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                                                                     EXHIBIT 4.1

                                            2000




                              SCOTTISH POWER plc




                          IAN SIMON MacGREGOR RUSSELL

                      ==================================

                              CONTRACT OF SERVICE
                           as DEPUTY CHIEF EXECUTIVE

                      ==================================







                   [LOGO OF FRESHFIELDS BRUCKHAUS DERINGER]
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CONTRACT OF SERVICE entered into                2000

Between

(1)  SCOTTISH POWER plc, incorporated under the Companies Act 1985 with number
SC193794 and having its Registered Office at 1 Atlantic Quay, Glasgow G2 8SP
(the Company);

(2)  IAN SIMON MacGREGOR RUSSELL residing at 71 Braid Avenue, Edinburgh, EH10
6ED (the Officer)

Whereby it is agreed as follows:

1.   Definition and interpretation

(a)  In this Contract, unless the context otherwise requires, words importing
     the singular only shall include the plural and vice versa, words importing
     natural persons shall include corporations and the following expressions
     shall have the following meanings:-

            (i)  the Board shall mean the Board of Directors of the Company;

           (ii)  Effective Date shall mean 1 October 2000;

          (iii)  the Employment shall mean the employment of the Officer under
                 this Contract;

           (iv)  the Group shall mean the Company and all of its Subsidiaries
                 and Subsidiary Undertakings;

            (v)  Scottish Power UK shall mean Scottish Power UK plc,
                 incorporated under the Companies Act 1985 with number SC 117120
                 and having its Registered Office at 1 Atlantic Quay, Glasgow G2
                 8SP;

           (vi)  Subsidiary shall mean a company which is a subsidiary (as that
                 term is defined by Section 736 of the Companies Act 1985 as
                 amended from time to time) of the Company;

          (vii)  Subsidiary Undertaking shall mean any undertaking which is a
                 subsidiary undertaking (as that term is defined by Section 258
                 of the Companies Act 1985 as amended by Section 21 of the
                 Companies Act 1989 and as amended from time to time hereafter)
                 of the Company; and

         (viii)  undertaking shall mean any undertaking (as that term is defined
                 in Section 259(l) of the Companies Act 1985 as amended by
                 Section 22 of the Companies Act 1989 and as amended from time
                 to time hereafter).

(b)  The index and headings do not form part of this Contract and are for
     reference only.
<PAGE>

2.   The employment

(a)  Subject to the provisions of this Contract, the Company employs and
     appoints the Officer and the Officer accepts employment and appointment as
     Deputy Chief Executive of the Company. Subject to the provisions of Clause
     4 of this Contract, the Officer shall be based, and his duties shall
     primarily be carried out, in Scotland.

(b)  The Officer may be required to act as a director (either executive or non-
     executive) of such other companies (either within or outside the Group) as
     the Board may from time to time reasonably require and intimate to the
     Officer in writing in addition to the appointment specified in Clause 2(a)
     under reservation to the Company of the right at any time and from time to
     time on giving notice in writing to the Officer to cancel such engagement
     in respect of such one or more of such other companies as shall be
     specified in such notice and from such date as may be stated therein, which
     notice shall take effect always subject to all commitments and obligations
     in respect of such engagements.

3.   Duration of the employment

(a)  The Employment will commence on the Effective Date and will continue
     thereafter unless and until terminated by the Company giving to the Officer
     written notice of not less than two years. Notwithstanding the provisions
     of this Clause, the employment may be terminated at any time by the Officer
     giving to the Company not less than twelve months previous notice in
     writing to that effect. For the avoidance of doubt and notwithstanding the
     foregoing provisions of this Clause it is expressly agreed between the
     parties hereto that the Employment shall terminate without notice on the
     retirement date specified in Clause 9(b) below unless otherwise agreed with
     the Board.

(b)  The Officer's period of continuous employment for the purposes of the
     Employment Rights Act 1996 commenced on 31 March 1994.

(c)  The Company shall be entitled at its sole discretion to make a payment to
     the Officer in lieu of notice. The Company shall be entitled to make such
     deductions from such payment as is required or permitted by law in respect
     of income tax, national insurance contributions and any other relevant
     deductions.

4.   Duties of the officer

During the Employment the Officer shall:-

(a)  undertake and carry out to the best of his ability such duties and exercise
     such powers in relation to the Group's respective businesses as may from
     time to time be assigned to or vested in him by the Board;
<PAGE>

(b)  in the discharge of such duties and in the exercise of such powers observe,
     obey and comply with all lawful resolutions, regulations and directions
     from time to time made or given by or under the authority of the Board and
     promptly, whenever required so to do, give a full account to the Board or a
     person duly authorised by the Board of all matters with which he is
     entrusted;

(c)  (unless prevented by ill-health, accident, holidays or other unavoidable
     cause) devote the whole of his time, attention and skill to the discharge
     of his duties hereunder;

(d)  whenever so required for the proper fulfilment of his duties, work without
     additional remuneration in excess of the normal hours of work of the
     Company which are 37 hours per week;

(e)  carry out his duties in a proper and efficient manner, faithfully and
     diligently serve the Company and at all times use his best endeavours to
     promote the interests of the Group;

(f)  attend and work at any premises of the Group wheresoever situated and
     travel and work both in the United Kingdom and abroad as may reasonably be
     required for the proper fulfilment of his duties; and

(g)  in pursuance of his duties hereunder perform such services for and accept
     such office in any Subsidiary or Subsidiary Undertaking as the Board may
     from time to time reasonably require.

5.   Remuneration

(a)  The Company shall pay to the Officer as remuneration for his services
     during the Employment a salary at such rate, being not less than
     (Pounds)390,000 per annum, as may from time to time be determined by the
     Board with effect from 1 December 1999. The said salary (which shall be
     exclusive of any bonus due in terms of the incentive bonus schemes
     hereinafter referred to) shall accrue from day to day and be payable by
     equal monthly instalments in arrears. The said salary shall be inclusive of
     all director's fees (if any) to which the Officer may be entitled as a
     director of the Company and all remuneration which may become payable to
     the Officer by or in respect of services rendered by him to any other
     company or undertaking within the Group; the said salary shall be exclusive
     of all Directors' fees receivable from any other company as provided in
     Clause 2(b) hereof, the rights of the Director in respect of such fees to
     be determined by the Board in its absolute discretion.

(b)  The rate of such salary shall be reviewed with effect from 1 April 2001 and
     annually thereafter or such other date as might be agreed between the
     parties during the continuance of the Employment. The revised rate of
     salary shall be fixed by the Board but shall not be less than the rate of
     salary applying immediately prior to the date of the review.
<PAGE>

6.   Expenses

The Company shall reimburse to the Officer (against receipts or other
appropriate evidence) the amount of all out-of-pocket expenses reasonably and
properly incurred by him on its behalf in connection with the discharge of his
duties under this Contract (including, without prejudice to the generality, the
cost of subscriptions to any professional bodies to which, for the purpose of
the Employment, the Officer is obliged, or which the Board considers it is
desirable for him, to belong in order to maintain his professional
qualifications).

7.   Bonus schemes

The Company has established incentive bonus schemes and, subject to the rules of
such schemes, the Officer shall be eligible to participate therein. The Company
reserves the right to amend or procure the amendment of the terms of or to
terminate or procure the termination of such schemes and to alter the level of
the Officer's participation therein without reference to or agreement from him.

8.   Motor car

The Company shall provide or procure the provision to the Officer during the
Employment and for the purposes thereof with a motor car deemed by the Company
to be appropriate to the status of the Employment and shall be responsible for
payment of the whole expenses of maintaining and running such motor car
including insurance, petrol and maintenance. The Officer shall be entitled to
make reasonable use of the said motor car for private purposes but shall not
take, or allow to be taken, the said motor car outside the United Kingdom
without the prior written consent of the Company.

9.   Pension scheme

(a)  The Officer may join any appropriate pension scheme established by the
     Company and Scottish Power UK (the Scheme) subject to and in accordance
     with the rules of the Scheme for the time being and from time to time in
     force.

(b)  Without prejudice to any provisions of the Scheme the Officer's retirement
     date under this Contract shall be 16 January 2016.

(c)  If either:-

           (i)   the Officer does not join the Scheme as soon as reasonably
                 practicable and, in any event, within three months of the date
                 of commencement of this Contract, or such longer period as the
                 Scheme may permit,

           or

          (ii)   within three months of the date of commencement of this
                 Contract the Officer takes out a personal pension scheme
                 approved under Section 631 of the Income and Corporation Taxes
                 Act 1988,
<PAGE>

         or

         (iii)  once having joined the Scheme the Officer ceases to be a member
                thereof while remaining in the Employment at any age under the
                normal retirement date referred to in Clause 9(b)

     then the Company shall not be obliged to maintain the Scheme or any other
     pension scheme for the benefit of the Officer and if the Company does
     maintain the Scheme or brings into effect another pension scheme it shall
     be within the discretion of the Company and the trustees of the Scheme or
     other scheme as to whether or not, and if so upon what terms, the Officer
     shall be permitted to become a member.

(d)  For so long as the Officer shall remain a member of the Scheme he shall be
     liable to make such contributions thereto and be entitled to such benefits
     therefrom and be subject to such terms and conditions as are set out in the
     rules from time to time governing the Scheme.

(e)  The Company has elected to contract out of the State Earnings Related
     Pension Scheme and a contracting-out certificate issued in accordance with
     the Social Security Pensions Act 1975 is in force in respect of the
     Employment, provided the Officer becomes and remains a member of the
     Scheme.

10.  Health insurance

The Officer shall become, and for as long as he is employed by the Company,
remain a member of the Group's private health insurance scheme particulars of
which have been given to the Officer. The benefit of membership shall extend to
the spouse and children (in accordance with the terms of the scheme) of the
Officer.

11.  Share option schemes

The Company has established share option schemes and, subject to the rules of
such schemes, the Officer shall be eligible to participate in these schemes. The
Officer hereby agrees and accepts that the grant of any option or other right
pursuant to such schemes or the termination or variation of such schemes shall
not constitute or give rise to any claim or right of action against the Company
under this Contract in respect of such grant, termination or variation.

12.  Absence

(a)  In respect of any absence from the Employment due to sickness or injury
     lasting more than 3 days but less than 8 days the Officer shall send to the
     Board or to such person as it shall nominate a self certification form, in
     such form as the Company may reasonably require. In respect of any absence
     exceeding 7 days, he shall send to the Board or to such person aforesaid a
     statement of his disability signed by a medical practitioner covering such
     absence after the seventh day.
<PAGE>

(b)  Subject to the terms of sub-clause 12(c) and sub-clause 19(a)(iv) below,
     during any period of absence from work due to sickness or injury, provided
     the Officer complies with the terms of sub-clause 12(a) above, the salary
     payable to the Officer under the terms of this Contract shall be paid at
     the full basic rate for the first six months of continuous absence (or such
     greater periods as the Board shall in its absolute discretion determine)
     and in respect of the following six months continuous absence (or such
     greater periods as the Board shall in its absolute discretion determine)
     the Officer shall be paid at half the full basic rate or at such greater
     rate as the Board shall, in its absolute discretion, determine. Thereafter
     no salary shall be payable.

(c)  The provisions of sub-clause 12(b) and the other provisions of this
     Contract are subject to the following:-

           (i)   the Board shall in its absolute discretion determine (1) if the
                 Officer has been absent through sickness or injury during any
                 period of twelve months prior to a period of absence to which
                 sub-clause 12(b) relates, whether or not salary shall be paid
                 pursuant to the provisions of sub-clause 12(b) for a number of
                 days equal to the days for which salary was paid during
                 sickness or injury during the relevant twelve months period;
                 (2) if the Officer is absent through sickness or injury for a
                 period of more than twelve months (or such greater period or
                 periods as the Board may determine pursuant to sub-clause (b)
                 above), whether or not any salary shall be paid for any period
                 greater than the initial twelve months absence; and (3) if the
                 Officer is absent through a reason other than sickness or
                 injury, whether or not any salary shall be paid during such
                 absence; and

          (ii)   if the sickness or injury shall be or appear to be occasioned
                 by actionable negligence of a third party in respect of which
                 damages are or may be recoverable any salary paid to the
                 Officer during his period of absence shall be repayable in the
                 event of, and out of, the receipt of the proceeds of any claim
                 against the third party; the Officer shall immediately notify
                 the Company of the reason for the sickness or injury and of any
                 claim, compromise, settlement or judgment made or awarded in
                 connection with it and shall give to the Company all
                 particulars the Company may reasonably require and shall repay
                 to it that part of any damages or compensation recovered
                 relating to loss of earnings for the period of absence as shall
                 equal the amount of salary paid to the Officer during the
                 period of absence provided that the amount to be refunded shall
                 not exceed the amount of damages or compensation recovered less
                 any costs incurred by the Officer in connection with the
                 recovery of such damages or compensation and shall not exceed
                 the total remuneration paid to the Officer by way of salary in
                 respect of the period of absence.

(d)  The foregoing provisions of sub-clauses 12(a) to (c) are without prejudice
     to the Officer's entitlement to Statutory Sick Pay ("SSP") in accordance
     with the
<PAGE>

     Social Security and Housing Benefits Act 1982 provided that any
     payment made under this Contract in respect of a day of sickness will count
     towards the Officer's SSP payment for that day and any sickness or other
     benefits obtained by the Officer under any social security, national
     insurance or other legislation from time to time in force or any benefit
     received by him from any insurance policy effected by the Company for his
     benefit in the event of incapacity in respect of a day of sickness will
     count towards the payment to be made under this Contract in respect of that
     day.  Monday to Friday (inclusive) in each week shall be Qualifying Days
     for the purposes of the said Act.

(e)  The Officer shall submit to such medical examinations as may reasonably be
     required by the Board from time to time by a medical practitioner selected
     by the Board. The Officer hereby authorises and gives consent to, for the
     purposes of Section 3 of the Access to Medical Reports Act 1988, the
     medical practitioner to disclose the results of such examination to the
     Board and his own medical practitioner to disclose to the Board such
     relevant medical information as the Board may reasonably require provided
     that the Officer is given prior notice of such request being made. Copies
     of any reports made and information provided to the Board by such medical
     practitioners shall be made available to the Officer. The fees and expenses
     incurred in the provision of such medical examination and obtaining of such
     medical information shall be borne by the Company.

13.  Holidays

(a)  The Officer shall be entitled in addition to all statutory and public
     holidays to thirty (30) days holidays in each calendar year at such time or
     times as may from time to time be agreed between the Board and the Officer.

(b)  Such holiday entitlement shall be deemed to accrue from day to day and may
     not be carried over from one calendar year to the next unless the Board
     shall, in its absolute discretion, otherwise determine. The Officer shall
     not be entitled to receive holiday pay in respect of any holidays accrued
     but not taken by him save on the termination of the Employment (other than
     termination pursuant to Clause 19) when he shall be entitled to receive
     holiday pay in respect of holidays accrued in the calendar year in which
     the Employment terminates but not taken at the date of such termination.

14.  Other interests

(a)  The Officer shall disclose to the Board any interest of his own (or that of
     his spouse or of any child of him or his spouse under eighteen years of age
     in so far as he is able to do so) (1) in any trade, business or occupation
     whatsoever which is in any way similar to any of those in which the Group
     or any member thereof is involved and (2) in any trade or business carried
     on by any supplier or customer of the Group or any member thereof whether
     or not such trade, business or occupation may be conducted for profit or
     gain.
<PAGE>

(b)  During the Employment the Officer shall not at any time, without the prior
     consent of the Board, either solely or jointly or in partnership or
     association with or as director, manager, consultant, agent, employee,
     servant or representative of or for any other person, firm, company or
     other undertaking directly or indirectly carry on or be engaged or
     concerned or interested in any business other than the business or
     businesses carried on within the Group or be engaged or concerned or
     interested in any way in any company, firm or other undertaking provided
     that nothing contained in this Clause shall preclude the Officer from
     holding any shares, securities, or loan capital (not exceeding three per
     centum of the shares or loan capital of the class concerned for the time
     being issued) in any company whose shares are listed or dealt in on a
     recognised Stock Exchange (provided always that if such company is a direct
     business competitor of the Group or any member thereof the Officer shall
     obtain the prior consent of the Board to the acquisition or variation of
     such holding).

15.  Confidentiality

During the Employment and after the termination thereof (howsoever arising) the
Officer shall not, except in the performance of his duties hereunder or unless
ordered to do so by a court of competent jurisdiction, divulge any information
of a confidential nature concerning the business, transactions, secrets or
affairs of the Group or any member thereof and shall use his best endeavours to
prevent the disclosure of such information.

16.  Intellectual property rights

(a)  For the purpose of the interpretation of this Clause 16 the following
     expressions shall have the following meanings:-

          Intellectual Property Materials shall mean inventions, discoveries,
          processes, copyright works, designs, semi-conductor chip topography,
          drawings, computer programs and codes, engineering and other forms of
          data, feasibility studies, specifications, plans and all other
          technical and other information, texts, records, operating and testing
          procedures, instruction manuals, bills of materials, formulae, tables
          of operating conditions and management, administrative and financial
          materials and systems, in respect of which, in all cases, Intellectual
          Property Rights subsist (or are capable of subsisting subject to the
          making of the appropriate application or registration) and all other
          similar or analogous items;

          Intellectual Property Rights shall mean patents, applications for
          patents, trade marks or trading names (whether or not registered),
          know-how, United Kingdom and foreign designs (registered or
          unregistered and including applications for registered designs),
          copyrights (including rights in computer software), topography rights
<PAGE>

          and other rights in semi-conductor chips, moral rights and all rights
          having equivalent or similar effect wheresoever situated.

(b)  All Intellectual Property Materials made, created, discovered, conceived,
     written, designed or originated by the Officer, whether alone or in
     conjunction with any other person, in the course of the Employment and in
     connection with or in any way affecting or relating to the business of the
     Company or any other undertaking within the Group or in any way, directly
     or indirectly, capable of being used or modified for use therein or in
     connection therewith shall be disclosed forthwith to the Company (together,
     where relevant, with all information and data in his possession as to the
     exact mode of working, producing and using the same) and such Intellectual
     Property Materials, and all Intellectual Property Rights relative thereto,
     upon their creation, discovery, conception, drafting, design or origination
     belong to and vest in the Company absolutely and beneficially together with
     all rights to apply for the Intellectual Property Rights where necessary.

(c)  The Officer shall if and when required to do so by the Company at the
     Company's expense do all things necessary to vest all such Intellectual
     Property Rights absolutely in the Company or its nominees as legal and
     beneficial owner and to secure, preserve and enforce all appropriate forms
     of protection therefor in any part of the world. For the purpose of this
     sub-clause 16(c) the Officer hereby irrevocably appoints the Company or its
     nominee to be his attorney to execute and do in his name, or in the name of
     the Company all documents, acts or things as the Officer has agreed to
     execute and do.

17.  Grievances and discipline

(a)  If the Officer wishes to obtain redress of any grievance relating to his
     employment he should apply in writing to the Chairman of the Board setting
     out the nature and details of any such grievance. If the matter is not then
     resolved the Officer shall present his grievance to the full Board in
     writing who will grant the Officer the opportunity of a hearing within a
     reasonable time. The decision of the Board on such grievance shall be final
     and binding on the Officer and the Company. Likewise, if the Board,
     Chairman or Chief Executive shall be dissatisfied with the conduct of the
     Officer and such conduct is not such as to entitle the Company to apply the
     provisions of Clause 19 hereof, written details of such dissatisfaction
     shall be given to the Officer and the provisions of this clause shall apply
     mutatis mutandis.

(b)  The Officer shall be notified by the Board of any disciplinary rules and
     code of conduct of the Company applicable to the Officer.

18.  Share dealings

During the Employment and for so long as the ordinary shares, or any of them, in
the capital of the Company are listed on the Official List of the London Stock
Exchange, the Officer shall (and shall procure, so far as he is able to do so,
that any person with
<PAGE>

whom he is connected, as that term is defined in Section 346 of the Companies
Act 1985) comply with the rules adopted by the Company governing dealings by the
directors in the shares of the Company.

19.  Termination and suspension

(a)  Notwithstanding the provisions of Clause 3 hereof the Company shall be
     entitled, but not bound, to terminate with immediate effect, or on the
     expiry of such period of notice as the Company may consider appropriate,
     the Employment by giving to the Officer notice in writing to that effect at
     any time after the happening of any one or more of the following events,
     namely:-

           (i)   if the Officer commits any serious or persistent breach of this
                 Contract, or fails to comply with any reasonable order or
                 direction of the Board, or is guilty of any gross default or
                 misconduct in connection with or affecting the business of the
                 Group or any member thereof or fails to perform his duties to
                 the standard considered by the Board to be required;

          (ii)   if he becomes insolvent or bankrupt or compounds with or grants
                 a trust deed for the benefit of his creditors;

         (iii)   if his behaviour is such as may reasonably be regarded as
                 materially prejudicial to the interests of the Group or any
                 member thereof, including, without prejudice to the generality
                 of the foregoing, if he is guilty of any criminal offence
                 involving dishonesty or moral turpitude, although not in breach
                 of this Contract;

          (iv)   if he is prevented by reason of illness, injury or some other
                 reason beyond his control from attending to his duties for such
                 period or aggregate periods as the Board determines to be
                 appropriate;

           (v)   if he becomes of unsound mind;

          (vi)   if he becomes prohibited by law from being a director of a
                 company; or

         (vii)   if he resigns as a director of any Subsidiary or of any
                 Subsidiary Undertaking without the consent of the Board which
                 consent shall not be unreasonably withheld.

(b)  Unless the Company shall agree that the Employment should continue, which
     agreement may be subject to such terms and conditions as the Company may
     determine, if the Officer resigns as a director of the Company, he shall be
     deemed to have given notice of termination of the Employment in accordance
     with Clause 3(a) hereof as at the date of his resignation as a director and
     the Employment shall terminate six months after that date.

(c)  In the event of the Employment being terminated in accordance with Clause
     19(a) or 19(b) above, the Officer shall not be entitled to make any claim
<PAGE>

     against the Company or any other member of the Group for damages or
     otherwise by reason of such termination but such termination shall be
     without prejudice to the continuing obligations of the Officer under this
     Contract.

(d)  The Board shall be entitled at any time to require the Officer not to
     attend at any place of work or otherwise suspend the Officer from the
     performance of his duties under this Contract whether in respect of the
     Company or any other member of the Group including at any time when notice
     of termination (1) has been given by either the Company or the Officer in
     terms of Clause 3(a) hereof or (2) is deemed to have been given by the
     Officer in terms of Clause 19(b) hereof.

20.  Events upon termination

(a)  Upon the termination of the Employment in terms of Clause 3, Clause 19 or
     otherwise, the Officer shall (1) deliver forthwith to the Company all
     Intellectual Property Materials and all other materials and property
     including letters, documents, files, films, records, reports, plans and
     papers and all copies thereof used in or relating to the business of any
     member of the Group as are in the possession of or under the control of the
     Officer and (2) return forthwith to the Company any motor car provided by
     the Company to the Officer in terms of Clause 8 above together with all
     keys thereto and all documentation relevant thereto.

(b)  Upon the termination of the Employment in terms of Clause 3, Clause 19 or
     otherwise or if the Officer shall cease for any reason to be a director of
     the Company the Officer shall upon the request of the Board at any time or
     from time to time thereafter tender his written resignation without claim
     for compensation from office as a director of the Company and all offices
     held by him in the Group or otherwise by virtue of his employment under
     this Contract and should he fail to do so the Company is hereby irrevocably
     authorised to appoint some person in his name and on his behalf to sign any
     documents or do all things necessary or requisite to give effect thereto.

21.  Restrictions after termination

(a)  In this Clause 21 the following expressions shall have the following
     meanings:

          Confidential Information shall mean trade secrets and confidential
          information which are for the time being confidential to the Company
          or any other member of the Group;

          Electricity Business means the generation, transmission, distribution
          or supply of electricity;

          Prohibited Area means Scotland, England, Wales, Northern Ireland and
          the Isle of Man;
<PAGE>

          Relevant Group Member means any member of the Group (excluding the
          Company but including any predecessor of a member of the Group) in
          respect of whose business the Officer has been directly concerned
          pursuant to the provisions of this Contract at any time during the
          period of 2 years prior to the Termination Date.

          Restricted Period means the period of 12 months commencing with the
          Termination Date;

          Termination Date means the date on which the Employment shall
          terminate irrespective of the cause or manner (including unlawful
          termination by the Company).

(b)  Since the Officer is likely to obtain in the course of his duties under
     this Contract Confidential Information and personal knowledge of and
     influence over suppliers, customers and employees of members of the Group
     the Officer hereby agrees with the Company that in addition to the other
     terms of this Contract and without prejudice to other restrictions imposed
     upon him by law, he will be bound by the covenants contained in sub-clauses
     21(c) to 21(j).

(c)  The Officer hereby undertakes that he will not, unless with the prior
     written consent of the Company, during the Restricted Period and within the
     Prohibited Area

           (i)   either on his own behalf or for any other person, firm, company
                 or other undertaking (whether as employee, consultant adviser,
                 director or otherwise) directly or indirectly be engaged in or
                 concerned with any business which competes with any business
                 carried on at the Termination Date by the Company or any other
                 Relevant Group Member where such business is conducted by
                 either a holder of a Composite Licence or a Generation Licence
                 or a Transmission Licence or a Public Electricity Supply
                 Licence or a Private Electricity ("Second Tier") Supply Licence
                 granted under the Electricity Act 1989; or

          (ii)   be employed by, act as a director of, provide services as an
                 adviser to any company that competes with the Company in its
                 core Electricity Business.

     PROVIDED THAT the provisions of this sub-clause 21(c) shall not restrict
     the Officer (including his spouse and children of him or his spouse under
     eighteen years of age) from holding or acquiring by way of bona fide
     investment only investments whether or not listed or quoted representing
     not more than three per cent of the issued investments of any class of any
     one company and shall not restrict any activity the performance of which
     could not involve the Officer in such competition.

(d)  The Officer hereby undertakes that he will not during the Restricted Period
     and within the Prohibited Area directly or indirectly canvass, solicit or
     interfere with or endeavour to canvass, solicit or interfere with, either
     on his own behalf
<PAGE>

     or for any other person, firm, company or other undertaking in competition
     with the Company or any Relevant Group Member the custom of any person,
     firm, company or other undertaking who at any time during the last twenty-
     four (24) months of his service with the Company was a customer of, or in
     the habit of dealing with, the Company or (as the case may be) any Relevant
     Group Member and with whom the Officer shall have been personally concerned
     or have had personal knowledge.

(e)  The Officer hereby undertakes that he will not during the Restricted Period
     and within the Prohibited Area either on his own behalf or for any other
     person, firm, company or other undertaking directly or indirectly solicit
     or endeavour to entice away from the Company or any Relevant Group Member
     or any person who is to his knowledge an employee, director, officer,
     agent, consultant or associate of such company at the Termination Date.

(f)  The Officer hereby undertakes that he shall not following the Termination
     Date represent himself as being in any way connected with the business of
     the Company or that of any Relevant Group Member (except to the extent
     agreed by the Company (or as the case may be) such Relevant Group Member).

(g)  The Officer agrees that each of the provisions contained in sub-clauses
     21(c) to 21(f) constitute an entirely separate and independent covenant on
     his part and the validity of one sub-clause shall not be affected by the
     validity or unenforceability of another.

(h)  The Officer agrees that he will at the request and cost of the Company
     enter into a direct agreement or undertaking with any Relevant Group Member
     whereby he will accept restrictions and provisions corresponding to the
     restrictions and provisions above (or such of them as may be reasonable and
     appropriate in the circumstances) in relation to such activities and such
     areas and for such a period as such Relevant Group Member may reasonably
     require for the protection of its legitimate interests.

(i)  While the restrictions imposed in this Clause 21 are considered by the
     parties to be reasonable in all the circumstances it is agreed that if any
     one or more of such restrictions shall either taken by itself or themselves
     together be adjudged by a court of competent jurisdiction to go beyond what
     is enforceable in all the circumstances for the protection of the Company's
     or any Relevant Group Member's legitimate interest but would be so judged
     enforceable if any particular restriction or restrictions were deleted or
     if any part or part of the wording thereof were deleted, then the said
     restrictions shall apply with such deletions.

(j)  The Officer agrees that having regard to the facts and matters set out
     above the restrictive covenants contained in this Clause 21 are not only
     reasonable but are also necessary for the protection of the business and
     Confidential Information of the Company and Relevant Group Members and he
     further
<PAGE>

     agrees that having regard to those circumstances those covenants do not
     work harshly upon him.

22.  Enforceability

In the event of any Clause or part thereof contained in this Contract being
declared invalid or unenforceable by any court of competent jurisdiction all
other Clauses or parts thereof shall remain in full force and effect and shall
not be affected thereby.

23.  reconstructions and amalgamations

If the Company shall undergo any process of reconstruction or amalgamation
(whether or not involving the liquidation of the Company) and the Officer shall
be offered employment by the successor or proposed successor to the Company or
any other member of the Group on terms no less favourable overall to those under
this Contract whether as to duties, responsibilities, remuneration or otherwise
and the Officer does not accept such offer within one month, then the Company
may terminate this Contract forthwith and, in such event, the Officer shall have
no claim for compensation against the Company in respect of such termination
(save as provided under the provisions of the Employment Protection
(Consolidation) Act 1978).

24.  Notices

Any notice hereunder shall be given by either party to the other by personal
delivery or by recorded delivery first class mail at, in the case of the
Company, its registered office for the time being and, in the case of the
Officer, his address last known to the Company. Any such notice shall in the
case of personal delivery be deemed to have been served at the time of delivery
and in the case of posting at the expiration of 48 hours after it has been
placed in the post and in proving such service by post it shall be sufficient to
prove that the envelope containing the same was properly addressed and mailed as
a pre-paid recorded delivery first class letter.

25.  Assignation

This Contract shall not be assignable by the Company or the Officer.

26.  Entire agreement

This Contract takes effect in substitution for all previous agreements and
arrangements (whether written, oral or implied) between the Company and the
Officer or Scottish Power UK and the Officer relating to his employment. Any
such previous agreements shall be deemed to have been terminated by mutual
consent and without liability to either party as from the date of commencement
of the Employment. The preceding provisions of this Clause shall not apply in
respect of any retirement benefits as may have been provided to or for the
Officer and/or his dependants, all of which shall be reserved to him and/or
them.
<PAGE>

27.  Continuing effect

The expiration or determination of the Employment, howsoever arising, shall not
operate to affect such of the provisions of the Contract as in accordance with
their terms are expressed to operate or have effect thereafter.

28.  Waiver

No waiver of any terms or conditions of this Contract shall be effective unless
made in writing and signed by the party against which enforcement of the waiver
is sought. A waiver of any breach of any terms or conditions of this Contract
shall not be construed as a waiver of any subsequent breach of condition whether
of the same or different nature.

29.  Governing law

This Contract shall be interpreted and receive effect in accordance with the law
of Scotland.
<PAGE>

In witness whereof these presents consisting of this and the preceding sixteen
pages are executed as follows:

SUBSCRIBED for and on behalf of          )
SCOTTISH POWER plc at 1 Atlantic Quay,   )
Glasgow on the     day of                )
Two Thousand by                          )    ............................
                                   and   )
                                         )    ............................
being respectively a Director and the    )
Secretary duly authorised to             )
subscribe this document on behalf of     )
SCOTTISH POWER plc                       )



SIGNED by the said                       )
IAN SIMON MacGREGOR RUSSELL              )
at                                       )
on the day of                            )
Two Thousand in the presence of          )

Witness ..............................

Address ..............................

        ..............................

        ..............................

Occupation .......................

Witness ..........................

Address ..........................

        ..........................

        ..........................

Occupation.......................