<PAGE>
 
                                                                   EXHIBIT 10.70
                              EMPLOYMENT AGREEMENT


     THIS AGREEMENT, made and entered into as of the 14 day of October, 1996
(the "Effective Date") by and between Duquesne Light Company (hereinafter called
the "Company"), a Pennsylvania corporation and a wholly-owned subsidiary of DQE,
Inc.

                                       a
                                        n
                                         d

     James E. Cross, an individual residing in Allegheny County, Pennsylvania
(hereinafter called the "Executive");

                                WITNESSETH THAT:

     WHEREAS, the Executive has been employed by the Company for a number of
years in executive capacities and with increasing responsibilities; and

     WHEREAS, the Executive and the Company are mutually desirous that such
satisfactory employment relationship shall continue under the terms and
conditions hereinafter provided; and

     WHEREAS, the execution and delivery of this Agreement have been duly
authorized by the Compensation Committee of the Board of Directors of the
Company and ratified by the Board of Directors of the Company (the "Board"),

     NOW, THEREFORE, the Company and the Executive, each intending to be legally
bound, hereby mutually covenant and agree as follows:

     1.  Employment and Term.
         ------------------- 

     (a) Employment.  The Company hereby offers to employ the Executive as the
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President, Generation Group of the Company, and the Executive hereby accepts
such employment with the Company, for the term set forth in Paragraph 1(b).

     (b) Term.  The term of the Executive's employment under this Agreement
         ----                                                              
shall commence on the Effective Date and end on the day immediately preceding
the third anniversary of the Effective Date, subject to the extension of such
term as hereinafter provided and earlier expiration of such term as provided in
Paragraph 7. The term of this Agreement shall be extended automatically for one
additional year as of each annual anniversary date hereof unless, no later than
ninety (90) days prior to such anniversary date, either the Board, on behalf of
the Company, or the Executive gives written notice to the other, in accordance
with Paragraph 12, that the term of this Agreement shall not be so extended.
<PAGE>
 
     2.  Duties.  During the period of employment as provided in Paragraph 1(b)
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hereof, the Executive shall serve as President, Generation Group of the Company
and perform all duties consistent with such positions at the direction of the
Chief Executive Officer of the Company or such other person not below the rank
of President as such Chief Executive Officer may designate.  The Executive shall
devote his entire time during reasonable business hours (reasonable sick leave
and vacations excepted) and best efforts to fulfill faithfully, responsibly and
satisfactorily his duties hereunder.

     3.  Base Salary.  For services performed by the Executive for the Employers
         -----------                                                            
pursuant to this Agreement during the period of employment as provided in
Paragraph 1(b) hereof, the Company shall pay the Executive a base salary at the
rate of at least $275,000 per year, payable in substantially equal semi-monthly
installments (or otherwise in accordance with the Company's regular payroll
practices).  Any compensation which may be paid to the Executive under any
additional compensation or incentive plan of the Company or which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the base salary to which the Executive shall be
entitled under this Agreement.

     4.  Salary Increases.  During the period of employment as provided in
         ----------------                                                 
Paragraph 1(b) hereof, the base salary of the Executive shall be periodically
reviewed by the Compensation Committee of the Board to determine whether or not
the same should be increased in light of the duties and responsibilities of the
Executive and the performance thereof, and, if it is determined that an increase
is merited, such increase shall be promptly put into effect and the base salary
of the Executive as so increased shall constitute the base salary of the
Executive for purposes of Paragraph 3.

     5.  Other Benefits.  In addition to the base salary to be paid to the
         --------------                                                   
Executive pursuant to Paragraph 3 hereof, the Executive shall also be entitled
to the following:

     (a) Participation in Plans.  The Executive shall be eligible for
         ----------------------                                      
participation in any bonus, incentive (short-term or long-term), stock option or
similar plan or program now in effect or hereafter established by the Company in
the same manner and to the same extent as, and subject to the same criteria
pertaining to, other senior executives of the Company.  The Executive shall also
participate in the various benefit plans maintained in force by the Company from
time to time, including qualified and nonqualified pension, supplemental
pension, disability, medical, group life insurance, supplemental life insurance
coverage, business travel insurance, sick leave, and other similar retirement
and welfare benefit plans, programs and arrangements.  Without limiting the
scope of the foregoing, the Company shall continue in force and effect the
existing nonqualified pension arrangements (the "Nonqualified Arrangements")
under which the Company has agreed to pay to the Executive or his beneficiary an
additional pension representing (i) the additional benefit the Executive would
have accrued under the Retirement Plan for Employees of Duquesne Light Company
(the "Retirement Plan") and the Supplemental Retirement Plan for Nonrepresented
Employees of Duquesne Light Company (the "Supplemental Plan") but for certain
limitations on such benefits set forth in the Internal Revenue Code and (ii) the
additional benefits the Executive would have accrued under the Retirement Plan
and the Supplemental Plan if he were credited thereunder with a total number of
years of Continuous Service (as defined in such Plans) equal to the sum of (A)
two (2) times the actual years of Continuous Service 

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accumulated by the Executive to age sixty (60), not to exceed thirty-five (35),
plus (B) such Continuous Service as may be accrued by the Executive after age
sixty (60) under the terms of such Plans.

     (b) Fringe Benefits.  The Executive shall be entitled to perquisites of
         ---------------                                                    
office, fringe benefits and other similar benefits no less favorable than those
available to the Executive immediately prior to the effective date of this
Agreement, or, if greater, those available to the Executive at any time during
the term of this Agreement.

     (c) Expense Reimbursement.  The Company shall reimburse the Executive, upon
         ---------------------                                                  
proper accounting, for reasonable business expenses and disbursements incurred
by his in the course of the performance of his duties under this Agreement.

     (d) Vacation.  The Executive shall be entitled to five (5) weeks of
         --------                                                       
vacation during each year of this Agreement, or such greater period as the Board
shall approve, without reduction in salary or other benefits.

     6.  Non-Competition and Confidentiality Agreement.  Concurrently with the
         ---------------------------------------------                        
execution of this Agreement, the Company and the Executive are entering into a
Non-Competition and Confidentiality Agreement (the "Non-Competition Agreement")
which, among other things, sets forth certain covenants on the part of the
Executive.  It is intended that the Non-Competition Agreement and this Agreement
be read together as a single agreement.

     7.  Termination.  Unless earlier terminated in accordance with the
         -----------                                                   
following provisions of this Paragraph 7, the Company shall continue to employ
the Executive and the Executive shall remain employed by the Company during the
entire term of this Agreement as set forth in Paragraph 1(b).  Paragraph 8
hereof sets forth certain obligations of the Company in the event that the
Executive's employment hereunder is terminated.  Certain capitalized terms used
in this Paragraph 7 and Paragraph 8 hereof are defined in Paragraph 7(c) below.

     (a) Death or Disability.  Except to the extent otherwise expressly stated
         -------------------                                                  
herein, including without limitation, as provided in Paragraph 8(a) with respect
to certain post-Date of Termination payment obligations of the Company, this
Agreement shall terminate immediately as of the Date of Termination in the event
of the Executive's death or in the event that the Executive becomes disabled.
The Executive will be deemed to be disabled upon the earlier of (i) the end of a
twelve (12) consecutive month period during which, by reason of physical or
mental injury or disease, the Executive has been unable to perform substantially
the Executive's usual and customary duties under this Agreement and (ii) the
date that a reputable physician selected by the Company determines in writing
that the Executive will, by reason of physical or mental injury or disease, be
unable to perform substantially the Executive's usual and customary duties under
this Agreement for a period of at least twelve (12) consecutive months.  At any
time and from time to time, upon reasonable request therefor by the Company, the
Executive shall submit to reasonable medical examination for the purpose of
determining the existence, nature and extent of any such disability.  In
accordance with Paragraph 12, the Company shall promptly give the Executive
written notice of any such determination of the Executive's disability and of
the decision of the Company to terminate the Executive's employment by reason
thereof.  In the event 

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<PAGE>
 
of disability, until the Date of Termination the base salary payable to the
Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the
amount of disability benefits, if any, paid to the Executive in accordance with
any disability policy or program of the Company.

     (b) Notification of Discharge for Cause or Resignation for Good Reason.  In
         ------------------------------------------------------------------     
accordance with the procedures hereinafter set forth, the Company may discharge
the Executive from his employment hereunder for Cause and the Executive may
resign from his employment hereunder for Good Reason.  Any discharge of the
Executive by the Company for Cause or resignation by the Executive for Good
Reason shall be communicated by a Notice of Termination to the Executive (in the
case of discharge) or the Company (in the case of resignation) given in
accordance with Paragraph 12 of this Agreement.  For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination is to be other than the date of receipt of such
notice, specifies the termination date (which date shall in all events be within
fifteen (15) days after the giving of such notice).  No purported termination of
the Executive's employment for Cause shall be effective without a Notice of
Termination.  The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstances in enforcing the Executive's
rights hereunder.

     (c) Definitions.  For purposes of this Paragraph 7 and Paragraph 8 hereof,
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the following capitalized terms shall have the meanings set forth below:


         (i)  "Accrued Obligations" shall mean, as of the Date of Termination,
               -------------------                                              
the sum of (A) the Executive's base salary under Paragraph 3 through the Date of
Termination to the extent not theretofore paid, (B) the amount of any bonus,
incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Date of Termination to the extent not
theretofore paid and (C) any vacation pay, expense reimbursements and other cash
entitlements accrued by the Executive as of the Date of Termination to the
extent not theretofore paid.

         (ii)  "Cause" shall mean either of the following that is materially and
                -----                                                           
demonstrably detrimental to the goodwill of the Company or materially damaging
to the relationships of the Company with its customers, suppliers or employees:
(A) conviction of the Executive of a felony involving moral turpitude or (B)
gross negligence or willful misconduct by the Executive in the performance of
his duties under this Agreement.

         (iii)  "Date of Termination" shall mean (A) in the event of a 
                 -------------------                                            
discharge of the Executive by the Company for Cause or a resignation by the
Executive for Good Reason, the date the Executive (in the case of discharge) or
the Company (in the case of resignation) receives a Notice of Termination, or
any later date specified in such Notice of Termination, as the case may be, (B)
in the event of a discharge of the Executive without Cause or a resignation by
the Executive without Good Reason, the date the Executive (in the case of
discharge) or the Company (in the case of resignation) receives notice of such
termination of employment, (C) in the event of the Executive's death, the date
of 

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<PAGE>
 
the Executive's death, and (D) in the event of termination of the Executive's
employment by reason of disability pursuant to Paragraph 7(a), the date the
Executive receives written notice of such termination.

     (iv)  "Good Reason" shall mean any of the following:  (A) the assignment to
            -----------                                                         
the Executive of any duties inconsistent in any respect with the Executive's
positions with the Company as set forth in this Agreement (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Paragraph 2, or any action by the Company
which results in diminution in such positions, authority, duties or
responsibilities, excluding for this purpose any isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of written notice thereof given by the Executive in
accordance with Paragraph 12; (B) any failure by the Company to comply with any
of the provisions of this Agreement, other than any isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of written notice thereof given by the Executive
in accordance with Paragraph 12; (C) the Company's requiring the Executive to be
based at any office or location other than the principal executive office of the
Company or at any office or location not within thirty-five (35) miles of the
principal executive office of the Company in Pittsburgh, Pennsylvania; or (D)
any purported termination by the Company of the Executive's employment otherwise
than as expressly permitted by this Agreement.

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<PAGE>
 
     8.  Obligations of the Employers Upon Termination.
         --------------------------------------------- 

     (a) Discharge for Cause, Resignation without Good Reason, Death or
         --------------------------------------------------------------
Disability.  In the event of a discharge of the Executive for Cause or
----------                                                            
resignation by the Executive without Good Reason, or in the event this Agreement
terminates pursuant to Paragraph 7(a) any reason of the death or disability of
the Executive:

         (i)  the Company shall pay all Accrued Obligations to the Executive, or
to his heirs or estate in the event of the Executive's death, in a lump sum in
cash within thirty (30) days after the Date of Termination; and

         (ii) the Executive, or his beneficiary, heirs or estate in the event of
the Executive's death, shall be entitled to receive all benefits accrued by his
as of the Date of Termination under the Retirement Plan, the Supplemental Plan,
the Nonqualified Arrangements (but only to the extent not previously paid or
distributed to the Executive through the purchase of annuity contracts or
otherwise) and all other qualified and nonqualified retirement, pension, profit
sharing and similar plans of the Company in such manner and at such time as are
provided under the terms of such plans and arrangements; and

         (iii)  except as otherwise provided in Paragraph 16 hereof, all other
obligations of the Company hereunder shall cease forthwith.

     (b) Discharge without Cause or Resignation for Good Reason.  If the
         ------------------------------------------------------         
Executive is discharged other than for Cause or disability or the Executive
resigns with Good Reason:

         (i) the Company shall pay to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination the aggregate of the following
amounts:

                    (A)  all Accrued Obligations; and

                    (B)  the balance of the base salary which as of the Date of
               Termination remains to be paid to the Executive pursuant to
               Paragraph 3 for the then-remaining term of this Agreement (taking
               into account any extensions of such term in effect immediately
               prior to the Date of Termination pursuant to Paragraph 1(b)); and

                    (C)  the product of (1) the Monthly Bonus Amount multiplied
               by (2) the number of full calendar months within the period from
               the Date of Termination through and including the last day of the
               then-remaining term of this Agreement (taking into account any
               extensions of such term in effect immediately prior to the Date
               of Termination pursuant to Paragraph 1(b)); and

                    (D)  a lump sum amount equal to the Actuarial Equivalent of
               the additional Accrued Pension the Executive would have accrued
               under the Retirement Plan, the additional Accrued Supplemental
               Pension the Executive 

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<PAGE>
 
               would have accrued under the Supplemental Plan and the additional
               benefit the Executive would have accrued under the Nonqualified
               Arrangements if the Executive's actual Continuous Service had
               ended on the last day of the then-remaining term of this
               Agreement (taking into account any extensions of such term in
               effect immediately prior to the Date of Termination pursuant to
               Paragraph 1(b)) and had his Compensation for each calendar year
               during such additional period equaled his Compensation for the
               twelve (12) full calendar months immediately preceding the
               calendar month in which the Date of Termination occurred (for
               purposes of the foregoing, the terms "Actuarial Equivalent,"
               "Accrued Pension," "Accrued Supplemental Pension," "Continuous
               Service" and "Compensation" shall have the respective meanings
               given to them under the Retirement Plan and the Supplemental
               Plan, except as the term "Continuous Service" shall be modified
               under the terms of the Nonqualified Arrangements).

          (ii)  for the then-remaining term of this Agreement (taking into
account any extensions of such term in effect immediately prior to the Date of
Termination pursuant to Paragraph 1(b)), the Company shall either (A) arrange to
provide the Executive, at the Company's cost, with life, disability and health-
and-accident insurance coverage providing substantially similar benefits to
those which the Executive was receiving immediately prior to the Date of
Termination, to the extent the Company continues to maintain benefit plans
providing for such benefits for executives generally or (B) in lieu of providing
such coverage, pay to the Executive within thirty (30) days after the Date of
Termination a lump sum amount in cash equal to two (2) times the projected cost
to the Company of providing the extended benefit coverage referred to in clause
(A) (as such cost shall be calculated by the Company's benefit consultants,
using reasonable assumptions); and

          (iii)  the Executive shall be entitled to receive all benefits accrued
by his as of the Date of Termination under the Retirement Plan, the Supplemental
Plan, the Nonqualified Arrangements (but only to the extent not previously paid
or distributed to the Executive through the purchase of annuity contracts or
otherwise) and all other qualified and nonqualified retirement, pension, profit
sharing and similar plans of the Company in such manner and at such time as are
provided under the terms of such plans; and

          (iv)  all stock options, stock appreciation rights, dividend
equivalent accounts and other stock interests or stock-based rights awarded to
the Executive on or before the Date of Termination under the Duquesne Light
Company Amended and Restated 1987 Long-Term Incentive Plan, the Executive
Incentive Plan or any similar plan of the Company shall become fully vested and
nonforfeitable as of the Date of Termination; provided, however, that if such
full vesting of all or any portion of such stock or stock-related awards
would constitute a violation of applicable law or the terms of any such plan of
the Company, then in lieu of the vesting of such awards (or such portion
thereof), the Company shall redeem such award (or such portion thereof) by
paying to the Executive in a lump sum in cash within thirty (30) days of the
Date of Termination an amount which represents the fair value of such award as
of the Date of Termination (reduced by any amount payable by the Executive under
the terms of such award (or such portion thereof) as an exercise or purchase
price with respect thereto); and

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<PAGE>
 
               (v) except as otherwise provided in Paragraph 16 hereof, all
other obligations of the Company hereunder shall cease forthwith.

          (c)  Payment Conditions.   In addition to all other conditions under
               ------------------                                             
this Agreement, the obligation of the Company to make payments and provide
benefits to the Executive or the Executive's beneficiary, heirs or estate under
this Agreement and otherwise shall terminate forthwith if any of the following
shall occur: (i) the Executive shall have breached any of his obligations under
this Agreement or (ii) the Executive in any way competes with or solicits the
employees of the Company, or any of its affiliates.

          9.   Indemnification.  The Company shall defend and hold the Executive
               ---------------                                                  
harmless to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as a
Director, officer or employee of the Company, or of any other person or
enterprise at the request of the Company.  Expenses incurred by the Executive in
defending a claim, action, suit or investigation or criminal proceeding shall be
paid by the Company in advance of the final disposition thereof upon the receipt
by the Company of an undertaking by or on behalf of the Executive to repay said
amount unless it shall ultimately be determined that the Executive is entitled
to be indemnified hereunder; provided, however, that this indemnification
arrangement shall not apply to a nonderivative action commenced by the Company
against the Executive.  The foregoing shall be in addition to any
indemnification rights the Executive may have by law, contract, charter, by-law
or otherwise.

          10.  Binding Effect.  This Agreement shall be binding upon and inure
               --------------                                                 
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of the Company.  The Company shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
significant portion of its respective assets, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform this Agreement if no such succession had taken place.
Regardless whether such agreement is executed, this Agreement shall be binding
upon any successor of the Company in accordance with the operation of law and
such successor shall be deemed the "Company" for purposes of this Agreement.


          11.  Dispute Resolution.
               ------------------ 

          (a) Arbitration.  Any controversy or claim arising out of or relating
              -----------                                                      
to this Agreement or the breach thereof (including the arbitrability of any
controversy or claim), shall be settled by arbitration in accordance with the
internal laws of the Commonwealth of Pennsylvania by three arbitrators, one of
whom shall be appointed by the Board, one by the Executive and the third of whom
shall be appointed by the first two arbitrators.  If the first two arbitrators
cannot agree on the appointment of a third arbitrator, then the third arbitrator
shall be appointed by the American Arbitration Association.  The arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall be
as provided in this Paragraph 11(a). Except as  

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<PAGE>
 
otherwise provided in Paragraph 11(b), the cost of any arbitration proceeding
hereunder shall be borne equally by the Company and the Executive. The award of
the arbitrators shall be binding upon the parties. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.

          (b) Legal Expenses.  In the event that it shall be necessary or
              --------------                                             
desirable for the Executive to retain legal counsel and/or incur other costs and
expenses in connection with the enforcement of any or all of his rights under
this Agreement, and provided that the Executive substantially prevails in the
enforcement of such rights, the Company shall pay (or the Executive shall be
entitled to recover from the Company, as the case may be) the Executive's
reasonable attorneys' fees and costs and expenses in connection with the
enforcement of the Executive's rights including the enforcement of any
arbitration award.

          12.  Notices.  All notices, requests, demands and other communications
               -------                                                          
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:

          (a)  to the Board or the Company, to:

               Duquesne Light Company
               One Oxford Centre
               Pittsburgh, PA  15279
               Attention:  Chief Executive Officer

          (b)  to the Executive, to:

               James E. Cross
               1610 Blackburn Heights Drive
               Sewickley, PA  15143

Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.


          13.  No Assignment.  Except as otherwise expressly provided herein,
               -------------                                                 
this Agreement is not assignable by any party and no payment to be made
hereunder shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or other charge.

          14.  Execution in Counterparts.  This Agreement may be executed by the
               -------------------------                                        
parties hereto in two or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.

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<PAGE>
 
          15.  Jurisdiction and Governing Law.  Jurisdiction over disputes with
               ------------------------------                                  
regard to this Agreement shall be exclusively in the courts of the Commonwealth
of Pennsylvania, and this Agreement shall be construed and interpreted in
accordance with and governed by the laws of the Commonwealth of Pennsylvania,
other than the conflict of laws provisions of such laws.

          16.  Survival.  The provisions of this Paragraph 16 and of Paragraphs
               --------                                                        
8, 9, 10, 11, 13, 15, 17, 18 and 19 of this Agreement shall survive the
termination of this Agreement to the extent necessary or appropriate to
effectuate the respective purposes of such provisions.

          17.  No Mitigation Required.  The Executive shall not be required to
               ----------------------                                         
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise; provided, however, that the amount of
any payment provided for under this Agreement be reduced dollar-for-dollar by
any compensation earned by the Executive as the result of employment by another
employer or otherwise after the Date of Termination, and the Executive shall
provide to the Company upon request documentation with respect to the amount of
any such compensation.

          18.  Severability.  If any provision of this Agreement shall be
               ------------                                              
adjudged by any court of competent jurisdiction to be invalid or unenforceable
for any reason, such judgment shall not affect, impair or invalidate the
remainder of this Agreement.

          19.  Prior Understandings.  This Agreement and the Non-Competition
               --------------------                                         
Agreement embody the entire understanding of the parties hereof, and supersede
all other oral or written agreements or understandings between them regarding
the subject matter hereof.  No change, alteration or modification hereof may be
made except in a writing, signed by each of the parties hereto.  The headings in
this Agreement are for convenience and reference only and shall not be construed
as part of this Agreement or to limit or otherwise affect the meaning hereof.

                                      -10-
<PAGE>
 
          IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.



Attest:                  DUQUESNE LIGHT COMPANY

/s/ Diane S. Eismont             /s/ David D. Marshall
___________________________   By______________________________
Diane S. Eismont, Secretary      David D. Marshall
                                 President and Chief              
                                 Executive Officer


                                 EXECUTIVE

                                 /s/ James E. Cross
                              By______________________________
                                 James E. Cross

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