### EXHIBIT NO. 10-9

STATE OF NEW YORK
PUBLIC SERVICE COMMISSION

At a session of the Public Service
Commission held in the City of
Albany on October 24, 2001

COMMISSIONERS PRESENT:
Maureen O. Helmer, Chairman
Thomas J. Dunleavy
James D. Bennett
Leonard A. Weiss
Neal N. Galvin

|CASE 01-E-0011 |  | Joint Petition of Niagara Mohawk Power Corporation, New York State
Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central
Hudson Gas & Electric Corporation, Constellation Nuclear, LLC and Nine Mile
Point Nuclear Station, LLC for Authority Under Public Service Law Section 70 to
Transfer Certain Generating and Related Assets and for Related Approvals.
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ORDER AUTHORIZING ASSET TRANSFERS
(Issued and Effective October 26, 2001)

BY THE COMMISSION:

INTRODUCTION



On January 31, 2001, Niagara Mohawk Power Corporation (Niagara Mohawk), Rochester Gas and Electric
Corporation (RG&E), Central Hudson Gas & Electric Corporation (Central
Hudson) and New York State Electric & Gas Corporation (NYSEG) submitted,
pursuant to Public Service Law (PSL) §70, a Joint Petition seeking
authority to transfer their respective interests in the Nine Mile Point Nuclear
Generating Station to Constellation Nuclear, LLC and Nine Mile Point Nuclear
Station, LLC (together Constellation).1

The Administrative Law
Judge assigned to this case conducted conferences on January 17 in anticipation
of the Joint Petition and on February 14, 2001.2 Thereafter, the Judge required
the parties to file comments or testimony concerning the proposed sale and the
ratemaking for the gain or loss on the transaction.3 On or about April 13, 2001,
six parties filed either comments or testimony: Department of Public Service
Staff, the State Attorney Generals Office, the International Brotherhood
of Electrical Workers - Local 97, Nucor Steel Auburn, Inc., RG&E, and Mr.
John Mavretich.4 On or about May 11, 2001, NYSEG, RG&E, Central Hudson,
Niagara Mohawk and IBEW Local 97 responded to the April 13 submissions.

In accordance with 16 NYCRR
3.9, the petitioners notified the active parties and other interested persons of
the settlement conferences being conducted in this case. The conferences began
in March 2001 and continued throughout the proceeding. As a result, each
petitioner has executed a Joint Proposal with Staff. The State Consumer
Protection Board has also entered into the Joint Proposals.

Niagara Mohawk filed its
Joint Proposal on May 7, 2001 and Multiple Intervenors joined in it. If we adopt
its terms, the Joint Proposal would resolve all matters pertaining to Niagara
Mohawk.

RG&E filed next on
August 9, 2001. Like the first one, RG&Es Joint Proposal seeks to
resolve all matters related to the sale of the Nine Mile facilities and the
recovery of the companys costs. Central Hudson filed on September 19,
2001. This proposal also seeks to resolve matters related to the sale and other
matters that could have been raised in this proceeding.

On September 20, 2001,
Constellation and Staff submitted a Joint Proposal that addresses
decommissioning trust fund matters. Finally, on September 27, 2001, NYSEG filed
a Joint Proposal like the other cotenants proposals that would resolve all
the companys issues related to Nine Mile.

By notices issued on
September 18 and 28, 2001, we provided the public and interested parties an
opportunity to comment on the cotenants and Constellations Joint
Proposals. Comments and responses were received from the State Attorney
Generals Office, Mr. Mavretich, IBEW Local 97, Nucor Steel Auburn, Inc.,
Niagara Mohawk, Central Hudson, RG&E, NYSEG, Constellation and Staff.

THE JOINT PETITION

Niagara Mohawk proposes to
sell Nine Mile 1 to Constellation for $234 million subject to various specified
price adjustments. Niagara Mohawk and the other utility company cotenants
propose to sell their 82% interest in Nine Mile Unit 2 to Constellation for $581
million, also subject to price adjustments.5 Half the purchase price is payable
at the closing; the other half will be paid in five annual installments with
interest. The real, personal and intangible property included in the sales is
specified in the December 11, 2000 Asset Purchase Agreements.6

Constellation will assume various liabilities and obligations for the fuel the units consume; the storage and
disposal of spent nuclear fuel; high-level and low-level waste; environmental liabilities; and, for injury and damage to persons or
property.

Constellation will also be
responsible for decommissioning the Nine Mile units. The cotenants will transfer
their decommissioning funds to Constellation at the closing and adjustments will
be made for any over- or under-funding as necessary.

Constellation has offered
to employ the 1,337 employees who currently work at the Nine Mile facilities. It
will also assume the collective bargaining agreement that exists between Niagara
Mohawk and IBEW Local 97. Employees who transfer to Constellation will retain
their seniority and receive full credit for their service with Niagara Mohawk.

Niagara Mohawk and
Constellation have entered into a Nine Mile 1 Power Purchase Agreement (PPA).
The PPA would run to August 22, 2009, concurrent with the facilitys NRC
operating license. The cotenants and Constellation have also entered into Nine
Mile 2 Power Purchase Agreements for ten years. Pursuant to the PPAs,
Constellation will sell to the utility companies 90% of the capacity and
electric output from the generating units. The parties have agreed to monthly
base prices, differentiated between on-peak and off-peak periods. When the PPAs
expire, the utility companies will have no further right or obligation to
purchase any output from the Nine Mile units.

In connection with Nine
Mile 2, the cotenants have entered into ten-year Revenue Sharing Agreements
(RSAs). The RSAs provide the utility companies 80% of the amount by which actual
market prices exceed a specific schedule of floor prices. Any such amounts will
be credited to the utility companies.

In a related matter,
RG&E, Central Hudson and the Long Island Power Authority (LIPA) are selling
their Nine Mile 2 transmission facilities to Niagara Mohawk at their net book
value.7 Niagara Mohawk will also enter into an agreement with NYSEG to operate
and maintain NYSEGs 18% interest in the Nine Mile 2 transmission
facilities. Niagara Mohawk will provide Constellation interconnection service
and off-site services for Nine Mile 2 until they mutually agree to terminate
this arrangement.

Niagara Mohawk will retain
ownership of the Nine Mile 1 interconnection facilities and provide
Constellation interconnection service and off-site services for this unit until
they agree to end the arrangement.

The Nine Mile 2 cotenants
(including LIPA) have entered into a Cotenant Agreement that addresses the
materials and supply inventory, nuclear insurance matters, and the accounting
for employee pension and retirement benefits. This agreement requires them to
share Nine Mile 2 costs and benefits to the time of the closing and as necessary
to wind down the cotenancy. They will share the cost of certain employee
retention, incentive and severance payments.

The selling cotenants have
also entered into a Selling Cotenants Agreement that specifies the closing and
transaction costs they will and will not share. This agreement also addresses
the transfer of decommissioning funds to Constellation, and the regulatory
treatment for the Nine Mile 2 material and supplies inventory.

The petitioners have also
entered into Reciprocal Easement Agreements that provide the owners of the
generation and transmission rights access to certain facilities after the sale.
Niagara Mohawk may also provide Constellation services after the closing
pursuant to a Service Agreement.

Finally, the Town of Scriba
entered into a Memorandum Of Understanding (MOU) with the cotenants that
addresses property taxes, special assessments, and other levies applicable to
the Nine Mile facilities. The MOU provides a gradual tax reduction over five
years and stable taxes thereafter. Over a ten-year period, taxes are expected to
be $125 million less than past amounts. Constellation has agreed to accept the
MOU.

THE JOINT PROPOSALS

Niagara Mohawk

The Niagara Mohawk Joint
Proposal (NMJP) addresses the sale of the Nine Mile 1 and 2 facilities and the
recovery of the companys costs. Among other things, it covers: operating
practices, budgets, expenses, capital costs, inventories, material and supplies,
investment tax credits, excess deferred federal income taxes, plant valuations,
ratepayer benefits, costs and benefits realized after the closing, nuclear
insurance matters and stranded costs. The Joint Proposal does not limit
Staffs right to audit the final transaction costs (and adjustments) for
the sales.

In general, the NMJP adopts
the accounting and ratemaking methods presented by two company witnesses in
prefiled testimony that accompanied the Joint Petition.8 The NMJP reduces Niagara
Mohawks unamortized investment in the Nine Mile units by $123 million
before the company is permitted to record a regulatory asset for the remainder.
Until the Commission addresses Niagara Mohawks rates, the NMJP requires
the company to record (in a memorandum account) the amortization, variations and
adjustments to the nuclear regulatory asset in accordance with its terms.

The NMJP applies the same
rate of return to the nuclear regulatory asset as applies to Niagara
Mohawks transmission and distribution assets. The next time the Commission
sets the companys rates, Niagara Mohawk will continue to seek to earn the
same return on the regulatory asset as applies to the transmission and
distribution assets.

The NMJP applies the entire
purchase price to the ratepayers benefit as of the closing and it does not
wait for Constellation to pay the second half over five years. For this reason,
the NMJP permits Niagara Mohawk to retain the interest payments and any
prepayments Constellation makes.

With respect to nuclear
insurance matters, the NMJP requires Niagara Mohawk to pass to ratepayers any
future distributions from the Nuclear Electric Insurance Limited (NEIL) related
to the premiums it paid to ensure eligibility for future distributions. If and
when Niagara Mohawk accesses or converts its nuclear insurance rights into an
asset, it will flow them to ratepayers.

Rochester Gas & Electric

The terms of the RG&E
Joint Proposal (RJP) resolve all matters related to the sale of the
companys interest in Nine Mile 2 and the recovery of its costs. The RJP
preserves Staffs right to audit the final transaction costs and
adjustments.

Among other things, the RJP
addresses: the auction, operating practices, budgets, expenses, capital costs,
inventories, Nine Mile 2 revenue requirements, capacity and energy forecasts
used to purchase electricity from Constellation, replacement power costs,
transaction costs incurred in this and another proceeding, RG&Es right
of first refusal, the companys Advantage New York proposal, pension and
retirement benefits, investment tax credits, excess deferred federal income
taxes, RG&Es Exit Agreement with Niagara Mohawk, decommissioning
costs, Nine Mile 2 valuation, ratepayer benefits, costs and benefits realized
after the closing, nuclear insurance matters and regulatory asset recovery,
including the rate of return on and the risks associated with the regulatory
asset.

The RJP adopts the
accounting and ratemaking methods presented by two company witnesses in
affidavits and testimony accompanying the Joint Petition.9 It allows RG&E to
establish a $329.5 million regulatory asset when Nine Mile 2 is sold.
Thereafter, the company would write off and reduce this amount by $20 million.
The company would record its amortization, variations and adjustments to the
Nine Mile 2 regulatory asset in a specified account in accordance with the terms
of the Joint Proposal. The regulatory asset would earn an 11.5% return until the
next time RG&Es electric rates are set. RG&E will seek to have the
return on the regulatory asset set the same as its electric utility business.

Ratepayers would obtain the
full benefits of the purchase price RG&E receives from Constellation from
the start. Consequently, the company would keep the interest payments and any
prepayments it receives from Constellation. Any Nuclear Electric Insurance
Limited (NEIL) distributions RG&E receives for Nine Mile 2 would be flowed
to customers, as would any portion of the asset rights that convert to the
company.

Central Hudson

The Central Hudson Joint
Proposal (CHJP) resolves all Nine Mile 2 matters that could have been raised in
this case and it does not limit Staffs rights to audit the final
transaction costs. The matters covered by the CHJP include: the auction,
operating practices, budgets, expenses, capital costs, inventories, transaction
costs for this and another proceeding, retirement and pension benefits,
investment tax credits, excess deferred federal income taxes, decommissioning
costs, Nine Mile 2 valuation, ratepayer benefits, costs and benefits realized
after the closing, nuclear insurance costs, federal tax and auction incentives
related to the Danskammer and Roseton Generating Stations that Central Hudson
has sold.

The CHJP incorporates the
accounting and ratemaking methods a company witness presented in testimony filed
with the Joint Petition.10 The CHJP requires Central Hudson to use the Nine Mile
purchase price (net of adjustments, offsets, and expenses) to benefit
ratepayers. It also requires the company to provide another $19 million to
benefit ratepayers. The CHJP allows the company to keep the interest payments
and any prepayments Constellation provides. All future NEIL distributions will
flow to ratepayers, as would any rights that convert to Central Hudson.

New York State Electric & Gas

The NYSEG Joint Proposal
(NYJP) resolves all matters pertaining to Nine Mile 2, including cost recovery.
Like the other Joint Proposals, it does not limit Staffs right to audit
the final transaction costs and adjustments. Among other things, it covers: the
transfer of NYSEGs interest, rate and accounting issues (other than
complete disposition of the Nine Mile 2 gain), compliance with the April 25,
2000 order in Case 99-E-0933, compliance with the Price Cap Plan authorized by
Opinion No. 98-6, auction results, operating practices, budgets, expenses,
capital costs, inventories, transactions costs incurred in this proceeding and
in other efforts to sell or transfer Nine Mile 2, pension and retirement
benefits, investment tax credits, excess deferred federal income taxes,
decommissioning costs, plant valuation, ratepayer benefits, costs and benefits
realized after the closing, nuclear insurance matters, and the use of the sale
proceeds.

NYSEG has agreed to
establish an Asset Sale Gain Account (ASGA) for the $113 million it expects to
receive for its interest in Nine Mile 2. The ASGA will accrue interest and be
used by the Commission for financially responsible purposes. One year after it
establishes the ASGA, NYSEG will begin to place $1.78 million in the account
monthly until new electric rates supercede the prevailing Price Cap Plan. NYSEG
will retain the interest payments it obtains from Constellation. Ratepayers will
receive all future NEIL distributions and any rights that convert to NYSEG.

Constellation

The Constellation Joint
Proposal (CJP) resolves certain issues Staff raised concerning the disposition
of the decommissioning trust funds. It amends the Nine Mile 1 and 2
Asset Purchase Agreements consistent with the prefiled testimony Staff submitted
in this case. The sellers agree with the proposed amendments.

In sum, the CJP retains
Constellations commitment to make payments to the sellers should it
realize unanticipated gains due to any delay in the decommissioning schedules
for the facilities. Rather than establish fixed payment amounts for events not
expected to occur for many years, the CJP provides an approach that does not
create any improper incentives concerning plant decommissioning activity. It is
similar to the one Consolidated Edison and Entergy used for the sale of the
Indian Point generating facilities. Should decommissioning not occur at the end
of the facilities operating lives, half of any excess decommissioning
trust funds will flow to ratepayers.

Support for the Sale

In support of the sale, the
Joint Petition acknowledges that the divestiture of utility-owned generation
facilities furthers electric industry restructuring and fosters a competitive
marketplace in New York. The cotenants maintain that the proposed sale aptly
responds to our request that they establish the value of the Nine Mile
facilities through an open market process. They point out that experienced
managers were used to conduct an auction open to all licensed operators of
nuclear power plants.

The petitioners observe
that each utility company will continue their transmission and distribution
businesses without impairment and they will remain subject to Commission
jurisdiction. Constellation will become an electric company in New York subject
to Public Service Law requirements.11

The Joint Petition lists
Constellations qualifications to own and operate the Nine Mile facilities.
They include the parent companys sizable generation and energy holdings
and its interests in nuclear power plants in Maryland.12

When the Nine Mile
facilities stop generating electricity, Constellation states, it will return the
Oswego site to a greenfield condition. To this end, it will apply the
decommissioning trust funds in accordance with NRC requirements and ratepayers
will not have to provide any more contributions to the trust funds.

In addition to assuming
decommissioning responsibilities, Constellation will assume all operational
costs and risks for the Nine Mile facilities. Its ownership of the facilities is
not expected to provide it market power in New York. The petitioners note that
Constellation does not own any transmission facilities in the State.

The petitioners state that
they have addressed employee concerns and labor interests by offering continued
employment and compensation for transfers and severances. They also claim the
sale will benefit the local community in Oswego County. Given a favorable real
property tax agreement, the petitioners believe Constellation will operate the
generating plants reliably in the competitive market.

Staff also provides its
support for the Joint Proposals. It states that each one provides a reasonable
balance between ratepayer and shareholder interests. In each instance, Staff
considers the amount of costs the utility will absorb (and not seek to recover
from ratepayers) as an acceptable result in the prevailing circumstances. Staff
also credits the provisions it obtained for various companies to apply amounts
already being collected in rates to the unrecovered investment in the nuclear
facilities.

Addressing the Power
Purchase Agreements, Staff notes that the PPAs are priced at the current
estimate for electricity on the open market. As such, it considers them to be
good hedges against market price fluctuations that could adversely affect
customers. Likewise, with the Revenue Sharing Agreements, Staff states that the
RSAs provide good hedges against market price increases at virtually no cost to
ratepayers.

Overall, Staff states that
the Joint Proposals help to introduce competition in the electric industry by
ending controversy about the recovery of nuclear power stranded costs.

In support of the NMJP,
Niagara Mohawk states that the proposal provides an equitable resolution of the
sale transaction issues and the treatment of stranded and other costs. The
company observes that the NMJP is consistent with applicable law and public
policy, and it provides a negotiated result that is comparable to a litigated
outcome. Niagara Mohawk considers the NMJPs chief attributes to be its
preservation of jobs in Oswego County and the continuation of a zero-emission
source of electricity.

Multiple Intervenors also
supports the NMJP. It states that the proposal provides a reasonable resolution
of the issues, including the reduction of the companys investment by $123
million. MI specifically supports the proposals Nuclear Electric Insurance
Limited (NEIL), purchased power, and revenue sharing provisions.

According to RG&E, the
RJP balances customer and utility interests well and it meets Commission
objectives. Having used a competitive bid process, RG&E insists that the
purchase price for the facilities compares favorably with the prices paid for
other nuclear power plants. It also believes that the separation of the Nine
Mile facility from the transmission and distribution assets will foster
competition. Given the stranded costs it will forgo and the rate amounts it will
use to amortize stranded costs, RG&E considers the proposal to be a fair
resolution of the issues.

Central Hudson also states
that it made beneficial concessions to customers that support adoption of the
CHJP. By achieving closure on the nuclear generation issues, Central Hudson
believes it can focus better on the provision of delivery services and more
effectively implement the vision for a competitive electric industry. Thus, the
company considers its proposal to be reasonable and in the public interest.

NYSEG states that the NYJP
adds to the development of a competitive electric market and it points to the
capital gain on the Nine Mile 2 sale that can be used to benefit ratepayers. It
notes that a non-bypassable wires charge might have otherwise been needed to
recover nuclear stranded costs. It also notes that customers do not risk Nine
Mile 2 replacement power costs during the remainder of the prevailing rate
restructuring plan. Finally, NYSEG states its strong preference to avoid
becoming a minority owner of Nine Mile 2 with little control over its budget or
operations.

COMMENTS CONCERNING THE JOINT PROPOSALS13

State Attorney General

The State Attorney
Generals Office (OAG) believes that utility company losses from the sale
of nuclear power plants should be borne by shareholders and not be charged to
ratepayers.14 According to OAG, shareholders should shoulder the risk of nuclear
power plants in return for the rewards they may provide. Given the sale of the
Nine Mile facilities at less than their book value, OAG believes the stranded
costs should be written off and not be converted into regulatory assets for
ratepayers to pay. It contends that the utility companies management (not
ratepayers) decided to make uneconomic investments in nuclear power plants.
According to OAG, the Commission has ample authority to relieve ratepayers of
the stranded cost burdens. It points out that the utility companies were never
provided any assurances that stranded costs would be recovered in rates.

OAG also opposes provisions
in various Joint Proposals that seek to restrict parties rights to
challenge the rate of returns the companies will seek in upcoming rate
proceedings. It insists that no party should be precluded from advocating a
different rate of return for regulatory assets than the one provided for
transmission and distribution assets.

Finally, OAG objects to
Joint Proposal provisions that specify monthly true-ups of purchase power costs
with market costs.15 It prefers that these matters be considered in rate cases
where other factors bearing on just and reasonable rates can also be considered.

Mr. Mavretich 16

Mr. Mavretich recognizes
the convenient opportunity the Joint Proposals provide to end the Nine Mile 2
controversy. However, he see little benefit in them for ratepayers. According to
Mr. Mavretich, a greater portion of the companies stranded costs should be
disallowed and not be recovered from ratepayers. He believes that the Joint
Proposals are lopsided and they favor shareholder interests. He estimates that
over $1 billion of cost recovery is provided to shareholders and he claims that
ratepayers will receive no comparable advantage. Consequently, he urges that the
Joint Proposals be rejected and that litigation or further negotiations be used
to obtain better results for ratepayers.

Mr. Mavretich specifically
endorses the Joint Proposals terms concerning the future benefits
available from Nuclear Electric Insurance Limited (NEIL). He states that they
properly preserve the benefits for ratepayers and they are consistent with the
prefiled testimony he provided.

IBEW Local 97

IBEW Local 97 represents
6,200 utility workers; 700 work at the Nine Mile facilities. The union supports
the Joint Proposals and states that they reasonably balance shareholder and
ratepayer interests. Local 97 urges us to act expeditiously to end the
uncertainty for workers at the facilities.

Nucor Steel Auburn

Nucor Steel Auburn, Inc.
believes the NYJP provides an acceptable resolution of the issues concerning
NYSEG. It specifically endorses the establishment of an Asset Sale Gain Account
that will be used to provide ratepayer benefits in a financially responsible
manner.

Alliance For Municipal Power

In May 2001, the Alliance
For Municipal Power (AMP) commented on the NMJP. AMP is concerned about the exit
fees that municipal customers pay before they can leave the electric network. In
general, AMP has complained about the summary nature of the NMJP, contending
that it should have included more details about the purchase price and stranded
costs. AMP specifically criticizes the provision that would apply Niagara
Mohawks allowed rate of return to the nuclear regulatory assets. It also
wants to review the final transaction costs for the sale. AMP proposes that
Niagara Mohawk not be allowed to recover its legal fees related to the sale.

Public Comments

Throughout this proceeding,
we have received letters, electronic mail, and comments concerning the Joint
Petition.17 Recently, when the parties filed their Joint Proposals, we conducted
public information forums in Syracuse on October 2, and in Oswego on October 3,
2001. At the forums, the staff of the Office of Consumer Education and Advocacy
described the Joint Petition, the Joint Proposals and solicited comments. The
public was also advised to mail, telephone, or submit comments electronically
over the internet.

Among others, we have heard
from a certified public accountant in Liverpool who urges us to reject the Joint
Proposal and from a resident of Greenlawn who believes that the nuclear power
plants should not be sold. A student attending the State University of New York
at Potsdam wrote us concerning the safe operation of nuclear power plants and an
RG&E ratepayer believes his utility company should write off all the
remaining Nine Mile 2 costs. A resident of Oswego not only opposes recovery
of stranded costs he believes a portion of the costs ratepayers have paid for
the facilities should be returned.

At the public forums, 33
persons attended and 12 provided comments. Several speakers urged that the power
plants not be sold and that they no longer operate. Others expressed concerns
about public safety, decommissioning efforts, and the need for more
information.  We also heard from an individual who was unable to attend
the public forums who is concerned about the risks of operating nuclear power
plants and would prefer that they be shut down.

DISCUSSION AND CONCLUSION

The proposed sale of the
four utility companies interests in Nine Mile 1 and 2, with associated
facilities, is consistent with the policies the Commission announced in 1996 to
open the electric system to competition and to allow electric generation
companies to compete in the sale of electricity. Each of the utility companies
has been operating since that time pursuant to a rate restructuring plan the
terms of which the Commission has ordered.

To their credit, the terms
of the proposed sales to Constellation are the result of a competitive bid and
auction process. This is in stark contrast to the sale terms two utility
companies presented in mid-1999 that they subsequently withdrew.18 In Case
99-E-0933, we understood that multiple bidders were interested in the nuclear
generation facilities and we insisted that the utility companies seek to obtain
a substantially higher market value for them. That objective has been met in
this case with the results of Constellations successful bid that we find
acceptable.

To assist the utility
companies in their auction efforts, in April 2000, we addressed nuclear stranded
cost matters and provided several observations. Chief among them, we stated that
the sale of the nuclear generation facilities at their current market value
would constitute appropriate mitigation of the stranded costs. We also stated
our willingness to address the ratemaking treatment for the Nine Mile sale at
the same time we determined whether the proposed asset transfer was in the
public interest.19

As in the recent case
involving Consolidated Edisons sale of the Indian Point nuclear facilities
to Entergy, the Office of the Attorney General (OAG) has stated its general
opposition to ratepayers paying the stranded costs for sales that fail to
produce sufficient proceeds to cover book costs. In this case, two utility
companies (Niagara Mohawk and RG&E) clearly have stranded cost losses
attributable to the sale of their nuclear generation facilities, a portion of
which ratepayers are being called upon to pay. The same might also be said of
the results of Central Hudsons and NYSEGs sale of their nuclear
generation assets; however, these companies used gains achieved from the sale of
other generating facilities to cover a portion of their book costs for Nine Mile
2.

Addressing first the
circumstances presented by Central Hudson and NYSEG, we find that treatment of
nuclear stranded costs provided by the CHJP and the NYJP is acceptable and that
they reasonably balance the interests of ratepayers and shareholders. The CHJP
requires Central Hudson to place its share of the Nine Mile 2 purchase price in
a benefit fund for ratepayers and it requires the company to contribute another
$19 million to the benefit fund. These are substantial advantages for ratepayers
that support our finding that the sale of Central Hudsons portion of Nine
Mile 2 is in the public interest and should be authorized.

Similarly, the NYJP
requires NYSEG to establish an asset sale gain account and to fund it with the
companys portion of the Nine Mile 2 sale proceeds and additional amounts.
Like the funds Central Hudson is putting aside, the NYSEG funds will be used to
benefit ratepayers in a financially responsible manner. These results support
our finding that the sale of NYSEGs portion of Nine Mile 2 is in the
public interest and should be authorized.

With respect to Central
Hudson and NYSEG, we reject OAGs and Mr. Mavretichs assertions that
the gains achieved from the sale of other generation facilities should not have
been used to reduce their book costs for Nine Mile 2. Given the acceptable terms
of the CHJP and the NYJP that we can adopt, there is no merit in the contention
that ratepayer interests are not served by applying the gain on other sales to
the Nine Mile book costs.

Turning to Niagara Mohawk
and RG&E, and their proposals to establish regulatory assets to recover Nine
Mile stranded costs, in neither instance does the utility company seek to
recover their entire loss on the sale transaction. The RJP requires RG&E to
write off $20 million of its loss which we find to be a proper amount given
the companys current financial and business circumstances, and considering
the continuing challenges associated with RG&Es ownership and
operation of the Ginna Nuclear Station and its remaining unrecovered nuclear
investments. In addition, the RJP requires the company to redirect and use up to
$30 million currently being collected in rates to amortize the nuclear
regulatory asset. These are substantial ratepayer benefits that otherwise reduce
the charges that could have been applied to them. For these reasons, we find
that the terms of the RJP are acceptable and the sale of RG&Es
interest in Nine Mile 2 is in the public interest.

As the sole owner of Nine
Mile 1 and as the company with the largest single interest in Nine Mile 2 (at
41%), it is no surprise that Niagara Mohawk incurs the greatest loss on the sale
of the nuclear facilities. The NMJP balances ratepayer and shareholder interests
by requiring the company to write off $123 million of the loss on the sale.
However, according to OAG and Mr. Mavretich, Niagara Mohawk (and the other
utility companies) should have written off much more than this to provide a
proper balance of ratepayer and shareholder interests. Inasmuch as the
generation assets were constructed to serve ratepayers and Niagara Mohawks
regulated rate of return was constrained and limited to its cost of capital,
OAGs and Mr. Mavretichs contentions are incorrect.20 Thus, we find no
merit in Mr. Mavretichs request for the parties to engage in further
negotiations or for us to initiate litigation in this case.

As to other Joint Proposal
terms that have drawn adverse comments, the OAG and the Alliance For Municipal
Power (AMP) object to any limits on the rate of return issues in upcoming
RG&E and Niagara Mohawk rate proceedings.21 While the RJPs provisions
apply only to Staff and the company,22 OAG nonetheless objects to them as a matter
of public policy. Both the OAG and AMP object to the NMJPs provisions for
the limits they seek to impose on third parties.

We find no compelling
public policy reason to preclude Staff from stating in advance the approach it
will adhere to and use in upcoming rate proceedings. We are not troubled by the
commitments it has made with RG&E that do not impose any limits or
restrictions on any other party. With respect to the restrictions the NMJP seeks
on third parties proposing a different rate of return for the nuclear regulatory
asset, we will place no such restrictions on the comments, or other submissions,
that may be provided in other cases.

OAG is also opposed to the
purchase power cost true-up provisions proposed by Niagara Mohawk and RG&E
and claims this matter is better left to the companies upcoming rate
proceedings.23 In response, RG&E states that it only intended the RJPs
true-up provision to operate on an interim basis pending the results of its next
proceeding.24 Thus, there does not appear to be any true issue between these
parties. With respect to Niagara Mohawk, as stated above, any party who seeks to
address the true-up provision in a ratemaking context will not be precluded from
submitting their comments or submissions.

Finally, while AMP believes
that Niagara Mohawk should not be allowed to recover all its legal fees, the
companys legal fees and final transaction costs remain subject to a final
audit.25

In summary, we have
considered the Joint Petition, and the various agreements the selling cotentants
and Constellation have executed for the Nine Mile facilities. We have also
considered the Joint Proposals that the petitioners have executed with Staff,
CPB and Multiple Intervenors. Further, as discussed above, we have evaluated the
comments that the parties and the public have provided concerning the Joint
Petition and the Joint Proposals. All of this leads us to find that the proposed
sale of the Nine Mile nuclear generation assets is in the public interest and
the transfer should be authorized pursuant to PSL §70.

State Environmental Quality Review Act Findings

On May 3, 1996, the
Commission issued a Final Generic Environmental Impact Statement (FGEIS) that
addressed the statewide environmental, social and economic impacts of a policy
opening New Yorks electric markets to competition.26 The FGEIS acknowledged
that localized impacts could arise as a result of specific divestiture proposals
presented by individual companies. To determine if any such impacts existed,
each company was directed to file a draft Environmental Assessment Form (EAF)
with its divestiture plan.

The approval of the sale of
Nine Mile 1 and 2 to Constellation constitutes a subsequent action to the policy
determinations issued in Case 94-E-0952 and to the rate and restructuring
decisions made by the Commission (Opinion Nos. 98-1, 98-6, 98-8, and
98-14).27 Therefore, under the State Environmental Quality Review Act (SEQRA), the
Commission must determine whether the impacts associated with the proposed
transfer are within the conditions and thresholds of the FGEIS.

The Commission issued a
Final Supplemental Environmental Impact Statement on October 5, 2001, which
analyzed the detailed site-specific information provided in the draft SEIS
submitted by the petitioners as part of their PSL §70 filing and the other
factual information referenced therein. It identifies and addresses the
environmental, social and economic impacts found to arise as a result of the
transaction. Determinations were made as to whether the impacts identified are
within the conditions and thresholds of the FGEIS. Additionally, a comparison
was made to the no action alternative to gauge the extent to which impacts
actually arose as a result of the proposed action.

We solicited but did not
receive any comments from the public on the draft SEIS. Nonetheless, we
recognized a potential significant adverse impact--the asset transfers
effects on property tax revenues. This impact was addressed and found to be
mitigated to the maximum extent practicable by a Memorandum of Understanding
(MOU) between the cotenants and the Town of Scriba that sets the property taxes
for the Nine Mile facilities for the next ten years. Constellation has agreed to
accept and abide by the MOU.

When the localized impacts
identified are balanced against the overall benefits to be derived from the
proposed transfer (as addressed in this order), it is clear that utility
ratepayers, and the State as a whole, will be better off by approving the
transaction. The separation of generation facilities from transmission and
distribution assets should lead to a competitive marketplace and reduced rates.
Lower electric rates should lead to economic growth and development. Given
Constellations focus on nuclear electricity, this transaction should
contribute to the safe and continued operation of the plants and to system
reliability.

Accordingly, the Commission
makes the findings stated above regarding the environmental impacts associated
with the sale. Pursuant to 6 NYCRR 617.11, the Commission certifies that,
consistent with environmental, social and economic considerations from among the
reasonable alternatives available, the approval of the sale of Nine Mile 1 and
2, and related assets, avoids or minimizes adverse impacts to the maximum extent
practicable and satisfies the requirements of SEQRA. The action is also
consistent with applicable policies set forth in Article 42 of the Executive Law
(Local Waterfront Revitalization and Coastal Resources), as implemented by 19
NYCRR 600, and will achieve a balance between the protection of the environment
and the need to accommodate social and economic considerations.

Federal and State Regulation

The petitioners interpret
the Public Utility Holding Company Act (PUHCA) as requiring a finding that new
ownership of a generating facility will benefit customers, is in the public
interest, and does not violate state law, before Constellation can be afforded
exempt wholesale generator (EWG) status for the Nine Mile 1 and 2 generating
facilities. Constellation seeks this status so it may operate the facilities
free of federal regulation intended for monopoly utilities. Constellation sees
the requisite benefit for the public in its participation in the wholesale
competitive market, which should result in increased competition.

Therefore, the petitioners
request that findings be made that the Nine Mile generating facilities be
determined to be eligible facilities as that term is defined by
PUHCA §32, thereby allowing the Federal Energy Regulatory Commission (FERC)
to issue a decision qualifying Constellation for EWG status under federal law.

In conformance with PUHCA
and FERCs regulations,28 the Commission finds that allowing the Nine Mile
facilities to become eligible facilities, with Constellation owning the plants
(either directly or indirectly through one or more affiliates as defined under
federal law)29 will benefit New York consumers, is in the public interest, and
does not violate New York law.

These findings are made on
the same basis that we have found that the transaction is in the public interest
pursuant to PSL §70. The Commission determined in Case 94-E-0952 (Opinion
No. 96-12) that a competitive marketplace for the provision of electricity
supply would benefit New York customers and this transaction furthers that goal.
Moreover, there is no violation of New York law in transferring the plants to
Constellation.

While Constellation will
become an electric corporation under New York law when it assumes ownership of
the Nine Mile facilities, it is being accorded lightened regulation.30 This
approach to regulation has been previously approved for generators that intend
to participate entirely or primarily in the wholesale market.31 Constellation,
however, will still be subject to state regulation with respect to such matters
as enforcement, investigation, safety (subject to the NRCs jurisdiction
over radiological matters), reliability and system improvements.

The Commission orders:

1.    The terms and conditions of the five Joint Proposals identified and described herein are adopted and
incorporated as part of this order.

2.    The Nine Mile 1 and 2 Asset Purchase Agreements are approved, subject to the requirements of this order.

3.    The Cotenant Agreement (as amended by the First Amendment dated September 28, 2000) and the Selling Cotenant
Agreement (as amended by the First Amendment
       dated September 28, 2000) are approved, subject to the requirements of this order.

4.    The Transmission Purchase and Sale Agreement and the Transmission Owners Agreement are approved, subject to the
requirements of this order.

5.    The Power Purchase Agreements and the Revenue Sharing Agreements are approved, subject to the requirements of
this order.

6.    The Property Tax Memorandum of Understanding is deemed to be reasonable, prudent, and in the public interest.

7.    No later than 90 days following the closing of the sale and transfer of the Nine Mile nuclear assets, the
petitioners shall file with the Commission a statement of the amount
       of proceeds received, the costs incurred, and the proposed accounting and ratemaking treatment
for the net proceeds, in conformance with the requirements of this order.

8.    The findings related to the Final Supplemental Environmental Impact Statement required under the State
Environmental Quality Review Act described in the body of this
       order are made.

9.    The findings on exempt wholesale generator status under the Public Utility Holding Company Act
described in the body of this order are made.

10.  This proceeding is continued.

By the Commission,
/s/  JANET HAND DEIXLER
Janet Hand Deixler
Secretary

FOOTNOTES

| | 1 | Niagara Mohawk owns Nine Mile Unit 1 and 41% of Nine Mile Unit 2.  NYSEG owns 18% of Nine Mile 2, RG&E owns 14%, and
Central Hudson has 9%.  The remainder belongs to the Long Island Power Authority.  LIPA is not selling its interest at
this time.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2 | Additional conferences were held on May 15 and September 14, 2001.  An evidentiary hearing was scheduled to begin on
September 25, 2001; however, it was cancelled when the last Joint Proposal was executed.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3 | The Joint Petition contained supporting affidavits and prefiled testimony from Constellation, Niagara Mohawk and the
other Nine Mile 2 cotenants.  This permitted the Judge to solicit other parties positions early in the proceeding.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4 | Mr. Mavretich appeard in this proceeding on behalf of Congressman Maurice D. Hinchey.
| | - | -------------------------------------------------------------------------------------

| | 5 | Adjustments will be made to the base purchase price for the actual closing date for the sale, human resource payments,
capital additions and replacements, low-level waste disposal costs, the continuation of the facilities NRC licenses,
and uranium enrichment/fabrication costs.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6 | The property includes:  spent nuclear fuel, high-level and low-level waste, and fuel-related inventory; machinery and
equipment; transferable agreements, contracts and permits; books and records; and, unexpired warranties and guarantees
from third parties.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7 | This transaction concerns the Scriba Substation, a tract of land encompassing the substation, and certain transmission
lines that connect Nine Mile 2 to Niagara Mohawks transmission system.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8 | The NMJP incorporates the joint testimony of Messrs. Steven W. Tasker and Dennis B. Schafer.  While this testimony supported
an amortization period for the nuclear regulatory asset balance not to exceed ten years, the NMJP recognizes adjustments
to the nuclear regulatory asset balance that can either shorten the amortization period or extend it beyond ten years.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 9 | The RJP incorporates the affidavits and testimony of Messrs. James J. Fletcher and Joseph J. Syta.
| | - | --------------------------------------------------------------------------------------------------

| | 10 | It incorporates Mr. Arthur R. Uprights testimony.
| | -- | --------------------------------------------------

| | 11 | Constellation has petitioned for lightened regulation in Case 01-E-0349.  An order in that case is being issued today.
| | -- | ----------------------------------------------------------------------------------------------------------------------

| | 12 | The petitioners also point out that the Nuclear Regulatory Commission (NRC) requires license transferees to provide
assurances that they are qualified to assume ownership.  They specifically point to the NRCs safety, decommissioning, and
financial requirements as providing additional support for the authorizations they are seeking here.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 13 | In addition to the comments reported below, comments were also received from NYSEG and RG&E.  NYSEGs comments concerning
the need for a new operating agreement for Nine Mile 2 is moot given the NYJP and the proposed sale of the companys
interest in the facility.  RG&Es comments concern a transmission facility dispute between it and Niagara Mohawk that is
pending court action.  Whether or not Staff helps to mediate this dispute, RG&Es comments neither detract from nor
dispute the merits of the NMJP.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 14 | OAG took the same position concerning the recent sale of the Indian Point nuclear generation facilities, See Case
01-E-0040, Consolidated Edison Company of New York, Inc. - Asset Sale, Order Authorizing Asset Transfer (issued
August 31, 2001).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 15 | Such provisions are contained in the NMJP and the RJP.
| | -- | ------------------------------------------------------

| | 16 | As noted above, Mr. Mavretich appeared in this proceeding on behalf of Congressman Maurice D. Hinchey.
| | -- | ------------------------------------------------------------------------------------------------------

| | 17 | Some of the correspondence we received was initially sent to Governor Pataki and various state legislators.  Such letters
were forwarded to us to consider in this proceeding.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 18 | Case 99-E-0933, Joint Petition to Transfer Nuclear Generation Assets, Order Allowing Petitions to be Withdrawn
(issued April 25, 2000).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------

| | 19 | Id., pp. 7 and 8.
| | -- | -----------------

| | 20 | We also note that Niagara Mohawk recently announced that it is willing, in the context of its proposal to merger with
National Grid, to write-off an additional $850 million.  Case 01-M-0075, Niagara Mohawk and National Grid Merger Proposal, Joint Proposal (dated October 11, 2001).
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 21 | The CHJP and the NYJP do not contain any such provisions.
| | -- | ---------------------------------------------------------

| | 22 | RG&Es Reply Comments (dated September 28, 2001), p. 8
| | -- | ------------------------------------------------------

| | 23 | OAG also opposed such provision in the CHJP; however, Central Hudson denies that there are any provisions of this sort
in its Joint Proposal.  Central Hudsons Reply Comments (dated September 28, 2001), pp. 4 and 5.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 24 | RG&Es Reply Comments (dated September 28, 2001), pp. 9 and 10.
| | -- | ---------------------------------------------------------------

| | 25 | The companies filing of their final costs will be made public and available for inspection by AMP or any other
interested party.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------

| | 26 | Case 94-E-0952, et al., Competitive Opportunities Proceeding.
| | -- | -------------------------------------------------------------

| | 27 | Case 94-E-0952, supra, Opinion No. 96-12 (issued May 20, 1996); Case 96-E-0898, Rochester Gas and Electric Corporation
- Rate Restructuring, Opinion No. 98-1 (issued January 14, 1998); Case 96-E-0891, New York State Electric & Gas
Corporation - Rate Restructuring, Opinion No. 98-6 (issued March 5, 1998); Case 94-E-0098, Niagara Mohawk Power
Corporation - Electric Rates, Opinion No. 98-8 (issued March 20, 1998); and, Case 96-E-0909, Central Hudson Gas &
Electric Corporation - Rate Restructuring, Opinion No. 98-14 (issued June 30, 1998).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 28 | 15 U.S.C.A. §79z-51; 18 C.F.R. §365.
| | -- | ------------------------------------

| | 29 | 15 U.S.C.A. §79b(a)(ii); 18 C.F.R. §365(a)(1)(i).
| | -- | -------------------------------------------------

| | 30 | Case 01-E-0349, Nine Mile Point Nuclear Station, LLC, Order Providing for Lightened Regulation of Nuclear Generation
Facilities (issued October 29, 2001).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31 | See, e.g., Case 98-E-1670, Carr Street Generating Station, Order Providing for Lightened Regulation (issued April 23, 1999).
| | -- | ----------------------------------------------------------------------------------------------------------------------------