, the maximum
          Capacity Bonus per Unit shall be equal to the sum of (a) (number of
          days of Commercial Operations in July / 31 days) * $62,500 and (b)
          (number of days of Commercial Operations in August / 31 days) *
          $62,500. If the Commercial Operations Date occurs in the second
          Contract Year, then for such second Contract Year the maximum Capacity
          Bonus per Unit shall be equal to the sum of (a) (number of days of
          Commercial Operations in June / 30 days) * $27,500 and (b) (number of
          days of Commercial Operations in July / 31 days) * $48,750 and (c)
          (number of days of Commercial Operations in August / 31 days) *
          $48,750. For all other Contract Years, the maximum Capacity Bonus
          shall be equal to $125,000 per Unit.

               7.1.4.3 Payable Monthly. The Capacity Bonus shall be divided by
                       ---------------
          12 and shall be paid over a 12 month term beginning with September of
          each Contract Year.

          7.2  Energy Charge. Each month beginning on the earlier of the
               -------------
     Commercial Operations Date or the Target COD and continuing for the Term,
     Buyer shall pay Seller an Energy Charge to the extent Seller delivers
     Electric Energy, Incremental Energy, Replacement Power or Test Energy. The
     Energy Charge for a billing month shall equal to the difference between (A)
     the sum of (a) the product of the total Electric Energy (in MWh) delivered
     to Buyer at the Point of Delivery from the Facility pursuant to Buyer's
     Dispatch orders, multiplied by the Facility Electric Energy Rate for each
     hour of such month plus (b) the product of the total Replacement Power (in
     MWh) provided by Seller to Buyer at the Replacement Power Delivery Point
     pursuant to Buyer's Dispatch orders, multiplied by the Replacement Power
     Energy Rate for each hour of such month adjusted for any Differential
     Transmission Adjustments incurred by Buyer plus (c) the product of the
     total Incremental Energy delivered to Buyer at the Point of Delivery
     pursuant to Section 4.3 multiplied by the Incremental Energy Rate for each
     hour of such month, plus (d) the product of the Test Energy (either Pre COD
     Test Energy or Post COD Test

                                      36
<PAGE>

     Energy, as applicable) multiplied by the applicable Test Energy Rate, minus
     (B) any Substitute Power Cost Credit.

               7.2.1   Facility Electric Energy Rate. The Facility Electric
                       -----------------------------
     Energy Rate is calculated as (the Actual Heat Rate x Fuel Charge)/1000+
     Variable O&M Rate.

               7.2.2   Replacement Power Energy Rate. The Replacement Power
                       -----------------------------
     Energy Rate is calculated as (Reference Heat Rate x Fuel
     Charge)/1000+Variable O&M Rate.

               7.2.3   Incremental Energy Rate. The Incremental Energy Rate is
                       -----------------------
     the sum of $100/MWh of Incremental Energy delivered to the Point of
     Delivery plus (a) with respect to the first 100 hours per Unit of
     Incremental Energy Dispatched by Buyer during any Contract Year, twenty
     percent (20%) of the Gross Margin resulting from such transaction, and (b)
     with respect to the next 150 hours per Unit of Incremental Energy
     Dispatched by Buyer in any Contract Year, thirty five (35%) of the Gross
     Margin resulting from such transaction.

               7.2.4   Test Energy Rates
                       -----------------

               7.2.4.1 Pre COD Test Energy. The Pre COD Test Energy Rate shall
                       -------------------
          be one of the following. If the Prevailing Market Price (less
          Transaction Costs) (expressed as $/MWh) is greater than the Facility
          Electric Energy Rate, the Pre COD Test Energy Rate shall be the sum of
          the Facility Electric Energy Rate, plus 95% of the difference between
          the Facility Electric Energy Rate and the Prevailing Market Price
          (less Transaction Costs). If the Prevailing Market Price (less
          Transaction Costs) is less than the Facility Electric Energy Rate, the
          Pre COD Test Energy Rate shall be 100% of such Prevailing Market Price
          less Transaction Costs, (but not including Scheduling Fees).

               7.2.4.2 Post COD Test Energy. The Test Energy Rate for Post COD
                       --------------------
          Test Energy shall be equal to either (a) the Facility Electric Energy
          Rate with respect to a test requested by Buyer the results of which do
          not require any corrections or adjustments, or (b) the lesser of the
          Facility Electric Energy Rate or the Prevailing Market Price (less
          Transaction Costs) in all other circumstances.

               7.2.4.3 Substitute Power Cost Credit. Substitute Power Cost
                       ----------------------------
          Credit shall be the Buyer's documented cost per MWh of Substitute
          Power (adjusted for any documented Differential Transmission
          Adjustments incurred by Buyer, if incrementally higher, or less any
          amounts of Differential Transmission Adjustments saved by Buyer if
          incrementally lower, less the Replacement Power Energy Rate multiplied
          by the Substitute Power (expressed in MWh) purchased by Buyer for each
          hour of such month.

               7.2.5   Fuel Charge
                       -----------

                                     37
<PAGE>

               7.2.5.1 Base Fuel Charge. If Buyer does not alter its Day Ahead
                       ----------------
          Schedule, the Fuel Charge for all Electric Energy delivered in
          accordance with such schedule shall be the Fuel Index value plus 10
          cents/MMBtu.

               7.2.5.2 Changes to Day Ahead Schedule for the Summer On Peak
                       ----------------------------------------------------
          Hours and in September for On Peak Hours. If Buyer makes a change(s)
          ----------------------------------------
          to the Day Ahead Schedule for operation in Summer On Peak Hours or in
          the On Peak Hours in September as provided in Section 4.3.2.4, the
          Fuel Charge for such Electric Energy generated pursuant to such
          Dispatch order shall be the Fuel Index value plus 15 cents/MMBtu.

               7.2.5.3 Changes to Day Ahead Schedule for Non-Summer Period and
                       -------------------------------------------------------
          Summer Off Peak Hours. If Buyer makes changes to the Day Ahead
          ---------------------
          Schedule for operation in the Non-Summer Period or Summer Off Peak
          Hours and such change requires Seller to purchase more gas than would
          have been purchased but for such change in the schedule, then Seller
          shall provide Buyer with a quoted surcharge to be added to the Base
          Fuel Charge, the sum of which shall be the Fuel Charge for all
          Electric Energy generated pursuant to such changed schedule. If such
          change requires Seller to liquidate any excess gas, then Seller shall
          provide Buyer with a quoted fixed change fee pursuant to such changed
          schedule. If Buyer does not accept the quoted fixed change fee, Seller
          will proceed with operation of the Facility in accordance with the
          Dispatch schedule in effect prior to the requested change.

               7.2.6  Early Commercial Operations Date. If the Commercial
     Operations Date occurs prior to July 1, 2001 for one or both Units, Buyer
     shall market and sell such Electric Energy delivered to Buyer from such
     Unit(s) at the Prevailing Market Price therefor if the Prevailing Market
     Price less Transaction Costs exceeds the Facility Electric Energy Rate, and
     Buyer shall remit to Seller 90% of the Gross Margin on any such
     transaction.

          7.3  Adjustment to Actual Heat Rate for Failure to Meet Guaranteed
               -------------------------------------------------------------
Heat Rate.
---------

               7.3.1 Established by Testing. For purposes of calculating the
                     ----------------------
     Facility Electric Energy Rate, the Actual Heat Rate shall be reduced if the
     results of periodic tests indicate the combined Net Heat Rate of Units 7
     and 8 and the Elwood II Units is greater than the Guaranteed Heat Rate
     under test conditions as set forth in Appendix B. The adjustment to the
     Actual Heat Rate shall be equal to the ratio of the Guaranteed Heat Rate
     divided by the Net Heat Rate, times the Actual Heat Rate. If any adjustment
     is necessary, the Actual Heat Rate Adjustment shall be effective
     retroactive to the date on which it was mutually determined that the Actual
     Heat Rate exceeded the Guaranteed Heat Rate and shall remain in effect
     until it is demonstrated by testing that the Net Heat Rate is less than the
     Guaranteed Heat Rate. In the event that Seller makes repairs to reduce the
     Net Heat Rate, the improvement shall be demonstrated by testing conducted
     at the expense of the Seller and the resulting adjustment to the Actual
     Heat Rate shall be retroactive to the date that repairs were effected.

                                      38
<PAGE>

               7.3.2   Accrual of Heat Rate Credits. To the extent Net Heat Rate
                       ----------------------------
     (including the Initial Net Heat Rate) is below the Threshold Heat Rate,
     Seller shall accrue half of such difference as credits to be applied in the
     future when the Net Heat Rate exceeds the Guaranteed Heat Rate ("Heat Rate
     Credits"). To the extent that the Net Heat Rate (beginning with the first
     test of the Net Heat Rate after the determination of the Initial Net Heat
     Rate) is less than the Initial Net Heat Rate (after application of the
     Degradation Curve) all of the difference will be accrued as Heat Rate
     Credits. For the purposes of tracking and accrual tabulation, the Heat Rate
     Credits that are established by testing shall be multiplied by the Electric
     Energy (kWh) delivered over the same period as the test results application
     period, and shall effectively be accrued in units of heat energy (Btus). If
     there is retroactive adjustment as provided for in Section 7.3.1, then the
     accrual tabulation of heat energy units shall be adjusted for the same
     period.

               7.3.3   Application of Heat Rate Credits. If the Net Heat Rate
                       --------------------------------
     (including the Initial Heat Rate) exceeds the Guaranteed Heat Rate, Seller
     may reduce the Net Heat Rate for purposes of calculating the Actual Heat
     Rate Adjustment (for the period during which such Net Heat Rate is in
     effect) by up to 50 Btus/kWh so long as Heat Rate Credits exist. The
     Seller's accumulated quantity of Heat Rate Credits shall be reduced to the
     extent utilized to reduce the Net Heat Rate. For the purposes of tracking
     and application tabulation, the negative Heat Rate Credits that are
     established by testing shall be multiplied by the Electric Energy (kWh)
     delivered over the same period as the test results application period, and
     shall effectively become a withdrawal of heat energy units (Btus) from the
     accumulated units of energy per Section 7.3.2. If there is retroactive
     adjustment as provided for in Section 7.3.1, then the withdrawal tabulation
     of heat energy units shall be adjusted for the same period.

               7.3.4   Cost of Heat Rate Tests. The costs (and allocation of the
                       -----------------------
     costs) of any test pursuant to this Section 7.3 are set forth in Section
     8.2.

          7.4  Start Up Charge. For each Start Up of a Unit pursuant to the
               ---------------
     Dispatch of such Unit by Buyer, Seller shall be entitled to a payment of
     $2500.00 (the "Start Up Charge") in June 1, 1999 dollars. At the beginning
     of each Contract Year (i.e., January 1), thereafter, the Start Up Charge
     shall be adjusted by the change in the GDP-IPD from the GDP-IPD value on
     the previous January 1 (or June 1 in the case of the first Contract Year).
     Seller shall pay for the gas consumed during any Failed Starts.

          7.5  Imbalance Charges. Buyer shall hold Seller harmless from any
               -----------------
     Imbalance Charges (i) that result from Buyer's Dispatch orders or other
     scheduling of generation under this Agreement, (ii) that are assessed
     against Buyer or Seller at any time when the Facility is generating
     Electric Energy within 1.5% of the Dispatch level directed by Buyer after
     achieving Start Up and has achieved the desired Dispatched load level for a
     period of ten (10) minutes, (iii) that are assessed for deliveries of
     Electric Energy during startup and shutdown, so long as Seller operates,
     Starts Up and shuts down the Units in

                                      39
<PAGE>

     accordance with this Agreement or (iv) that result from Unit trips. Buyer
     and Seller recognize that the Units may produce more or less energy than
     scheduled by Buyer.

          7.6  Rates Not Subject to Review. The rates for service specified
               ---------------------------
     herein (i.e., delivery of Electric Energy, Replacement Power and Capacity)
     shall remain in effect for the Term, and shall not be subject to change
     through application to the FERC pursuant to provisions of Section 205 et
     seq. of the Federal Power Act, absent agreement of the Parties.

     8.   Performance Tests.
          ------------------

          8.1  Test Procedures. Seller must conduct a test to determine the
               ---------------
Initial Net Heat Rate in conjunction with the final performance testing for each
Unit under the contract with the EPC Contractor. Seller must conduct a test on
or prior to the Commercial Operations Date to determine Net Dependable Capacity.
Thereafter at least once per Contract Year, Seller must conduct a test to
determine the Net Dependable Capacity and Net Heat Rate. After the Commercial
Operations Date, such annual testing shall be conducted on or about June 1 of
each Contract Year at a mutually agreeable time. Any test to determine the Net
Dependable Capacity and Net Heat Rate shall include a period of two hours during
which the Net Dependable Capacity is generated and the Electric Energy delivered
to the Point of Delivery. Once a test period has been initiated, it must last
for two hours unless Buyer's and Seller's authorized representatives mutually
agree to a shorter duration. Testing procedures to establish the Net Dependable
Capacity and Net Heat Rate from and after the Commercial Operations Date are
included as Appendix B and are consistent with ASME and OEM guidelines to the
extent practicable. No tests will be conducted or continued which, in the
opinion of Seller, should not be conducted or continued in accordance with
Prudent Industry Practice. Seller shall always have the right to perform a
Compressor Wash prior to a test. If Seller prevents or discontinues a test in
accordance with Prudent Industry Practice, Buyer shall have the right to require
a retest upon prior notice to Seller, if the test was conducted pursuant to
Buyer's request.

          8.2  Buyer's Right to Retest. Buyer shall have the right, at its
               -----------------------
expense (except as provided in this Section 8.2), to require Seller to establish
or reestablish the Net Dependable Capacity and Net Heat Rate on or about the
Commercial Operations Date and annually thereafter pursuant to a performance
test conducted at a mutually agreeable time if the Buyer reasonably believes
based upon operation of the Facility over the preceding thirty (30) days that
the Net Dependable Capacity as adjusted in accordance with Section 8.1 is more
than 2% below the then current level of Net Dependable Capacity or the Net Heat
Rate exceeds the Guaranteed Heat Rate. The first such test of a Unit (regardless
of the number of Units tested in such tests) in each Contract Year shall be
performed without a charge to Buyer. For the second test required by Buyer in
the same Contract Year, the Buyer shall pay to Seller $5,000, for the third
test, $15,000 and for the fourth test and all subsequent tests, $30,000
(regardless, in each case, of the number of Units tested in such tests). If the
results of the test indicate the Net Dependable Capacity is below 2% of the
current level or that Net Heat Rate exceeds the Guaranteed Heat Rate, Buyer
shall not pay for the cost of the test.

                                      40
<PAGE>

          8.3  Seller Right to Retest. Seller shall have the right to
               ----------------------
reestablish Net Dependable Capacity and Net Heat Rate pursuant to a capacity
test at mutually agreeable time(s). The results of each capacity test under this
Section 8.3 shall immediately determine or redetermine the Net Dependable
Capacity and Net Heat Rate retroactively to the date Seller can reasonably
demonstrate that it took corrective actions to improve the Net Dependable
Capacity or Net Heat Rate, adjusted by reference to the curves in Appendix F to
Reference Conditions.

          8.4  Conditions for Testing. During any capacity testing, Seller shall
               ----------------------
designate a maximum level for Buyer's Dispatch during such capacity testing,
which may be above the then current Net Dependable Capacity. All appropriate
auxiliary equipment associated with the Facility shall be in service at the time
of any test under this Section 8.3. Test data shall be collected with plant
instruments, except that Seller shall be allowed to substitute test
instrumentation for Facility instrumentation, provided that the test
instrumentation is of greater accuracy. Determination of net plant output shall
be with the Revenue Meter with appropriate adjustments made for transformer and
line losses.

          8.5  Scheduling of Testing. Any testing requested by Seller after the
               ---------------------
Commercial Operations Date shall either be performed during times Dispatched by
Buyer to generate or at mutually agreeable times. Buyer shall be entitled to
witness any such tests.

     9.   Ancillary Services
          ------------------

          9.1  Availability of Ancillary Services. Buyer shall be entitled, at
               ----------------------------------
no additional cost, to all Ancillary Services with respect to the Net Dependable
Capacity at the Point of Delivery. Seller does not guarantee the availability of
any ancillary services but does warrant that it will not remarket such services
to any third party; except in the case of Buyer default under Section 13.2.1.
Notwithstanding the above, Seller has the right to use Ancillary Services to
meet any requirement of the Interconnected Utility System, the ISO, or their
successors.

          9.2  Operational Considerations. Buyer may Dispatch the Facility with
               --------------------------
the objective to avoid the need for energy imbalance service from a control area
service provider, and to provide reactive power, load following (consistent with
the scheduling), voltage control, and frequency response, provided that such
services do not cause the Facility to operate outside of the Design Limits, and
do not impose any additional costs or liabilities on Seller.

          9.3  Future Enhancements. Seller shall provide such services,
               -------------------
including but not limited to automatic generation control, to the extent that
Buyer agrees to be responsible for reasonable incremental costs incurred by
Seller to provide such services subject to mutual agreement of the parties
working in good faith to arrive at an equitable arrangement.

     10.  Limitation of Liability and Exclusive Remedies
          ----------------------------------------------

          10.1 CONSEQUENTIAL DAMAGES. IN NO EVENT OR UNDER ANY CIRCUMSTANCES
               ---------------------
     SHALL EITHER PARTY (INCLUDING SUCH PARTY'S AFFILIATES AND SUCH PARTY'S AND
     SUCH AFFILIATES' RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS) BE
     LIABLE TO THE

                                      41
<PAGE>

     OTHER PARTY (INCLUDING SUCH PARTY'S AFFILIATES AND SUCH PARTY'S AND SUCH
     AFFILIATE'S RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS) FOR ANY
     SPECIAL, INCIDENTAL, EXEMPLARY, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES
     OR DAMAGES IN THE NATURE OF LOST PROFITS, WHETHER SUCH LOSS IS BASED ON
     CONTRACT, WARRANTY OR TORT. A PARTY'S LIABILITY UNDER THIS AGREEMENT SHALL
     BE LIMITED TO DIRECT, ACTUAL DAMAGES.

          10.2 SOLE REMEDIES FOR FAILURE TO DELIVER OR RELATED BREACHES.
               --------------------------------------------------------
     NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, OTHER THAN AS
     PROVIDED IN SECTION 10.3 BELOW, BUYER'S SOLE REMEDY FOR DAMAGES AND
     SELLER'S SOLE LIABILITY FOR DAMAGES FOR SELLER'S DEFAULT RELATING TO,
     ARISING OUT OF, OR IN ANY WAY CONNECTED WITH ANY FAILURE BY SELLER TO MEET
     GUARANTEED SUMMER ON PEAK AVAILABILITY OR GUARANTEED NON-SUMMER ON PEAK
     AVAILABILITY, TO DELIVER (OR CAUSE TO BE DELIVERED) ELECTRIC ENERGY,
     REPLACEMENT POWER OR SUBSTITUTE POWER AS DISPATCHED BY BUYER, OR FAILURE TO
     COMPLY WITH ANY FACILITY PERFORMANCE RELATED PROVISIONS INCLUDING SECTIONS
     4.1, 4.5.7, 4.5.8 OR 6.1, SHALL BE THE ADJUSTMENT TO CAPACITY CHARGES BASED
     UPON THE AVAILABILITY ADJUSTMENT SUBJECT TO THE LIMIT ON SELLER'S LIABILITY
     FOR SUCH ADJUSTMENT SET FORTH IN SECTION 7.1.3.4; AND SUCH AVAILABILITY
     ADJUSTMENT SHALL BE CONSIDERED LIQUIDATED DAMAGES IN LIEU OF ANY OTHER
     DAMAGES AT LAW, IN EQUITY OR AS SET FORTH ELSEWHERE IN THIS AGREEMENT.

          10.3 SOLE REMEDY FOR LATE COMMERCIAL OPERATIONS. BUYER'S SOLE REMEDIES
               ------------------------------------------
     AND SELLER'S SOLE LIABILITY FOR FAILURE OF THE COMMERCIAL OPERATIONS DATE
     TO OCCUR ON OR BEFORE THE TARGET COD (INCLUDING FAILURE TO COMPLY WITH
     SECTION 3) SHALL BE (a) THE OFFSET OF DELAY LDs AS SET FORTH IN SECTION 3.3
     AGAINST CAPACITY CHARGES AS THEY COME DUE, SUBJECT TO THE LIMITATION ON
     SELLER'S LIABILITY SET FORTH IN SUCH SECTION 3.3 AND (b) TERMINATION IN
     ACCORDANCE WITH SECTION 3.3.7, IF THE COMMERCIAL OPERATIONS DATE DOES NOT
     OCCUR BY THE FINAL COMMERCIAL OPERATIONS DATE.

          10.4 SOLE TERMINATION FOR DEFAULT REMEDIES. BUYER'S SOLE AND EXCLUSIVE
               -------------------------------------
     REMEDIES OF TERMINATION FOR DEFAULT SHALL BE AS SET FORTH IN SECTIONS
     3.3.7, 13 AND 19, AND SHALL BE, IN LIEU OF ANY OTHER REMEDIES OF
     TERMINATION AT LAW OR IN EQUITY.

          10.5 DIRECT DAMAGES FOR OTHER BREACHES. SUBJECT TO THE LIMITATIONS SET
               ---------------------------------
     FORTH IN SECTIONS 10.1, 10.2, AND 10.3, AND SUBJECT FURTHER TO THE
     ARBITRATION PROVISION OF SECTIONS 11.1 - 11.6, EACH

                                      42
<PAGE>

     PARTY SHALL BE ENTITLED WITHOUT DUPLICATION TO RECOVER FROM THE OTHER PARTY
     ITS DIRECT DAMAGES OR SEEK AN INJUNCTION OR OTHER EQUITABLE RELIEF FOR
     BREACH BY SUCH PARTY OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND TO ENFORCE
     ANY PAYMENT OBLIGATIONS OF SELLER HEREUNDER OR TO TAKE ALL LEGAL ACTION
     NECESSARY TO ENFORCE ANY ORDER, DECISION OR SETTLEMENT OF AN ARBITRATOR
     RENDERED PURSUANT TO SECTION 11.2.5.

     11.  Disagreements
          -------------

          11.1 Negotiations. The Parties shall attempt in good faith to resolve
               ------------
     all disputes promptly by negotiation, as follows. Any Party may give the
     other Party written notice of any dispute not resolved in the normal course
     of business. Executives of both Parties at levels one level above the
     personnel who have previously been involved in the dispute shall meet at a
     mutually acceptable time and place within ten (10) days after delivery of
     such notice, and thereafter as often as they reasonably deem necessary, to
     exchange relevant information and to attempt to resolve the dispute. If the
     matter has not been resolved within thirty (30) days from the referral of
     the dispute to senior executives, or if no meeting of senior executives has
     taken place within fifteen (15) days after such referral, either Party may
     initiate arbitration as provided hereinafter. If a Party intends to be
     accompanied at a meeting by an attorney, the other Party shall be given at
     least three (3) Business Days' notice of such intention and may also be
     accompanied by an attorney. All negotiations pursuant to this clause shall
     be confidential.

          11.2 Arbitration
               -----------

               11.2.1.   If the negotiation process provided for in Section 11.1
     above has not resolved the dispute, the dispute shall be decided solely and
     exclusively by arbitration in Chicago, Illinois in accordance with the
     Commercial Arbitration Rules of the American Arbitration Association. The
     arbitration shall be governed by the United States Arbitration Act (9
     U.S.C. ss. 1 et seq.), and judgment entered upon the award rendered by the
     arbitrator(s) may be entered in any court having jurisdiction thereof. This
     agreement to arbitrate and any other agreement or consent to arbitrate
     entered into in accordance herewith will be specifically enforceable under
     the prevailing arbitration law of any court having jurisdiction. Notice of
     demand for arbitration must be filed in writing with the other Party to
     this Agreement. The demand must be made within a reasonable time after the
     controversy has arisen. In no event may the demand for arbitration be made
     if the institution of legal or equitable proceedings based on such
     controversy is barred by the applicable statute of limitations. Any
     arbitration may be consolidated with any other arbitration proceedings.
     Either party may join any other interested parties. The award of the
     arbitrator shall be specifically enforceable in a court of competent
     jurisdiction.

          11.2.2    Either Party shall give to the other written notice in
     sufficient detail of the existence and nature of any dispute proposed to be
     arbitrated. The Parties shall attempt to agree on a person with special
     knowledge and expertise with respect to

                                      43
<PAGE>

     the matter at issue to serve as arbitrator. If the Parties cannot agree on
     an arbitrator within ten (10) days, each shall then appoint one individual
     to serve as an arbitrator and the two (2) thus appointed shall select a
     third arbitrator with such special knowledge and expertise to serve as
     chairman of the panel of arbitrators; and such three (3) arbitrators shall
     determine all matters by majority vote; provided, however, if the two (2)
                                             --------  -------
     arbitrators appointed by the Parties are unable to agree upon the
     appointment of the third arbitrator within five (5) days after their
     appointment, both shall give written notice of such failure to agree to the
     Parties, and, if the Parties fail to agree upon the selection of such third
     arbitrator within five (5) days thereafter, then either of the Parties upon
     written notice to the other may require such appointment from, and pursuant
     to the rules of, the Chicago office of the American Arbitration Association
     for commercial arbitration. Prior to appointment, each arbitrator shall
     agree to conduct such arbitration in accordance with the terms of this
     Agreement. The arbitration panel may choose legal counsel to advise it on
     the remedies it may grant, procedure, and such other legal issues as the
     panel deems appropriate but subject to limits on remedies and damages set
     forth in this Agreement.

          11.2.3    The Parties shall have sixty (60) days to perform discovery
     and present evidence and argument to the arbitrators. During that period,
     the arbitrators shall be available to receive and consider all such
     evidence as is relevant and, within reasonable limits due to the restricted
     time period, to hear as much argument as is feasible, giving a fair
     allocation of time to each Party to the arbitration. The arbitrators shall
     use all reasonable means to expedite discovery and to sanction
     noncompliance with reasonable discovery requests or any discovery order.
     The arbitrators shall not consider any evidence or argument not presented
     during such period and shall not extend such period except by the written
     consent of both Parties. At the conclusion of such period, the arbitrators
     shall have forty-five (45) days to reach a determination. To the extent not
     in conflict with the procedures set forth herein, which shall govern, such
     arbitration shall be held in accordance with the prevailing rules of the
     Chicago office of the American Arbitration Association for commercial
     arbitration.

          11.2.4    The arbitrators shall have the right only to interpret and
     apply the terms and conditions of this Agreement and to order any remedy
     allowed by this Agreement, but may not change any term or condition of this
     Agreement, deprive either Party of any right or remedy expressly provided
     hereunder, or provide any right or remedy that has been excluded hereunder.

          11.2.5    The arbitrators shall give a written decision to the Parties
     stating their findings of fact, conclusions of law and order, and shall
     furnish to each Party a copy thereof signed by them within five (5) days
     from the date of their determination.

     1.3  Costs. Each Party shall pay the cost of the arbitrator or arbitrators,
          -----
and any legal counsel appointed pursuant to subparagraph (a) above, with respect
to those issues as to which they do not prevail, as determined by the arbitrator
or arbitrators.

     11.4 Settlement Discussions. The Parties agree that no statements of
          ----------------------
position or offers of settlement made in the course of the dispute process
described in this Section

                                      44
<PAGE>

11 will be offered into evidence for any purpose in any litigation or
arbitration between the Parties, nor will any such statements or offers of
settlement be used in any manner against either Party in any such litigation or
arbitration. Further, no such statements or offers of settlement shall
constitute an admission or waiver of rights by either Party in connection with
any such litigation or arbitration. At the request of either Party, any such
statements and offers of settlement, and all copies thereof, shall be promptly
returned to the Party providing the same.

     11.5 Preliminary Injunctive Relief. Nothing in this Section 11 shall
          -----------------------------
preclude, or be construed to preclude, the resort by either Party to a court of
competent jurisdiction solely for the purposes of securing a temporary or
preliminary injunction to preserve the status quo or avoid irreparable harm
pending arbitration pursuant to this Section 11.

     11.6 Obligations to Pay Charges and Perform. If a disagreement arises on
          --------------------------------------
any matter which is not resolved as provided in Section 11.1 above, then,
pending the resolution of the disagreement by arbitration, Seller shall continue
to perform its obligations hereunder including its obligations to operate the
Units in a manner consistent with the applicable provisions of this Agreement
and Buyer shall continue to pay all charges and perform all other obligations
required in accordance with the applicable provisions of this Agreement. In
addition, notwithstanding the provisions of Section 13.3, neither Party shall be
entitled to terminate this Agreement for default (other than defaults pursuant
to Sections 13.1.1 or 13.2.1) by the other Party if the alleged default is the
subject of an arbitration pursuant to Section 11, pending the outcome of such
arbitration.

12.  Assignment; Project Financing; and Transfer of Units
     ----------------------------------------------------

     12.1 Assignment. Except as set forth in this Section 12, neither Party may
          ----------
assign its rights or obligations under this Agreement without the prior written
consent of the other Party. Either Party may assign this Agreement, without the
consent of the other Party, to an Affiliate or the parent company of an
Affiliate, but no such assignment shall release such assignor from any
obligations hereunder whether arising before or after such assignment.

     12.2 Transfers and Change of Control. For the Purposes of this Section
          -------------------------------
12.2, any direct transfer or series of direct transfers (whether voluntary or by
operation of law) of a majority of the outstanding voting equity interests of a
Party (or any entity or entities directly or indirectly holding a majority of
the outstanding voting equity interests of such Party) to any party other than
an Affiliate controlled by, or under common control with, such Party shall be
deemed an assignment of this Agreement. In such events; (i) prior notice of any
such assignment shall be provided to the other Party; (ii) any assignee (other
than Lenders or their designees pursuant to Section 12.3 below) shall expressly
assume assignor's obligation hereunder, unless otherwise agreed to by the other
Party; and (iii) except with respect to an assignment of this Agreement in its
entirety permitted hereunder by the Seller's Lender, no assignment, whether or
not consented to, shall relieve the assignor of its obligations hereunder in the
event the assignee fails to perform,

                                      45
<PAGE>

     unless the other party agrees in writing in advance to waive the assignor's
     continuing obligations pursuant to this Agreement, such waiver not to be
     unreasonably withheld.

          12.3  Consent to Assignment to Lender. Buyer consents to Seller's
                -------------------------------
     assignment of this Agreement to any Lenders or the granting to any Lenders
     of a lien or security interest in any right, title or interest in part or
     all of the Facility or any or all of Seller's rights under this Agreement
     for the purpose of the financing or refinancing of the Facility (or any
     part thereof) and the Interconnection Facilities; provided, however, that
                                                       --------  -------
     such assignment shall recognize Buyer's rights under this Agreement. Buyer
     further agrees to comply with reasonable requests of Seller in Seller's
     efforts to obtain project financing for the Facility, including without
     limitation execution of a consent to assignment by Buyer and delivery by
     Buyer's counsel of an opinion as described below as reasonably required by
     Lenders. Buyer recognizes that such financing will likely entail Buyer's
     execution of a consent to assignment that may grant certain rights to such
     Lenders, which shall be fully developed and described in the consent
     documents, including (i) this Agreement shall not be amended in any
     material respect or terminated (except for termination pursuant to the
     terms of this Agreement) without the consent of Lenders, which consent is
     not to be unreasonably withheld or delayed, (ii) Lenders shall be given
     notice of, and a reasonable opportunity to cure (in addition to the periods
     designated hereunder), any Seller breach or default of this Agreement, and
     (iii) if a Lender forecloses, takes a deed in lieu or otherwise exercises
     its remedies pursuant to any security documents, that Buyer shall, at
     Lender's request, continue to perform all of its obligations hereunder
     (subject to Buyer's rights under Section 13), so long as Lender or its
     nominee is performing all obligations of Seller hereunder in the place of
     Seller, and Lender may assign this Agreement to a Permitted Assignee so
     long as such Permitted Assignee assumes all obligations of Seller hereunder
     and so long as all monetary defaults of Seller are cured prior to such
     assignment, and may enforce all of Seller's rights to the extent Seller's
     obligations hereunder are being performed, (iii) that Lender(s) shall have
     no liability under this Agreement except during the period of such
     Lender(s)' ownership and/or operation of the Facility, (iv) that Buyer
     shall accept performance in accordance with this Agreement by Lender(s) or
     its (their) nominee, (v) if this Agreement is rejected in Seller's
     bankruptcy, Buyer will enter into a replacement agreement identical to this
     Agreement with a Permitted Assignee so long as such Permitted Assignee
     assumes all obligations of Seller hereunder and so long as all monetary
     defaults of Seller are cured prior to such assignment, and (vi) that Buyer
     shall make representations and warranties to Lender(s) as Lender(s) may
     reasonably request with regard to (A) Buyer's corporate existence, (B)
     Buyer's corporate authority to execute, deliver, and perform this
     Agreement, (C) the binding nature of (x) the document evidencing Buyer's
     consent to assignment to Lenders and (y) this Agreement on Buyer, (D)
     receipt of regulatory approvals by Buyer with respect to its execution and
     performance under this Agreement, and (E) whether to Buyer's knowledge, any
     defaults by Seller are known by Buyer then to exist under this Agreement.
     The documentation that Lenders may require under this Section 12.3 may
     include an opinion of counsel typical in project finance transactions.
     Seller agrees to reimburse Buyer for reasonable fees and expenses incurred
     by Buyer in connection with consent to assignment including without
     limitation, attorneys' fees and

                                      46
<PAGE>

     expenses. Such consent to assignment to Lenders shall provide that upon the
     exercise of trustee's or mortgagee's assignment rights pursuant to such
     assignment, trustee or mortgagee shall notify Buyer of the date and
     particulars of any such exercise of assignment rights.

          12.4  Potential Changes in Ownership or Control of Aquila. Seller
                ---------------------------------------------------
     acknowledges that Aquila may become the subject of a merger, acquisition,
     transfer of a majority of the outstanding voting equity of Aquila, or other
     change in control (the "Aquila Change in Control") in the near future and
     that such transaction may be deemed an assignment of this Agreement
     pursuant to Section 12.2. Seller agrees that, if, following the
     consummation of the Aquila Change in Control, Aquila, or its successor
     entity resulting from such transaction, provides evidence reasonably
     satisfactory to Lenders (in accordance with common industry practice)
     demonstrating that it has a credit rating that is equal to or higher than
     such rating applicable to UCU as of the date of this Agreement, Seller
     shall provide its consent pursuant to Section 12.1 to such deemed
     assignment, and upon consummation thereof shall release UCU from its joint
     and several liability and from all obligations arising from and after the
     Aquila Change in Control.

          12.5  Transfers Not in Accordance Herewith. Any sale, transfer, or
                ------------------------------------
     assignment of any interest in the Facility or in this Agreement made
     without fulfilling the requirements of this Section 12 shall be null and
     void and shall constitute an Event of Default.

     13.  Default, Termination and Remedies; Notice of Default. If Buyer
          ----------------------------------------------------
defaults under this Agreement, then Seller shall give Buyer written notice
describing such default. If Seller defaults under this Agreement, then Buyer
shall give Seller written notice describing such default and concurrently
provide any Lender with a copy of such notice.

          13.1  Events of Default of Seller. The following shall constitute
                ---------------------------
     Events of Default of Seller ("Seller Events of Default") upon their
     occurrence unless cured within seven (7) days after written receipt of
     Notice from Buyer of such failure requiring its remedy, in the case of
     defaults under Sections 13.1.1 (and twenty-one (21) days with respect to
     Section 13.1.2) or within sixty (60) days, in the case of all other
     defaults, after the date of written notice from Buyer as provided above,
     provided that, if any such other default cannot be cured within sixty (60)
     days with exercise of due diligence, and if Seller within such period
     submits to Buyer a plan reasonably designed to correct the default within a
     reasonable additional period of time not to exceed six (6) months, then an
     Event of Default shall not exist unless Seller fails to diligently pursue
     such cure or fails to cure such default within the additional period of
     time specified by such plan:

                13.1.1 Seller's failure to make payments when due; Seller
     Guarantor's failure to pay for Substitute Power (if Seller has failed
     previously to make such payment), a Delay Book Out Charge or an Outage Book
     Out Charge;

                13.1.2 (i) A Seller Guarantee ceases to remain in full force and
     effect in accordance with its terms (other than as a result of such Seller
     Guarantee having been

                                      47
<PAGE>

     fully drawn down by Buyer); (ii) the failure of a Seller Guarantor to make
     a payment upon a proper drawing by Buyer against a Seller Guarantee; or
     (iii) Seller fails to deliver a letter of credit as required by Section
     18.1 upon a Downgrade Event with respect to a Seller Guarantor.

                13.1.3 Seller's dissolution or liquidation;

                13.1.4 A Bankruptcy Event occurs with respect to Seller;

                13.1.5 Seller's assignment of this Agreement or any of Seller's
     rights under the Agreement or the sale or transfer of any interest in
     Seller in each case not in compliance with the provisions of Section 12;

                13.1.6 The sale by Seller to a third party of Electric Energy or
     Capacity committed to Buyer by Seller other than as permitted under this
     Agreement; and

                13.1.7 Any representation made by Seller under Section 14.1
     shall be false in any material respect.

          13.2  Buyer Default. The following shall constitute Events of Default
                -------------
     of ("Buyer Events of Default") upon their occurrence unless cured within
     seven (7) days after written receipt of Notice from Seller of such failure
     requiring its remedy, in the case of a default under Section 13.2.1 or
     within sixty (60) days, in the case of all other defaults, after the date
     of written notice from Buyer as provided above, provided that, if any such
     other default cannot be cured within sixty (60) days with exercise of due
     diligence, and if Seller within such period submits to Buyer a plan
     reasonably designed to correct the default within a reasonable additional
     period of time not to exceed six (6) months, then an Event of Default shall
     not exist unless Seller fails to diligently pursue such cure or fails to
     cure such default within the additional period of time specified by such
     plan:

                13.2.1 Buyer fails to pay any sum due from it hereunder on the
     due date thereof;

                13.2.2 A Bankruptcy Event occurs with respect to Buyer;

                13.2.3 Buyer dissolution or liquidation except in connection
     with an Aquila Change in Control pursuant to Section 12.4;

                13.2.4 Buyer's failure to post or maintain security in the form
     of a letter of credit as a result of a Downgrade Event with regard to Buyer
     as described in Section 18.2, to the levels, and upon the timing, specified
     in such Section 18.2;

                13.2.5 Buyer's assignment of this Agreement or any of Buyer's
     rights under this Agreement or the sale or transfer of any interest in
     Buyer in each case not in compliance with the provisions of Section 12; or

                                      48
<PAGE>

                13.2.6 Any representation made by Buyer under Section 14.1 shall
     be false in any material respect.

          13.3  Remedies.
                --------

                13.3.1 Upon the occurrence and during the continuance of a Buyer
     Event of Default or a Seller Event of Default, the non-defaulting Party may
     at its discretion suspend performance hereunder or terminate this Agreement
     upon thirty (30) days (or five (5) days for defaults under Section 13.1.4
     or 13.2.2 above) prior written notice to the Party in default. In addition,
     if Seller terminates this Agreement pursuant to this section 13.3.1, Seller
     may draw the amount of its direct damages incurred as a result of Buyer's
     default from the Buyer letter of credit, if any, posted pursuant to Section
     18.2.

                13.3.2 If a Buyer Event of Default under Section 13.2.1 has
     occurred and is continuing, Seller shall have the right to sell Capacity
     and Electric Energy from the Facility on a daily basis to third parties
     during the continuance of such Buyer Event of Default.

          13.4  Special Termination for Chronic Poor Availability. If the Summer
                -------------------------------------------------
     Average Availability for the Facility for a Summer Period (the "Initial
     Poor Availability Period") is less than 80%, then Seller shall promptly
     engage a mutually acceptable independent engineer to conduct an assessment
     of Seller's operating and maintenance practices to determine what steps are
     necessary to restore the Facility to an Equivalent Availability of at least
     97% and to recommend a detailed and specific protocol of equipment,
     operational and maintenance improvements necessary to achieve such
     Equivalent Availability (collectively, the "IE Protocol"). If Seller fails
     to fully and timely implement the IE Protocol and either (i) the Facility
     has a Summer Average Availability of less than 80% for each of the two
     Summer Periods subsequent to the Initial Poor Availability Period or (ii)
     if the Summer Average Availability for the Initial Poor Availability Period
     was less than 70%, and the Facility has a Summer Average Availability less
     than 70% for the Summer Period subsequent to the Initial Poor Availability
     Period, then Buyer may terminate this Agreement on September 15/th/ of the
     year that is two years after the Initial Poor Availability Period (in the
     case of a termination pursuant to the foregoing clause (i)) or on September
     15/th/ of the year after the Initial Poor Availability Period (in the case
     of a termination pursuant to clause (ii)). In the event of such
     termination, Seller shall have no liability to Buyer except for liability
     for obligations (including Availability Adjustments) accrued prior to such
     termination.

     14.  Representations and Warranties
          ------------------------------

          14.1  Representations and Warranties of Seller. Seller hereby makes
                ----------------------------------------
     the following representations and warranties to Buyer:

                14.1.1 Seller is a Delaware limited liability company duly
     organized, validly existing and in good standing under the laws of the
     State of Delaware, is qualified to do business in the State of Illinois and
     has the legal power and authority to own its

                                      49
<PAGE>

     properties, to carry on its business as now being conducted and to enter
     into this Agreement and, subject to the receipt of the regulatory approvals
     set forth in Section 20, carry out the transactions contemplated hereby and
     perform and carry out all covenants and obligations on its part to be
     performed under and pursuant to this Agreement.

                14.1.2 The execution, delivery and performance by Seller of this
     Agreement have been duly authorized by all necessary corporate action, and
     do not and will not require any consent or approval of Seller's Management
     Committee or equity holders other than that which has been obtained.

                14.1.3 The execution and delivery of this Agreement, the
     consummation of the transactions contemplated hereby and the fulfillment of
     and compliance with the provisions of this Agreement, do not and will not
     conflict with or constitute a breach of or a default under, any of the
     terms, conditions or provisions of any legal requirements, or any
     organizational documents, agreement, deed of trust, mortgage, loan
     agreement, other evidence of indebtedness or any other agreement or
     instrument to which Seller is a party or by which it or any of its property
     is bound, or result in a breach of or a default under any of the foregoing,
     and Seller has obtained all permits, licenses, approvals and consents of
     governmental authorities required for the lawful performance of its
     obligations hereunder.

                14.1.4 This Agreement constitutes the legal, valid and binding
     obligation of Seller enforceable in accordance with its terms, except as
     such enforceability may be limited by bankruptcy, insolvency,
     reorganization or similar laws relating to or affecting the enforcement of
     creditors' rights generally or by general equitable principles, regardless
     of whether such enforceability is considered in a proceeding in equity or
     at law.

                14.1.5 There is no pending, or to the knowledge of Seller,
     threatened action or proceeding affecting Seller before any governmental
     authority which purports to affect the legality, validity or enforceability
     of this Agreement.

          14.2  Representations and Warranties of Buyer. Aquila and UCU, on a
                ---------------------------------------
     joint and several basis, hereby make the following representation and
     warranties to Seller:

                14.2.1 Aquila is a corporation duly organized, validly existing
     and in good standing under the laws of the State of Delaware and UCU is a
     corporation duly organized, validly existing and in good standing under the
     laws of the State of Delaware. Each of Aquila and UCU is qualified to do
     business in the State of Illinois and has the legal power and authority to
     own its properties, to carry on its business as now being conducted and to
     enter into this Agreement and carry out the transactions contemplated
     hereby and perform and carry out all covenants and obligations on its part
     to be performed under and pursuant to this Agreement.

                14.2.2 The execution, delivery and performance by each of Aquila
     and UCU of this Agreement have been duly authorized by all necessary
     corporate action, and

                                      50
<PAGE>

     do not and will not require any consent or approval of its Board of
     Directors or shareholders other than that which has been obtained.

                14.2.3 The execution and delivery of this Agreement, the
     consummation of the transactions contemplated hereby and the fulfillment of
     and compliance with the provisions of this Agreement do not and will not
     conflict with or constitute a breach of or a default under, any of the
     terms, conditions or provisions of any legal requirements, or its Sections
     of incorporation or bylaws, or any deed of trust, mortgage, loan agreement,
     other evidence of indebtedness or any other agreement or instrument to
     which either Aquila or UCU is a party or by which it or any of its property
     is bound, or result in a breach of or a default under any of the foregoing.

                14.2.4 This Agreement constitutes the legal, valid and binding
     obligation of Aquila and UCU enforceable in accordance with its terms,
     except as such enforceability may be limited by bankruptcy, insolvency,
     reorganization or similar laws relating to or affecting the enforcement of
     creditors' rights generally or by general equitable principles, regardless
     of whether such enforceability is considered in a proceeding in equity or
     at law.

                14.2.5 There is no pending, or to the knowledge of Aquila or
     UtiliCorp, threatened action or proceeding affecting it before any
     governmental authority which purports to affect the legality, validity or
     enforceability of this Agreement.

     15.  Indemnification
          ---------------

     Each Party shall indemnify and hold harmless the other Party, and its
officers, directors, agents and employees from and against any and all claims,
demands, actions, losses, liabilities, expenses (including reasonable legal fees
and expenses), suits and proceedings of any nature whatsoever for personal
injury, death or property damage to each other's property or facilities or
personal injury, death or property damage to third parties (collectively
"Liabilities") caused by the negligence or willful misconduct of the
indemnifying Party that arise out of or are in any manner connected with the
performance of this Agreement, except to the extent such injury or damage is
attributable to the gross negligence or willful misconduct of, or breach of this
Agreement by, the Party seeking indemnification hereunder. Buyer shall indemnify
Seller from all Liabilities related to Electric Energy and Replacement Power
from and after delivery to the Point of Delivery or Replacement Power Delivery
Point as applicable; and Seller shall indemnify Buyer for all Liabilities
related to Electric Energy or Replacement Power prior to its delivery to the
Point of Delivery or Replacement Power Delivery Point as applicable.

     16.  Notices.
          -------

     Unless otherwise provided in this Agreement, any notice, consent or other
communication required to be made under this Agreement shall be in writing and
shall be delivered to the address set forth below or such other address or
persons as the receiving Party may from time to time designate by written
notice:

                                      51
<PAGE>

          If to Buyer, to:

               Aquila Energy Marketing Corporation
               1100 Walnut - Suite 2900
               Kansas City, Missouri 64106
               Attention: President
               Fax: (816) 527-1006


          With a copy to:

               Hogan & Hartson, L.L.P.
               555 Thirteenth Street, Columbia Square
               Washington, D.C. 20004-1109
               Attn: John P. Mathis, Esquire
               Fax: (202) 637-5910


          If to Seller, to:

               Elwood Energy III, LLC
               c/o Dominion Energy, Inc.
               120 Tredegar Street
               Richmond, VA 23219
               Attention: Christine M. Schwab, Esq.
               Fax: (804) 819-2202

          with a copy to:

               Elwood Energy III, LLC
               c/o McGuire, Woods, Battle & Boothe LLP
               901 E. Cary Street
               Richmond, VA 23219
               Attention:  Mark J. La Fratta, Esq.
               Telephone: (804) 775-1106
               Fax: (804) 698-2096

All notices shall be effective when received.

     17.  Confidentiality
          ---------------

     Each Party agrees that it will treat in confidence all documents, materials
and other information marked "Confidential" or "Proprietary" by the disclosing
Party ("Confidential Information") which it shall have obtained during the
course of the negotiations leading to, and its performance of, this Agreement
(whether obtained before or after the date of this Agreement). Confidential
Information shall not be communicated to any third party (other than, in the
case of

                                      52
<PAGE>

Seller, to its Affiliates, to its counsel, accountants, financial or tax
advisors, or insurance consultants, to prospective partners and other investors
in Seller and their counsel, accountants, or financial or tax advisors, or in
connection with its financing or refinancing; and in the case of Buyer, to its
Affiliates, or to its counsel, accountants, financial advisors, tax advisors or
insurance consultants). As used herein, the term "Confidential Information"
shall not include any information which (i) is or becomes available to a Party
from a source other than the other Party, (ii) is or becomes available to the
public other than as a result of disclosure by the receiving Party or its agents
or (iii) is required to be disclosed in the opinion for a Party's legal counsel
under applicable law or judicial, administrative or regulatory process, but only
to the extent it must be disclosed. The timing and content of any press releases
associated with this Agreement shall be agreed to by the Parties prior to any
public disclosure or distribution.

     18.  Security
          --------

          18.1  Seller Guarantees. Seller shall provide guarantees of Dominion
                -----------------
     Energy, Inc. ("Dominion") and Peoples Energy Corp ("Pecorp") (the "Seller
     Guarantees") in the form of Appendix H, each with a cumulative maximum
     liability amount for the Term equal to ten million dollars ($10,000,000).
     Such guarantees shall be in force beginning July 1, 2001 and shall remain
     in force until the termination of this Agreement. If and when a Seller
     Guarantor has paid out an amount equal to the maximum amount of the Seller
     Guarantee, such Seller Guarantor shall be released from any further
     liability to Buyer pursuant to this Agreement, and from and after such date
     Buyer shall be released from any obligation hereunder to obtain Substitute
     Power. Such Seller Guarantor may, in its sole discretion, reissue
     additional guarantees beyond such maximum. If a Downgrade Event occurs with
     respect to a Seller Guarantor, Seller shall post or cause to be posted in
     lieu of Seller's Guarantee, a letter of credit in favor of and reasonably
     acceptable to Buyer in an amount equal to its remaining liability under
     such Seller Guarantees. Neither Dominion nor Pecorp may assign or transfer
     its guarantee obligations to a third party entity without the consent of
     Buyer, and any assignee or transferee must have credit standing of
     Investment Grade or better . Pursuant to such guarantees, each of Dominion
     and Pecorp shall be severally, but not jointly or jointly and severally,
     liable for the performance of Seller, and their liabilities shall be
     limited to the amount stated in the guarantees for the applicable time
     period. Upon Buyer's request, Seller shall cause Dominion to provide
     audited financial statements on an annual basis after April 30 of each year
     for the preceding calendar year.

          18.2  Buyer Security. Upon request of Seller, Buyer shall be required
                --------------
     to post security in the form of a letter of credit in favor of and
     reasonably acceptable to Seller within ten (10) days of Seller's request if
     the rating of both Moody's and Standard & Poor's of UCU (or its successor
     or replacement entity pursuant to the operation of Section 12.4) the co-
     obligor under this Agreement, falls below Investment Grade. Such letter of
     credit shall be in an amount equal the next six (6) months Capacity Charges
     if such rating is one Rating Category below Investment Grade, or twelve
     (12) months Capacity Charges if such rating is two or more Rating
     Categories below Investment Grade, upon which Seller may draw any amounts
     due from Buyer hereunder and not timely paid. Any six

                                      53
<PAGE>

     month Capacity Charge letter of credit shall have a term of not less than
     180 days. Any twelve month Capacity Charge letter of credit shall have a
     term of not less than 364 days. If such letter of credit is not renewed at
     least thirty (30) days prior to expiration, Seller may draw the full amount
     of such letter of credit and hold such amounts to offset against liability
     (including future liability) of Buyer under this Agreement. If one or both
     rating agencies restores UCU's (or its successor or replacement entity
     pursuant to the operation of Section 12.4) long term debt rating to
     Investment Grade, than Buyer may request that Seller surrender the letter
     of credit to Buyer, and Seller will do so within three Business Days of
     such request.

     19.  Force Majeure
          -------------

          19.1 Definition. For the purposes of this Agreement, "Force Majeure
               ----------
     Event" means an event, condition or circumstance beyond the reasonable
     control of and without the fault or negligence of the Party affected (the
     "Affected Party") which, despite all reasonable efforts of the Affected
     Party to prevent it or mitigate its effects, prevents the performance by
     such Affected Party of its obligations hereunder. Subject to the foregoing,
     "Force Majeure Event" as to either Party, shall include:

               19.1.1    explosion and fire (in either case to the extent not
     attributable to the fault or the negligence of the Affected Party);

               19.1.2    lightning,  flood,  earthquake, landslide, tornado,
     unusually severe storms, or other natural calamity or act of God;

               19.1.3    strike or other labor dispute other than any labor
     dispute or strike by Seller's employees or the employees of any contractor
     or subcontractor employed at or performing work with respect to the
     Facility (except to the extent arising out of a strike or labor action by
     employees or labor organization members not employed at or performing work
     with respect to the Facility);

               19.1.4    war, insurrection, civil disturbance, sabotage or riot;

               19.1.5    failure to obtain Governmental Approvals as a result of
     a Change in Law;

               19.1.6    Changes in Law materially adversely affecting operation
     of the Facility;

               19.1.7    lack of fuel caused by a Force Majeure Event (as
     defined in this Agreement) experienced by the Facility's fuel supplier or
     transporter (as if for purposes of this Section 19.1.7 such fuel supplier
     or transporter is the Affected Party) or curtailment of firm gas
     transportation service to the Facility pursuant governmental order that
     materially affects the delivery of gas to the Facility;

                                      54
<PAGE>

               19.1.8    the failure of performance by any third party having an
     agreement with Seller, including, without limitation, any vendor, supplier,
     or customer of Seller that is excused by reason of force majeure (or
     comparable term), as defined in Seller's agreement with such third party
     but only if such event would also constitute Force Majeure as defined in
     this Agreement; and

               19.1.9    mechanical equipment breakdown caused by a Force
     Majeure Event described in Section 19.1.1, 19.1.2, or 19.1.4, and

               19.1.10   interruption of acceptance by the Interconnected
     Utility of delivery of Electric Energy from the Facility into the
     Interconnected Utility System.

          19.2 Obligations Under Force Majeure.
               --------------------------------

               19.2.1    If either Party is rendered unable, wholly or in part,
     by a Force Majeure Event, to carry out some or all of its obligations under
     this Agreement (other than obligations to pay money) despite all reasonable
     efforts of such Party to prevent or mitigate its effects, then, during the
     continuance of such inability, the obligation of such Party to perform the
     obligations so affected shall be suspended, except as provided in this
     Section 19. If Seller is the Affected Party, the Target COD shall be
     extended day for day for the duration of the effects of a Force Majeure
     Event.

               19.2.2    A Party relying on a Force Majeure Event shall give
     written notice of such Force Majeure Event to the other Party as soon as
     practicable after such event occurs, which notice shall include information
     with respect to the nature, cause and date of commencement of the
     occurrence(s), and the anticipated scope and duration of the delay. Upon
     the conclusion of the Force Majeure Event, the Party heretofore relying on
     such Force Majeure Event shall, with all reasonable dispatch, take all
     steps reasonably necessary to resume the obligation(s) previously
     suspended.

               19.2.3    Notwithstanding the foregoing, a Party shall not be
     excused under this Section 19, (x) for any non-performance of its
     obligations under this Agreement having a greater scope or longer period
     than is justified by the Force Majeure Event, (y) for the performance of
     obligations that arose prior to the Force Majeure Event, or (z) to the
     extent absent the Force Majeure Event the Affected Party would nonetheless
     have been unable to perform its obligations under this Agreement.

          19.3 Force Majeure Not Forced Outage. Any periods of Forced Outage or
               -------------------------------
     Forced Derating caused by Force Majeure Events shall not be included as
     Forced Outage Hours, or Forced Derating Hours for purposes of calculation
     of the Availability Adjustment.

          19.4 No Economic Force Majeure.  Force Majeure Events do not include
               -------------------------
     changes in market conditions.

                                      55
<PAGE>

          19.5 Continued Payment Obligation. Buyer shall have no obligation to
               ----------------------------
     pay the monthly Capacity Charge during a Force Majeure period when the
     Seller is the Affected Party except:

               19.5.1 Prior to Commercial Operations Date. Buyer shall have no
                      -----------------------------------
     obligation to pay Capacity Charges during a Force Majeure Period unless,
     and to the extent Seller delivers or causes to be delivered Replacement
     Power or Substitute Power. However, Seller's provision of Replacement
     Power, causing Substitute Power to be delivered, or payment of a Delay or
     Outage Book Out Charge shall not constitute, in any manner, a waiver of a
     Force Majeure Event.

               19.5.2 After the Commercial Operations Date. After the Commercial
                      ------------------------------------
     Operations Date, Buyer shall have no obligation to pay Capacity Charges
     during any Force Majeure Period where Seller is the Affected Party, except
     that Buyer shall continue to pay for 50% of the Capacity Charges for up to
     the first 15 days of any Force Majeure Event as if the Unit(s) were meeting
     the Guaranteed Availability during such period. Beginning on the sixteenth
     (16/th/) day Buyer shall have no obligation to pay Capacity Charges unless
     and to the extent (a) Seller provides Replacement Power or causes to be
     delivered Substitute Power, or (b) the Facility is Available for Dispatch
     by Buyer.

               19.5.3 Proration of Effect of Force Majeure Affecting Elwood
                      -----------------------------------------------------
     Station and Expansions Thereto. If a Force Majeure Event affects both the
     ------------------------------
     Units and other units at the Elwood Station (including expansions thereof),
     Seller shall equitably allocate the burdens of the effects of such Force
     Majeure Event over all affected units (for example, if a gas curtailment
     affecting Units 1-6 constitutes a Force Majeure, the gas available shall be
     ratably allocated over such six units to the extent feasible).

          19.6 Extended Force Majeure Event After Commercial Operations. If an
               --------------------------------------------------------
Affected Party reasonably believes that a Force Majeure Event that is preventing
it from performing its obligations hereunder could result in a suspension of
such performance for a period of one (1) month or longer, the Affected Party
shall submit a plan to the other Party to overcome the Force Majeure Event. Such
plan shall be submitted within thirty (30) Business Days of the start of the
Force Majeure Event. The plan shall set forth a course of repairs, improvements,
changes to operations or other actions which could reasonably be expected to
permit the Affected Party to resume performance its obligations under this
Agreement within a reasonable time frame projected in the plan. While such a
plan is in effect, the Affected Party shall provide weekly status reports to the
other Party notifying the other Party of the steps which have been taken to
remedy the Force Majeure Event and the expected remaining duration of the
Party's inability to perform its obligations. If the Force Majeure Event has not
been overcome within five (5) months from its inception, the Parties shall meet
to reassess the amount of time that is likely to pass before the Affected Party
can reasonably be expected to resume performance under this Agreement, and
Seller shall have thirty (30) days to establish a revised plan to overcome the
Force Majeure Event within twelve (12) months of its beginning. If at the end of
such thirty (30) days one or both of the Parties reasonably concludes that the
Force Majeure Event cannot be reasonably be expected to be overcome within
twelve months of the

                                      56
<PAGE>

beginning of the Force Majeure Event, the Party that is not the Affected Party
may terminate this Agreement with five (5) days notice to the Affected Party. If
the Affected Party is Seller and the Force Majeure Event only materially impacts
the operation of one Unit, then any termination by Buyer will be as to the
impacted Unit only. Notwithstanding Buyer's election not to terminate this
Agreement, Buyer shall nonetheless have the right to terminate this Agreement,
if Seller has failed to remedy the effects of the Force Majeure Event within
twelve months of its inception such that the Facility is capable of delivering
the Net Dependable Capacity and meeting other performance criteria hereunder.
Upon termination of this Agreement as provided in this Section 19.6, the Parties
shall have no further liability or obligation to each other except for any
obligation arising prior to the date of such termination and those that survive
termination as listed in Section 2.2. In addition to the foregoing, the Party
not prevented from performing its obligations due to the Force Majeure Event may
terminate this Agreement upon ten (10) Days prior written notice if (a) the
Affected Party fails to provide a Force Majeure remedy plan as provided for in
this Section 19.6, (b) the Affected Party fails to carry out the Force Majeure
remedy plans in a method reasonably designed to cause that Party to be able to
perform it obligations hereunder within twelve (12) months of the Force Majeure
Event occurring, or (c) within five (5) Business Days after a request therefor
fails to provide a weekly status report to the other Party.

     20.  Interconnection and Transmission
          --------------------------------

          20.1 Facilities. Seller shall own, operate, maintain and control
               ----------
     during the Term at its sole cost and expense all interconnection facilities
     located on the Facility site up to, but not including, the Point of
     Delivery. Seller shall pay all costs associated with interconnecting the
     Facility to the Interconnected Utility System, including any facilities
     upgrades required by ComEd.

          20.2 Transmission. Buyer shall be responsible for arranging and paying
               ------------
     for transmission services from the Point of Delivery, including any
     applicable transmission costs, system charges or line/system losses from
     the Point of Delivery, except to the extent of Incremental Transmissions
     Costs for Replacement Power. Buyer shall also be responsible for obtaining
     and paying for any ancillary or control area services required by FERC,
     ComEd or any independent system operator or other transmission utility with
     respect to the delivery and transmission of ComEd past the Point of
     Delivery.

     21.  Taxes
          -----

          21.1 Applicable Taxes. Each Party shall be responsible for the payment
               ----------------
     of all taxes imposed on its income or net worth. Except as provided in this
     Section 21, Seller shall be responsible for the payment of all present or
     future federal, state, municipal or other lawful taxes applicable by reason
     of the operation of the Facility or assessable on Seller's property or
     operations including taxes on (i) the purchase by Seller or delivery of
     fuel to the Facility, and (ii) production of electricity. Buyer shall pay
     all existing and any new sales, use, excise, and any other similar taxes,
     if any, imposed or levied by a governmental agency on the sale or use of or
     payments for the Electric Energy,

                                      57
<PAGE>

     Replacement Power, Substitute Power and Net Dependable Capacity sold and
     delivered under this Agreement arising at or after the Point of Delivery.

          Buyer shall indemnify, defend, and hold Seller harmless from any
     liability for all such taxes for which Buyer is responsible. Seller shall
     indemnify, defend, and hold Buyer harmless from any liability from all such
     taxes for which Seller is responsible. Buyer shall reimburse Seller
     promptly on demand for the amount of any such tax that is Buyer's
     responsibility hereunder that Seller remits, plus any penalties and
     interest incurred and remitted, except such penalties as result from
     Seller's conduct. Seller shall reimburse Buyer promptly on demand for the
     amount of any such tax that is Seller's responsibility hereunder that Buyer
     remits, plus any penalties, interest incurred and remitted, except
     penalties as result from Buyer's conduct.

          21.2 Contested Taxes. Neither Party shall be required to pay any such
               ---------------
     tax, assessment, charge, levy, account payable or claim if the validity,
     applicability or amount thereof is being contested in good faith by
     appropriate actions or proceedings (including posting security as may be
     required) which will prevent the forfeiture or sale of any property
     utilized under this Agreement or any material interference with the use
     thereof.

          21.3 Other Charges. Seller and Buyer will pay and discharge all lawful
               -------------
     assessments and governmental charges or levies imposed upon it or in
     respect to all or any part of its property or business, all trade accounts
     payable in accordance with usual and customary business terms, and all
     claims for work, labor, or materials which, if unpaid might become a lien
     or charge upon any of its property.

     22.  Miscellaneous Provisions
          ------------------------

          22.1 Non-Waiver. The failure of either Party to insist in any one or
               ----------
     more instances upon strict performance of any provisions of this Agreement,
     or to take advantage of any of its rights hereunder, shall not be construed
     as a waiver of any such provisions or the relinquishment of any such right
     or any other right hereunder, which shall remain in full force and effect.

          22.2 Relationship of Parties. This Agreement shall not be interpreted
               -----------------------
     or construed to create an association, joint venture, or partnership
     between the Parties or to impose any partnership obligation or liability
     upon either Party. Neither Party shall have any right, power or authority
     to enter into any agreement or undertaking for, or to act on behalf of, or
     to act as or be an agent or representative of, or to otherwise bind, the
     other Party.

          22.3 Successors and Assigns. This Agreement shall inure to the benefit
               ------------------------
     of and be binding upon the successors and permitted assigns of the Parties.

          22.4 Governing Laws. This Agreement shall be construed in accordance
               --------------
     with and governed by the laws of the State of Illinois without regard to
     its conflicts of laws provisions.

                                      58
<PAGE>

          22.5 Counterparts. This Agreement may be executed in more than one
     counterpart, each of which may be signed by fewer than all Parties, but all
     of which constitute the same Agreement.

          22.6 Third Party Beneficiaries.  This Agreement is intended solely
               -------------------------
for the benefit of the Parties hereto. Nothing in this Agreement shall be
construed to create a duty to or standard of care with reference to, or any
liability to, any Person not a Party to this Agreement.

          22.7 Financial Information. After Seller closes on any third party
               ---------------------
financing, then from the date of such financing, for information purposes only,
Seller shall, on a quarterly basis, provide to Buyer a statement of its debt
coverage ratio if it is below 1.5. If Seller's debt coverage ratio is 1.5 or
greater, Seller shall only inform Buyer that its debt cover ratio is 1.5 or
greater without further information. Buyer agrees to treat such information as
confidential pursuant to Section 17. In no event shall Buyer alter its
performance under this Agreement in any manner based upon such information.
Under no circumstances shall Seller have any liability to Buyer whatsoever as a
result of actions taken by Buyer in reliance upon such information and Buyer
hereby releases Seller for any liability whatsoever resulting therefrom.

     23.  Appointment of Aquila As UCU's Agent
          ------------------------------------

          23.1 Appointment.
               -----------

     UCU hereby appoints Aquila as its true and lawful agent and attorney-in-
     fact, with full power and this Agreement, including without limitation, any
     notices, consents, elections, waivers, correspondence, agreements,
     instruments or claims which Aquila deems appropriate; provided, however,
     that Aquila may not agree to amend this Agreement on behalf of UCU. UCU may
     terminate this appointment upon written notice to Seller.

          23.2 Presumption of Authority. Seller may conclusively presume and
               ------------------------
     rely upon the fact that to the extent specified in Section 23.1, any
     instrument executed by Aquila acting as Buyer or agent or attorney-in-fact
     for UCU in authorized, regular, and binding upon UCU, without further need
     for inquiry.

     24.  Entire Agreement and Amendments
          -------------------------------

     This Agreement supersedes all previous representations, understandings,
negotiations and agreements either written or oral between the Parties hereto or
their representatives with respect to the subject matter hereof and constitutes
the entire agreement of the Parties with respect to the subject matter hereof.
No amendments or changes to this Agreement shall be binding unless made in
writing and duly executed by both Parties.

                                      59
<PAGE>

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date set forth at the beginning of this Agreement.

                                 Buyer:  Aquila Energy Marketing Corporation

                                 By    /s/ VJ Horgan
                                    -------------------------------
                                    Name:  VJ Horgan
                                         --------------------------
                                    Title: Senior VP
                                          -------------------------


                                 Buyer:  UtiliCorp United Inc.

                                 By    /s/ Keith Stamm
                                    --------------------------------
                                    Name:  Keith Stamm
                                         ---------------------------
                                    Title: Senior VP
                                          --------------------------


                                 Seller: Elwood Energy III, LLC

                                 By    /s/ Ronald D. Usher
                                    --------------------------------
                                    Name:  Ronald D. Usher
                                    Title: General Manager

                                      60
<PAGE>

                                  APPENDIX A
                            FACILITY DESIGN LIMITS
                        AND OTHER DISPATCH RESTRICTIONS

(1)  The Design Limits for the Facility shall be the following:
     ----------------------------------------------------------

     (a)  The Maximum Load for a Facility shall be equal to the Net Dependable
          Capacity pursuant to OEM warranties, recommendations, and ambient
          conditions and the Governmental Approvals relating to the Facility;

     (b)  The Minimum Load for a Unit shall be equal to sixty percent (60%) of
          Net Dependable Capacity (but no less than ninety (90) MW) which shall
          adjust with ambient conditions in accordance with actual capability of
          the Units as provided in Appendix F.

     (c)  The minimum time required to Start-Up any one Unit (including the
          Elwood II Units) is twenty-two (22) minutes. The minimum time required
          to Start-Up multiple units under simultaneous Dispatch for two or
          three units is thirty-seven (37) minutes; provided however that the
          commencement of the Start-Up of second and the third Unit shall follow
          the commencement of Start-Up of the first Units by fifteen (15)
          minutes. The minimum time required to Start-Up four units under
          simultaneous Dispatch is fifty-two (52) minutes, provided however that
          the commencement of the Start-Up of the fourth Unit shall follow the
          commencement Start-Up of the second Unit by fifteen (15) minutes.

     (d)  The ramp rate (load increase rate) from synchronization to Minimum
          Load is twelve and one-half (12.5) MW per minute per Unit. Minimum
          time for the load increase from synchronization to Minimum Load is
          seven (7) minutes.

     (e)  The ramp rate (load increase rate) from Minimum Load to Maximum Load
          is thirteen (13) MW per minute per Unit. Minimum time for the load
          increase from Minimum Load to Maximum Load is four and six-tenths
          (4.6) minutes.

     (f)  The ramp down rate (load decrease rate) from all load levels is
          fifteen (11.5) MW per minute per Unit.

     (g)  The power factor of Electric Energy from a Unit as measured at the
          Unit's Revenue Meter shall be in the range from 0.90 lagging to 0.95
          leading.

(2)  Dispatch and Start Procedure
     ----------------------------

     (a)  Upon Start Up of Unit(s), Seller will ramp Unit(s) to Minimum Load
          according to the Design Limits above, and thereafter adjust the load
          between Minimum Load

                                      A-1


<PAGE>

          and Maximum Load of the Unit(s) according with the Dispatch
          Notification and in compliance with the Design Limits above.

     (b)  There shall be a minimum run time per Unit of four (4) consecutive
          hours; provided, however, Buyer shall have the option to Dispatch each
                 --------  -------
          Unit for a minimum run time of two (2) consecutive hours up to ten
          (10) times each Contract Year subject to Prudent Industry Practice and
          within manufacturer's recommendations.

     (c)  There shall be a minimum idle time of two (2) hours between the time a
          Unit is taken off-line until the initiation of the next Start Up
          Sequence for that Unit.

     (d)  Seller shall have the flexibility to Start Up the Units (along with
          the Elwood II Units) in a manner that meets Buyer's Dispatch schedule
          with the least number of Units, consistent with Design Limits and
          Prudent Industry Practice.

(3)  Generation During Start Up
     --------------------------

     (a)  During Start Up of one or more Units and while making load changes in
          response to Dispatch Requests, Seller shall use Prudent Industry
          Practices and commercially reasonable efforts to conform the Start Up
          and operation of the Unit(s) to the Dispatch Request and to minimize
          the amount of inadvertent Electric Energy generated prior to the
          Requested Load Delivery Time.

     (b)  Prior to the Requested Load Delivery Time, during the Start Up of one
          Unit, Seller expects to deliver no more than 26 MWh.

     (c)  Prior to the Dispatch Load Delivery Time, during the Start Up of two
          Units, Seller expects to deliver no more than 70 MWh.

     (d)  Prior to the Dispatch Load Delivery Time, during the Start Up of three
          Units, Seller expects to deliver no more than 114 MWh.

     (e)  Prior to the Dispatch Load Delivery Time, during the Start Up of four
          Units, (a 1Unit then 2 Units then 1 Unit Start Up), Seller expects to
          deliver no more than 178 MWh.

     (f)  Seller expects to deliver no more than 18 MWh per unit during ramp
          down to off line.

     (g)  If more MWh are delivered during the Start Up(s) than stated in
          sections (3)(a) to (3)(f) above, Buyer will market such MWh, and
          Seller will reimburse Buyer if Buyer's resale price is less than the
          Facility Electric Energy Rate at such time.

                                      A-2
<PAGE>

(4)  Permitted Runtime Hours
     -----------------------

     (a)  A maximum permitted runtime per Unit of 2500 hours per Contract Year,
          except in the first Contract Year, 90% of the maximum permitted
          runtime and in the final Contract Year, 92% of the maximum permitted
          runtime.

     (b)  To the extent that permitted runtime hours are less than 2500 hours
          per Contract Year, Seller shall be obligated to deliver Replacement
          Power or comparable consideration between the permitted runtime hours
          and 2500 hours per Contract Year.

                                      A-3



<PAGE>

                                  APPENDIX B

                     HEAT RATE and CAPACITY TEST PROCEDURE
                     -------------------------------------
                               Elwood Units 5 -8
                               -----------------

1.     Introduction
       ------------

This document describes the procedure for determining the Net Dependable
Capacities and corrected Net Heat Rates of Elwood Units 5-8. The Net Dependable
Capacities determined by this procedure will serve as the baseline establishing
the Capacity Payments and the amount of any future Forced Derating a given Unit
may experience. The corrected Net Heat Rates determined by this procedure will
be used to evaluate the thermal performance of each unit against the expected
degradation in thermal performance as predicted by GE Curve 519HA772, "Expected
Gas Turbine Plant Performance Loss Following Normal Maintenance and Off-Line
Compressor Wash."

The introduction should clarify that there are essentially two performance test
procedures considered in this Appendix B. The first will be conducted by the EPC
Contractor on or about the Commercial Operations and that the results of that
performance testing will serve both to qualify the EPC Contractor's performance
commitment to the Seller, and those results will apply in the determination of
the Net Dependable Capacity and Initial Net Heat Rate under this Agreement.
Thereafter periodic tests will be conducted by the Seller for the purpose of
determining ongoing performance of the Units and/or the Facility. The following
period tests conducted by the Seller shall be accomplished utilizing permanent
meters and instruments installed at the Facility for data acquisition, but
otherwise conducted with the intent of yielding results that will be comparable
with the first testing series.

There will be a series of pre-test activities to verify that the gas turbine
generator being tested is operating properly at full capability and is
adequately prepared for the capacity test. The Unit will be operated at 100%
capability in the normal (not overfiring) operating mode with evaporative
coolers in service.

The evaluation methodologies utilize correction factors to correct the measured
Unit capacity and Heat Rate to the Reference Conditions. Thermal performance and
capacity will be further adjusted for degradation according to the accumulated
fired hours at the time of the test. These correction factors are determined
from curves supplied by the turbine OEM.

2.     References
       ----------

     A.   Power Sales Agreement between Seller and Buyer relating to Units 5-8.

     B.   ASME Performance Test Procedures For General Electric Heavy Duty Gas
          Turbines, GEI-41067D.

                                 B-1
<PAGE>

   C.   Correction Curve set supplied by GE as part of output and thermal
        performance guarantees and GE Degradation Curve.

   D.   ASME PTC-22 (1997) Gas Turbine Performance Test Code

3.   Measurement and Instrumentation
     -------------------------------

The test set-up consists of the gas turbine generator unit, selected station
instruments, precision psychrometer, and weather instruments installed at the
Facility.

The ambient air humidity will be measured near the inlet air filter on each Unit
using a precision psychrometer.

The ambient temperature will be measured near the inlet air filter on each Unit
using a precision thermometer.

The barometric pressure will be determined by averaging the barometric pressure
readings from transmitters installed on each Unit.

The gross power output will be measured utilizing the General Electric Mark V
control system.

The generator net power output will be measured with the installed Transdata
watt-hour meter (Revenue Meter). The measurement will be made by repeatedly
timing a fixed increment of elapsed Watt-hours.

The test point duration will be determined by stopwatch.

The gaseous fuel flow rate will be measured with the orifice metering section
supplied with the gas turbine and its associated pressure and temperature
instrumentation.

4.   Pre-Test Preparation
     --------------------

     4.1 The gas turbine compressor section will be cleaned as described in the
     GE Turbine Generator Manual immediately prior to testing. The compressor
     inlet plenum will be inspected before and after the Compressor Wash. If the
     compressor is judged to be dirty after the initial wash, additional
     Compressor Wash may be required.

     4.2 The gas turbine exhaust thermocouple signal processing system will be
     confirmed to be operating to control specification. A
     thermocouple/calibrator will be used to input a 1000EF signal to the unit
     control system at the terminal strips where the unit thermocouple leads
     first terminate. At least three thermocouple wire sets for each control
     system computer will be checked (R, S, and T) for a total of at least nine
     wire sets. If proper operation cannot be confirmed, the control system must
     be corrected before testing. This calibration check will be conducted no
     more than sixty (60) days prior to the test and the calibration data sheets
     made part of the test record.

     4.3 The calibration and proper operation of all pertinent pressure
     transmitters will be verified not more than sixty (60) days prior to the
     conduct of the test. Copies of the

                                      B-2
<PAGE>

     calibration data sheets shall be made a part of each test record. At a
     minimum, the following transmitters shall be checked:

       .  Gas fuel static pressure transmitter(s)
       .  Gas fuel orifice differential pressure transmitter(s)
       .  Barometric pressure transmitter(s)

     During verification, pressure will be supplied to each transmitter with an
     NIST traceable device. The input pressure levels shall cover an appropriate
     estimated range of normal operation. If proper operation cannot be
     confirmed, the transmitter in question must be re-calibrated before
     testing.

     4.4 The Revenue Meter calibration must have been completed within the
     interval specified in Section 5.1 of the Agreement and best reasonable
     efforts shall be used to schedule the Revenue Meter calibration within the
     sixty (60) day period prior to the test.

     4.5 Inlet Guide Vane (IGV) angular position will be measured with a
     machinist's protractor. The angle will be measured on sixteen vanes around
     the inlet circumference. The average of these measurements will define the
     true position of the IGV's. The true angle will be compared to the feedback
     angle displayed by the unit control system. The control system angle must
     be in agreement with the measured angle to within plus or minus 0.5
     degrees, or the control system must be re-calibrated.

     4.6 A fuel sampling location will be identified as close as possible to the
     gas turbine and upstream of the metering station.

5.   Conducting the Test
     -------------------

Capacity and thermal performance testing will be conducted by Seller and
witnessed by Buyer at its discretion.

     5.1 A minimum of three test points will be conducted on each unit. Each
     test point will be conducted with the gas turbine power equipment and all
     test instrumentation functioning satisfactorily and in a steady-state
     condition with evaporative coolers in service and with the Mark V control
     system indicating that the unit is at base load. Prior to and during each
     test point, the gas turbine wheel space temperatures will be monitored
     individually to verify thermal stability. The gas turbine will be
     considered in a steady state condition when each turbine wheel space
     temperature changes by no more than 5EF over a fifteen minute period. The
     unit thermal stability will be documented by print-outs from the unit
     control system.

     5.2 In accordance with ASME PTC-22 (1997), additional parameters will be
     monitored during each test point to verify that the system is in a steady
     state condition. These parameters and corresponding limits of variation are
     listed in the following table:

                                      B-3
<PAGE>

<TABLE>
<CAPTION>
Table: Steady-State Conditions Summary
-----------------------------------------------------------------------------------------------------------
         Parameter                   Monitored               Variation Limit                  Rule
-----------------------------------------------------------------------------------------------------------
<S>                             <C>                          <C>                    <C>
    Turbine Wheelspace          Prior to and during                n/a              May not change more than
    Temperature (each)              test point                                       5EF over any 15 minute
                                                                                             period
-----------------------------------------------------------------------------------------------------------
    Ambient Temperature          During test point                + 4/o/F                Variation from test
                                                                  -                    point average may not
                                                                                          exceed limit
-----------------------------------------------------------------------------------------------------------
   Wet Bulb Temperature          During test point                + 3/o/F                Variation from test
                                                                  -                    point average may not
                                                                                          exceed limit
-----------------------------------------------------------------------------------------------------------
    Gross Power Output           During test point               + 2.0 %               Variation from test
                                                                 -                      point average may not
                                                                                          exceed limit
-----------------------------------------------------------------------------------------------------------
    Barometric Pressure          During test point                +0.5%                Variation from test
                                                                  -                    point average may not
                                                                                          exceed limit
-----------------------------------------------------------------------------------------------------------
</TABLE>

     5.3 In accordance with ASME PTC-22 (1997), each test point will be
     conducted over a thirty minute time period. Data will be recorded at five
     minute intervals (or more frequently) throughout the duration of the test
     point for a minimum of seven complete sets of instrument readings. No test
     point should exceed thirty minutes nor should the data recording interval
     exceed ten minutes.

     5.4. Fuel samples will be taken at the beginning and end of each test point
     for a total of twelve samples per unit (including duplicates). Fuel samples
     will be delivered to a reputable third party laboratory for analysis. As a
     backup, duplicate fuel samples will be retained at the site until all fuel
     analysis is completed.

     5.5 Testing shall be conducted with the inlet bleed heat system off and
     isolated.

6.   Evaluation
     ----------

     6.0 Test Boundary

     This test procedure and the calculations employed are intended to determine
     the Net Dependable Capacity and Net Heat Rate as shown on the Heat Rate
     Boundary Diagram.

     6.1 Net Dependable Capacity Evaluation
     --------------------------------------

     Generator Net Power Output
     --------------------------

     Generator Net Power Output (GNPO) will be calculated from the measured net
     power output from the test point divided by the test point duration in
     hours.

          GNPO = measured net power output (kWh) / test point duration (hrs.)

                                      B-4
<PAGE>

     Net Dependable Capacity
     -----------------------

     Generator Net Power Output (GNPO) will be corrected from the test
     conditions to the Reference Conditions. The result will be the Net
     Dependable Capacity (NDC).

     NDC = Net Dependable Capacity corrected to Reference Conditions.

     NDC = GNPO x CF\\1\\ x CF\\2\\ x CF\\3\\

           where:

           CF\\1\\ = Factor used to correct power from the measured ambient
           temperature and humidity to the contract conditions

                   = CF\\a\\ / CF\\b\\

                     where:

                           CF\\a\\ = Ambient temperature and humidity correction
                           factor from GE Curve [insert curve number when
                           received from GE] at the Reference Conditions

                           CF\\b\\ = Ambient temperature and humidity correction
                           factor from GE Curve [insert curve number when
                           received from GE] at the measured ambient temperature
                           and humidity

           CF\\2\\ = Factor used to correct power from the measured barometric
           pressure to the rated barometric pressure

                   = P\\R\\ / P\\M\\

                     where:

                           P\\R\\ = Rated barometric pressure (14.39 psia)
                           P\\M \\= Measured barometric pressure

           CF\\3\\ = Factor used to correct for accumulated fired hours prior to
           the test

                   = 1 + (% output loss from curve 519HA772)


     The NDC's determined from each test point will be summed and divided by the
     number of test points to determine the NDC for contract purposes.

                                      B-5
<PAGE>

         6.2 Net Heat Rate
         -----------------

         Net Heat Rate will be calculated from the measured rate of heat
         consumption and the measured net power output.

         NHR = Net Heat Rate, Btu/kWh (uncorrected)

         NHR = HC / GNPO, Btu/kWh

               where:
                      HC = Heat consumption rate, BTU/hr

                      GNPO = Generator net power output from paragraph 6.1, kW

         6.3  Heat Consumption Rate
         --------------------------

         Turbine rate of heat consumption will be calculated from the measured
         fuel flow rate (from turbine control system and compensated for fuel
         temperature) and the fuel higher heating value as determined from the
         average of laboratory analysis of the fuel samples.

         HC = Turbine heat consumption rate, Btu/hr

         HC = 3600 x W\\F\\ x HHV, Btu/hr
               where:

               3600 = units conversion, 3600 sec/hr
               W\\F\\ = Fuel flow rate, lb/s (measured by turbine control system
               and compensated for fuel temperature)
               HHV = Fuel higher heating value, Btu/lb

         6.4  Corrected Net Heat Rate
         ----------------------------

         Net Heat Rate will be corrected from test conditions to the Reference
         Conditions accounting for degradation in accordance with Section 1 of
         this procedure.

         CNHR = Corrected Net Heat Rate, Btu/kWh

         CNHR = NHR x CF1\\HR\\ x CF2\\HR\\

              where:

              NHR = Net Heat Rate from Section 6.2, Btu/kWh

              CF1\\HR\\ = Correction factor to correct heat rate from the
              measured ambient temperature and humidity to the Reference
              Conditions

                        = CF1\\HR(a)\\ / CF1\\HR(b)\\

                                      B-6
<PAGE>

                           where:

                           CF1\\HR(a)\\ = Ambient temperature and humidity
                           correction factor from GE Curve [insert curve number
                           when received from GE] at the Reference Conditions.

                           CF1\\HR(b)\\ = Ambient temperature and humidity
                           correction factor from GE Curve [insert curve number
                           when received from GE] at the measured ambient
                           temperature and humidity

                  CF2\\HR\\ = Factor to correct heat rate for the total fired
                  hours accumulated prior to the test. Factor derived from GE
                  Curve 519HA772 at the accumulated fired hours

                           = 1- (% heat rate degradation from curve 519HA772)

                                      B-7
<PAGE>

                                  APPENDIX C

                                COMMUNICATIONS

1.       Purpose

         The purpose of this Appendix is:

         (i)    To describe the nature of, and the requirements for the
                communication link that will be maintained between Seller and
                Buyer;

         (ii)   To identify and establish a communications procedure (the
                "Communications Procedure") that defines the responsibilities
                for, and the frequency, content, and logistics of communication
                between personnel responsible for operating the Facility
                ("Seller's Operator(s)") and Dispatcher concerning the
                availability and Dispatch of the Units. The Parties desire that
                such a procedure be established so that only responsible and
                authorized personnel can issue requests and/or orders that may
                impact reliability and availability of the Units.

2.       Communication Link.

         (i)    Buyer shall establish and maintain dedicated phone lines for all
                communications concerning the availability and Dispatch of the
                Units. These dedicated systems shall be used as the primary
                communications link between Seller's Operators and Buyer's
                Dispatcher responsible for Dispatching Buyer's system
                ("Generation Dispatcher"). In addition to the dedicated phone
                lines, Seller and Buyer shall establish standard phone line(s)
                as a back-up system. Seller's dedicated and standard phone lines
                are to be located at the control facilities of the Units.

         (ii)   At any time a Unit at the Facility is synchronized to the
                Interconnected Utility System, Seller must ensure that a
                Seller's Operator is available at the dedicated phone line (or
                back-up phone line if the dedicated line is unavailable) to
                respond to the Dispatch orders from the Generation Dispatcher.
                Both Seller and Buyer recognize that there may be operational
                conditions or events that will required Seller's Operator to
                leave the control room in order to resolve the condition or
                event. Both Seller and Buyer also recognize that these
                conditions or events will be infrequent. During such times,
                Seller's Operator must first notify the Generation Dispatcher,
                and provide information regarding how the Seller's Operator can
                be reached (i.e. a standard, back-up phone line and/or a
                cellular phone).

         (iii)  Seller shall establish and maintain a paging system for the
                Seller's Operators. Such paging system shall constitute the
                secondary communications link between Seller's Operators and the
                Generation Dispatcher. During those times when no Unit at the
                Facility is synchronized to the Interconnected Utility, or
                during power operation when Seller's Operator has left the
                control room to resolve an operational condition or event, this
                paging system will become the primary communications link
                between Seller's Operator and the Generation Dispatcher.
                Whenever the paging system is the primary communications link,
                Seller will

                                      C-1
<PAGE>

                ensure at least one Seller's Operator will be available at all
                times, via the paging system. Should the Dispatcher initiate the
                paging system, Seller's Operator(s) shall immediately contact
                the Generation Dispatcher via telephone for specific Dispatch
                orders. Seller will notify Buyer as soon as possible of any
                disruption or unavailability of the dedicated or standard phone
                lines, or the pager system, as soon as practicable. Seller shall
                also provide a list of back-up contracts to the paging system
                (i.e. the names and home phone numbers for the operators) to be
                used should the paging system fail, be inadvertently turned off,
                lost, unavailable due to satellite communication problems, or if
                the operator fails to respond. This list of back-up contacts
                shall be incorporated into the Communications Procedure.

3.       Communications Procedure

         (i)    Prior to the Commercial Operations Date, Seller and Buyer shall
                establish a mutually approved Communication Procedure that
                defines the responsibilities for, and the frequency, content,
                and logistics of, all communications between Seller's
                Operator(s) and the Generation Dispatcher concerning the
                availability and dispatch of the Units.

                Seller and Buyer shall ensure that the most current mutually-
                approved revision of this Communication Procedure is available
                to the Seller's Operator(s) and the Generation Dispatcher. Both
                Seller and Buyer shall mutually review and revise the
                communications procedure, as necessary.

         (ii)   The Communications Procedure shall provide telephone numbers for
                all dedicated and standard phone lines of both Seller and Buyer
                (including telephone numbers for facsimile machines) and pager
                numbers for all of Seller's Operators.

                The Communications Procedure shall also provide back-up contacts
                to the paging system (i.e. the names and home phone numbers for
                the operators) to be used should the paging system fail, be
                inadvertently turned off, lost, unavailable due to satellite
                communication problems, or if the Seller's Operator fails to
                respond.

                In addition, the Communications Procedure shall provide
                instructions and requirements to both the Seller's Operator(s)
                and the Generation Dispatcher describing the process(es) for
                communicating unit availability and Dispatch orders for the
                Units.

                At a minimum, the Communication Procedure shall provide
                communication instructions for the following items:

                         a)    Routine notifications (by both Seller's
                               Operator(s) and the Generation Dispatcher) of
                               expected hourly capability and demand, as
                               required by Section 4(e)(ii) of this Agreement.

                         b)    Start-up and Dispatch orders for Units;

                         c)    Conditions, issues or events that could affect
                               the output or reliability of the Units;

                                      C-2
<PAGE>

                         d)    The time of day (based on a twenty-four hour
                               clock) when a Unit is placed on line and taken
                               off line;

                         e)    Unit deratings, including the amount of any
                               derate, the estimated or known start time and
                               date of the derate, the estimated or known ending
                               time and date of the derate, and the cause of the
                               derate;

                         f)    Conditions at the Facility or a Unit that could
                               affect the present or anticipated load following
                               capability of a Unit;

                         g)    Planned and emergency testing requirements, or
                               other operational work that could limit the
                               availability or maneuverability of a Unit; and

                         h)    The use of operational reporting forms that are
                               provided in Appendix D.

4.  Revisions

Each Party shall appoint a representative having power and authority to act on
its behalf (the "Representative"). Each Party may change its Representative from
time-to-time, effective upon notice given to the other Party. A Representative
may change addresses, telephone numbers, facsimile numbers and other similar
data to be used in directing communications under this Appendix C or Appendix D
to the Party represented by that Representative. Each Representative shall be
authorized to agree on behalf of the Party that appointed that Representative to
any change in the forms or procedures provided under this Appendix C or Appendix
D.

                                      C-3
<PAGE>

                                  APPENDIX D

                           OPERATIONS REPORTING FORM

              DATA APPLICABLE FOR ELWOOD AVAILABILITY DECLARATION

<TABLE>
<S>                                                                                                <C>
Availability Declaration Period Commencing ___PM/AM,___/___/___TO____PM/AM,___/___/___

TO:                                           FAX No.
                                              Telephone No.

------------------------------------------------------------------------------------------------------

                           This FAX is a submission of
------------------------------------------------------------------------------------------------------

Generator's Offer Data                                                                             _
------------------------------------------------------------------------------------------------------

A revision to the previously submitted offer of ____/____/____                                     _
  --------
------------------------------------------------------------------------------------------------------

This document is a hardcopy back-up to the offer of ____/____/____                                 _
------------------------------------------------------------------------------------------------------

Unit_______    Available to Meet Net Dependable Capacity    _____ Yes    _____ No
Unit_______    Available to Meet Net Dependable Capacity    _____ Yes    _____ No

Deratings:                                 Time                       Time
Unit____  Cause Code: _____   MW______   Start______Date___/___/___    Stop______Date ____/___/___
Unit____  Cause Code: _____   MW_______   Start______Date___/___/___   Stop_______Date ____/___/___

Minimum:                                    Time                      Time
Unit____  Cause Code: _____   MW_______   Start______Date___/___/___   Stop_______Date ____/___/___
Unit____  Cause Code: _____   MW_______   Start______Date___/___/___   Stop_______Date ____/___/___
</TABLE>

Submitted By:

Date:

If you do not receive all the pages or if clarification or retransmission is
required call

Return acknowledgment FAX to the attention of:

FAX Number:
________________________________________________________________________________
________________________________________________________________________________

Acknowledgment by                   (Signature)

                                    (Title)

Acknowledgment date and time_____________________________________

                                      D-1
<PAGE>

                                  APPENDIX E

                  EQUIVALENT AVAILABILITY CALCULATIONS ("EA")

Seller shall calculate for each month, an Equivalent Availability ("EA") for
calculation of the Availability Adjustment Credit described in Section 7.1.3.
The EA will be calculated (a) for the Summer Super Peak Hours; (b) for the
Summer Partial-Peak Hours and (c) for the total of all Non-Summer On-Peak Hours
in accordance with the following formula:

                  EA    = {1 - [FOH  +  EFDH] }
                                -------------
                                     PH

Where:

Equivalent Forced Derated Hours ("EFDH") are the product of Forced Derated Hours
(FDH) and Size of Reduction (as defined below), divided by the Net Dependable
Capacity (NDC). Equivalent hours are computed for each Forced Derating and then
summed for the applicable period.

Forced Derated Hours ("FDH") and Forced Outage Hours ("FOH") are calculated over
On Peak Hours, during the applicable period, during which a Unit experiences a
Forced Derating or Forced Outage, as applicable. They are calculated monthly in
the Summer Period across all Summer Super Peak Hours and Summer Partial Peak
Hours and annually for Non-Summer On Peak Hours (as applicable).

Period Hours ("PH") means the total number of Summer Super Peak, Summer Partial
Peak or Non-Summer On Peak Hours (as applicable) in each period.

A Forced Outage or Forced Derating event shall only be included in the
calculation of the Equivalent Availability when Seller fails to meet, in whole
or part, Buyer's Dispatch and fails (a) to deliver or cause to be delivered
Replacement Power or Substitute Power, (b) to pay to Buyer Third Party Damages
pursuant to Section 4.7.4, or (c) to pay the Outage Book Out Charge due to an
unplanned component failure or other condition that requires the load on the
Unit or Facility to be reduced below the level Dispatched.

The Size of Reduction for a Forced Derating shall be determined by Seller and
shall be based upon observed output of a typical unit having the same equipment
problems under similar operating and environmental conditions. Buyer may request
Seller to justify the size of the reduction through provision of reasonably
available historical operating records in support of Seller's selection of the
Size of Reduction.

In the event of a continuing Forced Outage or Forced Derating, Buyer may submit
Dispatch requests as if the Unit were available for full operation, provided
such requests are submitted in good faith and support Buyer's need to Dispatch a
Unit absent the Forced Outage or Forced Derating. If other units at the Elwood
Station are operating, Buyer's request shall be deemed to

                                      E-1
<PAGE>

be in good faith. If no other units are running at the Elwood Station, Buyer
shall, if requested by Seller, provide written explanation of the reasons that
would demonstrate the economic justification for such Dispatch request.

The following shall not be deemed a Forced Outage or Forced Derating for
purposes of calculating the Equivalent Availability (a) a Unit is shut down for
Scheduled Maintenance Outages or Compressor Washes as provided in Section 6.4
and 6.5 respectively, (b) A Unit is down or derated, but Seller meets Buyer's
Dispatch order through (i) Replacement Power, (ii) Substitute Power, (iii)
payment of Third Party Damages pursuant to Section 4.7.4, or (iv) payment of an
Outage Book Out Charge, (c) a Unit is curtailed, interrupted, reduced or
increased by the Interconnected Utility pursuant to Sections 4.8 or 6.6.2, (d)
to the extent a Unit is not Available as a result of a Force Majeure Event, or
(e) Seller pays imbalance charges to compensate for any under-delivery.

                                      E-2
<PAGE>

                                   APPENDIX F

                             Output Adjustment Curve

                               Degradation Curves
                               ------------------

---------------------------------------------------------------------------
          CURVE                                        NUMBER
---------------------------------------------------------------------------
GE Expected Degradation                            719HA722
---------------------------------------------------------------------------


                           Turbine Performance Curves
                           --------------------------

---------------------------------------------------------------------------
          CURVE                                        NUMBER
---------------------------------------------------------------------------
Estimated Single Unit Performance, Base            522HA851
---------------------------------------------------------------------------
Compressor Inlet Temperature Corrections, Base     522HA852
---------------------------------------------------------------------------
Modulated Inlet Guide Vanes Effect                 522HA853
---------------------------------------------------------------------------
Altitude Correction for Turbine                    416HA622B
---------------------------------------------------------------------------
Humidity Effects Curve                             498HA697B
---------------------------------------------------------------------------

                                       F-1
<PAGE>

                                   APPENDIX G

                             Non Billable Generation

To establish the kilowatt-hours of electricity provided by a Unit and consumed
by other units for a billing period, the total for each billing period of
electricity consumed by each of units 5, 6, 7 and 8to be determined from the
individual unit electric meter readings using the Revenue Meter which will then
be summed for all four units. From this sum, the total monthly electricity
purchased from the Interconnected Utility (as determined from the Interconnected
Utility's revenue meter in the ComEd/Elwood Switchyard) will be subtracted,
yielding an aggregate total of the electricity consumed by all four units that
had been generated by one or more other units. This amount will then be
multiplied by the ratio of the total operating hours of a given unit to the
total operating hours of all four units. This product will represent the
electricity generated by a given unit and consumed by other units. This value
will be subtracted from the reading of the Revenue Meter for a particular
Committed Unit for billing purposes for the billing period. The following
example demonstrates the calculation methodology:

Total electricity generated Unit 5 - 30,000 MWh

Total electricity generated Unit 6 - 22,500 MWh

Total electricity generated Unit 7 - 15,000 MWh

Total electricity generated Unit 8 - 0 MWh


Total electricity consumed Unit 5 - 20,000 kWh

Total electricity consumed Unit 6 - 30,000 kWh

Total electricity consumed Unit 7 - 15,000 kWh

Total electricity consumed Unit 8- 2,000 kWh


Total electricity consumed All Units = 20,000 + 30,000 + 15,000 + 2,000
= 67,000 kWh

Total electricity purchased from the Interconnected Utility- 30,000 kWh

Total electricity consumed by all four units and generated by all four units =
67,000 - 30,000 = 37,000 kWh

                                      G-1
<PAGE>

Unit 5 monthly operating hours - 200

Unit 6 monthly operating hours - 150

Unit 7 monthly operating hours - 100

Unit 8 monthly operating hours - 0


Total operating hours = 200 + 150 + 100 + 0 = 450 hours


CALCULATION:

Electricity furnished by Unit 5 and consumed by the other units = (200/450)
(37,000) = 16,444 kWh (16.444 MWh)

Electricity furnished by Unit 6 and consumed by the other units = (150/450)
(37,000) = 12,333 kWh (12.333 MWh)

Electricity furnished by Unit 7 and consumed by the other units = (100/450)
(37,000) = 8,222 kWh (8.222 MWh)

Electricity furnished by Unit 8 and consumed by the other units = (0/450)
(37,000) = 0 kWh


Billable Generation Unit 5 = 30,000 - 16.444 = 29,983 MWh

Billable Generation Unit 6= 22,500 - 12.333 = 22,488 MWh

Billable Generation Unit 7 = 15,000 - 8.222 = 14,992 MWh

Billable Generation Unit 8 = 0-0 = 0 MWh"

                                       G-2
<PAGE>

                                 APPENDIX H-1

                                   GUARANTY

         THIS GUARANTY dated as of ___________, is made by Peoples Energy
Corporation, an Illinois corporation ("Guarantor"), in favor of UtiliCorp United
Inc. and Aquila Energy Marketing Corporation, Delaware corporations (referring
to collectively hereafter as "Creditor").

         WHEREAS, Creditor and Elwood Energy, III LLC, a Delaware limited
liability company ("Debtor"), have entered into that certain Power Sales
Agreement dated ___________, (the "Contract") and capitalized items used and not
otherwise defined herein shall have the meanings assigned to them in the
Contract;

         WHEREAS, Guarantor, through one or more subsidiaries, owns a 50 percent
membership interest in Debtor and the remaining 50 percent membership interest
is indirectly owned by Dominion Energy, Inc. ("Dominion"); and

         WHEREAS, to induce Creditor to extend credit to Debtor pursuant to the
Contract, Guarantor has agreed to provide to Creditor this Guaranty;

         NOW, THEREFORE, in consideration of the premises, Creditor's execution
of the Contract and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby agrees as
follows:

         1. Guaranty. Subject to the provisions hereof, Guarantor hereby
            --------
irrevocably, absolutely and unconditionally guarantees the timely payment of all
financial obligations which become due and payable by Debtor to Creditor under
or in connection with the Contract (collectively, "Obligations" and
individually, an "Obligation") such that, if Debtor fails, neglects or refuses
to perform any Obligation, Guarantor shall make such payment within ten business
days after Guarantor receives written notice thereof. Notwithstanding the
foregoing, as to any Obligation which Guarantor is called upon to pay or cause
payment to be made, Guarantor reserves to itself the right to assert any and all
defenses under the Contract which Debtor could assert against Creditor with
respect to such Obligation; provided, however, that such reservation shall not
include any legal or equitable discharge or defense of a guarantor or surety
arising out of any of the events described in Section 2 or Section 3 hereof. The
guarantee of Guarantor pursuant to this Section 1 is limited to 50 percent of
the Obligations ; provided, however, that in no event shall the maximum
aggregate liability of Guarantor under this Guaranty exceed $10,000,000 (the
"Guaranty Cap Amount") plus any amounts owed for collecting or enforcing this
Guaranty pursuant to the next sentence hereof; provided further, that
Guarantor's obligations hereunder are separate and independent obligations from
those of Dominion under Dominion's Guaranty of even date herewith and neither
Guarantor nor Dominion shall be liable for the obligations of the other under
their respective guaranties by reason of joint and several liability or
otherwise. In addition to Guarantor's liability for the Obligations set forth
herein, Guarantor agrees to pay to Creditor such further amounts as shall be
sufficient to cover the costs of collecting or enforcing this Guaranty
(including reasonable fees, expenses and disbursements of counsel). This
Guaranty is a guaranty of payment and not of collection.

                                      H-1
<PAGE>

         2.  Guaranty Absolute. Except as otherwise expressly provided in
             -----------------
Section 3(b) hereof, Creditor may, at any time and from time to time, without
the consent of or notice to Guarantor, and without impairing or releasing the
obligations of Guarantor hereunder:

             (a) change the manner, place or terms of payment of, or (if
applicable) interest rate on, or renew, extend or alter, any or all of the
Obligations;

             (b) amend, waive, terminate or otherwise modify the Contract or any
other document, instrument or agreement relating to any Obligation;

             (c) release (in whole or in part) or compromise or settle with
Debtor or any other person liable in any manner for payment of any or all of the
Obligations;

             (d) exercise or refrain from exercising any rights against Debtor
or any other person or otherwise act or refrain from acting or otherwise fail to
be diligent; and

             (e) take, substitute, surrender, exchange or release any collateral
or other security for any or all of the Obligations.

         3.  Effect of Certain Events. Guarantor agrees that, except as
             ------------------------
otherwise expressly provided in Section 3(b) hereof, Guarantor's liability
hereunder will not be released, reduced or impaired by the occurrence of any of
the following events:

             (a) the liquidation, dissolution, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment or other similar proceeding affecting
the status, composition, identity, existence, assets or obligations of Debtor,
or the disaffirmance or termination of any of the Obligations or the Contract in
or as a result of any such proceeding;

             (b) the renewal, consolidation, extension, modification or
amendment from time to time of the Contract or any document, instrument or
agreement relating to any Obligation, provided, however, that notwithstanding
anything contained in this Guaranty or the Contract to the contrary, Creditor
and Debtor may not, without the prior written consent of Guarantor, (i) extend
or lengthen the Term of the Contract (as defined in the Contract as of the date
hereof) beyond or (ii) change, modify or amend the definition of the term
"Capacity Charges" (as defined in the Contract as of the date hereof) in any
manner that would increase Guarantor's liability under this Guaranty;

             (c) the failure, delay, waiver or refusal by Creditor to exercise,
in whole or in part, any right or remedy held by Creditor with respect to the
Contract or the Obligations thereunder; or

             (d) the sale, encumbrance, transfer or other modification of the
ownership of Debtor or Creditor or any change in the name, identity, business,
structure, composition, financial condition or management (including, without
limitation, by reason of a merger, dissolution, consolidation or reorganization)
of Debtor or Creditor;

                                      H-2
<PAGE>

             (e) future changes in conditions, including change of law, or any
invalidity, unenforceability or irregularity with respect to the execution and
delivery of the Contract or this Guaranty; and

             (f) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor or surety, subject to clause
(ii) of Section 1 hereof.

         4.  Waivers. Except as expressly provided in Section 1 hereof,
             -------
Guarantor waives:

             (a) notice of acceptance of this Guaranty, of the creation or
existence of the Contract or any Obligation thereunder, and of any action by
Creditor in reliance hereon or in connection herewith;

             (b) promptness, diligence, presentment, demand for payment, notice
of dishonor or nonpayment, protest and notice of protest with respect to any
Obligation;

             (c) any requirement that suit be brought against, or any other
action by Creditor be taken against, Debtor or any other person as a condition
to Guarantor's obligations under this Guaranty or as a condition to enforcement
of this Guaranty against Guarantor.

             (d) notice of adverse change in the financial condition of Debtor
or any other fact which might increase Creditor's risk; and

             (e) any other notices or demands to which guarantors or sureties
may be entitled.

         5.  Continuing Guaranty. This Guaranty is an absolute and continuing
             -------------------
guaranty. This Guaranty shall terminate when all of the Obligations have been
indefeasibly paid in full to Creditor. Notwithstanding anything in this Guaranty
to the contrary, this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, if at any time, either before or after the
termination hereof, payment of the Obligations guaranteed pursuant to this
Guaranty, or any part thereof, is rescinded or must be returned by Creditor upon
the insolvency, bankruptcy or reorganization of Debtor or Guarantor, all as
though such payment had not been made.

         6.  Representations and Warranties. Guarantor represents and warrants
             ------------------------------
to Creditor as follows:

             (a) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of Illinois and has full corporate power and
authority to execute, deliver and perform this Guaranty.

             (b) The execution, delivery and performance of this Guaranty by
Guarantor have been and remain duly authorized by all necessary corporate action
on the part of by Guarantor and do not contravene any provision of law or of
Guarantor's certificate of incorporation or bylaws or any contractual
restriction binding on Guarantor or any of its assets.

             (c) All consents, authorizations and approvals of, and
registrations and declarations with, any governmental authority necessary for
the due execution, delivery and

                                      H-3
<PAGE>

performance of this Guaranty by Guarantor have been obtained and remain in full
force and effect and all conditions thereof have been duly complied with, and no
other action by, and no notice to or filing with, any governmental authority is
required in connection with the execution, delivery or performance by Guarantor
of this Guaranty.

             (d) This Guaranty constitutes the legal, valid and binding
obligation of Guarantor enforceable against Guarantor in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

             (e) Debtor is indirectly partially owned by Guarantor, and this
Guaranty reasonably may be expected to benefit, directly or indirectly,
Guarantor.

         7.  Covenants. Guarantor agrees that, so long as this Guaranty remains
             ---------
in effect, Guarantor will promptly furnish to Creditor, upon request at any time
and from time to time, a copy of Guarantor's most recent annual report on Form
10-K or quarterly report on Form 10-Q, in each case as filed with the Securities
and Exchange Commission (the "SEC"); provided however, if Guarantor is not
required to file such reports with the SEC, Guarantor agrees to furnish to
Creditor such comparable financial information respecting Guarantor as Creditor
may from time to time reasonably request.

         8.  Miscellaneous.
             -------------

             (a)  Notice. Any notice or other communication given hereunder by
                  ------
either Guarantor or Creditor to the other party ("Notice") shall be in writing
and delivered personally, mailed by registered or certified mail, postage
prepaid and return receipt requested, by telecopier, or by courier guaranteeing
overnight delivery, as follows:

                  (i)      if to Guarantor:

                           Peoples Energy Corporation
                           130 East Randolph Drive
                           Chicago, Illinois
                           Attention: William W. Reynolds, Treasurer
                           Telecopy No.: (312) 240-4348


                  (ii)     if to Creditor:



Notice given by personal delivery or mail shall be effective upon actual receipt
or refusal of receipt. Notice given by telecopier shall be deemed effective upon
transmission and electronic confirmation by the transmitting telecopier. All
Notices by telecopier shall be confirmed promptly after transmission in writing
by certified mail or personal delivery. Any party may change any address to
which Notice is to be given to it by giving Notice as provided above of such
change of address. All amounts becoming payable by Guarantor to Creditor under
this Guaranty shall be payable at

                                      H-4
<PAGE>

Creditor's offices located at its address for purposes of Notice, or such other
place as Creditor may from time to time designate (including wire transfer
instructions).

            (b) Amendments; Waivers; Remedies. All amendments, waivers, consents
                -----------------------------
or approvals arising pursuant to this Guaranty must be in writing signed by
Guarantor and Creditor. No failure on the part of Creditor to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise thereof or the exercise of any other right, power or
privilege operate as such a waiver. No right, power or remedy of Creditor under
this Guaranty or the Contract shall be exclusive of any other right, power or
remedy, but shall be cumulative and in addition to any other right, power or
remedy thereunder or now or hereafter existing by law or in equity.

            (c) Severability. If any provision of this Guaranty or the
                ------------
application thereof to any party or circumstance shall be invalid or
unenforceable, then the remaining provisions or the application of such
provision to parties or circumstances other than those as to which it is invalid
or unenforceable, shall continue to be valid and enforceable.

            (d) Assignment. Neither Guarantor nor Creditor may assign its rights
                ----------
or obligations under this Guaranty without the other party's prior written
consent, which consent may not be unreasonably withheld; provided, however,
Creditor may assign its rights hereunder without consent of Guarantor (but with
prior notice thereof to Guarantor) to any party to whom the Contract has been
properly assigned in accordance with the terms thereof. Subject to the
foregoing, this Guaranty shall be binding on, and shall inure to the benefit of,
Guarantor and Creditor and their respective successors and assigns.

            (e) GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
                -------------
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS. GUARANTOR AND CREDITOR EACH HEREBY
IRREVOCABLY SUBMITS FOR ITSELF AND IN RESPECT OF ITS PROPERTY TO THE ORIGINAL
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN CHICAGO, ILLINOIS WITH
REGARD TO ANY SUIT, CLAIM OR ACTION IN ANY WAY RELATED TO THE EXECUTION,
DELIVERY OR PERFORMANCE OF THIS GUARANTY, AND GUARANTOR HEREBY IRREVOCABLY
WAIVES ANY AND ALL OBJECTIONS TO WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH SUITS, CLAIMS OR ACTIONS IN SUCH JURISDICTIONS, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS. THE PARTIES HERETO FURTHER AGREE THAT ANY AND ALL SUCH
SUITS, CLAIMS OR ACTIONS SHALL BE BROUGHT OR FILED EXCLUSIVELY IN SUCH COURTS
AND NOWHERE ELSE.

            (f) Headings. The headings of the sections and subsections of this
                --------
Guaranty are for convenience only, and shall not limit or otherwise affect the
meaning hereof.

            (g) Counterparts. Guarantor may sign this Guaranty in any number of
                ------------
counterparts, each of which shall be an original but all of which when taken
together shall constitute one and the same instrument.



                                      H-5
<PAGE>

                  (h) Construction of Agreement. Unless the context of this
                      -------------------------
Agreement clearly requires otherwise, (i) pronouns, wherever used herein and of
whatever gender, shall include natural persons, corporations, and associations
of every kind and character, (ii) the gender of all words used in this Guaranty
shall include the masculine, feminine and neuter, (iii) the words "includes" or
"including" shall mean "including without limitation", and (iv) the words
"hereof", "herein", "hereunder" and similar terms in this Guaranty shall refer
to this Guaranty as a whole and not any particular section or subsection in
which such words appear.

                  (i) Interpretation and Reliance. No presumption will apply in
                      ---------------------------
favor of any party hereto in the interpretation of this Guaranty or in the
resolution of any ambiguity of any provision hereof.


         IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed
effective as of the date first above written.

                                                PEOPLES ENERGY CORPORATION

                                                By:___________________________

                                                Name:_________________________

                                                Title:________________________

                                      H-6
<PAGE>

                                 APPENDIX H - 2

                                    GUARANTY

         THIS GUARANTY dated as of ___________, is made by Dominion Energy,
Inc., a Virginia corporation ("Guarantor"), in favor of UtiliCorp United Inc.
and Aquila Energy Marketing Corporation, Delaware corporations (referred to
collectively hereafter as "Creditor").

         WHEREAS, Creditor and Elwood Energy III, LLC, a Delaware limited
liability company ("Debtor"), have entered into that certain Power Sales
Agreement dated ___________, (the "Contract") and capitalized terms used and not
otherwise defined herein shall have the meanings assigned to them in the
Contract;

         WHEREAS, Guarantor, through one or more subsidiaries, owns a 50 percent
membership interest in Debtor and the remaining 50 percent membership interest
is indirectly owned by Peoples Energy Corporation ("Peoples"); and

         WHEREAS, to induce Creditor to extend credit to Debtor pursuant to the
Contract, Guarantor has agreed to provide to Creditor this Guaranty;

         NOW, THEREFORE, in consideration of the premises, Creditor's execution
of the Contract and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby agrees as
follows:

         1. Guaranty. Subject to the provisions hereof, Guarantor hereby
            --------
irrevocably, absolutely and unconditionally guarantees the timely payment of all
financial obligations which become due and payable by Debtor to Creditor under
or in connection with the Contract (collectively, "Obligations" and
individually, an "Obligation") such that, if Debtor fails, neglects or refuses
to perform any Obligation, Guarantor shall make such payment within ten business
days after Guarantor receives written notice thereof. Notwithstanding the
foregoing, as to any Obligation which Guarantor is called upon to pay or cause
payment to be made, Guarantor reserves to itself the right to assert any and all
defenses under the Contract which Debtor could assert against Creditor with
respect to such Obligation; provided, however, that such reservation shall not
include any legal or equitable discharge or defense of a guarantor or surety
arising out of any of the events described in Section 2 or Section 3 hereof. The
guarantee of Guarantor pursuant to this Section 1 is limited to 50 percent of
the Obligations; provided, however, that in no event shall the maximum aggregate
liability of Guarantor under this Guaranty exceed $10,000,000 (the "Guaranty Cap
Amount") plus any amounts owed for collecting or enforcing this Guaranty
pursuant to the next sentence hereof; provided further, that Guarantor's
obligations hereunder are separate and independent obligations from those of
Peoples under Peoples' Guaranty of even date herewith and neither Guarantor nor
Peoples shall be liable for the obligations of the other under their respective
guaranties by reason of joint and several liability or otherwise. In addition to
Guarantor's liability for the Obligations set forth herein, Guarantor agrees to
pay to Creditor such further amounts as shall be sufficient to cover the costs
of collecting or enforcing this Guaranty (including reasonable fees, expenses
and disbursements of counsel). This Guaranty is a guaranty of payment and not of
collection.

                                      H-1
<PAGE>

         2. Guaranty Absolute. Except as otherwise expressly provided in Section
            -----------------
3(b) hereof, Creditor may, at any time and from time to time, without the
consent of or notice to Guarantor, and without impairing or releasing the
obligations of Guarantor hereunder:

            (a) change the manner, place or terms of payment of, or (if
applicable) interest rate on, or renew, extend or alter, any or all of the
Obligations;

            (b) amend, waive, terminate or otherwise modify the Contract or any
other document, instrument or agreement relating to any Obligation;

            (c) release (in whole or in part) or compromise or settle with
Debtor or any other person liable in any manner for payment of any or all of the
Obligations;

            (d) exercise or refrain from exercising any rights against Debtor or
any other person or otherwise act or refrain from acting or otherwise fail to be
diligent; and

            (e) take, substitute, surrender, exchange or release any collateral
or other security for any or all of the Obligations.

         3. Effect of Certain Events. Guarantor agrees that, except as otherwise
            ------------------------
expressly provided in Section 3(b) hereof, Guarantor's liability hereunder will
not be released, reduced or impaired by the occurrence of any of the following
events:

            (a) the liquidation, dissolution, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment or other similar proceeding affecting
the status, composition, identity, existence, assets or obligations of Debtor,
or the disaffirmance or termination of any of the Obligations or the Contract in
or as a result of any such proceeding;

            (b) the renewal, consolidation, extension, modification or amendment
from time to time of the Contract or any document, instrument or agreement
relating to any Obligation, provided, however, that notwithstanding anything
contained in this Guaranty or the Contract to the contrary, Creditor and Debtor
may not, without the prior written consent of Guarantor, (i) extend or lengthen
the Term of the Contract (as defined in the Contract as of the date hereof)
beyond _____________, or (ii) change, modify or amend the definition of the term
"Capacity Charges" (as defined in the Contract as of the date hereof) in any
manner that would increase Guarantor's liability under this Guaranty;

                                      H-2
<PAGE>

          (c) the failure, delay, waiver or refusal by Creditor to exercise, in
whole or in part, any right or remedy held by Creditor with respect to the
Contract or the Obligations thereunder; or

          (d) the sale, encumbrance, transfer or other modification of the
ownership of Debtor or Creditor or any change in the name, identity, business,
structure, composition, financial condition or management (including, without
limitation, by reason of a merger, dissolution, consolidation or reorganization)
of Debtor or Creditor;

          (e) future changes in conditions, including change of law, or any
invalidity, unenforceability or irregularity with respect to the execution and
delivery of the Contract or this Guaranty; and

          (f) any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor or surety, subject to clause (ii)
of Section 1 hereof.

     4.   Waivers. Except as expressly provided in Section 1 hereof, Guarantor
waives:

          (a) notice of acceptance of this Guaranty, of the creation or
existence of the Contract or any Obligation thereunder, and of any action by
Creditor in reliance hereon or in connection herewith;

          (b) promptness, diligence, presentment, demand for payment, notice of
dishonor or nonpayment, protest and notice of protest with respect to any
Obligation;

          (c) any requirement that suit be brought against, or any other action
by Creditor be taken against, Debtor or any other person as a condition to
Guarantor's obligations under this Guaranty or as a condition to enforcement of
this Guaranty against Guarantor.

          (d) notice of adverse change in the financial condition of Debtor or
any other fact which might increase Creditor's risk; and

          (e) any other notices or demands to which guarantors or sureties may
be entitled.

     5.   Continuing Guaranty. This Guaranty is an absolute and continuing
          -------------------
guaranty. This Guaranty shall terminate when all of the Obligations have been
indefeasibly paid in full to Creditor. Notwithstanding anything in this Guaranty
to the contrary, this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, if at any time, either before or after the
termination hereof, payment of the Obligations guaranteed pursuant to this
Guaranty, or any part thereof, is rescinded or must be returned by Creditor upon
the insolvency, bankruptcy or reorganization of Debtor or Guarantor, all as
though such payment had not been made.

     6.    Representations and Warranties. Guarantor represents and warrants to
           ------------------------------
Creditor as follows:

                                      H-3
<PAGE>

            (a) Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of Virginia and has full corporate power and
authority to execute, deliver and perform this Guaranty.

            (b) The execution, delivery and performance of this Guaranty by
Guarantor have been and remain duly authorized by all necessary corporate action
on the part of by Guarantor and do not contravene any provision of law or of
Guarantor's certificate of incorporation or bylaws or any contractual
restriction binding on Guarantor or any of its assets.

            (c) All consents, authorizations and approvals of, and registrations
and declarations with, any governmental authority necessary for the due
execution, delivery and performance of this Guaranty by Guarantor have been
obtained and remain in full force and effect and all conditions thereof have
been duly complied with, and no other action by, and no notice to or filing
with, any governmental authority is required in connection with the execution,
delivery or performance by Guarantor of this Guaranty.

            (d) This Guaranty constitutes the legal, valid and binding
obligation of Guarantor enforceable against Guarantor in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

            (e) Debtor is indirectly partially owned by Guarantor, and this
Guaranty reasonably may be expected to benefit, directly or indirectly,
Guarantor.

         7. Covenants. Guarantor agrees that, so long as this Guaranty remains
            ---------
in effect, Guarantor will promptly furnish to Creditor, upon request at any time
and from time to time, a copy of Guarantor's most recent annual report on Form
10-K or quarterly report on Form 10-Q, in each case as filed with the Securities
and Exchange Commission (the "SEC"); provided however, if Guarantor is not
required to file such reports with the SEC, Guarantor agrees to furnish to
Creditor such comparable financial information respecting Guarantor as Creditor
may from time to time reasonably request.

         8. Miscellaneous.
            -------------

            (a) Notice. Any notice or other communication given hereunder by
                ------
either Guarantor or Creditor to the other party ("Notice") shall be in writing
and delivered personally, mailed by registered or certified mail, postage
prepaid and return receipt requested, by telecopier, or by courier guaranteeing
overnight delivery, as follows:

                           (i)      if to Guarantor:

                                    Dominion Energy, Inc.
                                    120 Tredegar Street
                                    Richmond, Virginia 23219
                                    Attention: Diane Leopold /
                                    Christine M. Schwab, Esq.
                                    Telecopy No.: (804) 819-2202

                                      H4
<PAGE>

               (ii)  if to Creditor:

Notice given by personal delivery or mail shall be effective upon actual receipt
or refusal of receipt. Notice given by telecopier shall be deemed effective upon
transmission and electronic confirmation by the transmitting telecopier. All
Notices by telecopier shall be confirmed promptly after transmission in writing
by certified mail or personal delivery. Any party may change any address to
which Notice is to be given to it by giving Notice as provided above of such
change of address. All amounts becoming payable by Guarantor to Creditor under
this Guaranty shall be payable at Creditor's offices located at its address for
purposes of Notice, or such other place as Creditor may from time to time
designate (including wire transfer instructions).

          (b)  Amendments; Waivers; Remedies. All amendments, waivers, consents
               -----------------------------
or approvals arising pursuant to this Guaranty must be in writing signed by
Guarantor and Creditor. No failure on the part of Creditor to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise thereof or the exercise of any other right, power or
privilege operate as such a waiver. No right, power or remedy of Creditor under
this Guaranty or the Contract shall be exclusive of any other right, power or
remedy, but shall be cumulative and in addition to any other right, power or
remedy thereunder or now or hereafter existing by law or in equity.

          (c)  Severability. If any provision of this Guaranty or the
               ------------
application thereof to any party or circumstance shall be invalid or
unenforceable, then the remaining provisions or the application of such
provision to parties or circumstances other than those as to which it is invalid
or unenforceable, shall continue to be valid and enforceable.

          (d)  Assignment. Neither Guarantor nor Creditor may assign its rights
               ----------
or obligations under this Guaranty without the other party's prior written
consent, which consent may not be unreasonably withheld; provided, however,
Creditor may assign its rights hereunder without consent of Guarantor (but with
prior notice thereof to Guarantor) to any party to whom the Contract has been
properly assigned in accordance with the terms thereof. Subject to the
foregoing, this Guaranty shall be binding on, and shall inure to the benefit of,
Guarantor and Creditor and their respective successors and assigns.

          (e)  GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
               -------------
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS. GUARANTOR AND CREDITOR EACH HEREBY
IRREVOCABLY SUBMITS FOR ITSELF AND IN RESPECT OF ITS PROPERTY TO THE ORIGINAL
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN CHICAGO, ILLINOIS WITH
REGARD TO ANY SUIT, CLAIM OR ACTION IN ANY WAY RELATED TO THE EXECUTION,
DELIVERY OR PERFORMANCE OF THIS GUARANTY, AND GUARANTOR HEREBY IRREVOCABLY
WAIVES ANY AND ALL OBJECTIONS TO WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH SUITS, CLAIMS OR ACTIONS IN SUCH JURISDICTIONS, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS. THE PARTIES HERETO FURTHER

                                      H-5
<PAGE>

AGREE THAT ANY AND ALL SUCH SUITS, CLAIMS OR ACTIONS SHALL BE BROUGHT OR FILED
EXCLUSIVELY IN SUCH COURTS AND NOWHERE ELSE.

          (f)  Headings. The headings of the sections and subsections of this
               --------
Guaranty are for convenience only, and shall not limit or otherwise affect the
meaning hereof.

          (g)  Counterparts. Guarantor may sign this Guaranty in any number of
               ------------
counterparts, each of which shall be an original but all of which when taken
together shall constitute one and the same instrument.

          (h)  Construction of Agreement. Unless the context of this Agreement
               -------------------------
clearly requires otherwise, (i) pronouns, wherever used herein and of whatever
gender, shall include natural persons, corporations, and associations of every
kind and character, (ii) the gender of all words used in this Guaranty shall
include the masculine, feminine and neuter, (iii) the words "includes" or
"including" shall mean "including without limitation", and (iv) the words
"hereof", "herein", "hereunder" and similar terms in this Guaranty shall refer
to this Guaranty as a whole and not any particular section or subsection in
which such words appear.

          (i)  Interpretation and Reliance. No presumption will apply in favor
               ---------------------------
of any party hereto in the interpretation of this Guaranty or in the resolution
of any ambiguity of any provision hereof.

     IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed
effective as of the date first above written.

                                        DOMINION ENERGY, INC.

                                        By:      _____________________________

                                        Name:    _____________________________

                                        Title:   _____________________________

                                      H-6
<PAGE>

                                  APPENDIX I

                         Scheduled Maintenance Outages

<TABLE>
<CAPTION>
                                                                   Frequency of                      Duration of
-------------------------------------------------------------------------------------------------------------------

                   <C>                           <C>                                              <C>
       Type            Scheduled Maintenance                        Inspection                       Inspection

       Major           Combustion Inspection        Every 400 starts or 8,000 equivalent hours        4-5 days

       Major          Hot Gas Path Inspection       Every 800 starts or 24,000 equivalent hours      10-12 days

       Major             Major CT Overhaul         Every 1,600 starts or 48,000 equivalent hours       20 days

     Routine*             BOP Inspections                      Each Spring and Fall                    4 days
-------------------------------------------------------------------------------------------------------------------
</TABLE>

*Note:  Routine Balance of Plant inspections will be scheduled during a Major
Inspection outage.



                                      I-1
<PAGE>

                                  APPENDIX K

                         Remote Monitoring Data Points

Pursuant to Section 4.3.2.7, Seller shall use commercially reasonable efforts to
make available to Buyer the Station Fuel Meter outputs listed below:

         Station Fuel Meter, including:

         (a)  instantaneous and integrated natural gas fuel flow;

         (b)  instantaneous and integrated natural gas fuel energy flow;

         (c) instantaneous fuel quality raw data (fuel heat content, delivery
pressure, delivery temperature).

Pursuant to Section 4.3.2.7, Seller shall make available to Buyer the Facility
and Unit outputs listed below:

1.       Revenue Meter Per Unit, including:

         (a)  instantaneous and integrated Electric Energy output (corrected to
the Point of Delivery);

         (b)  instantaneous reactive power (volt-amperes-reactive, leading or
lagging), or power factor (leading or lagging) as available;

         (c)  integrated electric power inflow (backfeed)

         (d)  station voltage (as measured at the Revenue Meter potential
transformers;

         (e)  system frequency (as measured on the interconnected Utility system
bus, or if not available, at the Revenue Meter)

2.       Individual Fuel Meter instantaneous natural gas fuel flow to the
individual Units (including Elwood II Units).

3.       Station service instantaneous and integrated electric energy
consumption.

4.       Ambient dry-bulb temperature at or near to the combustion turbine air
inlet.

5.       Relative humidity or ambient wet-bulb temperature at or near to the
combustion turbine air inlet.

6.       Ambient atmospheric pressure at or near to the combustion turbine air
inlet.


                                      I-1