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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[X]  |  | Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 
|     |  |                                                                                         
|[  ] |  | Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934

|                                      |  |                              
|------------------------------------- |  | -----------------------------
|For the Quarter Ended: March 31, 2003 |  | Commission File No. 333-42638

NRG Northeast Generating LLC

(Exact name of Registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 41-1937472                          
|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                               |  |                                     
|901 Marquette Avenue, Suite 2300
Minneapolis, Minnesota        |  | 55402                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(612) 373-5300
(Registrants telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes  [X]     No  [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)

Yes  [  ]     No  [X]

Indicate by check mark whether the registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.

Yes  [X]     No  [  ]



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TABLE OF CONTENTS



|                                |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|Part I  FINANCIAL INFORMATION 
|                                | Item I  Consolidated Financial Statements and Notes                                         
|                                |                                                                                               | Consolidated Statements of Operations     
|                                |                                                                                               | Consolidated Balance Sheets               
|                                |                                                                                               | Consolidated Statements Of Members Equity
|                                |                                                                                               | Consolidated Statements Of Cash Flows     
|                                |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                | Item 4. Controls and Procedures                                                              
|Part II  OTHER INFORMATION    
|                                | Item 1. Legal Proceedings                                                                    
|                                | Item 3. Defaults Upon Senior Securities                                                      
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|                                | Cautionary Statement Regarding Forward-Looking Statements                                    
|SIGNATURES                     
|EX-99.1 Officers' Certification



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TABLE OF CONTENTS

INDEX

|                                                                                             |                                                            |  |          |       | 
|-------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  | -------- | ----- | 
|                                                                                             |                                                            |  | Page No.
|                                                                                             |                                                            |  |         
|Part I                                                                                       |                                                            |  |          |      
|Item 1 Consolidated Financial Statements and Notes                                           |                                                            |  |          |      
|                                                                                             | Consolidated Statements of Operations                      |  |          | 3     | 
|                                                                                             | Consolidated Balance Sheets                                |  |          | 4     | 
|                                                                                             | Consolidated Statements of Members Equity                 |  |          | 5     | 
|                                                                                             | Consolidated Statements of Cash Flows                      |  |          | 6     | 
|                                                                                             | Notes to Consolidated Financial Statements                 |  |          | 7-14  | 
|Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                            |  | 15-23    |      
|Item 3 Quantitative and Qualitative Disclosures About Market Risk                            |                                                            |  | 23       |      
|Item 4 Controls and Procedures                                                               |                                                            |  | 23       |      
|Part II                                                                                      |                                                            |  |          |      
|Item 1 Legal Proceedings                                                                     |                                                            |  | 24-26    |      
|Item 3 Defaults on Senior Securities                                                         |                                                            |  | 26       |      
|Item 6 Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |                                                            |  | 26       |      
|                                                                                             | Cautionary Statement Regarding Forward Looking Information |  |          | 26-28 | 
|SIGNATURES                                                                                   |                                                            |  | 29       |      
|CERTIFICATIONS                                                                               |                                                            |  | 30       |      

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Part I  FINANCIAL INFORMATION




Item I  Consolidated Financial Statements and Notes




NRG Northeast Generating LLC And Subsidiaries
Consolidated Statements of Operations
(UNAUDITED)

|                             |                                     |      |                    |         |                    |   |        |         |  
|---------------------------- | ----------------------------------- | ---- | ------------------ | ------- | ------------------ | - | ------ | ------- | -
|                             |                                     |      | Three Months Ended |         | Three Months Ended
|                             |                                     |      | March 31,          |         | March 31,         
|                             |                                     |      |                    |         |                   
|(In thousands)               |                                     | 2003 |                    | 2002   
|                             |                                     |      |                    |        
|Operating revenues           |                                     |      |                    |         |                    |   |        |        
|                             | Revenues                            |      | $                  | 180,214 |                    |   | $      | 131,568 |  
|Operating costs and expenses |                                     |      |                    |         |                    |   |        |        
|                             | Operating costs                     |      |                    | 169,057 |                    |   |        | 98,035  |  
|                             | Depreciation                        |      |                    | 16,336  |                    |   |        | 12,311  |  
|                             | General and administrative expenses |      |                    | 10,812  |                    |   |        | 3,672   |  
|                             | Special charges                     |      |                    | 707     |                    |   |        |        |  
|                             |                                     |      |                    |         |                    |   |        |        
|Operating (loss) income      |                                     |      | (16,698            | )       |                    |   | 17,550 |        
|Other income (expense)       |                                     |      |                    |         |                    |   |        |        
|                             | Other income, net                   |      |                    | 61      |                    |   |        | 223     |  
|                             | Interest expense                    |      |                    | (12,594 | )                  |   |        | (15,633 | )
|                             |                                     |      |                    |         |                    |   |        |        
|Net (loss) income            |                                     | $    | (29,231            | )       |                    | $ | 2,140  |        
|                             |                                     |      |                    |         |                    |   |        |         |  

See accompanying notes to consolidated financial statements.

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NRG Northeast Generating LLC And Subsidiaries
Consolidated Balance Sheets
(UNAUDITED)

|                                                                                        |                                                                                    |                                       |           |           |           |              |           |         |           | 
|--------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------- | --------- | --------- | --------- | ------------ | --------- | ------- | --------- | 
|                                                                                        |                                                                                    |                                       |           | March 31, |           | December 31,
|(In thousands)                                                                          |                                                                                    | 2003                                  |           | 2002     
|                                                                                        |                                                                                    |                                       |           |          
|Assets                                                                                  |                                                                                    |                                       |           |           |           |              |           |        
|Current Assets:                                                                         |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        | Cash and cash equivalents                                                          |                                       | $         | 11,980    |           |              | $         | 14,354  |          
|                                                                                        | Accounts receivable, net of allowance for doubtful accounts of $57,761 and $50,712 |                                       |           | 150,699   |           |              |           | 118,153 |          
|                                                                                        | Inventory                                                                          |                                       |           | 102,878   |           |              |           | 123,963 |          
|                                                                                        | Derivative instruments valuation                                                   |                                       |           | 19,189    |           |              |           | 23,039  |          
|                                                                                        | Prepaid expenses                                                                   |                                       |           | 60,166    |           |              |           | 38,309  |          
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        |                                                                                    | Total current assets                  |           |           | 344,912   |              |           |         | 317,818   | 
|Property,
plant and equipment, net of accumulated depreciation of $175,824 and $157,534 |                                                                                    |                                       | 1,313,236 |           |           |              | 1,333,928 |        
|Deferred finance costs, net of accumulated amortization of $1,262 and $1,161            |                                                                                    |                                       | 9,694     |           |           |              | 8,995     |        
|Derivative instruments valuation                                                        |                                                                                    |                                       |          |           |           |              | 9,601     |        
|Other assets, net of accumulated amortization of $3,189 and $2,605                      |                                                                                    |                                       | 22,811    |           |           |              | 23,395    |        
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        |                                                                                    | Total assets                          |           | $         | 1,690,653 |              |           | $       | 1,693,737 | 
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |         |          
|Liabilities and Members Equity                                                         |                                                                                    |                                       |           |           |           |              |           |        
|Liabilities:                                                                            |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        | Current portion of long-term debt                                                  |                                       | $         | 556,500   |           |              | $         | 556,500 |          
|                                                                                        | Note payable  affiliate                                                           |                                       |           | 30,000    |           |              |           | 30,000  |          
|                                                                                        | Accounts payable                                                                   |                                       |           | 1,037     |           |              |           | 14,607  |          
|                                                                                        | Accounts payable-affiliates                                                        |                                       |           | 44,699    |           |              |           | 11,476  |          
|                                                                                        | Accrued fuel and purchased power expense                                           |                                       |           | 43,192    |           |              |           | 37,168  |          
|                                                                                        | Accrued interest                                                                   |                                       |           | 16,728    |           |              |           | 4,198   |          
|                                                                                        | Other accrued liabilities                                                          |                                       |           | 9,229     |           |              |           | 11,713  |          
|                                                                                        | Derivative instruments valuation                                                   |                                       |           | 18,037    |           |              |           | 13,017  |          
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        |                                                                                    | Total current liabilities             |           |           | 719,422   |              |           |         | 678,679   | 
|Derivative instruments valuation                                                        |                                                                                    |                                       | 9,657     |           |           |              | 7,559     |        
|Other
long-term obligations                                                             |                                                                                    |                                       | 27,766    |           |           |              | 27,936    |        
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        |                                                                                    | Total liabilities                     |           |           | 756,845   |              |           |         | 714,174   | 
|Commitments and contingencies                                                          
|
|                                                                                        | Members equity                                                                    |                                       |           | 933,808   |           |              |           | 979,563 |          
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |        
|                                                                                        |                                                                                    | Total liabilities and members equity |           | $         | 1,690,653 |              |           | $       | 1,693,737 | 
|                                                                                        |                                                                                    |                                       |           |           |           |              |           |         |          

See accompanying notes to consolidated financial statements.

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NRG Northeast Generating LLC And Subsidiaries
Consolidated Statements Of Members Equity
(UNAUDITED)

For the three months ended March 31, 2003 and 2002

|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|----------------------------------------------------------- |  | -------------- | ------- | ----------- |  | ------------- | ------- | -------- |  | ----------- | ------- | - |  | - | --------- | -
|                                                            |  |                |         |             |  |               |         |          |  | Accumulated |         |   |  |  
|                                                            |  | Member         |         |             |  |               |         | Other    |  | Total      
|                                                            |  | Contributions/ |         | Accumulated |  | Comprehensive |         | Members'
|(In thousands)                                              |  | Distributions  |         | Net Income  |  | Income        |         | Equity  
|                                                            |  |                |         |             |  |               |         |         
|Balances at December 31, 2001                               |  | $              | 788,315 |             |  | $             | 158,528 |          |  | $           | 107,741 |   |  | $ | 1,054,584 |  
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Net income                                                  |  |                |         |             |  |               | 2,140   |          |  |             |         |   |  |   | 2,140     |  
|Impact of SFAS No. 133 for the quarter ended
March 31, 2002 |  |                |         |             |  |               |         |          |  |             | (19,870 | ) |  |   | (19,870   | )
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Comprehensive
loss                                          |  |                |         |             |  |               |         |          |  |             |         |   |  |   | (17,730   | )
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Balances at March 31, 2002                                  |  | $              | 788,315 |             |  | $             | 160,668 |          |  | $           | 87,871  |   |  | $ | 1,036,854 |  
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Balances at December 31, 2002                               |  | $              | 788,315 |             |  | $             | 162,413 |          |  | $           | 28,835  |   |  | $ | 979,563   |  
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Net loss                                                    |  |                |         |             |  |               | (29,231 | )        |  |             |        |   |  |   | (29,231   | )
|Impact of SFAS No. 133 for the quarter ended
March 31, 2003 |  |                |         |             |  |               |         |          |  |             | (16,524 | ) |  |   | (16,524   | )
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Comprehensive loss                                          |  |                |         |             |  |               |         |          |  |             |         |   |  |   | (45,755   | )
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  
|Balances at March 31, 2003                                  |  | $              | 788,315 |             |  | $             | 133,182 |          |  | $           | 12,311  |   |  | $ | 933,808   |  
|                                                            |  |                |         |             |  |               |         |          |  |             |         |   |  |   |           |  

See accompanying notes to consolidated financial statements.

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NRG Northeast Generating LLC And Subsidiaries
Consolidated Statements Of Cash Flows
(UNAUDITED)

|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                 |        |         |   | 
|---------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------ | --------------------------------------------------- | ------- | ------ | --------------- | ------ | --------------- | ------ | ------- | - | 
|                                                     |                                                                                                |                                            |                                                     |         |        | Three Months    |        | Three Months   
|                                                     |                                                                                                |                                            |                                                     |         |        | Ended March 31, |        | Ended March 31,
|(In thousands)                                       |                                                                                                | 2003                                       |                                                     | 2002   
|                                                     |                                                                                                |                                            |                                                     |        
|Cash flows from operating activities:                |                                                                                                |                                            |                                                     |         |        |                 |        |                
|                                                     | Net (loss)/income                                                                              |                                            | $                                                   | (29,231 | )      |                 | $      | 2,140           |       
|                                                     | Adjustments to reconcile net (loss)/income to net cash
(used) provided by operating activities |                                            |                                                     |         |        |                 |        |                 |       
|                                                     |                                                                                                | Depreciation                               |                                                     |         | 18,658 |                 |        |                 | 12,311 |        
|                                                     |                                                                                                | Unrealized loss/(gain) on energy contracts |                                                     |         | 4,045  |                 |        |                 | (9,984 | )      
|                                                     |                                                                                                | Amortization of deferred financing costs   |                                                     |         | 101    |                 |        |                 | 101    |        
|                                                     |                                                                                                | Allowance for doubtful accounts            |                                                     |         | 7,049  |                 |        |                 |       |        
|                                                     |                                                                                                | Gain on disposal of property and equipment |                                                     |         | (2,210 | )               |        |                 |       |        
|                                                     |                                                                                                | Changes in assets and liabilities:         |                                                     |         |        |                 |        |                 |        |        
|                                                     |                                                                                                |                                            | Accounts receivable                                 |         |        | (39,595         | )      |                 |        | (2,586  | )
|                                                     |                                                                                                |                                            | Inventories                                         |         |        | 21,085          |        |                 |        | 14,049  |  
|                                                     |                                                                                                |                                            | Prepaid expenses                                    |         |        | (21,857         | )      |                 |        | (19,711 | )
|                                                     |                                                                                                |                                            | Accounts payable                                    |         |        | (13,570         | )      |                 |        | (392    | )
|                                                     |                                                                                                |                                            | Accounts payable  affiliates                       |         |        | 33,223          |        |                 |        | 14,569  |  
|                                                     |                                                                                                |                                            | Accrued interest                                    |         |        | 12,530          |        |                 |        | 13,566  |  
|                                                     |                                                                                                |                                            | Accrued fuel and purchased power expense            |         |        | 6,024           |        |                 |        | (14,617 | )
|                                                     |                                                                                                |                                            | Other accrued liabilities                           |         |        | (2,484          | )      |                 |        | 6,024   |  
|                                                     |                                                                                                |                                            | Other assets and liabilities                        |         |        | 221             |        |                 |        | (83     | )
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Net cash (used) provided by operating activities     |                                                                                                |                                            | (6,011                                              | )       |        |                 | 15,387 |                
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Cash flows from investing activities:                |                                                                                                |                                            |                                                     |         |        |                 |        |                
|                                                     |                                                                                                |                                            | Capital expenditures                                |         |        | (432            | )      |                 |        | (6,995  | )
|                                                     |                                                                                                |                                            | Proceeds from disposition of property and equipment |         |        | 4,869           |        |                 |        |        |  
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Net cash provided by (used) investing activities     |                                                                                                |                                            | 4,437                                               |         |        |                 | (6,995 | )              
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Cash flows from financing activities:                |                                                                                                |                                            |                                                     |         |        |                 |        |                
|                                                     |                                                                                                |                                            | Deferred financing costs                            |         |        | (800            | )      |                 |        |        |  
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Net cash used in financing activities                |                                                                                                |                                            | (800                                                | )       |        |                 |       |                
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Net (decrease)/increase in cash and cash equivalents |                                                                                                |                                            | (2,374                                              | )       |        |                 | 8,392  |                
|Cash and cash equivalents at beginning of period     |                                                                                                |                                            | 14,354                                              |         |        |                 | 370    |                
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                
|Cash and cash equivalents at end of period           |                                                                                                | $                                          | 11,980                                              |         |        | $               | 8,762  |                
|                                                     |                                                                                                |                                            |                                                     |         |        |                 |        |                 |       

See accompanying notes to consolidated financial statements.

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NRG Northeast Generating LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NRG Northeast Generating LLC (the Company or NRG Northeast), a
wholly-owned indirect subsidiary of NRG Energy, Inc. (NRG Energy), owns
electric power generation plants in the northeastern region of the United
States. The Company was formed for the purpose of financing, acquiring, owning,
operating and maintaining, through its subsidiaries and affiliates; facilities
owned by Arthur Kill Power LLC, Astoria Gas Turbine Power LLC, Connecticut Jet
Power LLC, Devon Power LLC, Dunkirk Power LLC, Huntley Power LLC, Middletown
Power LLC, Montville Power LLC, Norwalk Power LLC, Oswego Power LLC and
Somerset Power LLC.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with the Securities and Exchange Commission (SEC)
regulations for interim financial information and with the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The accounting policies followed by the Company are set forth in
Item 15  Note 2 to the Companys financial statements in its annual report on
Form 10-K for the year ended December 31, 2002 (Form 10-K). The following notes
should be read in conjunction with such policies and other disclosures in the
Form 10-K. Interim results are not necessarily indicative of results for a full
year.

In the opinion of management, the accompanying unaudited interim
consolidated financial statements contain all material adjustments necessary to
present fairly the consolidated financial position of the Company as of March
31, 2003 and December 31, 2002, the results of its operations and members
equity for the three months ended March 31, 2003 and 2002, and its cash flows
for the three months ended March 31, 2003 and 2002.

Certain prior year amounts have been reclassified for comparative
purposes. These reclassifications had no effect on net income or total members
equity as previously reported.

1. Recent Developments

In December 2001, Moodys Investor Service (Moodys) placed NRG Energys
long-term senior unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to preserve NRG
Energys investment grade rating and improve its financial condition. This plan
included financial support to NRG Energy from Xcel Energy; marketing certain
NRG Energy assets for sale; canceling and deferring capital spending; and
reducing corporate expenses.

In response to a possible downgrade during 2002, Xcel Energy contributed
$500 million to NRG Energy, and NRG Energy and its subsidiaries sold assets and
businesses that provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432 million in debt. NRG Energy also cancelled or
deferred construction of approximately 3,900 MW of new generation projects. On
July 26, 2002, Standard & Poors (S&P) downgraded NRG Energys senior unsecured
bonds to below investment grade, and three days later Moodys also downgraded
NRG Energys senior unsecured debt rating to below investment grade. Since July
2002, NRG Energy senior unsecured debt, as well as the secured NRG Northeast
Generating LLC bonds and the secured NRG South Central Generating LLC bonds and
secured LSP Energy (Batesville) bonds were downgraded multiple times. After NRG
Energy failed to make payments due under certain unsecured bond obligations on
September 16, 2002, both Moodys and S&P once again lowered their ratings on
NRG Energys unsecured bonds and its subsidiaries secured bonds. Currently,
NRG Energys unsecured bonds carry a rating of D at S&P and
between Ca and C at Moodys, depending on the specific debt issue. NRG
Northeast secured bonds currently carry a rating of D at S&P and
B1 at Moodys.

As a result of the downgrade of NRG Energys credit rating, declining
power prices, increasing fuel prices, the overall down-turn in the energy
industry, and the overall down-turn in the economy, NRG Energy has experienced
severe financial difficulties. These difficulties have caused NRG Energy to,
among other things, miss scheduled principal and interest payments due to its
corporate lenders and bondholders, prepay for fuel and other related delivery
and transportation services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges of
approximately $3.1 billion as of December 31, 2002, related to various
operating projects as well as for projects that were under construction which
NRG Energy has stopped funding.

NRG Energy and certain wholly owned subsidiaries have failed to timely
make several interest and/or principal payments on indebtedness. These missed
payments have resulted in cross-defaults of numerous other non-recourse and
limited recourse debt instruments of NRG Energy and have caused the
acceleration of multiple debt instruments of NRG Energy, rendering such debt
immediately due and payable. For more specific information regarding NRG
Energys liquidity issues, refer to Liquidity Issues in

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Item I of Form 10-K filed by NRG Energy on March 31, 2003.

Since March 31, 2003 NRG Energy failed to make a first-quarter payment of
$19.1 million due on March 31, 2003 relating to interest and fees on the $1.0
billion unsecured 364-day revolving credit facility; a $13.6 million interest
payment due on April 1, 2003 on the $350 million of 7.75% senior unsecured
notes maturing 2011; a $21.6 million interest payment due on April 1, 2003 on
the $500 million of 8.625% senior unsecured notes maturing 2031; and a $9.6
million interest payment due on May 1, 2003 on the $240 million of 8.0% senior
unsecured notes maturing 2013. On May 13, 2003, XL Capital Assurance, as controlling party,
accelerated the approximately $319 million of debt issued by NRG Peaker Finance Company LLC.
Accordingly, these facilities are in default.

Prior to the downgrades, many corporate guarantees and commitments of NRG
Energy and its subsidiaries required that they be supported or replaced with
letters of credit or cash collateral within 5 to 30 days of a ratings downgrade
below Baa3 or BBB- by Moodys or Standard & Poors, respectively. As a result
of the downgrades on July 26, 2002 and July 29, 2002, NRG Energy received
demands to post collateral aggregating approximately $1.1 billion. NRG Energy
is presently working with various secured project lender groups with respect to
the issue of posting collateral and is working towards establishing a
comprehensive plan of restructuring.

In August 2002, NRG Energy retained financial and legal restructuring advisors
to assist its management in the preparation of a comprehensive financial and
operational restructuring.
 In November 2002, NRG Energy and Xcel Energy presented a
comprehensive plan of restructuring to an ad hoc committee of its
bondholders and a steering committee of its bank lenders (the Ad Hoc Creditors
Committees). The restructuring plan served as a basis for continuing negotiations between
the Ad Hoc Creditors Committees, NRG Energy and Xcel Energy related to a
consensual plan of reorganization for NRG Energy.

On November 22, 2002, five former NRG Energy executives filed an involuntary Chapter 11 petition against NRG Energy in U.S.
Bankruptcy Court for the District of Minnesota. On February 19, 2003, NRG Energy announced that it had reached a settlement with the petitioners. On May 12, 2003, the Bankruptcy Court
issued an order abstaining from exercising jurisdiction over any aspect of the case and dismissed the case.

On March 26, 2003, Xcel Energy announced that its board of directors had
approved a tentative settlement agreement with holders of most of NRG Energys
long-term notes and the steering committee representing NRG Energys bank lenders. The
settlement is subject to certain conditions, including the approval of at least
a majority in dollar amount of the NRG Energy bank lenders and long-term
noteholders and definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for Xcel Energy to
make payments to NRG Energy over the next 13 months totaling up to $752 million
for the benefit of NRG Energys creditors in consideration for their waiver of
any existing and potential claims against Xcel Energy. Under the settlement,
Xcel Energy will make the following payments: (i) $350 million at or shortly
following the consummation of a restructuring of NRG Energys debt. It is
expected this payment would be made prior to year-end 2003; (ii) $50 million on
January 1, 2004. At Xcel Energys option, it may fill this requirement with
either cash or Xcel Energy common stock or any combination thereof; and (iii)
$352 million in April 2004. Since the announcement on March 26, 2003,
representatives of NRG Energy, Xcel Energy, the bank lenders and noteholders
have continued to meet to draft the definitive documentation necessary to fully
implement the terms and conditions of the tentative settlement agreement.

On May
14, 2003 NRG Energy and certain of its U.S. affiliates (including NRG Northeast) filed voluntary petitions
for reorganization under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States
Bankruptcy Court for the Southern District of New York (the
Bankruptcy Court), In re: NRG ENERGY, INC., et. al., Case No.
03-13204 (PCB). NRG Energy expects operations to continue as normal
during the restructuring process, while it operates its business as a debtor-in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy
Code and orders of the Bankruptcy Court. In connection with its Chapter 11 filing, NRG Energy also announced that the company
had secured a $250 million debtor-in-possession (DIP) financing facility from GE Capital Corporation, subject to Bankruptcy Court approval, to be utilized by NRG Northeast and some of NRG Northeasts subsidiaries. The company
anticipates that the DIP, together with its cash reserves and its ongoing revenue stream, will be sufficient to fund its operations, including
payment of employee wages and benefits, during the reorganization process.

On May 15, 2003, NRG Energy announced that it had been notified that the New York Stock Exchange
(NYSE) has suspended trading in NRG Energys corporate units that trade under the ticker symbol NRZ and that an application to the Securities and Exchange Commission to delist
the Units is pending the completion of applicable procedures,
including appeal by NRG Energy of the NYSE staffs decision. NRG
Energy does not plan to make such an appeal. The NYSE took this
action following NRG Energys announcement that it and certain of its U.S. affiliates had filed voluntary petitions
for reorganization under Chapter 11 of the Bankruptcy Code.

The accompanying financial statements have been prepared assuming NRG Northeast will continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

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2. Debt

As of March 31, 2003, NRG Energy has failed to make scheduled payments on
interest and/or principal on approximately $4.0 billion of its recourse debt
and is in default under the related debt instruments. These missed payments
also have resulted in cross-defaults of numerous other non-recourse and limited
recourse debt instruments of NRG Energy. In addition to the missed debt
payments, a significant amount of NRG Energys debt and other obligations
contain terms, which require that they be supported with letters of credit or
cash collateral following a ratings downgrade. As a result of the downgrades
that NRG Energy experienced in 2002, NRG Energy estimates that it is in default
of its obligations to post collateral of approximately $1.1 billion,
principally to fund equity guarantees associated with its construction revolver
financing facility, to fund debt service reserves and other guarantees related
to NRG Energy projects and to fund trading operations.

Absent an agreement on a comprehensive restructuring plan, NRG Energy will
remain in default under its debt and other obligations, because it does not
have sufficient funds to meet such requirements and obligations.
There can be no assurance that NRG Energys creditors ultimately will accept
any consensual restructuring plan under the bankruptcy process. For discussion of NRG Energys restructuring activities, refer to Note 1 in the
Form 10-Q filed by NRG Energy for the three months ended March 31, 2003 and Form 8-K filed by NRG Energy on May 16, 2003.

Pending the resolution of NRG Energys credit contingencies, NRG Energy
and NRG Northeast has classified as current liabilities those long-term debt
obligations that lenders have the ability to accelerate within twelve months of
the balance sheet date.

3. Inventory

Inventory consists of spare parts, coal, fuel oil and kerosene and is
stated at the lower of weighted average cost or market value:

|               |       |                |        |                   |  |   |        |         | 
|-------------- | ----- | -------------- | ------ | ----------------- |  | - | ------ | ------- | 
|(In thousands) |       | March 31, 2003 |        | December 31, 2002
|               |       |                |        |                  
|Fuel oil       |       | $              | 31,711 |                   |  | $ | 47,052 |        
|Spare parts    |       |                | 58,895 |                   |  |   | 59,524 |        
|Coal           |       |                | 10,364 |                   |  |   | 14,378 |        
|Kerosene       |       |                | 1,739  |                   |  |   | 2,852  |        
|Other          |       |                | 169    |                   |  |   | 157    |        
|               |       |                |        |                   |  |   |        |        
|               | Total |                | $      | 102,878           |  |   | $      | 123,963 | 
|               |       |                |        |                   |  |   |        |        

4.     Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:

|                                    |  |               
|----------------------------------- |  | --------------
|Facilities, machinery and equipment |  | 10 to 30 years
|Office furnishings and equipment    |  | 3 to 10 years 

Property, plant and equipment consisted of:

|                                    |                                    |                |           |                   |  |   |           |           | 
|----------------------------------- | ---------------------------------- | -------------- | --------- | ----------------- |  | - | --------- | --------- | 
|(In thousands)                      |                                    | March 31, 2003 |           | December 31, 2002
|                                    |                                    |                |           |                  
|Facilities, machinery and equipment |                                    | $              | 1,414,453 |                   |  | $ | 1,415,726 |          
|Land                                |                                    |                | 46,925    |                   |  |   | 46,925    |          
|Construction in progress            |                                    |                | 26,486    |                   |  |   | 27,615    |          
|Office furnishings and equipment    |                                    |                | 1,196     |                   |  |   | 1,196     |          
|Accumulated depreciation            |                                    |                | (175,824  | )                 |  |   | (157,534  | )        
|                                    |                                    |                |           |                   |  |   |           |          
|                                    | Property, plant and equipment, net |                | $         | 1,313,236         |  |   | $         | 1,333,928 | 
|                                    |                                    |                |           |                   |  |   |           |          

In light of economic developments related to the Connecticut assets
and the FERC issued order regarding cost of service reimbursements,
NRG Northeast reassessed the asset lives for the Connecticut
facilities. The shorter depreciable lives resulted in an increase in
depreciation of approximately $6.0 million for the three months
ended March 31, 2003.

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5. Derivative Instruments and Hedging Activity

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities(SFAS No. 133), as amended by SFAS No.
137 and SFAS No. 138. SFAS No. 133 requires the Company to record all
derivatives on the balance sheet at fair value. Changes in the fair value of
non-hedge derivatives are immediately recognized in earnings. Derivatives that
have been designated as hedges of assets, liabilities or firm commitments, are
accounted for using the fair value method. Changes in the fair value of these
instruments are recognized in earnings as offsets to the changes in the fair
value of the related hedged assets, liabilities and firm commitments.
Derivatives that have been designated as hedges of forecasted transactions are
accounted for using the cash flow method. Changes in the fair value of these
instruments are deferred and recorded as a component of accumulated other
comprehensive income (OCI) until the hedged transactions occur and are
recognized in earnings. Reclassifications of the deferred gains and losses are
included on the same line of the statement of operations in which the hedged
item is recorded. The ineffective portion of the change in fair value of a
derivative instrument designated as a cash flow hedge is immediately recognized
in earnings. The Company formally assesses both at inception and at least
quarterly thereafter, whether the derivatives used in hedging transactions are
highly effective in offsetting the changes in either the fair value or cash
flows of the hedged item. This assessment includes all components of each
derivatives gain or loss unless otherwise noted. When it is determined that a
derivative ceases to be a highly effective hedge, hedge accounting is
discontinued.

SFAS No. 133 applies to the Companys long-term power sales contracts,
long-term gas purchase contracts and other energy related commodities financial
instruments used to mitigate variability in earnings due to fluctuations in
spot market prices, hedge fuel requirements at generation facilities and
protect investments in fuel inventories. At March 31, 2003, the Company had
derivative contracts extending through December 2006.

Accumulated Other Comprehensive Income

The following table summarizes the effects of SFAS No. 133 on the
Companys OCI balance:

|                                                                 |                                   |                                              |        |        |         |   |         |         |        |  
|---------------------------------------------------------------- | --------------------------------- | -------------------------------------------- | ------ | ------ | ------- | - | ------- | ------- | ------ | -
|Gains/(Losses)                                                   |                                   | Three Months Ended                          
|(In thousands)                                                   |                                   | March 31,                                   
|                                                                 |                                   |                                             
|                                                                 |                                   | 2003                                         |        | 2002  
|                                                                 |                                   |                                              |        |       
|Beginning Balance                                                |                                   | $                                            | 28,835 |        |         | $ | 107,741 |        
|                                                                 |                                   | Previously deferred amounts unwound from OCI |        |        | (12,764 | ) |         |         | (3,846 | )
|                                                                 | Mark to market to hedge contracts |                                              |        | (3,760 | )       |   |         | (16,024 | )     
|                                                                 |                                   |                                              |        |        |         |   |         |        
|Ending Balance                                                   |                                   | $                                            | 12,311 |        |         | $ | 87,871  |        
|                                                                 |                                   |                                              |        |        |         |   |         |        
|Gains/(Losses) expected to unwind from OCI during next 12 months |                                   | $                                            | 12,311 |        |         |   | 42,146  |        

Gains of
$12.8 million were reclassified from OCI to current period earnings
during the three months ended March 31, 2003 due to the unwinding of
previously deferred amounts. These amounts are recorded on the same
line item in the statement of operations in which the hedged items
are recorded. During the three months ended March 31, 2003, the Company recorded a loss
of approximately $3.8 million in OCI, related to changes in the fair values of
derivatives accounted for as hedges. The net balance in OCI relating to SFAS
No. 133 as of March 31, 2003 was a gain of approximately $12.3 million. The
Company expects $12.3 million of the deferred net gains on derivative
instruments accumulated in OCI to be recognized as earnings during the next
twelve months.

Statement of Operations

The following table summarizes the effects of SFAS No. 133 on the
Companys statement of operations:

|                                     |  |                    |        |      |  |   |       | 
|------------------------------------ |  | ------------------ | ------ | ---- |  | - | ----- | 
|Gains/(Losses)                       |  | Three Months Ended
|(In thousands)                       |  | March 31,         
|                                     |  | 2003               |        | 2002
|                                     |  |                    |        |     
|                                     |  |                    |        |      |  |   |       | 
|Revenues                             |  | $                  | (2,239 | )    |  | $ | 3,930 | 
|Operating costs                      |  |                    | (1,806 | )    |  |   | 6,054 | 
|                                     |  |                    |        |      |  |   |       | 
|Total statement of operations impact |  | $                  | (4,045 | )    |  | $ | 9,984 | 
|                                     |  |                    |        |      |  |   |       | 

During the three months ended March 31, 2003 and 2002, the Company
recognized no gain or loss due to ineffectiveness of commodity cash flow
hedges.

The Companys earnings for the three months ended March 31, 2003 were
decreased by unrealized losses of $4.0 million and for the three months ended
March 31, 2002 were increased by unrealized gains of $10.0 million,
respectively, associated with changes in the fair value of energy related
derivative instruments not accounted for as hedges in accordance with SFAS No.
133.

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6. Regulatory Issues

NRG Northeast is impacted by rule/tariff changes that occur in the
existing ISOs. On March 1, 2003, ISO-New England implemented its version of
Standard Market Design. This change dramatically modifies the New England
market structure by incorporating Locational Marginal Pricing (pricing by
location rather than on a New England wide basis). On February 26, 2003, NRG
Northeast filed a proposed cost of service agreement with the Federal Energy
Regulatory Commission (FERC) for the following Connecticut facilities:
Middletown Power LLC, Montville Power LLC, Norwalk Power LLC and Devon Power
LLC units 11-14 (collectively the NRG Subsidiaries). In the filing, NRG
Northeast requested that major and minor maintenance expenses of the NRG
Subsidiaries be paid for through a tracking mechanism that would insure that
NRG Northeast receives compensation only for actual maintenance expenses.
Under the proposed cost of service agreement, the other NRG Energy costs would
be paid through a monthly cost-based payment. NRG Northeast requested an
effective date of February 27, 2003. The cost of service filing was made
notwithstanding the impending implementation of Standard Market Design in New
England, including the adoption of Locational Marginal Pricing. Even though
NRG Northeast views this change as a significant improvement to the existing
market design, NRG Northeast still considered the energy market within New
England as insufficient to allow for NRG Northeast to recover its reasonable
costs and earn a reasonable return on investment.

On March 25, 2003, FERC issued an order (the March Order) approving the
NRG Subsidiaries spring 2003 maintenance expenses, subject to refund and
authorized an effective date of February 27, 2003. In the March Order, FERC
also required the establishment of an escrow account for the payment of the
maintenance expenses and that ISO New England would act as the escrow agent.

On April 25, 2003, the FERC issued an order (the April Order) rejecting
the remaining part of the proposed cost of service agreement, including the
monthly cost-based payment. Rather, FERC authorized NRG Northeast to recover
its other fixed costs by including fixed costs in its energy market bids until
ISO New England implements locational or deliverability capacity or resource
adequacy requirements, which should be no later than June 1, 2004.
Specifically, FERC authorized any generating facility located in a designated
congestion area, such as Connecticut, with a capacity factor of ten percent or
less in 2002 to include fixed costs in its energy market bids. The April Order
was unclear whether the ten percent test would be done on a station or unit
basis. If the test were done on a station basis all of the NRG Subsidiaries
would satisfy the test. Under a unit basis, the following facilities would not
qualify: Devon 12, Middletown 2 and 3, and Norwalk 2. However, under the ten
percent test, NRG Energys other Connecticut facilities such as Cos Cob and the
remote jets would qualify. In the April Order, FERC also approved fixed costs
for the NRG Subsidiaries in the amount of $103.4 million. In the April Order,
FERC stated that an expedited procedure would be developed for the paying
entities to examine the fixed costs of the NRG Subsidiaries but that any
changes in the approved fixed costs would have only a prospective effect.

Until the impact of the rate structure change on future cash flows of each
affected NRG Northeast facility can be estimated, it is not determinable
whether there are any recoverability issues for a portion of the approximately
$400 million of related plant assets for these facilities. If the rates
approved by FERC for NRG Northeasts Connecticut generating facilities are
insufficient to provide future cost recovery, additional asset impairment
charges could be forth coming. NRG Northeast is filing with FERC for additional
clarification of the April Order.

7. Commitments and Contingencies

Litigation

The
New York Voluntary Bankruptcy Case

On
May 14, 2003 NRG Energy and certain of its U.S. affiliates
(including NRG Northeast)
filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code (the Bankruptcy Code) in the United
States Bankruptcy Court for the Southern District of New York (the
Bankruptcy Court), In re: NRG ENERGY, INC., et. al., Case No.
03-13024 (PCB). NRG Energy expects operations to continue as normal
during the restructuring process, while it operates its business as a
debtor-in-possession under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of
the Bankruptcy Code and orders of the Bankruptcy Court.

Fortistar Capital Inc. v. NRG Energy, Inc., Hennepin County District Court

On July 12, 1999, Fortistar Capital Inc. sued NRG Energy in Minnesota
state court. The complaint sought injunctive relief and damages of over $50
million resulting from NRG Energys alleged breach of a letter agreement with
Fortistar relating to the Oswego Steam Station. NRG Energy asserted
counterclaims. After considerable litigation, the parties entered into a
conditional, confidential settlement agreement, which was subject to necessary
board and lender approvals. NRG Energy was unable to obtain necessary
approvals. Fortistar has moved the court to enforce the settlement, seeking
damages in excess of $35 million plus interest and attorneys fees. NRG Energy
is opposing Fortistars motion on the grounds that conditions to contract
performance have not been satisfied. No decision has been made on the pending
motion, and NRG Energy cannot predict the outcome of this dispute.

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Connecticut Light & Power Company v. NRG Power Marketing Inc., Docket No.
3:01-CV-2373 (A WT), pending in the United States District Court, District of
Connecticut

This matter involves a claim by Connecticut Light & Power Company for
recovery of amounts it claims are owing for congestion charges under the terms
of a Standard Offer Services contract between the parties, dated October 29,
1999. CL&P has served and filed its motion for summary judgment to which NRG
Power Marketing filed a response on March 21, 2003. CL&P has offset
approximately $30 million from amounts owed to NRG Power Marketing, claiming
that it has the right to offset those amounts under the contract.  NRG Power
Marketing, has counterclaimed seeking to recover those amounts, arguing among
other things that CL&P has no rights under the contract to offset them. On
May 14, 2003, NRG Power Marketing provided notice to CL&P of
termination of the contract effective May 19, 2003. Pursuant to the
request of the Attorney General of Connecticut and the Connecticut
Department of Public Utility Control. On May 16, 2003, the Federal
Energy Regulating Commission (FERC) issued an Order directing NRG
Power Marketing to continue to provide service to CL&P under
the contract, pending further order by FERC. NRG
Power Marketing cannot estimate at this time the likelihood of an unfavorable
outcome in this matter, or the overall exposure for congestion charges for the
full term of the contract. Although the outcome of this litigation may have an
affect on NRG Northeast, NRG Northeast is not a party to this litigation.

The State of New York and Erin M. Crotty, as Commissioner of the New York State
Department of Environmental Conservation v. Niagara Mohawk Power Corporation et
al.,United States District Court for the Western District of New York, Civil
Action No. 02-CV-002S

In January, 2002, NRG Energy and Niagara Mohawk Power Corporation (NiMo)
were sued by the New York Department of Environmental Conservation in federal
court in New York. The complaint asserted that projects undertaken at NRG
Energys Huntley and Dunkirk plants by NiMo, the former owner of the
facilities, required preconstruction permits pursuant to the Clean Air Act and
that the failure to obtain these permits violated federal and state laws. In
July, 2002, NRG Energy filed a motion to dismiss. On March 27, 2003 the court
dismissed the complaint against NRG Energy with prejudice as to the federal
claims and without prejudice as to the state claims. It is possible the state
will appeal this dismissal to the Second Circuit Court of Appeals. In the
meantime, on April 25, 2003, the state provided to NRG Energy notice of intent
to again sue the Company and various affiliates by filing a second amended
complaint in this same action in the federal court in New York, asserting
against the NRG Defendants violations of operating permits and deficient
operating permits at the Huntley and Dunkirk plants. If the case ultimately is
litigated to a judgment and there is an unfavorable outcome that could not be
addressed through use of compliant fuels and/or a plantwide applicability
limit, NRG Energy has estimated that the total investment that would be
required to install pollution control devices could be as high as $300 million
over a ten to twelve-year period, and NRG Energy may be responsible for payment
of certain penalties and fines.

Niagara Mohawk Power Corporation v. NRG Energy, Inc., Huntley Power, LLC, and
Dunkirk Power, LLC,Supreme Court, State of New York, County of Onondaga, Case
No. 2001-4372

NRG Energy has asserted that NiMo is obligated to indemnify it for any
related compliance costs associated with resolution of the enforcement action.
NiMo has filed suit in state court in New York seeking a declaratory judgment
with respect to its obligations to indemnify NRG Energy under the asset sales
agreement. NRG Energy has pending a summary judgment motion on its entitlement
to be reimbursed by NiMo for the attorneys fees NRG Energy has incurred in the
enforcement action, and that motion should be heard within the next 60 days.

Huntley Power LLC, Dunkirk Power LLC and Oswego Power LLC

All three of these facilities have been issued Notices of Violation with
respect to opacity exceedances. NRG Energy has been engaged in consent order
negotiations with the New York State Department of Environmental Conservation
(DEC) relative to opacity issues affecting all three facilities periodically
since 1999. One proposed consent order was forwarded by DEC under cover of a
letter dated January 22, 2002, which makes reference to 7,890 violations at the
three facilities and contains a proposed payable penalty for such violations of
$900,000. On February 5, 2003, DEC sent to NRG Energy a proposed Schedule of
Compliance and asserted that it is to be used in conjunction with newly-drafted
consent orders. NRG Energy has not yet received the consent orders although NRG
Energy has been told by DEC that DEC is now seeking a penalty in excess of that
cited in its January 22, 2002 letter. NRG Energy expects to continue
negotiations with DEC regarding the proposed consent orders, including the
Schedule of Compliance and the penalty amount. NRG Energy cannot predict
whether those discussions with the DEC will result in a settlement and, if they
do, what sanctions will be imposed. In the event that the consent order
negotiations are unsuccessful, NRG Energy does not know what relief DEC will
seek through an enforcement action and what the result of such action will be.

Niagara Mohawk Power Corporation v. Dunkirk Power LLC, et al., Supreme Court,
Erie County, Index No. 1-2000-8681

On October 2, 2000, plaintiff Niagara Mohawk Power Corporation commenced
this action against NRG Energy to recover damages plus late fees, less payments
received through the date of judgment, as well as any additional amounts due
and owing, for electric service provided to the Dunkirk Plant after September
18, 2000. Plaintiff Niagara Mohawk claims that NRG Energy has failed to pay
retail tariff amounts for utility services commencing on or about June 11, 1999
and continuing to September 18, 2000 and

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thereafter. Plaintiff has alleged breach of contract, suit on account,
violation of statutory duty, and unjust enrichment claims. On or about October
23, 2000, NRG Energy served an answer denying liability and asserting
affirmative defenses.

After proceeding through discovery, and prior to trial, the parties and
the court entered into a stipulation and order filed August 9, 2002
consolidating this action with two other actions against NRG Northeasts
Huntley and Oswego subsidiaries, both of which cases assert the same claims and
legal theories for failure to pay retail tariffs for utility services.

On October 8, 2002, a Stipulation and Order was filed in the Erie County
Clerks Office staying this action pending submission of some or all of the
disputes in the action to the FERC. NRG Energy cannot make an evaluation of the
likelihood of an unfavorable outcome. The cumulative potential loss could
exceed $35 million.

Niagara Mohawk Power Corporation v. Huntley Power LLC, NRG Huntley Operations,
Inc., NRG Dunkirk Operations, Inc., Dunkirk Power LLC, Oswego Harbor Power LLC,
and NRG Oswego Operations, Inc., Case Filed November 26, 2002 in Federal Energy
Regulatory Commission Docket No. EL 03-27-000.

This is the companion action filed by Niagara Mohawk at FERC, similarly
asserting that Niagara Mohawk is entitled to receive retail tariff amounts for
electric service provided to the Huntley, Dunkirk and Oswego plants. The
parties are currently engaged in settlement negotiations in an attempt to
resolve both this FERC action and the above-referenced state court proceedings
respecting amounts owing for electrical service provided to these three plants.
At this stage of the proceedings, NRG Energy cannot estimate the likelihood of
an adverse determination. As noted above, the cumulative potential loss could
exceed $35 million.

NRG Energy Credit Defaults

NRG Energy and various of its subsidiaries are in default under various of
their credit facilities, financial instruments, construction agreements and
other contracts, which have given rise to liens, claims and contingencies
against them and may in the future give rise to additional liens, claims and
contingencies against them. In addition, NRG Energy and various of its
subsidiaries have entered into various guarantees, equity contribution
agreements, and other financial support agreements with respect to the
obligations of their affiliates, which have given rise to liens, claims and
contingencies against them and may in the future give rise to additional liens,
claims and contingencies against the party or parties providing the financial
support. NRG Energy cannot at this time predict the outcome or financial impact
of these matters.

NYISO Claims

In November 2002, the NYISO notified NRG Northeast of claims related to
New York City mitigation adjustments, general NYISO billing true-ups and other
miscellaneous charges related to sales between November 2000 and October 2002.
NRG Northeast disagrees with both the validity and calculation of many of the
claims and is currently negotiating with the NYISO over the ultimate
disposition. NRG Northeast continues to
negotiate with no additional amounts being reserved during the three months
ended March 31, 2003.

Guarantees

The Company is directly liable for the obligations of certain of its
subsidiaries pursuant to guarantees relating to certain of their operating
obligations. In addition, in connection with the purchase and sale of fuel,
emission credits and power generation products to and from third parties with
respect to the operation of some of the Companys generation facilities in the
United States, the Company may be required to guarantee a portion of the
obligations of certain of its subsidiaries. As of March 31, 2003, the Companys
obligations pursuant to its guarantees of the performance of its subsidiaries
totaled approximately $105.8 million.

8. Special Charges

The Company incurred $0.7 million of restructuring costs consisting of
advisor fees. These costs were recognized as special charges in the statement
of operations.

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9. Asset Retirement Obligation

Effective January 1, 2003, NRG Northeast adopted SFAS No. 143, Accounting
for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires an
entity to recognize the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. Upon initial recognition of a
liability for an asset retirement obligation, an entity shall capitalize an
asset retirement cost by increasing the carrying amount of the related
long-lived asset by the same amount as the liability. Over time, the liability
is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Retirement obligations associated with long-lived assets included within
the scope of SFAS No. 143 are those for which a legal obligation exists under
enacted laws, statutes and written or oral contracts, including obligations
arising under the doctrine of promissory estoppel.

NRG Northeast has
identified certain retirement obligations at
Somerset Power LLC, a wholly owned subsidiary of NRG Northeast, related
primarily to future environmental obligations. NRG Northeast has also
identified other asset retirement obligations that could not be calculated
because the assets associated with the retirement obligations were determined
to have an indeterminate life. The adoption of SFAS No. 143 resulted in
recording a $0.2 million increase to property, plant and equipment and a $0.3
million increase to other long-term obligations. The cumulative effect of
adopting SFAS No. 143 was approximately a $0.1 million increase to depreciation
expense and approximately a $0.1 million increase to interest expense.

The following represents the balances of the asset retirement obligation
as of January 1, 2003 and the additions and accretion of the asset retirement
obligation for the three months ended March 31, 2003:

|                   |  |                   |     |  |                |              |    |                |  |   |     | 
|------------------ |  | ----------------- | --- |  | -------------- | ------------ | -- | -------------- |  | - | --- | 
|                   |  |                   |     |  |                |              |    |               
|                   |  |                   |     |  |                | Accretion in |    |                |  |   |    
|Description        |  | Beginning Balance |     |  | Quarter Ended  |              |    | Ending Balance | 
|(in thousands)     |  | Jan. 1, 2003      |     |  | March 31, 2003 |              |    | March 31, 2003 | 
|                   |  |                   |     |  |                |              |    |                | 
|Somerset
Power LLC |  | $                 | 313 |  |                | $            | 10 |                |  | $ | 323 | 
|                   |  |                   |     |  |                |              |    |                | 
|Total              |  | $                 | 313 |  |                | $            | 10 |                |  | $ | 323 | 

The following represents the pro-forma effect on NRG Northeasts net
income
for the three months ended March 31, 2002, as if NRG Northeast had adopted SFAS
No. 143 as of January 1, 2002:

|                                                                     |  |                                  |       |  
|-------------------------------------------------------------------- |  | -------------------------------- | ----- | -
|                                                                     |  | Three Months EndedMarch 31, 2002
|                                                                     |  | (In thousands)                   |      
|                                                                     |  |                                  |      
|Net income as reported                                               |  | $                                | 2,140 |  
|Pro-forma adjustment to reflect
retroactive adoption of SFAS No. 143 |  |                                  | (145  | )
|                                                                     |  |                                  |      
|Pro-forma net income                                                 |  | $                                | 1,995 |  

10. Recent Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections,that supersedes previous guidance for the reporting of gains and
losses from extinguishment of debt and accounting for leases, among other
things. SFAS No. 145 requires that only gains and losses from the
extinguishment of debt that meet the requirements for classification as
Extraordinary Items, as prescribed in Accounting Practices Board Opinion No.
30, should be disclosed as such in the financial statements. Previous guidance
required all gains and losses from the extinguishment of debt to be classified
as Extraordinary Items. This portion of SFAS No. 145 is effective for fiscal
years beginning after May 15, 2002, with restatement of prior periods required.
NRG Northeast adopted this standard as of January 1, 2003 and has no
extraordinary gains or losses that will require restatement.

In addition, SFAS No. 145 amends SFAS No. 13, Accounting for Leases,as
it relates to accounting by a lessee for certain lease modifications. Under
SFAS No. 13, if a capital lease is modified in such a way that the change gives
rise to a new agreement classified as an operating lease, the assets and
obligation are removed, a gain or loss is recognized and the new lease is
accounted for as an operating lease. Under SFAS No. 145, capital leases that
are modified so the resulting lease agreement is classified as an operating
lease are to be accounted for under the sale-leaseback provisions of SFAS No.
98, Accounting for Leases.These provisions of SFAS No. 145 were effective
for transactions occurring after May 15, 2002.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities,(SFAS No. 146). SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).SFAS No. 146 applies to
costs associated with an exit activity that does not involve an entity newly
acquired in a business combination or with a disposal activity covered by SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.The
provisions of SFAS No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002.

In November 2002, The FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002, irrespective of
the guarantors fiscal year-end. The disclosure requirements became effective
for financial statements of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees. The interpretation also clarifies the requirements related to the
recognition of a liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the guarantee. See Note
7.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities(FIN No. 46). FIN No. 46 requires an enterprises
consolidated financial statements to include subsidiaries in which the
enterprise has a controlling interest. Historically, that requirement has been
applied to subsidiaries in which an enterprise has a majority voting interest,
but in many circumstances the enterprises consolidated financial statements do
not include the consolidation of variable interest entities with which it has
similar relationships but no majority voting interest. Under FIN No. 46 the
voting interest approach is not effective in identifying controlling financial
interest. The new rule requires that for entities to be consolidated that those
assets be initially recorded at their carrying amounts at the date the
requirements of the new rule first apply. If determining carrying amounts as
required is impractical, then the assets are to be measured at fair value the
first date the new rule applies. Any difference between the net amount of any
previously recognized interest in the newly consolidated entity should be
recognized as the cumulative effect of an
accounting change. FIN No. 46 becomes effective in the third quarter of
2003. FIN No. 46 is not expected to have a significant impact on NRG Northeast.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Overview

Due to the factors discussed below, as well as other matters discussed
herein, NRG Energys financial condition has deteriorated significantly in the
recent past. See Liquidity  below. As a result, NRG Energy does not
contemplate that it will have sufficient funds to make required principal and
interest payments on its corporate debt, which means that NRG Energy will
remain in default of the various corporate level debt obligations.

Industry Dynamics

An unregulated merchant power company in the United States can be
characterized in two ways, as a generator or as an energy merchant, with some
companies having characteristics of both. In the United States, generators are
either outgrowths of regulated utilities, developers or independent aggregators
of plants divested by utilities. Generators have grown through acquisitions or
the construction of new power plants. Energy merchants have emphasized risk
management and trading skills over the ownership of physical assets. Energy
deregulation paved the way for development of these companies, with utilities
in some regions forced to sell off some of their generating capacity and buy
electricity on the wholesale market or through power procurement agreements.

Both generators and energy merchants prospered in the late 1990s.
Starting in 1999, however, a number of factors began to arise which had a
negative effect on the business model for merchant power companies. These
factors included:

California When California restructured its electricity industry in the
mid-1990s, it required utilities to sell generation assets and buy electricity
on the wholesale spot market, without the stability of long-term contracts. At
the time, California had adequate supplies of power, but the State of
California was experiencing unusually high electricity demand growth while new
capacity additions were not keeping pace. Supply began to lag behind demand,
and previously moderate weather gave way to dryer conditions, reducing
hydroelectric supply. Shortages and blackouts ensued in 1999 and 2000.
Meanwhile, as wholesale electricity prices moved higher, utilities were not
allowed to pass higher costs on to consumers under Californias regulatory
regime. Unable to bear the financial burden, PG&E sought Chapter 11 protection
and California took over the role of procuring electricity for the utilities.
Politicians have criticized the electricity generators and the energy
merchants, accusing them of improperly manipulating supply, demand and prices.
Merchant power companies in California are now embroiled in protracted
litigation with California and private parties, which is discouraging new
investment.

Economy The United States economy, already headed towards a recession by
mid-2001, suffered a heavy blow on September 11, 2001. This, along with a
decrease in economically driven electricity demand, exacerbated the drop in
stock valuations of the energy merchants. Other regions of the world economy
have suffered problems as well, which has exposed companies with international
assets to losses based on severe currency fluctuations.

Weather On the whole, the summer of 2001, the winter of 2001/2002 and
the summer of 2002 were mild in the United States. This together with an
oversupply of new generation in many markets has driven down energy prices
significantly.

Enron The bankruptcy of Enron has devastated the merchant power
industry. The public and political perception created by Enron put a stigma on
the industry, drove investors away and increased scrutiny of the industry.
Enron also played a key role in the energy trading markets, providing a widely
used electronic trading platform that accounted for an enormous amount of
trading volume. No other company has stepped in to fill this role, and as a
result the electricity markets have become far less efficient and liquid.

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Credit ratings The credit rating agencies were sharply criticized for
not foreseeing Enrons problems. As a result, the agencies have been quick to
scrutinize the rest of the industry, and have tightened their criteria for
creditworthiness. The agencies have downgraded most, if not all, of the
industry participants. Many of these downgrades were severe  ratings at times
were dropped several notches at once, or dropped more than once in a span of
weeks. This has resulted in most of the energy companies, generators and
merchants having non-investment grade credit ratings at this time.

Oversupply As wholesale electricity prices and market liquidity
increased in the late 1990s the industry went on a building boom. Through 2001
capital was readily available for the industry, encouraging companies to build
new generation facilities. The years 2000 and 2001 saw record megawatt capacity
additions in the United States, and record years were on the horizon for 2002
and 2003. Even with steady economic growth this would have created an
oversupply of generation. Limited economic growth and recession have
exacerbated the oversupply situation.

Results of Operations

For the three months ended March 31, 2003 compared to the three months ended
March 31, 2002

Net loss
for the three months ended March 31, 2003 was $29.2 million,
compared to a net income for the three months ended March 31, 2002 of $2.1
million. This decrease in net income was due to the factors described below.

Operating Revenues

For the three months ended March 31, 2003, the Company had total revenues
of $180.2 million, compared to $131.6 million for the same period in 2002, an
increase of $48.6 million or 36.9%. The increase in revenues is due to improved
market prices in 2003, resulting from increased natural gas prices. This increase was due to the New York assets. In addition to
increased prices, there were increased megawatt hours produced. This increase
was offset by decreases related to the Connecticut assets due to losses on the
Standard Offer contract.

Operating Costs

For the three months ended March 31, 2003, operating costs were $169.1
million compared to $98.0 million for the same period in 2002, an increase of
$71.1 million, or 72.6%. Operating costs primarily consist of expenses for
fuel, plant operations and maintenance, property and other non-income related
taxes and unrealized gains or losses associated with changes in the fair value
of energy related derivative instruments not accounted for as hedges in
accordance with SFAS No. 133. The increase in operating costs is primarily due
to an overall increase in fuel expense.

For the three months ended March 31, 2003, fuel expense was $113.5 million
compared to $45.9 million for the same period in 2002, an increase of $67.6
million or 147.3% caused by higher generation and higher natural gas prices
compared to the first three months of 2002.

For the three months ended March 31, 2003, plant operations and
maintenance expense was $53.7 million compared to $52.2 million for the same
period in 2002, an increase of $1.5 million or 2.9%. Labor and benefits was
$21.5 million compared to $18.0 million for the same period 2002. This
increase is due to increased pension and other benefit costs. Maintenance,
parts, supplies and services were $18.5 million for the three months ended
March 31, 2003 compared to $19.3 million for the same period ended 2002. This
decrease is due to reduced service costs from leveraging the portfolio.
Property and other non-income based taxes was $13.7 million for the three
months ended March 31, 2003 compared to $14.9 million for the same period in
2002 due to reduced payments in lieu of taxes.

Depreciation

For the three months ended March 31, 2003, depreciation costs were $16.3
million compared to $12.3 million for the same period in 2002, an increase of
$4.0 million or 32.5%. Depreciation expense is related to the acquisition
costs of the facilities and routine capital additions, which are being
depreciated over ten to thirty years. The increase in depreciation expense is
attributable to shorter depreciable lives on the Connecticut facilities, which
was effective January 1, 2003. In light of economic developments related to
the Connecticut assets and the FERC issued order regarding cost of service
reimbursements, NRG Northeast reassessed the asset lives.

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General and Administrative Expenses

For the three months ended March 31, 2003, general and administrative
expenses were $10.8 million compared to $3.7 million for
the same period in 2002, an increase of $7.1 million or 191.9%. General
and administrative expenses include costs for outside legal and other contract
services, payments to NRG Energy for corporate services, expenses related to
office administration, as well as costs for certain employee benefits incurred
under operating service agreements and bad debt expense. The increase was due to $6.2 million of
bad debt expense recorded in the first three months of 2003 for
collectibility issues primarily related to one contract.

Special Charges

For the three months ended March 31, 2003, special charges were $0.7 million
compared to zero for the same period in 2002. Special charges consist of restructuring costs and advisor fees.

Regulatory Issues

NRG Northeast is impacted by rule/tariff changes that occur in the
existing ISOs. On March 1, 2003, ISO-New England implemented its version of
Standard Market Design. This change dramatically modifies the New England
market structure by incorporating Locational Marginal Pricing (pricing by
location rather than on a New England wide basis). On February 26, 2003, NRG
Northeast filed a proposed cost of service agreement with the Federal Energy
Regulatory Commission (FERC) for the following Connecticut facilities:
Middletown Power LLC, Montville Power LLC, Norwalk Power LLC and Devon Power
LLC units 11-14 (collectively the NRG Subsidiaries). In the filing, NRG
Northeast requested that major and minor maintenance expenses of the NRG
Subsidiaries be paid for through a tracking mechanism that would insure that
NRG Northeast receives compensation only for actual maintenance expenses.
Under the proposed cost of service agreement, the other NRG Energy costs would
be paid through a monthly cost-based payment. NRG Northeast requested an
effective date of February 27, 2003. The cost of service filing was made
notwithstanding the impending implementation of Standard Market Design in New
England, including the adoption of Locational Marginal Pricing. Even though
NRG Northeast views this change as a significant improvement to the existing
market design, NRG Northeast still considers the energy market within New
England as insufficient to allow for NRG Northeast to recover its reasonable
costs and earn a reasonable return on investment.

On March 25, 2003, FERC issued an order (the March Order) approving the
NRG Subsidiaries spring 2003 maintenance expenses, subject to refund and
authorized an effective date of February 27, 2003. In the March Order, FERC
also required the establishment of an escrow account for the payment of the
maintenance expenses and that ISO New England would act as the escrow agent.

On April 25, 2003, the FERC issued an order (the April Order) rejecting
the remaining part of the proposed cost of service agreement, including the
monthly cost-based payment. Rather, FERC authorized NRG Northeast to recover
its other fixed costs by including fixed costs in its energy market bids until
ISO New England implements locational or deliverability capacity or resource
adequacy requirements, which should be no later than June 1, 2004.
Specifically, FERC authorized any generating facility located in a designated
congestion area, such as Connecticut, with a capacity factor of ten percent or
less in 2002 to include fixed costs in its energy market bids. The April Order
was unclear whether the ten percent test would be done on a station or unit
basis. If the test were done on a station basis all of the NRG Subsidiaries
would satisfy the test. Under a unit basis, the following facilities would not
qualify: Devon 12, Middletown 2 and 3, and Norwalk 2. However, under the ten
percent test, NRG Energys other Connecticut facilities such as Cos Cob and the
remote jets would qualify. In the April Order, FERC also approved fixed costs
for the NRG Subsidiaries in the amount of $103.4 million. In the April Order,
FERC stated that an expedited procedure would be developed for the paying
entities to examine the fixed costs of the NRG Subsidiaries but that any
changes in the approved fixed costs would have only a prospective effect.

Until the impact of the rate structure change on future cash flows of each
affected NRG Northeast facility can be estimated, it is not determinable
whether there are any recoverability issues for a portion of the approximately
$400 million of related plant assets for these facilities. If the rates
approved by FERC for NRG Northeasts Connecticut generating facilities are
insufficient to provide future cost recovery, additional asset impairment
charges could be forth coming. NRG Northeast is filing with FERC for additional
clarification of the April Order.

Interest Expense

Interest expense for the three months ended March 31, 2003 was $12.6
million compared to $15.6 million for the three months ended March 31, 2002, a
decrease of $3.0 million or 19.2%. Interest expense primarily relates to the
amortization of deferred finance costs and interest on the senior secured bonds
issued on February 22, 2000 and the affiliated note payable issued on June 15,
2002. The decrease in interest expense is attributable to a decline in the
average principle amounts outstanding on the senior secured
indebtedness.

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Accounting Policies and Estimates

The Company managements discussion and analysis of its financial
condition and results of operations are based upon the Companys consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements and related disclosures in compliance with
generally accepted accounting principles requires the application of
appropriate technical accounting rules and guidance as well as the use of
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. These judgments, in and of themselves,
could materially impact the financial statements and disclosures based on
varying assumptions, which may be appropriate to use. In addition, the
financial and operating environment also may have a significant effect, not
only on the operation of the business, but on the results reported through the
application of accounting measures used in preparing the financial statements
and related disclosures, even if the nature of the accounting policies have not
changed.

On an ongoing basis, the Company evaluates its estimates utilizing
historic experience, consultation with experts and other methods the Company
considers reasonable. In any case, actual results may differ significantly from
the Companys estimates. Any effects on the Companys business, financial
position or results of operations resulting from revisions to these estimates
are recorded in the period in which the facts that give rise to the revision
become known.

Refer to Item 15 Note 2 of the consolidated financial statements of the
Companys Form 10-K for the year ended December 31, 2002 for additional
discussion regarding the Companys accounting policies and estimates.

Liquidity

Liquidity Issues of NRG Energy and it Subsidiaries  Current Status and Chain
of Events

In December 2001, Moodys Investor Service (Moodys) placed NRG Energys
long-term senior unsecured debt rating on review for possible downgrade. In
response, Xcel Energy and NRG Energy put into effect a plan to preserve NRG
Energys investment grade rating and improve its financial condition. This plan
included financial support to NRG Energy from Xcel Energy; marketing certain
NRG Energy assets for sale; canceling and deferring capital spending; and
reducing corporate expenses.

In response to a possible downgrade during 2002, Xcel Energy contributed
$500 million to NRG Energy, and NRG Energy and its subsidiaries sold assets and
businesses that provided NRG Energy in excess of $286 million in cash and
eliminated approximately $432 million in debt. NRG Energy also cancelled or
deferred construction of approximately 3,900 MW of new generation projects. On
July 26, 2002, Standard & Poors (S&P) downgraded NRG Energys senior unsecured
bonds to below investment grade, and three days later Moodys also downgraded
NRG Energys senior unsecured debt rating to below investment grade. Since July
2002, NRG Energy senior unsecured debt, as well as the secured NRG Northeast
Generating LLC bonds and the secured NRG South Central Generating LLC bonds and
secured LSP Energy (Batesville) bonds were downgraded multiple times. After NRG
Energy failed to make payments due under certain unsecured bond obligations on
September 16, 2002, both Moodys and S&P once again lowered their ratings on
NRG Energys unsecured bonds and its subsidiaries secured bonds. Currently,
NRG Energysunsecured bonds carry a rating of D at S&P and
between Ca and C at Moodys, depending on the specific debt issue. NRG
Northeast Generating LLC secured bonds currently carry a rating of D at S&P and
B1 at Moodys.

As a result of the downgrade of NRG Energys credit rating, declining
power prices, increasing fuel prices, the overall down-turn in the energy
industry, and the overall down-turn in the economy, NRG Energy has experienced
severe financial difficulties. These difficulties have caused NRG Energy to,
among other things, miss scheduled principal and interest payments due to its
corporate lenders and bondholders, prepay for fuel and other related delivery
and transportation services and provide performance collateral in certain
instances. NRG Energy has also recorded asset impairment charges of
approximately $3.1 billion as of December 31, 2002, related to various
operating projects as well as for projects that were under construction which
NRG Energy has stopped funding.

NRG Energy and certain wholly owned subsidiaries have failed to timely
make several interest and/or principal payments on indebtedness. These missed
payments have resulted in cross-defaults of numerous other non-recourse and
limited recourse debt instruments of NRG Energy and have caused the
acceleration of multiple debt instruments of NRG Energy, rendering such debt
immediately due and payable. For more specific information regarding NRG
Energys liquidity issues, refer to Liquidity Issues in Item I of Form 10-K
filed by NRG Energy on March 31, 2003.

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Since March 31, 2003 NRG Energy failed to make a first-quarter payment of
$19.1 million due on March 31, 2003 relating to interest and fees on the $1.0
billion unsecured 364-day revolving credit facility; a $13.6 million interest
payment due on April 1, 2003 on the $350 million of 7.75% senior unsecured
notes maturing 2011; a $21.6 million interest payment due on April 1, 2003 on
the $500 million of 8.625% senior unsecured notes maturing 2031; and a $9.6
million interest payment due on May 1, 2003 on the $240 million of 8.0% senior
unsecured notes maturing 2013.  On May 13, 2003, XL Capital Assurance, as controlling party, accelerated
the approximately $319 million of debt issued by NRG Peaker Finance Company LLC. These facilities are in default.

Prior to the downgrades, many corporate guarantees and commitments of NRG
Energy and its subsidiaries required that they be supported or replaced with
letters of credit or cash collateral within 5 to 30 days of a ratings downgrade
below Baa3 or BBB by Moodys or Standard & Poors, respectively. As a result
of the downgrades on July 26, 2002 and July 29, 2002, NRG Energy received demands to post
collateral aggregating approximately $1.1 billion. NRG Energy is presently
working with various secured project lender groups with respect to the issue of
posting collateral and is working towards establishing a comprehensive plan of
restructuring.

In August 2002, NRG Energy retained financial and legal restructuring
advisors to assist its management in the preparation of a comprehensive
financial and operational restructuring. In November 2002, NRG Energy and Xcel Energy presented a
comprehensive plan of restructuring to an ad hoc committee of
its bondholders and a steering committee of its bank lenders (the Ad Hoc
Creditors Committees). The
restructuring plan has served as a basis for continuing negotiations between
the Ad Hoc Creditors Committees, NRG Energy and Xcel Energy related to a
consensual plan of reorganization for NRG Energy.

On November 22, 2002, five former NRG Energy executives filed an
involuntary Chapter 11 petition against NRG Energy in U.S. Bankruptcy
Court for the District of Minnesota. On February 19, 2003, NRG Energy
announced that it had reached a settlement with the petitioners.
On May 12, 2003, the Bankruptcy Court issued an order abstaining from exercising jurisdiction over any aspect of the case and dismissed the case.

On March 26, 2003, Xcel Energy announced that its board of directors had
approved a tentative settlement agreement with holders of most of NRG Energys
long-term notes and the steering committee representing NRGs bank lenders. The
settlement is subject to certain conditions, including the approval of at least
a majority in dollar amount of the NRG Energy bank lenders and long-term
noteholders and definitive documentation. There can be no assurance that such
approvals will be obtained. The terms of the settlement call for Xcel Energy to
make payments to NRG Energy over the next 13 months totaling up to $752 million
for the benefit of NRG Energys creditors in consideration for their waiver of
any existing and potential claims against Xcel Energy. Under the settlement,
Xcel Energy will make the following payments: (i) $350 million at or shortly
following the consummation of a restructuring of NRG Energys debt. It is
expected this payment would be made prior to year-end 2003; (ii) $50 million on
January 1, 2004. At Xcel Energys option, it may fill this requirement with
either cash or Xcel Energy common stock or any combination thereof; and (iii)
$352 million in April 2004. Since the announcement on March 26, 2003,
representatives of NRG Energy, Xcel Energy, the bank lenders and noteholders
have continued to meet to draft the definitive documentation necessary to fully
implement the terms and conditions of the tentative settlement agreement.

On May
14, 2003 NRG Energy and certain of its U.S. affiliates (including NRG
Northeast) filed voluntary petitions for reorganization under Chapter
11 of the United States Bankruptcy Code (the Bankruptcy Code) in the
United States Bankruptcy Court for the Southern District of New York
(the Bankruptcy Court), In re: NRG ENERGY, INC., et al., Case No.
03-13024 (PCB). NRG Energy expects operations to continue as normal
during the restructuring process, while it operates its business as a
debtor-in-possession under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of
the Bankruptcy Code and orders of the Bankruptcy Court. In connection
with its Chapter 11 filing, NRG Energy also announced that the
company had secured a $250 million debtor-in-possession (DIP)
financing facility from GE Capital Corporation, subject to Bankruptcy
Court approval, to be utilized by its NRG Northeast and some of NRG
Northeasts subsidiaries. The company anticipates that the DIP,
together with its cash reserves and its ongoing revenue stream, will
be sufficient to fund its operations, including payment of employee
wages and benefits, during the reorganization process.

On May
15, 2003, NRG Energy announced that it has been notified that the New
York Stock Exchange (NYSE) has suspended trading in NRG Energys
corporate units that trade under the ticker symbol NRZ and that an
application to the Securities and Exchange Commission to delist the
Units is pending the completion of applicable procedures, including
appeal by NRG Energy of the NYSE staffs decision. NRG Energy
does not plan to make such an appeal. The NYSE took this action
following NRG Energys announcement that it and certain of its
U.S. affiliates had filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code.

Cash Flows

|                                                   |  |                            |        |      |  |   |        | 
|-------------------------------------------------- |  | -------------------------- | ------ | ---- |  | - | ------ | 
|                                                   |  | For the three months ended
|                                                   |  | March 31,                 
|                                                   |  |                           
|(In thousands)                                     |  | 2003                       |        | 2002
|                                                   |  |                            |        |     
|Net cash (used) / provided by operating activities |  | $                          | (6,011 | )    |  | $ | 15,387 | 

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Net cash provided by operations decreased during the three months ended
March 31, 2003, compared to the same period in 2002. The most significant
changes in working capital items related to the increases in Accounts
Receivable and Prepaid Expenses during 2003.

|                                                      |  |                            |       |      |  |   |        |  
|----------------------------------------------------- |  | -------------------------- | ----- | ---- |  | - | ------ | -
|                                                      |  | For the three months ended
|                                                      |  | March 31,                 
|                                                      |  |                           
|(In thousands)                                        |  | 2003                       |       | 2002
|                                                      |  |                            |       |     
|Net cash provided by / (used) in investing activities |  | $                          | 4,437 |      |  | $ | (6,995 | )

Net cash provided by investing activities for the three months ended March
31, 2003, increased in comparison to the same period in 2002. The increase is
due to a reduction in capital expenditures and cash proceeds received upon sale
of property.

|                                      |  |                            |      |      |  |   |   | 
|------------------------------------- |  | -------------------------- | ---- | ---- |  | - | - | 
|                                      |  | For the three months ended
|                                      |  | March 31,                 
|                                      |  |                           
|(In thousands)                        |  | 2003                       |      | 2002
|                                      |  |                            |      |     
|Net cash used in financing activities |  | $(                         | 800) |      |  | $ | 0 | 

Net cash used in financing activities for the three months ended March 31,
2003 increased from the same period in 2002. The increase is due to
deferred finance costs incurred during 2003.

The debt agreements of NRG Energys subsidiaries and project affiliates
generally restrict their ability to pay dividends, make distributions or
otherwise transfer funds to NRG Energy. As of March 31, 2003, the Company is
restricted from making distributions to NRG Energy. On March 31, 2003, the
Company had approximately $12.0 million of cash on hand.

Off Balance-Sheet Items

As of March 31, 2003, NRG Northeast does not have any significant
relationships with structured finance or special purpose entities that provide
liquidity, financing or incremental market risk or credit risk.

Contractual obligations and commercial commitments

NRG Northeast has a variety of contractual obligations and other
commercial commitments that represent prospective cash requirements in addition
to its capital expenditure program. The following is a summarized table of
contractual obligations. See additional discussion in Item 15 and Notes 6, 7
and 12 to the Consolidated Financial Statements of NRG Northeasts Form 10-K
filing for the year ended December 31, 2002.

|                                   |  |                                                     |         |            |  |           |         |           |  |               |       |  |  |   |       |  |  |   |       | 
|---------------------------------- |  | --------------------------------------------------- | ------- | ---------- |  | --------- | ------- | --------- |  | ------------- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                   |  | Payments Due by Period Subsequent to March 31, 2003
|                                   |  |                                                    
|                                   |  | Total                                               |         | Short Term |  | 1-3 Years |         | 4-5 Years |  | After 5 Years
|                                   |  |                                                     |         |            |  |           |         |           |  |              
|                                   |  | (In thousands)                                     
|Long term debt                     |  | $                                                   | 556,500 |            |  | $         | 556,500 |           |  | $             |      |  |  | $ |      |  |  | $ |      | 
|Operating Leases                   |  |                                                     | 6,676   |            |  |           | 780     |           |  |               | 1,536 |  |  |   | 1,048 |  |  |   | 3,312 | 
|Note payable  affiliate           |  | $                                                   | 30,000  |            |  | $         | 30,000  |           |  |               |      |  |  |   |      |  |  |   |      | 
|                                   |  |                                                     |         |            |  |           |         |           |  |               |       |  |  |   |       |  |  |   |       | 
|Total contractual cash obligations |  | $                                                   | 593,176 |            |  | $         | 587,280 |           |  | $             | 1,536 |  |  | $ | 1,048 |  |  | $ | 3,312 | 
|                                   |  |                                                     |         |            |  |           |         |           |  |               |       |  |  |   |       |  |  |   |       | 

|                             |  |                                                                |         |            |  |                |         |           |  |               |   |  |  |   |   |  |  |   |   | 
|---------------------------- |  | -------------------------------------------------------------- | ------- | ---------- |  | -------------- | ------- | --------- |  | ------------- | - |  |  | - | - |  |  | - | - | 
|                             |  | Amount of Commitment by Expiration Period as of March 31, 2003
|                             |  |                                                               
|                             |  | Total Amounts                                                  |         |            |  |                |         |           |  |               |   |  |  |   |   |  |  |  
|                             |  | Committed                                                      |         | Short Term |  | 1-3 Years      |         | 4-5 Years |  | After 5 Years
|                             |  |                                                                |         |            |  |                |         |           |  |              
|                             |  |                                                                |         |            |  | (In thousands) |         |           |  |               |   |  |  |  
|Guarantees                   |  | $                                                              | 105,839 |            |  | $              | 105,839 |           |  | $             |  |  |  | $ |  |  |  | $ |  | 
|                             |  |                                                                |         |            |  |                |         |           |  |               |   |  |  |   |   |  |  |   |   | 
|Total commercial commitments |  | $                                                              | 105,839 |            |  | $              | 105,839 |           |  | $             |  |  |  | $ |  |  |  | $ |  | 
|                             |  |                                                                |         |            |  |                |         |           |  |               |   |  |  |   |   |  |  |   |   | 

NRG Northeast provides performance guarantees to third parties on behalf
of NRG Power Marketing in relation to certain of its sales and supply
agreements.

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Derivative Instruments

The tables below disclose NRG Northeasts derivative activities that
include non-exchange traded contracts accounted for at fair value.
Specifically, these tables disaggregate realized and unrealized changes in fair
value; identifies changes in fair value attributable to changes in valuation
techniques; disaggregates estimated fair values at March 31, 2003 based on
whether fair values are determined by quoted market prices or more subjective
means; and indicates the maturities of contracts at March 31, 2003.

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Derivative Activity

|                                                                       |  |                |        |  
|---------------------------------------------------------------------- |  | -------------- | ------ | -
|Gains/(Losses)                                                         |  | Total         
|                                                                       |  |               
|                                                                       |  | (In thousands)
|Fair Value of contracts outstanding at the beginning of the period     |  | $              | (3,641 | )
|Contracts realized or otherwise settled during the period              |  |                | (6,091 | )
|Fair value of new contract when entered into during the period         |  |                |       |  
|Changes in fair values attributable to changes in valuation techniques |  |                |       |  
|Other changes in fair values                                           |  |                | 1,227  |  
|                                                                       |  |                |        |  
|Fair value of contracts outstanding at the end of the period           |  | $              | (8,505 | )
|                                                                       |  |                |        |  

Sources of Fair Value Gains/(Losses)

|                                                 |  |                                       |       |           |  |           |        |           |  |                |        |             |  |   |   |  |  |   |        |  
|------------------------------------------------ |  | ------------------------------------- | ----- | --------- |  | --------- | ------ | --------- |  | -------------- | ------ | ----------- |  | - | - |  |  | - | ------ | -
|                                                 |  | Fair Value of Contracts at Period End
|                                                 |  |                                      
|                                                 |  | Maturity                              |       |           |  |           |        |           |  |                |        | Maturity in |  |   |   | 
|                                                 |  | Less than 1                           |       | Maturity  |  | Maturity  |        | excess of |  | Total Fair    
|Maturity schedule                                |  | Year                                  |       | 1-3 Years |  | 4-5 Years |        | 5 Years   |  | Value         
|                                                 |  |                                       |       |           |  |           |        |           |  |               
|                                                 |  |                                       |       |           |  |           |        |           |  | (In thousands) |        |             |  |  
|Prices actively quoted                           |  | $                                     | 3,521 |           |  | $         | (9,885 | )         |  | $              | (2,141 | )           |  | $ |  |  |  | $ | (8,505 | )
|Prices provided by other external sources        |  |                                       |      |           |  |           |       |           |  |                |       |             |  |   |  |  |  |   |       |  
|Prices based on models & other valuation methods |  |                                       |       |           |  |           |       |           |  |                |       |             |  |   |  |  |  |   |        |  
|                                                 |  |                                       |       |           |  |           |        |           |  |                |        |             |  |   |   |  |  |   |        |  
|                                                 |  | $                                     | 3,521 |           |  | $         | (9,885 | )         |  | $              | (2,141 | )           |  | $ |  |  |  | $ | (8,505 | )
|                                                 |  |                                       |       |           |  |           |        |           |  |                |        |             |  |   |   |  |  |   |        |  

Recent Accounting Pronouncements

In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations.This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS No. 143 requires an entity to
recognize the fair value of a liability for an asset retirement obligation in
the period in which it is incurred. The liability is initially capitalized as
part of the cost of the related tangible long-lived asset and thus depreciated
over the assets useful life. SFAS No. 143 is effective for
financial statements issued for fiscal years beginning after June
15, 2002. Effective January 1, 2003, NRG Northeast adopted SFAS No.
143, as required. Accordingly, NRG Northeast identified certain
retirement obligations related to future environmental obligations.
The adoption of SFAS No. 143 resulted in NRG Northeast recording a
$0.2 million increase in property, plant and equipment and a
$0.3 million increase in other long-term obligations. The cumulative
effect of adopting SFAS No. 143 was a $0.1 million increase in
depreciation expense and a $0.1 million increase in interest expense.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections,that supersedes previous guidance for the reporting of gains and
losses from extinguishment of debt and accounting for leases, among other
things. SFAS No. 145 requires that only gains and losses from the
extinguishment of debt that meet the requirements for classification as
Extraordinary Items, as prescribed in Accounting Practices Board Opinion No.
30, should be disclosed as such in the financial statements. Previous guidance
required all gains and losses from the extinguishment of debt to be classified
as Extraordinary Items. This portion of SFAS No. 145 is effective for fiscal
years beginning after May 15, 2002, with restatement of prior periods required.
NRG Northeast adopted this standard as of January 1, 2003 and has no
extraordinary gains or losses that will require restatement.

In addition, SFAS No. 145 amends SFAS No. 13, Accounting for Leases,as
it relates to accounting by a lessee for certain lease modifications. Under
SFAS No. 13, if a capital lease is modified in such a way that the change gives
rise to a new agreement classified as an operating lease, the assets and
obligation are removed, a gain or loss is recognized and the new lease is
accounted for as an operating lease. Under SFAS No. 145, capital leases that
are modified so the resulting lease agreement is classified as an operating
lease are to be accounted for under the sale-leaseback provisions of SFAS No.
98, Accounting for Leases.These provisions of SFAS No. 145 were effective
for transactions occurring after May 15, 2002.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities,(SFAS No. 146). SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).SFAS No. 146 applies to
costs associated with an exit activity that does not involve an entity newly
acquired in a business combination or with a disposal activity covered by SFAS
No. 144, Accounting for the Impairment

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or Disposal of Long-Lived Assets.The provisions of SFAS No. 146 are
effective for exit or disposal activities that are initiated after December 31,
2002.

In November 2002, The FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others.The initial recognition and initial
measurement provisions of this interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002, irrespective of
the guarantors fiscal year-end. The disclosure requirements became effective
for financial statements of interim or annual periods ending after December 15,
2002. The interpretation addresses the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees. The interpretation also clarifies the requirements related to the
recognition of a liability by a guarantor at the inception of the guarantee for
the obligations the guarantor has undertaken in issuing the guarantee. See Note
7.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities(FIN No. 46). FIN No. 46 requires an enterprises
consolidated financial statements to include subsidiaries in which the
enterprise has a controlling interest. Historically, that requirement has been
applied to subsidiaries in which an enterprise has a majority voting interest,
but in many circumstances the enterprises consolidated financial statements do
not include the consolidation of variable interest entities with which it has
similar relationships but no majority voting interest. Under FIN No. 46 the
voting interest approach is not effective in identifying controlling financial
interest. The new rule requires that for entities to be consolidated that those
assets be initially recorded at their carrying amounts at the date the
requirements of the new rule first apply. If determining carrying amounts as
required is impractical, then the assets are to be measured at fair value the
first date the new rule applies. Any difference between the net amount of any
previously recognized interest in the newly consolidated entity should be
recognized as the cumulative effect of an accounting change. FIN No. 46 becomes
effective in the third quarter of 2003. FIN No. 46 is not expected to have a
significant impact on NRG Northeast.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risks, including changes in commodity
prices and interest rates, and credit risk as disclosed in Managements
Discussion and Analysis in its annual report on Form 10-K for the year ended
December 31, 2002. Except as follows, there have been no material changes as of
March 31, 2003 to the market risk disclosures presented as of December 31,
2002.

Commodity Price Risk

NRG Northeast is exposed to commodity price variability in electricity,
emission allowances and natural gas, oil and coal used to meet fuel
requirements. To manage earnings volatility associated with these commodity
price risks, NRG Northeast, through its affiliate NRG Power Marketing, may
enter into financial instruments, which may take the form of fixed price,
floating price or indexed sales or purchases, and options, such as puts, calls,
basis transactions and swaps.

Through NRG Power Marketing, NRG Northeast utilizes an undiversified
Value-at-Risk (VAR) model to determine the maximum potential three-day loss
in the fair value of the commodity price related financial instruments for the
forward twelve months. The VAR for NRG Northeast assumes a 95% confidence
interval and reflects NRG Northeasts merchant strategy, the generation assets,
load obligations and the bilateral physical and financial transactions of NRG
Northeast. The volatility estimate is based on the implied volatility for at
the money daily call options for forward markets where NRG Northeast has
exposure. This model encompasses the ISO-NE and NYISO generating regions.

The estimated maximum potential three-day loss in fair value of the
commodity price related financial instruments, calculated using the VAR model,
is approximately $155.7 million and $33.8 million as of March 31, 2003 and
2002, respectively. The average, high and low amounts for the three months
ended March 31, 2003 were $121.1 million, $187.0 million and $76.8 million,
respectively. The average, high and low amounts for the three months ended
March 31, 2002 were $33.7 million, $42.2 million and $28.6 million,
respectively.




Item 4. Controls and Procedures

The
Vice President, General Counsel, Treasurer and Controller (the Certifying Officers) have evaluated NRG
Northeasts disclosure controls and procedures as defined in the rules of the
SEC within 90 days of the filing date of this report and have determined that,
except to the extent indicated otherwise in this paragraph, disclosure controls
and procedures were effective in ensuring that material information required to
be disclosed by NRG Northeast in the reports filed under the Securities
Exchange Act of 1934 is recorded, processed, summarized and

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reported within the time periods specified in the SECs rules and forms.
During the fourth quarter of 2002, the Certifying Officers determined that
there were certain deficiencies in the internal controls relating to financial
reporting at NRG Northeast caused by NRG Northeasts pending financial
restructuring and business realignment. During the second half of 2002, there
were material changes and vacancies in senior NRG Northeast management
positions and a diversion of NRG Northeasts financial and management resources
to restructuring efforts. These circumstances detracted from NRG Northeasts
ability through its internal controls to timely monitor and accurately assess
the impact of certain transactions, as would be expected in an effective
financial reporting control environment. NRG Northeast has dedicated and will
continue to dedicate in 2003 resources to make corrections to those control
deficiencies. Notwithstanding the foregoing and as indicated in the
certification accompanying the signature page to this report, the Certifying
Officers have certified that, to the best of their knowledge, the financial
statements, and other financial information included in this report on Form
10-Q, fairly present in all material respects the financial conditions, results
of operations and cash flows of NRG Northeast as of, and for the periods
presented in this report.

NRG Northeasts Certifying Officers are primarily responsible for the
accuracy of the financial information that is represented in this report. To
meet their responsibility for financial reporting, they have established
internal controls and procedures which, subject to the disclosure in the
foregoing paragraph, they believe are adequate to provide reasonable assurance
that NRG Northeasts assets are protected from loss. There were no significant
changes in internal controls or in other factors that could significantly
affect these controls subsequent to the date of the Certifying Officers
evaluation.




Part II  OTHER INFORMATION




Item 1. Legal Proceedings

The New York Voluntary Bankruptcy Case

On
May 14, 2003 NRG Energy and certain of its U.S. affiliates
(including NRG Northeast)
filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code (the Bankruptcy Code) in the United
States Bankruptcy Court for the Southern District of New York (the
Bankruptcy Court), In re: NRG ENERGY, INC., et. al., Case No.
03-13024 (PCB). NRG Energy expects operations to continue as normal
during the restructuring process, while it operates its business as a
debtor-in-possession under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of
the Bankruptcy Code and orders of the Bankruptcy Court.

Fortistar Capital Inc. v. NRG Energy, Inc., Hennepin County District Court

On July 12, 1999, Fortistar Capital Inc. sued NRG Energy in Minnesota
state court. The complaint sought injunctive relief and damages of over $50
million resulting from NRG Energys alleged breach of a letter agreement with
Fortistar relating to the Oswego Steam Station. NRG Energy asserted
counterclaims. After considerable litigation, the parties entered into a
conditional, confidential settlement agreement, which was subject to necessary
board and lender approvals. NRG Energy was unable to obtain necessary
approvals. Fortistar has moved the court to enforce the settlement, seeking
damages in excess of $35 million plus interest and attorneys fees. NRG Energy
is opposing Fortistars motion on the grounds that conditions to contract
performance have not been satisfied. No decision has been made on the pending
motion, and NRG Energy cannot predict the outcome of this dispute.

Connecticut Light & Power Company v. NRG Power Marketing Inc., Docket No.
3:01-CV-2373 (A WT), pending in the United States District Court, District of
Connecticut

This matter involves a claim by Connecticut Light & Power Company for
recovery of amounts it claims are owing for congestion charges under the terms
of a Standard Offer Services contract between the parties, dated October 29,
1999. CL&P has served and filed its motion for summary judgment to which NRG
Power Marketing filed a response on March 21, 2003. CL&P has offset
approximately $30 million from amounts owed to NRG Power Marketing, claiming
that it has the right to offset those amounts under the contract. NRG Power
Marketing, has counterclaimed seeking to recover those amounts, arguing among
other things that CL&P has no rights under the contract to offset them. On May 14, 2003, NRG Power Marketing
provided notice to CL&P of termination of the contract effective May 19, 2003. Pursuant to
the request of the Attorney General of Connecticut and the Connecticut Department of Public
Utility Control. On May 16, 2003, the Federal Energy Regulating Commission (FERC) issued an Order directing NRG Power
Marketing to continue to provide service to CL&P under the contract, pending further order by FERC. NRG
Power Marketing cannot estimate at this time the likelihood of an unfavorable
outcome in this matter, or the overall exposure for congestion charges for the
full term of the contract. Although the outcome of this litigation may have an
affect on NRG Northeast, NRG Northeast is not a party to this litigation.

The State of New York and Erin M. Crotty, as Commissioner of the New York State
Department of Environmental Conservation v. Niagara Mohawk Power Corporation et
al.,United States District Court for the Western District of New York, Civil
Action No. 02-CV-002S

In January, 2002, NRG Energy and Niagara Mohawk Power Corporation (NiMo)
were sued by the New York Department of Environmental Conservation in federal
court in New York. The complaint asserted that projects undertaken at NRG
Energys Huntley and Dunkirk plants by NiMo, the former owner of the
facilities, required preconstruction permits pursuant to the Clean Air Act and
that the failure to obtain these permits violated federal and state laws. In
July, 2002, NRG Energy filed a motion to dismiss. On March 27, 2003 the court
dismissed the complaint against NRG Energy with prejudice as to the federal
claims and without prejudice as to the state claims. It is possible the state
will appeal this dismissal to the Second Circuit Court of Appeals. In the
meantime, on April 25, 2003, the state provided to NRG Energy notice of intent
to again sue the Company and various affiliates by filing a second amended
complaint in this same action in the federal court in New York, asserting
against the NRG Defendants violations of operating permits

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and deficient operating permits at the Huntley and Dunkirk plants. If the
case ultimately is litigated to a judgment and there is an unfavorable outcome
that could not be addressed through use of compliant fuels and/or a plantwide
applicability limit, NRG Energy has estimated that the total investment that
would be required to install pollution control devices could be as high as $300
million over a ten to twelve-year period, and NRG Energy may be responsible for
payment of certain penalties and fines.

Niagara Mohawk Power Corporation v. NRG Energy, Inc., Huntley Power, LLC, and
Dunkirk Power, LLC,Supreme Court, State of New York, County of Onondaga, Case
No. 2001-4372

NRG Energy has asserted that NiMo is obligated to indemnify it for any
related compliance costs associated with resolution of the enforcement action.
NiMo has filed suit in state court in New York seeking a declaratory judgment
with respect to its obligations to indemnify NRG Energy under the asset sales
agreement. NRG Energy has pending a summary judgment motion on its entitlement
to be reimbursed by NiMo for the attorneys fees NRG Energy has incurred in the
enforcement action, and that motion should be heard within the next 60 days.

Huntley Power LLC, Dunkirk Power LLC and Oswego Power LLC

All three of these facilities have been issued Notices of Violation with
respect to opacity exceedances. NRG Energy has been engaged in consent order
negotiations with the New York State Department of Environmental Conservation
(DEC) relative to opacity issues affecting all three facilities periodically
since 1999. One proposed consent order was forwarded by DEC under cover of a
letter dated January 22, 2002, which makes reference to 7,890 violations at the
three facilities and contains a proposed payable penalty for such violations of
$900,000. On February 5, 2003, DEC sent to NRG Energy a proposed Schedule of
Compliance and asserted that it is to be used in conjunction with newly-drafted
consent orders. NRG Energy has not yet received the consent orders although NRG
Energy has been told by DEC that DEC is now seeking a penalty in excess of that
cited in its January 22, 2002 letter. NRG Energy expects to continue
negotiations with DEC regarding the proposed consent orders, including the
Schedule of Compliance and the penalty amount. NRG Energy cannot predict
whether those discussions with the DEC will result in a settlement and, if they
do, what sanctions will be imposed. In the event that the consent order
negotiations are unsuccessful, NRG Energy does not know what relief DEC will
seek through an enforcement action and what the result of such action will be.

Niagara Mohawk Power Corporation v. Dunkirk Power LLC, et al., Supreme Court,
Erie County, Index No. 1-2000-8681

On October 2, 2000, plaintiff Niagara Mohawk Power Corporation commenced
this action against NRG Energy to recover damages plus late fees, less payments
received through the date of judgment, as well as any additional amounts due
and owing, for electric service provided to the Dunkirk Plant after September
18, 2000. Plaintiff Niagara Mohawk claims that NRG Energy has failed to pay
retail tariff amounts for utility services commencing on or about June 11, 1999
and continuing to September 18, 2000 and thereafter. Plaintiff has alleged
breach of contract, suit on account, violation of statutory duty, and unjust
enrichment claims. On or about October 23, 2000, NRG Energy served an answer
denying liability and asserting affirmative defenses.

After proceeding through discovery, and prior to trial, the parties and
the court entered into a stipulation and order filed August 9, 2002
consolidating this action with two other actions against NRG Northeasts
Huntley and Oswego subsidiaries, both of which cases assert the same claims and
legal theories for failure to pay retail tariffs for utility services.

On October 8, 2002, a Stipulation and Order was filed in the Erie County
Clerks Office staying this action pending submission of some or all of the
disputes in the action to the FERC. NRG Energy cannot make an evaluation of the
likelihood of an unfavorable outcome. The cumulative potential loss could
exceed $35 million.

Niagara Mohawk Power Corporation v. Huntley Power LLC, NRG Huntley Operations,
Inc., NRG Dunkirk Operations, Inc., Dunkirk Power LLC, Oswego Harbor Power LLC,
and NRG Oswego Operations, Inc., Case Filed November 26, 2002 in Federal Energy
Regulatory Commission Docket No. EL 03-27-000.

This is the companion action filed by Niagara Mohawk at FERC, similarly
asserting that Niagara Mohawk is entitled to receive retail tariff amounts for
electric service provided to the Huntley, Dunkirk and Oswego plants. The
parties are currently engaged in settlement negotiations in an tempt to resolve
both this FERC action and the above-referenced state court proceedings
respecting amounts owing for electrical service provided to these three plants.
At this stage of the proceedings, NRG Energy cannot estimate the likelihood of
an adverse determination. As noted above, the cumulative potential loss could
exceed $35 million.

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NRG Energy Credit Defaults

NRG Energy and various of its subsidiaries are in default under various of
their credit facilities, financial instruments, construction agreements and
other contracts, which have given rise to liens, claims and contingencies
against them and may in the future give rise to additional liens, claims and
contingencies against them. In addition, NRG Energy and various of its
subsidiaries have entered into various guarantees, equity contribution
agreements, and other financial support agreements with respect to the
obligations of their affiliates, which have given rise to liens, claims and
contingencies against them and may in the future give rise to additional liens,
claims and contingencies against the party or parties providing the financial
support. NRG Energy cannot at this time predict the outcome or financial impact
of these matters.




Item 3. Defaults Upon Senior Securities

NRG Northeast has identified the following material defaults with respect
to the indebtedness of the Company and its significant subsidiaries:

$320 million of 8.065% Series A Senior Secured Bonds due 2004 issued by NRG Northeast Generating LLC



| |  |  | Failure to make $53.5 million principal payment on December 15, 2002
| | - |  | --------------------------------------------------------------------
|
| |  |  | Failure to fund debt service reserve account                        

$130 million of 8.824% Series B Senior Secured Bonds due 2015 issued by NRG Northeast Generating LLC



| |  |  | Failure to fund debt service reserve account
| | - |  | --------------------------------------------

$300 million of 9.29% Series C Senior Secured Bonds due 2024 issued by NRG Northeast Generating LLC



| |  |  | Failure to fund debt service reserve account
| | - |  | --------------------------------------------

In addition to the foregoing, there may be additional technical defaults
with respect to these or other NRG Northeast debt instruments. Further,
defaults on or acceleration of the foregoing debt instruments may result in
cross-defaults on or cross-acceleration of these or other NRG Northeast debt
instruments.




Item 6. Exhibits and Reports on Form 8-K





|(A) |  | Exhibits
|--- |  | --------



| | 99.1 |  | Officers Certification
| | ---- |  | -----------------------



|(B) |  | Reports on Form 8-K
|--- |  | -------------------
|   
|    |  | None.              






Cautionary Statement Regarding Forward-Looking Statements

The information presented in this quarterly report includes
forward-looking statements in addition to historical information. These
statements involve known and unknown risks and relate to future events, or
projected business results. In some cases forward-looking statements may be
identified by their use of such words as may, expects, plans,
anticipates, contemplates, believes, and similar terms. Forward-looking
statements are only predictions or expectations and actual results may differ
materially from the expectations expressed in any forward-looking statement.
While NRG Northeast believes that the expectations expressed in such
forward-looking statements are reasonable, NRG Northeast can give no assurances
that these expectations will prove to have been correct. In addition to any
assumptions and other factors referred to specifically in connection with such
forward-looking statements, factors that could cause actual results to differ
materially from those contemplated in any forward-looking statements include,
among others, the following:



| |  |  | The impact of NRG Energys or
NRG Northeasts Chapter 11 bankruptcy filing in the United States Bankruptcy
Court for the Southern District of New York, including the actions
and decisions of creditors of NRG Energy and NRG Northeast and/or
interested third parties, the various instructions, orders and
decisions of the Bankruptcy Court and the possibility of a bankruptcy filing by additional NRG Energy subsidiaries.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Changes in market design or implementation of rules that affect NRG
Energys ability to transmit or sell power in any market, including,
without limitation, the failure of market mechanism to allow NRG Energy
to recover all of its fixed costs through the FERC authorized bidding
procedure on certain Connecticut generation facilities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NRG Northeast undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The foregoing review of factors that could cause NRG Northeasts actual results
to differ materially from those contemplated in any forward-looking statements
included in this Form 10-Q should not be construed as exhaustive.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                    |  |                                                                                |  | 
|------------------- |  | ------------------------------------------------------------------------------ |  | 
|                    |  | NRG Northeast Generating LLC                                                   |  | 
|                    |  |                                                                                |  | 
|                    |  |                                                                                |  | 
|                    |  | (Registrant)                                                                   |  | 
|                    |  |                                                                                |  | 
|                    |  |                                                                                |  | 
|                    |  | /s/ Scott J. Davido                                                            |  | 
|                    |  |                                                                                |  | 
|                    |  | Scott J. Davido,
Vice President, General Counsel
(Principal Executive Officer) |  | 
|                    |  |                                                                                |  | 
|                    |  | /s/ George P. Schaefer                                                         |  | 
|                    |  |                                                                                |  | 
|Date:  May 20, 2003 |  | George P. Schaefer, Treasurer
(Principal Financial Officer)                    |  | 
|                    |  |                                                                                |  | 
|                    |  | /s/ William T. Pieper                                                          |  | 
|                    |  |                                                                                |  | 
|                    |  | William T. Pieper, Controller
(Principal Accounting Officer)                   |  | 
|                    |  |                                                                                |  | 

29



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##### Table of Contents



CERTIFICATIONS

I, Scott J. Davido, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of NRG Northeast
Generating LLC;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: May 20, 2003



/s/ Scott J. Davido

Vice President, General Counsel

30



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##### Table of Contents



CERTIFICATIONS

I, George P. Schaefer, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of NRG Northeast
Generating LLC;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: May 20, 2003



/s/ George P. Schaefer

Treasurer

31



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##### Table of Contents



CERTIFICATIONS

I, William T. Pieper, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of NRG Northeast
Generating LLC;                                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: May 20, 2003



/s/ William T. Pieper

Controller

32