<PAGE>

                                                                   Exhibit 10.8a

                                                                  Execution Copy


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

                          Exempt Facilities Agreement

                            Dated as of May 8, 2001

                                    between

                            Dynegy Roseton, L.L.C.

                                      and

                                Roseton OL LLC



                             Roseton Units 1 and 2

--------------------------------------------------------------------------------
<PAGE>

                          Exempt Facilities Agreement

          This EXEMPT FACILITIES AGREEMENT, dated as of May 8, 2001 (this
"Exempt Facilities Agreement"), is between DYNEGY ROSETON, L.L.C., a Delaware
----------------------------
limited liability company (the "Company") and ROSETON OL LLC, a Delaware limited
                                -------
liability company (the "Owner Lessor," and collectively with the Company, the
                        ------------
"Parties," and each a "Party").
--------               -----

                              W I T N E S S E T H:

          WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement
(the "APSA"), dated as of August 7, 2000, by and among Dynegy Power Corp. (the
      ----
indirect parent of the Company), Central Hudson Gas & Electric Corporation
("Central Hudson"), Consolidated Edison Company of New York, Inc., and Niagara
----------------
Mohawk Power Corporation, the Company acquired the Roseton Generating Station,
which is comprised of a two unit combined capacity 1200 MW (net) electric
generating facility, and is located in Newburgh, New York (the "Facility");
                                                                --------

          WHEREAS, the sale of the Facility under the APSA included each of the
components listed in Exhibit A hereto (the "Exempt Facilities"), which Exempt
                     ---------              -----------------
Facilities had been financed and/or refinanced by Central Hudson prior to the
sale of the Facility to Company with the proceeds of the issuance and sale by
various governmental authorities of the industrial development revenue bonds or
private activity bonds listed in Exhibit B hereto (the "Revenue Bonds");
                                 ---------              -------------

          WHEREAS, Section 7.13 of the APSA requires that the Company comply
with certain obligations relating to the Exempt Facilities, including causing
any subsequent purchasers of the Facility, to comply with substantially the same
provisions as those contained in Section 7.13 of the APSA;

          WHEREAS, concurrently with the execution and delivery of this Exempt
Facilities Agreement, the Parties are entering into a leveraged sale leaseback
financing (the "Lease Financing") whereby the Company is selling the Facility,
                ---------------
including the Exempt Facilities (the "Lease Assets"), to Roseton OL LLC (the
                                      ------------
"Owner Lessor"), and the Owner Lessor is leasing the Lease Assets, back to the
-------------
Company pursuant to a facility lease agreement between the Parties of even date
herewith (the "Facility Lease");
               --------------

          WHEREAS, the Company desires to comply with its obligations under
Section 7.13 of the APSA, and the Owner Lessor has agreed, subject to the terms
and conditions contained herein, to comply with each of the obligations relating
to the Exempt Facilities contained herein (the "Exempt Facilities Obligations");
                                                -----------------------------
and

          WHEREAS, the Parties desire to set forth their respective rights and
obligations with respect to the Exempt Facilities.
<PAGE>

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:

SECTION 1.  EXEMPT FACILITIES

     Each of (i) the Owner Lessor, as purchaser of the Facility from the
Company, and (ii) the Company, as lessee under the Facility Lease, understands
and agrees that:

          (a)  The Facility includes the Exempt Facilities that have been
financed, and refinanced, in whole or in part, by Central Hudson with the
proceeds of the Revenue Bonds the interest on which, with certain exceptions, is
excluded from gross income for purposes of federal income taxation; and Central
Hudson is the economic obligor in respect of such Revenue Bonds.

          (b)  The basis for such exclusion is the use of the Exempt Facilities
for the purpose of (i) the abatement or control of atmospheric or water
pollution or contamination and/or (ii) the collection, storage, treatment,
utilization, processing or final disposal of solid waste and/or the collection,
storage, treatment, utilization, processing or final disposal of sewage, such
qualifying purposes being discussed in more detail in Sections 2(b) and 3(b)
below.

          (c)  The use of the Exempt Facilities for a purpose other than a
qualifying purpose indicated in Section 1(b) above could impair (i) such
exclusion from gross income of the interest on such bonds, possibly with
retroactive effect, unless appropriate remedial action were taken (which could
include prompt defeasance or redemption of such bonds) and/or (ii) the
deductibility of payment by Central Hudson of interest based on the restrictions
in Section 150(b) of the Internal Revenue Code of 1986, as amended (the "Code").
                                                                         ----

SECTION 2.  OWNER LESSOR'S OBLIGATIONS

     The Owner Lessor, as purchaser of the Facility from the Company,
understands and agrees that:

          (a)  Any breach by the Owner Lessor of its obligations under this
Exempt Facilities Agreement could result in the incurrence by Central Hudson of
additional costs and expenses, including increased interest costs, loss of the
interest deduction for tax purposes and transaction costs relating to any
refinancing, redemption and/or defeasance of all or part of the Revenue Bonds.
The Owner Lessor will indemnify Central Hudson for such additional costs and
expenses.

          (b)  (i) The Owner Lessor agrees that it shall not use, or permit the
use of, the Exempt Facilities for any purpose other than the continuing use of
such Exempt Facilities, and in accordance with the respective tax and/or other
compliance documents for each of the Revenue Bonds, for:

                         (1)  abating or controlling atmospheric or water
pollution or contamination by removing, altering, disposing of or storing
pollutants, contaminants, waste or heat, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(g);

                                       2
<PAGE>

                         (2)  the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or

                         (3)  the collection, storage, treatment, utilization,
processing or final disposal of sewage, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(f);

unless it has obtained at its own expense an opinion addressed to Central Hudson
of nationally recognized bond counsel reasonably acceptable to Central Hudson
that such use will not impair (x) the exclusion from gross income of the
interest on any issue of Revenue Bonds for federal income tax purposes or (y)
the deductibility of Central Hudson's payments of interest based on the
restrictions in Section 150(b) of the Code.

                    (ii) The Owner Lessor reasonably expects, as of the date of
this Agreement, that the Exempt Facilities will continue to be used for the
qualifying purposes set forth in Section 2(b)(i), and for no other purpose, for
the remainder of their useful lives.

               (c)  It is expressly understood and agreed that the provisions of
Section 2(b) shall not prohibit the Owner Lessor from (i) suspending the
operation of the Exempt Facilities on a temporary basis and/or (ii) selling
exclusively for cash the Exempt Facilities consisting of personal property, in
whole or in part, including any sale for scrap, provided that in the case of
suspension of operation under clause (i) above, the operation of the Lease
Assets served by such Exempt Facilities shall not theretofore have been, and is
not then being, terminated on a permanent basis, and provided further that in
the case of a sale under clause (ii) above the proceeds of such sale of the
Exempt Facilities shall within six months from the date of sale be expended to
acquire replacement property to be used for the same qualifying purpose as the
Exempt Facilities so sold or be otherwise applied and provided further that the
Owner Lessor has obtained at its own expense an opinion of nationally recognized
bond counsel addressed to and reasonably satisfactory to Central Hudson as to
the exact application of the proceeds of such sale and that any such application
will not impair (x) the exclusion from gross income of the interest on any issue
of Revenue Bonds for federal income tax purposes or (y) the deductibility of
Central Hudson's payments of interest based on the restrictions in Section
150(b) of the Code.

               (d)  The Owner Lessor agrees that it shall not issue, or have
issued on its behalf, any tax-exempt bonds to finance or refinance its
acquisition of the Exempt Facilities; provided that it is expressly understood
and agreed that this clause Section 2(d) shall not prohibit the use of tax-
exempt bonds to finance or refinance any improvement to the Exempt Facilities
made after the date of acquisition or to any assets other than the Exempt
Facilities.

               (e)  The Owner Lessor agrees that it shall give Central Hudson at
least 180 days' prior written notice of any suspension (other than on a
temporary basis) or termination of the operation of the Exempt Facilities, or
any part thereof, and of any sale, exchange, transfer or other disposition of
the Exempt Facilities, or any part thereof, including, but not limited to, a
sale for scrap, such written notice to be provided whether or not an opinion of
counsel is required to be obtained in accordance with Section 2(c).

                                       3
<PAGE>

            (f)  If Central Hudson shall desire to refund any Revenue Bonds, the
Owner lessor shall, at the expense of the Company until the expiration or
earlier termination of the Facility Lease, cooperate with Central Hudson and
with Central Hudson's counsel with respect to such refunding bonds and shall
provide upon request any representations, agreements or covenants that are
reasonably requested concerning its compliance to such date and/or in the future
with the representations, agreements and covenants made herein.

            (g)  Other than under the Lease Financing, if the Owner Lessor shall
sell, exchange, transfer or otherwise dispose of the Exempt Facilities to a
third party, the Owner Lessor shall cause to be included in the documentation
relating to such transaction covenants and agreements on the part of such third
party for the benefit of Central Hudson, and as requested by Central Hudson, the
trustee for the holders of any Revenue Bonds, substantially identical to those
on the part of the Owner Lessor contained in this Exempt Facilities Agreement.

            (h)  The covenants and agreements of the Owner Lessors contained in
this Exempt Facilities Agreement shall continue in effect so long as any of the
Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding, and thereafter, this Exempt Facilities
Agreement shall terminate. At the request of Central Hudson, the Owner Lessor
shall execute further documentation to provide that such covenants and
agreements are also for the benefit of the trustee of the holders of any Revenue
Bonds.

            (i)  Subject to the Owner Lessor's compliance with this Exempt
Facilities Agreement, the Owner Lessor shall not have any liability under the
Revenue Bonds.

            (j)  Until the expiration or earlier termination of the Facility
Lease, the Company shall be obligated to perform, and the Owner Lessor shall be
deemed to have performed, the obligations pursuant to this Section 2.

SECTION 3.  COMPANY'S OBLIGATIONS

     The Company, as lessee under the Facility Lease, understands and agrees
that:

            (a)  Any breach by the Company of its obligations under this Exempt
Facilities Agreement could result in the incurrence by Central Hudson of
additional costs and expenses, including increased interest costs, loss of the
interest deduction for tax purposes and transaction costs relating to any
refinancing, redemption and/or defeasance of all or part of the Revenue Bonds.
The Company will indemnify Central Hudson for such additional costs and
expenses.

            (b)  (i) The Company agrees that it shall not use, or permit the use
of, the Exempt Facilities for any purpose other than the continuing use of such
Exempt Facilities, and in accordance with the respective tax and/or other
compliance documents for each of the Revenue Bonds, for:

                    (1)  abating or controlling atmospheric or water pollution
or contamination by removing, altering, disposing of or storing pollutants,
contaminants, waste or heat, all as contemplated in U.S. Treasury Regulations
Section 1.103-8(g);

                                       4
<PAGE>

                    (2)  the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or

                    (3)  the collection, storage, treatment, utilization,
processing or final disposal of sewage, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(f);

unless it has obtained at its own expense an opinion addressed to Central Hudson
of nationally recognized bond counsel reasonably acceptable to Central Hudson
that such use will not impair (x) the exclusion from gross income of the
interest on any issue of Revenue Bonds for federal income tax purposes or (y)
the deductibility of Central Hudson's payments of interest based on the
restrictions in Section 150(b) of the Code.

               (ii) The Company reasonably expects, as of the date of this
Agreement, that the Exempt Facilities will continue to be used for the
qualifying purposes set forth in Section 3(b)(i), and for no other purpose, for
the remainder of their useful lives.

          (c)  It is expressly understood and agreed that the provisions of
Section 3(b) shall not prohibit the Company from (i) suspending the operation of
the Exempt Facilities on a temporary basis and/or (ii) selling exclusively for
cash the Exempt Facilities consisting of personal property, in whole or in part,
including any sale for scrap, provided that in the case of suspension of
operation under clause (i) above, the operation of the Lease Assets served by
such Exempt Facilities shall not theretofore have been, and is not then being,
terminated on a permanent basis, and provided further that in the case of a sale
under clause (ii) above the proceeds of such sale of the Exempt Facilities shall
within six months from the date of sale be expended to acquire replacement
property to be used for the same qualifying purpose as the Exempt Facilities so
sold or be otherwise applied and provided further that the Company has obtained
at its own expense an opinion of nationally recognized bond counsel addressed to
and reasonably satisfactory to Central Hudson as to the exact application of the
proceeds of such sale and that any such application will not impair (x) the
exclusion from gross income of the interest on any issue of Revenue Bonds for
federal income tax purposes or (y) the deductibility of Central Hudson's
payments of interest based on the restrictions in Section 150(b) of the Code.

          (d)  The Company agrees that it shall not issue, or have issued on its
behalf, any tax-exempt bonds to finance or refinance its acquisition of the
Exempt Facilities; provided that it is expressly understood and agreed that this
Section 3(d) shall not prohibit the use of tax-exempt bonds to finance or
refinance any improvement to the Exempt Facilities made after the date of
acquisition or to any assets other than the Exempt Facilities.

          (e)  The Company agrees that it shall give Central Hudson at least 180
days' prior written notice of any suspension or termination of the operation of
the Exempt Facilities, or any part thereof, and of any sale, exchange, transfer
or other disposition of the Exempt Facilities, or any part thereof, including,
but not limited to, a sale for scrap, such written notice to be provided whether
or not an opinion of counsel is required to be obtained in accordance with
Section 3(c).

          (f)  If Central Hudson shall desire to refund any Revenue Bonds, the
Parties shall cooperate with Central Hudson and with Central Hudson's counsel
with respect to such

                                       5
<PAGE>

refunding bonds and shall provide upon request any representations, agreements
or covenants that are reasonably requested concerning its compliance to such
date and/or in the future with the representations, agreements and covenants
made herein.

            (g)  Other than under the Lease Financing, if the Company shall
sell, exchange, transfer or otherwise dispose of the Exempt Facilities to a
third party, the Company shall cause to be included in the documentation
relating to such transaction covenants and agreements on the part of such third
party for the benefit of Central Hudson, and as requested by Central Hudson, the
trustee for the holders of any Revenue Bonds, substantially identical to those
on the part of the Company contained in this Exempt Facilities Agreement.

            (h)  The covenants and agreements on the part of the Company
contained in this Exempt Facilities Agreement shall continue in effect so long
as any of the Revenue Bonds, including any refunding bonds issued hereafter to
refund any Revenue Bonds, shall remain outstanding, and thereafter, this Exempt
Facilities Agreement shall terminate. At the request of Central Hudson, the
Company shall execute further documentation to provide that such covenants and
agreements are also for the benefit of the trustee of the holders of any Revenue
Bonds.

            (i)  Subject to the Company's compliance with this Exempt Facilities
Agreement, the Company shall not have any liability under the Revenue Bonds.

            (j)  Promptly after obtaining Actual Knowledge thereof, the Company
shall notify the Owner Lessor if there shall no longer be Revenue Bonds
outstanding during the Term.

SECTION 4.  MISCELLANEOUS

            (a)  Amendment of Sections 2(e) and 3(e). The Company agrees that it
will request Central Hudson to agree to an amendment to the ASPA that removes
the covenant set forth in Section 7.13(e) of the ASPA and replaces such covenant
with a covenant substantially identical to the following:


     The Company shall not undertake, or permit to occur, any suspension
     (other than on a temporary basis) or termination of the operation of
     the Exempt Facilities, or any part thereof, or of any sale, exchange,
     transfer or other disposition of the Exempt Facilities, or any part
     thereof, including, but not limited to, a for scrap (collectively, a
     "Trigger Event"), prior to the day that is at least 45 days' after
      -------------
     the date that the Company shall have provided Central Hudson with a
     copy of a term sheet or other summary describing in reasonable detail
     the principal terms of such Trigger Event in sufficient detail to
     demonstrate that the Owner Lessor is in compliance with its
     obligations hereunder. Such written notice shall be provided whether
     or not an opinion of counsel is required to be obtained in accordance
     with Section 2(c). The Owner Lessor also agrees to provide such other
     information relating to the Trigger Event as Central Hudson shall, at
     any time prior to the closing of the Trigger Event, reasonably
     request to the extent such information is necessary

                                       6
<PAGE>

     or useful to determine compliance by the Owner Lessor with its
     obligations hereunder. The Owner Lessor shall provide such
     information as soon as practicable but in any event, within three (3)
     business days after such information becomes available.

If Central Hudson agrees to accept the foregoing covenant in substitution for
the covenant set forth in Section 7.13(e) of the ASPA, the Parties agree to
enter into an amendment hereto, each acting reasonably and in good faith,
deleting Sections 2(e) and 3(e) hereof and substituting, in place thereof,
covenants substantially identical to the new covenant agreed to by Central
Hudson.

          (b)  Amendments and Waivers. No term, covenant, agreement or condition
of this Exempt Facilities Agreement may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each Party hereto.

          (c)  Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein to a Party
shall be in writing or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) and (b) above, in each case addressed to such Party at its address set forth
below or at such other address as such Party may from time to time designate by
written notice to the other Party.

     If to the Company:

          Dynegy Roseton, L.L.C.
          c/o Dynegy Northeast Generation, Inc.
          992 River Road
          Newburgh, New York  12550
          Telephone No.: (845) 563-4961
          Facsimile No.: (845) 563-4992
          Attention: Daniel P. Thompson, Vice President, Operations

     with a copy to:

          Dynegy Power Corp.
          1000 Louisiana Street, Suite 5800
          Houston, Texas 77002
          Telephone No.: (713) 507-6823
          Facsimile No.: (713) 767-8510
          Attention: Timothy A. Beverick, Esq.

                                       7
<PAGE>

     If to the Owner Lessor:

          Roseton OL LLC
          c/o Wilmington Trust Company
          Rodney Square North
          1100 North Market Street
          Wilmington, DE 19890-0001
          Telephone No.: 302-651-1000
          Facsimile No.: 302-651-8882
          Attention: Corporate Trust Administration

          (d) Survival.  Except for the provisions of Sections 2(a) and 3(a),
which shall survive, the warranties and covenants made by each Party hereto
shall not survive the expiration or termination of this Exempt Facilities
Agreement under Sections 2(h) and 3(h).

          (e) Successors, Assigns and Third-Party Beneficiaries.

                    (i)   This Exempt Facilities Agreement shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the Parties and
their respective successors and assigns as permitted by and in accordance with
the terms hereof.

                    (ii)  Except as expressly provided herein or in the Lease
Financing documents, neither Party may assign its interests or transfer its
obligations herein without the consent of the other Party.

                    (iii) The Parties understand and agree that Central Hudson
is a third-party beneficiary of this Exempt Facilities Agreement.

          (f) Governing Law. This Exempt Facilities Agreement has been delivered
in the State of New York and shall be in all respects governed by and construed
in accordance with the laws of the State of New York including all matters of
construction, validity and performance without giving effect to the conflicts of
laws provisions thereof except New York General Obligations Law Section 5-1401.

          (g) Severability. Any provision of this Exempt Facilities Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

          (h) Counterparts. This Exempt Facilities Agreement may be executed by
the Parties in separate counterparts, each of which, when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

          (i) Headings and Table of Contents. The headings of the sections of
this Exempt Facilities Agreement are inserted for purposes of convenience only
and shall not be construed to affect the meaning or construction of any of the
provisions hereof.

                                       8
<PAGE>

          (j)  Further Assurances. Each Party hereto will promptly and duly
execute and deliver such further documents and assurances for and take such
further action reasonably requested by the other Party, all as may be reasonably
necessary to carry out more effectively the intent and purpose of this Exempt
Facilities Agreement.

          (k)  Limitation of Liability. It is expressly understood and agreed by
the Parties that (a) this Exempt Facilities Agreement is executed and delivered
by Wilmington Trust Company ("Wilmington"), not individually or personally but
                              ----------
solely as manager of the Owner Lessor, in the exercise of the powers and
authority conferred and vested in it pursuant to that certain LLC Agreement of
Roseton OL LLC, dated as of May 1, 2001, (b) each of the representations,
undertakings and agreements herein made on the part of the Owner Lessor is made
and intended not as personal representations, undertakings and agreements by
Wilmington but is made and intended for the purpose for binding only the Owner
Lessor, (c) nothing herein contained shall be construed as creating any
liability on Wilmington individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the Parties or by any Person claiming by, through or under
the Parties and (d) under no circumstances shall Wilmington be personally liable
for the payment of any indebtedness or expenses of the Owner Lessor or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Owner Lessor under this Exempt Facilities
Agreement.

                                       9
<PAGE>

     IN WITNESS WHEREOF, the Parties have caused this Exempt Facilities
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.

                             DYNEGY ROSETON, L.L.C.

                             By:________________________________________
                                Name:
                                Title:

                             ROSETON OL LLC

                             By: Wilmington Trust Company, not in its individual
                                 capacity but solely as Lessor Manager

                             By:________________________________________
                               Name:
                               Title:
<PAGE>

                                                                       EXHIBIT A
                                                                              to
                                                               Exempt Facilities
                                                                       Agreement
                                                                       ---------

                               Exempt Facilities
                               -----------------

     Dust Collection and Fly Ash Reinjection System.  This system is designed
     ----------------------------------------------
to remove fly ash from boiler exhaust gases and reinject the ash into the boiler
for burning.  The dust collector on each boiler consists of a structural
foundation, a support structure, casing inlet and outlet duct connections,
internal dust and gas separating elements, dust collector hoppers, internal flow
dividers, hopper level sensors, hopper outlet valving and interlocking, and
automatic control and sequencing equipment for continual removal of residue
collected in the hoppers.  The fly ash reinjection system on each boiler
consists of a transport piping system from the dust collector hoppers to the
boiler, motor driven air blowers and air heaters to supply hot transport air,
controls and instrumentation for motors and heaters, and associated electrical
and pneumatic equipment.

     Waste Water Treatment System.  The facilities are designed to remove
     ----------------------------
pollutants from the process discharge water and consist of lift stations, a
gravity transport line to the waste treatment area, four waste water treatment,
settling and neutralizing basins, transfer pumps, piping, chemical injectors,
skimming and final settling facilities; and associated pumps, piping, controls,
instrumentation and electrical equipment;

     Sewage Treatment System.  The sewage treatment system is designed to treat
     -----------------------
raw sanitary sewage and consists of a lift station, gravity transport line, we
wells, a package type sewage treatment plant equipped with aerating blowers,
skimmer, electrical controllers and instrumentation, and associated piping,
pumps, chemical feeders and other controls.

     Fuel Oil Spill Control Facilities.  The fuel oil spill control equipment is
     ---------------------------------
designed to prevent spilled oil from contaminating the Hudson River and consists
of a floating boom used to encircle fuel ships and barges during unloading, a
motorboat, to tow the boom into place, oil separating and monitoring pits for
drainage from fuel oil storage tank areas, and welded steel envelopes around
storage tanks.  A sheet piling baffle extending from above the river water
surface to the river bottom encloses the outlet of the storm and storage tank
farm drain to entrap any oil which may escape from anywhere on the plant
property.

     Smoke Density Meters.  These meters will measure the opacity of stack gases
     --------------------
in order to indicate the presence of abnormal boiler burning conditions that
could lead to unacceptable emissions to the atmosphere.

     Yard Drainage System, Fuel Oil Trench and Oil Tank Berm.  The yard drainage
     -------------------------------------------------------
system is designed to collect drainage water and channel it to the Hudson River
after any contaminant oil has been separated from the drainage flow.  The fuel
oil drainage trench serves to trap any leaks

                                      A-1
<PAGE>

from sunken oil pipelines and thus prevents the seepage of oil into underground
water streams. The oil tank berm is designed to contain spillage from the
Roseton Facility's fuel oil storage tanks.

                                      A-2
<PAGE>

                                                                       EXHIBIT B
                                                                              to
                                                               Exempt Facilities
                                                                       Agreement
                                                                       ---------


                                 Revenue Bonds
                                 -------------

New York State Energy Research and Development Authority "Revenue Bonds" -
Central Hudson

          1.  $4.5 million, 6 1/4% Pollution Control Revenue Bonds (Central
     Hudson Gas & Electric Corporation Projects), Series A, due June 1, 2007
     ($2.496 million relates to the Roseton Plant)

          2.  $41.15 million, Pollution Control Refunding Revenue Bonds (Central
     Hudson Gas & Electric Corporation Projects), 1999 Series C, due August 1,
     2028 ($1.533 million relates to the Roseton Plant)

          3.  $41 million, Pollution Control Refunding Revenue Bonds (Central
     Hudson Gas & Electric Corporation Projects), Series D, due August 1, 2028
     ($1.527 million relates to the Roseton Plant)

                                      B-1