AMENDED AND RESTATED



                  LIMITED LIABILITY COMPANY OPERATING AGREEMENT



                                       OF



                               CE GENERATION, LLC











Operating Agmt Execution Version

<PAGE>








                                TABLE OF CONTENTS


                                TABLE OF CONTENTS

                                                                        Page

ARTICLE I...................................................................1

DEFINITIONS AND CHARACTERIZATION............................................1
  1.1. Definitions..........................................................1
  1.2. Tax Characterization.................................................4

ARTICLE II..................................................................4

FORMATION...................................................................4
  2.1. Organization.........................................................4
  2.2. Name.................................................................4
  2.3. Term.................................................................4
  2.4. Registered Agent and Office..........................................4
  2.5. Principal Office.....................................................4
  2.6. Qualified in Other Jurisdictions.....................................5

ARTICLE III.................................................................5

PURPOSE; NATURE OF BUSINESS.................................................5
  3.1. Purpose..............................................................5

ARTICLE IV..................................................................5

ACCOUNTING AND RECORDS......................................................5
  4.1. Records to be Maintained.............................................5
  4.2. Tax Returns and Reports; Accounting..................................6
  4.3. Information..........................................................6
  4.4. Confidentiality......................................................7

ARTICLE V...................................................................7

MEMBERS.....................................................................7
  5.1. Membership Classes...................................................7
  5.2. Names and Addresses..................................................7
  5.3. Admission of New Members.............................................7

ARTICLE VI..................................................................7

MANAGEMENT; RIGHTS AND DUTIES OF MEMBERS....................................7
  6.1. Management...........................................................8
  6.2. Operations..........................................................11

<PAGE>

  6.3. Other Opportunities.................................................13
  6.4. Liability...........................................................14
  6.5. Exculpation and Indemnification.....................................14

ARTICLE VII................................................................14

CONTRIBUTIONS AND CAPITAL ACCOUNTS.........................................15
  7.1. Contributions.......................................................15
  7.2. No Obligation to Restore Deficit Balance............................15
  7.3. Withdrawal; Successors..............................................15
  7.4. Interest............................................................15
  7.5. No Personal Liability...............................................15

ARTICLE VIII...............................................................16

DISTRIBUTIONS..............................................................16

ARTICLE IX.................................................................16

TRANSFER OF INTERESTS......................................................16
  9.1. Transfer of Interests...............................................16
  9.2. Conditions to Transfer..............................................16
  9.3. Electric Utility....................................................17
  9.4. QF True Up..........................................................17

ARTICLE X..................................................................18

DISSOLUTION AND WINDING UP.................................................18
 10.1. Dissolution.........................................................18
 10.2. Effect of Dissolution...............................................18
 10.3. Distribution of Assets on Dissolution...............................18
 10.4. Winding Up and Filing Articles of Cancellation......................19

ARTICLE XI.................................................................19

MISCELLANEOUS..............................................................19
 11.1. Notices.............................................................19
 11.2. Amendment; Waiver; Decisions........................................19
 11.3. Resolution of Disputes..............................................19
 11.4. Headings............................................................19
 11.5. Binding Agreement...................................................20
 11.6. Enforcement.........................................................20
 11.7. Saving Clause.......................................................20
 11.8. Counterparts........................................................20
 11.9. Governing Law.......................................................20
 11.10. No Rights of Creditors and Third Parties under Agreement...........20
 11.11. General Interpretive Principles....................................21

<PAGE>

 11.12. Entire Agreement...................................................21
 Schedule 1
 Exhibit A - Joinder Agreement


<PAGE>








                              AMENDED AND RESTATED

                  LIMITED LIABILITY COMPANY OPERATING AGREEMENT

                                       OF

                               CE GENERATION, LLC



     This Amended and Restated Limited Liability Company Operating  Agreement of
CE Generation,  LLC, a Delaware limited  liability  company (the "Company"),  is
made by and among the Company,  MidAmerican  Energy  Holdings  Company,  an Iowa
corporation  and  successor  to  CalEnergy  Company,  Inc.  ("MEHC") and El Paso
Merchant Energy North America Company,  a Delaware  corporation and successor to
El Paso Power Holding Company ("El Paso") as of August 1, 2002.

     WHEREAS,  the Company was formed as a limited liability company pursuant to
the Delaware  Limited  Liability  Company Act, 6 Del C.  ss.18-101,  et seq., as
amended from time to time (the "Act"),  by filing a Certificate  of Formation of
the Company  with the office of the  Secretary of State of the State of Delaware
and entering into this Agreement; and

     WHEREAS,  El  Paso  (Class  A) and  MEHC  (Class  B) each  hold  50% of the
ownership interests in the Company;

     WHEREAS, MEHC and El Paso desire to amend and restate the Limited Liability
Company Operating Agreement dated February 9, 1999.

     NOW,  THEREFORE,  in  consideration  of the agreements and  obligations set
forth  herein and for other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby  acknowledged and intending to be legally bound,
the Company, MEHC and El Paso, hereby adopt the following provisions:

                                   ARTICLE I.

                        DEFINITIONS AND CHARACTERIZATION

     1.1. Definitions.  In addition to the other terms defined elsewhere in this
Agreement (as defined  below),  the following  terms shall have the meanings set
forth below:

     Affiliate. Any Person, directly or indirectly,  controlling,  controlled by
or under common  control with such Person and any director,  officer,  employee,
consultant or agent of such Person.

     Agreement.  This Amended and Restated Limited  Liability  Company Operating
Agreement including all amendments adopted in accordance with this Agreement and
the Act.


<PAGE>

     Board. The Board of Directors of the Company.

     Business  Day.  Any day other  than  Saturday,  Sunday or such other day on
which banking institutions in New York, New York, are authorized or obligated to
close.

     Capital  Account.  The  account  maintained  for  a  Member  determined  in
accordance with Article VII.

     Capital  Contribution.  Any contribution of Property to the Company made by
or on behalf of a Member.

     Certificate.  The Certificate of Formation of the Company,  as amended from
time to time and filed in the Office of the  Secretary  of State of the State of
Delaware.

     Class A  Interests.  The Class A Interests  representing  50% of the common
equity of the Company and entitling the holder to the rights described herein.

     Class B  Interests.  The Class B Interests  representing  50% of the common
equity of the Company and entitling the holder to the rights described herein.

     Code. The Internal Revenue Code of 1986, as amended.

     Development Agreement. The certain agreement by and among the Company, MEHC
and El Paso Power Holding Company  executed as of the Closing Date as defined in
the Purchase Agreement.

     Director.  A person duly appointed to the Board in accordance  with Section
6.1.

     Dissolution  Event.  An event,  the  occurrence of which will result in the
dissolution of the Company under Article X.

     Electric Utility. An "electric utility," "electric utility holding company"
or a combination thereof, as such terms are used in 18 C.F.R. ss. 292.206 or any
successor provision, any Subsidiary of any of the foregoing, or any other Person
in which any of the foregoing  holds an interest  which,  if such Person owned a
Class A  Interest,  would be deemed to result  in any  portion  of such  Class A
Interest  being held by any of the  foregoing.  Any  determination  of who is an
Electric Utility shall be made by the Board.

     FERC. The Federal Energy Regulatory Commission, or any successor agency.

     Fiscal Year. The calendar year.

     Imperial Valley Projects. The meaning set forth in the Purchase Agreement.

     Interests.  The Class A Interests and Class B Interests  taken  together or
individually as the context may require.

<PAGE>

     IPPCo Debt. shall mean the $400 million  indebtedness of the Company issued
prior to the Closing as defined in the Purchase Agreement.

     Member.  The Persons,  other than the Company,  executing this Agreement as
Members and any new Members added in accordance with this Agreement.

     Membership  Admission.  The sale or issuance by the Company of any Interest
to any Person, whether or not such Person, immediately prior to the time of such
sale or issuance, was a Member.

     Officer. The Persons appointed pursuant to Section 6.1(f).

     Person.  An individual,  trust,  estate,  corporation,  partnership,  joint
venture, limited liability company, business trust,  unincorporated association,
or a government or agency or political subdivision thereof.

     Power Purchase Agreements.  The power sale contracts pursuant to which each
Project sells electricity.

     Projects.   The  Company's  interests  in  certain  generating  facilities,
commonly  known as Salton Sea Units I, II, III,  IV and V, CE Turbo,  Del Ranch,
Elmore, Vulcan, Leathers, PRL, Yuma and Saranac.

     Property. Any property, real or personal, tangible or intangible, including
money and securities,  and any legal or equitable interest in such property, but
excluding services and promises to perform services in the future.

     Purchase  Agreement.  The Equity Purchase Agreement dated February 21, 1999
between MEHC, as Seller,  and El Paso, as Buyer, for the purchase of the Class A
Interests.

     PURPA. The Public Utility Regulatory Policies Act of 1978, as amended.

     QF.  A power  plant  which  has  qualified  as a  "small  power  production
facility" or a "cogeneration facility" as such terms are defined in PURPA.

     QF Project.  Any Project  which has  obtained the status of a QF until such
time as the Board  determines  to  terminate  the QF status,  or such Project is
otherwise determined not to be a QF by FERC.

     Securities Act. The Securities Act of 1933, as amended.

     Subsidiary.  Any corporation or other entity  (including  partnerships  and
other business associations and joint ventures) in which the Company directly or
indirectly owns 10% or more of the equity securities.

<PAGE>

     Tax  Regulations.  The federal  income tax  regulations  promulgated by the
United States Treasury  Department under the Code as such Tax Regulations may be
amended from time to time.  All references  herein to a specific  section of the
Tax Regulations shall be deemed also to refer to any corresponding  provision of
succeeding Tax Regulations.

     Transfer. Any sale assignment, pledge, hypothecation,  abandonment or other
disposition or encumbrance whether or not for consideration.

     Zinc Recovery  Project.  That certain zinc extraction  facility  located in
Imperial  Valley,  California,  owned by  CalEnergy  Minerals LLC and all future
expansions thereof and future minerals  extraction  facilities  developed in the
vicinity of the Projects located in Imperial Valley, California.

     1.2. Tax Characterization. It is intended that the Company be characterized
and treated for federal,  state and local  income tax purposes as the  Directors
shall determine from time to time.


                                   ARTICLE II.

                                    FORMATION

     2.1.  Organization.  The Members hereby  continue the Company as a Delaware
limited liability company pursuant to the provisions of the Act.

     2.2. Name. The name of the Company is CE Generation,  LLC, and all business
of the Company  shall be conducted  under that name,  or one or more  fictitious
names as the Board may determine from time to time.

     2.3.  Term.  The existence of the Company  shall be  perpetual,  unless the
Company shall be sooner  dissolved  and its affairs wound up in accordance  with
the Act or this Agreement.

     2.4.  Registered Agent and Office.  The registered agent for the service of
process  and the  registered  office of the  Company  shall be that  Person  and
location set forth in the  Certificate.  The Members or the Board may, from time
to time, change the registered agent or office through  appropriate filings with
the Office of the Secretary of State of the State of Delaware.  In the event the
registered  agent ceases to act as such for any reason or the registered  office
shall  change,  the Members or Board  shall  promptly  designate  a  replacement
registered agent or file a notice of change of address, as the case may be.

     2.5.  Principal Office. The Principal Office of the Company (the "Principal
Office")  shall be located  at:  302 South  36th  Street,  Suite  400-Z,  Omaha,
Nebraska 68131, Attn:  General Counsel,  or at such other address as the Company
may have furnished in writing.


<PAGE>

     2.6. Qualified in Other Jurisdictions.  The Members shall cause the Company
to be qualified,  formed or registered under assumed or fictitious name statutes
or similar laws in any jurisdiction in which the Company transacts business. Any
member of the Board,  any  Officer or any  person  appointed  by the Board as an
authorized person within the meaning of the Delaware Act, shall execute, deliver
and file any  certificates  (and any  amendments  and/or  restatements  thereof)
necessary for the Company to qualify to do business in a  jurisdiction  in which
the Company may wish to conduct business.


                                  ARTICLE III.

                           PURPOSE; NATURE OF BUSINESS

     Purpose.  The  Company's  business  and  purpose is to (i) to engage in the
ownership and operation of the Projects,  (ii) to issue the IPPCo Debt, (iii) if
approved by the Board, to construct new projects, (iv) if approved by the Board,
to pursue new generation  facilities,  to engage in activities incidental to the
foregoing  (including  financing  activities),  and any and all lawful  business
activities  which  may be  approved  by the  Board  from  time to time for which
limited liability companies may be organized under the Act.


                                   ARTICLE IV.

                             ACCOUNTING AND RECORDS

     4.1.  Records to be  Maintained.  The Company shall  maintain the following
records at the Principal Office:

     (a) a current  list of the full name set  forth in  alphabetical  order and
last known mailing address of each Member, together with information relating to
each Member's Capital Contributions and Membership Interest;

     (b) a copy of the  Certificate  and all amendments  thereto,  together with
executed  copies of any powers of attorney  pursuant to which the Certificate or
any such amendment has been executed;

     (c) a copy of the Company's federal,  state and local income or information
tax returns and reports for the three most recent Fiscal Years; and

     (d) the  Company's  books  and  records,  including  financial  statements,
permits and  insurance of the Company,  which shall be open to inspection by the
Members or their agents at reasonable times.

     4.2. Tax Returns and Reports;  Accounting. The Company, at its own expense,
shall cause its accountants to prepare and timely file income tax returns of the
Company in all  jurisdictions  where such filings are required,  and the Company
shall cause its accountants to prepare and deliver to each Member, within ninety
(90) days after the  expiration  of each Fiscal  Year or as soon as  practicable
thereafter,  at the  Company's  expense,  all  information  with  respect to the
Company  required by the Code and the Tax Regulations for the preparation of the
Members' federal income tax returns. The Company shall use the accrual method of
accounting in the preparation of its financial  reports and for tax purposes and
shall keep its books and records accordingly.

     4.3. Information.

     (a) Requested Information.  With reasonable  promptness,  the Company shall
furnish  each Member or Director  with such other data and  information  as from
time to time may be reasonably requested.  Any written or electronic data of the
Company  provided to a Member  shall also be  contemporaneously  provided to the
other  Member or  Members.  With  respect to  holders of the Class A  Interests,
information   shall  be  provided  to  the  Technical   Director.   The  Company
acknowledges  that its obligations under this Section 4.3(a) shall not limit the
rights of its Members or Directors  under  applicable law to obtain  information
and other materials from the Company.

     (b)  Management  Reporting.  The  Officers  shall cause to be prepared  and
delivered to the Board or a designated  officer of each  Member,  within  thirty
(30) days after the end of each  quarter (and monthly to the extent such reports
are available), reports which are conventional for the power generation industry
presenting  timely and relevant  information  on the financial  and  operational
performance  of the Company and its assets.  In addition to the  foregoing,  the
Officers shall prepare and deliver to the Board (i) within sixty (60) days after
the end of each Fiscal Year, a balance sheet of the Company and its Subsidiaries
as at the end of such  year and  statements  of  income  and  cash  flows of the
Company and its  Subsidiaries  for such year,  setting forth in comparative form
the figures for the previous Fiscal Year,  audited and certified by a nationally
recognized  accounting firm acting as the independent  public accountants of the
Company;  (ii)  within  thirty  (30) days after the end of each  fiscal  quarter
(other  than  year-end),  an  unaudited  balance  sheet of the  Company  and its
Subsidiaries  as at the end of such  quarter and  statements  of income and cash
flows for the Company and its  Subsidiaries  for such quarter,  setting forth in
comparative  form the figures for the same fiscal quarter for the previous year;
(iii) with reasonable  promptness,  such other financial information and reports
as  from  time  to  time  may be  requested  by the  Board,  including,  without
limitation, production reports, management reports and efficiency data.

     (c)  Inspection.  From and after the date hereof,  the Company will permit,
upon  reasonable  prior notice and at such Member's sole cost and expense,  each
holder of more than 5% of the outstanding  Interests,  its nominee,  assignee or
its representative to visit and inspect any of the properties of the Company and
its  Subsidiaries,  to examine  all their  books of  account,  records,  reports
(including  tax records  and  returns)  and other  papers and to make copies and
extracts  therefrom,  during  normal  business  hours,  subject  to  appropriate
confidentiality requirements.

<PAGE>

     4.4.  Confidentiality.  As  much  of the  information  and  other  material
furnished under or in connection with this Agreement  (whether furnished before,
on or after the date  hereof)  constitutes  or contains  confidential  business,
financial or other information of the Company, its Subsidiaries or the Projects,
each Member  covenants  for itself and its  directors,  officers,  partners  and
stockholders  that it will not disclose such  confidential  information and will
cause its respective officers,  directors,  employees,  counsel, accountants and
other  representatives to abide by such confidentiality  obligations;  provided,
however,  that such  Member may  disclose or deliver  any  information  or other
material  disclosed  to or received  by the Member  should  such  disclosure  or
delivery be required by law or regulation provided that it provides prior notice
to the Company so that the Company may seek an appropriate  protective order, if
applicable.

                                   ARTICLE V.

                                     MEMBERS

     5.1. Membership  Classes.  The Company shall have two classes of membership
interests,  Class A Interests  and Class B Interests.  The Class A Interests and
Class B Interests  shall each  represent 50% of the common equity of the Company
and  shall  each  be  entitled  to 50%  of  the  voting  rights  and  50% of any
distributions, and otherwise have the rights as set forth in this Agreement.

     5.2.  Names and  Addresses.  The names and addresses of the Members of each
class are as stated on Schedule 1.

     5.3.  Admission  of New  Members.  The Members  may  effect,  at their sole
discretion,  a Membership Admission by the prior written consent of both (i) the
holders  of a  majority  of the  Class A  Interests  and (ii) the  holders  of a
majority of the Class B Interests;  provided, however, that at no time while any
Project remains a QF may such Membership  Admission be effected if it will cause
an Electric Utility, or more than one Electric Utility in the aggregate,  to own
more than 50% of the equity of the  Company or  otherwise  cause any  Project to
lose its QF status.


                                   ARTICLE VI.

                    MANAGEMENT; RIGHTS AND DUTIES OF MEMBERS
<PAGE>


     6.1. Management.  (a) Board. The Company shall be managed exclusively by or
under the  direction of a Board of Directors  (the  "Board"),  consisting of six
Directors,  three of whom  shall be  appointed  by the  holders  of the  Class A
Interests  and three of whom shall be  appointed  by the  holders of the Class B
Interests;  provided,  that,  no person  appointed by the holders of the Class A
Interests shall be an Electric Utility. No Director or Officer of the Company is
a  "manager"  (within the meaning of the Act) of the  Company.  Following  their
appointment,  Directors shall serve until (i) removal, (ii) resignation or (iii)
election of a successor  by the holders of the  applicable  class of  Interests,
whichever  occurs first.  Directors may be removed at any time,  with or without
cause, by the holders of the class of Interests appointing such Director.

     (b) Authority of the Board. Except as provided in Section 6.2,

     (i) The  Board,  acting  as a group  or  through  the  Officers,  has  sole
authority to manage the Company and is authorized to make any  contracts,  enter
into any  transactions,  make and  obtain any  commitments  and take any and all
actions on behalf of the Company to conduct or further the  Company's  business.
Any  action  taken by the  Directors  or  Officers  on behalf of the  Company in
accordance with the foregoing  provisions  shall constitute the act of and shall
serve to bind the Company;

     (ii) Each  Director  has one vote in Board  decisions;  (iii) Action by the
Board requires either

     (A) a resolution  approved by the affirmative  vote of at least four of the
Directors present at a meeting of the Board, (1) scheduled by a prior act of the
Directors or called upon at least two business days' written notice signed by at
least two Directors or President, and (2) with a quorum present of at least four
of the Directors, or

     (B) a written action, signed by at least four of the Directors.

     (c)  Meetings of the Board.  The Board  shall hold annual  meetings at such
time and at such place as shall be designated by the President and stated in the
notice of the meeting.  Notice of the annual meeting stating the place, date and
hour of the meeting  shall be given to each Director not less than ten (10) days
before the date of such annual  meeting,  either  personally,  by telephone,  by
mail, by telegram or by any other means of  communication.  Special  meetings of
the Board may be called by the  Chairman,  if any, or the President on three (3)
days' notice to each  Director,  either  personally,  by telephone,  by mail, by
telegram  or by any other  means of  communication;  special  meetings  shall be
called by the Chairman, if any, or the President or Secretary in like manner and
on like notice on the written request of one or more of the Directors.

     (d) Quorum and Acts of the Board.  At all  meetings of the Board a majority
of the Directors  shall  constitute a quorum for the transaction of business and
the act of a majority of the Directors  present at any meeting at which there is
a quorum shall be the act of the Board, except as may be otherwise  specifically
provided by this  Agreement.  If a quorum shall not be present at any meeting of
the Board,  the Directors  present  thereat may adjourn the meeting from time to

<PAGE>

time,  without  notice other than  announcement  at the meeting,  until a quorum
shall be present. Any action required or permitted to be taken at any meeting of
the Board may be taken without a meeting pursuant to Section 6.1(b)(iii)(B),  if
such written action is filed with the minutes of the proceedings of the Board.

     (e) Electronic  Communications.  Directors may  participate in a meeting of
the Board by means of conference telephone or similar  communications  equipment
by means of which all persons  participating in the meeting can hear each other,
and such  participation in a meeting shall constitute  presence in person at the
meeting.

     (f)  Officers.  The  Board  shall  appoint  Officers  of the  Company  (the
"Officers")  and  assign  in  writing  titles  (including,  without  limitation,
President, Vice President, Secretary, and Treasurer) to such persons. Any number
of offices may be held by the same person.  The Board at its annual  meetings or
any duly convened  special  meetings may appoint such other Officers as it shall
deem  necessary who shall hold their  offices for such terms and shall  exercise
such powers and perform such duties as shall be determined  from time to time by
the Board.  The salary and bonus,  if any, of the President shall be fixed by or
in the manner prescribed by the Board.

     (1) The  President.  The  President  (the  "President")  shall be the chief
executive  officer of the Company,  shall have general and active  management of
the business of the Company and shall see that all orders and resolutions of the
Board  are  carried  into  effect.   The  President  shall  be  responsible  for
administering the Administrative Services Agreement on behalf of the Company and
for  overseeing  the  provision of services to the Company and the  Subsidiaries
pursuant  thereto.  The President  shall promptly advise the Board of any issues
regarding services rendered or recommendations for additional services under the
Administrative  Services Agreement,  Power Marketing Services Agreement and Fuel
Management  Services Agreement (each as referenced in Section 6.2(a)(ii) below).
The President shall see that each Member and the Technical Director are provided
with  and  have  reasonable  access  to  information  and  data of the  Company,
including  without  limitation  information and data provided or received by the
Company  in  connection  with  contracts  between  the  Company  and a Member or
affiliate of a Member all Records.  The salary and bonus of the President  shall
be set by the Board.  If the office of  President  is  vacant,  the Board  shall
endeavor to promptly  appoint a President.  In the event the office of President
is vacant for a period of more than thirty (30)  consecutive  days,  each Member
shall  cause  its Chief  Executive  Officer  (in the case of El Paso,  the Chief
Executive Officer of El Paso Corporation) to meet and attempt to reach agreement
on the appointment of a President.

     (2) The  Technical  Director.  Subject to the  direction of the Board,  the
Technical  Director (the  "Technical  Director")  shall be  responsible  for (i)
overseeing  activities  related to optimizing  the  commercial  contracts,  (ii)
optimization  of  project  economic  value,   including  power  sales  and  fuel
management,  (iii) reviewing  proposed  repairs,  replacements and other capital
expenditures,  and (iv) assisting the President in developing  and  implementing
the Annual Budget. The Technical Director shall be afforded reasonable access to
all information and data of the Company and meetings of the Board. The Technical
Director shall maintain his/her principal office, during regular business hours,
at the  Administration  Building of the  Projects  located in  Imperial  County,
California.  Subject to Board ratification, the holders of the Class A Interests

<PAGE>

shall  appoint  the  Technical  Director  and only the Board  shall  remove  the
Technical  Director.  The holders of the Class A Interests  shall be responsible
for the costs and expenses,  without  reimbursement,  of the Technical  Director
which are attributable to the Technical Director's salary,  bonus,  benefits and
travel-related  expenses.  The Company shall  provide,  at its cost and expense,
office space and supplies, communications access and furniture for the Technical
Director at the Administration Building in Imperial County, California.

     (3) Vice Presidents.  The Vice Presidents  (each, a "Vice President") shall
perform  such  duties  and have  such  powers as the Board may from time to time
prescribe.

     (4) The Treasurer.  The Treasurer (the "Treasurer")  shall have the custody
of the Company funds and securities and shall keep full and accurate accounts or
receipts and  disbursements  in books belonging to the Company and shall deposit
all  moneys  and other  valuable  effects  in the name and to the  credit of the
Company in such  depositories  as may be designated by the Board.  The Treasurer
shall  disburse the funds of the Company as may be ordered by the Board,  taking
proper  vouchers for such  disbursements,  and shall render to the President and
the Board, at its annual meetings,  or when the Board so requires, an account of
all of the  Treasurer's  transactions  and of  the  financial  condition  of the
Company.

     (5) The  Secretary.  The  Secretary  (the  "Secretary")  shall  attend  all
meetings of the Board and record all proceedings of the meetings of the Board in
books to be kept for that  purpose.  The  Secretary  shall give,  or cause to be
given,  notice of all meetings of the Board, and shall perform such other duties
as may be prescribed by the Board or the President,  under whose supervision the
Secretary shall be.

     (g) Operating Committee. The Board may, appoint an Operating Committee (the
"Operating  Committee").  The Operating  Committee shall be comprised of (a) two
members to be selected by the Directors  appointed by the holders of the Class A
Interests and (b) two members to be selected by the  Directors  appointed by the
holders of the Class B Interests. The Operating Committee shall meet as required
in person or by phone, and no less than monthly,  prior to each Board meeting to
(i) with respect to Company issues that do not require Board  approval,  discuss
and recommend  resolution of such issues as delegated to the Operating Committee
by the  Board,  (ii) with  respect  to Company  issues  which do  require  Board
approval  and  issues  unresolved  by  the  Operating  Committee  not  otherwise
requiring Board approval, discuss and make recommendations to the Board for such
issues as delegated to the  Operating  Committee by the Board and (iii)  perform
such other duties as may be prescribed by the Board. At each Board meeting,  the
Operating  Committee  will  report  on its  activities  and  decisions  and make
recommendations  to the Board for those issues that require  Board  approval and
issues resolved or unresolved by the Operating Committee not otherwise requiring
Board approval.  Once appointed,  the Operating Committee shall remain in effect
until the Board elects otherwise.

     (h) Binding.  Unless otherwise  determined by the Board or as otherwise set
forth in this Agreement, each Officer has the authority to bind the Company.

<PAGE>

     (i)  Nonliability  of Directors and Officers for Acts or Omissions in Their
Official  Capacity.  To the full extent  permitted by the Act, all Directors and
Officers  appointed  thereby are released  from  liability for damages and other
monetary relief on account of any act, omission, or conduct in the Director's or
such  Officer's  managerial  capacity.  No  amendment  or repeal of this section
affects any  liability  or alleged  liability of any Director or Officer for any
acts, omission, or conduct that occurred prior to the amendment or repeal.

     6.2.  Operations.  (a) Restrictions.  Without the approval of a majority of
the Board (including at least one Director appointed by the holders of the Class
A Interests  and at least one  Director  appointed by the holders of the Class B
Interests)  or the approval of the holders of a majority of the  Interests,  the
Company  shall not take (and,  subject to paragraph  (b) below,  shall cause its
Subsidiaries and controlled Affiliates not to take) the following actions:

     (i) provide guarantees,  indemnities,  loans or other forms of financial or
credit  support  in favor of any Member or any of their  Affiliates,  other than
pursuant to arrangements existing as of the date hereof;

     (ii) enter into any other  transaction,  agreement or arrangement  with any
Member  or any of  their  Affiliates  other  than  the  Administrative  Services
Agreement dated March 3, 1999, between MEHC and the Company, the Fuel Management
Services Agreement dated March 1999, between El Paso Merchant Energy-Gas Company
(formerly known as El Paso Energy  Marketing  Company) and the Company,  and the
Power Marketing  Services  Agreement dated March 1999,  between El Paso Merchant
Energy, L.P. (formerly known as El Paso Power Services Company) and the Company,
each as amended from time to time;  provided that any amendments  proposed to be
entered into after the date hereof  shall  require  approval  under this Section
6.2(a);

     (iii)  adopt the annual  operating,  capital  and  maintenance  budget (the
"Annual Budget") for any Project other than changes reasonably  necessary in the
case of emergencies  including the Company's 1999 operating  budget presented to
the Board on or before May 1, 1999 and  approved  by May 31,  1999.  This budget
shall include all existing project capital expenditure requirements,  all direct
project revenues,  costs and expenses as well as the direct costs of Services as
addressed in  agreements  with  Affiliates of a Member which are included in the
existing 1999 Project Annual Budgets.  Any other costs shall only be included in
the Annual Budget with the approval of the Board;

     (iv) make any capital expenditures,  acquire any assets or expand or modify
any Project at a cost of more than $100,000 for any single capital  expenditure,
acquisition, expansion or modification, or $500,000 in the aggregate per Project
for  any   series  of  capital   expenditures,   acquisitions,   expansions   or
modifications  (or such  other  amounts as may be fixed from time to time by the
Board),  in each case, other than pursuant to the Annual Budget for such Project
or relating to the  replacement or repair of such Project in the ordinary course
of business or such as are reasonably necessary in the case of emergencies;

     (v) liquidate, file for bankruptcy, reorganize, dissolve or wind up;

<PAGE>

     (vi) merge or consolidate with or into any other Person;

     (vii) transfer,  sell, lease or otherwise  dispose of its assets other than
in the ordinary  course of business)  having a value in excess of $250,000 to or
in favor of a third party unless included in an approved budget;

     (viii)  issue,  repurchase  or redeem any  Interest  in the  Company or any
securities  convertible  or  exchangeable  for any  such  Interest;  (ix)  incur
indebtedness for borrowed money (or enter into any related guarantee,  pledge or
security  arrangement)  in excess of $1  million,  except  for  refinancings  of
existing debt  outstanding  principle and accrued  interest plus transaction and
closing costs on commercially reasonable terms;

     (x) enter into any  contractual or other agreement or commitment that would
exceed $100,000 in any year (or $500,000 over the life of the contract) (or such
other amount as may be fixed from time to time by the Board),  other than in the
ordinary course of business or pursuant to the Annual Budget;

     (xi) adopt, or modify in any material respect,  the Company's  distribution
policy,  as  described  in  Article  VIII  hereof,  other than  pursuant  to the
Company's  financing  documents,  its organizational  documents or rating agency
requirements;

     (xii) enter into any  material  amendment to the  Company's  organizational
documents;

     (xiii)  make  any  material  modification  to or enter  into  any  material
amendment  of any  Power  Purchase  Agreement  or  any  other  material  Project
agreement;

     (xiv)  initiate or settle any  litigation or other  adversary or regulatory
proceeding  involving  claims in excess of  $100,000  and will  provide at least
three  Business  Days  prior  notice  to the  Directors  before  initiating  any
litigation,  adversarial  or  regulatory  proceeding,  and will  provide as much
notice as reasonably  practicable  prior to settling any such  proceeding.

     (xv)  take any  action  with  respect  to a change  in the QF status of any
Project;

     (xvi) make any material tax election, settle any material tax litigation or
controversy,  select  any  agents  or  employees  to  manage  any  material  tax
litigation  or  controversy,  file  any  material  tax  returns  (including  any
amendments thereto), or make any material tax payments;

     (xvii) establish or modify material accounting practices and procedures;

     (xviii) select independent accountants;

     (xix) make any  determination as to the amount and timing of any additional
Capital Contributions to the Company;

<PAGE>

     (xx) enter into any joint venture or any new project other than pursuant to
the Purchase Agreement and Development Agreement ; and

     (xxi) waive any material rights the Company or any of its  Subsidiaries may
have in respect of any Member

     (xxi)  make any  other  material  decision  not in the  ordinary  course of
business.

     (b) Subsidiaries. The above clauses (other than clauses (viii), (xi), (xii)
and (xix)) shall apply to all  Subsidiaries  and  controlled  Affiliates  of the
Company as well as to the Company itself.

     (c) Annual Budget.  The Officers shall prepare and deliver to the Board, no
later  than  September  30 of each year a  proposed  Annual  Budget for the next
Fiscal Year and a meeting of the Board shall be held prior to October 31 or such
early date as may be required by project documents to take action to approve the
Annual  Budget for the  forthcoming  year.  In the event the Board  cannot reach
agreement as to the Annual  Budget with respect to any Project  prior to the end
of any Fiscal Year, such Project shall continue to be run in accordance with the
Annual  Budget for the previous year until a new Annual Budget is agreed upon or
reached pursuant to the dispute resolution  mechanisms set forth in Section 11.3
below;  provided that all the items in the last Annual Budget shall be increased
for  inflation  based on the  change  in the  Consumer  Price  Index - All Urban
Consumer,  as  reported  by the U.S.  Department  of Labor  for the most  recent
12-month period for which figures are available.

     (d)  Additional  Actions.  Each Member agrees to take all steps  reasonably
necessary  to cause the Company to comply with the  provisions  of this  Section
6.2.

     6.3.  Other   Opportunities.   Except  as  expressly   provided  under  the
Development Agreement,  the Company shall have the right to pursue all ventures,
activities and opportunities  relating to the expansion of its existing Projects
at existing  sites and all new projects  developed on leasehold or fee interests
owned by the Company or any of the Subsidiaries,  other than with respect to the
Zinc Recovery  Project and the other mineral  recovery and processing  rights or
projects at the Imperial Valley Projects or at other  locations.  Except for the
rights  provided to the Company in the  preceding  sentence,  no Member shall be
restricted  from  independently   pursuing  any  competing  or  other  ventures,
activities or opportunities in the independent power production  business or any
other  business.  The Board shall evaluate from time to time the  feasibility of
the Project  Subsidiaries  that own various Projects  becoming "exempt wholesale
generators"  ("EWG") as defined in Public Utilities  Holding Company Act. In the
event that the Board determines that such an event is beneficial and in the best
interest  of the Company  with  respect to any or all of the  Projects,  without
violating  the terms of any  material  contracts  of the  Company  or any of the
Project  Subsidiaries,  the  Company  shall apply to FERC for EWG status for the
applicable Project Subsidiaries.

<PAGE>

     6.4. Liability.  No Member, Director or Officer shall be liable as such for
any debts, obligations or liabilities of the Company.

     6.5.  Exculpation and Indemnification . (a) No Member,  Director or Officer
appointed thereby shall be liable, directly or indirectly,  to the Company or to
any other Member for any loss,  claim,  damage or liability arising from any act
or omission  performed or omitted by it in connection  with this Agreement or in
its  capacity  as a Member,  Director or Officer of the  Company,  except to the
extent  any  such  losses,   claims,   damages  or  liabilities   are  primarily
attributable to such Member's,  Director's or Officer's gross negligence,  fraud
or willful misconduct.

     (b) The Company shall,  to the fullest extent  permitted by applicable law,
indemnify  and hold  harmless  each  Member,  Director  and Officer  against all
losses,  claims,  damages or  liabilities  to which  such  Member,  Director  or
Officer,  as such, may become subject in connection  with any matter arising out
of or related to the Company's business or affairs, except (i) to the extent any
such loss,  claim,  damage or liability is finally  judicially  determined to be
primarily   attributable  to  such  Member's,   Director's  or  Officer's  gross
negligence,  fraud  or  willful  misconduct  or (ii) for  economic  loss to such
Member's membership interest. If a Member,  Director or Officer becomes involved
in any capacity in any action,  proceeding or  investigation  in connection with
any matter arising out of or related to the Company's  business or affairs,  the
Company will  periodically  reimburse  such Member,  Director or Officer for its
legal and other expenses  incurred in connection  therewith,  provided that such
Member,  Director or Officer shall  promptly  repay to the Company the amount of
any  such  reimbursed  expenses  paid to it if it shall  be  finally  judicially
determined  that  such  Member,  Director  or  Officer  is  not  entitled  to be
indemnified  by the  Company  in  connection  with  such  action  proceeding  or
investigation.  If for any reason  (other  than the gross  negligence,  fraud or
willful   misconduct  of  such  Member,   Director  or  Officer)  the  foregoing
indemnification  is  unavailable  to  such  Member,   Director  or  Officer,  or
insufficient  to hold it  harmless,  then the Company  shall  contribute  to the
amount paid or payable by such  Member,  Director or Officer as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
the relative  benefits  received by the Company on the one hand and such Member,
Director or Officer on the other hand or, if such allocation is not permitted by
applicable  law, to reflect not only the  relative  benefits  (if  permitted  by
applicable  law to be  taken  into  account  in  respect  of such  contribution)
referred to above but also any other relevant equitable consideration.

     (c)  The  reimbursement,  indemnity  and  contribution  provisions  of this
Section 6.5 shall (i) extend upon the same terms and conditions (but only to the
extent any loss,  claim,  damage or liability relates to the business or affairs
of the Company) to the directors,  officers, employees and Affiliates and agents
of the applicable  Member and (ii) be reduced (and, if applicable,  refunded) by
the amount of any  insurance or other  payments from third parties in respect of
an indemnifiable claim hereunder.

<PAGE>


                                  ARTICLE VII.

                       CONTRIBUTIONS AND CAPITAL ACCOUNTS

     7.1. Contributions.  Each Member has previously made a Capital Contribution
to the Company in exchange  for the issuance of its Class A Interests or Class B
Interests, as applicable.

     7.2. No Obligation to Restore Deficit  Balance.  Except as required by law,
no Member  shall be  required  to restore  any  deficit  balance in its  Capital
Account.

     7.3. Withdrawal; Successors. A Member shall not be entitled to withdraw any
part of its Capital  Account or to receive any  distribution  from the  Company,
except as  specifically  provided in this  Agreement.  No Member holding Class A
Interests may withdraw from membership without the consent of the Board.

     7.4.  Interest.  No  Member  shall be  entitled  to earn  interest  on such
Member's Capital Contribution or on any profits retained by the Company.

     7.5. No Personal Liability. No Member shall have any personal liability for
the repayment of any Capital Contributions of any other Member.




<PAGE>


                                  ARTICLE VIII.

                                  DISTRIBUTIONS

     Except as  modified  in  accordance  with  Section  6.2(a)(xi)  above,  the
Company's distribution policy shall be to pay quarterly distributions (except as
otherwise  required  by  financing  documents)  on the  Interests  equal  to the
Company's net after-tax cash flow after  operating  expenses and all payments of
principal,  interest and premiums on the Company's indebtedness and related debt
service  obligations,  in each case,  less such amounts the Board  determines is
required for working capital or applicable reserves. Distributions shall be made
equally as between the Class A Interests and the Class B Interests.

                                   ARTICLE IX.

                              TRANSFER OF INTERESTS

     9.1.  Transfer of  Interests.  No holder of  Interests  shall  Transfer any
Interests, or any beneficial interest therein, without the consent of the holder
or holders of a majority of the Interests of the class other than those proposed
to be so  Transferred;  provided,  that (i) such consent may not be unreasonably
withheld in  connection  with the  Transfer of all or  substantially  all of the
Interests  owned by such holder,  (ii) the foregoing  shall not prohibit (a) any
Transfer to an Affiliate of such transferor  unless,  with respect to a Transfer
of Class A Interests, such Affiliate is an Electric Utility, or such Transfer of
Class A Interests  otherwise  would cause a Project to no longer  qualify for QF
status,  (b) any Transfer resulting from any merger or consolidation of MEHC (or
any successor) with or into any other Person,  the sale of all or  substantially
all of its  independent  power  production  assets or other change in beneficial
ownership of MEHC (or any successor) and (c) any pledge of Interests by MEHC (or
any successor) in connection with a financing; and (iii) the withholding of such
consent shall be deemed  reasonable with respect to the proposed Transfer of any
Class A Interests to an Electric  Utility or an Affiliate of an Electric Utility
or any other  Transfer  of Class A  Interests  that would  cause a Project to no
longer  qualify  for QF status.  Any  Transfer  or  purported  Transfer  made in
violation of this Article IX shall be null and void and of no effect.

     9.2.  Conditions to Transfer.  No Member shall  Transfer any portion of its
Interest  unless (i) the transferee (if other than another  Member) agrees to be
bound by this  Agreement  and  executes a  counterpart  hereof and such  further
documents as may be necessary, in the opinion of the Company and its counsel, to
make it a party  hereto (and any such  transferee  shall then be deemed a Member
for all  purposes of this  Agreement  but no such  agreement  shall  relieve the
transferor from liability herein);  (ii) the permitted transferee  (including an
Affiliate  of the  transferor)  has  executed  a Joinder  Agreement  in the form
attached hereto as Exhibit A; and (iii) such transfer is made pursuant to either
an effective  registration statement under the Securities Act and any applicable
state   securities  laws  or  an  available   exemption  from  the  registration
requirements of the Securities Act and such laws.

<PAGE>

     9.3. Electric Utility. Any holder of the Class A Interests shall not become
an Electric  Utility or take any other action that would cause any Project to no
longer  qualify  for QF status  for as long as the  Company  owns any  direct or
indirect  interest in any QF. Any such holder of Class A Interests  who breaches
the foregoing  restriction shall indemnify and hold harmless the Company and the
other  holders  of  Interests  from  any  losses,   costs,   damages  (including
consequential  damages),  expenses and  liabilities  resulting from such breach,
including,  without  limitation,  any  liability to holders of Class B Interests
resulting  from the  application  of the  provisions  of Section 9.4 hereof as a
result of such breach.

     9.4. QF True Up.

     (a) If, during the period during which any of the QF Projects remains a QF,
there is a sale of the Class B  Interests,  a QF Project is sold or a QF Project
owner or the Company is dissolved, the Board shall have an analysis performed in
accordance  with the procedures  and practices  mandated by FERC to determine if
such event will result in the loss of QF status for any QF Project. In addition,
the Board will have such an analysis  performed if at any time facts come to its
attention  that indicate that  entitlement  to QF Project  benefits  through the
Company has caused or will cause the aggregate interest of Electric Utilities in
any QF Project to exceed  fifty  percent  (50%) of the equity  interests in such
Project (calculated in accordance with FERC regulations),  thereby  jeopardizing
such Project's QF status.

     (b) If, based on such analysis,  the Company is advised by counsel that the
QF status of a QF Project  is likely to be lost,  and the Board  concludes  that
loss of QF status will cause an economic loss to the Company, the parties hereto
and the Company shall take the following steps:

     (i)  The  holders  of the  Class B  Interests  will  pay any  distributions
received  from each  affected QF Project to the holders of the Class A Interests
to the extent  required to maintain  the QF status for the affected QF Projects.
If excess  distributions  have already been paid by the Company,  the holders of
the Class B Interests will pay an amount  sufficient to eliminate such excess to
the  holders of the Class A  Interests  (together  with  interest  thereon at an
annual rate of 7%). In the event  distributions  derived from a QF Project which
would  otherwise be paid to and retained by the holders of the Class B Interests
are  payable to the  holders of the Class A  Interests  in  accordance  with the
foregoing,  distributions  payable from other business activities of the Company
which,  upon  advice of counsel or an order from  FERC,  are  determined  not to
constitute benefits of any affected QF Project,  shall be payable by the holders
of the Class A  Interests  to the  holders of the Class B  Interests  to offset,
insofar as possible, the loss of distributions  otherwise payable on the Class B
Interests from the QF Projects.

     (ii) If the  foregoing  procedure is inadequate to protect the QF status of
an affected QF Project,  the Board may direct the holder of the Class B Interest
to sell Class B Interests to an entity which is not an Electric Utility.

<PAGE>


                                   ARTICLE X.

                           DISSOLUTION AND WINDING UP

     10.1. Dissolution. The Company shall be dissolved and its affairs wound up,
upon the  first to occur of any of the  following  events  (each of which  shall
constitute a Dissolution Event):

     (a) the disposition for cash and/or liquid securities of all the securities
and  substantially  all of the other  Property  held by the Company,  unless the
Company is continued with the consent of the Members;

     (b) the written consent of the Members; and

     (c) the dissolution,  expulsion, or withdrawal, if permitted, of any Member
unless, within 90 days after such event, the Company is continued by the written
consent of the remaining Members.

     10.2.  Effect of Dissolution.  Upon  dissolution,  the Company shall not be
terminated and shall continue until the winding up of the affairs of the Company
is completed and a certificate of cancellation  has been issued by the Secretary
of State of Delaware.

     10.3.  Distribution  of Assets on  Dissolution.  Upon the winding up of the
Company,  the  remaining  Members  shall  take full  account  of the  assets and
liabilities  of the  Company  and shall  liquidate  the assets of the Company as
promptly as is consistent with obtaining the fair value thereof. The proceeds of
any liquidation shall be applied and distributed in the following order:

     (a) first,  to the payment of the debts and  liabilities  of the Company to
creditors,  including Members who are creditors, to the extent permitted by law,
in  satisfaction  of such debts and  liabilities and to the payment of necessary
expenses of liquidation;

     (b) second,  to the setting up of any reserves  which such Members may deem
necessary or appropriate for any anticipated obligations or contingencies of the
Company  arising out of or in  connection  with the operation or business of the
Company.  Such  reserves  may be paid over by such Members to an escrow agent or
trustee selected by such Members to be disbursed by such escrow agent or trustee
in payment of any of the aforementioned obligations or contingencies and, if any
balance  remains at the  expiration  of such period as such  Members  shall deem
advisable,  shall be  distributed  by such escrow agent or trustee in the manner
hereinafter provided;

     (c) then,  to the Members  equally as between the Class A Interests and the
Class B Interests.

<PAGE>

     10.4. Winding Up and Filing Articles of Cancellation. Upon the commencement
of the winding up of the Company, articles of cancellation shall be delivered by
the Company to the  Secretary of State of Delaware  for filing.  The articles of
cancellation shall set forth the information required by the Act. The winding up
of the Company shall be completed when all debts,  liabilities,  and obligations
of the Company have been paid and  discharged or reasonably  adequate  provision
therefor  has been made and all the  remaining  Property of the Company has been
distributed to the Members.


                                   ARTICLE XI.

                                  MISCELLANEOUS

     11.1. Notices. Notices to the Company shall be sent to the Principal Office
of the Company.  Notices to the Members shall be sent to their  addresses as set
forth on  Schedule  1 hereto.  Any Member  may  require  notices to be sent to a
different  address  by giving  notice to the  Company  and the other  Members in
accordance with this Section 11.1. Any notice or other communication required or
permitted hereunder shall be in writing,  and shall be deemed to have been given
with  receipt  confirmed  if and when  delivered  personally,  given by  prepaid
telegram or mailed first class,  postage prepaid,  delivered by courier, or sent
by facsimile, to such Members at such addresses.

     11.2.  Amendment;  Waiver;  Decisions.  Amendments to this Agreement may be
made from time to time, provided, however, that, except as otherwise provided in
the last  sentence of this  Section  11.2 or  elsewhere  in this  Agreement,  no
amendment,  modification  or waiver of this  Agreement or any  provision  hereof
shall be valid or  effective  unless in writing  and signed by (i) the holder or
holders of a majority of the Class A Interests and (ii) the holder or holders of
a majority of the Class B  Interests.  No waiver of any breach or  condition  of
this Agreement shall be deemed to be a waiver of any other subsequent  breach or
condition,  whether of like or  different  nature.  The  Members  may amend this
Agreement in any way necessary,  in their reasonable  judgment,  to effectuate a
Membership  Admission.   Notwithstanding  anything  in  this  Agreement  to  the
contrary, any decision to be made or action to be taken by the Members hereunder
shall be made or taken by (i) the holder or holders of a majority of the Class A
Interests and (ii) the holder or holders of a majority of the Class B Interests.

     11.3.  Resolution of Disputes.  In the event of any failure of the Board or
the Members to reach  agreement on any  material  decision  (including,  without
limitation, those described in Section 6.2 hereof), the chief executive officers
and/or  President  of each of the  Members  shall meet to attempt to resolve any
such dispute in good faith.  If agreement  cannot be reached between the parties
within 15 days,  the parties  shall be free to pursue any other  remedy they may
have.

     11.4. Headings.  All Article and Section headings in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
Article or Section.

<PAGE>

     11.5. Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto,  their  successors,  and permitted  assigns,
except as otherwise provided herein.

     11.6.  Enforcement The parties agree that irreparable damage would occur in
the event that any of the  provisions  of this  Agreement  were not performed in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that the  parties  shall be  entitled  to an  injunction  or
injunctions to prevent  breaches of this  Agreement and to enforce  specifically
the terms and  provisions  of this  Agreement in any court of the United  States
located  in the  State of New York or in New York  state  court,  this  being in
addition to any other remedy to which they are entitled at law or in equity. The
Company and the Members  shall have the right to  specific  performance  of such
obligations, and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, each of the Company and the Members hereby waives
the claim or defense that the party instituting such action or proceeding has an
adequate remedy at law. In addition,  each of the parties hereto (a) consents to
submit itself to the personal  jurisdiction  of any federal court located in the
State of New York or any New York state  court in the event any  dispute  arises
out of this Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny such personal jurisdiction by motion
or other  request  for leave from any such court and (c) agrees that it will not
bring  any  action  relating  to  this  Agreement  or any  of  the  transactions
contemplated  by this Agreement in any court other than a federal or state court
sitting in the State of New York.

     11.7.  Saving  Clause.  If any  provision of this  Agreement  shall be held
invalid,  illegal or unenforceable in any jurisdiction in any respect,  then the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein shall not in any way be affected or impaired,  and the parties  shall use
their best efforts to amend or substitute such invalid, illegal or unenforceable
provision with enforceable and valid provisions which would produce as nearly as
possible the rights and obligations  previously  intended by the parties without
renegotiation of any material terms and conditions stated herein.

     11.8.  Counterparts.  This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall  be  deemed  an  original  and all of which
together shall be considered one and the same agreement.

     11.9.  Governing Law. This Agreement  shall be governed by and construed in
accordance  with the laws of the State of Delaware  without giving effect to the
conflicts of laws or provisions thereof.

     11.10.  No Rights of Creditors  and Third  Parties  under  Agreement.  This
Agreement  is entered  into among the Company and the Members for the  exclusive
benefit  of the  Company,  its  Members,  and  their  successors  and  permitted
assignees.  This  Agreement  is  expressly  not  intended for the benefit of any
creditor  of the  Company  or any other  Person.  Except  and only to the extent
provided by applicable  statute,  no such creditor or any third party shall have
any rights  under this  Agreement or any  agreement  between the Company and any
Member with respect to any Capital Contribution or otherwise.

<PAGE>

     11.11.  General  Interpretive  Principles.  For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:

     (a) the terms defined in this  Agreement  include the plural as well as the
singular,  and the use of any gender herein shall be deemed to include the other
gender;

     (b) accounting  terms not otherwise  defined herein have the meanings given
to them in the United States in accordance  with generally  accepted  accounting
principles;

     (c)  references  herein to "Articles",  "Sections"  and other  subdivisions
without reference to a document are to designated  Articles,  Sections and other
subdivisions of this Agreement;

     (d) a reference to a paragraph  without further reference to a Section is a
reference  to such  paragraph  as  contained  in the same  Section  in which the
reference appears, and this rule shall also apply to other subdivisions;

     (e) the words  "herein",  "hereof",  "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provision;

     (f) where any provision in this  Agreement  refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be  applicable  whether  such  action is taken  directly or  indirectly  by such
Person; and

     (g) the term  "include" or  "including"  shall mean without  limitation  by
reason of enumeration.

     11.12.   Entire   Agreement.   This   Agreement   constitutes   the  entire
understanding  between the parties  hereto  with  respect to the subject  matter
hereof  and  supersedes  any prior  agreements,  written or oral,  with  respect
thereto.

                        [SIGNATURES APPEAR ON NEXT PAGE]





<PAGE>


     IN WITNESS WHEREOF,  the parties hereto have hereunto set their hands as of
the date hereof.

CE GENERATION, LLC

By:__/s/ Douglas L. Anderson__
Name:    Douglas L. Anderson
Title:  Senior Vice President


MIDAMERICAN ENERGY HOLDINGS COMPANY


By:__/s/ Douglas L. Anderson
Name:  Douglas L. Anderson
Title:  Senior Vice President



EL PASO MERCHANT ENERGY NORTH AMERICA COMPANY


By:__/s/ John L. Harrison___
Name:  John L. Harrison
Title:  Senior Vice President, Chief Financial Officer and Treasurer





<PAGE>


                                   SCHEDULE 1



     El Paso Merchant Energy North America Company      100% of Class A Interest
     1001 Louisiana Street
     Houston, TX  77002


     MidAmerican Energy Holdings Company, Inc.          100% of Class B Interest
     302 South 36th Street
     Suite 400-Z
     Omaha, Nebraska 68131




<PAGE>


                                                                    Exhibit A

                                JOINDER AGREEMENT



     Joinder  Agreement,  dated as of this ___ day of _____ ____, by and between
CE Generation,  LLC., a Delaware limited liability company (the "Company"),  and
the undersigned (the "New Investor").

     Reference is made to that certain  Amended and Restated  Limited  Liability
Company Operating Agreement (the "Operating  Agreement"),  dated as of August 1,
2002, by and among the Company,  MidAmerican  Energy Holdings  Company,  El Paso
Merchant  Energy North America Company and the other holders of interests in the
Company  from time to time party  thereto,  as the same may from time to time be
amended.

     By executing this Joinder  Agreement,  the New Investor hereby agrees to be
bound  by the  terms  of the  Operating  Agreement  as if it  were  an  original
signatory to the Operating  Agreement and shall be entitled to all of the rights
and  benefits  afforded  to, and shall be subject  to all the  restrictions  and
obligations of the Members (as defined in the Operating Agreement) thereunder.

     The  New  Investor  hereby  represents  and  warrants  that  (i)  it  is  a
[corporation]  duly organized,  validly  existing and in good standing under the
laws of []and has the power and authority to execute and deliver this  Agreement
and  perform  its  obligations  hereunder,  (ii)  the  execution,  delivery  and
performance of this Agreement has been authorized by the [board of directors] of
the New Investor and no other approval or  authorization  is necessary and (iii)
the execution, delivery and performance of this Agreement does not conflict with
or violate the terms of its  [Certificate  of  Incorporation]  or By-laws or any
agreement to which it is a party or may be bound.

     IN WITNESS WHEREOF, the parties hereto have executed this Joinder Agreement
as of the date first above written.

                                      By:___________________________
                                      Name:
                                      Title:

Agreed to and Accepted by:

CE Generation, LLC


---------------------------
Name:
Title: