<PAGE>
 
Exhibit 10.92


                       FIRST AMENDMENT TO THE AMENDED AND
                  RESTATED DISBURSEMENT AND SECURITY AGREEMENT

          THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED DISBURSEMENT AND
SECURITY AGREEMENT, dated as of October 9, 1998 (this "Amendment"), is entered
by and among Buzzard Power Corporation, a Delaware corporation ("Lessee"),
                                                                 ------
Scrubgrass Generating Company, L.P, a Delaware limited partnership ("Lessor"),
                                                                     ------  
Credit Lyonnais, acting through its New York branch, as agent for the Banks, the
Bond LOC Issuer and the Contract LOC Issuer (in such capacity, the "Agent"),
                                                                    -----
Bankers Trust Company, a New York banking corporation, as security agent for the
Agent on behalf of the Banks, the Bond LOC Issuer and the Contract LOC Issuer
(in such capacity, the "Disbursement Agent"), and Bankers Trust Company, a New
                        --------------------                                  
York banking corporation as securities intermediary (in such capacity, the
"Securities Intermediary"). Each of Lessee, Lessor, the Disbursement Agent, the
------------------------
Securities Intermediary and the Agent shall hereinafter be referred to as a
"Party," and collectively as the "Parties."
 -----                            -------

                                   WITNESSETH

          WHEREAS, Lessee, Lessor, the Disbursement Agent and the Agent have
entered into that certain Amended and Restated Disbursement and Security
Agreement, dated as of December 22, 1995 (as herein and hereafter amended, the
"Disbursement and Security Agreement," all capitalized terms used but not
-------------------------------------                                    
otherwise defined in this Amendment shall have the meaning assigned to such
terms in the Disbursement and Security Agreement);

          WHEREAS, Lessee, Lessor, the Disbursement Agent and the Agent desire
to amend the Disbursement and Security Agreement to bring the account and
security arrangements provided for in such agreement, including but not limited
to the security interest created thereby, into compliance with the 1994 Official
Text of Article 8 of the Uniform Commercial Code of the State of New York (as in
effect from time to time, the "UCC"); and
                               ---
 
          WHEREAS, in connection with bringing the account and security
arrangements provided for in the Disbursement and Security Agreement into
compliance with the 1994 Official Text of Article 8 of the UCC, Lessee, Lessor,
the Disbursement Agent and the Agent desire that Bankers Trust Company, a New
York banking corporation, act as a "securities intermediary" as defined in the
UCC for purposes of the Disbursement and Security Agreement as amended by this
Amendment.

          NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements contained herein and other valuable consideration, the
sufficiency of which is hereby acknowledged, the Parties intending to be legally
bound agree as follows:

          Section 1. Amendments to the Disbursement and Security Agreement.
                     ----------------------------------------------------- 

               (a) Section 2.01 of the Disbursement and Security Agreement is
amended by adding the following language at the end of the last sentence
thereof:

          "The Securities Intermediary shall, at the direction of the
          Disbursement Agent, promptly credit to the appropriate Account all
          property delivered to it pursuant to the provisions hereof. The
          Securities Intermediary hereby agrees that each item of such
<PAGE>
 
          property (whether investment property, financial asset, security,
          instrument or cash) and all rights related thereto, now or hereafter
          deposited in or credited to any of the Accounts shall be treated as a
          "financial asset" within the meaning of Section 8-102(a)(9) of the UCC
          to be held by the Securities Intermediary, acting as a "securities
          intermediary" (as defined in the UCC). The Securities Intermediary
          shall comply with 'entitlement orders' (within the meaning of Section
          8-102(a)(8) of the UCC), including, without limitation, any order or
          notification to the Securities Intermediary directing transfer or
          redemption of any financial assets in the Accounts, issued by the
          Disbursement Agent and relating to the Accounts without the
          requirement of further consent by Lessee, Lessor or any other person."

               (b) Section 2.02(a) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Construction Account"' with the
language "entitled 'Scrubgrass Generating Company, L.P., Construction Account,
Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (c) Section 2.02(b) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Amortization Account"' with the
language "entitled 'Scrubgrass Generating Company, L.P., Amortization Account,
Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (d) Section 2.02(b) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Amortization Sub-Account"' with
the language "entitled 'Scrubgrass Generating Company, L.P., Amortization Sub-
Account, Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (e) Section 2.02(c) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Insurance Account"' with the
language "entitled 'Scrubgrass Generating Company, L.P., Insurance Account,
Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (f) Section 2.02(d) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Lessor Revenues Account"' with
the language "entitled 'Scrubgrass Generating Company, L.P., Lessor Revenues
Account, Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (g) Section 2.02(e) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Rent Suspense Account"' with
the language "entitled 'Scrubgrass Generating Company, L.P., Rent Suspense
Account, Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (h) Section 2.02(f) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Borrower Environmental
Liability Reserve Account"' with the language "entitled 'Scrubgrass Generating
Company, L.P., Borrower Environmental Liability Reserve Account, Bankers Trust
Company as Disbursement Agent, as Secured Party"'.

               (i) Section 2.02(g) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Hedge Account"' with the
language "entitled 'Scrubgrass
<PAGE>
 
Generating Company, L.P., Hedge Account, Bankers Trust Company as Disbursement
Agent as Secured Party"'.
               (j) Section 2.03(a) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Operating Account"' with the
language "entitled 'Buzzard Power Corporation, Operating Account, Bankers Trust
Company as Disbursement Agent, as Secured Party

               (k) Section 2.03(b) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Maintenance Reserve Account"'
with the language "entitled 'Buzzard Power Corporation, Maintenance Reserve
Account, Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (l) Section 2.03(b) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Maintenance Reserve Sub-
Account"' with the language "entitled 'Buzzard Power Corporation, Maintenance
Reserve Sub-Account, Bankers Trust Company as Disbursement Agent, as Secured
Party"'.

               (m) Section 2.03(c) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Available Cash Flow Account"'
with the language "entitled 'Buzzard Power Corporation, Available Cash Flow
Account, Bankers Trust Company as Disbursement Agent, as Secured Party"'.

               (n) Section 2.03(d) of the Disbursement and Security Agreement is
amended by replacing the language "entitled the 'Lessee Environmental Liability
Reserve Account"' with the language "entitled 'Buzzard Power Corporation, Lessee
Environmental Liability Reserve Account, Bankers Trust Company as Disbursement
Agent, as Secured Party".

               (o) Article 2 of the Disbursement and Security Agreement is
amended by adding the following new Section 2.05 at the end thereof:

          "SECTION 2.05  Administration of the Accounts.
                         ------------------------------ 

               (a) The Securities Intermediary shall not change the name or
          account number of any of (i) the Lessor Accounts without the prior
          written consent of the Disbursement Agent, Lessor and the Agent and
          (ii) the Lessee Accounts without the prior written consent of the
          Disbursement Agent, Lessee and the Agent.

               (b) All securities or other property underlying any financial
          assets credited to the Accounts shall be registered in the name of the
          Securities Intermediary, indorsed to the Securities Intermediary or in
          blank or credited to another securities account maintained in the name
          of the Securities Intermediary and in no case will any financial asset
          credited to the Accounts be registered in the name of the Agent, the
          Disbursement Agent, Lessor or Lessee, payable to the order of the
          Agent, the Disbursement Agent, Lessor or Lessee or specially indorsed
          to Lessor or Lessee except to the extent the foregoing have been
          specially indorsed to the Securities Intermediary or in blank.
<PAGE>
 
               (c) Each of the Accounts is a "securities account" as such term
          is defined in Section 8-501(a) of the UCC."


               (p) The second sentence of Section 3.01 of the Disbursement and
Security Agreement is amended by restating such sentence as follows:

          "Lessee acknowledges that, except after the Disbursement Agent's
          receipt of an Agent Release Notice, the Disbursement Agent is the
          agent solely of the Agent and hereby irrevocably relinquishes to the
          Disbursement Agent as security agent for the Agent on behalf of the
          Secured Parties, all right, title and interest which Lessee has in the
          Lessee Account Collateral, subject to the terms and conditions of this
          Disbursement Agreement and grants the Disbursement Agent sole dominion
          and control over such Lessee Account Collateral."

               (q) Article 14 of the Disbursement and Security Agreement is
amended by (i) replacing the words "Disbursement Agent" each time they appear in
Section 14.01 with the words "Disbursement Agent and Securities Intermediary",
(ii) adding in paragraph (a) of Section 14.01 after the word "sufficiency", the
parenthetical phrase "(except with respect to the Securities Intermediary, as
provided in Section 8-504 of the UCC)" and (iii) adding the following new
Sections 14.02, 14.03, 14.04, 14.05 and 14.06 at the end thereof:

               "SECTION 14.02 Conflict with Other Agreements. The Securities
                              ------------------------------                
          Intermediary hereby confirms and agrees that:

               (a) There are no other agreements entered into between the
          Securities Intermediary and either Lessor, Lessee, the Agent or the
          Disbursement Agent with respect to any of the Accounts;

               (b) It has not entered into, and until the termination of this
          Disbursement Agreement will not enter into, any agreement with any
          other person relating to the Accounts or any financial assets credited
          thereto pursuant to which it has agreed to comply with entitlement
          orders (as defined in Section 8-102(a)(8) of the UCC) of such other
          person; and

               (c) It has not entered into, and until the termination of this
          Disbursement Agreement will not enter into, any agreement with either
          Lessor, Lessee, the Agent or the Disbursement Agent purporting to
          limit or condition the obligation of the Securities Intermediary to
          comply with entitlement orders as set forth in Section 2.01 hereof.



               SECTION 14.03 Adverse Claims. Except for the claims and interests
                             --------------                                     
          of Lessor, Lessee, the Disbursement Agent and the Agent on behalf of
          the Banks, the Bond LOC Issuer and the Contract LOC Issuer, in the
          Accounts, the Securities Intermediary does not know of any claim to,
          or interest in, the Accounts or in any "financial asset" (as defined
          in Section 8-102(a) of the UCC) credited thereto. If any person
          asserts any lien, encumbrance or adverse claim (including any writ,
          garnishment, judgment, warrant of attachment, execution or similar
          process) against
         
<PAGE>
 
          the Accounts or in any financial asset carried therein, the Securities
          Intermediary will promptly notify the Agent, the Disbursement Agent,
          Lessor and Lessee thereof.

               SECTION 14.04 Subordination of Lien. In the event that the
                             ---------------------                       
          Securities Intermediary has or subsequently obtains by agreement, by
          operation of law or otherwise a security interest in any of the
          Accounts or any security entitlement credited thereto, the Securities
          Intermediary hereby agrees that such security interest shall be
          subordinate to the security interest of the Disbursement Agent in the
          Accounts under this Disbursement Agreement.

               SECTION 14.05 Right of Set-off. The financial assets and other
                             -----------------                               
          items deposited to the Accounts will not be subject to deduction, set-
          off; banker's lien, or any other right in favor of any person other
          than the Disbursement Agent; provided, however, that the Securities
                                       --------- -------                     
          Intermediary may set off (i) all amounts due to the Securities
          Intermediary in respect of customary fees and expenses for the routine
          maintenance and operation of the Accounts and (ii) the face amount of
          any checks which have been credited to the Accounts but are
          subsequently returned unpaid because of uncollected or insufficient
          finds.

               SECTION 14.06 Actions by Securities Intermediary. The Lessor,
                             ----------------------------------             
          Lessee and Agent agree that if the Disbursement Agent is required by
          the terms of this Disbursement Agreement to perform any action or
          obligation which can only be performed by the Securities Intermediary,
          then if and to the extent that the Disbursement Agent has instructed
          or caused the Securities Intermediary to perform such action or
          obligation the Disbursement Agent shall be deemed to have performed
          such action or obligation under this Disbursement Agreement."

               (r) Section 16.07 of the Disbursement and Security Agreement is
amended by adding the following sentence at the end thereof:

          "No waiver of any right hereunder shall be binding on any party hereto
          unless it is in writing and is signed by all of the parties hereto."

               (s) Section 16.08 of the Disbursement and Security Agreement is
amended by restating such section in its entirety as follows:

               SECTION 16.08 Applicable Law. Both this Disbursement Agreement
                             --------------                                  
          and the Accounts shall be governed by the laws of the State of New
          York (without giving effect to the principles thereof relating to
          conflicts of law other than section 5-1401 of the New York General
          Obligations Law). Regardless of any provision in any other agreement,
          for purposes of the UCC, New York shall be deemed to be the Securities
          Intermediary's jurisdiction and the Accounts (as well as the
          securities entitlements related thereto) shall be governed by the laws
          of the State of New York (without giving effect to the principles
          thereof relating to conflicts of law other than section 5-1401 of the
          New York General Obligations Law).

               (t) Article 16 of the Disbursement and Security Agreement is
amended by adding the following Section at the end thereof:
<PAGE>
 
               (u) Paragraph (b) of Section 16.01 is amended by replacing the
words "Disbursement Agent" each time they appear therein with the words
"Disbursement Agent, Securities Intermediary".

               SECTION 16.08 Conflicting Agreements. In the event of any
                             ----------------------                     
          conflict between this Disbursement Agreement (or any portion thereof)
          and any other agreement now existing or hereafter entered into, the
          terms of this Disbursement Agreement shall prevail.

          Section 2. Disbursement and Security Agreement. Effective on the date
                     -----------------------------------                       
hereof the Disbursement and Security Agreement shall automatically, without any
further notice, consent or other act, be hereby amended; provided, that the
                                                         --------          
security interests granted by Lessor and Lessee, respectively, pursuant to, and
the liens created by, the Disbursement and Security Agreement in favor of the
Disbursement Agent for the benefit of the Persons specified therein, shall be
ratified and continued (but not be terminated) upon the effectiveness of this
Amendment.

          Section 3. Reference to and Effect on the Transaction Documents.
                     ---------------------------------------------------- 

               (a) On and after the date of this Amendment, each reference in
the Disbursement and Security Agreement to "this Disbursement Agreement",
"hereunder", "hereof', "herein" or words of like import, and each reference in
any other agreement including but not limited to the Amended and Restated
Participation Agreement, the Amended and Restated Reimbursement Agreement, the
Amended and Restated Lease and any other Transaction Documents, to the
Disbursement and Security Agreement shall mean a reference to the Disbursement
and Security Agreement as amended hereby.

               (b) Except as specifically amended above, the Disbursement and
Security Agreement, and all other related agreements including but not limited
to the Amended and Restated Participation Agreement, the Amended and Restated
Reimbursement Agreement, the Amended and Restated Lease and any other
Transaction Documents, shall remain in lull force and effect and are hereby
ratified and confirmed. Without limiting the generality of the foregoing, the
Amended and Restated Reimbursement Agreement and the Amended and Restated Lease
and all collateral described therein do and shall continue to secure the payment
of all obligations of Lessor and Lessee under such agreements respectively.

               (c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of any party to the Disbursement and Security Agreement
or any related agreements including but not limited to the Amended and Restated
Participation Agreement, the Amended and Restated Reimbursement Agreement, the
Amended and Restated Lease and any other Transaction Documents, nor constitute a
waiver of any provision of any of such agreement.

          Section 4 Representations and Warranties. Each of Lessor and Lessee
                    ------------------------------                           
represents and warrants to each other party to this Amendment that:

               (a) it is a limited partnership, in the case of Lessor, and a
corporation, in the case of Lessee, duly formed, validly existing and in good
standing under the laws of the State of
<PAGE>
 
Delaware and has all requisite power and authority, partnership, corporate or
otherwise, to conduct its business, to own its properties and to execute and
deliver, and to perform all of its obligations under this Amendment;

               (b) the execution and performance by it of this Amendment have
been duly authorized by all necessary partnership or corporate action, as the
case may be, and do not and will not (i) in the case of Lessor only, require any
further consent or approval of the partners of Lessor, (ii) violate any
provision of its organizational documents or, to the best of its knowledge, of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to it, (iii)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which it is a
party or by which it or its property may be bound or affected, or (iv) result
in, or require, the creation or imposition of any mortgage, deed of trust,
pledge, lien, security interest or encumbrance of any nature upon or with
respect to any of the properties now owned or hereafter acquired by it;

               (c) no authorization, consent, approval or license of, or filing
or registration with, any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any specifically
granted exemption from any of the foregoing, is or will be necessary to the
valid execution, delivery or performance by it of this Amendment or the
transactions contemplated hereby which have not been duly made or obtained, are
not in full force and effect and which are not subject to appeal or judicial
governmental or other review;

               (d) this Amendment has been duly and validly executed and
delivered by it; and

               (e) assuming the due authorization, execution and delivery
thereof by the parties other than it, this Amendment constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency or similar laws from time to time in effect that affect creditors'
rights generally or by limitation on the availability of equitable remedies.

          Section 5. Miscellaneous
                     -------------

               (a) Governing Law. This Amendment and the rights and obligations
                   -------------
of the Parties hereunder shall be construed in accordance with and be governed
by the laws of the State of New York (without giving effect to the principles
thereof relating to conflicts of law other than section 5-1401 of the New York
General Obligations Law). Regardless of any provision in any other agreement,
for purposes of the UCC, New York shall be deemed to be the Securities
Intermediary's jurisdiction and the Accounts (as well as the securities
entitlements related thereto) shall be governed by the laws of the State of New
York (without giving effect to the principles thereof relating to conflicts of
law other than section 5-1401 of the New York General Obligations Law).

               (b) Counterparts Delivery by Fax. This Amendment may be executed
                   ----------------------------
and delivered in any number of counterparts and by the different Parties hereto
on separate counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission.

               (c) Further Assurances. Each Party hereto agrees that, from time
                   ------------------
to time
<PAGE>
 
upon the written request of any other Party, it will take any such actions
and execute any such instruments as such other Party may reasonably request in
order fully to carry out the provisions and intentions of this Amendment.

               (d) Severability. In case any provision in or obligation under
                   ------------
this Amendment shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

               (e) Headings. The section headings of this Amendment are inserted
                   --------
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Amendment.


                     [THE NEXT PAGE IS THE SIGNATURE PAGE]
                                        
<PAGE>
 
          IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to
be executed by their duty authorized officers and attested on the date first
above written.


LESSOR:               SCRUBGRASS GENERATING COMPANY, L.P.,
                      a Delaware limited partnership



                      By: /s/ Brian Sedar
                          --------------------------------                     
                          Name: Brian Sedar
                          Title: Secretary



AGENT:                CREDIT LYONNAIS, acting through its New York Branch as 
                      Agent



                      By:  /s/ Robert G. Colvin
                           --------------------                     
                           Name: Robert G. Colvin
                           Title: Vice President



LESSEE:               BUZZARD POWER CORPORATION, a Delaware corporation



                      By:  /s/ William D. Linehan
                           ________________________________________
                           Name: William D. Linehan
                           Title: Chief Financial Officer



DISBURSEMENT
AGENT:                BANKERS TRUST COMPANY, as Disbursement Agent


                      By:  /s/ Thomas Moskie
                           ----------------------------------------
                           Name: Thomas Moskie
                           Title: Vice President


SECURITIES
INTERMEDIARY:         BANKERS TRUST COMPANY, as Securities Intermediary


                      By:  /s/ Thomas Moskie
                           ---------------------------------------
                           Name: Thomas Moskie
                           Title: Vice President