<PAGE>

                                                                   Exhibit 10.10

                                                                  Execution Copy

                          COMMON FACILITIES AGREEMENT

                           Dated as of April 16, 1999

                                By and Between

                     THE PEOPLES GAS LIGHT AND COKE COMPANY

                                      and

                               ELWOOD ENERGY LLC
<PAGE>

                          COMMON FACILITIES AGREEMENT
                          ---------------------------


     This Common Facilities Agreement (the "Agreement") is made and entered into
as of April 16, 1999 (the "Effective Date") by and between The Peoples Gas Light
and Coke Company, an Illinois corporation ("Peoples"), and Elwood Energy LLC, a
Delaware limited liability company ("Elwood").

                                    RECITALS
                                    --------

     A. Peoples owns approximately 274 acres of real property in Elwood,
Illinois legally described on Exhibit A-1 (the "Property").

     B. Peoples and Elwood have entered into the Ground Lease dated September
30, 1998, as amended (the "Ground Lease"), pursuant to which Peoples has leased
to Elwood approximately 21.465 acres of land, together with the improvements
located thereon, which land is legally described in Exhibit A-2 (the
"Premises"). The Property other than the Premises is sometimes referred to
herein as the "McDowell Energy Center".

     C. Elwood intends to own, acquire, construct, lease, develop, permit,
operate, finance and manage a 600 MW simple cycle peaking power generating
facility and related assets, and up to 2500 MW of additional combined cycle and
simple cycle power generating facilities and related assets, on the Premises and
adjacent properties (such 600 MW facility and such other 2500 MW facilities,
collectively the "Facility").

     D. Elwood and Peoples desire to set forth their mutual agreement with
respect to the shared use of certain facilities on the Property (the "Services")
and the sharing of the costs and expenses with respect thereto by Elwood,
Peoples and any tenants of Peoples.

     NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, Peoples and Elwood agree as
follows:


                                   ARTICLE I
                                  DEFINITIONS

     Defined Terms. Unless the context otherwise requires, capitalized terms
     -------------
used in this Agreement shall have the meanings ascribed below, terms used in the
singular shall include the plural;  references to "Sections," "Exhibits" or
"Appendices" are to sections, exhibits or appendices of this Agreement; a
reference to a given agreement or instrument or to a Law is a reference to that
agreement or instrument or Law, and the regulations promulgated thereunder, as
amended, modified or supplemented from time to time; the words "include",
"includes" and "including" are not limiting; the words "hereof", "herein" or
"hereunder" and words of similar
<PAGE>

impact refer to this Agreement as a whole and not to any particular provision;
and a reference to a Person includes permitted successors and assigns.

     "Affiliate" of a specified Person means any other Person that directly, or
      ---------
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with the Person specified.  For purposes of the foregoing,
"control," "controlled by" and "under common control with" with respect to any
Person shall mean the possession, directly or indirectly, 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 otherwise.

     "Agreement" means this Common Facilities Agreement, including all exhibits,
      ---------
appendices, attachments and amendments hereto.

     "Base Index" means the GDPIPD published for the calendar quarter
      ----------
immediately prior to the Effective Date.

     "Billing Period" means each calendar month; except that, in the event that
      --------------
the Effective Date or the Termination Date occurs on a day other than the first
day of a calendar month, "Billing Period" shall mean, for such month or months
only, the period from the Effective Date through the end of the calendar month
during which the Effective Date occurs or the period from the beginning of the
calendar month during which the Termination Date occurs through the Termination
Date, respectively.

     "Blowdown Water" means water discharged from the Facility's inlet air
      --------------
coolers that meets the quantity and quality specifications set forth in Appendix
D.

     "Construction Contracts" means the Agreement for Engineering, Procurement,
      ----------------------
Construction, & Installation Services for the Elwood Generation Facility dated
July 23, 1998 between General Electric Company, a New York corporation ("GE"),
and Elwood and the Agreement For Engineering, Procurement, Construction &
Installation Services for the Elwood Generation Facility Phase II Units 3 & 4
dated September 25, 1998 between GE and Elwood.

     "Contract Year" means: (i) for the first Contract Year, that period from
      -------------
the Effective Date to and including December 31 of such year; and (ii) for each
Contract Year thereafter, the calendar year.

     "Effective Date" has the meaning set forth in the introductory paragraph
      --------------
hereof.

     "Elwood" has the meaning set forth in the introductory paragraph hereof.
      ------

     "Elwood's Fire Protection System" means the fire pumps, water pipes, fire
      -------------------------------
hydrants, sprinkler heads and other equipment to be installed by or on behalf of
Elwood at the Facility

                                       2
<PAGE>

used to protect Elwood's employees and the Facility from harm due to fire, as
more fully described in Appendix B.

     "Facility" has the meaning set forth in the Recitals.
      --------

     "Fee" means, with respect to each Service, the charge therefor set forth in
      ---
the applicable Appendix to this Agreement by the Party receiving such Service.

     "Final Acceptance" has the meaning set forth in the Construction Contracts.
      ----------------

     "Financing Documents" means the loan agreements, notes, indentures,
      -------------------
security agreements and other documents, if any, relating to the financing
(including refinancing) of the Facility, the Property, the McDowell Energy
Center or any part thereof.

     "Fire Protection Water" means water to be supplied by Peoples to Elwood for
      ---------------------
the operation of Elwood's Fire Protection System that meets the quantity and
quality specifications set forth in Appendix B.  Fire Protection Water may be
supplied from wells operated by Peoples, or such other sources as Peoples may
determine from time to time in its sole discretion.

     "Force Majeure Event" has the meaning set forth in Section 8.1.
      -------------------

     "GDPIPD" means the final Gross Domestic Product Implicit Price Deflator
      ------
Index published for each quarter by the United States Department of Commerce,
or, if such index is discontinued, such other comparable replacement index as
the parties designate.

     "Governmental Authority" means any national, state or local government
      ----------------------
(whether domestic or foreign), any political subdivision thereof or any other
governmental, judicial, public or statutory instrumentality, authority, body,
agency, court or arbitrator with authority and valid jurisdiction to bind a
party at law.

     "Ground Lease" has the meaning set forth in the Recitals.
      ------------

     "Law" means any applicable statute, law, ordinance, code, rule, Permit,
      ---
regulation, interpretation, judgment, decree, decision or order of any
Governmental Authority.

     "Lender" means (i) any Person that, from time to time, has made loans to
      ------
Elwood or Peoples or their respective permitted successors or permitted assigns
for the financing or refinancing of the Facility, the Property or the McDowell
Energy Center or which are secured thereby, (ii) the holders of indebtedness
evidencing any such loans, (iii) any Person acting on behalf of such lender(s)
to whom any lenders' rights under financing documents have been transferred, any
trustee on behalf of any such lenders, and any Person subrogated to the rights
of the lenders, or (iv) any Person who purchases the Facility or the McDowell
Energy Center in a

                                       3
<PAGE>

sale-leaseback financing in which the seller thereof leases back the Facility or
the McDowell Energy Center (as the case may be), or any Lender to such Person.

     "Material Adverse Effect" means (i) any material adverse effect on the
      -----------------------
McDowell Energy Center or the Facility, (ii) any material adverse effect on the
operation or utilization of the McDowell Energy Center or the Facility, or (iii)
a material adverse effect on the rights or remedies of a Party under this
Agreement, the Ground Lease or the Purchase and Sale Agreement.

     "Operating Agreement" means the Operating Agreement of Elwood dated July
      -------------------
23, 1998 between Peoples Elwood, LLC, a Delaware limited liability company, and
Dominion Elwood, Inc., a Delaware corporation.

     "Party" means either Peoples or Elwood.
      -----

     "Payment Due Date" has the meaning set forth in Section 5.1.
      ----------------

     "Peoples" has the meaning set forth in the introductory paragraph hereof.
      -------

     "Peoples' Fire Protection System" means Peoples' tanks, fire pumps, water
      -------------------------------
pipes, fire hydrants, wells, sprinkler heads and other equipment existing at the
McDowell Energy Center on the Peoples side of the Point of Interconnection used
to protect Peoples' employees and the McDowell Energy Center from harm due to
fire, as altered, modified or replaced from time to time.

     "Permits" means all applicable permits, licenses, approvals,
      -------
authorizations, consents, exemptions, waivers, variances, or filings with or
otherwise issued by a Governmental Authority.

     "Person" means any individual, partnership, corporation, association,
      ------
business trust, limited liability company, government or political subdivision
thereof, governmental agency or other entity.

     "Point of Interconnection" means either (i) the point of interconnection of
      ------------------------
Elwood's Service Water system and Peoples' Service Water system described in
Appendix A, (ii) the point of interconnection of Elwood's Fire Protection System
and Peoples' Fire Protection System described in Appendix B, (iii) the point of
interconnection of Elwood's Storm Water discharge system and Peoples' Storm
Water discharge system described in Appendix C, or (iv) the point of
interconnection of Elwood's Blowdown Water discharge system and Peoples' Storm
Water discharge system described in Appendix D, as the context requires.

     "Premises" has the meaning set forth in the Recitals.
      --------

                                      4
<PAGE>

     "Project Documents" means the Ground Lease, the Purchase and Sale
      -----------------
Agreement, Financing Documents, the Operating Agreement, and any operation and
maintenance agreements executed in connection with the Facility and the
Construction.

     "Prudent Operating Practice" means, with respect to the Services to be
      --------------------------
provided under this Agreement, the reasonable practices, methods, and acts which
(i) are commonly used to operate and maintain facilities such as the McDowell
Energy Center safely, reliably and efficiently and in compliance with applicable
Laws, and (ii) at a particular time, in the exercise of reasonable judgment in
light of the facts known or that reasonably should have been known at the time a
decision was made, would have been expected to accomplish the desired result
safely, reliably and efficiently in a manner consistent with applicable Law and
this Agreement.

     "Purchase and Sale Agreement" means a Purchase and Sale Agreement, and any
      ---------------------------
amendments thereto, in the form attached as Exhibit C to the Ground Lease at
such time as it is executed by and between Elwood and Peoples.

     "Reference Index" means, for any Contract Year, the GDPIPD published for
      ---------------
the calendar quarter immediately prior to the first day of such Contract Year.

     "Services" has the meaning set forth in Recital D.
      --------

     "Service Water" means untreated water from wells on Peoples' property or
      -------------
from such other source(s) that Peoples may develop.

     "Storm Water" means surface runoff from precipitation of any form
      -----------
discharged from the Facility at one or more Points of Interconnection described
on Appendix  C to People's storm water system that meets the quality
specifications in Appendix C.

     "Term" has the meaning set forth in Section 3.1.
      ----

     "Termination Date" means December 31, 2028 unless this Agreement is
      ----------------
terminated earlier in accordance with the provisions of Article VII in which
case "Termination Date" means the date this Agreement terminates under such
Article VII.


                                   ARTICLE II
                     SERVICES PROVIDED BY PEOPLES TO ELWOOD

     Subject to the terms and conditions of this Agreement and for the
compensation set forth in Article V, commencing on the Effective Date and
continuing through the Termination Date, Peoples agrees to provide the following
Services to Elwood, and Elwood agrees to purchase the Services from Peoples:

                                       5
<PAGE>

     Section 2.1  Service Water
                  -------------

       (a) Peoples' Responsibilities.  Commencing April 1, 1999 Peoples shall
           -------------------------
use best efforts to provide Service Water at the Point of Interconnection and
pursuant to the quality, quantity and other specifications set forth in Appendix
A.

       Peoples shall own, operate and maintain in accordance with applicable Law
and Prudent Operating Practice such facilities on its side of the applicable
Point of Interconnection as are necessary to provide Service Water to Elwood in
accordance with this Agreement.  Peoples shall be responsible for obtaining and
maintaining all Permits that are necessary for the operation of the wells and
other water supply sources and the provision of Service Water hereunder.
Peoples shall not take any action or use or permit the use of its wells and
other water supply sources in any manner which would cause a violation or breach
of, or cause the loss or termination of or failure to renew or (re)issue, any
Permits and approvals obtained or required to be obtained in connection with the
provision of Services under this Section 2.1.  Peoples shall not amend or modify
any of such Permits without the consent of Elwood, which consent shall not be
unreasonably withheld or delayed (and which shall be deemed given unless Elwood
notifies Peoples of its decision to refuse consent within 30 days of Peoples
request).

     (b) Elwood's Responsibilities.  Elwood shall be responsible at its sole
         -------------------------
cost and expense for the design, construction and installation of Elwood's
Service Water system, including physically connecting Elwood's Service Water
system with Peoples' Service Water system at the Point of Interconnection, all
in accordance with Prudent Operating Practice.  The work for such physical
connection shall be conducted in a manner and at times reasonably acceptable to
Peoples, and Elwood shall provide to Peoples any and all schedules, advance
notices and other information that Peoples' representatives may request
concerning such work. Prior to construction of the Point of Interconnection,
Elwood shall submit to Peoples for Peoples' approval, which shall not be
unreasonably withheld or delayed (and which shall be deemed given unless Peoples
notifies Elwood of its decision to refuse consent within 30 days of Elwood's
request), all design drawings for the Point of Interconnection.  Upon completion
of construction of the Point of Interconnection and Elwood's Service Water
system, Elwood shall provide Peoples with a copy of "as-built" engineering
drawings of the Point of Interconnection and Elwood's Service Water system.
Elwood shall be responsible for the maintenance of Elwood's Service Water system
at its sole cost and expense, except with respect to Peoples' obligations
expressly set forth in Section 2.1(a).  Elwood shall not take any action or use
or permit the use of Elwood's Service Water system in any manner which would
cause a violation or breach of, or cause the loss or termination of or failure
to renew or (re)issue, any Permits and approvals obtained or required to be
obtained in connection with Peoples' Service Water system or Peoples' provision
of Services under Section 2.1(a).

     (c) Termination.  Notwithstanding anything contained herein to the
         -----------
contrary, Peoples may terminate the provision of Service under this Section 2.1
without liability and without need

                                       6
<PAGE>

to show cause by a notice in writing pursuant to Article XIII of this Agreement
at least twelve (12) months before the effective date of such termination.

     Section 2.2  Fire Protection Water
                  ---------------------

          (a) Peoples' Responsibilities.  Commencing on the later of April 1,
              -------------------------
1999 and the date on which Elwood has connected Elwood's Fire Protection System
to Peoples' Fire Protection System at the Point of Interconnection, Peoples
shall use best efforts to provide Fire Protection Water to Elwood at the Point
of Interconnection and pursuant to the quality, quantity and other
specifications set forth in Appendix B.

          Peoples shall own, operate, and maintain Peoples' Fire Protection
System and any wells or other sources of Fire Protection Water in accordance
with all applicable Laws and Prudent Operating Practice.  Peoples shall be
responsible for obtaining and maintaining all Permits that are necessary for the
operation of Peoples' Fire Protection System and the provision of Fire
Protection Water to Elwood's Fire Protection System hereunder. Peoples shall not
take any action or use or permit the use of Peoples' Fire Protection System in
any manner which would cause a violation or breach of, or cause the loss or
termination of or failure to renew or (re)issue, any Permits and approvals
obtained or required to be obtained in connection with the intended use by
Elwood of Elwood's Fire Protection System or Peoples' provision of Services
under this Section 2.2. Peoples shall not amend or modify any of such Permits
without the consent of Elwood, which consent shall not be unreasonably withheld
or delayed (and which shall be deemed given unless Elwood notifies Peoples of
its decision to refuse consent within 30 days of Peoples request).

          (b) Elwood's Responsibilities.  Elwood shall be responsible at its
              -------------------------
sole cost and expense for the design, construction and installation of Elwood's
Fire Protection System, including physically connecting Elwood's Fire Protection
System with Peoples' Fire Protection System at the Point of Interconnection, all
in accordance with Prudent Operating Practice.  The work for such physical
connection shall be conducted in a manner and at times reasonably acceptable to
Peoples, and Elwood shall provide to Peoples any and all schedules, advance
notices and other information that Peoples' representatives may request
concerning such work. Prior to construction of the Point of Interconnection,
Elwood shall submit to Peoples for Peoples' approval (which shall not be
unreasonably withheld or delayed and which shall be deemed given unless Peoples
notifies Elwood of its decision to refuse consent within 30 days of Elwood's
request) all design drawings for the Point of Interconnection.  Upon completion
of construction of the Point of Interconnection and Elwood's Fire Protection
System, Elwood shall provide Peoples with a copy of "as-built" engineering
drawings of the Point of Interconnection and Elwood's Fire Protection System.
Elwood shall be responsible for the maintenance of Elwood's Fire Protection
System at its sole cost and expense, except with respect to Peoples' obligations
expressly set forth in this Section 2.2.  Elwood shall not take any action or
use or permit the use of Elwood's Fire Protection System in any manner which
would cause a violation or breach of, or cause the loss or termination of or
failure to renew or (re)issue, any Permits and approvals

                                       7
<PAGE>

obtained or required to be obtained in connection with Peoples' Fire Protection
System or Peoples' provision of Services under this Section 2.2.

          (c) Alterations or Improvements to the McDowell Energy Center.   If
              ---------------------------------------------------------
Peoples desires to make alterations or improvements to the existing McDowell
Energy Center which would result in Fire Protection Water being inadequate to
meet the requirements for operation of both the McDowell Energy Center and the
Facility, Peoples shall provide Elwood with written notice eighteen (18) months
in advance of the date that either Elwood's Fire Protection System or Peoples'
Fire Protection System will become inadequate.  Upon receiving such notice,
Elwood shall have the option of installing its own modifications to Elwood's
Fire Protection System (including procuring its own Fire Protection Water) or
equitably sharing in the expenses for such alterations or improvements as are
necessary and mutually acceptable to the Parties to meet the needs of both the
McDowell Energy Center and the Facility and modifying the prices set forth in
Appendix B to reflect such equitable sharing.

          (d) Termination.  Notwithstanding anything contained herein to the
              -----------
contrary, Peoples may terminate the provision of Service under this Section 2.2
without liability and without need to show cause by a notice in writing pursuant
to Article XIII of this Agreement at least eighteen (18) months before the
effective date of such termination.

     Section 2.3  Storm Water
                  -----------

          (a) Elwood's Responsibilities.  Elwood has caused, at its sole cost
              -------------------------
and expense, a storm water retention pond and associated facilities to be
constructed for its own use in accordance with the requirements of this
Agreement and good engineering practice, in a lien free manner, at a site on the
McDowell Energy Center identified on Appendix C (the "Retention Pond"). Elwood
shall be responsible at its sole cost and expense for the design, construction
and installation of Elwood's Storm Water discharge system, including physically
connecting Elwood's Storm Water discharge system with Peoples' Storm Water
discharge system at the Point of Interconnection, all in accordance with Prudent
Operating Practice.  The work for such physical connection shall be conducted in
a manner and at times reasonably acceptable to Peoples, and Elwood shall provide
to Peoples any and all schedules, advance notices and other information that
Peoples' representatives may request concerning such work. Prior to construction
of the Point of Interconnection, Elwood shall submit to Peoples for Peoples'
approval, which shall not be unreasonably withheld or delayed (and which shall
be deemed given unless Peoples notifies Elwood of its decision to refuse consent
within 30 days of Elwood's request), all design drawings for the Point of
Interconnection.  Upon completion of construction of the Point of
Interconnection and Elwood's Storm Water discharge system, Elwood shall provide
Peoples with a copy of "as-built" engineering drawings of the Point of
Interconnection and Elwood's Storm Water discharge system.  Elwood shall be
responsible for the maintenance of Elwood's Storm Water discharge system at its
sole cost and expense, except with respect to Peoples' obligations expressly set
forth in this Section 2.3.  Elwood shall not take any action or use or permit
the use of Elwood's Storm Water discharge system in any manner which would

                                       8
<PAGE>

cause a violation or breach of, or cause the loss or termination of or failure
to renew or (re)issue, any Permits and approvals obtained or required to be
obtained in connection with Peoples' Storm Water discharge system or Peoples'
provision of Services under this Section 2.3.

          Elwood shall have the right to discharge its Storm Water into Peoples'
Storm Water discharge system provided such Storm Water meets the specifications
set forth in Appendix C.  Elwood shall own, operate or maintain at its sole
expense, such equipment as is necessary to ensure that the Storm Water delivered
to Peoples meets the quality specifications set forth in Appendix C.  To the
fullest extent permitted by Law, Elwood hereby agrees to indemnify, save and
hold Peoples and its Affiliates harmless from all costs, expenses (including
reasonable attorneys' fees and court costs), losses (including the loss of any
Permits), damages, fines and penalties arising out of any claims, demands and
causes of action which may be asserted by any Person directly or indirectly
resulting from Elwood's failure to discharge Storm Water that meets the
requirements of Appendix C.

          (b) Peoples' Responsibilities. Peoples shall accept and dispose of
              -------------------------
Storm Water that is delivered by Elwood to Peoples at the Point of
Interconnection which meets the requirements set forth in Appendix C in
accordance with applicable Law and Prudent Operating Practice.  Peoples shall
not be required to accept or dispose of Storm Water that fails to conform to the
specifications set forth in Appendix C.

          Peoples shall be responsible for obtaining and maintaining all Permits
that are necessary for the acceptance and disposal of Elwood's Storm Water that
meets the specifications set forth in Appendix C.  Peoples shall also use best
efforts to provide that Elwood's Storm Water is authorized under such Permits.
Peoples shall not take any action or use or permit the use of its Storm Water
discharge system in any manner which would cause a violation or breach of, or
cause the loss or termination of or failure to renew or (re)issue, any Permits
and approvals obtained or required to be obtained in connection with the
provision of Services under this Section. Peoples shall not amend or modify any
of such Permits without the consent of Elwood, which consent shall not be
unreasonably withheld or delayed (and which shall be deemed given unless Elwood
notifies Peoples of its decision to refuse consent within 30 days of Peoples'
request).

          (c) Nonconforming Discharge.  If Elwood discharges Storm Water into
              -----------------------
Peoples' Storm Water discharge system that fails to meet the specifications set
forth in Appendix C, the Party that first becomes aware of such nonconforming
discharge shall immediately notify the other Party and Elwood shall take at its
sole cost and expense all steps necessary to prevent the further discharge of
such nonconforming Storm Water.  In addition, if Elwood fails to prevent the
further discharge of such nonconforming Storm Water within seven (7) days of the
date Elwood first becomes aware of such nonconforming discharge and such failure
continues for three (3) days after notice is given to Elwood from Peoples, then
Peoples may stop providing Service under this Section 2.3 until Peoples is
reasonably satisfied that the discharge of nonconforming Storm Water has ceased.

                                      9
<PAGE>

          (d)     Termination.  Notwithstanding anything contained herein to the
                  -----------
contrary, Peoples may terminate the provision of Service under this Section 2.3
without liability and without need to show cause by a notice in writing pursuant
to Article XIII of this Agreement at least eighteen months before the effective
date of such termination.

     Section 2.4  Blowdown Water Discharge Services
                  ---------------------------------

          (a)     Peoples' Responsibilities.  Commencing April 1, 1999, Peoples
                  -------------------------
shall accept and dispose of Blowdown Water that is delivered by Elwood to
Peoples at the respective Points of Interconnection and pursuant to the quality,
quantity and other specifications set forth in Appendix D in accordance with
applicable Law and Prudent Operating Practice. Peoples shall not be required to
dispose of Blowdown Water in excess of the quantities specified or that fails to
conform to the qualities specified in Appendix D. Peoples shall own, operate and
maintain in accordance with applicable Law and Prudent Operating Practice such
facilities as are necessary to provide Services under this Section 2.4.

          Peoples shall be responsible for obtaining and maintaining all Permits
that are necessary for the disposal of Blowdown Water hereunder.  Peoples shall
not take any action or use or permit the use of its facilities in any manner
which would cause a violation or breach of, or cause the loss or termination of
or failure to renew or (re)issue, any Permits and approvals obtained or required
to be obtained in connection with the provision of Services under this Section
2.4. Peoples shall not amend or modify any of such Permits without the consent
of Elwood, which consent shall not be unreasonably withheld or delayed (and
which shall be deemed given unless Elwood notifies Peoples of its decision to
refuse consent within 30 days of Peoples' request).

          (b)     Elwood's Responsibilities.  Elwood shall be responsible at its
                  -------------------------
sole cost and expense for the design, construction and installation of Elwood's
Blowdown Water discharge system, including physically connecting Elwood's
Blowdown Water discharge system with Peoples' Storm Water discharge system at
the Point of Interconnection, all in accordance with Prudent Operating Practice.
The work for such physical connection shall be conducted in a manner and at
times reasonably acceptable to Peoples, and Elwood shall provide to Peoples any
and all schedules, advance notices and other information that Peoples'
representatives may request concerning such work. Prior to construction of the
Point of Interconnection, Elwood shall submit to Peoples for Peoples' approval,
which shall not be unreasonably withheld or delayed (and which shall be deemed
given unless Peoples notifies Elwood of its decision to refuse consent within 30
days of Elwood's request), all design drawings for the Point of Interconnection.
Upon completion of construction of the Point of Interconnection and Elwood's
Blowdown Water discharge system, Elwood shall provide Peoples with a copy of
"as-built" engineering drawings of the Point of Interconnection and Elwood's
Blowdown Water discharge system.  Elwood shall be responsible for the
maintenance of Elwood's Blowdown Water discharge system at its sole cost and
expense, except with respect to Peoples' obligations

                                      10
<PAGE>

expressly set forth in this Section 2.4. Elwood shall not take any action or use
or permit the use of Elwood's Blowdown Water discharge system in any manner
which would cause a violation or breach of, or cause the loss or termination of
or failure to renew or (re)issue, any Permits and approvals obtained or required
to be obtained in connection with Peoples' sewage system or Peoples' provision
of Services under this Section 2.4.

     Elwood shall have the right to discharge Blowdown Water into Peoples' Storm
Water discharge system that meets the specifications set forth in Appendix D.
Elwood shall own, operate or maintain at its sole expense, such equipment as is
necessary to ensure that the Blowdown Water delivered to Peoples meets the
specifications set forth in Appendix D.

          (c) Nonconforming Discharge.  If Elwood discharges Blowdown Water into
              -----------------------
Peoples' Storm Water discharge system that fails to meet the specifications set
forth in Appendix D, the Party that first becomes aware of such nonconforming
discharge shall immediately notify the other Party and Elwood shall take all
reasonable steps at its disposal site to prevent the further discharge of such
nonconforming Blowdown Water.  In addition, if Elwood fails to prevent the
further discharge of such nonconforming Blowdown Water within seven (7) days of
the date Elwood first becomes aware of such nonconforming discharge, and such
failure continues for three (3) days after notice is given to Elwood from
Peoples, then Peoples may stop providing Blowdown Water disposal Service until
Peoples is reasonably satisfied that the discharge of nonconforming Blowdown
Water has ceased.

          (d) Termination. Notwithstanding anything contained herein to the
              -----------
contrary, Peoples may terminate the provision of Service under this Section 2.4
without liability and without need to show cause by a notice in writing pursuant
to Article XIII of this Agreement at least eighteen (18) months before the
effective date of such termination.

     Section 2.5  Office Space, Restrooms, Showers, Locker Rooms, Warehousing
                  -----------------------------------------------------------
and Machine Shop Access
-----------------------

          (a) Peoples Responsibilities.  Commencing October 1, 1998, Peoples
              ------------------------
shall allow Elwood to occupy certain office space and use certain restrooms,
showers, locker rooms, warehouse space and use of a machine shop depicted on
Appendix E (the "Office and Warehouse Space"), including desks, restrooms, and
storage for keeping records.  Peoples shall provide normal heating and cooling
for such facilities.  The Office and Warehouse Space shall be located as shown
on Appendix E or as otherwise mutually agreed to by the Parties.  Elwood's use
of the Office and Warehouse space shall be only for such period of time as
reasonably necessary until Elwood constructs its own such facilities, and in any
event no later than December 31, 1999 and month to month thereafter, subject to
mutual agreement of the Parties (the "Office and Warehouse Space Termination
Date").  Payment of costs and expenses as well as other applicable terms and
conditions relating to such facilities shall be as set forth on Appendix E.

                                      11
<PAGE>

          (b)     Elwood's Responsibilities.  Elwood shall be responsible for
                  -------------------------
maintaining the Office and Warehouse Space in a clean and professional manner
and will be responsible for the procurement of potable water, telephone and any
other services ancillary to its use of the Office and Warehouse Space.  At the
conclusion of Elwood's use of the Office and Warehouse Space, and in any event
no later than the Office and Warehouse Space Termination Date, Elwood shall
return the Office and Warehouse Space to Peoples broom clean and in the same
condition it was provided to Elwood by Peoples, ordinary wear and tear excepted.
Elwood agrees to indemnify and hold Peoples and its Affiliates harmless from and
against all costs, expenses (including reasonable attorneys' fees and court
costs), losses (including the loss of any Permits), damages, fines and penalties
arising out of any claims, demands and causes of action which may be asserted by
any Person directly or indirectly resulting from Elwood's occupancy of the
Office and Warehouse Space.

          (c)     No Warranty.  THE OFFICE AND WAREHOUSE SPACE IS PROVIDED
                  -----------
HEREUNDER ON AN "AS IS AND WHERE IS" BASIS, WITH ALL FAULTS AND DEFECTS PATENT
AND LATENT, WITHOUT ANY WARRANTIES WHATSOEVER. ALL WARRANTIES EXPRESS OR
IMPLIED, ARE HEREBY DISCLAIMED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     Section 2.6  Easements
                  ---------

     At the request of Elwood, and upon the conditions set forth in the
following sentence, Peoples shall grant to Elwood (i) an easement over, upon and
under the "Lessor's Parcel" (as defined in the Ground Lease) for the purpose of
constructing, using, and maintaining an underground water line and related pipes
and other facilities, for the purpose of supplying Service Water to the
Facility, and (ii) an easement over, upon and under the Lessor's Parcel for the
purpose of constructing, using, and maintaining an underground line for Blowdown
Water and related pipes and other facilities, for the purpose of carrying such
Blowdown Water to a treatment facility or to another discharge point, located
off of the Lessor's Parcel, and (iii) an easement over, upon and under the
Lessor's Parcel for the purpose of constructing, using, and maintaining an
underground line for Storm Water and related pipes and other facilities, for the
purpose of carrying such Storm Water to a discharge point for which Elwood has
obtained necessary permits (whether or not located on the Lessor's Property) or
to a treatment facility or to another discharge point located off of the
Lessor's Parcel, and (iv) an easement over, upon and under the Lessor's Parcel
for the purpose of constructing, using, and maintaining an underground water
line and related pipes and other facilities, for the purpose of supplying Fire
Protection Water to the Facility. Elwood shall be entitled to request such
easements, and Peoples shall grant such easements in the event that (A) in the
case of the easement for Service Water described in clause (i) above, the
Facility's use or anticipated use of Service Water exceeds the Service Water
quantities described on Appendix B, (B) in the case of the easements for each of
Service Water, Blowdown Water, Storm Water and Fire Protection Water, (x)
Peoples terminates its obligation to provide Service pursuant to Section 2.1(c),
2.2(d), 2.3(d) or

                                      12
<PAGE>

2.4(d) hereof, as applicable or (y) either party terminates this Agreement
pursuant to Section 7.3 hereof. The location of each such easement shall be
subject to the reasonable approval of Peoples. Elwood shall pay for all costs of
constructing, installing, using and maintaining such easements and the lines and
other facilities located therein in a lien free manner and in accordance with
Prudent Operating Practice, and Elwood shall at all times keep such easements
and the facilities located therein in good condition and repair in accordance
with Prudent Operating Practice. In the event Peoples anticipates incurring any
costs or expenses in connection with the location of any such easements or the
installation of said underground facilities, Peoples shall inform Elwood of the
estimated amount thereof before incurring same. Within ten days after receipt of
such estimated costs, Elwood shall elect either to (i) proceed with the work or
location giving rise to such costs, in which case Elwood shall promptly
reimburse Peoples for such costs upon demand, or (ii) discontinue such proposed
work or revise its plans for such work, in which case Peoples shall not incur
such costs or shall inform Elwood of the estimated costs to be incurred by
Peoples in the case of such revised plans. Peoples shall have the right to use
the surface of the Lessor Parcel subject to such easements for all purposes that
do not materially interfere with Elwood's use and enjoyment of such easements.
Peoples shall have the right, from time to time, to relocate the aforesaid
easements to other areas of the Lessor's Parcel reasonably acceptable to Elwood,
at Peoples cost, provided such relocation does not materially interfere with the
operation of the Facility.

     Peoples hereby grants to Elwood a nonexclusive easement over, upon and
under the Lessor's Parcel for the construction, use and operation of and for the
discharge of Storm Water into, the Retention Pond and associated pipes and
facilities, on and under the real property described in Exhibit B.  The
Retention Pond and associated pipes and facilities shall be operated and
maintained by Elwood as part of Elwood's Storm Water discharge system.  The
easement granted hereby shall terminate at such time, if ever, that Peoples
leases or sells to Elwood the real property on which the Retention Pond is
located.  Peoples and Elwood agree to execute an easement agreement mutually
acceptable in form and substance to both Parties for recording in the Office of
the Recorder of Deeds of Will County to provide public notice of the granting of
said easement.

     Section 2.7  Landscaping
                  -----------

          (a)     Peoples' Responsibilities. Peoples shall provide to Elwood
                  -------------------------
landscaping services with respect to the areas depicted on Exhibit A-2. Peoples
shall supply all necessary personnel, equipment and materials in connection with
these Services.

          (b)     Termination. In the event that Peoples desires to terminate
                  -----------
its obligations under this Section 2.7, Peoples shall provide forty-five (45)
days prior written notice to Elwood and Elwood shall no longer be liable for the
cost of providing such maintenance activities.

     Section 2.8. Generation and Disposal of Waste.  All solid, special and
                  --------------------------------
hazardous waste and used oil generated by Elwood at the Facility shall be
managed on site and transported

                                      13
<PAGE>

and disposed of at offsite facilities in compliance with all Laws and at
Elwood's sole cost and expense. Elwood shall be responsible for obtaining at its
sole cost and expense any required hazardous waste generator number from EPA or
IEPA as applicable for Elwood's operation of the Facility. All solid, special
and hazardous waste and used oil generated in Elwood's operation of the Facility
shall be manifested in Elwood's name.

     Section 2.9  EPCRA Reporting.
                  ---------------

          (a)     Pursuant to the Emergency Planning and Community Right-to-Know
Act ("EPCRA"), certain notifications must be made to governmental authorities
when any "extremely hazardous substances" and any "hazardous chemical" (as
defined under EPCRA) are brought to a facility above certain threshold
quantities. Within twenty (20) days of Elwood bringing any extremely hazardous
substance or hazardous chemical onto the Facility for which a threshold quantity
has been set under EPCRA, Elwood shall transmit to Peoples, at a minimum, (i) a
copy of the Material Safety Data Sheet, (ii) the quantity of such extremely
hazardous substance(s) and hazardous chemical(s) brought on site, as well as the
quantity of any then existing inventory. Peoples shall comply with the
applicable notification requirements under EPCRA if the quantity of the
extremely hazardous substance or the hazardous chemical on Peoples' retained
land and the Facility exceeds the threshold reporting requirement. Peoples shall
send a copy of any such notices to Elwood.

         (b)      Notwithstanding anything contained herein to the contrary,
Peoples may terminate the provision of Services under this Section 2.9 without
liability and without need to show cause by delivering written notice to Elwood
at any time after any termination of the Ground Lease.

     Section 2.10 Air Monitoring and Reporting.  Section 21.2 of the Ground
                  ----------------------------
Lease provides for Elwood to construct and initially operate the "Elwood
Generation Assets" (as defined in the Ground Lease) pursuant to People's
Prevention of Significant Deterioration Construction Permit ("PSD Permit") and
to operate the Elwood Generation Assets under Peoples' operating permit to be
issued under Title V of the Clean Air Act (the "Title V Permit").  This right to
operate the Elwood Generation Assets under such permits continues until such
time as the necessary operating permits for the Elwood Generation Assets are
moved into Elwood's name as set forth in such Section 21.2 of the Ground Lease.
Until such time as issuance of a Title V Permit for operation of the Elwood
Generation Assets in Elwood's name, Elwood shall comply, at Elwood's sole cost
and expense, with the requirements, including but not limited to the air
monitoring, record keeping and reporting requirements under the PSD Permit or
Title V Permit as such permits apply to the operation of the Elwood Generation
Assets (the "Pre-Elwood Title V Period").  During such Pre-Elwood Title V
Period, Elwood shall provide Peoples with any monitoring reports required for
submission to IEPA within a reasonable period of time under the circumstances
before such reports are due to IEPA for review and comment by Peoples.  In no
event shall Elwood delay the timely submission of such monitoring reports to
IEPA in waiting for or in attempting to address Peoples' comments.  This Section
2.10 shall in no way

                                      14
<PAGE>

alter or eliminate the rights and obligations of Peoples and Elwood under
Section 21.2 of the Ground Lease.

     Section 2.11  Additional Services.  The Services set forth in this Article
                   -------------------
II are the only Services Peoples is obligated to provide to Elwood.  Subject to
the Parties' mutual agreement to compensation and other terms, each Party agrees
to negotiate in good faith to provide the other with any and all Services in
addition to those specified in this Agreement that are necessary to the
implementation and purposes of this Agreement and are reasonably requested by
either Party.


                                  ARTICLE III
                                      TERM

     Section 3.1   Term. The term of this Agreement shall commence on the
                   ----
Effective Date and shall terminate on December 31, 2028, unless this Agreement
is terminated earlier in accordance with the terms of Article VII.


                                   ARTICLE IV
                           COMPENSATION FOR SERVICES

     Section 4.1   Payment Schedule.  Elwood shall compensate Peoples for the
                   ----------------
Services provided pursuant to Article II in accordance with the payment
schedules set forth in Appendices A through E.

     Section 4.2   Taxes.  In addition to the Fees set forth in Appendices A
                   -----
through E, Elwood shall pay (or reimburse Peoples for) all sales, use or other
transfer taxes imposed by Law upon the provision of such Service or commodity.

     Section 4.3   Increased Cost of Service.  The Parties acknowledge and agree
                   -------------------------
that, except as expressly identified in the Appendices, the Services to be
provided under this Agreement are expected to be provided using the existing
facilities of the McDowell Energy Center (subject to repair or replacement
during the ordinary course of business) and under operating circumstances
similar in all material respects to those in existence as of the date of this
Agreement.  In the event that additions or improvements (as compared to repairs
or replacements) to such existing facilities of the McDowell Energy Center are
necessary to continue to provide these Services beyond those that could
reasonably be expected under existing operating conditions, whether as a result
of changes in the nature of the Facility's operations, changes required by
applicable Law or otherwise, Peoples shall notify Elwood of such necessary
changes and either (i) the Parties shall develop a mutually agreeable amendment
to this Agreement to develop and execute a plan for such additions or
improvements, including an appropriate sharing of expenses, or a modification of
the prices set forth in the applicable Appendix or (ii) Elwood shall elect not
to have such Services provided by Peoples.

                                      15
<PAGE>

     Section 4.4  Adjustments to Cost of Service.  Beginning on the first day of
                  ------------------------------
the second Contract Year and on the first day of each Contract Year thereafter
(subject to the other provisions of this Section 4.4), the annual Fees for each
respective Service (and the corresponding monthly Fees) shall be adjusted to
reflect changes in the GDPIPD, as follows:  (i) the Fee set forth in the
applicable Appendix multiplied by (ii) a fraction, the numerator of which is the
Reference Index and the denominator of which is the Base Index.  Notwithstanding
anything contained herein to the contrary, in the event that a Party providing
Services to the other Party hereunder reasonably determines that the cost of
providing a particular Service is greater than or less than the agreed upon Fee
for such Service set forth in the applicable Appendixes, then the Parties shall
negotiate in good faith for an increase or decrease, as the case may be, in
compensation to be paid to the Party providing such Service; provided, however,
that there shall not be permitted hereunder an increase or decrease, as the case
may be, in the Fee for any Service more frequently than once in an Contract Year
(except for an increase or decrease reflecting a change in the GDPIPD as
provided in the first sentence of this Section 4.4).  In the absence of the
Parties being able to agree on any equitable cost allocation, any Party's cost
for such Services shall be proportionate to reflect the percentage of such
Party's use represents as a percentage of the whole.  Notwithstanding the
above, no amendment shall be required and no sharing of expenses or adjustment
of the Fees set forth in the applicable Appendix shall be made in the event that
an addition or modification to the facilities needed to provide the Services is
undertaken solely for discretionary or other purposes unrelated to this
Agreement or because of the negligence or willful misconduct of the Party
obligated to provide the Service in question.


                                   ARTICLE V
                              BILLING AND PAYMENT

     Section 5.1  Billing.  Invoices for the Services provided hereunder during
                  -------
each Billing Period shall be rendered by the Party providing the applicable
Service (the "Providing Party") to the Party receiving such Service (the
"Receiving Party") following the end of such Billing Period.  Subject to Section
5.3 hereof, the Receiving Party shall pay the Providing Party in full within
thirty (30) days of its receipt of the invoice from Providing Party (the
"Payment Due Date").

     Section 5.2  Interest on Late Payments.  Any amount owing pursuant to
                  -------------------------
Section 5.1 but unpaid beyond the Payment Due Date shall accrue interest from
the Payment Due Date to the date payment is made at the lesser of (a) a rate per
annum equal to the prime lending rate quoted to responsible commercial borrowers
on ninety (90) day loans by Bank of America, NT&SA, plus two percent (2%) or (b)
the maximum rate permitted by law.

     Section 5.3  Disputed Payments.  In the event the Receiving Party disputes
                  -----------------
a portion of any amount due hereunder, the Receiving Party shall provide notice
to the Providing Party on or before the Payment Due Date, stating the amount in
dispute and the basis of such dispute and shall pay any undisputed amount.  Upon
resolution of such dispute, any amount owing shall be paid with interest as set
forth in Section 5.2.  Unless resolved by mutual agreement of the Parties

                                      16
<PAGE>

within ninety (90) days of the Payment Due Date, any dispute regarding any
amount due shall be resolved in accordance with the provisions of Article XI.

     Section 5.4  Billing Records.  The Providing Party shall maintain and
                  ---------------
preserve in a neat and orderly fashion, for a period of not less than three (3)
years, all written and electronic records of all data and information used to
calculate the amount of any invoice, including, without limitation, receipts
showing the source, quantity and price of all expenses incurred by the Providing
Party in performing the Services.  Upon reasonable advance request, the
Receiving Party shall have access to such records during normal business hours
for purposes of inspection, auditing and copying.

                                   ARTICLE VI
                                RIGHTS OF ACCESS

     Peoples and its contractors, employees, agents and other entities that
supply goods or services to Peoples in connection with Peoples' performance of
this Agreement shall be entitled to enter the Facility to the extent necessary
in order to perform Peoples' obligations hereunder.  The Parties shall mutually
agree on a mechanism to identify those Persons supplying goods and Services with
a need to enter the Facility and, so far as practicable, the Parties shall
mutually agree in advance upon the routes of access to the Facility to be used
by such Persons.  All Persons who enter the Facility pursuant to this Article VI
shall enter the Facility subject to Elwood's reasonable rules for safety and
security, and such other reasonable rules or conditions Elwood may impose.
Peoples shall not take any action or request access to the Facility for any
purpose which could reasonably be expected to have a Material Adverse Effect.


                                  ARTICLE VII
                       EVENTS OF DEFAULT AND TERMINATION

     Section 7.1  Events of Default.   An event of default under this Agreement
                  -----------------
(an "Event of Default") shall be deemed to exist upon the occurrence of any one
or more of the following events:

          (a)     Failure by a Providing Party to provide any of the Services at
the respective times required therefor by this Agreement, which failure
continues for a period of ten (10) days after receipt of written notice of such
failure;

          (b)     Failure by the Receiving Party to make payment of any amount
due to the Providing Party under this Agreement when such payment is due
hereunder, which failure continues for a period of ten (10) days after receipt
of written notice of such nonpayment, unless such amount is in dispute, in which
case the provisions of Article XI shall apply;

                                      17
<PAGE>

          (c)     Failure by Elwood to vacate the Office and Warehouse Space by
more than two (2) days following the Office and Warehouse Space Termination
Date;

          (d)     Failure by a Party to perform any other material obligation
under this Agreement, which failure (i) continues for a period of forty-five
(45) days after receipt of written notice of such failure, or (ii) such longer
period as is reasonably necessary for the nonperforming Party to cure such
failure, provided the nonperforming Party commences efforts to cure such failure
within forty-five (45) days after receipt of written notice of such failure and
thereafter proceeds with all due diligence to cure such failure; provided,
however, the cure period provided for in this clause (ii) shall not exceed 180
days unless the defaulting Party notifies the other Party, prior to the
expiration of such 180-day period, that such 180-day period is insufficient to
cure such default with the exercise of best efforts and provides to the other
Party together with such notice a reasonable plan and schedule for curing such
default; or

          (e)     If a Party fails to comply with the terms of any decision or
order issued pursuant to Article XI, and such failure continues (i) for thirty
(30) days after receipt of notice thereof, or (ii) such longer period (not to
exceed 180 days) as is reasonably necessary for the nonperforming Party to cure
such failure, provided the nonperforming Party commences efforts to comply with
such decree or order within thirty (30) days after receipt of written notice
thereof and thereafter proceeds with all due diligence to cure such failure.

     Section 7.2  Notice to Lender, Opportunity to Cure.  Anything in this
                  -------------------------------------
Agreement notwithstanding, from and after the closing date of any loans under
the Financing Documents, Peoples shall not seek to terminate this Agreement as
the result of any default of Elwood without first giving a copy of any notices
required to be given to Elwood under Section 7.1 to the Lenders, such notice to
be coupled with a request to the Lenders to cure any such default within the
applicable cure period provided to Elwood, such cure period to begin on the date
of such notice to the Lenders. If there is more than one Lender, the Lenders
will designate in writing to Peoples an agent (the "Agent") and any notice
required hereunder shall be delivered to such Agent, such notice to be effective
upon delivery to the Agent as if delivered to each of the Lenders.  The address
for Lender or Agent shall be provided to Peoples by Elwood and thereafter may be
changed by the Lender or the Agent by subsequent delivery of a notice to Peoples
at  the address for Peoples provided in Article XIII (or at such other address
subsequently delivered to the Lender or the Agent in accordance with this
Section 7.2) and otherwise in accordance with the requirements of Article XIII.

     No rescission or termination of this Agreement by Peoples pursuant to
Section 7.3(a) or Section 7.3(c) shall be valid or binding upon the Lenders
without such notice, the expiration of such cure period, and the expiration of
the Extended Cure Period (as defined below) provided in this Section 7.2.  The
Lenders may make, but shall be under no obligation to make, any payment or
perform any act required to be made or performed by Elwood, with the same effect
as if made or performed by Elwood.  If the Lenders fail to cure or are unable or
unwilling to cure any  Event of Default by Elwood within the applicable cure
period provided to Elwood in this Agreement,

                                      18
<PAGE>

Peoples shall have all its rights and remedies with respect to such default as
set forth in this Agreement; provided, however, that if the cure by the Lenders
of the Event of Default requires the Lenders to take control of, and occupy, the
Facility, the Lenders, upon the termination of the cure period provided to
Elwood, such cure period commencing on the delivery of such notice to the
Lenders shall be offered a further period (the "Evaluation Period"), during
which the Lenders shall evaluate such default, the condition of the Facility,
and other matters relevant to the actions to be taken by the Lenders concerning
such default, and which Evaluation Period shall end on the sooner to occur of
(i) the Lenders' delivery to Peoples of a notice that the Lenders have elected
to pursue their remedies under the Financing Documents and assume the rights and
obligations of Elwood under this Agreement (an "Election Notice"), or (ii)
thirty (30) days following the end of the cure period. Upon the delivery of the
Election Notice, the Lenders shall be granted an additional period or six (6)
months to cure any Event of Default (the "Extended Cure Period"). In the event
that the Lenders fail to cure any Event of Default on or before the expiration
of the Extended Cure Period, as it may have been extended, Peoples may exercise
its rights and remedies with respect to such default set forth in this
Agreement, and may immediately terminate this Agreement, and such termination
shall be effective on delivery to the Lenders or the Agent of notice of such
termination.

     Section 7.3  Remedies; Termination.  Upon the occurrence and continuation
                  ---------------------
of  an Event of Default, the non-defaulting Party, in addition to any other
remedies it may have under this Agreement, may do any or all of the following
(which remedies shall be cumulative):

          (a)     Terminate this Agreement upon thirty (30) days' written notice
to the defaulting party; provided, however, no such termination shall terminate
Elwood's right to request, and Peoples obligation to grant, the easements
referred to in Section 2.6 hereof pursuant to the terms and conditions set forth
therein, which Section shall survive any such termination of this Agreement; and
provided further, however, if Peoples terminates this Agreement as a result of
an Event of Default, Peoples will enter into a new common facilities agreement
with the Lenders or their nominee, for the remainder of the term hereof,
effective as of the date of such termination, upon the terms, provisions,
covenants and agreements herein contained and subject only to the rights, if
any, of any parties then in possession of any part of the Lessor's Parcel,
provided: (i) the Lenders, the Agent or its or their nominee shall make written
request upon Peoples for such new common facilities agreement within fifteen
(15) days after the date of such termination and such written request is
accompanied by payment to Peoples of sums then due to Peoples under this
Agreement; and (ii) the Lenders, Agent or their or its nominee shall pay to
Peoples at the time of the execution and delivery of the new Agreement, any and
all sums which would, at the time of the execution and delivery thereof, be due
pursuant to this Agreement but for such termination, and in addition thereto,
any expenses, including reasonable attorneys' fees, to which Peoples shall have
been subjected by reason of such Event of Default.

          (b)     Upon the occurrence of an Event of Default pursuant to Section
7.1(c), either (i) treat Elwood as a tenant in sufferance and charge Elwood for
each day such Event of Default continues an amount equal to two (2) times the
charge (calculated on a per diem basis)

                                      19
<PAGE>

for the Office and Warehouse Space pursuant to Article III (which amount Elwood
hereby agrees is a reasonable liquidated damage, and not a penalty), or (ii) to
the extent permitted by law, Peoples may re-enter the Office and Warehouse Space
and take complete and peaceful possession thereof, with process of law, but
without the requirement of any additional notice (to Elwood, any Lender or
otherwise) and without relinquishing any other right given to the non-defaulting
Party hereunder or by operation of Law. All property of Elwood removed from the
Office and Warehouse Space by Peoples pursuant to the exercise of its rights
under clause (ii) of the preceding sentence may be handled, removed or stored by
Peoples at the cost and expense of Elwood and Peoples shall not be responsible
in any event for the value, preservation or safekeeping thereof. Elwood shall
reimburse Peoples upon demand with respect to such removal and storage and all
such property not removed or retaken from storage by Elwood within thirty (30)
days after the Office and Warehouse Space Termination Date shall be conclusively
deemed to have been conveyed by Elwood to Peoples as by bill of sale without
further payment or credit by Peoples to Elwood.

          (c)     Exercise any other remedies available at Law or equity;
provided, however, no such termination shall terminate Elwood's right to
request, and Peoples obligation to grant, the easements referred to in Section
2.6 hereof pursuant to the terms and conditions set forth therein, which Section
shall survive any such termination of this Agreement.

Upon any such termination, the non-defaulting party shall be entitled to sue for
and recover damages arising from such Event of Default.

     Elwood may also terminate this Agreement or any one or more of the Services
without liability and without need to show cause by a notice in writing pursuant
to Article XIII of this Agreement at least ninety (90) days before the effective
date of such termination.

     Section 7.4  Right to Operate.
                  ----------------

          (a)     Scope of Right.  Upon the occurrence of an Event of Default,
                  --------------
in addition to other remedies hereunder, (including without limitation, the
right to terminate this Agreement pursuant to Section 7.3) the non-defaulting
Party may, but shall not be obligated to, assume operational control of the
facilities and equipment of the defaulting Party necessary for the continuation
of the Services provided for under this Agreement. In the event that a non-
defaulting Party determines to exercise its right under this Section 7.4, such
Party shall provide the defaulting Party three (3) days written notice of such
election. At the expiration of such three (3) day period, unless the defaulting
Party shall have cured the Event of Default in question, the non-defaulting
Party, its employees, contractors and designated third parties shall have the
unrestricted right to enter the property of the defaulting Party for the purpose
of operating such facilities and equipment as may be necessary to effectuate the
continuation of the Services provided for under this Agreement; provided,
                                                                --------
however, that nothing herein shall entitle (i) Elwood to assume operational
-------
control of Peoples' facilities and equipment used directly and exclusively in
the purchase, storage, distribution, sale, and transportation of natural gas or
(ii)

                                      20
<PAGE>

Peoples to assume operational control of Elwood's facilities and equipment
used directly and exclusively in the generation of electricity; provided,
                                                                --------
further, that the non-defaulting Party exercising its rights under this Section
-------
7.4 shall continue to perform its obligations under this Agreement. In addition
to the foregoing, upon the occurrence of an Event of Default with respect to
Peoples' obligation to provide the Fire Protection Water Service under Section
2.2, then Elwood may, at its sole risk and expense, enter upon the McDowell
Energy Center to the extent necessary to obtain access to Peoples' water storage
lagoons for the purpose of parking and operating a pumper truck or similar
vehicle and laying piping or hose to enable Elwood to pump water from such
lagoons to the Facility to furnish the Facility with Fire Protection Water;
provided, however, that (i) nothing in this Agreement shall require Peoples to
maintain such lagoons at any time or in any manner, and Peoples shall at all
times be free to use, abandon or fill in such lagoons in any manner Peoples
deems appropriate or convenient in its sole discretion, (ii) Elwood shall
exercise its rights under this sentence only if at the time the Event of Default
occurs there exist sufficient quantities of water in the lagoons and such water
is not contaminated such that its use as Fire Protection Water would not be in
accordance with Prudent Operating Practice.

          (b)     Liability. A Party's exercise of its rights under this Section
                  ---------
7.4 shall not be deemed an assumption by such Party of any liability
attributable to the other Party; provided, however, that, without limiting the
                                 --------  -------
provisions of Section 10.1 or Section 10.2, as the case may be, during the
period in which a Party is operating any of the other Party's facilities or
equipment pursuant to this Section 7.4, the defaulting Party shall be relieved
of all of its obligations to provide the Services being provided by the
nondefaulting Party (the "Operating Party") through its operation of the
defaulting Party's facilities and such Operating Party shall defend, indemnify,
and hold harmless the defaulting Party and its directors, partners, officers,
employees and agents from and against all claims, demands, damages, losses,
judgments, awards liabilities, costs and expenses (including reasonable
attorneys' fees, court costs and other expenses of litigation) in connection
with any suit, claim, action or other legal proceeding relating to the bodily
injury, sickness, disease or death of persons or the damage to or destruction of
property, real or personal, resulting from or arising out of the Operating
Party's negligence or willful misconduct in the operation of the defaulting
Party's facilities or equipment. The liability imposed by this Section 7.4(b)
upon the Operating Party shall not apply to claims, demands, damages, losses,
judgments, awards, liabilities, costs and expenses resulting from the negligence
or willful misconduct of the defaulting Party.

          (c)     Costs and Payments. During the period that a Party is
                  ------------------
operating the other Party's facilities or equipment pursuant to this Section
7.4, such Party shall continue to make such payments as are due to the other
pursuant to Article V, net of any applicable offsets; provided, however, that
                                                      --------  -------
the Operating Party may deduct from such payments all reasonable costs and
expenses incurred by such Operating Party in connection with the exercise of its
right under this Section 7.4.

                                      21
<PAGE>

          (d)    Length of Right. An Operating Party may continue to operate the
                 ---------------
portions of the other Party's facilities or equipment provided for in this
Section 7.4 until such time as (i) the defaulting Party cures the Event of
Default giving rise to the Operating Party's exercise of its rights under this
Section 7.4 or recommences the provision of the Service or commodity in
question, (ii) a Lender shall have foreclosed upon the Facility or otherwise
exercised remedies with respect to Elwood, the Facility or the Project Documents
and shall have designated another Person to operate and maintain the Facility,
(iii) after notice from defaulting Party, if Operating Party has failed to cure
such Event of Default within thirty (30) days after assuming operational control
of the defaulting Party's facilities, or (iv) the Operating Party terminates
this Agreement pursuant to Section 7.3.

                                  ARTICLE VIII
                                 FORCE MAJEURE

     Section 8.1  Definition of Force Majeure.  "Force Majeure Event" means any
                  ---------------------------
cause beyond the reasonable control of, and not due to the fault or negligence
of, the Party affected, and which could not have been avoided by due diligence
and use of reasonable efforts, including, but not limited to, drought, flood,
earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance,
sabotage, explosions, public utility outages, subsurface aquifer depletion,
failure of equipment or of suppliers, contractors or shippers to furnish labor,
equipment, goods or services, and strikes or labor disputes.

     Section 8.2  Excused Performance.  Each Party hereto shall be excused from
                  -------------------
performance and shall not be considered to be in default with respect to any
obligation hereunder, except the obligation to make payments of money in a
timely manner, if and to the extent that its failure of, or delay in,
performance is due to a Force Majeure Event; provided:

          (a)     such Party gives the other Party written notice describing the
particulars of the Force Majeure Event as soon as is reasonably practicable;

          (b)     the suspension of performance is of no greater scope and of no
longer duration than is reasonably required by the Force Majeure Event;

          (c)     no obligations of the Party which arose before the occurrence
causing the suspension of performance are excused as a result of the occurrence;
and

          (d)     the Party uses best efforts to overcome or mitigate the
effects of such occurrence;

     Section 8.3  Settlement of Strikes.  Notwithstanding the foregoing, nothing
                  ---------------------
in this Article VIII shall be construed to require the settlement of any strike,
walkout, lockout or other labor dispute on terms which, in the sole judgment of
the Party involved in the dispute, are

                                      22
<PAGE>

contrary to such Party's interest. It is understood and agreed that the
settlement of strikes, walkouts, lockouts or other labor disputes shall be
entirely within the discretion of the Party experiencing such action.


                                   ARTICLE IX
                         REPRESENTATIONS AND WARRANTIES
                            LIMITATION OF LIABILITY

     Section 9.1  Peoples' Representations And Warranties.  Peoples hereby
                  ---------------------------------------
represents and warrants to Elwood as follows as of the Effective Date:

          (a)     Standing. It is a corporation duly organized and validly
existing under the laws of the State of Illinois.

          (b)     No Litigation. Except as disclosed in the Company's Form 10-K
filed with the Securities and Exchange Commission ("SEC") for the fiscal year
ended September 30, 1998, andthe Company's Form 10-Q filed with the SEC for the
fiscal period ended December 31, 1998, there are no legal or arbitration
proceedings or any proceedings by or before any governmental or regulatory
authority or agency, now pending or threatened against Peoples which, if
adversely determined, could have a material adverse effect upon Peoples' ability
to perform under this Agreement or an adverse effect upon the financial
condition, operations, prospects or business, as a whole, of Peoples.

          (c)     No Breach.  The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will not conflict with or result in a breach of, or
require any consent (except consents in the nature of Permits which have been
obtained or reasonably are expected to be obtained in due course) under, the
organizational documents of Peoples, or any applicable Law, or any agreement or
instrument to which Peoples is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument.

          (d)     Authority.  Peoples has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by Peoples of this Agreement have been duly
authorized by all necessary actions on its part; and this Agreement has been
duly and validly executed and delivered by Peoples and constitutes a legal,
valid and binding obligation of Peoples enforceable in accordance with its
terms.

          (e)     No Consents.  Except as set forth on Schedule 9.1(e), no
authorization, consent, approval, Permits or other action by, and no notice to
or filing with, any Governmental Authority is required for the due execution,
delivery and performance by Peoples of this Agreement which has not been
obtained.

                                      23
<PAGE>

     Section 9.2  Elwood's Representations and Warranties.  Elwood hereby
                  ---------------------------------------
represents and warrants to Peoples as follows:

          (a)     Standing. It is a limited liability company duly organized and
validly existing under the laws of the State of Delaware.

          (b)     No Litigation. There are no legal or arbitration proceedings
or any proceedings by or before any governmental or regulatory authority or
agency, now pending or threatened against Elwood which, if adversely determined,
could have a material adverse effect upon Elwood's ability to perform under this
Agreement or an adverse effect upon the financial condition, operations,
prospects or business, as a whole, of Elwood.

          (c)     No Breach.  The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will not conflict with or result in a breach of, or
require any consent (except consents in the nature of Permits which have been
obtained or reasonably are expected to be obtained in due course) under, the
organizational documents of Elwood, or any applicable Law, or any agreement or
instrument to which Elwood is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument.

          (d)     Authority.  Elwood has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by Elwood of this Agreement have been duly
authorized by all necessary actions on its part; and this Agreement has been
duly and validly executed and delivered by Elwood and constitutes a legal, valid
and binding obligation of Elwood enforceable in accordance with its terms.

          (e)     No Consents.  Except as set forth on Schedule 9.2(e), no
authorization, consent, approval or other action by, and no notice to or filing
with, any Governmental Authority is required for the due execution, delivery and
performance by Elwood of this Agreement which has not been obtained.

     Section 9.3  Limitations of Warranties and Liabilities.
                  -----------------------------------------

     (a)  EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IX, THE PARTIES
EXPRESSLY DISCLAIM ANY AND ALL REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE
SERVICES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     (b)  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER (WHETHER IN
CONTRACT, TORT, STRICT LIABILIITY OR OTHERWISE) FOR ANY

                                      24
<PAGE>

LOST REVENUES, LOST PROFITS, OR PUNITIVE, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
OF ANY NATURE, EVEN IF A PARTY IS SPECIFICALLY INFORMED OF THE POSSIBILITY
THEREOF.

     (c)  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL PEOPLES' LIABILITY TO ELWOOD IN CONNECTION WITH THE PERFORMANCE OF
THIS AGREEMENT (WHETHER IN CONTRACT, TORT, STRICT LIABILIITY OR OTHERWISE)
EXCEED IN THE AGGREGATE THE SUM OF ALL AMOUNTS THEN PAID BY ELWOOD UNDER SECTION
4.1 HEREOF ; PROVIDED, HOWEVER, THAT THE LIMITATION OF LIABILITY CONTAINED IN
THIS SENTENCE SHALL NOT BE APPLICABLE TO ANY LIABILITY (WHETHER IN CONTRACT,
TORT, STRICT LAIBILITY OR OTHERWISE) CAUSED BY THE GROSS NEGLIGENCE OR
INTENTIONAL MISCONDUCT OF PEOPLES, OR TO ANY OBLIGATIONS OF PEOPLES UNDER
SECTION 10.3 HEREOF. THE TERMS OF THIS SECTION SHALL IN NO RESPECT LIMIT
PEOPLES' LIABILITY UNDER THE GROUND LEASE.


                                   ARTICLE X
                                   INDEMNITY

     Section 10.1  Definition of "Environmental Laws" and "Hazardous Materials".
                   -----------------------------------------------------------
For purposes of this Agreement, "Environmental Laws" means any and all federal,
state and municipal laws, ordinances and regulations, including without
limitation any and all requirements to register underground storage tanks,
relating to:  (i) emissions, discharges, spills, releases or threatened releases
of pollutants, contaminants, "Hazardous Materials" (as hereinafter defined), or
hazardous or toxic materials or wastes onto land or into ambient air, surface
water, ground water, wetlands, or septic systems; (ii) the use, treatment,
storage, disposal, handling, or containing of Hazardous Materials or hazardous
and/or toxic wastes, material products or by-products (or of equipment or
apparatus containing Hazardous Materials); or (iii) pollution or the protection
of human health or the environment.  "Hazardous Materials" means (A) hazardous
materials, hazardous wastes, and hazardous substances as those terms are defined
under any Environmental Laws, (B) petroleum and petroleum products including
crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any
mixtures thereof; (D) asbestos or any material which contains any hydrated
mineral silicate, including, but not limited to chrysotile, amosite,
crocidolite, tremolite, anthophylite or actinolite, whether friable or non-
friable; (E) PCB's or PCB-containing materials, or fluids; (F) any other
hazardous, toxic or radioactive substance, material, contamination, pollutant,
or waste; and (G) any substance with respect to which any Environmental Law or
Governmental Authority requires environmental investigation, monitoring or
remediation.

     Section 10.2  Elwood's Indemnity.  Unless due to the intentional
                   ------------------
misconduct or gross negligence of Peoples or Peoples' agents or employees,
Elwood shall defend, indemnify, and

                                      25
<PAGE>

hold harmless Peoples, its directors, officers, employees and agents (the
"Peoples Indemnified Parties") from and against any and all liabilities, claims,
losses, damages, actions, judgments, costs, and expenses (including without
limitation attorney's fees and expenses) of every kind (collectively "Claims")
to the extent imposed upon or asserted against the Peoples Indemnified Parties
or any one of them by reason of or in connection with (a) any accident, injury
to or death of persons, or loss of or damage to property occurring on or about
the Premises or the McDowell Energy Center related to Elwood's use of the
Premises or operation of the Facility or performance of its obligations under
this Agreement; (b) Elwood's possession, operation, use or misuse of the
Facility; (c) the imposition or enforcement of any liens upon the McDowell
Energy Center arising by, through or under Elwood or its acts or omissions under
this Agreement; or (d) any failure on the part of Elwood to perform or comply
with any of the terms of this Section 10.2. In addition to the foregoing, Elwood
shall indemnify, defend and hold the Peoples Indemnified Parties free and
harmless from and against any Claims arising from or caused in whole or in part,
directly or indirectly, by any one of the following: (a) the discharge in or
from the Premises or the Facility by any one of Elwood or its employees, agents,
contractors and subtenants (collectively, "Elwood's Parties") of any Hazardous
Materials, or the disposal, release, threatened release, discharge, or
generation of Hazardous Materials to, in, on, under, about, or from the Premises
or the Facility by any of the Elwood's Parties; or (b) the failure of any of the
Elwood's Parties to comply with any Environmental Laws, licenses or permits
relating to the Premises. Elwood's indemnity and liability hereunder shall
survive the expiration or earlier termination of this Agreement. In no event,
however, shall the indemnities contained in this Section 10.2 include any lost
profits or lost revenues incurred by Peoples. Notwithstanding anything to the
contrary in this Agreement, Elwood shall not be required to indemnify any
Indemnified Party for any Claims for which Peoples is required to indemnify
Elwood under the Ground Lease or the Purchase and Sale Agreement.

     Section 10.3  Peoples' Indemnity.  Peoples shall defend, indemnify, and
                   ------------------
hold harmless Elwood, its directors, officers, employees and agents (the "Elwood
Indemnified Parties") from and against:  (a) any Claims arising from or in
connection with (i) any Hazardous Materials at, from, in or on the Premises or
the Facility on or prior to the Commencement Date, (ii) any violation by Peoples
or its employees and agents (collectively, the "Peoples' Parties") of any
Environmental Laws and any failure by the Peoples' Parties to comply with any
Environmental Laws, licenses or permits with respect to the McDowell Energy
Center (specifically excluding, however, any such failure for which Elwood is
obligated to indemnify the Peoples Parties pursuant to Section 2.3, 2.4, or 10.2
hereof or pursuant to the Ground Lease or the Purchase and Sale Agreement);
specifically excluding in each case, however, any emission, discharge, spill,
release or disposal of Hazardous Materials at, from or on the Premises or at the
Facility at or prior to the Effective Date caused by the Elwood's Parties, or
any violation of any Environmental Law; caused by the Elwood's Parties, and
(iii) the discharge in or from the McDowell Energy Center by any of the Peoples'
Parties of any Hazardous Materials, or the disposal, release, threatened
release, discharge, or generation of Hazardous Materials to, in, on, under,
about or from the McDowell Energy Center by any of the Peoples' Parties; and (b)
the imposition or enforcement of any liens upon Elwood's interest in the
Premises or the Facility arising by,

                                      26
<PAGE>

through or under Peoples or its acts or omissions under this Agreement;
provided, however, in no event shall the indemnifications contained in this
sentence, or any limitations thereof contained in this Section, in any way limit
Peoples' indemnification obligations under the Ground Lease or the Purchase and
Sale Agreement which are and shall be separate and independent indemnification
obligations of Peoples. In no event, however, shall the indemnities contained in
this Section 10.3 include any lost profits or lost revenues incurred by Elwood.
Peoples' indemnity and liability under this Section 10.3 shall survive the
expiration or earlier termination of this Agreement or an assignment of this
Agreement by Peoples. However, in the event of such assignment, the indemnities
contained in this Section 10.3 shall, as to any successor of Peoples, in no
event pertain, cover or relate to the acts or omissions of Peoples' successors
or assigns under this Agreement (or any other person or entity except the
Peoples Parties).

                                   ARTICLE XI
                                  ARBITRATION

     Section 11.1  Matters Subject to Arbitration.  In case any disagreement
                   ------------------------------
shall arise between the parties hereto relating to any of the following matters,
such matter in dispute shall, at the election of either party hereto, be
determined by arbitration in the manner provided in this Article XI:

          (a)      Any disputes arising under Article V hereof.

          (b)      Any disputes concerning the specifications set forth in any
of the Appendixes hereto.

          (c)      Any disputes arising under Section 4.3 concerning whether
additions or modifications to Peoples' facilities needed to provide Services
hereunder are discretionary.

     Section 11.2  Arbitration Proceedings.  The determination by arbitration of
                   -----------------------
any matter agreed to be submitted to arbitration as provided in this Agreement
shall be determined as follows:  Either party shall notify the other party of
its desire to arbitrate the matter in dispute and shall state in said notice the
name and address of a qualified person to act as arbitrator hereunder.  Within
thirty (30) days after the receipt of such notice, the other party shall give
notice to the sender of the first-mentioned notice, likewise stating the name
and address of a qualified person to act as arbitrator hereunder.  The
arbitrators so specified in such notices shall be experienced in the field of
the matter in dispute.  If within thirty (30) days following the appointment of
the latter of said arbitrators, said two (2) arbitrators shall be unable to
agree in respect of the matter in dispute, the said arbitrators shall appoint by
instrument in writing a third similarly qualified arbitrator, who shall proceed
with the two (2) arbitrators first appointed to determine the matter in dispute.
The written decision of any two (2) of the arbitrators so appointed shall be
binding and conclusive upon the parties hereto.  If after notice of the
appointment of an arbitrator, the other party shall fail within the above-
specified period of thirty (30) days to appoint an arbitrator, then the
arbitrator so appointed by the first party shall have

                                      27
<PAGE>

power to proceed to arbitrate as sole arbitrator, and to make an award. If the
two (2) arbitrators aforesaid shall be unable to agree within thirty (30) days
following the appointment of the latter of said arbitrators upon the matter in
dispute and shall fail to appoint in writing a third arbitrator within thirty
(30) days thereafter, the necessary arbitrator, who need not be similarly
qualified but who shall be a member of a National Panel of Arbitrators of the
American Arbitration Association shall be appointed by the American Arbitration
Association in accordance with the then existing commercial arbitration rules of
said American Arbitration Association. Unless otherwise agreed to by the
Parties, all arbitration proceedings shall be held in Chicago, Illinois.

     Section 11.3  Expenses of Arbitration. Peoples and Elwood shall each pay
                   -----------------------
all of the fees of the person acting as arbitrator hereunder for Peoples and
Elwood, respectively, one-half of the fees of any third arbitrator appointed
pursuant to the provisions of Section 11.2, one-half of the general expenses of
any arbitration conducted under this Agreement, and all of its own respective
attorneys' fees incurred with respect thereto.

     Section 11.4  Parties Entitled to Participate in Arbitration Proceedings.
                   ----------------------------------------------------------
Peoples and Elwood shall each have the right to appear and be represented by
counsel before said arbitrators and to submit such data and memoranda in support
of their respective positions in the matter in dispute as each may deem
necessary or appropriate in the circumstances.


                                  ARTICLE XII
                             SUCCESSORS AND ASSIGNS

     Section 12.1  Transfer of McDowell Energy Center.  Peoples may assign its
                   ----------------------------------
rights and obligations under this Agreement only to a Person to whom it
transfers the McDowell Energy Center provided: (a) it secures from such Person
an agreement in writing that such Person shall be bound by the terms and
conditions of this Agreement, and (b) such Person assumes all of Peoples'
obligations hereunder for any period of ownership or control of the McDowell
Energy Center, unless otherwise agreed to by Elwood and such Person.  No such
transfer or assignment shall relieve or release Peoples from any obligations
under this Agreement without the prior written consent of Elwood as to the
financial ability of any such assignee to perform the obligations of Peoples
under this Agreement, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, Peoples shall have the right, without
the consent of Elwood, (x) to assign or pledge this Agreement to any lenders,
trustees, agents or secured parties in connection with any financing for the
Property or secured thereby, and/or (y) to assign all of its rights and
obligations under this Agreement to Peoples Energy Resources Corp., an Illinois
corporation, provided that Peoples transfers the McDowell Energy Center to
Peoples Energy Resources Corp.  Elwood hereby agrees, in connection with any
such financing or assignment in connection therewith described in clause (x) of
the preceding sentence, to execute and deliver (and to cause any Lenders,
trustees, agents or secured parties existing by through or under Elwood to
execute and deliver) at the request of any such Lender, trustee, agent or
secured party,

                                      28
<PAGE>

a consent to assignment in form typical in project finance transactions and
reasonably acceptable to Elwood.

     Section 12.2  Transfer of Facility.  Except as set forth in the following
                   --------------------
sentence, Elwood may assign its rights and obligations under this Agreement only
to a Person to whom it transfers the Facility provided: (a) it secures from such
Person an agreement in writing that such Person shall be bound by the terms and
conditions of this Agreement, and (b) such Person assumes all of Elwood's
obligations hereunder for any period of ownership or control of the Facility,
unless otherwise agreed to by Peoples and such Person.  Notwithstanding the
foregoing, Elwood shall have the right, without the consent of Peoples, to
assign or pledge this Agreement to any lenders, trustees, agents or secured
parties in connection with any financing for the Facility or secured thereby.
Peoples hereby agrees, in connection with any such financing or assignment in
connection therewith, to execute and deliver (and to cause any lenders,
trustees, agents or secured parties existing by through or under Peoples to
execute and deliver) at the request of any such lender, trustee, agent or
secured party, a consent to assignment in form typical in project finance
transactions and reasonably acceptable to Peoples.  No such transfer or
assignment shall relieve or release Elwood from any obligations under this
Agreement without the prior written consent of Peoples as to the financial
ability of any such assignee to perform the obligations of Elwood under this
Agreement, which consent shall not be unreasonably withheld or delayed.


                                  ARTICLE XIII
                                    NOTICES

     Any notice, demand, offer or other written instrument required or permitted
to be given pursuant to this Agreement shall be in writing, and shall be signed
by the Party giving such notice and shall be sent by facsimile, with a copy by
overnight courier service, telegram or registered mail:

     If to the Peoples:  The Peoples Gas Light and Coke Company
                         130 East Randolph Drive
                         Chicago, Illinois 60601
                         Telecopy No. (312) 240-4541
                         Attn:  William E. Morrow, Vice President

     With a copy to:     John Nassos
                         The Peoples Gas Light and Coke Company
                         130 East Randolph Drive
                         23rd Floor
                         Chicago, Illinois 60601
                         Telecopy No. (312) 240-4486

                                      29
<PAGE>

     If to Elwood:    Elwood Energy, LLC
                      c/o Dominion Energy, Inc.
                      P.O. Box 26532
                      Richmond, Virginia 23261
                      120 Tredegar Street
                      Richmond, Virginia 23219
                      Telecopy No. (804) 819-2202
                      Attn:  Ronald D. Usher/Christine Schwab

     Each Party shall have the right to change the place to which notice shall
be sent or delivered by similar notice sent or delivered in like manner to the
other Party.  Without limiting any other means by which a Party may be able to
prove that a notice has been received by the other Party, a notice shall be
deemed to be duly received:

          (a)      if sent by hand, overnight courier service or telegram, the
date when left at the address of the recipient;

          (b)      if sent by registered mail, the date of the return receipt or
first attempted delivery; or

          (c)      if sent by facsimile, upon receipt by the sender of an
acknowledgment or transmission report generated by the machine from which the
facsimile was sent indicating that the facsimile was sent to the receiving
Party's facsimile number specified above or as may be specified by the receiving
Party from time to time in accordance with this Article XIII.


                                  ARTICLE XIV
                                 MISCELLANEOUS

     Section 14.1  Non-Dedication.  Nothing herein shall be construed as the
                   ---------------
dedication by either Party of its facilities or equipment to the public or any
part thereof.  Neither Party shall take any action that would subject the other,
or the other's facilities or equipment to the jurisdiction of any Governmental
Authority.  Neither Party shall assert in any proceeding before a court or
regulatory body that the other is a public utility by virtue of such other
Party's performance under this Agreement.

     Section 14.2  Independent Parties.  Nothing in this Agreement shall be
                   -------------------
construed as creating a partnership, trust or any similar relationship between
the Parties.  Neither Party is authorized to act on behalf of the other Party
and neither shall not be considered the agent of the other.

     Section 14.3  Agreement Binding.  This Agreement shall be binding upon and
                   -----------------
for the benefit of the Parties hereto and their permitted successors and
permitted assigns.

                                      30
<PAGE>

     Section 14.4  Drafting Interpretations.  Preparation of this Agreement has
                   ------------------------
been a joint effort of the parties and the resulting document shall not be
construed more severely against one of the parties than against the other.

     Section 14.5  Choice of Law.  This Agreement and any dispute arising
                   -------------
therefrom shall be governed and interpreted in accordance with the laws of
Illinois as applied to contracts made and wholly performed within said state.

     Section 14.6  Section Headings and Subheadings.  All Section headings and
                   --------------------------------
subheadings are inserted for convenience only and shall not affect any
construction or interpretation of this Agreement.

     Section 14.7  Severability.  The invalidity of one or more phrases,
                   ------------
sentences, clauses, or Sections contained in this Agreement shall not affect the
validity of the remaining portions of the Agreement so long as the material
purposes of this Agreement can be determined and effectuated.

     Section 14.8  Entire Agreement.  This Agreement sets forth the full and
                   ----------------
complete understanding of the Parties as to the subject matter contained herein,
and all prior written or oral understandings, offers or other communications of
every kind pertaining to the subject matter contained herein are hereby
abrogated and withdrawn.

     Section 14.9  Amendment.  This Agreement may be amended or modified only by
                   ---------
mutual written agreement signed by authorized representatives of both Parties
hereto.

     Section 14.10  Survival.  Cancellation, expiration or earlier termination
                    --------
of this Agreement shall not relieve the Parties of obligations that by their
nature should survive such cancellation, expiration or termination, including
without limitation,  promises of indemnity and  confidentiality.

     Section 14.11  Cooperation.  The Parties shall cooperate with each other in
                    -----------
carrying out the transactions contemplated by this Agreement, in obtaining any
and all required consents of third parties, including, without limitation, any
Permits, or licenses, required in connection with this Agreement, in filing
notifications and reports, if any, which may be required, and in executing and
delivering all documents, instruments and copies thereof as shall be reasonably
agreed upon or as a party may reasonably request for the purpose of carrying out
the terms and conditions of this Agreement.

     Section 14.12  Waiver.  No waiver of any of the provisions of this
                    ------
Agreement shall be deemed to be, nor shall it constitute, a waiver of any other
provision whether similar or not.  No single waiver shall constitute a
continuing waiver.  No waiver shall be binding unless executed in writing by the
Party making the waiver.

                                      31
<PAGE>

     Section 14.13  Consequential Damages.  Notwithstanding any other provision
                    ---------------------
of this Agreement, in no event shall either Party be liable to the other Party
for any special or consequential damages (including without limitation, loss of
profits) suffered as a result of a breach of this Agreement or  paid as a result
of any and all claims, demands, suits, causes of action, proceedings, including
any arbitration proceedings, judgments and liabilities, incurred or sustained by
or against such other Party.

     Section 14.14  Insurance; Waiver of Subrogation.  Each Party shall maintain
                    --------------------------------
such insurance as required under the Ground Lease and the Purchase and Sale
Agreement.  Peoples and Elwood each hereby waive any and every claim for
recovery from the other for any and all loss of or damage to their respective
property, or to the contents thereof, which loss or damage is covered by valid
and collectible physical damage insurance policies or would have been covered
had the insurance policies required by this Agreement been in force, to the
extent that such loss or damage is recoverable under said insurance policies.
Inasmuch as this mutual waiver of subrogation will preclude the assignment of
any such claim by subrogation (or otherwise) to an insurance company or any
other person, Peoples and Elwood each agree to give to each insurance company
which has issued, or in the future may issue its policies of physical damage
insurance, written notice of the terms of this mutual waiver, and to have said
insurance policies properly endorsed, if necessary, to prevent the invalidation
of such insurance coverage by reason of said waiver.

     Section 14.15  Third Parties.  Nothing in this Agreement, whether express
                    -------------
or implied, is intended to confer any rights or remedies on any persons other
than the Parties hereto and their respective permitted successors and permitted
assigns.

     Section 14.16  Counterparts.  This Agreement may be signed in any number of
                    ------------
counterparts and each counterpart shall represent a fully executed original as
if signed by both Parties.

                                      32
<PAGE>

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first written above.

                                        ELWOOD ENERGY LLC:

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

                                        THE PEOPLES GAS LIGHT AND COKE COMPANY

                                        By:   /s/ William E. Morrow
                                              ----------------------------------
                                              William E. Morrow
                                              Vice President

                                      33
<PAGE>

                          COMMON FACILITIES AGREEMENT
                                  EXHIBIT A-1
                                  -----------

                       LEGAL DESCRIPTION OF THE PROPERTY

THE SOUTHEAST QUARTER OF THE NORTHEAST QUARTER, ALSO THE EAST 99.00 FEET OF THE
SOUTHWEST QUARTER OF THE NORTHEAST QUARTER, ALSO THE SOUTHEAST QUARTER EXCEPTING
THAT PART DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHEAST CORNER OF THE SAID
SOUTHEAST QUARTER; THENCE SOUTH 90 DEGREES 00 MINUTES 00 SECONDS WEST 568.00
FEET, ALONG THE SOUTH LINE OF THE SAID SOUTHEAST QUARER; THENCE NORTH 00 DEGREES
26 MINUTES 48 SECONDS EAST 454.00 FEET, ALONG A LINE PARALLEL TO THE EAST LINE
OF THE SAID SOUTHEAST QUARTER; THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS
EAST 568.00 FEET, ALONG A LINE PARALLEL TO THE SAID SOUTH LINE OF THE SOUTHEAST
QUARTER, TO THE SAID EAST LINE OF THE SOUTHEAST QUARTER; THENCE SOUTH 00 DEGREES
26 MINUTES 48 SECONDS WEST 454.00 FEET, ALONG THE SAID EAST LINE OF THE
SOUTHEAST QUARTER, TO THE POINT OF BEGINNING, AND ALSO THE EAST HALF OF THE
SOUTHWEST QUARTER EXCEPTING THEREFROM THAT PART DESCRIBED AS FOLLOWS:  BEGINNING
AT THE SOUTHWEST CORNER OF GOVERNMENT LOT 1 IN THE SAID SOUTHWEST QUARTER, SAID
SOUTHWEST CORNER BEING 1428.22 FEET EAST (MEASURED ALONG THE SOUTHLINE OF THE
SAID SOUTHWEST QUARTER) FROM THE SOUTHWEST CORNER; THENCE EAST ALONG THE SOUTH
LINE OF SAID GOVERNMENT LOT 1, A DISTANCE OF 32.03 FEET; THENCE NORTH,
PERPENDICULAR TO THE SAID SOUTH LINE OF GOVERNMENT LOT 1, A DISTANCE OF  2629.69
FEET, TO THE NORTH LINE OF SAID GOVERNMENT LOT 1; THENCE WEST ALONG THE SAID
NORTH LINE OF GOVERNMENT LOT 1, A DISTANCE OF 4.06 FEET, TO THE NORTHWEST CORNER
OF SAID GOVERNMENT LOT 1, SAID NORTHWEST CORNER OF GOVERNMENT LOT 1 BEING
1437.51 FEET EAST (MEASURED ALONG THE NORTH LINE OF THE SAID SOUTHWEST QUARTER)
FROM THE NORTHWEST CORNER OF THE SAID WEST FRACTIONAL HALF OF THE SOUTHWEST
QUARTER; THENCE SOUTH ALONG THE WEST LINE OF SAID GOVERNMENT LOT 1, A DISTANCE
OF 2629.83 FEET, TO THE POINT OF BEGINNING ALL IN SECTION 7, TOWNSHIP 34 NORTH,
RANGE 10 EAST OF THE THIRD PRINCIPAL MERIDIAN

EXCLUDING, HOWEVER:

THE EAST 33.00 FEET OF THE SOUTHEAST QUARTER OF THE NORTHEAST QUARTER AND THE
EAST 33.00 FEET OF THE SOUTHEAST QUARTER EXCEPTING THE SOUTH 454.00 FEET
THEREOF, ALL IN SECTION 7, TOWNSHIP 34 NORTH, RANGE 10 EAST OF THE THIRD
PRINCIPAL MERIDIAN, IN WILL COUNTY, ILLINOIS CONTAINING 2.645 ACRES MORE OF
LESS.
<PAGE>

                                  EXHIBIT A-2
                                  -----------

                       LEGAL DESCRIPTION OF THE PREMISES

THAT PART OF THE SOUTHEAST QUARTER OF SECTION 7, TOWNSHIP 34 NORTH, RANGE 10
EAST OF THE THIRD PRINCIPAL MERIDIAN, DESCRIBED AS FOLLOWS:  COMMENCING AT THE
SOUTHEAST CORNER OF THE SAID SOUTHEAST QUARTER; THENCE SOUTH 90 DEGREESS 00
MINUTES 00 SECONDS WEST 1202.35 FEET, ALONG THE SOUTH LINE OF SAID SOUTHEAST
QUARTER, TO THE POINT OF BEGINNING; THENCE NORTH 00 DEGRESS 00 MINUTES 00
SECONDS EAST 454.00 FEET; THENCE SOUTH 90 DEGREES 00 MINUTES 00 SECONDS WEST
84.23 FEET; THENCE NORTH 00 DEGREES 00 MINUTES 00 SECONDS EAST 781.04 FEET;
THENCE SOUTH 90 DEGREES 00 MINUTES 00 SECONDS WEST 80.00 FEET; THENCE NORTH 00
DEGREES 00 MINUTES 00 SECONDS EAST 402.23 FEET; THENCE SOUTH 90 DEGREES 00
MINUTES 00 SECONDS WEST 423.52 FEET; THENCE SOUTH 00 DEGREES 00 MINUTES 00
SECONDS WEST 113.03 FEET; THENCE SOUTH 02 DEGREES 35 MINUTES 36 SECONDS EAST
409.99 FEET; THENCE SOUTH 90 DEGREES 00 MINUTES 00 SECONDS WEST 42.00 FEET;
THENCE SOUTH 00 DEGREES 00 MINUTES 00 SECONDS WEST 298.57 FEET; THENCE SOUTH 90
DEGREES 00 MINUTES 00 SECONDS WEST 100.73 FEET; THENCE SOUTH 00 DEGREES 00
MINUTES 00 SECONDS WEST 816.10 FEET, TO A POINT ON THE SAID SOUTH LINE OF THE
SAID SOUTHEAST QUARTER; THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS EAST
711.93 FEET, ALONG THE SAID SOUTH LINE OF THE SOUTHEAST QUARTER, TO THE POINT OF
BEGINNING, IN WILL COUNTY, ILLINOIS, CONTAINING 21.465 ACRES MORE OR LESS.
<PAGE>

                          COMMON FACILITIES AGREEMENT
                                   APPENDIX A

                        NON-POTABLE SERVICE WATER SUPPLY
                        --------------------------------


1. Scope of Service: Peoples shall supply non-potable Service Water to Elwood
   under this Appendix A per the following specifications.

2. Quality: Untreated well water as provided by the existing Peoples Gas raw
   water system. (A representative water quality analysis for a typical sample
   of the well water is attached.)

3. Maximum Flow Rate:  200 gpm

4. Pressure: 100 - 140 psig

5. Point of Interconnection: The interconnection, including required valves, to
   be proposed by Elwood and subject to Peoples' review and approval, which
   shall not be unreasonably withheld or delayed.

6. Monthly Service Water Supply Fee:

   a. Deep well pump (250 kw, 700 gpm, 0.08c/kwh):  45c per 1000 gallons.
      27.5 gpm x 60 min/hr x 1000 hr x 4 units = 6.6 million gal.
      0.45/1000 x 6.6 million = $2,970/yr.
   b. Service water pump (115.5 kw, 110 gpm, 0.08c/kwh): $1.40 per 1000 gal
   c. Total electric: $1.85/1000 gal.  For 6.6 million gal: $12,210/year or
      $1017.5/mo.
   d. Maintenance: $182.5/mo.
   e. Total:  $1200/mo.

Facilities owned by Peoples Gas and associated with supplying non-potable
service water to Elwood Energy  (These facilities are not to be considered
exclusively dedicated to Elwood Energy.)

1. Two 700 gpm deep well pumps.
2. Three 740 gpm (at 140 psig discharge pressure) raw water pumps.
3. One 932,700 gallon raw water storage tank.  Process Water capacity is
   approximately 180,000 gallons.
<PAGE>

                          COMMON FACILITIES AGREEMENT
                                   APPENDIX B

                          FIRE PROTECTION WATER SUPPLY
                          ----------------------------


1. Scope of Service: Peoples shall supply Fire Protection Water to Elwood under
   this Appendix B per the following specifications.

2. Maximum Flowrate: Nominally 2500 gpm.

3. Pressure at Maximum Flowrate: Nominally 105 psig.

4. Pressure at Zero Flowrate: Nominally 120 psig

5. Storage Capacity: 750,000 gallons for the total PGL fire system.

6. Point of Interconnection:  To be provided by Elwood and subject to Peoples'
approval, which shall not be unreasonably withheld or delayed.

7. Monthly Fire Protection Water Supply Fee:

   a. 14 hp x .746kw/hp/.875 eff. x 730 hr/mo x $0.0757/kwh = $660/mo.
   b. Three years maint. on pumps = $11,000/36 mo. = $305/mo
   c. Total = $965/mo.

Facilities:
-----------
a.   Two 2500 gpm (at 125 psig discharge pressure) fire water pumps.
     One is electric-motor driven (primary).
     One is diesel-engine driven (backup).

b.   One 50 gpm (at nominally 120 psig) fire water jockey pump. (Used to
     maintain pressure under no load.

c.   One 500 kw diesel emergency generator.

d.   One 932,700 gallon raw water tank.  Fire water capacity of tank is
     approximately 750,000-800,000 gallons.

(These facilities are not to be considered exclusively dedicated to Elwood
Energy.)
<PAGE>

                          COMMON FACILITIES AGREEMENT
                                   APPENDIX C


                ACCEPTANCE AND DISPOSAL OF STORMWATER DISCHARGE


1. Scope of Service: Peoples shall accept and dispose of the discharge of Storm
   Water from the Facility under this Appendix C per the following
   specifications.

2. Maximum Flowrate into the Peoples Storm Water system: Storm Water discharge
   quantities shall not be monitored.  Detention storage shall be designed and
   maintained in accordance with the Village of Elwood stormwater detention
   ordinances in effect at the time.

3. Contaminants: pH in range of 6 to 9, and otherwise in compliance with
   applicable Law.

4. Sampling Provisions: Elwood shall provide a sample point prior to the point
   where Storm Water from the Elwood Facility enters the Peoples Storm Water
   system for Peoples' use in obtaining grab samples.

5. Point of Interconnection: Points of Interconnection shall be as designated on
   the detention storage construction plans approved by the Village of Elwood
   for construction.

6. Monthly Storm Water Acceptance Fee: The fee is based on the cost of monthly
   monitoring and analysis of the Storm Water by a chemist. The cost will be
   shared equally by Peoples and Elwood. The initial charge to Elwood is $200
   per month.
<PAGE>

                          COMMON FACILITIES AGREEMENT
                                   APPENDIX D

                   ACCEPTANCE AND DISPOSAL OF BLOWDOWN WATER


1. Scope of Service: Peoples shall accept and dispose of the discharge of
   Blowdown Water from the Facility into Peoples' Storm Water discharge system
   in accordance with the Peoples Gas NPDES permit under this Appendix D per the
   following specifications.

2. Maximum Flowrate into the Peoples' Storm Water discharge system:  140 gpm

3. Contaminants:

   a. Chlorine (free): less than 0.5 mg/l
   b. Chromium:        less than 0.2 mg/l
   c. pH:              6 to 9
   d. Zinc:            less than 1.0 mg/l

4. Chemical treatment of inlet air cooler water:  None

5.   Sampling Provisions: Elwood shall provide a sample point prior to the point
where Blowdown Water from the Elwood Facility enters the Peoples' Storm Water
discharge system for Peoples' use in obtaining grab samples.

5. Point of Interconnection: To be proposed by Elwood and approved by Peoples,
   which approval shall not be unreasonably withheld or delayed.

6. Monthly Blowdown Water Acceptance Fee: $187.5 per month
   150 hr/yr x $30/hr/12 mo. x 50% (Split cost)
<PAGE>

                          COMMON FACILITIES AGREEMENT
                                   APPENDIX E


         OFFICE SPACE, RESTROOMS, SHOWERS, LOCKER ROOMS, WAREHOUSING
         -----------------------------------------------------------
                            AND MACHINE SHOP ACCESS
                           ------------------------

1. Scope of Services: Peoples shall allow Elwood to occupy certain office space,
   use certain restrooms, locker rooms, showers, warehouse space, machine shops,
   machine tools, and certain other ancillary facilities as listed in this
   Appendix E.

2. Description of the facility: The facility is a nominally 6000 SF space in the
   Contract Maintenance and Warehouse Building located adjacent to the northwest
   corner of the turbine site. The leased space includes one office, locker
   rooms, bath rooms, lunch room, and warehouse space. It has a truck dock and
   parking in front of the building.

3. Description of office: A 25 ft x 15 ft office on the north end of the
   building.

4. Description of locker rooms: The mens locker room (19 ft x 50 ft) contains 50
   lockers and a four-shower head shower. The women's locker room (10 ft x 12
   ft) contains five lockers and one shower stall.

5. Description of warehouse space: The warehouse space (94 ft x 39 ft) includes
   four work benches that will be used for testing welders at the job site.

6. Description of other ancillary facilities allowed:  Access to the parking
   facilities in front of the building will be allowed.

7. Rental Fee for Access to Peoples Facilities:  $2500 per month ($5/SF/year)