<PAGE>   1
                                                                EXHIBIT 10.31


                       OPERATION AND MAINTENANCE AGREEMENT

         THIS OPERATION AND MAINTENANCE AGREEMENT (this "Agreement") dated as
of December 15, 1999, is entered into by and between Devon Power LLC, a
Delaware limited liability company (the "Owner"), and NRG Devon Operations,
Inc., a Delaware corporation (the "Operator").

                                    RECITALS

         1.   The Owner owns an electricity generation facility and related
assets in Milford, Connecticut (the "Facility").

         2.   The Operator has expertise in the operation and maintenance of
electricity generating facilities of the type and character of the Facility and
desires to provide administrative, operating and maintenance services for the
Facility on the terms and conditions set out herein.

         3.   The Owner and the Operator desire to set forth the terms pursuant
to which the Operator shall provide the administrative, operating and
maintenance services for the Facility.


                                    AGREEMENT

In consideration of the premises and the covenants, conditions, and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledge, the parties hereto agree as
follows:


                                    ARTICLE 1
                                   DEFINITIONS

         Whenever used in this Agreement with initial capitalization, the
following terms shall have the meanings specified or referred to in this
Article 1.

         "Affiliate" means, with respect to any person or entity, (i) each
entity that such person or entity Controls, (ii) each person or entity that
Controls such person or entity, and (iii) each entity that is under common
Control with such person or entity.

         "Agreement" shall have the meaning provided in the introductory
paragraph hereof.

         "Approved Operating Budget" means the Operating Budget as approved by
the Owner, as such Operating Budget may be modified in writing in accordance
with the terms of this Agreement.

         "Calendar Quarter" means the three-month periods commencing January 1,
April 1, July 1 and October 1.

         "Calendar Year" means the twelve-month period from January 1 to
December 31 inclusive.

         "Consumables" means water treatment chemicals, reagents and other
chemicals, lubrication fluids and filters, hydraulic fluids and filters, air
filters, ordinary fasteners (nuts, bolts, nails, etc., which are customarily
readily available on normal commercial terms), light bulbs and flourescent
tubes, ordinary gasket materials, gloves, flashlights, batteries, disposable
safety equipment and first aid supplies, replacement hand tools, solder and
welding






<PAGE>   2


rods, all supplies for maintenance and plant cleaning materials and supplies,
and all other items commonly considered to be consumables within operations of
similar facilities.

         "Control" means the possession, directly or indirectly, through one or
more intermediaries, of (i) in the case of a corporation, a majority of the
outstanding voting securities thereof; (ii) in the case of a limited liability
company, partnership, limited partnership or venture, the right to more than
50% of the distributions therefrom (including liquidating distributions); (iii)
in the case of a trust or estate, including a business trust, a majority of the
beneficial interest therein; and (iv) in the case of any other entity, a
majority of the economic or beneficial interest therein.

         "Dispatch Schedule" means the schedule that shows the required
generation and fuel for the relevant time period as published by the Owner.

         "Effective Date" means the date of this Agreement.

         "Equipment" means all of the mechanical and electrical equipment,
pumps, piping, Rolling Stock and controls of the Facility owned or controlled
by the Owner and used or intended to be used or useable in the generation of
electric power.

         "Facility" is defined in Recital 1.

         "Five Year Forecast" means a rolling five year operation and
maintenance plan and Operating Budget forecast (including major maintenance and
capital repairs, and recommended improvements and additions) prepared by the
Operator based on the Owner's proposed schedule for dispatch of the Facility
for the same period, submitted to the Owner for approval each July 1.

         "Force Majeure" means an event which (i) is not within the reasonable
control of the Party claiming Force Majeure (the "Claiming Party"), (ii) was
not caused by the acts, omissions or delays of the Claiming Party or any person
over whom the Claiming Party has control, (iii) is not an act event or
condition the risks or consequences of which the Claiming Party has expressly
agreed to assume pursuant to this Agreement, and (iv) by the prompt exercise of
due diligence, the Claiming Party is unable to overcome or avoid or cause to be
avoided. Force Majeure includes, but is not restricted to acts of God, fire,
civil disturbance, labor dispute, labor or material shortage, sabotage, or
action or restraint by court order of any public or governmental authority (so
long as the Claiming Party has not applied for or assisted in the application
for, and has opposed where and to the extent reasonable, such government
action).

         "Hazardous Waste" means waste with inherent properties which make such
waste dangerous to manage by ordinary means, including, but not limited to
chemicals and other wastes defined as hazardous at any time during the term of
this Agreement by the State of [name of state where Facility located] or by any
applicable federal, state or local laws, ordinances, regulations, orders or
other actions promulgated or taken with respect thereto..

         "Independent Public Accountant" means the firm of independent public
accountants of nationally recognized standing selected by the Owner to perform
an annual financial audit pursuant to the terms of this Agreement.

         "In Market Availability ("IMA ")" means a measure of plant performance
for meeting the annual Dispatch Schedule. IMA shall be calculated by dividing
the actual net generation delivered to the grid by the level of generation
prescribed in the Dispatch Schedule, with no value assigned when dispatch is
scheduled at zero. The IMA shall not exceed 100%. The IMA shall be 96% or
higher for June, July, August and September. The IMA shall be 95% or higher for
the remaining months. The IMA shall be subject to correction for significant
equipment failures that require an outage or result in unsafe conditions or
violations of Legal Requirements.








<PAGE>   3


         " ISO" means the independent system operator established to sell Power
in the market served by the Facility.

"Labor Agreements" means the collective bargaining agreements between Operator
and local labor unions with respect to the operation of the Facility or the
maintenance thereof.

         "Legal Requirements" means all laws, statutes, codes, ordinances,
Permits, orders, awards, judgments, decrees, injunctions, rules, regulations,
authorizations, consents, approvals, orders, franchises, licenses, directions
and requirements of all governments or governmental units, courts or
arbitrators, which now or at any time hereafter may be applicable to or affect
the Facility or any part thereof or any streets, alleys, passageways,
sidewalks, curbs, or gutters adjoining the Facility or any part thereof or any
use or condition of the Facility or any part thereof or the acquisition,
construction, ownership, use or operation of the Facility or any part thereof,
except those the non-compliance as to which will not have a material adverse
effect on the acquisition, construction, ownership or operation of the
Facility.

         "Margin" means, for the applicable period, the Owner's revenues less
fuel and direct operating and maintenance expenses.

         "Notice" is defined in Section 10.13.

         "Notice of Termination" means that Notice issued by the Owner or
Operator pursuant to Article 5 of this Agreement which shall terminate this
Agreement.

         "Operating Account" means the account established by and in the name
of the Owner and funded from time to time with sufficient amounts to pay all
Operating Costs as the same accrue and are payable.

         "Operating Budget" means the annual budget to be prepared by the
Operator pursuant to Section 2.2(b).

         "Operating Costs" means the actual costs directly, properly and
reasonably incurred and paid for by the Operator from the Operating Account on
behalf of the Owner in the ordinary course of business solely for the
administration, operation and maintenance of the Facility, including, without
limitation or duplication: (a) wages and overhead costs for employees of the
Operator, including, without limitation, retirement plans, medical and life
insurance, disability and occupational hazard insurance, employee benefits,
employees savings plan, employee taxes and budgeted employee incentive fees;
(b) overtime; (c) employee training including tuition, travel, meals and
lodging; (d) all maintenance costs and expenses, including, without limitation,
scheduled, routine, preventative and unscheduled maintenance; (e) the cost of
Consumables, new and replacement spare parts, and all fuel expenses incurred
under any fuel agreements; (f) Plant Office Expenses; (g) capital expenditures
or replacement of Equipment and Rolling Stock approved in writing in advance by
the Owner; (h) care and handling of any Hazardous Waste; (i) Rolling Stock
Expenses; (j) cost of utility services for the Facility; (k) costs of legal,
accounting and consulting services including labor negotiations; (l) cost of
compliance with the Permits and Legal Requirements; (m) municipal, local and
franchise taxes on the Facility (but excluding any such taxes payable by
Operator as the Operator); (o) lease payments for property or easements and (p)
costs of insurance; provided, however, that no costs incurred or paid by the
Operator to any Affiliate of the Operator shall be treated as an Operating Cost
unless incurred in accordance with Section 4.12(c).

         "Operator Fee" means the fee to be paid by the Owner Entity to
Operator for the services provided pursuant to this Agreement as set forth in
Section 3.1.

         "Performance Incentive" means the payment to the Operator under
Article 9 for achieving certain performance levels of operation.






<PAGE>   4


         "Permits" means all of the consents, approvals, authorizations,
directions, licenses and permits issued by any federal, state or local agency
or authority to the Owner or the Operator with respect to the ownership,
construction, operation and maintenance of the Facility in a safe and
commercially sound manner.

         "Person" means any individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.

         "Plant Office Expenses" means costs and expenses associated directly
with and incurred at the administrative offices of the Facility, including but
not limited to telephone and telecopy services, heat, electricity, postage and
overnight mail services, paper, envelopes, file folders, computer paper,
computer software, copy paper, copier and computer supplies, maintenance and
replacement of computer and office equipment, supplies, office cleaning and
maintenance (including light bulbs and fluorescent tubes), miscellaneous office
supplies, internet and cellular telephone services, and any other expenses
related to the Operator's use of the plant office, plant office equipment and
plant office operation.

         "Power Pool" means the New England Power Pool or its successor.

         "Project Agreements" means agreements between the Owner and various
third parties as provided to the Operator by the Owner from time to time,
including, without limitation, those agreements listed on Exhibit A hereto:

         "Prudent Operating Practices" means, at a particular time, those
practices, methods, equipment, and acts then engaged in or approved by a
significant portion of the electric utility industry and commonly used in
utility engineering and operations to operate and maintain equipment equivalent
to the Facility Equipment consistent with good business practices, economy,
reliability, safety, and expedition, having due regard for current editions of
the National Electric Code and other applicable electrical safety and
maintenance codes and standards, manufacturer's warranties and recommendations,
and all Legal Requirements governing the Facility.

         "Rolling Stock" means locomotives, bulldozers, front-end loaders,
forklifts, mobile cranes, person lifts, pickup trucks, tractors, trailers,
automated sweeping equipment and the like, purchased or leased by the Owner for
use at the Facility.

         "Rolling Stock Expenses" means expenses, such as fuels, maintenance
and materials, licenses (if required), lease payments, insurance, and backup
equipment for the Rolling Stock.

         "Scheduling Coordinator" means the Person, designated by the Owner,
that is responsible for (i) developing the Owner's Dispatch Schedule, and (ii)
providing instructions to the Operator regarding the level of generation
required and fuel to be used to meet the Owner's revenue requirements.

         "Subcontractor" means any person, firm or corporation which performs
work for the Operator or the Owner at the request and direction of the Operator
pursuant to the terms of this Agreement and, subject to the provisions of
Section 4.2(c), may include Affiliates of the Owner or the Operator. Such
Subcontractors shall be qualified by the Operator's evaluation of credentials
and qualifications in accordance with a qualification program approved by the
Owner.


                                    ARTICLE 2
                               OPERATOR WORK SCOPE

         2.1      Operator Work Scope:

                  (a)   Subject to the provisions of Section 3.1, the Operator
         agrees to administer, operate and







<PAGE>   5


         maintain the Facility in accordance with the terms and conditions of
         this Agreement.

                  (b)   Subject to the terms of this Agreement and so long as
         it remains in effect, the Owner hereby grants the Operator the
         non-exclusive right (which shall not constitute an easement or other
         restriction on the Facility) to enter on the premises on which the
         Facility is located and to occupy and have free access to use the same
         for solely the purposes set forth in this Agreement. The Operator
         agrees that in its capacity as the Operator it does not and shall not
         claim at any time any interest or estate of any kind or extent
         whatsoever in the Facility by virtue of this Agreement or the
         Operator's occupancy or use of the Facility hereunder.

                  (c)   Operator covenants that it will not cause or permit any
         waste or destruction of, or damage to, the Facility, ordinary wear and
         tear excepted, and shall not use or permit the use of the Facility
         other than as described in this Agreement, and that it will not suffer
         to be maintained any nuisance or unlawful or improper use of
         occupation of the Facility; provided, however, that noise from
         equipment shall be referred to the Owner for correction as a
         maintenance or capital budget item.

                  (d)   The Operator agrees that all programs, procedures and
         other intellectual property developed by the Operator for use on or at
         the Facility shall remain the property of the Owner.

         2.2      General Duties: The Operator shall, in consideration for the
Operator Fee and Performance Incentive, administer, operate and maintain of the
Facility in accordance with the Approved Operating Budget, the Dispatch
Schedule, Prudent Operating Practices and all Legal Requirements. It is
understood and agreed that the Operator shall incur Operating Costs in the
Owner's name and such Operating Costs shall be payable from funds on deposit in
the Operating Account. The Owner shall manage the Operating Account, writing
checks, drafts, and making wire transfers, in paying Operating Costs. Without
limiting the generality of the first sentence of this Section 2.2, of the
Operator shall perform the following tasks:

                  (a)   Perform all administrative work of the Facility
         including:

                        (i)    Plan, schedule and conduct all business related
         to the operation and maintenance of the Facility.

                        (ii)   Coordinate the fuel supply including delivery,
         unloading and inventory as required by the Dispatch Schedule, on a day
         to day basis.

                        (iii)  Develop a spare parts and inventory program and
         submit the same to the Owner for approval, such program being intended
         to minimize carrying costs of the Owner and risks of shortages of
         inventory.

                        (iv)   Based on the approved spare parts and inventory
         program, and as provided for in the Approved Operating Budget,
         purchase and inventory spare parts, materials, and supplies (including
         Consumables and items covered by Plant Office Expenses and Rolling
         Stock Expenses), and review and approve invoices for same.

                        (v)    Based on the Dispatch Schedule, ISO and Power
         Pool rules (A) maintain the required IMA and (B) advise the Owner of
         risks associated with fuel and dispatch issues, including any
         recommended curtailments.

                        (vi)   Provide such operating and maintenance
         consulting services to the Owner as  it may deem necessary or
         desirable.

                        (vii)  Respond in a timely manner to written requests
         for Facility information from the Owner.












<PAGE>   6

                        (viii) Develop a qualification program for evaluating
         the qualifications and credentials of Subcontractors, and maintain the
         existing R Stamp program for boiler and pressure vessel repair.

                        (ix)   Cooperate with and assist the Owner in
         performing the Owner's obligations, and the obligations of any party
         acting for or as the assignee of the Owner, under the Project
         Agreements.

                        (x)    Obtain and maintain such workers' compensation,
         unemployment and other employee-related insurance as is required under
         applicable state law.

                        (xi)   Negotiate and administer the Labor Agreements to
         achieve continuity of labor forces, labor harmony and efficient use of
         labor forces in accordance with the Approved Operating Budget. (xii)
         Maintain necessary administrative office facilities.

                        (xiii) Jointly with the Owner, provide for good
         community relations.

                        (xiv)  Prepare and provide periodic reports on behalf
         of and at the request of the Owner.

                        (xv)   Provide recommendations to the Owner to increase
         reliability and reduce expenses.

                        (xvi)  Obtain and maintain required and appropriate
levels of insurance with respect to its activities hereunder.

                        (xvii) Provide assistance to the Owner in tracking
purchase and sales of emissions credits.

         (b)             Perform all work associated with the Annual Operating
         Budgets including:

                         (i)   Provide accounting for any monthly, quarterly,
         year end or other reports.

                         (ii)  Provide monthly and quarterly detailed financial
         and operating reports with Approved Operating Budget
         comparison.

                        (iii)    Review and approve all invoices.

                        (iv)     Maintain true, complete and accurate cost
         ledgers and accounting records in accordance with generally accepted
         accounting principles ("GAAP")utilized by the Owner regarding the
         services provided and expenses paid or incurred by it pursuant to this
         Agreement.

                        (v)    Cooperate with the Independent Public Accountant
         authorized by the Owner to perform annual financial audits.

                        (vi)   Provide a proposed Operating Budget on or before
         July 1 of each year for the next eighteen (18) month period for
         approval in advance by the Owner, based on the Owner's inputs. The
         Operator shall take into account the Dispatch Schedule, fuel and other
         contracts, and other relevant matters, in the preparation of the
         proposed Operating Budget. The Operator shall list all assumptions,
         including emissions data, and provide adequate information to identify
         risks. For any partial Calendar Year, the Operator shall submit a
         proposed Operating Budget to the Owner







<PAGE>   7


         for the balance of the first partial Calendar Year plus the following
         Calendar Year for the Owner's approval.

                        (vii)  Provide a proposed Five Year Forecast on or
         before July 1 each year for the next five years for approval by the
         Owner, based on the Owner's inputs.

                        (viii) Provide Notice to the Owner promptly if
         Operating Expenses exceed or are expected to exceed the Approved
         Operating Budget by the lesser of $50,000 or 10% of any individual
         line item in the Approved Operating Budget, including detailed
         information impacting specific line items. Provide proposed revisions
         to the Operating Budget based on changes in the Owner's expected
         Dispatch Schedule for the relevant period, and fuel and/or other
         contracts.

                        (ix)   Identify and determine the necessity and cost of
         capital improvements and annually recommend a capital budget to the
         Owner. (c)      Perform operation and maintenance services at the
         Facility including:

                        (i)    Maintain an effective and sufficient operating
         work force through appropriate on-going hiring, training,
         administration and compensation and coordination with the Owner's
         management personnel.

                        (ii)   Develop and maintain safety procedures, a safety
         manual, an employee job-site conduct handbook and an effective safety
         program, including, without limitation, fire and explosion safety
         measures.

                        (iii)  Operate and maintain the Facility in a clean,
         safe and efficient manner in accordance with the Approved Operating
         Budget, Dispatch Schedule, Prudent Operating Practices, the Project
         Agreements, equipment manufacturers specifications and warranty terms,
         and all Legal Requirements, including developing and maintaining an
         environmental program. Such operation shall economically limit the use
         of emission allowances.

                        (iv)   Maintain true, complete and accurate operating
         logs, records and reports necessary or beneficial for proper operation
         and maintenance of the Facility.

                        (v)    Maintain drawings, instruction books and
         operating and maintenance manuals and procedures and revise drawings
         and manuals as modifications are made. All such material, including
         all revisions and updates, regardless of medium used, shall remain the
         Owner's property.

                        (vi)   Maintain all tools and instruments necessary to
         operate and maintain the Facility.

                        (vii)  Develop, implement and regularly update a
         maintenance program that is intended to minimize maintenance costs,
         maximize intervals between major maintenance outages, and does not
         invalidate equipment manufacturers' warranties, specifications and
         recommendations or Prudent Operating Practices and meets the
         requirements of the authorized insurance inspector.

                        (viii) Schedule and perform or cause to be performed
         the work specified in the maintenance program in accordance with the
         Dispatch Schedule, the Approved Operating Budget, Prudent Operating
         Practice, and all Legal Requirements.

                        (ix)   Schedule, perform and record periodic
         operational checks and tests of equipment in accordance with the
         equipment manufacturers' specifications and recommendations Prudent
         Operating Practices and all Legal Requirements, and arrange for
         required environmental or other required specialized equipment tests
         to be performed.







<PAGE>   8



                        (x)    Evaluate the nature and impact of any equipment
         failure and if the failure is major or material, promptly provide
         Notice to the Owner and review the situation with the Owner and
         mutually agree on a reasonable remedy of the matter.

                        (xi)   Cooperate with and assist the Owner's personnel
         in obtaining and maintaining required Legal Requirements.

                        (xii)  Operate the Facility in accordance with the
         Approved Operating Budget for such items, and if a new operating
         budget is not timely approved by the Owner, operate in accordance with
         the preceding Approved Operating Budget until a new Operating Budget
         is approved by the Owner, and approval shall be subject to dispute
         resolution in a timely manner. (xiii)   Provide for necessary and
         desirable security services for the Facility.

                        (xiv)  Provide for building, structural and yard
         maintenance services.

                        (xv)   Order, receive and maintain adequate inventories
         and supplies.

                        (xvi)  Provide the Owner and the Owner's designees with
         unrestricted access to the Facility and cooperate with the Owner and
         its representatives and designees in all Owner inspections of the
         Facility. Such inspections may occur without Notice at any time and
         shall not unreasonably interfere with personnel safety or the
         operation and maintenance of the Facility.

                        (xvii) Operate and maintain the Facility in such a way
         as to satisfy all Legal Requirements, taking such samples and
         performing and reporting such tests as are required by all Legal
         Requirements, and promptly provide Notice to the Owner of any areas of
         Legal Requirements conflicts or violations or unsatisfactory
         conditions or test results, including performing all necessary testing
         and reporting in accordance with Legal Requirements.

                        (xviii) Dispose of all waste materials, including ash,
         in accordance with Legal Requirements and the Owner's waste disposal
         agreements, if any.


                                    ARTICLE 3
                          RESPONSIBILITIES OF THE OWNER

         3.1      Owner Responsibilities.  The Owner shall have exclusive
operational control and decision making authority with respect to the overall
operation of the Facility.  In addition, the Owner shall be responsible for the
following:

                  (a) Operator Fee. The Owner shall pay to the Operator the
         base Operator Fee of $500,000.00 per calendar year, in equal quarterly
         installments in arrears (prorated for any partial quarterly period
         between the Effective Date and the first day of the next full Calendar
         Quarter), due and payable on the first day of the following Calendar
         Quarter until such time as this Agreement is terminated as provided
         for in Article 5 or 6. Such fee is not subject to escalation.

                  (b) Fund Operating Account. The Owner shall promptly fund and
         replenish the Operating Account upon request of the Operator in the
         amounts specified by the Operator as necessary to pay all current
         Operating Costs and all other Operating Costs reasonably projected by
         the Operator to become due and payable during the next thirty (30)
         days.

                  (c) Accounting Guidelines.  The Owner shall provide the
         Operator with accounting policies, directives and procedures so that
         the Operator can perform its responsibilities in Article 2.







<PAGE>   9


                  (d) Approval of Submittals. The Owner shall promptly review
         the proposed maintenance program, the five year forecast, and the
         proposed operating budget. The Owner shall meet with the Operator to
         discuss the same and, if the Owner determines that any item proposed
         should be changed and if the parties are unable to resolve a dispute
         in good faith with respect to the submittals, the same shall be
         submitted to dispute resolution.

                  (e) Remedy of Major Equipment Failures. The Owner shall
         promptly meet with the Operator to determine the course of action to
         be taken to remedy or repair major equipment failures; provided,
         however, that the Operator shall take such action as it deems prudent
         to protect life or property in the event of an emergency involving
         failure of equipment.

                  (f) Preparation of Dispatch Schedules. The Owner shall be
         responsible to provide to the Operator by June 1 each year a proposed
         Dispatch Schedule for the next five (5) years. The Dispatch Schedule
         shall show all anticipated fuel requirements, as well as periods of
         time and corresponding generation levels required for the Owner's
         revenues.

                  (g) Approval of Capital Budget. The Owner shall promptly
         review any capital additions or replacements recommended by the
         Operator, and shall approve such capital additions or replacements as
         the Owner deems necessary or desirable. The Owner shall separately
         contract for any major maintenance replacements or capital
         improvements that are outside of the capacity of the Operator's
         resources.

                  (h) Provide copies of Legal Requirements and Project
         Agreements.  The Owner shall provide to the Operator copies of all
         Legal Requirements and Project Agreements.

                  (i) Safety: The Owner shall be responsible to ensure that
         there is adequate funding available for safety related capital
         expenditures, and to ensure that the Operator implements an effective
         safety program.

         3.2      Owner's Representative.  The Owner's Commercial Asset Manager
shall be the Owner's site representative and shall be responsible for the
following:

                  (a) Work with the Operator to ensure that the Owner's
         obligations under the Project Agreements are performed.

                  (b) Work with the Operator to ensure that Legal Requirements
         are maintained.

                  (c) Ensure that the Power Pool, bilateral and income
         statement accounting (including but not limited to closing the books
         monthly, quarterly and annually) is performed and required reports are
         issued, including the Independent Public Accountant's annual report.

                  (d) Ensure that invoices are properly cost coded and timely
         reviewed and approved.

                  (e) Represent the Owner's interests with respect to local
         community relations, including property tax issues.


                                    ARTICLE 4
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

         4.1 Representations and Warranties. The Owner and the Operator each
hereby represents and warrants to the other that the following statements are
true and correct as of the date hereof and shall be true and correct at all
times that it is a party hereto:








<PAGE>   10


                  (a) It is duly formed, validly existing, and in good standing
         under the laws of the jurisdiction of its incorporation or formation;
         to the extent required by applicable law, it is duly qualified and in
         good standing in the jurisdiction of its principal place of business,
         if different from its jurisdiction of incorporation or formation; and
         that it has full power and authority to execute and deliver this
         Agreement and to perform its obligations hereunder, and all necessary
         actions by the officers, managers, members or other applicable persons
         necessary for the due authorization, execution, delivery, and
         performance of this Agreement by it have been duly taken.

                  (b) It has duly executed and delivered this Agreement and the
         other documents contemplated herein, and they constitute its legal,
         valid and binding obligations enforceable against it in accordance
         with their terms (except as may be limited by bankruptcy, insolvency
         or similar laws of general application and by the effect of general
         principles of equity, regardless of whether considered at law or in
         equity).

                  (c) Its authorization, execution, delivery, and performance
         of this Agreement does not and will not (i) conflict with, or result
         in a breach, default or violation of, (A) its organizational
         documents, (B) any contract or agreement to which it is a party or is
         otherwise subject, or (C) any law, order, judgment, decree, writ,
         injunction or arbitral award to which it is subject; or (ii) require
         any consent, approval or authorization from, filing or registration
         with, or notice to, any governmental authority (including any
         approvals required by the Federal Energy Regulatory Commission) or
         other person, unless such requirement has already been satisfied.

                  (d) It is not a party to any litigation the outcome of which
         could reasonably be expected to adversely affect its ability to
         perform its obligations hereunder or to have a material adverse effect
         on its properties, business or financial condition.

                  (e) The Owner does not warrant or represent that the
         Facility's premises are safe, healthful, or suitable for the
         performance of the Operator's obligations hereunder.

                  (f) The Owner is an exempt wholesale generator ("EWG")
as defined in the regulations of the Federal Energy Regulatory Commission.


         4.2      Covenants.  The Owner and the Operator hereby covenant and
         agree as follows:

                  (a) Each will timely acquire and maintain all permits,
         licenses, waivers and approvals (including, if required, approval to
         operate as an EWG) required by any state or federal regulatory
         authority in order for it to perform its obligations hereunder.

                  (b) Each will at all times abide by all laws, rules and
         regulations of any state or federal governmental authority applicable
         to the conduct of the Parties or the performance of their obligations
         hereunder.

                  (c) The Operator will not acquire any assets or services from
         or to any Affiliate except in the ordinary course of the Operator's
         business upon terms no less favorable to the Operator than would be
         obtained in a comparable arms length transaction with a Person not an
         Affiliate and then only with the written consent of the Owner after
         receiving a reasonable description in writing of each of the terms
         thereof. Affiliate services shall also be subject to the Operator's
         Subcontractor qualification program.


                                    ARTICLE 5
                              TERM AND TERMINATION






<PAGE>   11

         5.1  Term. This Agreement shall be effective on the Effective Date and
remain in effect until the fifth anniversary of the Effective Date. This
Agreement shall automatically be renewed for successive five-year periods
subject to Notice of Termination of both Parties one hundred eighty (180) days
prior to the end of the Term. The Operator shall be reimbursed for usual and
customary demobilization costs and employee severance costs, if any, if the
Owner elects to not renew this Agreement.

         5.2  Termination for Convenience. Notwithstanding the foregoing the
Owner may at any time and in its sole discretion terminate this Agreement upon
at least six (6) months prior Notice of Termination to the Operator. This
Agreement shall thereupon terminate on the date set forth in such Notice of
Termination. In the event of such termination, the Owner shall pay the present
value of the Operator Fees for the remaining period of the Term, discounted at
prime plus 6%, plus usual and customary demobilization costs and employee
severance costs, if any.

         5.3  Termination for Cause. The Owner may terminate the Operator for
failure to remedy an Event of Default, such termination to be effective on the
date specified in the Notice of Termination, and the Operator shall forfeit any
Operator Fee not yet paid or owing for the remainder of the Term.

         5.4  Affiliate Termination. The Owner may terminate this Agreement
with at least six (6) months prior Notice if NRG Energy, Inc. or one of its
Affiliates ceases to maintain an ownership interest in the Owner of at least
25%. In the event of such termination, the Operator shall be reimbursed for
usual and customary demobilization costs and employee severance costs, if any,
but shall not be paid any amount in respect of the Operating Fee scheduled to
accrue during the period after the date of such termination.


                                    ARTICLE 6
                    EVENTS OF DEFAULT AND DISPUTE RESOLUTION

         6.1      Events of Default.

                  (a) The Owner shall be in default under this Agreement if the
         Owner fails to pay when due any amount payable by the Owner hereunder
         not being disputed by the Owner in good faith in writing, and fifteen
         (15) days have elapsed after such due date.

                  (b) The Operator shall be in default if the Operator commits
         a material breach of its obligations under this Agreement, or if its
         breach under this Agreement causes a material default in any Project
         Agreement or a material adverse variance in the Approved Operating
         Budget and the Operator shall fail to promptly cure such failure
         within forty-five (45) days after Notice thereof, or if the failure is
         capable of being cured but is not resolved within forty-five (45) days
         after Notice thereof, and the Operator has commenced and is diligently
         pursuing a cure to such default, such default is not cured within one
         hundred eighty (180) days after Notice thereof. Failure to meet the
         required IMA for two consecutive Calendar Quarters is an Event of
         Default.


         6.2      Rights Upon Default.

                  (a) Right of Operator. Upon the occurrence and continuance of
         a default described in 6.01(a), the Operator may, at its option,
         terminate this Agreement by delivering written Notice of termination
         to the Owner, which Notice of termination shall be effective
         forty-five (45) days after the date it is received by the Owner;
         provided, however, that if the Owner has cured or undertaken to cure
         such default within thirty (30) days of actual delivery of such Notice
         of termination to the Owner, such Notice of termination shall be
         deemed to have been canceled and shall be null and void. In the event
         of such termination, the Owner shall pay all amounts due the Operator,
         including the Operator Fee, Incentive Fee (if any, for the current
         period), and any unreimbursed costs advanced by the Operator for
         Operating Costs






<PAGE>   12


         then due. In such event, Operator shall take all necessary steps to
         shut down and protect the Facility, leaving the same in an orderly and
         safe condition, prior to leaving the premises. The rights and remedies
         of the Operator (and of any Person acting on behalf of or claiming
         through the Operator) under this Section 6.2(a) shall be the
         Operator's (and any such Person's) sole right and remedy for any
         breach of or default under the terms of this Agreement.

                  (b) Right of the Owner. Upon the occurrence and continuance
         of an Event of Default described in Section 6.1, the Owner may, at its
         option, terminate this Agreement, in accordance with Section 5.3, by
         delivering written Notice of termination to the Operator, which Notice
         of termination shall be effective immediately. In such event, Operator
         shall take all necessary steps to protect the Facility, leaving the
         same in an orderly and safe condition, prior to leaving the premises.
         The rights and remedies of the Owner (and of any Person acting on
         behalf of or claiming through the Owner) under this Section 6.2(b)
         shall be the Owner's (and any such Person's) sole right and remedy for
         any breach of or default under the terms of this Agreement.

         6.3 Dispute Resolution. In the event the parties are unable to resolve
a dispute in good faith within thirty days, the aggrieved party shall Notice
the other party and the matter shall be referred to a senior officer of each
party, who shall have thirty (30) days to resolve the matter, after which
either party may pursue any and all other remedies available at law or in
equity.


                                    ARTICLE 7
                    INDEMNIFICATION; LIMITATIONS OF LIABILITY

         7.1 Indemnifications. To the extent not otherwise covered by Facility
insurance, each party hereto will indemnify and hold harmless the other and
each director, officer, employee and Affiliate thereof, from and against all
losses, claims, damages, expenses or liabilities to which the such indemnified
party or such director, officer, employee or affiliated Person may become
subject, insofar as such losses, claims, damages, expenses or liabilities (or
actions, suits or proceedings including any inquiry or investigation or claims
in respect thereof) arise out of, in any way relate to, or result from a breach
of this Agreement by the indemnifying party; provided however, that such party
shall not have the right to be so indemnified for its own gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction
after all appeals and time for appeals have expired. If any action, suit or
proceeding arising from any of the foregoing is brought against a party or any
other Person indemnified or intended to be indemnified pursuant to this Section
7.1, the indemnifying party will, if required by the indemnified party or any
such indemnified Person, resist and defend such action, suit or proceeding or
cause the same to be resisted and defended by counsel reasonably satisfactory
to the Person or Persons indemnified or intended to be indemnified. Each
indemnified Person shall, unless the indemnified party or such indemnified
Person has made the request described in the preceding sentence and such
request has been complied with, have the right to employ its own counsel
(including staff counsel) to investigate and control the defense of any matter
covered by such indemnity and the reasonable fees and expenses of such counsel
shall be at the expense of the indemnifying party. Notwithstanding anything
contained in this Section 7.1 to the contrary, each of the Owner and the
Operator shall be named insured on the insurance covering the Facility's
property and business, and no party shall be required to indemnify the other
for any loss for which such insurance shall provide a recovery.

         7.2 Limitation of Liability. The liability of either party to the
other on all claims of any kind (excluding death or bodily injury), whether
based on contract, indemnity, warranty, tort (including, as the case may be, a
party's own negligence), strict liability or otherwise, for all losses or
damages arising out of, connected with, or resulting from this Agreement or
from the performance or breach thereof, or from any services covered by or
furnished during the term of this Agreement, shall in no case exceed five times
the annual Operator Fee.

         7.3 Waiver of Consequential Damages. In no event, whether based on
contract, indemnity, warranty, tort (including, as the case may be, a party's
own negligence) or otherwise, shall the Operator or its Subcontractors and
suppliers be liable to the Owner, or the Owner, its Subcontractors and
suppliers be liable to the Operator, for




<PAGE>   13


special, incidental, exemplary, indirect or consequential damages including,
but not limited to, loss of profits or revenue, loss of use of the equipment or
any associated equipment, cost of capital, cost of purchased power, cost of
substitute equipment, facilities or services, downtime costs, or claims of
customers of the Owner or the Operator for such damages, and each party shall
indemnify the other, its Subcontractors and suppliers against any such claims
from the other's suppliers or customers.




<PAGE>   14




                                    ARTICLE 8
                                   ASSIGNMENT

         8.1 Assignment. Neither Party shall assign this Agreement or its rights
hereunder without the prior written consent of the other Party, provided,
however, either Party may, without the consent of the other Party (and without
relieving itself from liability hereunder), (i) transfer, sell, pledge, encumber
or assign this Agreement or the accounts, revenues or proceeds hereof in
connection with any financing or other financial arrangements by or for the
benefit of the Owner Entity or NRG Northeast Generating LLC, (ii) transfer or
assign this Agreement to an Affiliate of such Party if such Affiliate's
creditworthiness and technical ability to perform hereunder is not materially
different than that of such Party, (iii) transfer or assign this Agreement to
any person or entity succeeding to all or substantially all of the assets of
such Party, or (iv) in the case of the Owner Entity, transfer or assign this
Agreement to any person or entity acquiring the Station; provided, however, that
in each such case, any such assignee (other than an assignee in a transaction
referred to in clause (i) above) shall agree in writing to be bound by the terms
and conditions hereof and such assignee's creditworthiness and technical ability
to perform hereunder shall not be materially different than that of such Party.


                                    ARTICLE 9
                             PERFORMANCE INCENTIVES

         9.1      Performance Incentives.

                  (a) The Operator may be entitled to receive an Incentive Fee
         or obligated to pay a Penalty, as specified in Appendix A.

                  (b) The Incentive Fee or Penalty will be due each August 1,
         and will be based on the preceding twelve month period ending July 1.
         Penalties, if any, may be recouped or set-off against the next due and
         payable Operator Fee or Incentive Fee and adjusted for any partial
         operating year following the date of this Agreement.


                                   ARTICLE 10
                                  MISCELLANEOUS

         10.1 Independent Contractor. Except as otherwise expressly stated in
this Agreement, the Operator shall at all times be deemed an independent
contractor and not by reason of this Agreement a joint venturer, agent or
principal of the Owner and none of the Operator's officers, directors, partners,
employees, agents or representatives or the officers, directors, partners,
employees, agents or representatives of its Subcontractors shall be considered
officers, directors, partners, employees, agents or representatives of the
Owner.

         10.2 Severability. The invalidity, in whole or in part, of any of the
provisions of this Agreement will not affect the validity of the remaining
provisions hereof.

         10.3 Entire Agreement. This Agreement and all amendments thereto
contain the complete agreement between the Owner and the Operator with respect
to the matters contained herein and supersede all other agreements, whether
written or oral, with respect to the matters contained herein between the Owner
and the Operator.

         10.4 Amendment. No modification amendment, or other change to this
Agreement will be effective unless consented to in writing by each of the
parties hereto.

         10.5 Waiver. Failure or forbearance by a party to exercise any of its
rights or remedies under this


<PAGE>   15






Agreement shall not constitute a waiver of such rights or remedies. No party
shall be deemed to have waived or forborne any right or remedy resulting from
such failure to perform unless it has made such wavier specifically in writing.

         10.7 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same Agreement.

         10.8 Choice of law. This Agreement shall be governed by the laws of the
State of New York.

         10.9 Title Passage. Title to all materials and services provided under
this Agreement shall pass to the Owner upon performance of the work or upon the
Owner becoming obligated to make payment therefor. It is expressly understood
and agreed, however, that the passage of title shall not release the Operator
from its responsibility to fully carry out its obligations under this Agreement.
The Operator shall issue purchase orders in the name of the Owner as the Owner's
agent.

         10.10 Effect of Force Majeure. If either party is rendered unable by an
event of Force Majeure to carry out, in whole or part, its obligations under
this Agreement, then, for only the pendency of such Force Majeure, the party
affected by the event (other than the obligation to make payments then due or
becoming due with respect to performance which occurred prior to the event)
shall be temporarily relieved of its obligations hereunder insofar as they are
affected by Force Majeure but for no longer period. The party affected by an
event of Force Majeure shall provide the other party with written notice setting
forth the full details thereof within two (2) Business Days after the occurrence
of such event and shall take all reasonable measures to mitigate or minimize the
effects of such event of Force Majeure.

         10.11 Interest on Amounts due. Any amounts owing fifteen (15) days
after the due date thereof shall bear interest at the prime rate of interest as
reported from time to time in the Wall Street Journal plus 2%.

         10.12 Continuous Operation. During the pendency of any dispute arising
under this Agreement, unless otherwise agreed between the parties the Operator
shall continue to operate the Facility without default or interruption in
service.


<PAGE>   16


         10.13 Notice: A Notice, consent, approval, or other communication (each
a "Notice") shall be delivered in writing via mail or facsimile, and if meant
for

<TABLE>
<CAPTION>
         Owner delivered to:                         Operator delivered to:
<S>                                               <C>
         Commercial Asset Manager                    President
         Devon Power LLC                             NRG Devon Operations, Inc.
         1221 Nicollet Mall, Suite 700               1221 Nicollet Mall, Suite 700
         Minneapolis, MN 55403                       Minneapolis, MN 55403
         612-373-5350 (phone)                        612-373-8668 (phone)
         612-373-5346 (fax)                          612-373-5346 (fax)
</TABLE>

         IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first set forth above.

DEVON POWER LLC                             NRG DEVON OPERATIONS INC.


<TABLE>

<S>                                               <C>
By: /s/ Craig A. Mataczynski                      By: /s/ Louis P. Matis
    -----------------------                           ------------------
Name: Craig A. Mataczynski                        Name: Louis P. Matis
      ---------------------                              --------------
Title: President                                  Title: President
       -------------------                               ---------
</TABLE>