<PAGE>

                                                                     Exhibit 4.7
                      [LETTERHEAD OF SHEPHERD & WEDDERBURN]

                             SP TRANSMISSION LIMITED

                         CONFORMED TRANSMISSION LICENCE


     1.  This conformed electricity transmission licence has been produced by
         Shepherd & Wedderburn from materials supplied by ScottishPower. It is
         intended for use by ScottishPower personnel as a convenient reference
         tool, but is not a substitute for the definitive texts from which it
         has been produced.

     2.  The conformed licence is intended to consolidate (a) the provisions of
         annexe 2 to the licensing scheme made by the Secretary of State on 28
         September 2001 in relation to Scottish Power UK plc and Manweb plc (the
         "scheme"), (b) the standard conditions for transmission licences
         determined by the Secretary of State on 27 September 2001 as brought
         into effect in relation to SP Transmission Limited by the scheme (c)
         all directions and consents of a continuing nature issued under the
         licence and (d) all modifications to the licence made since 1 October
         2001.

     3.  Those standard conditions which, in accordance with Part II of the
         licence, are not in effect have been included in this document for
         completeness, but are shown in italics.

     4.  The underline and strike through contained in this document reflect the
         changes made by the modification to the electricity transmission
         licence issued to SP Transmission Limited on 21 December 2001.

<PAGE>

                                    CONTENTS

<TABLE>
<S>                                                                                     <C>
                                   PRELIMINARY
                                   -----------

PART I: TERMS OF THE LICENCE                                                            1

PART II: THE STANDARD CONDITIONS                                                        3

PART III: AMENDED STANDARD CONDITIONS                                                   5

                        CONSOLIDATED STANDARD CONDITIONS
                        --------------------------------

SECTION A.     INTERPRETATION, APPLICATION AND PAYMENTS                                 8

1.    Definitions and Interpretation                                                    8

2.    Application of Section C of Part II Supplementary Standard
      Conditions for England and Wales                                                 26

3.    Application of Section D of Part II Supplementary Conditions for Scotland        28

4.    Payments by the Licensee to the Authority                                        30

SECTION B      GENERAL                                                                 34

5.    Regulatory Accounts                                                              34

6.    Change of Financial Year                                                         40

7.    Licensee's Grid Code                                                             42

7A .  Compliance with Other Grid Codes                                                 45

8.    Compliance with Distribution Codes                                               46

9.    Change Co-ordination for the Utilities Act 2000                                  47

10.   Disposal of Relevant Assets                                                      49

11.   Provision of Information to the Authority                                        52

12.   Prohibition of Cross-Subsidies                                                   55

SECTION C -    SUPPLEMENTARY STANDARD CONDITIONS
               FOR ENGLAND AND WALES                                                   56

C1.   Interpretation of Section C                                                      56

C2.   Prohibited Activities                                                            62

C3.   Balancing and Settlement Code                                                    63
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                 <C>
C4.   NETA Implementation                                                             71

C5.   Supplementary Grid Code Condition for England and Wales                         74

C6.   Pooling and Settlement Agreement Run-off                                        75

C7.   Charges for Use of System                                                       78

C7A.  Use of System Charging Methodology                                              81

C7B.  Connection Charging Methodology                                                 83

C7C.  Non- discrimination                                                             87

C7D.  Requirement to Offer Terms                                                      88

C7E.  Functions of the Authority                                                      91

C7F.  Connection and Use of System Code                                               94

C7G.  Information about the Licensee's Transmission System                            99

C8.   Security Arrangements                                                          101

SECTION D -    SUPPLEMENTARY CONDITIONS FOR SCOTLAND                                 102

D1.   Interpretation of Section D                                                    102

D2.   Trading Code for Scotland                                                      105

D3.   Restriction on Use of Certain Information                                      111

D3A.  Independence of and Appointment of Managing Director of the
      Transmission Business                                                          114

D3B.  Appointment of Compliance Officer                                              121

D4.   Transmission System Outages                                                    125

D5.   Supplementary Grid Code Condition for Scotland                                 126

D6.   Settlement Agreement for Scotland                                              127

D7.   Security Arrangements                                                          128

D8.   Basis of charges for use of system and connection to system:
      requirements for transparency                                                  129

D8A.  Non-discrimination in the provision of use of system and connection
      to system                                                                      134

D8B.  Requirement to offer terms                                                     135

D8C.  Functions of the Authority                                                     139
</TABLE>

<PAGE>

                        SPECIAL CONDITIONS AND SCHEDULES
                        --------------------------------

<TABLE>
<S>                                                                                         <C>
PART IV: SPECIAL CONDITIONS                                                                 141

A:   Interpretation                                                                         141

B:   Basis of charges for use of the Scottish interconnection                               142

C:   Non-discrimination in the provision of use of the Scottish interconnection             149

D:   Requirement to offer terms                                                             151

E:   Functions of the Authority                                                             155

F:   Submission of certain agreements                                                       156

G:   Requests for Transit                                                                   159

H:   Transmission System Security Standard and Quality of Service (Scotland)                161

I:   Definitions                                                                            164

J:   Restriction of transmission charges                                                    167

Annex A to Special Condition J                                                              170

K:   Restriction of transmission charges: adjustments                                       171

L:   Information to be provided to the Authority in connection with
     the charge restriction conditions                                                      172

M:   Allowances in respect of security costs                                                175

N:   Duration of charge restriction conditions                                              178

Schedule A:  Supplementary Provisions of the Charge Restriction Conditions                  180

O:   Restriction on Activity and Financial Ringfencing                                      183

P:   Availability of Resources                                                              186

Q:   Undertaking from ultimate controller                                                   189

R:   Credit Rating of Licensee                                                              191

S:   Indebtedness                                                                           192

SCHEDULE 1 - AUTHORISED AREA                                                                195

SCHEDULE 2 - REVOCATION                                                                     196
</TABLE>

<PAGE>

                             CONSENTS AND DIRECTIONS
                             -----------------------

<TABLE>
<S>                                                                                  <C>
(01.04.92)   Direction issued under Condition 7 (of Part IV) of the
             Generation, Transmission and Public Electricity Supply Licence
             of Scottish Power UK plc now Standard Condition 10 of this licence     200

(28.07.00)   Direction issued under Conditions 8 and 8A (of Part IV) of
             the Transmission Licence of Scottish Power UK plc now
             Standard Condition D3 and D3A of this licence                          203

(01.10.01)   Consent issued under Special Licence Condition S of this licence       206

(01.10.01)   Consent issued under Special Licence Condition S of this licence
             and Annex thereo                                                       207

(12.11.01)   Direction issued under Special Licence Condition H of this licence     213

(20.11.01)   Consent issued under Special Licence Condition S of this licence       216

(28.01.02)   Direction issued under Standard Condition 10 of this licence           219
</TABLE>

<PAGE>

                                   PRELIMINARY

                          PART I: TERMS OF THE LICENCE

1.   This licence, treated as granted under section 6(1)(b) of the Electricity
     Act 1989 ("the Act"), authorises SP Transmission Limited (a company
     registered in Scotland under number SC189126) ("the licensee") whose
     registered office is situated at 1 Atlantic Quay, Robertson Street, Glasgow
     G2 8SP, to transmit electricity for the purpose of giving a supply to any
     premises or enabling a supply to be so given in the area specified in
     Schedule 1 during the period specified in paragraph 3 below, subject to -

     (a)  the standard conditions of electricity transmission licences referred
          to in -

          (i)  paragraph 1 of Part II below which shall have effect in the
               licence; and

          (ii) paragraph 2 of Part II below which shall have effect in the
               licence only in accordance with the provisions of standard
               conditions 2 and 3 respectively,

          in each case, subject to such amendments (if any) as are set out in
          Part III below (together "the conditions");

     (b)  the special conditions, if any, set out in Part IV below (the "Special
          Conditions");

     (c)  such Schedules hereto, if any, as may be referenced in the conditions,
          the Special Conditions or the terms of the licence.

2.   This licence is subject to transfer, modification or amendment in
     accordance with the provisions of the Act, the Special Conditions or the
     conditions.

3.   This licence, unless revoked in accordance with the terms of Schedule 2,
     shall continue until determined by not less than 25 years' notice in
     writing given by the Authority to the licensee.

4.   The provisions of section 109(1) of the Act (Service of documents) shall
     have effect as if set out herein and as if for the words "this Act" there
     were substituted the words "this licence".

5.   Without prejudice to sections 11 and 23(1) of the Interpretation Act 1978,
     Parts I to IV inclusive of, and the Schedules to, this licence shall be
     interpreted and construed in like manner as an Act of Parliament passed
     after the commencement of the Interpretation Act 1978.

                                       1

<PAGE>

6.   References in this licence to a provision of any enactment where, after the
     date of this licence -

     (a)  the enactment has been replaced or supplemented by another enactment,
          and

     (b)  such enactment incorporates a corresponding provision in relation to
          fundamentally the same subject matter,

     shall be construed, so far as the context permits, as including a reference
     to the corresponding provision of that other enactment. Pursuant to a
     licensing scheme made by the Secretary of State under Part II of Schedule 7
     to the Utilities Act 2000 on 28 September 2001 this licence was made and is
     treated as granted under section 6(1)(b) of the Electricity Act 1989.

                                       2

<PAGE>

                        PART II: THE STANDARD CONDITIONS

1.   Standard conditions in effect in this licence

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Section A                        Section B                        Section D
------------------------------------------------------------------------------------------------
<S>                              <C>                               <C>
Standard condition 1             Standard condition 5             Standard condition D1
------------------------------------------------------------------------------------------------
Standard condition 2             Standard condition 6             Standard condition D2
------------------------------------------------------------------------------------------------
Standard condition 3             Standard condition 7             Standard condition D3
------------------------------------------------------------------------------------------------
Standard condition 4             Standard condition 7A            Standard condition D3A
------------------------------------------------------------------------------------------------
                                 Standard condition 8             Standard condition D3B
------------------------------------------------------------------------------------------------
                                 Standard condition 9             Standard condition D4
------------------------------------------------------------------------------------------------
                                 Standard condition 10            Standard condition D5
------------------------------------------------------------------------------------------------
                                 Standard condition 11            Standard condition D6
------------------------------------------------------------------------------------------------
                                 Standard condition 12            Standard condition D7
------------------------------------------------------------------------------------------------
                                                                  Standard condition D8
------------------------------------------------------------------------------------------------
                                                                  Standard condition D8A
------------------------------------------------------------------------------------------------
                                                                  Standard condition D8B
------------------------------------------------------------------------------------------------
                                                                  Standard condition D8C
------------------------------------------------------------------------------------------------
</TABLE>

2.   Standard conditions not in effect in this licence

--------------------------------------
Section C
--------------------------------------
Standard condition C1
--------------------------------------
Standard condition C2
--------------------------------------
Standard condition C3
--------------------------------------
Standard condition C4
--------------------------------------
Standard condition C5
--------------------------------------
Standard condition C6
--------------------------------------
Standard condition C7
--------------------------------------
Standard condition C7A
--------------------------------------

                                       3

<PAGE>

---------------------------------
Standard condition C7B
---------------------------------
Standard condition C7C
---------------------------------
Standard condition C7D
---------------------------------
Standard condition C7E
---------------------------------
Standard condition C7F
---------------------------------
Standard condition C7G
---------------------------------
Standard condition C8
---------------------------------

Note: A copy of the current standard conditions of electricity generation
licences can be inspected at the principal office of the Authority. The above
lists are correct at the date of this licence but may be changed by subsequent
amendments or modifications to the licence. The authoritative up-to-date version
of this licence is available for public inspection at the principal office of
the Authority.

                                       4

<PAGE>

                      PART III: AMENDED STANDARD CONDITIONS

1.   Standard condition 1 shall be amended by the addition of the following text
     as an additional definition:-

     ""bulk supply point"                   means any point at which electricity
                                            is delivered from a transmission
                                            system to any distribution system."

2.   Standard condition 5 (Regulatory Accounts) shall be amended by the addition
     of the following text at the start of paragraph 6:

     "6.  Unless the Authority otherwise consents (such consent may be given in
     relation to some or all of the obligations in this condition and may be
     given subject to such conditions as the Authority considers appropriate),"

3.   Standard condition 11 (Provision of Information to the Authority) shall be
     amended by the addition of the following text as new paragraphs 6 to 9:

     "6.  The licensee shall procure from each company or other person which the
          licensee knows or reasonably should know is at any time an ultimate
          controller of the licensee a legally enforceable undertaking in favour
          of the licensee in a form specified by the Authority that that
          ultimate controller ("the information covenantor") will give to the
          licensee, and will procure that any person (including, without
          limitation, a corporate body) which is a subsidiary of, or is
          controlled by, the information covenantor (other than the licensee and
          the licensee and its subsidiaries) will give to the licensee, all such
          information as may be necessary to enable the licensee to comply fully
          with the obligation imposed on it by paragraph 1. Such undertaking
          shall be obtained within 7 days of such corporate body or other person
          in question becoming an ultimate controller of the licensee and shall
          remain in force for so long as the licensee remains the holder of this
          licence and the information covenantor remains an ultimate controller
          of the licensee.

     7.   The licensee shall deliver to the Authority evidence (including a copy
          of each such undertaking) that the licensee has complied with the
          obligation to procure undertakings pursuant to paragraph 6, and shall
          comply with any direction from the Authority to enforce any
          undertaking so procured.

                                       5

<PAGE>

     8.   The licensee shall not, save with the consent in writing of the
          Authority, enter (directly or indirectly) into any agreement or
          arrangement with any ultimate controller of the licensee or, where the
          ultimate controller is a corporate body, any of the subsidiaries of
          such a corporate ultimate controller (other than the subsidiaries of
          the licensee) at a time when:

          (a)  an undertaking complying with paragraph 6 is not in place in
               relation to that ultimate controller; or

          (b)  there is an unremedied breach of such undertaking; or

          (c)  the licensee is in breach of the terms of any direction issued by
               the Authority under paragraph 7 of this condition.

     9.   In this condition

           "ultimate controller"             means:

                                             (a)  a holding company of the
                                                  licensee which is not itself a
                                                  subsidiary of another company;
                                                  and

                                             (b)  any person who (whether alone
                                                  or with a person or persons
                                                  connected with him) is in a
                                                  position to control, or to
                                                  exercise significant influence
                                                  over, the policy of the
                                                  licensee or any holding
                                                  company of the licensee by
                                                  virtue of:

                                                  (i)  rights under contractual
                                                       arrangements to which he
                                                       is a party or of which he
                                                       is a beneficiary; or

                                                  (ii) rights of ownership
                                                       (including rights
                                                       attached to or deriving

                                       6

<PAGE>

                                                    from securities or rights
                                                    under a trust) which are
                                                    held by him or of which he
                                                    is a beneficiary; but
                                                    excluding any director or
                                                    employee of a corporate body
                                                    in his capacity as such; and

                                        (c)  for the purposes of sub-paragraph
                                             (b), a person is connected with
                                             another person if they are party to
                                             any arrangement regarding the
                                             exercise of any such rights as are
                                             described in that paragraph."

4.   Standard condition 12 (Prohibition of Cross-Subsidies) shall be amended by
     the addition of the following text as a new paragraph 2 of that condition:

     "2.  Nothing which the licensee is obliged to do or not to do pursuant to
          this licence or any other document which grants a licence to the
          licensee under the Act shall be regarded as a cross-subsidy for the
          purposes of this condition."

                                       7

<PAGE>

                        CONSOLIDATED STANDARD CONDITIONS

               SECTION A. INTERPRETATION, APPLICATION AND PAYMENTS

Condition 1. Definitions and Interpretation

1. In the standard conditions unless the context otherwise requires:


the "Act"                       means the Electricity Act 1989.


"affiliate"                     in relation to the licensee means any holding
                                company or subsidiary of the licensee or any
                                subsidiary of a holding company of the licensee,
                                in each case within the meaning of sections 736.
                                736A, and 736B of the Companies Act 1985.

"alternative accounting rules"  for the purposes of standard condition 5
                                (Regulatory Accounts) only, has the meaning
                                given in that condition.

"ancillary services"            means:

                                (a) such services as any authorised electricity
                                operator may be required to have available as
                                ancillary services pursuant to the licensee's
                                Grid Code; and

                                (b) such services as any authorised electricity
                                operator or person making interconnector or
                                Scottish interconnection transfers may have
                                agreed to have

                                       8

<PAGE>

                                available as being ancillary services pursuant
                                to any agreement made with the licensee

                                and which may be offered for purchase by the
                                licensee for the purpose of securing stability
                                of operation on the licensee's transmission
                                system and the distribution system of any
                                authorised electricity operator or any system
                                linked to the licensee's transmission system by
                                an interconnector or Scottish interconnection.

"Application Regulations"       means the Electricity (Applications for Licences
                                and Extensions and Restrictions of Licences)
                                Regulations 2001.

"appropriate time"              for the purposes of standard condition D3A
                                (Independence of and Appointment of a Managing
                                Director of the Transmission Business) only, has
                                the meaning given in that condition.

"auditors"                      means the licensee's auditors for the time being
                                holding office in accordance with the
                                requirements of the Companies Act 1985.

"authorised"                    in relation to any business or activity means
                                authorised by licence granted or treated as
                                granted under section 6 or exemption granted
                                under section 5 of the Act.

"authorised area"               means the area from time to time comprised in
                                Schedule 1 to this licence.

                                       9

<PAGE>

"authorised electricity operator"     means any person (other than the licensee
                                      in its capacity as operator of the
                                      licensee's transmission system) who is
                                      authorised to generate, transmit,
                                      distribute, or supply electricity and for
                                      the purposes of standard conditions C7C to
                                      C7E inclusive shall include any person who
                                      has made application to be so authorised
                                      which application has not been refused and
                                      any person transferring electricity to or
                                      from the licensee's transmission system
                                      across any interconnector or Scottish
                                      interconnection (or who has made an
                                      application for use of an interconnector
                                      or Scottish interconnection which has not
                                      been refused).

the "Authority"                       means the Gas and Electricity Markets
                                      Authority established under section 1 of
                                      the Utilities Act 2000.

"balancing mechanism"                 for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"balancing services"                  for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"balancing services activity"         for the purposes of Section C only, has
                                      the meaning given in standard condition
                                      C1 (Interpretation of Section C).

"bilateral agreement"                 for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of

                                       10

<PAGE>

                                      Section C).

"bilateral connection agreement"      for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"bulk supply point"                   means any point at which electricity is
                                      delivered from a transmission system to
                                      any distribution system.

"BSC Framework Agreement"             for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"competent authority"                 for the purposes of Section D only, has
                                      the meaning given in standard condition D3
                                      (Restriction on Use of Certain
                                      Information).

"confidential information"            for the purposes of Section D only, has
                                      the meaning given in standard condition D3
                                      (Restriction on Use of Certain
                                      Information).

"connection charges"                  means charges made or levied or to be made
                                      or levied for the carrying out (whether
                                      before or after the date on which the
                                      licence came into force) or works and
                                      provision and installation of electrical
                                      plant, electric lines and meters in
                                      constructing or modifying entry and exit
                                      points on the licensee's transmission
                                      system together with charges in respect of
                                      maintenance and repair of such items in so
                                      far as not otherwise recoverable as use of
                                      system charges and in respect of
                                      disconnection and the removal of
                                      electrical plant,

                                       11

<PAGE>

                                      electric lines and ancillary meters
                                      following disconnection, all as more fully
                                      described in paragraphs 4 and 8 of
                                      standard condition C7B (Connection
                                      Charging Methodology) and special
                                      condition B1 (Basis of Charges for Use of
                                      Scottish Interconnection), whether or not
                                      such charges are annualised.

"connection charging methodology"     for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"consolidated transmission business"  for the purposes of standard condition 5
                                      (Regulatory Accounts) only, has the
                                      meaning given in that condition.

"Consumer Council"                    means the Gas and Electricity Consumer
                                      Council established under section 2 of the
                                      Utilities Act 2000.

"construction agreement"              for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"contract"                            for the purposes of paragraph 9 of
                                      standard condition D2 (Trading Code for
                                      Scotland) only, has the meaning given in
                                      that condition.

"core industry documents"             for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

                                       12

<PAGE>

"customer"                                means any person supplied or requiring
                                          to be supplied with electricity at any
                                          premises in Great Britain but shall
                                          not include any authorised electricity
                                          operator in his capacity as such.

"CUSC"                                    for the purposes of Section C only,
                                          has the meaning given in standard
                                          condition C1 (Interpretation of
                                          Section C).

"CUSC user"                               for the purposes of Section C only,
                                          has the meaning given in standard
                                          condition C1 (Interpretation of
                                          Section C).

"Director General of Electricity Supply"  for the purposes of standard condition
                                          4 (Payments by the Licensee to the
                                          Authority) only, has the meaning given
                                          in that condition.

"disposal"                                for the purposes of standard condition
                                          10 (Disposal of Relevant Assets) only,
                                          has the meaning given in that
                                          condition.

"Distribution Code"                       means any distribution code required
                                          to be prepared by a licensed
                                          distributor pursuant to standard
                                          condition 9 (Distribution Code) of a
                                          distribution licence and approved by
                                          the Authority and revised from time to
                                          time with the approval of the
                                          Authority.

"distribution licence"                    means a distribution licence granted
                                          or treated as granted under section
                                          6(1)(c) of the Act.

                                       13

<PAGE>

"distribution system"                     means the system consisting (wholly or
                                          mainly) of electric lines owned or
                                          operated by an authorised distributor
                                          and used for the distribution of
                                          electricity from grid supply points or
                                          generation sets or other entry points
                                          (and bulk supply points in Scotland)
                                          to the points of delivery to customers
                                          or authorised electricity operators or
                                          any transmission licensee within Great
                                          Britain in its capacity as operator of
                                          a transmission system, and includes
                                          any remote transmission assets (owned
                                          by a transmission licensee within
                                          England and Wales) operated by such
                                          distributor and any electrical plant,
                                          meters and metering equipment owned or
                                          operated by such distributor in
                                          connection with the distribution of
                                          electricity, but shall not include any
                                          part of a transmission system,


"effective time"                          for the purposes of Section C  only,
                                          has the meaning given in standard
                                          condition C1 (Interpretation of
                                          Section C).

"Electricity Arbitration Association"     for the purposes of standard condition
                                          D3 (Restriction on Use of Certain
                                          Information) only, has the meaning
                                          given in that condition.

"estimated costs"                         for the purposes of standard condition
                                          4 (Payments by the Licensee to the
                                          Authority) only, has the meaning given
                                          in that condition.

"external transmission activities"        for the purposes of Section D only,
                                          has the meaning given in standard
                                          condition D3 (Restriction on Use of

                                       14

<PAGE>

                                      Certain Information).

"external distribution activities"    for the purposes of standard condition D3
                                      (Restriction on Use of Certain
                                      Information) only, has the meaning given
                                      in that condition.

"financial year"                      means subject to standard condition 6
                                      (Change of Financial Year) (where
                                      applicable) a period of 12 months
                                      beginning on 1st April of each year and
                                      ending on 31st March of the following
                                      calendar year.

"founder members"                     for the purposes of standard condition D2
                                      (Trading Code) only, has the meaning given
                                      in that condition.

"Fuel Security Code"                  means the document of that title
                                      designated as such by the Secretary of
                                      State as from time to time amended.

"generation set"                      means any plant or apparatus for the
                                      production of electricity and shall where
                                      appropriate include a generating station
                                      comprising more than one generating set.

"grid supply point"                   means any point at which electricity is
                                      delivered from a transmission system to
                                      any distribution system.

"the handbook"                        for the purposes of standard condition 5
                                      (Regulatory Accounts) only, has the
                                      meaning given in that condition.

                                       15

<PAGE>

"holding company"                  for the purposes of standard condition 5
                                   (Regulatory Accounts) only, has the meaning
                                   given in that condition.

"information"                      includes any documents, accounts, estimates,
                                   returns, records or reports and data in
                                   written, verbal or electronic form and
                                   information in any form or medium whatsoever
                                   (whether or not prepared specifically at the
                                   request of the Authority) of any description
                                   specified by the Authority.

"interconnection"                  has the meaning given in standard condition
                                   D1 (Interpretation of Section D).

"interconnector(s)"                has the meaning given in standard condition
                                   C1 (Interpretation of Section C).

"interconnector(s) business"       has the meaning given in standard condition
                                   C1 (Interpretation of Section C).

"licensed distributor"             means any holder of a distribution licence.

"licensee's Grid Code"             means the grid code required to be drawn up
                                   by the licensee pursuant to standard
                                   condition 7 (Licensee's Grid code), as from
                                   time to time revised with the approval of the
                                   Authority.

                                       16

<PAGE>

"licensee's transmission system"     means the transmission system of the
                                     licensee within the authorised area owned
                                     and operated by the licensee.

"other founder member"               for the purposes of standard condition D2
                                     (Trading Code) only, has the meaning given
                                     in that condition.

"other Grid Codes"                   means the grid codes which the holder(s) of
                                     a transmission licence (other than the
                                     licensee) are required to draw up and have
                                     approved by the Authority pursuant to
                                     standard condition 7 (Licensee's Grid code)
                                     of their transmission licence, as from time
                                     to time revised with the approval of the
                                     Authority.

"participating interest"             has the meaning given by section 260 of the
                                     Companies Act 1985 as amended by section 22
                                     of the Companies Act 1989.

"Pooling and Settlement Agreement"   means the agreement of that title approved
                                     by the Secretary of State as from time to
                                     time amended.

"regulatory accounts"                for the purposes of standard condition 5
                                     (Regulatory Accounts) only, has the meaning
                                     given in that condition.

"related undertaking"                in relation to the licensee means any
                                     undertaking in which the licensee has a
                                     participating interest.


"relevant agreement"                 for the purposes of standard condition C7E
                                     (Functions of the Authority) only, has the
                                     meaning given in that

                                       17

<PAGE>

                                           condition.

"relevant assets"                          for the purposes of standard
                                           condition 10 (Disposal of Relevant
                                           Assets) only has the meaning given in
                                           that condition.

"Relevant Consumers' Committees"           for the purposes of standard
                                           condition 4 (Payments by the Licensee
                                           to the Authority) only, has the
                                           meaning given in that condition.

"relevant proportion"                      for the purposes of standard
                                           condition 4 (Payments by the Licensee
                                           to the Authority) only, has the
                                           meaning given in that condition.

"relevant year"                            for the purposes of standard
                                           condition 4 (Payments by the Licensee
                                           to the Authority) only, has the
                                           meaning given in that condition.

"relinquishment of operational control"    for the purposes of standard
                                           condition 10 (Disposal of Relevant
                                           Assets) only, has the meaning given
                                           in that condition.

"remote transmission assets"               means any electric lines, electrical
                                           plant or meters in England and Wales
                                           owned by the licensee which:

                                           (a) are embedded in a distribution
                                           system of an authorised electricity
                                           operator within the authorised area
                                           of the licensee and are not directly
                                           connected by lines or plant owned by
                                           the licensee to a sub-station owned
                                           by the licensee and

                                       18

<PAGE>

                                    (b) are by agreement between the licensee
                                    and such authorised electricity operator
                                    operated under the direction and control of
                                    such authorised electricity operator.

"Retail Price Index"                means the general index of retail prices
                                    published by the Office for National
                                    Statistics each month in respect of all
                                    items or:

                                    (a) if the index for any month in any year
                                    shall not have been published on or before
                                    the last day of the third month after such
                                    month, such index for such month or months
                                    as the Authority may after consultation with
                                    the licensee and for the purposes of this
                                    condition generally determine to be
                                    appropriate in the circumstances; or

                                    (b) if there is a material change in the
                                    basis of the index, such other index as the
                                    Authority may after consultation with the
                                    licensee and for the purposes of this
                                    condition generally determine to be
                                    appropriate in the circumstances.

"Scottish interconnection"          has the meaning given in standard condition
                                    D1 (Interpretation of Section D).

"Scottish transmission system"      for the purposes of standard condition D2
                                    (Trading Code) only, has the meaning given
                                    in that condition.

                                       19

<PAGE>

"Secretary of State's costs"            for the purposes of standard condition 4
                                        (Payments by the Licensee to the
                                        Authority) has the meaning given in that
                                        condition.

"separate business"                     (i)  in relation to any area of England
                                        and Wales, has the meaning given in
                                        standard condition C1 (Interpretation of
                                        Section C); and

                                        (ii) in relation to any area of
                                        Scotland, has the meaning given in
                                        standard condition D1 (Interpretation of
                                        Section D).

"Settlement Agreement for Scotland"     has the meaning given in standard
                                        condition D6 (Settlement Agreement for
                                        Scotland).

"short term contract"                   for the purposes of standard condition
                                        D2 (Trading Code) only, has the meaning
                                        given in that condition.

"statutory accounts"                    means the accounts to be prepared by the
                                        licensee under the Companies Act 1985.

"subsidiary"                            means a subsidiary within the meanings
                                        of sections 736, 736A, 736B of the
                                        Companies Act 1985.

"total system"                          for the purposes of Section C only, has
                                        the meaning given in standard condition
                                        C1 (Interpretation of Section C).

                                       20

<PAGE>

"Trading Code"                      for the purposes of Section D only, has the
                                    meaning given in standard condition D1
                                    (Interpretation of Section D).

"trading of electricity"            for the purposes of Section D only, has the
                                    meaning given in standard condition D2
                                    (Trading Code).

"trading system"                    for the purposes of Section D only, has the
                                    meaning given in standard condition D2
                                    (Trading Code).

"transmission business"             (i)  in relation to any area of England and
                                    Wales, has the meaning given in standard
                                    condition C1 (Interpretation of Section C);
                                    and

                                    (ii) in relation to any area of Scotland,
                                    has the meaning given in standard condition
                                    D1 (Interpretation of Section D).

"transmission licence"              means a licence granted or treated as
                                    granted under section 6(1)(b) of the Act.

"transmission network services"     means all services provided by the licensee
                                    as part of its transmission business other
                                    than excluded services and in relation to
                                    any area of England and Wales the balancing
                                    services activity.

"transmission system"               means a system consisting (wholly or mainly)
                                    of high voltage electric wires owned or
                                    operated by the licensee in its authorised
                                    area and used for the transmission of

                                       21

<PAGE>

                                        electricity from one generating station
                                        to a sub-station or to another
                                        generating station or between
                                        sub-stations or to or from any
                                        interconnector and Scottish
                                        interconnection in question and in
                                        relation to Scotland including any
                                        interconnector and Scottish
                                        interconnection, and includes any
                                        electrical plant and meters owned or
                                        operated by such transmission company in
                                        connection with the transmission of
                                        electricity but shall not include any
                                        remote transmission assets.

"undertaking"                           bears the meaning ascribed to that
                                        expression by section 259 of the
                                        companies Act 1985.

"use of interconnector"                 means use of any interconnector for the
                                        transfer of electricity.

"use of system"                         means use of the licensee's transmission
                                        system for the transport of electricity
                                        by any authorised electricity operator.

"use of system charges"                 means charges made or levied or to be
                                        made or levied by the licensee for the
                                        provision of transmission network
                                        services and/or in relation to any area
                                        of England and Wales in respect of the
                                        balancing services activity, in each
                                        case as part of the transmission
                                        business, to any authorised electricity
                                        operator, but shall not include
                                        connection charges.

"use of system charging methodology"    for the purposes of Section C only, has
                                        the meaning

                                       22

<PAGE>

                                  given in standard condition C1 (Interpretation
                                  of Section C).

         2.    Any word or expressions used in the Utilities Act 2000 or Part I
               of the Act shall, unless the contrary intention appears, have the
               same meaning when used in the standard conditions.

         3.    Except where the context otherwise requires, any reference to a
               numbered standard condition (with or without a letter) or
               Schedule is a reference to the standard condition (with or
               without a letter) or Schedule bearing that number in this
               licence, and any reference to a numbered paragraph (with or
               without a letter) is a reference to the paragraph bearing that
               number in the standard condition or Schedule in which the
               reference occurs, and reference to a Section is a reference to
               that Section in these standard conditions.

         4.    These standard conditions shall have effect as if, in relation to
               a licence holder who is a natural person, for the words "it",
               "its" and "which" there were substituted the words "he", "him"
               "his", and "whom", and cognate expressions shall be construed
               accordingly.

         5     Except where the context otherwise requires, a reference in a
               standard condition to a paragraph is a reference to a paragraph
               of that standard condition and a reference in a paragraph to a
               sub-paragraph is a reference to a sub-paragraph of that
               paragraph.

         6.    Any reference in these conditions to-

         (a)   a provision thereof;

         (b)   a provision of the standard conditions of electricity generation
               licences;

         (c)   a provision of the standard conditions of electricity
               distribution licences;

         (d)   a provision of the standard conditions of electricity supply
               licences,

                                       23

<PAGE>

              shall, if these standard conditions or the standard conditions in
              question come to be modified, be construed so as far as the
              context permits, as a reference to the corresponding provision of
              these standard conditions or the other standard conditions in
              question as modified.

         7.   In construing the standard conditions, the heading or title of any
              standard  condition or paragraph shall be disregarded.

         8.   Any reference in a standard condition to the purposes of that
              condition generally is a reference to the purposes of that
              condition as incorporated in this licence and as incorporated in
              each other licence under section 6(1)(b) of the Act (whenever
              granted) which incorporates it.

         9.   Where any obligation under, in or pursuant to the licence is
              required to be performed by a specified date or within a specified
              period, and where the licensee has failed so to perform by such
              date or within such period, such obligation shall continue to be
              binding and enforceable after the specified date or after the
              expiry of the specified period (but without prejudice to all
              rights and remedies available against the licensee by reason of
              the licensee's failure to perform by that date or within that
              period).

         10.  Anything required by or under these standard conditions to be done
              in writing may be done by facsimile transmission of the instrument
              in question or by other  electronic means and, in such case -

              (a)   the original instrument or other confirmation in writing
                    shall be delivered or sent by pre-paid first class post as
                    soon as is reasonably practicable, and

              (b)   where the means of transmission had been agreed in advance
                    between

                                       24

<PAGE>

                 the parties concerned, in the absence of and pending such
                 confirmation, there shall be a refutable presumption that what
                 was received duly represented the original instrument.

     11.   The definitions referred to in this condition may include some
           definitions which are not used or not used exclusively in Sections A
           and B (which Sections are incorporated in all transmission licences).
           Where:

           (a)   any definition is not used in Sections A and B, that definition
                 shall, for the purposes of this licence, be treated:

                 (i)   as part of the standard condition or conditions (and the
                       Section) in which it is used;

                 (ii)  as not having effect in the licence until such time as
                       the standard condition in which the definition is used
                       has effect within the licence in pursuance of standard
                       condition 2 (Application of Section C (England and Wales)
                       or standard condition 3 (Application of Section D
                       (Scotland));

           (b)   any definition which is used in Sections A and B and is also
                 used in one or more other Sections:

                 (i)   shall only be modifiable in accordance with the
                       modification  process  applicable to each of the standard
                       conditions in which it is used; and

                 (ii)  if any such standard condition is modified so as to omit
                       that definition, then the reference to that definition in
                       this condition shall automatically cease to have effect.

                                       25

<PAGE>

Condition 2. Application of Section C of Part II Supplementary Standard
Conditions for England and Wales

1.   Where the Secretary of State provides, by a scheme made under Schedule 7 to
     the Utilities Act 2000, for Section C (in whole or in part) to have effect
     within this licence:

     (a)   paragraphs 4 to 8 shall cease to be suspended and shall have effect
           in the licensee's licence; and

     (b)   the licensee shall be obliged to comply with the requirements of
           Section C (in whole or, as the case may be, in part) of this licence,

     from the date the said scheme takes effect.

2.   Until -

     (a)   the Secretary of State provides, by a scheme made under Schedule 7 to
           the Utilities Act 2000, for Section C (in whole or in part) to have
           effect within this licence; or

     (b)   the Authority has issued to the licensee a direction pursuant to
           paragraph 4,

     the standard conditions in Section C (in whole or, as the case may be, in
     part) shall not have effect within this licence; and the licensee shall not
     be obliged to comply with any of the requirements of Section C (in whole
     or, as the case may be, in part) of this licence.

3.   Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of this
     standard condition shall be suspended and shall have no effect in this
     licence until such time as the Authority issues to the licensee a notice
     ending the suspension and providing for

                                       26

<PAGE>

     those paragraphs to have effect in this licence with effect from the date
     specified in the notice.

4.   The Authority may issue a direction (a "Section C Direction"). Where the
     Authority has issued to the licensee a Section C Direction the standard
     conditions in Section C (in whole or, as the case may be, in part) shall
     have effect within this licence from the date specified in the direction;
     and the licensee shall be obliged to comply with the requirements of
     Section C (in whole or, as the case may be, in part) to the extent and
     subject to the terms specified in such direction.

5.   A Section C Direction may specify that the standard conditions in Section C
     (in whole or in part) are to have effect in this licence;

6.   The Authority may, with the consent of the licensee:

     (a)   vary the terms (as set out in the Section C Direction or elsewhere)
           under which Section C (or parts thereof) has effect in this licence;
           or

     (b)   provide for Section C (or parts thereof) to cease to have effect in
           this licence.

7.   The variation or cessation provided for in paragraph 6 shall take effect
     form the date specified in the variation or cessation notice given to the
     licensee by the Authority.

8.   With effect from the date of cessation referred to in paragraph 7,
     paragraphs 4 to 7 of this condition shall be suspended and shall cease to
     have effect in this licence, but the Authority may at any time thereafter
     give to the licensee a notice ending the suspension and providing for those
     paragraphs again to have effect in this licence with effect from the date
     specified in the notice.

                                       27

<PAGE>

Condition 3. Application of Section D of Part II Supplementary Conditions for
Scotland

1.   Where the Secretary of State provides, by a scheme made under Schedule 7 to
     the Utilities Act 2000, for Section D (in whole or in part) to have effect
     within this licence:

     (a)  paragraphs 4 to 8 shall cease to be suspended and shall have effect in
          the licensee's licence; and

     (b)  the licensee shall be obliged to comply with the requirements of
          Section D (in whole or, as the case may be, in part) of this licence,

     from the date the said scheme takes effect.

2.   Until -

     (a)  the Secretary of State provides, by a scheme made under Schedule 7 to
          the Utilities Act 2000, for Section D (in whole or in part) to have
          effect within this licence; or

     (b)  the Authority has issued to the licensee a direction pursuant to
          paragraph 4,

      the standard conditions in Section D (in whole or, as the case may be, in
      part) shall not have effect within this licence; and the licensee shall
      not be obliged to comply with any of the requirements of Section D (in
      whole or, as the case may be, in part) of this licence.

3.    Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of
      this standard condition shall be suspended and shall have no effect in
      this licence until such time as the Authority issues to the licensee a
      notice in writing ending the suspension and providing for those
      paragraphs to have effect in this licence with effect from the date
      specified in the notice.

                                       28

<PAGE>

4.   The Authority may issue a direction (a "Section D Direction"). Where the
     Authority has issued to the licensee a Section D Direction the standard
     conditions in Section D (in whole or, as the case may be, in part) shall
     have effect within this licence from the date specified in the direction;
     and the licensee shall be obliged to comply with the requirements of
     Section D (in whole or, as the case may be, in part) to the extent and
     subject to the terms specified in such direction.

5.   A Section D Direction may specify that the conditions in Section D (in
     whole or in part) are to have effect in this licence.

6.   The Authority may, with the consent of the licensee:

     (a)   vary the terms (as set out in the Section D Direction or elsewhere)
           under  which  Section D (or parts thereof) has effect in this
           licence; or

     (b)   provide for Section D (or parts thereof) to cease to have effect in
           this licence.

7.   The variation or cessation provided for in paragraph 6 shall take effect
     from the date specified in the variation or cessation notice given to the
     licensee by the Authority.

8.   With effect from the date of cessation referred to in paragraph 7,
     paragraphs 4 to 7 of this condition shall be suspended and shall cease to
     have effect in this licence, but the Authority may at any time thereafter
     give to the licensee a notice ending the suspension and providing for those
     paragraphs again to have effect in this licence with effect from the date
     specified in the notice.

                                       29

<PAGE>

Condition 4. Payments by the Licensee to the Authority

1.   The licensee shall, at the times stated, pay to the Authority such amounts
     as are determined by or under this condition.

2.   In respect of each relevant year at the beginning of which the licensee
     holds this licence, the licensee shall pay to the Authority the aggregate
     of:

     (a)   an amount which is the relevant proportion of the estimated costs of
           the Authority during the year in question;

     (b)   an amount which is the relevant proportion of the estimated costs of
           the Consumer Council during the year in question;

     (c)   an amount which is the relevant proportion of the estimated costs
           incurred in the previous relevant year by the Competition Commission
           in connection with references made to it with respect to the licence
           or any other electricity transmission licence;

     (d)   an amount which is the relevant proportion of the Secretary of
           State's  costs during the year in question;

     (e)   an amount which is the relevant proportion of the difference (being a
           positive or negative amount), if any, between:

           (aa)   any costs estimated by the Authority or, in the case of
                  sub-paragraph 2(d), the Secretary of State in the previous
                  relevant year under sub-paragraphs 2(a), (b), (c), and (d);
                  and

           (bb)   the actual costs of the Authority, the Consumer Council, the
                  Competition Commission (in connection with that reference) and
                  the Secretary of State for the previous relevant year or, in
                  the case of the

                                       30

<PAGE>

                   Competition Commission, for the relevant year prior to the
                   previous relevant year; and

     (f)   in respect of the relevant year ending on 31 March 2002, an amount
           which is the relevant proportion of the actual unrecovered costs of
           the Director General of Electricity Supply and the Relevant
           Consumers' Committees.

3.   The amounts determined in accordance with paragraph 2 shall be paid by the
     licensee to the Authority in two instalments, with:

     (a)   the first instalment being due for payment by 30 June in each year;
           and

     (b)   the second instalment being due for payment by 31 January in each
           year

     provided that, in each case, if the Authority has not given notice of the
     amount of the instalment due at least 30 days before the payment date
     stated above, the licensee shall pay the amount due within 30 days from the
     actual giving of notice by the authority to the licensee (whenever notice
     is given).

4.   Where the licensee fails to pay the amount determined in accordance with
     paragraph 2 within 30 days of the due date set out in paragraph 3, it shall
     pay simple interest on the amount at the rate which is from time to time
     equivalent to the base rate of NatWest Bank plc or, if there is no such
     base rate, such base rate as the Authority may designate for the purposes
     hereof.

5.   In relation to any data or information specified by the Authority in a
     direction given for the purposes of this condition generally, the licensee
     shall submit a certificate to the Authority, approved by a resolution of
     the board of directors of the licensee and signed by a director of the
     licensee pursuant to that resolution. Such certificate shall be submitted
     to the Authority each year on the date specified by the Authority. Each
     certificate shall be in the following form -

                                       31

<PAGE>

      "In the opinion of the directors of [the licensee], all data and
      information provided to the Authority on [date provided to the Authority]
      for the purposes of enabling the Authority to calculate the licence fee
      payable by [the licensee] pursuant to standard condition 4 (Payments by
      the Licensee to the Authority) is accurate."

6.    In this condition:

     "estimated costs"              means costs estimated by the Authority as
                                    likely to be:

                                    (a)   the costs of the Authority and the
                                          Consumer Council; and

                                    (b)   the costs incurred by the Competition
                                          Commission, such estimate having
                                          regard to the views of the Competition
                                          Commission.

     "relevant proportion"          means the proportion of the costs
                                    attributable to the licensee in accordance
                                    with principles determined by the Authority
                                    for the purposes of this condition generally
                                    and notified to the licensee.

     "relevant year"                means a year beginning on 1 April of each
                                    calendar year and ending on 31 March of the
                                    following calendar year.

     "Secretary of State's costs"   means costs estimated by the Secretary of
                                    State as likely to be his costs in relation
                                    to:

                                    (a)   the establishment of the Authority and
                                          the Consumer Council; and

                                    (b)   Schedule 7 to the Utilities Act 2000.

5.    In sub-paragraph 2(f) of this condition:

                                       32

<PAGE>

     "Director General of Electricity Supply"   means the office previously
                                                established under section 1 of
                                                the Act;

     "Relevant Consumers' Committees"           means the committees previously
                                                appointed by the Director
                                                General of Electricity Supply
                                                under section 2 of that Act

                                       33

<PAGE>

PART II: SECTION B GENERAL

Condition 5.  Regulatory Accounts

1.   The following paragraphs of this condition apply for the purpose of
     ensuring that the licensee (and any affiliate or related undertaking)
     maintains accounting and reporting arrangements which enable regulatory
     accounts to be prepared for the consolidated transmission business and
     showing the financial affairs of the consolidated transmission business.

2.   The licensee shall:

     (a)   keep or cause to be kept for the period referred to in section
           222(5)(b) of the Companies Act 1985 and in the manner referred to in
           that section such accounting records in respect of the consolidated
           transmission business so that the revenues, costs, assets,
           liabilities, reserves and provisions of, or reasonably attributable
           to, the consolidated transmission business are separately
           identifiable in the accounting records of the licensee (and any
           affiliate or related undertaking) from those of any other business of
           the licensee;

     (b)   prepare on a consistent basis from such accounting records in respect
           of:

           (i)   each financial year, accounting statements comprising a profit
                 and loss account, a statement of total recognised gains and
                 losses, a balance sheet, and a cash flow statement, together
                 with notes thereto, and showing separately in respect of the
                 consolidated transmission business and in appropriate detail
                 the amounts of any revenue, cost, asset, liability, reserve or
                 provision which has been either:

                 (aa) charged from or to any other business together with a
                      description of the basis of that charge; or

                 (bb) determined by apportionment or allocation between the

                                       34

<PAGE>

                            consolidated transmission business and any other
                            business together with a description of the basis of
                            the apportionment or allocation; and

                (ii)  the first six months of each financial year, an interim
                      profit and loss account; and

                (iii) each financial year, sufficient accounting information in
                      respect of the consolidated transmission business to allow
                      the preparation of consolidated accounting statements of
                      the licensee or, where applicable, the ultimate holding
                      company of the licensee. Such information shall include a
                      profit and loss account, a statement of total recognised
                      gains and losses, a balance sheet, and a cash flow
                      statement together with notes thereto.

         (c)    procure, in respect of the accounting statements prepared in
                accordance with this condition in respect of each financial
                year, a report by the auditors and addressed to the Authority
                stating whether in their opinion those statements have been
                properly prepared in accordance with this condition and give a
                true and fair view of the revenues, costs, assets, liabilities,
                reserves and provisions of, or reasonably attributable to, the
                consolidated transmission business to which the statements
                relate; and

         (d)    deliver to the Authority a copy of the account referred to in
                sub-paragraph (b)(ii), the auditors' report referred to in
                sub-paragraph (c), the accounting statements referred to in
                sub-paragraph (b)(i) and the accounting information referred to
                in sub-paragraph b(iii), as soon as reasonably practicable, and
                in any event not later than three months after the end of the
                period to which it relates in the case of the account referred
                to in sub-paragraph (b)(ii) and six months after the end of the
                financial year to which they relate in the case of the
                accounting statements, auditors' report and accounting
                information referred to in sub-paragraphs (b)(i), (b)(iii) and
                (c).

                                       35

<PAGE>

3.   Unless the Authority so specifies in directions issued for the purposes of
     this condition, or with the Authority's prior written approval, the
     licensee shall not in relation to the accounting statements in respect of a
     financial year change the bases of charge or apportionment or allocation
     referred to in sub-paragraph 2(b)(i) from those applied in respect of the
     previous financial year.

4.   Where, in relation to the accounting statements in respect of a financial
     year, the licensee has changed such bases of charge or apportionment or
     allocation from those adopted for the immediately preceding financial year,
     the licensee shall, if so directed in directions issued by the Authority,
     in addition to preparing accounting statements on those bases which it has
     adopted, prepare such accounting statements on the bases which applied in
     respect of the immediately preceding financial year.

5.   Accounting statements and information in respect of a financial year
     prepared under sub-paragraph 2(b)(i) and (b)(iii) shall, so far as
     reasonably practicable and unless otherwise approved by the Authority
     having regard to the purposes of this condition:

     (a) have the same content and format as the statutory accounts of the
         licensee prepared under section 226 and, where appropriate, section 227
         of the Companies Act 1985 and conform to the best commercial accounting
         practices including all relevant accounting standards issued or adopted
         by the Accounting Standards Board currently in force;

     (b) state the accounting policies adopted; and

     (c) with the exception of the part of such statements and information which
         shows separately the amounts charged, apportioned or allocated and
         describes the bases of charge or apportionment or allocation
         respectively, be published with the statutory accounts of the licensee.

6.   Unless the Authority otherwise consents (such consent may be given in
     relation to some or all of the obligations in this condition and may be
     given subject to such conditions as the Authority considers appropriate),
     unless the accounting statements

                                       36

<PAGE>

        and information prepared under sub-paragraph 2(b)(i) and (b)(iii) are
        prepared on the current cost basis as provided by the alternative
        accounting rules, the licensee shall, unless otherwise agreed by the
        Authority, in addition to preparing those accounting statements under
        that paragraph, prepare accounting statements for the consolidated
        transmission business covering the same period, which shall comprise and
        show separately:

        (a)  a profit and loss account, a statement of total recognised gains
             and losses, a balance sheet, and a cash flow statement, together
             with notes thereto, which shall:

             (i)   include in respect of current costs assets amounts determined
                   on the current cost basis as provided by the alternative
                   accounting rules; and

             (ii)  show or disclose the information and other matters required
                   by the alternative accounting rules to be shown or disclosed
                   in accounts where the amounts included in respect of assets
                   covered by any items shown in those accounts have been
                   determined on any basis mentioned in paragraph 31 of section
                   C of Part II of Schedule 4 to the Companies Act 1985;

        (b)  in respect of the consolidated transmission business the adjusted
             amount of any such provision for depreciation as is referred to in
             paragraph 32(2) of section C of Part II of Schedule 4 to the
             Companies Act 1985 and the item shown in the profit and loss
             account of the consolidated transmission business for the relevant
             period which are affected by the determination of amounts on the
             current cost basis as provided by the alternative accounting rules,
             including the profit (or loss) before taxation; and

        (c)  such other current cost information as is referred to in the
             handbook as the Authority may reasonably require;

        and shall deliver the same, together with an auditors' report prepared
        in relation to the

                                       37

<PAGE>

          current cost basis accounting statements in the form referred to in
          sub-paragraph 2(c), to the Authority within the time limit referred to
          in sub-paragraph 2(d), and shall (with the exception of the part of
          such statements and information which shows separately the amounts
          charged, apportioned or allocated and describes the bases of charge or
          apportionment or allocation respectively) publish the same with the
          statutory accounts of the licensee.

7.   References in this condition to costs or liabilities of, or reasonably
     attributable to, the consolidated transmission business shall be construed
     as excluding taxation and capital liabilities which do not relate
     principally to the consolidated transmission business, and interest
     thereon; and references to any profit and loss account shall be construed
     accordingly.

8.   Without prejudice to paragraph 5 of the terms of this licence, references
     in this condition to sections of the Companies Act 1985 are references to
     those provisions as amended, substituted or inserted by the relevant
     provisions of the Companies Act 1989 and if such provisions of the
     Companies Act 1989 are not in force at the date of grant of this licence
     shall be construed as if such provisions were in force at such date.

9.   For the purposes of paragraph 6:

     "alternative accounting rules"     means the rules set out in section C of
                                        Part II of Schedule 4 to the Companies
                                        Act 1985.

     "current cost assets"              means assets of any description
                                        mentioned in paragraph 31 of section C
                                        of Part II of Schedule 4 to the
                                        Companies Act 1985.

     "the handbook"                     means the handbook issued by the
                                        Accounting Standards Committee of the
                                        Consultative Committee of Accounting

                                       38

<PAGE>

                                             Bodies (CCAB Limited) or any
                                             successor body entitled "Accounting
                                             for the effects of changing prices:
                                             a Handbook" in its current edition
                                             for the time being or in the event
                                             that no such handbook shall be in
                                             issue such guidance or publication
                                             as may be issued in replacement or
                                             substitution therefor.

10.  For the purposes of this condition:

     "consolidated transmission business"    means the consolidation, for
                                             regulatory accounting purposes, of
                                             the businesses referred to in the
                                             definition of "transmission
                                             business" as defined in standard
                                             condition 1 (Definitions and
                                             Interpretations).

     "holding company"                       means a holding company within the
                                             meaning of sections 736, 736A and
                                             736B of the Companies Act 1985.

     "regulatory accounts"                   means the accounts required to be
                                             prepared by the licensee pursuant
                                             to this condition.

                                       39

<PAGE>

         (This page left blank intentionally)

Condition 6. Change of Financial Year

1.   The definition of "financial year" in standard condition 1 (Definitions and
     Interpretation) shall, for the purpose only of the statutory accounts of
     the licensee, cease to apply to the licensee from the date the licensee
     sends a notice to the Authority for that purpose.

2.   Such notice:

     (a)  shall specify the date from which, for the purpose set out at
          paragraph 1, the current and subsequent financial years of the
          licensee shall run; and

     (b)  shall continue in effect until revoked by the licensee issuing a
          further notice.

3.   While the notice continues in effect the licensee shall procure the
     preparation of and shall deliver to the Authority audited group accounts
     for its group of companies for each financial year.

4.   Audited group accounts produced in accordance with paragraph 3:

     (a)  shall comprise consolidated group accounts in respect of the group of
          companies;

     (b)  shall, save insofar as is necessary to reflect a different financial
          year, have the same form and content as the statutory accounts of the
          licensee;

     (c)  shall be accompanied by a report by the auditors and addressed to the
          Authority stating whether in their opinion the audited group accounts
          have been properly prepared in accordance with this condition and give
          a true and

                                       40

<PAGE>

          fair view of the state of affairs of the group of companies and of its
          profits or losses, total recognised gains or losses and cash flows
          during the financial year;

     (d)  may, with the prior written consent of the Authority, omit or provide
          in a different form, specified in the consent, such information as may
          be specified in the consent; and

     (e)  shall clearly disclose any differences between the accounting policies
          underlying the preparation of the statutory accounts of the licensee
          and the accounting policies underlying the preparation of the audited
          group accounts.

5.   The licensee may, for the purpose only of its statutory accounts, change
     its financial year from that previously notified by sending to the
     Authority a new notice pursuant to paragraph 1. Where the licensee sends
     the Authority a new notice the previous notice shall be revoked, as
     provided by sub-paragraph 2(b). The licensee's financial year-end will
     change with effect from the date specified in the new notice. The new
     notice shall specify the licensee's new financial year-end.

6.   No provisions of this condition shall apply to the financial year of the
     licensee as defined in standard condition 1 (Definitions and
     Interpretation) for the purpose of accounts produced in compliance with
     standard condition 5 (Regulatory Accounts). No provisions of this condition
     shall affect the licensee's obligations in respect of payment of licence
     fees under standard condition 4 (Payments by the Licensee to the
     Authority).

                                       41

<PAGE>

Condition 7. Licensee's Grid Code

1.   The licensee shall in consultation with authorised electricity operators
     liable to be materially affected thereby prepare and at all times have in
     force and shall implement and comply (subject to paragraph 10) with the
     Grid Code to be known as the licensee's Grid Code:

     (a)  covering all material technical aspects relating to connections to and
          the operation and use of the licensee's transmission system or (in so
          far as relevant to the operation and use of the licensee's
          transmission system) the operation of electric lines and electrical
          plant connected to the licensee's transmission system or any
          distribution system of any authorised distributor and (without
          prejudice to the foregoing) making express provision as to the matters
          referred to in paragraph 5 below; and

     (b)  which is designed so as:

          (i)   to permit the development, maintenance and operation of an
                efficient, co-ordinated and economical system for the
                transmission of electricity;

          (ii)  to facilitate competition in the generation and supply of
                electricity (and without limiting the foregoing, to facilitate
                the licensee's transmission system being made available to
                persons authorised to supply or generate electricity on terms
                which neither prevent nor restrict competition in the supply or
                generation of electricity) ; and

          (iii) subject to sub-paragraphs (i) and (ii), to promote the security
                and efficiency of the electricity generation, transmission and
                distribution systems in England and Wales or Scotland each taken
                as a whole.

2.   The licensee's Grid Code in force at the date this condition comes into
     force shall be sent to the Authority for its approval. Thereafter the
     licensee shall (in consultation with authorised electricity operators
     liable to be materially affected thereby) periodically review (including
     upon the request of the Authority) the licensee's Grid Code and its
     implementation. Following any such review, the licensee shall send to the
     Authority:

                                       42

<PAGE>

     (a)  a report on the outcome of such review; and

     (b)  any proposed revisions to the licensee's Grid Code from time to time
          as the licensee (having regard to the outcome of such review)
          reasonably thinks fit for the achievement of the objectives referred
          to in paragraph (b) of paragraph 1; and

     (c)  any written representations or objections from authorised electricity
          operators liable to be materially affected thereby (including any
          proposals by such operators for revisions to the licensee's Grid Code
          not accepted by the licensee in the course of the review) arising
          during the consultation process and subsequently maintained.

3.   Revisions to the licensee's Grid Code proposed by the licensee and sent to
     the Authority pursuant to paragraph 2 shall require to be approved by the
     Authority.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Authority may consider appropriate, the Authority may issue
     directions requiring the licensee to revise the licensee's Grid Code in
     such manner as may be specified in the directions, and the licensee shall
     forthwith comply with any such directions.

5.   The licensee's Grid Code shall include codes relating to the technical
     operation of the licensee's transmission system, including:

     (a)  connection conditions specifying the technical, design and operational
          criteria to be complied with by the licensee and by any person
          connected or seeking connection with the licensee's transmission
          system or by any person authorised to generate who is connected with
          or seeks connection with the licensee's transmission system or any
          transmission system or distribution system of any third party which is
          located in Great Britain.

     (b)  an operating code specifying the conditions under which the licensee
          shall operate the licensee's transmission system and under which
          persons shall operate their plant and/or distribution systems in
          relation to the licensee's

                                       43

<PAGE>

          transmission system, in so far as necessary to protect the security
          and quality of supply and safe operation of the licensee's
          transmission system under both normal and abnormal operating
          conditions; and

     (c)  a planning code specifying the technical and design criteria and
          procedures to be applied by the licensee in the planning and
          development of the licensee's transmission system and to be taken into
          account by persons connected or seeking connection with the licensee's
          transmission system in the planning and development of their own plant
          and systems.

6.   The licensee shall give or send a copy of the licensee's Grid Code (as from
     time to time revised) to the Authority.

7.   The licensee shall (subject to paragraph 8) give or send a copy of the
     licensee's Grid Code (as from time to time revised) to any person
     requesting the same.

8.   The licensee may make a charge for any copy of the licensee's Grid Code (as
     from time to time revised) given or sent pursuant to paragraph 7 of an
     amount which will not exceed any amount specified for the time being for
     the purposes of this condition in directions issued by the Authority.

9.   In preparing, implementing and complying with the licensee's Grid Code
     (including in respect of the scheduling of maintenance of the licensee's
     transmission system), the licensee shall not unduly discriminate against or
     unduly prefer any person or class or classes of person in favour of or as
     against any person or class or classes of persons.

10.  The Authority may (following consultation with the licensee) issue
     directions relieving the licensee of its obligations to implement or comply
     with the licensee's Grid Code in respect of such parts of the licensee's
     transmission system and/or to such extent as may be specified in the
     directions.

                                       44

<PAGE>

Condition 7A. Compliance with Other Grid Codes

1.   The licensee shall comply with the provisions of any other Grid Codes in so
     far as applicable to the licensee or licensee's transmission business.

2.   The Authority may, following consultation with the transmission company
     responsible for any other Grid Code and any other authorised electricity
     operators directly affected thereby, issue directions relieving the
     licensee of its obligation under paragraph 1 in respect of such parts of
     such other Grid Code and to such extent and subject to such conditions as
     may be specified in those directions.

                                       45

<PAGE>

Condition 8. Compliance with Distribution Codes

1.   The licensee shall comply with the provisions of every Distribution Code in
     so far as applicable to it.

2.   The Authority may, following consultation with the licensed distributor
     responsible for the relevant Distribution Code and any other authorised
     electricity operators directly affected thereby, issue directions relieving
     the licensee of its obligation under paragraph 1 in respect of such parts
     of such Distribution Code and to such extent and subject to such conditions
     as may be specified in those directions.

                                       46

<PAGE>

Condition 9. Change Co-ordination for the Utilities Act 2000

1.   The licensee shall take all reasonable measures to secure and implement,
     and shall not take any steps to prevent or unduly delay, such changes to
     the industry framework documents as are necessary or expedient to give full
     and timely effect to the provisions of the Utilities Act 2000.

2.   In complying with paragraph 1, the licensee shall act in the case of each
     industry framework document consistently with the change procedures
     currently applicable to that document, except where to do so would be
     inconsistent with any provision of the Utilities Act 2000, in which event
     that provision shall take precedence.

3.   For the purposes of this condition, "industry framework document" means,
     subject to paragraph 4, any of the following documents to which the
     licensee is a party, or in relation to which it holds rights in respect of
     amendment or termination, together with any documents which are
     supplemental or ancillary thereto:

     (a) the Pooling and Settlement Agreement;

     (b) the Balancing and Settlement Code;

     (c) the Master Connection and Use of System Agreement or the Connection and
         Use of System Code;

     (d) the Settlement Agreement for Scotland;

     (e) the Master Registration Agreement;

     (f) the Data Transfer Services Agreement;

     (g) the Radio Teleswitch Agreement;

     (h) any Grid Code;

     (i) any Distribution Code;

     (j) the Trading Code;

     (k) the Fuel Security Code;

     (l) any agreement for use of an interconnector or Scottish interconnection;
         and

     (m) any agreement for the provision of distribution use of system, meter
         provision services, meter maintenance services, data retrieval
         services, data processing services, data aggregation services, or
         prepayment meter services.

                                       47

<PAGE>

4.   Where the Authority considers that the list of industry framework documents
     set out in paragraph 3 should be modified for the purposes of this
     condition, the licensee shall discuss any proposed modification (including
     addition) to the list in good faith and use all reasonable endeavours to
     agree such modification with the Authority.

5.   This condition shall cease to have effect on 30 June 2002 or such earlier
     date as the Authority may specify in a direction given, for the purposes of
     this condition generally.

                                       48

<PAGE>

Condition 10. Disposal of Relevant Assets

1.   The licensee shall not dispose of or relinquish operational control over
     any relevant asset otherwise than in accordance with the following
     paragraphs of this condition.

2.   Save as provided in paragraph 3, the licensee shall give to the Authority
     not less than two months' prior written notice of its intention to dispose
     of or relinquish operational control over any relevant asset, together with
     such further information as the Authority may request relating to such
     asset or the circumstances of such intended disposal or relinquishment of
     control or to the intentions in regard thereto of the person proposing to
     acquire such asset or operational control over such asset.

3.   Notwithstanding paragraphs 1 and 2, the licensee may dispose of or
     relinquish operational control over any relevant asset:

     (a)  where:

          (i)  the Authority has issued directions /1/ /2/ for the purposes of
               this condition containing a general consent (whether or not
               subject to conditions) to:

               (aa) transactions of a specified description; and/or

               (bb) the disposal of or relinquishment of operational control
                    over relevant assets of a specified description; and

          (ii) the disposal or relinquishment of operational control in question
               is effected pursuant to a transaction specified in the
               Authority's directions or the relevant assets in question are of
               a description to which such directions apply and the disposal or
               relinquishment of operational control is in accordance with any
               conditions to which the consent is subject; or

     (b)  where the disposal or relinquishment of operational control in
          question is required by or under any enactment or subordinate
          legislation.

________________
/1/  Direction issued under Condition 7 (of Part IV) of the Generation,
     Transmission and Public Electricity Supply Licence of Scottish Power UK plc
     now Standard Condition 10 of this licence (01.04.92)

/2 / Direction issued under Standard Condition 10 of this licence (28.01.02)

                                       49

<PAGE>

4.   Notwithstanding paragraph 1, the licensee may dispose of or relinquish
     operational control over any relevant asset specified in any notice given
     under paragraph 2 in circumstances where:

     (a)  the Authority confirms in writing that it consents to such disposal or
          relinquishment (which consent may be made subject to the acceptance by
          the licensee or any third party in favour of whom the relevant asset
          is proposed to be disposed or operational control is proposed to be
          relinquished to, of such conditions as the Authority may specify); or

     (b)  the Authority does not inform the licensee in writing of any objection
          to such disposal or relinquishment of control within the notice period
          referred to in paragraph 2.

5.   In this condition:

     "disposal"              (a)  in relation to disposal of a relevant asset
                                  situated in England and Wales includes any
                                  sale, gift, exchange, assignment, lease,
                                  licence, loan, mortgage, charge, or grant of
                                  any other encumbrance or the permitting of any
                                  encumbrance to subsist or any other
                                  disposition;

                                       50

<PAGE>

                                              (b)  in relation to disposal of a
                                                   relevant asset situated in
                                                   Scotland includes the grant
                                                   of any disposition,
                                                   conveyance, contract of
                                                   excambion, any lease,
                                                   assignation, licence, the
                                                   grant of any right of
                                                   possession, loan, standard
                                                   security, floating charge to
                                                   a third party, or the grant
                                                   of any servitude right,
                                                   wayleave or any other
                                                   transaction or event which is
                                                   capable under any enactment
                                                   or rule of law of affecting
                                                   the title to a registered
                                                   interest in land and
                                                   "dispose" and cognate
                                                   expressions shall be
                                                   construed accordingly;

    "relevant asset"                          means:

                                              any asset for the time being
                                              forming part of the licensee's
                                              transmission system or of any
                                              interconnector, any control centre
                                              for use in conjunction therewith
                                              and any legal or beneficial
                                              interest in (or right, title or
                                              interest in) land upon which any
                                              of the foregoing is situate (which
                                              for the purposes of property
                                              located in Scotland means any
                                              estate, interest, servitude or
                                              other heritable or leasehold right
                                              in or over land including any
                                              leasehold interests or other
                                              rights to occupy or use and any
                                              contractual or personal rights in
                                              favour of the licensee relating to
                                              the occupation, use or acquisition
                                              of such property).

    "relinquishment of operational control"   includes, without limitation,
                                              entering into any agreement or
                                              arrangement whereby operational
                                              control of a relevant asset or
                                              relevant assets is not or ceases
                                              to be under the sole management of
                                              the licensee.

                                       51

<PAGE>

Condition 11. Provision of Information to the Authority

1.   Subject to paragraph 4, the licensee shall furnish to the Authority, in
     such manner and at such times as the Authority may reasonably require, such
     information and shall procure and furnish to it such reports, as the
     Authority may reasonably require or as may be necessary for the purpose of
     performing:

     (a)  the functions conferred on the Authority by or under the Act; and

     (b)  any functions transferred to or conferred on it by or under the
          Utilities Act 2000.

2.   The licensee shall not be required by the Authority to furnish it under
     this condition with information for the purpose of the exercise of its
     functions under section 47 of the Act.

3.   The licensee shall, if so requested by the Authority, give reasoned
     comments on the accuracy and text of any information or advice (so far as
     relating to its activities as holder of an electricity transmission
     licence) which the Authority proposes to publish pursuant to section 48 of
     the Act.

4.   This condition shall not require the licensee to produce any documents or
     give any information which it could not be compelled to produce or give in
     evidence in civil proceedings before a court.

5.   The power of the Authority to call for information under paragraph 1 is in
     addition to the power of the Authority to call for information under or
     pursuant to any other condition. There shall be a presumption that the
     provision of information in accordance with any other condition is
     sufficient for the purposes of that condition, but that presumption shall
     be rebutted, if the Authority states in writing that in its opinion such
     further information is, or is likely to be, necessary to enable it to
     exercise functions under the condition in question.

6.   The licensee shall procure from each company or other person which the
     licensee knows or reasonably should know is at any time an ultimate
     controller of the

                                       52

<PAGE>

     licensee a legally enforceable undertaking in favour of the licensee in a
     form specified by the Authority that that ultimate controller ("the
     information convenantor") will give to the licensee, and will procure that
     any person (including, without limitation, a corporate body) which is a
     subsidiary of, or is controlled by, the information covenantor (other than
     the licensee and the licensee and its subsidiaries) will give to the
     licensee, all such information as may be necessary to enable the licensee
     to comply fully with the obligation imposed on it by paragraph 1. Such
     undertaking shall be obtained within 7 days of such corporate body or other
     person in question becoming an ultimate controller of the licensee and
     shall remain in force for so long as the licensee remains the holder of
     this licence and the information covenantor remains an ultimate controller
     of the licensee.

7.   The licensee shall deliver to the Authority evidence (including a copy of
     each such undertaking) that the licensee has complied with the obligation
     to procure undertakings pursuant to paragraph 6, and shall comply with any
     direction from the Authority to enforce any undertaking so procured.

8.   The licensee shall not, save with the consent in writing of the Authority,
     enter (directly or indirectly) into any agreement or arrangement with any
     ultimate controller of the licensee or, where the ultimate controller is a
     corporate body, any of the subsidiaries of such a corporate ultimate
     controller (other than the subsidiaries of the licensee) at a time when:

     (a)  an undertaking complying with paragraph 6 is not in place in relation
          to that ultimate controller; or

     (b)  there is an unremedied breach of such undertaking; or

     (c)  the licensee is in breach of the terms of any direction issued by the
          Authority under paragraph 7 of this condition.

9.   In this condition

     "ultimate controller"               means:

                                       53

<PAGE>

                                      (a)  a holding company of the licensee
                                           which is not itself a subsidiary of
                                           another company; and

                                      (b)  any person who (whether alone or
                                           with a person or persons connected
                                           with him) is in a position to
                                           control, or to exercise significant
                                           influence over, the policy of the
                                           licensee or any holding company of
                                           the licensee by virtue of:

                                           (i)  rights under contractual
                                                arrangements to which he is a
                                                party or of which he is a
                                                beneficiary; or

                                           (ii) rights of ownership (including
                                                rights attached to or deriving
                                                from securities or rights under
                                                a trust) which are held by him
                                                or of which he is a beneficiary;
                                                but excluding any director or
                                                employee of a corporate body in
                                                his capacity as such; and

                                      (c)  for the purposes of sub-paragraph
                                           (b), a person is connected with
                                           another person if they are party to
                                           any arrangement regarding the
                                           exercise of any such rights as are
                                           described in that paragraph.

                                       54

<PAGE>

Condition 12. Prohibition of Cross-Subsidies

1.   The licensee shall procure that the transmission business shall not give
     any cross-subsidy to, or receive any cross-subsidy from, any other business
     of the licensee or of an affiliate or related undertaking of the licensee.

2.   Nothing which the licensee is obliged to do or not to do pursuant to this
     licence or any other document which grants a licence to the licensee under
     the Act shall be regarded as a cross-subsidy for the purposes of this
     condition.

                                       55

<PAGE>

SECTION C - SUPPLEMENTARY STANDARD CONDITIONS FOR  ENGLAND AND WALES

Condition C1. Interpretation of Section C

1.       In the standard conditions in this Section unless the context otherwise
         requires:

         "balancing mechanism"             means the mechanism for the making
                                           and acceptance of offers and bids
                                           pursuant to the arrangements
                                           contained in the BSC and referred to
                                           in paragraph 2(a) of standard
                                           condition C3 (Balancing and
                                           Settlement Code).

         "balancing services"              means:
                                           (a)    ancillary services;

                                           (b)    offers and bids made in the
                                                  balancing mechanism; and

                                           (c)    other services available to
                                                  the licensee which serve to
                                                  assist the licensee in
                                                  operating the licensee's
                                                  transmission system in
                                                  accordance with the Act or the
                                                  standard conditions and/or in
                                                  doing so efficiently and
                                                  economically.

         "balancing services activity"     means the activity, as part of the
                                           transmission business, of procuring
                                           and using balancing services for the
                                           purpose of balancing the licensee's
                                           transmission system.

         "bilateral agreement"             means a bilateral connection
                                           agreement and/or a bilateral embedded
                                           generation agreement.

                                       56

<PAGE>

         "bilateral connection agreement"         means an agreement between the
                                                  licensee and a CUSC user
                                                  supplemental to the CUSC
                                                  relating to a direct
                                                  connection to the licensee's
                                                  transmission system
                                                  identifying the relevant
                                                  connection site and setting
                                                  out other site specific
                                                  details in relation to that
                                                  connection to the licensee's
                                                  transmission system, including
                                                  provisions relating to payment
                                                  of connection charges.

         "bilateral embedded generation           means an agreement entered
         agreement"                               into between the licensee and
                                                  a CUSC user supplemental to
                                                  the CUSC, relating to a
                                                  generating station (or other
                                                  connections provided for in
                                                  the CUSC) connected to a
                                                  distribution system in England
                                                  and Wales and the use of the
                                                  licensee's transmission system
                                                  in relation to that generating
                                                  station (or other connections
                                                  provided for in the CUSC)
                                                  identifying the relevant site
                                                  of connection to the
                                                  distribution system and
                                                  setting out other site
                                                  specific details in relation
                                                  to that use of the licensee's
                                                  transmission system.

         "BSC"                                    means the balancing and
                                                  settlement code provided for
                                                  in paragraph 1 of standard
                                                  condition C3 (Balancing and
                                                  Settlement Code), as from time
                                                  to time modified in accordance
                                                  with that condition.

                                       57

<PAGE>

         "BSC Framework Agreement"                means the agreement of that
                                                  title, in the form approved by
                                                  the Secretary of State, by
                                                  which the BSC is made
                                                  contractually binding between
                                                  the parties to that agreement,
                                                  as from time to time amended
                                                  with the consent of the
                                                  Secretary of State.

         "connection charging methodology"        means the principles on which,
                                                  and the methods by which, for
                                                  the purposes of achieving the
                                                  objectives referred to in
                                                  paragraph 11 of standard
                                                  condition C7B (Connection
                                                  Charging Methodology),
                                                  connection charges are
                                                  determined.

         "construction agreement"                 means an agreement between the
                                                  licensee and a CUSC user in
                                                  respect of construction works
                                                  required on the licensee's
                                                  transmission system and the
                                                  associated construction works
                                                  of the CUSC user in relation
                                                  to a connection to the
                                                  licensee's transmission system
                                                  or in relation to a generating
                                                  station connected to a
                                                  distribution system in England
                                                  and Wales, whether for the
                                                  initial connection or a
                                                  modification of the
                                                  connection.

                                       58

<PAGE>

         "core industry documents"                means those documents which

                                                  (a)   in the Secretary of
                                                        State's opinion are
                                                        central industry
                                                        documents associated
                                                        with the activities of
                                                        the licensee and
                                                        authorised electricity
                                                        operators, the subject
                                                        matter of which relates
                                                        to or is connected with
                                                        the BSC or the
                                                        balancing and
                                                        settlement arrangements
                                                        and

                                                  (b)   have been so designated
                                                        by the Secretary of
                                                        State.

         "CUSC"                                   means the Connection and Use
                                                  of System Code provided for in
                                                  paragraph 2 of standard
                                                  condition C7F (Connection and
                                                  Use of System Code), as from
                                                  time to time modified in
                                                  accordance with that
                                                  condition.

         "CUSC Framework Agreement"               means the agreement of that
                                                  title, in the form approved by
                                                  the Secretary of State, by
                                                  which the CUSC is made
                                                  contractually binding between
                                                  the parties to that agreement,
                                                  as amended from time to time
                                                  with the approval of the
                                                  Secretary of State.

         "CUSC party"                             means any person who is a
                                                  party to the CUSC Framework
                                                  Agreement.

         "CUSC user"                              means a CUSC party other than
                                                  the licensee.

         "effective time"                         means the start of the first
                                                  period for trading under the
                                                  BSC as determined by the
                                                  Secretary of State.

                                       59

<PAGE>

         "information"                            includes any documents,
                                                  accounts, estimates (whether
                                                  relating to the past or the
                                                  future), returns, records or
                                                  reports and data in written,
                                                  verbal or electronic form and
                                                  information in any form or
                                                  medium whatsoever (whether or
                                                  not prepared specifically at
                                                  the request of the Authority).

         "interconnector(s)"                      means the electric lines and
                                                  electrical plant and meters
                                                  owned or operated by the
                                                  licensee solely for the
                                                  transfer of electricity to or
                                                  from the transmission system
                                                  of the licensee into or out of
                                                  England and Wales.

         "interconnector (s) business"            means the business of the
                                                  licensee or any affiliate or
                                                  related undertaking in the
                                                  operation of any
                                                  interconnector.

         "separate business"                      means each of:

                                                  (a) the transmission business
                                                      of the licensee: and

                                                  (b) the interconnector(s)
                                                      business of the licensee,

                                                  taken separately from one
                                                  another and from any other
                                                  business of the licensee, but
                                                  so that where all or any part
                                                  of such business is carried on
                                                  by an affiliate or related
                                                  undertaking of the licensee
                                                  such part of the business as
                                                  is carried on by that
                                                  affiliate or related
                                                  undertaking shall be
                                                  consolidated with any other
                                                  part of such business of the
                                                  licensee (and of any other
                                                  affiliate or related
                                                  undertaking) so as to form a
                                                  single separate business.

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         "total system"                           means the licensee's
                                                  transmission system and the
                                                  transmission or distribution
                                                  systems of all authorised
                                                  electricity operators which
                                                  are located in England and/or
                                                  Wales.

         "transmission business"                  means the authorised business
                                                  of the licensee or any
                                                  affiliate or related
                                                  undertaking in the planning,
                                                  development, construction and
                                                  maintenance of the licensee's
                                                  transmission system (whether
                                                  or not pursuant to directions
                                                  of the Secretary of State made
                                                  under section 34 or 35 of the
                                                  Act) and the operation of such
                                                  system for the transmission of
                                                  electricity, including the
                                                  balancing services activity,
                                                  and any business in providing
                                                  connections to the licensee's
                                                  transmission system, but shall
                                                  not include

                                                  (i)   any other separate
                                                        business

                                                  (ii)  any business of the
                                                        licensee or any
                                                        affiliate or related
                                                        undertaking in the
                                                        provision of settlement
                                                        services in connection
                                                        with the BSC or the
                                                        Pooling and Settlement
                                                        Agreement or

                                                  (iii) any other business (not
                                                        being a separate
                                                        business) of the
                                                        licensee or any
                                                        affiliate or related
                                                        undertaking in the
                                                        provision of services to
                                                        or on behalf of any one
                                                        or more persons.

         "use of system charging                  means the principles on which,
         methodology"                             and the methods by which, for
                                                  the purposes of achieving the
                                                  objectives referred to in
                                                  paragraph 5 of standard
                                                  condition C7A (Use of System
                                                  Charging Methodology), use of
                                                  system charges are determined.

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Condition C2. Prohibited Activities

1.       The purpose of this condition is to prevent abuse by the licensee of
         its position as owner and operator of the licensee's transmission
         system.

2.       The licensee shall not and shall procure that any affiliate or related
         undertaking of the licensee shall not, on its own account (or that of
         the licensee or of any affiliate or related undertaking of the licensee
         as the case may be), purchase or otherwise acquire electricity for the
         purpose of sale or other disposition to third parties except with the
         consent of the Authority.

3.       In paragraph 2, the reference to the purchase or other acquisition of
         electricity shall include entering into or acquiring the benefit of a
         contract conferring rights or obligations (including rights or
         obligations by way of option) in relation to or by reference to the
         sale, purchase or delivery of electricity at any time or the price at
         which electricity is sold or purchased at any time.

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Condition C3. Balancing and Settlement Code

1.       The licensee shall at all times have in force a BSC, being a document

         (a)   setting out the terms of the balancing and settlement
               arrangements described in paragraph 2;

         (b)   designed so that the balancing and settlement arrangements
               facilitate achievement of the objectives set out in paragraph 3;
               and

         (c)   including the modification procedures required by paragraph 4 and
               the matters required by paragraphs 6 and (where applicable) 10.

         and the licensee shall be taken to comply with this paragraph by
         adopting as the BSC in force with effect from the date this condition
         comes into effect the document designated by the Secretary of State for
         the purpose of this condition and by modifying such document from time
         to time in accordance with the provisions of paragraphs 4 and 5.

2.       The balancing and settlement arrangements are

         (a)   arrangements pursuant to which BSC Parties may make, and the
               licensee may accept, offers or bids to increase or decrease the
               quantities of electricity to be delivered to or taken off the
               total system at any time or during any period so as to assist the
               licensee in operating and balancing the licensee's transmission
               system; and for the settlement of financial obligations (between
               BSC Parties, or between BSC Parties and the licensee) arising
               from the acceptance of such offers or bids; and

         (b)   arrangements:

               (i)  for the determination and allocation to BSC Parties of the
                    quantities of electricity  delivered to and taken off the
                    total system, and

               (ii) which set, and provide for the determination and financial
                    settlement of, obligations between BSC Parties, or (in
                    relation to the operation

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<PAGE>

                    of the licensee's transmission system) between BSC Parties
                    and the licensee, arising by reference to the quantities
                    referred to in sub-paragraph (i), including the imbalances
                    (after taking account of the arrangements referred to in
                    sub-paragraph (a)) between such quantities and the
                    quantities of electricity contracted for sale and purchase
                    between BSC Parties.

3.       The objectives referred to in paragraph 1(b) are:

         (a)  the efficient discharge by the licensee of the obligations imposed
              upon it by this licence;

         (b)  the efficient, economic and co-ordinated operation by the licensee
              of the licensee's transmission system;

         (c)  promoting effective competition in the generation and supply of
              electricity, and (so far as consistent therewith) promoting such
              competition in the sale and purchase of electricity;

         (d)  without prejudice to paragraph 10, promoting efficiency in the
              implementation and administration of the balancing and settlement
              arrangements described in paragraph 2.

4.       The BSC shall include procedures for its own modification (including
         procedures for the modification of the modification procedures
         themselves), which procedures shall provide (without prejudice to any
         procedures for modification of the BSC set out in the programme
         implementation scheme provided for in standard condition C4 (NETA
         Implementation) or in the BSC by reference to the programme
         implementation scheme):

         (a)  for proposals for modification of the BSC to be made by the
              licensee, BSC Parties and such other persons or bodies as the BSC
              may provide;

         (b)  where such a proposal is made,

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<PAGE>

              (i)   for bringing the proposal to the attention of BSC Parties
                    and such other persons as may have an appropriate interest
                    in it;

              (ii)  for proper consideration of any representations on the
                    proposal;

              (iii) for properly evaluating whether the proposed modification
                    would better facilitate achieving the applicable BSC
                    objective(s), provided that so far as any such evaluation
                    requires information which is not generally available
                    concerning the licensee or the licensee's transmission
                    system, such evaluation shall be made on the basis of the
                    licensee's proper assessment (which the licensee shall make
                    available for these purposes) of the effect of the proposed
                    modification on the matters referred to in paragraphs 3(a)
                    and (b);

              (iv)  for development of any alternative modification which may,
                    as compared with the proposed modification, better
                    facilitate achieving the applicable BSC objective(s);

              (v)   for the preparation of a report

                    -    setting out the proposed modification and any
                         alternative,

                    -    evaluating the proposed modification and any
                         alternative,

                    -    assessing the extent to which the proposed modification
                         or any alternative would better facilitate achieving
                         the applicable BSC objective(s),

                    -    assessing the impact of the modification on the core
                         industry documents and the changes expected to be
                         required to such documents as a consequence of such
                         modification,

                    -    setting out a timetable for implementation of the
                         modification and any alternative, including the date
                         with effect from which such modification (if made) is
                         to take effect; and

              (vi)  for the submission of the report to the Authority as soon
                    after the proposal is made as is appropriate (taking into
                    account the complexity, importance and urgency of the
                    modification) for the proper execution and completion of the
                    steps in sub-paragraphs (i) to (v);

         (c)  for the timetable (referred to in sub-paragraph (b)(v)) for
              implementation of any modification to be such as will enable the
              modification to take effect as soon as practicable after the
              Authority has directed such modification to be

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<PAGE>

              made, account being taken of the complexity, importance and
              urgency of the modification, and for that timetable to be extended
              with the consent of or as directed by the Authority;

         (d)  for empowering the licensee to secure, if so directed by the
              Authority in circumstances specified in the BSC,

              (i)   that the modification procedures are complied with in
                    respect of any particular modification in accordance with
                    the terms of the direction;

              (ii)  that, where a modification has been made but not implemented
                    in accordance with its terms, all reasonable steps are taken
                    to implement it in accordance with the terms of the
                    direction and

              (iii) that the licensee can recover its reasonable costs and
                    expenses properly incurred in complying with the direction.

5.       (a)  If a report has been submitted to the Authority pursuant to the
              procedures described in paragraph 4(b)(vi), and the Authority is
              of the opinion that a modification set out in such report would,
              as compared with the then existing provisions of the BSC and any
              other modifications set out in such report, better facilitate
              achieving the applicable BSC objective(s), the Authority may
              direct the licensee to make that modification.

         (b)  The licensee shall have power (by executing an appropriate
              instrument) to modify the BSC in accordance with any direction of
              the Authority pursuant to sub-paragraph (a), or paragraph 7 of
              standard condition C4 (NETA Implementation), and shall modify it
              in accordance with every such direction; but it shall not have
              power to modify the BSC in any other circumstance.

         (c)  Only the licensee shall have power to modify the BSC.

6.       The BSC shall provide for:

         (a)  a copy of the BSC to be provided to any person requesting the same
              upon payment of an amount not exceeding the reasonable costs of
              making and providing such copy;

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<PAGE>

         (b)  the licensee to refer to the Authority for determination, whether
              of its own motion or as provided in the BSC, such matters arising
              under the BSC as may be specified in the BSC;

         (c)  information about the operation of the BSC and the balancing and
              settlement arrangements

              (i)   to be provided to the Authority and/or

              (ii)  to be published,

         and for the licensee to be empowered to secure compliance with these
         requirements if so directed by the Authority.

7.       The BSC may include:

         (a)  arrangements to facilitate or secure compliance with the programme
              implementation scheme designated pursuant to standard condition C4
              (NETA Implementation) or matters envisaged thereunder, and

         (b)  arrangements for final settlement and reconciliation of
              liabilities arising under or in connection with the Pooling and
              Settlement Agreement in respect of settlement periods prior to the
              effective time.

8.       The provisions of paragraphs 6, 7, 10 and 12 shall not limit the
         matters which may be provided for in the BSC.

9.       The Authority may direct the licensee to procure the provision to him
         of, or the publication of, such information about the operation of the
         BSC and/or the balancing and settlement arrangements as is referred to
         in paragraph 6(c) and specified in the direction.

10.      (a)  The BSC shall provide for arrangements pursuant to which, if
              sub-paragraph (b) has effect

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              (i)   modifications proposed in respect of one code shall (in so
                    far as applicable thereto) be proposed in respect of the
                    other code,

              (ii)  the modifications procedures under each code may so far as
                    practicable be co-ordinated, and

              (iii) all reasonable steps are taken to secure that rights in
                    respect of computer systems used in support of the
                    implementation of the BSC are made available to support the
                    implementation of the other code on terms approved by the
                    Authority.

         (b)  This sub-paragraph shall have effect if any licence
              authorising the transmission of electricity in an area in
              Scotland includes a condition pursuant to which there are or
              are to be arrangements equivalent to the BSC applying in
              Scotland or part of it.

         (c)  In this paragraph, "code" means the BSC and any equivalent
              arrangements applying in Scotland or part of it and approved
              by the Authority for the purpose of this condition.

11.      The licensee shall comply with:

         (a)  the BSC; and

         (b)  any direction to the licensee made pursuant to this condition.


12.      (a)  The licensee shall be a party to the BSC Framework Agreement.

         (b)  The BSC and/or the BSC Framework Agreement shall contain
              provisions:

              (i)   for admitting as an additional party to the BSC
                    Framework Agreement any person who accepts the terms
                    and fulfils the conditions (each as specified in the
                    BSC) on which accession to the BSC Framework
                    Agreement is offered;

              (ii)  for the licensee to refer to the Authority for
                    determination, whether of its own motion or as
                    provided in the BSC any dispute which shall arise as
                    to whether a person seeking to be admitted as a party
                    to the

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<PAGE>

                    BSC Framework Agreement has fulfilled any accession
                    conditions; and if the Authority determines that the person
                    seeking admission has fulfilled all relevant accession
                    conditions, for admitting such person as a party to the BSC
                    Framework Agreement.

              (iii) for persons to be admitted as additional parties to the BSC
                    Framework Agreement by either

                    -    a representative (who need not be a BSC Party)
                         appointed thereunder to act on behalf of all parties to
                         it, or

                    -    if there is no such representative or if the
                         representative fails to act, the licensee acting on
                         behalf of all parties to it.

         (c)  If, following a determination of the Authority as referred to in
              sub-paragraph (b)(ii), the representative referred to in
              sub-paragraph b(iii) fails to act on behalf of all parties to
              admit such person, the licensee shall act on behalf of all parties
              to admit such person if directed to do so by the Authority.

13.      The licensee shall take all reasonable measures to secure and implement
         (consistently with the procedures applicable under or in relation to
         the core industry documents to which it is party (or in relation to
         which it holds rights in respect of amendment)), and shall not take any
         steps to prevent or unduly delay, changes to those documents, such
         changes being changes which are appropriate in order to give full and
         timely effect to and/or in consequence of any modification which has
         been made to the BSC.

14.      For the avoidance of doubt, paragraph 13 is without prejudice to any
         rights of approval, veto or direction in respect of proposed changes to
         the documents referred to in paragraph 13 which the Authority may have.

15.      In this condition in the expression "sale and purchase of electricity",
         sale excludes sale by way of assumption of an imbalance under the BSC
         and sale by way of supply to premises, and purchase shall be construed
         accordingly; and

        "applicable BSC objective(s)"    means:

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                                          (a)  in relation to a proposed
                                               modification of the modification
                                               procedures, the requirements of
                                               paragraph 4 (to the extent they
                                               do not conflict with the
                                               objectives set out in paragraph
                                               3); and

                                          (b)  in relation to any other proposed
                                               modification, the objectives set
                                               out in paragraph 3.

         "BSC Party"                      means any authorised electricity
                                          operator which is party, and (unless
                                          the context otherwise requires) any
                                          other person which is party, to the
                                          BSC Framework Agreement, other than
                                          the licensee and any person which is
                                          such a party for the purposes only of
                                          administering and/or facilitating the
                                          implementation of the BSC.

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Condition C4. NETA Implementation

1.       The licensee shall comply with the programme implementation scheme
         established in accordance with paragraph 2, as modified from time to
         time in accordance with paragraph 4.

2.       The programme implementation scheme shall be a scheme designated by the
         Secretary of State setting out the steps, including without limitation
         steps as to the matters referred to in paragraph 3, to be taken (or
         procured) by the licensee (and/or by authorised electricity operators)
         which are, in the Secretary of State's opinion, appropriate in order to
         give full and timely effect to:

         (a)      any modifications made to this licence and to the licences of
                  authorised electricity operators by the Secretary of State
                  pursuant to the power vested in him under section 15A of the
                  Act;

         (b)      any conditions imposed by any exemption from the requirement
                  to hold any such licence; and

         (c)      the matters envisaged by such modifications and conditions.

3.       The programme implementation scheme may include provisions, inter alia,

         (a)      to secure or facilitate the amendment of any of the core
                  industry documents;

         (b)      to secure that any systems, contracts, persons or other
                  resources employed in the implementation of the Pooling and
                  Settlement Agreement may be employed in the implementation of
                  the BSC;

         (c)      for the giving of indemnities against liabilities to which
                  parties to the Pooling and Settlement Agreement may be
                  exposed;

         (d)      for securing the co-ordinated and effective commencement of
                  implementation of and of operations under the BSC,
                  including the testing,

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<PAGE>

                  trialling and start-up of the systems, processes and
                  procedures employed in such implementation and employed by
                  authorised electricity operators and others in connection with
                  such operations;

         (e)      for co-ordinating the administration and implementation of the
                  BSC and the administration of the Pooling and Settlement
                  Agreement; and for dealing with run-off as defined in
                  paragraph 7 of standard condition C6 (Pooling and Settlement
                  Agreement Run-Off);

         (f)      for the licensee to refer to the Authority for determination,
                  whether of its own motion or as provided in the programme
                  implementation scheme, disputes, as to matters covered by the
                  scheme, between persons who are required (by conditions of
                  their licences or exemptions) or who have agreed to comply
                  with the scheme or any part of it; and

         (g)      for the Authority, in the circumstances set out in the scheme,
                  to require that consideration be given to the making of a
                  proposal to modify the BSC and, if so, to require the making
                  of such proposal in the manner set out in the scheme, such
                  power to be exercisable at any time within the period of 12
                  months after the effective time.

4.       (a)      The Secretary of State may at any time direct in accordance
                  with the provisions of the programme implementation scheme,
                  that the programme implementation scheme, other than
                  provisions pursuant to paragraphs 3(g) and 7(a), be modified
                  in the manner set out in such direction, in order to give (or
                  continue to give) full and timely effect to the matters
                  described in paragraph 2.

         (b)      The Secretary of State shall serve a copy of any such
                  direction on the licensee, and thereupon the licensee shall
                  comply with the scheme as modified by the direction.

5.       If there is any conflict between the requirements contained in the
         programme implementation scheme pursuant to paragraph 3(a) and/or
         imposed on the licensee by paragraphs 1 and 4, and those imposed on the
         licensee by any other condition, the

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<PAGE>

         provisions of this condition shall prevail.

6.       Without prejudice to paragraph 1, the licensee shall use all reasonable
         endeavours to do such things as may be requisite and necessary in order
         to give full and timely effect to the modifications made to this
         licence by the Secretary of State pursuant to the power vested in him
         under section 15A of the Act (and to give full and timely effect to the
         matters envisaged by such modifications).

7.       (a)      The Authority may, in the circumstances specified in the
                  programme  implementation scheme, direct the licensee to
                  modify the BSC in the manner indicated in the direction.

         (b)      The Authority shall not make any such direction after the
                  effective time.

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Condition C5. Supplementary Grid Code Condition for England and Wales

1.       In addition to the list of items referred to in paragraph 5 of standard
         condition 7 (Licensee's Grid Code) which are to be included in the
         licensee's Grid Code, the licensee shall also include in that Grid Code
         procedures relating to the outage of generation sets and a balancing
         code specifying, among other matters, information to be submitted by
         authorised electricity operators to the licensee for the purposes of,
         and the making of offers and bids in, the balancing mechanism, and the
         issuing by the licensee of instructions by reference to such offers and
         bids.

2.       In this condition and standard condition 7 (Licensee's Grid Code) in
         relation to any area of England and Wales, authorised electricity
         operator includes any person transferring electricity to or from
         England and Wales across an interconnector.

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Condition C6. Pooling and Settlement Agreement Run-off

1.       The licensee shall continue to be a party to the Pooling and Settlement
         Agreement in its capacity as grid operator and ancillary services
         provider and will comply with that agreement for the purposes of
         run-off until the provisions of the BSC relating to run-off become
         effective.

2.       The licensee  shall  maintain for a minimum  period of six years such
         records in respect of the period  before the effective time of:

         (a)      generation sets and interconnector transfers available or
                  declared as available;

         (b)      offer prices (including  separate elements thereof) of
                  generation sets and interconnector transfers declared as
                  available;

         (c)      generation sets and interconnector transfers scheduled for
                  despatch or despatched;

         (d)      ancillary services called for by the licensee and provided;

         (e)      kilowatt hours of electricity  taken from the total system by
                  any purchaser of electricity under the Pooling and Settlement
                  Agreement; and

         (f)      imports and exports of electricity across any interconnector

         as shall be reasonably necessary to give effect to the settlement
         system operated under the Pooling and Settlement Agreement.

3.       The licensee shall give or send to any person requesting the same, but
         in each case only in respect of any 28 day period before the effective
         time:

         (a)      the bid prices (showing separately prices for start up,
                  no-load heat and incremental heat rates) of each generation
                  set and interconnector transfer

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<PAGE>

                  offered in each period for which prices are bid over the
                  preceding 28 days for despatch by any authorised electricity
                  operator;

         (b)      declared (and, where different, actual) availability of
                  generation sets (on a set-by-set basis) or interconnector
                  transfers offered for despatch over the preceding 28 days by
                  any authorised electricity operator; and

         (c)      the Pool Selling Price and the Pool Purchase Price as derived
                  in respect of any period over the preceding 28 days pursuant
                  to the terms of the Pooling and Settlement Agreement.

4.       The licensee may make a charge for the information given or sent
         pursuant to paragraph 3 to any person not otherwise entitled to the
         same under the terms of the Pooling and Settlement Agreement of an
         amount which shall not exceed the maximum amount specified in
         directions issued by the Authority for the purposes of this condition.

5.       The licensee shall provide to the Authority such information as the
         Authority shall request concerning the merit order system or any aspect
         of its operation.

6.       The obligations of the licensee under this condition in relation to the
         period before the effective time shall continue notwithstanding any
         termination of the Pooling and Settlement Agreement on or after the
         effective time.

7.       In this condition:

         "available"                               in relation to any generation
                                                   set or interconnector
                                                   transfer means a generation
                                                   set or interconnector
                                                   transfer which is both

                                                   (a)   available in accordance
                                                         with the licensee's
                                                         Grid Code; and

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                                                   (b) declared as available for
                                                       the generation of
                                                       electricity in accordance
                                                       with the provisions of
                                                       the Pooling and
                                                       Settlement Agreement, and

         "interconnector transfer"                 means electricity generating
                                                   capacity of an amount not
                                                   exceeding the maximum
                                                   capacity specified in any
                                                   contract for use of the
                                                   relevant interconnector as
                                                   may at any time be available
                                                   to generate electricity for
                                                   transfer across the
                                                   interconnector to the total
                                                   system.

         "merit order system"                      means a system applying in
                                                   the period before the
                                                   effective time and
                                                   establishing economic
                                                   precedence of electricity
                                                   from available generation
                                                   sets or interconnector
                                                   transfers to be delivered or
                                                   transferred to the total
                                                   system (subject to other
                                                   system needs).

         "run-off"                                 means the determination and
                                                   settlement (including by way
                                                   of reconciliation) of amounts
                                                   due arising under or in
                                                   connection with the Pooling
                                                   and Settlement Agreement in
                                                   relation to settlement
                                                   periods up to and including
                                                   the settlement period
                                                   immediately prior to the
                                                   effective time (including the
                                                   resolution of disputes in
                                                   respect thereof).

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Condition C7.  Charges for Use of System

1.       The licensee shall:

         (a)    by the date this condition comes into effect determine a use of
                system charging methodology approved by the Authority; and

         (b)    conform to the use of system charging methodology as modified in
                accordance with standard condition C7A (Use of System Charging
                Methodology).

2.       The licensee shall by the date this condition comes into effect:

         (a)    prepare a statement approved by the Authority of the use of
                system charging methodology, and

         (b)    prepare, other than in respect of a charge which the Authority
                has consented need not so appear, a statement, in a form
                approved by the Authority, of use of system charges determined
                in accordance with the use of system charging methodology and in
                such form and in such detail as shall be necessary to enable any
                person to make (other than in relation to charges to be made or
                levied in respect of the balancing services activity) a
                reasonable estimate of the charges to which he would become
                liable for the provision of such services,

         and, without prejudice to paragraph 5 of this condition or paragraph 3
         of standard condition C7A (Use of System Charging Methodology), if any
         change is made in the use of system charges to be so made other than in
         relation to charges to be made in respect of the balancing services
         activity, or the use of system charging methodology, the licensee
         shall, before the changes take effect, furnish the Authority with a
         revision of the statement of use of system charges (or if the Authority
         so accepts, with amendments to the previous such statement) and/or (as
         the case may be) with a revision of the statement of the use of system
         charging methodology, which reflect the changes.

3.       Approvals by the Authority pursuant to paragraphs 1(a) and 2(a) may be
         granted subject to such conditions relating to further action to be
         undertaken by the licensee in relation to the use of system charging
         methodology better meeting the relevant objectives including, but not
         limited to, matters identified in any initial consultation

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<PAGE>

         by the Authority, as the Authority deems appropriate. Such conditions
         may include (but are not limited to) elements relating to the time by
         which action under the conditions must be completed.

4.       Nothing in this condition shall affect the ability of the licensee to
         charge according to the statement issued pursuant to paragraph 2(b).

5.       The licensee:

         (a)    shall give, except where the Authority consents to a shorter
                period, 150 days notice to the Authority of any proposals to
                change use of system charges other than in relation to charges
                to be made in respect of the balancing services activity,
                together with a reasonable assessment of the effect of the
                proposals (if implemented) on, those charges, and

         (b)    where it has decided to implement any proposals to change use of
                system charges other than in relation to charges to be made in
                respect of the balancing services activity, shall give the
                Authority notice of its decision and the date on which the
                proposals will be implemented which shall not, without the
                consent of the Authority, be less than a month after the date on
                which the notice required by this sub-paragraph was given.

6.       Unless otherwise determined by the Authority, the licensee shall only
         enter arrangements for use of system which secure that use of system
         charges will conform with the statement last furnished under paragraph
         2(b) either:

         (a)    before it enters into the arrangements; or

         (b)    before the charges in question from time to time fall to be
                made,

         and, for the purposes of this paragraph, the reference to the statement
         last furnished under paragraph 2(b) shall be construed, where that
         statement is subject to amendments so furnished before the relevant
         time, as a reference to that statement as so amended.

7.       References in paragraphs 1, 2, 5 and 6 to charges do not include
         references to:

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         (a)    connection charges; or

         (b)    to the extent, if any, to which the Authority has accepted they
                would, as respects certain matters, be so determined, charges
                determined by reference to the provisions of the CUSC.

8.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statements
         prepared in accordance with paragraph 2 and shall, at least once in
         every year that this licence is in force, make such revisions as may be
         necessary to such statements in order that the information set out in
         the statements shall continue to be accurate in all material respects.

9.       The licensee shall send a copy of any such statement, revision,
         amendment or notice given under paragraphs 2 or 5 to any person who
         asks for any such statement, revision, amendment or notice.

10.      The licensee may make a charge for any statement, revision, or
         amendment of a statement, furnished, or notice sent pursuant to
         paragraph 9 of an amount reflecting the licensee's reasonable costs of
         providing such statement, revision, amendment or notice which costs
         shall not exceed the maximum amount specified in directions issued by
         the Authority for the purposes of this condition.

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Condition C7A. Use of System Charging Methodology

1.       The licensee shall, for the purpose of ensuring that the use of system
         charging methodology achieves the relevant objectives, keep the use of
         system charging methodology at all times under review

2.       The licensee shall, subject to paragraph 3, make such modifications of
         the use of system charging methodology as may be requisite for the
         purpose of better achieving the relevant objectives.

3.       Except with the consent of the Authority, before making a modification
         to the use of system charging methodology, the licensee shall:

         (a)    consult the CUSC users on the proposed modification and allow
                them a period of not less than 28 days within which to make
                written representations;

         (b)    send a copy of the terms of the proposed modification to any
                person who asks for them;

         (c)    furnish the Authority with a report setting out;

                (i)    the terms originally proposed for the modification;

                (ii)   the representations (if any) made to the licensee;

                (iii)  any change in the terms of the modification intended in
                       consequence of such representations;

                (iv)   how the intended modification better achieves the
                       relevant objectives; and

                (v)    a timetable for implementation of the modification and
                       the date with effect from which the modification (if
                       made) is to take effect, such date being not earlier than
                       the date on which the period referred to in paragraph 4
                       expires; and

         (d)    where the Authority has given a direction that sub-paragraphs
                (a), (b) and/or (c) should not apply, comply with such other
                requirements (if any) that the

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                Authority may specify in the direction.

4.       Where the licensee has complied with the requirements of paragraph 3,
         it shall, unless the Authority has within 28 days of the report being
         furnished to him given a direction that the modification may not be
         made, make the modification to the use of system charging methodology.

5.       In paragraphs 1, 2 and 3 "the relevant objectives" shall mean the
         following objectives:

         (a)    that compliance with the use of system charging methodology
                facilitates effective competition in the generation and supply
                of electricity and (so far as is consistent therewith)
                facilitates competition in the sale, distribution and purchase
                of electricity;

         (b)    that compliance with the use of system charging methodology
                results in charges which reflect, as far as is reasonably
                practicable, the costs incurred by the licensee in its
                transmission business; and

         (c)    that, so far as is consistent with sub-paragraphs (a) and (b),
                the use of system charging methodology, as far as is reasonably
                practicable, properly takes account of the developments in the
                licensee's transmission business.

6.       The licensee shall send a copy of any report furnished under paragraph
         3 to any person who asks for any such report.

7.       The licensee may make a charge for any report sent pursuant to
         paragraph 6 of an amount reflecting the licensee's reasonable costs of
         providing such report which costs shall not exceed the maximum amount
         specified in directions issued by the Authority for the purposes of
         this condition.

8.       Nothing in this condition shall impact on the application of special
         conditions AA5Ato AA5E.

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Condition C7B. Connection Charging Methodology

1.       The licensee shall:

         (a)    by the date this condition comes into effect determine a
                connection charging methodology approved by the Authority; and

         (b)    conform to the connection charging methodology as modified in
                accordance with paragraph 10.

2.       The licensee shall, for the purpose of ensuring that the connection
         charging methodology achieves the relevant objectives, keep the
         connection charging methodology at all times under review.

3.       The licensee shall, subject to paragraph 9, make such modifications to
         the connection charging methodology as may be requisite for the purpose
         of better achieving the relevant objectives.

4.       The licensee shall by the date this condition comes into effect prepare
         a statement approved by the Authority of the connection charging
         methodology in relation to charges, including charges:

         (a)    for the carrying out of works and the provision and installation
                of electrical lines or electrical plant or meters for the
                purposes of connection (at entry or exit points) to the
                licensee's transmission system;

         (b)    in respect of extension or reinforcement of the licensee's
                transmission system rendered (at the licensee's discretion)
                necessary or appropriate by virtue of providing connection to
                or use of system to any person seeking connection;

         (c)    in circumstances where the electrical lines or electrical plant
                to be installed are (at the licensee's discretion) of greater
                size than that required for use of system by the person seeking
                connection;

         (d)    for maintenance and repair (including any capitalised charge)
                required of electrical lines or electrical plant or meters
                provided or installed for making a connection to the
                licensee's transmission system; and

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         (e)    for disconnection from the licensee's transmission system and
                the removal of electrical plant, electrical lines and meters
                following disconnection,

         and the statement referred to in this paragraph shall be in such form
         and in such detail as shall be necessary to enable any person to
         determine that the charges to which he would become liable for the
         provision of such services are in accordance with such statement.

5.       An approval by the Authority pursuant to paragraph 1(a) and 4 may be
         granted subject to such conditions relating to further action to be
         undertaken by the licensee in relation to the connection charging
         methodology better meeting the relevant objectives as identified in any
         initial consultation by the Authority as the Authority deems
         appropriate. Such conditions may include (but are not limited to)
         elements relating to the time by which actions under this condition
         need to be completed.

6.       Nothing in this condition shall affect the ability of the licensee to
         charge according to the statement issued pursuant to paragraph 4.

7.       Unless otherwise determined by the Authority, the licensee shall only
         enter into a bilateral agreement or a construction agreement which
         secures that the connection charges will conform with the statement of
         the connection charging methodology last furnished under paragraphs 4
         or 10 either:

         (a)    before it enters into the arrangements; or

         (b)    before the charges in question from time to time fall to be
                made.

8.       The connection charging methodology shall make provision for connection
         charges for those items referred to in paragraph 4 to be set at a level
         for connections made after 30 March 1990 which will enable the licensee
         to recover:

         (a)    the appropriate proportion of the costs directly or indirectly
                incurred in carrying out any works, the extension or
                reinforcement of the licensee's transmission system or the
                provision and installation, maintenance and repair or (as the
                case may be) removal following disconnection of any electric
                lines, electric plant or meters; and

         (b)    a reasonable rate of return on the capital represented by such
                costs,

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         and for connections made before 30 March 1990 the connection charging
         methodology for those items referred to in paragraph 4 shall as far as
         is reasonably practicable reflect the principles in sub-paragraphs (a)
         and (b).

9.       Except with the consent of the Authority, before making a modification
         to the connection charging methodology the licensee shall:

         (a)    consult the CUSC users on the  proposed modification and allow
                them a period of not less than 28 days within which to make
                written representations;

         (b)    send a copy of the terms of the proposed modification to any
                person who asks for them;

         (c)    furnish the Authority with a report setting out:

                (i)    the terms originally proposed for the modification;

                (ii)   the representations (if any) made to the licensee;

                (iii)  any change in the terms of the modification intended in
                       consequence of such representations;

                (iv)   how the intended modification better achieves the
                       relevant objectives; and

                (v)    a timetable for implementation of the modification and
                       the date with effect from which the modification (if
                       made) is to take effect, such date being not earlier than
                       the date on which the period referred to in paragraph 10
                       expires; and

          (d)   where the Authority has given a direction that sub-paragraphs
                (a), (b) and/or (c) should not apply, comply with such other
                requirements (if any) that the Authority may specify in the
                direction.

10.      Where the licensee:

         (a)    has complied with the requirements of paragraph 9, it shall,
                unless the Authority has within 28 days of the report being
                furnished to it given a direction that the modification may not
                be made, make the modification to the

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                 connection charging methodology;

         (b)     makes a modification to the connection charging methodology,
                 furnish the Authority with a revised statement showing the
                 changed connection charging methodology and such revised
                 statement of the connection charging methodology shall
                 supersede previous statements of the connection charging
                 methodology furnished under paragraph 4 or this paragraph 8
                 from the date specified therein.

11.      In paragraphs 2, 3 and 9 "the relevant objectives" shall mean:

         (a)     the objectives referred to in paragraph 5 of standard
                 condition C7A(Use of System Charging Methodology), as if
                 references therein to the use of system charging methodology
                 were to the connection charging methodology; and

         (b)     in addition, the objective, in so far as consistent with
                 sub-paragraph (a), of facilitating competition in the carrying
                 out of works for connection to the licensee's transmission
                 system.

12.      A statement furnished under paragraphs 4 or 10 shall, where
         practicable, include examples of the connection charges likely to be
         made in different cases as determined in accordance with the methods
         and principles shown in the statement.

13.      The licensee shall send a copy of any statement or revision of a
         statement or report furnished under paragraphs 4, 9 or 10 to any person
         who asks for any such statement or revision thereof or report.

14.      The licensee may make a charge for any statement or revision of a
         statement or report, furnished or sent pursuant to paragraph 13 of an
         amount reflecting the licensee's reasonable costs of providing such
         which costs shall not exceed the maximum amount specified in directions
         issued by the Authority for the purposes of this condition.

15.      Nothing in this condition shall impact on the application of special
         conditions AA5A to AA5E.

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Condition C7C. Non- discrimination

1.       In the provision of use of system or in the carrying out of works for
         the purpose of connection to the licensee's transmission system, the
         licensee shall not discriminate as between any persons or class or
         classes of persons.

2.       Without prejudice to paragraph 1 and subject to paragraph 3, the
         licensee shall not make charges for provision of use of system to any
         authorised electricity operator or class or classes of authorised
         electricity operator which differ in respect of any item separately
         identified in the statement referred to at paragraph 2(b) of standard
         condition C7 (Charges for Use of System) from those for provision of
         similar items under use of system to any other authorised electricity
         operator or class or classes of authorised electricity operator except
         in so far as such differences reasonably reflect differences in the
         costs associated with such provision.

3.       Notwithstanding paragraph 2, the licensee shall not make use of system
         charges in respect of any item of charge separately identified in the
         statement referred to at paragraph 2(b) of standard condition C7
         (Charges for Use of System) on any authorised electricity operator
         whose contract does not provide for him to receive the service to which
         such item of charge refers.

4.       The licensee shall not in setting use of system charges restrict,
         distort or prevent competition in the generation, transmission, supply
         or distribution of electricity.

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Condition C7D. Requirement to Offer Terms

1.       Unless otherwise determined by the Authority under standard condition
         C7E (Functions of the Authority), on application made by:

         (a)   any authorised electricity operator in the case of an application
               for use of system; and

         (b)   any person in the case of an application for connection,

         the licensee shall (subject to paragraph 5) offer to enter into the
         CUSC Framework Agreement.

2.       On application made by any person the licensee shall (subject to
         paragraph 5) offer to enter into a bilateral agreement and/or a
         construction agreement relating to connection or modification to an
         existing connection and such offer shall make detailed provision
         regarding:

         (a)   the carrying out of work (if any) required to connect the
               licensee's transmission system to any other system for the
               transmission or distribution of electricity and for the obtaining
               of any consents necessary for such purpose;

         (b)   the carrying out of works (if any) in connection with the
               extension or reinforcement of the licensee's transmission
               system rendered (in the licensee's discretion) appropriate or
               necessary by reason of making the connection or modification
               to an existing connection and for the obtaining of any
               consents necessary for such purpose;

         (c)   the installation of appropriate meters (if any) required to
               enable the licensee to measure electricity being accepted into
               the licensee's transmission system at the specified entry
               point or points or leaving such system at the specified exit
               point or points;

         (d)   the date by which any works required to permit access to the
               licensee's transmission system (including for this purpose any
               works to reinforce or extend the licensee's transmission
               system) shall be completed (time being of

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               the essence unless otherwise agreed by the person seeking
               connection);

         (e)   the connection charges to be paid to the licensee, such charges:

               (i)   to be presented in such a way as to be referable to the
                     connection charging methodology or any revision thereof;
                     and

               (ii)  to be set in conformity with the  requirements of paragraph
                     8 of standard condition C7B (Connection Charging
                     Methodology) and (where relevant) paragraph 4; and

         (f)   such further terms as are or may be appropriate for the purpose
               of the agreement.

3.       For the purpose of determining an appropriate proportion of the costs
         directly or indirectly incurred in carrying out works under a bilateral
         agreement and/or construction agreement, the licensee will have regard
         to:

         (a)   the benefit (if any) to be obtained or likely in the future to be
               obtained by the licensee or any other person as a result of
               carrying out such works whether by reason of the reinforcement or
               extension of the licensee's transmission system or the provision
               of additional entry or exit points on such system or otherwise;
               and

         (b)   the ability or likely future ability of the licensee to recoup a
               proportion of such costs from third parties.

4.       The licensee shall offer terms in accordance with paragraphs 1 and 2
         above as soon as practicable and (except where the Authority consents
         to a longer period) in any event not more than the period specified in
         paragraph 6 below after receipt by the licensee of an application
         containing all such information as the licensee may reasonably require
         for the purpose of formulating the terms of the offer.

5.       The licensee shall not be obliged pursuant to this condition to offer
         to enter or to enter into any agreement if:

         (a)   to do so would be likely to involve the licensee:

               (i)   in breach of its duties under section 9 of the Act;

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               (ii)  in breach of any regulations made under section 29 of the
                     Act or of any other enactment relating to safety or
                     standards applicable in respect of the transmission
                     business;

               (iii) in breach of the licensee's Grid Code; or

               (iv)  in breach of the conditions; or

         (b)   the person making the application does not undertake to be bound
               insofar as applicable by the terms of the licensee's Grid Code
               and/or the CUSC from time to time in force; or

         (c)   in the case of persons making application for use of system under
               paragraph 1, such person ceases to be an authorised electricity
               operator.

6.       For the purpose of paragraph 4, the period specified shall be:

         (a)   in the case of persons seeking use of system only and seeking to
               become a party to the CUSC Framework Agreement if not already a
               party, in connection with such use, 28 days; and

         (b)   in the case of persons seeking a bilateral connection agreement
               or a construction agreement (and seeking to become a party to the
               CUSC Framework Agreement if not already a party, in connection
               with such agreements, 3 months; and

         (c)   in any other case, 28 days.

7.       The licensee shall within 28 days following receipt of a request from
         any person, give or send to such person such information in the
         possession of the licensee as may be reasonably required by such person
         for the purpose of completing an application under the Application
         Regulations or such provisions of similar effect contained in any
         further regulations then in force made pursuant to sections 6(3), 60
         and 64(1) of the Act.

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Condition C7E. Functions of the Authority

1.       If, after a period which appears to the Authority to be reasonable for
         the purpose, the licensee has failed to enter into an agreement with
         (as the case may be) any authorised electricity operator or any person
         entitled or claiming to be entitled thereto pursuant to a request under
         standard condition C7D (Requirement to Offer Terms), the Authority may,
         pursuant to section 7(3)(c) of the Act and on application of such
         authorised electricity operator or such person or the licensee, settle
         any terms in dispute of the agreement to be entered into between the
         licensee and that authorised electricity operator or that person in
         such manner as appears to the Authority to be reasonable having (in so
         far as relevant) regard in particular to the following considerations:

         (a)   that such authorised electricity operator or such person should
               pay to the licensee:

               (i)   in the case of use of  system, use of system charges in
                     accordance with paragraphs 1 and 6 of standard condition C7
                     (Charges for Use of System); or

               (ii)  in the case of connection charges in accordance with
                     paragraphs 1 and 7 of standard condition C7B (Connection
                     Charging Methodology);

         (b)   that the performance by the licensee of its obligations under the
               agreement should not cause it to be in breach of those provisions
               referred to at paragraph 5 of standard condition C7D (Requirement
               to Offer Terms);

         (c)   that any methods by which the licensee's transmission system is
               connected to any other system for the transmission or
               distribution of electricity accord (insofar as applicable to the
               licensee) with the licensee's Grid Code and with the Distribution
               Code; and

         (d)   that the terms and conditions of the agreement so settled by the
               Authority and of any other agreements entered into by the
               licensee pursuant to a request under standard condition C7D
               (Requirement to Offer Terms) should be in as similar a form as is
               practicable.

2.       Insofar as any person entitled or claiming to be entitled to an offer
         under standard

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         condition C7D (Requirement to Offer Terms) wishes to proceed on the
         basis of an agreement as settled by the Authority pursuant to paragraph
         1, the licensee shall forthwith enter into such agreement.

3.       If in respect of any bilateral agreement or construction agreement to
         the licensee's transmission system entered into pursuant to standard
         condition C7D (Requirement to Offer Terms) or this condition either the
         licensee or other party to such agreement proposes to vary the
         contractual terms of such agreement in any manner provided for under
         such agreement, the Authority may, at the request of the licensee or
         other party to such agreement, settle any dispute relating to such
         variation in such manner as appears to the Authority to be reasonable.

4.       Where the licensee is party to a relevant agreement for connection
         and/or use of system which is other than in conformity with the CUSC,
         if either the licensee or other party to such agreement for connection
         and/or use of system proposes to vary the contractual terms of such
         agreement in any manner provided for under such relevant agreement, the
         Authority may, at the request of the licensee or other party to such
         agreement, settle any dispute relating to such variation in such manner
         as appears to the Authority to be reasonable having (in so far as
         relevant) regard to the consideration that the terms so settled are, in
         so far as circumstances allow, similar to the equivalent terms in the
         CUSC.

5.       If the licensee and a CUSC user or other person party to a relevant
         agreement are in dispute as to whether:

         (a)   use of system charges made, or to be made, conform with the
               statement of the use of system charges furnished under paragraphs
               2(b) or 8 of standard condition C7 (Charges for Use of System)
               which applied or applies in relation to the period in respect of
               which the dispute arises;

         (b)   connection charges made, or to be made, conform with the
               statement of the connection charging methodology furnished under
               paragraphs 4 or 10 of standard condition C7B (Connection Charging
               Methodology) which applied or applies in relation to the period
               in respect of which the dispute arises,

         such dispute may be referred to the Authority for him to determine
         whether, in the case of sub-paragraph (a), the charges made, or to be
         made, conformed with the

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         relevant statement(s) furnished under standard condition C7 (Charges
         for Use of System), or whether, in the case of sub-paragraphs (b), the
         charges conformed with the relevant methodology.

6.       For the purposes of this condition:

         "relevant agreement"                   means an agreement in respect of
                                                which paragraph 3 of standard
                                                condition 10C of the licensee's
                                                licence, as such applied
                                                immediately prior to 18
                                                September 2001 had effect.

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Condition C7F. Connection and Use of System Code

1.       The licensee shall establish arrangements for connection and use of
         system in respect of matters other than those to which standard
         conditions 7 (Licensees Grid Code), C5 (Supplementary Grid Code
         Condition for England and Wales) and C7A to C7E relate which are
         calculated to facilitate the achievement of the following objectives:

         (a)   the efficient discharge by the licensee of the obligations
               imposed upon it under the Act and by this licence; and

         (b)   facilitating effective competition in the generation and supply
               of electricity, and (so far as consistent therewith) facilitating
               such competition in the sale, distribution and purchase of
               electricity,

         and the licensee shall be taken to comply with this paragraph by having
         a document setting out the arrangements for connection and use of
         system designated by the Secretary of State for the purposes of this
         condition by the date this condition comes into effect and by modifying
         such document from time to time in accordance with the provisions of
         paragraphs 6 and 7.

2.       The licensee shall prepare a connection and use of system code ("CUSC")
         setting out:

         (a)   the terms of the arrangements made in pursuance of paragraph 1;

         (b)   the procedures established in pursuance of paragraph 6; and

         such other terms as are or may be appropriate for the purposes of the
         CUSC.

3.       The licensee shall only enter into arrangements for connection and use
         of system which are in conformity with any relevant provisions of the
         CUSC.

4.       The CUSC shall provide for:

         (a)   the licensee and each CUSC user to be contractually bound insofar
               as is applicable by the terms of the licensee's Grid Code from
               time to time in force;

         (b)   the licensee and each CUSC user to enter into an agreement or
               agreements,

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                supplemental to and in a form prescribed by the CUSC, setting
                out site specific details in respect of each site at which the
                CUSC user's electrical lines or electrical plant is connected to
                the licensee's transmission system;

         (c)    there to be referred to the Authority for determination such
                matters arising under the CUSC as may be specified in the CUSC;
                and

         (d)    a copy of the CUSC to be provided to any person requesting the
                same upon payment of an amount not exceeding the reasonable
                costs of making and providing such copy.

5.       The provisions of paragraphs 4 and 10 shall not limit the matters which
         may be provided for in the CUSC.

6.       The licensee shall establish and operate procedures for the
         modification of the CUSC (including procedures for modification of the
         modification procedures themselves), so as to better facilitate
         achievement of the applicable CUSC objectives, which procedures shall
         provide:

         (a)    for proposals for modification of the CUSC to be made by the
                licensee, CUSC users and such other persons and bodies as the
                CUSC may provide;

         (b)    where such a proposal is made:

                 (i)   for bringing the proposal to the attention of CUSC
                       Parties and such other persons as may properly be
                       considered to have an appropriate interest in it;

                 (ii)  for proper consideration of any representations on the
                       proposal;

                 (iii) for properly evaluating whether the proposed modification
                       would better facilitate achieving the applicable CUSC
                       objectives, provided that so far as any such evaluation
                       requires information which is not generally available
                       concerning the licensee or the licensee's transmission
                       system, such evaluation shall be made on the basis of the
                       licensee's proper assessment (which the licensee shall
                       make available for these purposes) of the effect of the
                       proposed modification on the matters referred to in
                       paragraph 1(a) and (b);

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                 (iv)  for development of any alternative modification which
                       may, as compared with the proposed modification, better
                       facilitate achieving the applicable CUSC objectives;

                 (v)   for the preparation of a report:

                       -     setting out the proposed modification and any
                             alternative;

                       -     evaluating the proposed modification and any
                             alternative;

                       -     assessing the extent to which the proposed
                             modification or any alternative would better
                             facilitate achieving the applicable CUSC
                             objectives;

                       -     assessing the impact of the modification on the
                             core industry documents and the changes expected to
                             be required to such documents as a consequence of
                             such modification;

                       -     setting out a timetable for implementation
                             of the modification and any alternative,
                             including the date with effect from which
                             such modification (if made) is to take
                             effect; and

                 (vi)  for the submission of the report to the Authority as soon
                       after the proposal is made as is appropriate (taking into
                       account the complexity, importance and urgency of the
                       modification) for the proper execution and completion of
                       the steps in sub-paragraphs (i) to (v); and

         (c)     for the timetable (referred to in sub-paragraph (b)(v)) for
                 implementation of any modification to be such as will enable
                 the modification to take effect as soon as practicable after
                 the Authority has directed such modification to be made,
                 account being taken of the complexity, importance and urgency
                 of the modification, and for that timetable to be extended
                 with the consent of or as required by the Authority.

7.       (a)     If a report has been submitted to the Authority pursuant to
                 procedures described in paragraph 6(b)(vi), and the Authority
                 is of the opinion that a modification set out in such report
                 would, as compared with the then existing provisions of the
                 CUSC and any alternative modifications set out in such report,
                 better facilitate achieving the applicable CUSC objectives

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                 the Authority may direct the licensee to make that
                 modification.

         (b)     The licensee shall only modify the CUSC:

                 (i)   in order to comply with any direction of the Authority
                       pursuant to sub-paragraph (a); or

                 (ii)  with the consent of the Authority,

                 and it shall not have the power to modify the CUSC in any
                 other circumstance; and the licensee shall furnish the
                 Authority with a copy of any modification made.

         (c)     Only the licensee shall have the power to modify the CUSC.

8.       The licensee shall prepare and publish a summary of the CUSC as
         modified or changed from time to time in such form and manner as the
         Authority may from time to time direct.

9.       The licensee shall be a party to the CUSC Framework Agreement and shall
         comply with the CUSC.

10.      The CUSC Framework Agreement shall contain provisions:


         (a)     for admitting as an additional party to the CUSC Framework
                 Agreement any person who accepts the terms and fulfils the
                 conditions (each as specified in the CUSC) on which accession
                 to the CUSC Framework Agreement is offered; and

         (b)     for referring for determination by the Authority any dispute
                 which shall arise as to whether a person seeking to be admitted
                 as a party to the CUSC Framework Agreement has fulfilled any
                 accession conditions; and if the Authority determines that the
                 person seeking accession had fulfilled all relevant standard
                 conditions, for admitting such person to be a party to the CUSC
                 Framework Agreement.

11.      The Authority may issue a direction to the licensee to make such
         amendments to the agreement known as the Master Connection and Use of
         System Agreement ("MCUSA") and the supplemental agreements and
         ancillary services agreements (as

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         defined or referred to in MCUSA) and any associated agreements derived
         from MCUSA as shall be stated as required to be made to amend them
         appropriately into the CUSC Framework Agreement, CUSC, bilateral
         agreements, construction agreements and associated agreements derived
         from CUSC so as to maintain continuity of contractual relationships.

12.      The licensee shall take all reasonable steps to secure and implement
         (consistently with the procedures applicable under or in relation to
         such documents), and shall not take any steps to prevent or unduly
         delay, changes to the core industry documents to which it is a party
         (or in relation to which it holds rights in respect of amendment), such
         changes being changes which are appropriate in order to give full and
         timely effect to and/or in consequence of any modification which has
         been made to the CUSC.

13.      For the avoidance of doubt, paragraph 11 is without prejudice to any
         rights of approval, veto or direction in respect of proposed changes to
         the documents referred to in paragraph 12 which the Authority may have.

14.      The licensee shall comply with any direction to the licensee made
         pursuant to this condition.

15.      In this condition:

         "applicable CUSC objectives"      means:

                                           (a)  in relation to a proposed
                                                modification of the modification
                                                procedures, the requirements of
                                                paragraph 6 (to the extent that
                                                they do not conflict with the
                                                objectives set out in paragraph
                                                1); and

                                           (b)  in relation to any other
                                                proposed modification, the
                                                objectives set out in paragraph
                                                1.

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Condition C7G.  Information about the Licensee's Transmission System

1.       The licensee shall by not later than 31 March in each financial year
         prepare a statement in a form approved by the Authority showing in
         respect of each of the seven succeeding financial years circuit
         capacity, forecast power flows and loading on each part of the
         licensee's transmission system and fault levels for each transmission
         node, together with:

         (a)     such further information as shall be reasonably necessary to
                 enable any person seeking use of system to identify and
                 evaluate the opportunities available when connecting to and
                 making use of such system; and

         (b)     a commentary prepared by the licensee indicating the licensee's
                 views as to those parts of the licensee's transmission system
                 most suited to new connections and transport of further
                 quantities of electricity.

2.       The licensee shall include in every statement prepared under paragraph
         1 above the information required by that paragraph except that the
         licensee may with the prior consent of the Authority omit from such
         statement any details as to circuit capacity, power flows, loading or
         other information, disclosure of which would, in the view of the
         Authority, seriously and prejudicially affect the commercial interests
         of the licensee or any third party.

3.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statement
         prepared in accordance with paragraph 1 and shall, at least once every
         year that this licence is in force, revise such statement in order that
         the information set out in the statement shall continue to be accurate
         in all material respects.

4.       The licensee shall send a copy of any such statement or revision given
         under paragraphs 1 or 3 to any person who asks for one.

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5.       The licensee may make a charge for any statement or revision sent
         pursuant to paragraph 4 of an amount reflecting the licensee's
         reasonable costs of providing such which costs shall not exceed the
         maximum amount specified in directions issued by the Authority for the
         purposes of this condition.

                                      100

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Condition C8. Security Arrangements

1.       The licensee shall comply with the provisions of the Fuel Security Code
         and such provisions shall have effect as if they were set out in this
         licence.

                                      101

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SECTION D - SUPPLEMENTARY CONDITIONS FOR SCOTLAND

Condition D1.  Interpretation of Section D

"interconnection"                            means: the 275 kV and 400 kV
                                             circuits between and including the
                                             associated switchgear at Harker
                                             sub-station in Cumbria and the
                                             associated switchgear at Strathaven
                                             sub-station in Lanarkshire;

                                             the 275kV transmission circuit
                                             between and including the
                                             associated switchgear at Cockenzie
                                             in East Lothian and the associated
                                             switchgear at Stella in Tyne and
                                             Wear; and

                                             the 400kV transmission circuit
                                             between and including the
                                             associated switchgear at Torness in
                                             East Lothian and the associated
                                             switchgear at Stella in Tyne and
                                             Wear

                                             all as existing at the date on
                                             which the transmission licence
                                             comes into force as from time to
                                             time maintained, repaired or
                                             renewed, together with any
                                             alteration, modification or
                                             addition (other than maintenance,
                                             repair or renewal) which is
                                             primarily designed to effect a
                                             permanent increase in one or more
                                             particular interconnection
                                             capacities as they exist
                                             immediately prior to such
                                             alteration, modification or
                                             addition and as from time to time
                                             maintained, repaired or renewed;
                                             and

                                             the 132kV transmission circuit
                                             between and including (and directly
                                             connecting) the associated
                                             switchgear at Chapelcross and the

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                                             associated switchgear at Harker
                                             sub-station in Cumbria; and

                                             the 132kV transmission circuit
                                             between and including (and
                                             connecting, via Junction V) the
                                             associated switchgear at
                                             Chapelcross and the associated
                                             switchgear at Harker sub-station in
                                             Cumbria

                                             all as existing at the date on
                                             which the transmission licence
                                             comes into force and as from time
                                             to time maintained, repaired or
                                             renewed.

"Scottish interconnection"                   means such part of the
                                             interconnection as is situated in
                                             Scotland.

"separate business"                          means each or any of:

                                             (a)   any supply business of (i)
                                                   the licensee or (ii) an
                                                   affiliate or related
                                                   undertaking of the licensee;

                                             (b)   any distribution business of
                                                   (i) the licensee or (ii) an
                                                   affiliate or related
                                                   undertaking of the licensee;

                                             (c)   any generation business of
                                                   (i) the licensee or (ii) an
                                                   affiliate or related
                                                   undertaking of the licensee;

"Trading Code"                               means the trading code required to
                                             be adopted pursuant to standard
                                             condition D2 (Trading Code for
                                             Scotland) and approved by the
                                             Authority as from time to time
                                             revised with the approval of the
                                             Authority.

"transmission business"                      means the authorised business of
                                             the licensee or any affiliate or
                                             related undertaking of the licensee
                                             in the planning, development,

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                                             construction and maintenance of the
                                             licensee's transmission system
                                             (whether or not pursuant to
                                             directions of the Secretary of
                                             State made under section 34 or 35
                                             of the Act) and the operation of
                                             such system for transmission by the
                                             licensee, including any business in
                                             providing connections to the
                                             licensee's transmission system, but
                                             shall not include any other
                                             business (whether or not a separate
                                             business) of the licensee or any
                                             affiliate or related undertaking of
                                             the licensee in the provision of
                                             services to or on behalf of any one
                                             or more persons.

                                      104

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Condition D2. Trading Code for Scotland

1.       The licensee shall, jointly with the other founder member, adopt a
         Trading Code designated by the Authority for the purposes of this
         condition not later than such date as shall be specified in directions
         issued by the Authority for the purposes of this condition and the
         licensee shall comply with the terms of such Trading Code as from time
         to time revised (including any directions, consents, approvals or
         determinations thereunder by the Authority).

2.       The Trading Code shall include:

         (a)   arrangements for the establishment of facilities and procedures
               for effecting trading of electricity between the founder members
               and between and among the founder members and other persons who
               become members of the trading system after the date of the coming
               into force of the Trading Code;

         (b)   arrangements for effecting trading of electricity between members
               of the trading system;

         (c)   arrangements for the establishment of a trading committee to
               carry out the general management and supervision of the trading
               system and its operation;

         (d)   arrangements for the admission to membership of the trading
               system of:


               (i)   any person authorised to generate electricity by a
                     generation licence granted under section 6 (1) (a)of the
                     Act:

                     (aa)  who operates a generating station of a net capacity
                           not less than 50MW (or such other net capacity as the
                           Authority shall direct from time to time); and

                     (bb)  who satisfies such other (if any) requirements as the
                           Authority shall direct from time to time; and

                     (cc)  applies for such membership and agrees to be bound by
                           the

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<PAGE>

                           provisions of the Trading Code; and

                     (dd)  whose said generation licence contains a standard
                           condition requiring it to comply with the provisions
                           of the Trading Code.

               (ii)  any licence holder specified or of a description specified
                     by the Authority:

                     (aa)  who applies for such membership and agrees to be
                           bound by the provisions of the Trading Code; and

                     (bb)  whose licence contains a standard condition requiring
                           it to comply with the provisions of the Trading Code.

         (e)   arrangements for charging members for the costs of the trading
               system;

         (f)   provisions for the giving of directions by the Authority to the
               members of the trading system including (without limitation)
               directions in relation to the responsibilities of the trading
               committee, the contents of reports to be prepared by the trading
               committee pursuant to the Trading Code, the confidentiality and
               prevention of disclosure of information and matters relating to
               the trading system and trading of electricity under the trading
               system and the criteria for membership of the trading system;

         (g)   provisions for the approval by the Authority of certain matters
               including (without limitation) approval of the resignation of a
               founder member from membership of the trading system, the
               cessation of the membership of other members in certain
               circumstances, the admission of persons to membership in certain
               circumstances and any adjustment by the Trading Committee to the
               amount of the membership contributions or other sums payable by
               members pursuant to the Trading Code;

         (h)   provisions for referring certain matters to the Authority for its
               determination including (without limitation) certain
               disagreements arising under the Trading Code concerning the
               admission of persons to membership of the trading system

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<PAGE>

               and the cessation of the membership of members;

         (i)   provisions for delivering to the Authority copies of reports
               prepared by the trading committee pursuant to the Trading Code;

         (j)   administration procedures for the trading system.

3.       In complying with the Trading Code the licensee:

         (a)   shall have regard to its duty to facilitate competition as
               specified in section 9(2) (b) of the Act; and

         (b)   shall not unduly discriminate against or unduly prefer:

               (i)   any one or any group of members; or

               (ii)  the licensee in the conduct of any business other than the
                     transmission business

         in favour of or as against any one other or any other group of members.

4.       The licensee shall, jointly with each other transmission licence holder
         with an authorised area in Scotland and in consultation with the
         members of the trading system, review the Trading Code and its
         operation from time to time after the date of the coming into force of
         this transmission licence and the licensee shall do so whenever
         requested by the Authority and in accordance with the terms of such
         request (including any requirement to prepare such revisions to the
         Trading Code as shall be necessary in order to give effect to such
         matters as shall be specified in the request). Any revision to the
         Trading Code resulting from the carrying out of any review shall be
         sent to the Authority for its approval and no revision to the Trading
         Code shall become effective until the Authority has approved the
         revision.

5.       The licensee shall give or send a copy of the Trading Code (as from
         time to time revised) to the Authority.

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<PAGE>

6.       The licensee shall (subject to paragraph 7) give or send a copy of the
         Trading Code (as from time to time revised) to any authorised
         electricity operator who requests it.

7.       The licensee may make a charge for any copy of the Trading Code (as
         from time to time revised) given or sent pursuant to paragraph 6 of an
         amount which will not exceed any amount specified for the time being
         for the purpose of this condition in directions issued by the
         Authority.

8.       If there shall be any disagreement between the licensee and any other
         transmission licence holder within an authorised area in Scotland as to
         the terms of any revision which is to be made to the Trading Code
         pursuant to paragraph 4 then:

         (a)   the licensee shall refer the matter to the Authority for
               determination;

         (b)   the licensee shall jointly with each other transmission licence
               holder with an authorised area in Scotland forthwith prepare such
               revision on the basis of the terms so determined by the
               Authority; and

         (c)   a revision so prepared shall for all the purposes of this
               standard condition be deemed to have been prepared in accordance
               with paragraph 4.

9.       For the purposes of this condition:

         "trading of electricity"       means sales and purchases of electricity
                                        pursuant to short term contracts;

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         "short term contract"             means a contract under which a person
                                           has a right or an obligation (whether
                                           or not conditional or contingent) to
                                           receive or provide electricity other
                                           than:

                                           (i)    a contract:

                                           which is performed without the use of
                                           any part of the Scottish transmission
                                           system ; and

                                           under which the purchaser is not a
                                           person authorised to supply
                                           electricity in Scotland or, if so
                                           authorised, undertakes to the seller
                                           to use the electricity received or
                                           provided pursuant to the contract
                                           only for purposes other than supply
                                           to premises in Scotland;

                                           or

                                           (ii)   a contract under which no
                                           person has a right or an obligation
                                           (whether or not conditional or
                                           contingent) to receive or provide
                                           electricity on a day earlier than the
                                           29th day after the date on which the
                                           contract is made or entered into; or

                                           (iii)  a contract under which; a
                                           person has a right or an obligation
                                           (whether or not conditional or
                                           contingent) to receive or provide
                                           electricity on any one or more of the
                                           28 days after the date on which the
                                           contract is made or entered into; and

                                           that person has a right or an
                                           obligation to receive or provide on
                                           the 29th (or any later) day after
                                           such date (and on the same terms as
                                           the highest daily amount referred to
                                           below) an amount of electricity not
                                           less than the highest daily amount of
                                           electricity which it has a right or
                                           an obligation to receive or provide
                                           during the period of 28 days referred
                                           to in sub-paragraph (a) above.

         "trading system"                  means the facilities and procedures
                                           established under the Trading Code
                                           for the trading of electricity.

         "other founder member"            means the other transmission licence
                                           holder with an authorised area in
                                           Scotland on 1 April 1991 .

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<PAGE>

         "founder members"                 means the licensee and the other
                                           founder member together.

         "Scottish transmission system "   means the transmission systems of the
                                           licensee and any other transmission
                                           licence holder with an authorised
                                           area in Scotland taken together, but
                                           excluding any part thereof which is
                                           not situated in Scotland.

         "contract"                        shall include any contract whether or
                                           not in, or evidenced by writing, but
                                           shall not include the Pooling and
                                           Settlement Agreement or any contract
                                           made or entered into pursuant to the
                                           Pooling and Settlement Agreement.

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<PAGE>

Condition D3. Restriction on Use of Certain Information

1.       Any information relating to or deriving from the management or
         operation of the transmission business shall, for the purposes of this
         condition, be treated as confidential information.

2.       The licensee shall not (and shall procure that its affiliates and
         related undertakings shall not) disclose or authorise access to
         confidential information:

         (a)   save to the extent provided by sub-paragraphs 3(b) to (d), to
               such of its (or its affiliates' or related undertakings')
               employees, agents, advisers, consultants or contractors as are
               engaged in, or in respect of, the management or operation of any
               other business (whether or not a separate business) of the
               licensee; or

         (b)   save to the extent permitted by paragraph 3, to any other person.

3.       Subject to paragraphs 9 to 12 of standard condition D3A (Independence
         of and Appointment of Managing Director of the Transmission Business),
         the licensee shall (and shall procure that its affiliates and related
         undertakings shall) disclose or authorise access to confidential
         information only:

         (a)   in the following circumstances, namely;

               (i)  to such of its (or its affiliates' or related undertakings')
                    employees, agents, advisers, consultants or contractors as
                    are engaged in, or in respect of, the management or
                    operation of the transmission business or any external
                    transmission activities and require access to the
                    information for that purpose;

               (ii) to personnel of any holder of a distribution licence or a
                    transmission licence holder engaged in the external
                    distribution activities of that distribution licence holder,
                    or the external transmission activities of that transmission
                    licence holder (as the case may be), to the extent necessary
                    for the performance by such personnel of those external
                    distribution activities, or those external transmission
                    activities (as the

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<PAGE>

                     case may be), and the use by such personnel of that
                     information for that purpose;

               provided that effective arrangements are maintained in place at
               all times for ensuring that no further disclosure of any
               information supplied or obtained pursuant to this paragraph is
               made and that such information is used only for the purpose of
               the transmission business or any external transmission activities
               of the licensee;

         (b)   where the licensee (or any affiliate or related undertaking of
               the licensee) is required or permitted to disclose such
               information by virtue of:

               (i)   any requirement of a competent authority/3/;

               (iii) the standard conditions of any licence granted under the
                     Act or any document referred to in such a licence with
                     which it is required by virtue of the Act or that licence
                     to comply;

               (iv)  any other requirement of law; or

               (v)   the rules of the Electricity Arbitration Association or of
                     any judicial or other arbitral process or tribunal of
                     competent jurisdiction;

         (c)   where such information was provided by or relates to any person
               who has notified (or otherwise agreed with) the licensee that it
               need not be treated as confidential; or

         (d)   where such information, not being information provided by or
               relating to any person other than the licensee, is placed by the
               licensee in the public domain

         and in each case the licensee shall disclose or authorise access to the
         confidential information only insofar as is necessary or appropriate in
         all the circumstances.

4.       Subject to paragraphs 9 to 12 of standard condition D3A (Independence
         of and Appointment of Managing Director of the Transmission Business),
         the licensee shall use all reasonable endeavours to ensure that any
         person who is in possession of or has access to confidential
         information in accordance with sub-paragraph 3(a) shall use such
         information only for the purposes of the transmission business or any
         external transmission activities.

5.       In this condition

_________________

/3/      Direction issued under Conditions 8 and 8A (of Part IV) of the
         Transmission Licence of Scottish Power UK plc now Standard Conditions
         D3 and D3A of this licence

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<PAGE>

        "competent authority"                   means the Secretary of State,
                                                the Authority, the Compliance
                                                Officer, the Stock Exchange, the
                                                Panel on Take-overs and Mergers,
                                                or any local or national agency,
                                                regulatory body, authority,
                                                department, inspectorate,
                                                minister (including Scottish
                                                Ministers), ministry, official
                                                or public or statutory person
                                                (whether autonomous or not) of,
                                                or of the government of, the
                                                United Kingdom, the United
                                                States of America or the
                                                European Community.

        "confidential information"              bears the meaning given at
                                                paragraph 1.

        "Electricity Arbitration Association"   means the unincorporated
                                                members' club of that name
                                                formed inter alia to promote the
                                                efficient and economic operation
                                                of the procedure for the
                                                resolution of disputes within
                                                the electricity supply industry
                                                by means of arbitration or
                                                otherwise in accordance with its
                                                arbitration rules.

        "external distribution activities"      means any business of the
                                                licensee or any affiliate or
                                                related undertaking comprising
                                                or ancillary to the maintenance,
                                                repair or operation of, or other
                                                activities in connection with
                                                any electricity distribution or
                                                transmission system other than
                                                the licensee's distribution
                                                system ("an external
                                                distribution system").

        "external transmission activities"      has the meaning given to that
                                                term in standard condition D3A
                                                (Independence of and Appointment
                                                of Managing Director of the
                                                Transmission Business) of this
                                                part of this licence.

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<PAGE>

Condition D3. Independence of and Appointment of Managing Director of the
Transmission Business

1

        (a)    The licensee shall establish and shall thereafter maintain the
               full managerial and operational independence of the transmission
               business and any external transmission activities from each other
               business (whether or not a separate business) of the licensee and
               of its affiliates and related undertakings.

        (b)    The licensee shall appoint an officer (hereafter referred to as
               "the Managing Director of Transmission") to be responsible for
               the conduct of the transmission business and any external
               transmission activities.

2.      The Managing Director of Transmission may be a director:

        (a)    of the transmission licensee; or

        (b)    in the circumstances set out in paragraph 12 only, of the
               licensee and of an affiliate or related undertaking of the
               licensee which holds a distribution licence or a holding company
               only engaged in ownership or management of distribution or
               transmission businesses or both;

        provided that the licensee shall ensure that the Managing Director of
        Transmission shall not be a director of any other affiliate or related
        undertaking of the licensee and that he shall not be engaged by the
        licensee in any other capacity than as Managing Director of
        Transmission.

3.      The licensee shall arrange for the Managing Director of Transmission in
        the course of discharging his responsibility under paragraph 1 to be
        provided from time to time with:

        (a)    the services of such persons (as the Managing Director of
               Transmission may from time to time select), whose services:

               (i)   may be dispensed with at the sole  discretion (subject to
                     compliance  with relevant UK employment legislation) of the
                     Managing Director of

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                      Transmission; and

               (ii)   will only be utilised if such persons execute a contract
                      of or for services containing an appropriate
                      confidentiality clause regarding that information which
                      may be acquired by such person whilst working for the
                      transmission business and any external transmission
                      activities;

        (b)    such premises, systems, equipment, facilities, property,
               personnel, data and management resources; and

        (c)    such finance;

        as may be reasonably required by the Managing Director of Transmission
        for the efficient and effective management and operation of the
        transmission business in accordance with the licensee's duty under
        section 9(2)(a) of the Act and the transmission licence.

4.      The licensee shall direct the Managing Director of Transmission:

        (a)    to inform the directors of the licensee, in writing, if, at any
               time, he is of the opinion that the provision of those items
               specified in paragraph 3 are not sufficient to enable the
               licensee to comply with its duties under section 9(2)(a) of the
               Act and the transmission licence; and

        (b)    as soon as practicable after the end of the year 2001 and of each
               subsequent calendar year, to furnish to the directors of the
               licensee:

               (i)    an informative report on the provision of those matters
                      made in respect of that year; and

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<PAGE>

               (ii)   a statement of his opinion whether adequate arrangements
                      have been or are likely to be made for the provision of
                      those matters which will be required in respect of the
                      ensuing calendar year to enable the licensee to comply
                      with those duties including, in particular, a description
                      of the differences in the provision of those matters made
                      or likely to be made in that year compared with the
                      provision made in respect of the preceding year and the
                      reasons for those differences.

5.      On receipt of any information under paragraph 4(a) or report and
        statement under paragraph 4(b), the licensee shall, subject to
        compliance with the listing rules (within the meaning of Part IV of the
        Financial Services Act 1986 (c.60)) of the Stock Exchange:

        (a)    give to the Authority forthwith that information or report and
               statement; and

        (b)    where such a report is  received, publish it in such form and
               manner as the Authority may direct.

6.      Except insofar as the Authority consents/4/ to the licensee doing so,
        the licensee shall only give directions to the Managing Director of
        Transmission as to the discharge of his responsibilities under
        paragraph 1:

        (a)    where:

               (i)    in the bona fide and reasonable opinion of the licensee
                      the statutory, licence and contractual obligations of the
                      licensee; or

               (ii)   in the bona fide opinion of the directors, their duties;
                      so require; or

_______________

/4/     Direction issued under Conditions 8 and 8A (of Part IV) of the
        Transmission Licence of Scottish Power UK plc now Standard

                                      116

<PAGE>

         (b)  to ensure compliance with paragraph 4.

7.       The licensee shall give directions under sub- paragraph 6(a) by notice
         in writing, specifying in the notice the statutory, licence or
         contractual obligations of the licensee or duty of the directors of the
         licensee which require the licensee to give directions, which notice
         shall be copied to the Authority.

8.       Except in so far as the Authority consents to the licensee not doing
         so, the licensee shall, subject to paragraph 9 below, ensure that:

         (a)   no business of the licensee (or of any affiliate or related
               undertaking of the licensee), other than the transmission
               business or any external transmission activities, may use or have
               access to:

               (i)     premises or parts of premises occupied by persons engaged
                       in, or in respect of, the management or operation of the
                       transmission business or any external transmission
                       activities;

               (ii)    systems for the recording, processing or storage of data
                       to which persons engaged in, or in respect of, the
                       management or operation of the transmission business or
                       any external transmission activities also have access;

               (iii)   equipment, facilities or property employed for the
                       management or operation of the transmission business or
                       any external transmission activities; or

               (iv)    the services of persons who are (whether or not as their
                       principal occupation) engaged in, or in respect of, the
                       management or operation of the transmission business or
                       any external transmission activities; and

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         (b)   it can and does, insofar as is legally possible, prevent any
               person who has ceased to be engaged in, or in respect of, the
               management or operation of the transmission business from being
               engaged in, or in respect of, the activities of any other
               business of the licensee (or of any affiliate or related
               undertaking of the licensee) until the expiry of an appropriate
               time from the date on which he ceased to be engaged by the
               transmission business.

9.       The Authority may, upon the written request of the licensee, issue a
         direction relieving the licensee of its obligations under standard
         condition D3 (Restriction on Use of Certain Information) and under
         paragraphs 1(a), 2 and 8 of this condition, to such extent and subject
         to such terms and conditions as he may specify in that direction,
         where:

         (a)   it is not reasonably practicable for the licensee to comply with
               any aspect of those obligations;

         (b)   in the case of paragraphs 2 to 4 of standard condition D3
               (Restriction on Use of Certain Information), a failure to comply
               with any aspect of those obligations would be of a trivial
               nature; or

         (c)   in the case of paragraphs 1(a) and 8 of this condition, any
               arrangements for the use of or access to premises, systems,
               equipment, facilities, property or personnel by both the
               transmission business and any other business of the licensee (or
               of any affiliate or related undertaking of the licensee):

               (i)   do not involve a cross-subsidy being either given to the
                     transmission business by such other business or received
                     from the transmission business by such other business;

               (ii)  obtain for the transmission business, in the most efficient
                     and

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                     economical manner possible, the use of the relevant
                     premises, systems, equipment, facilities, property or
                     personnel; and

               (iii) do not restrict, distort or prevent competition in the
                     generation or supply of electricity,

             provided that the licensee shall not thereby be relieved of any
             obligation imposed on it by EU Directive 96/92/EC.

10.      Where, subsequent to the issue of a direction pursuant to paragraph 9,
         the criteria set out at sub-paragraphs 9(a), (b) or (c) cease to be
         satisfied, the Authority may withdraw the direction or modify any terms
         and conditions which may be specified in it.

11.      For the purposes of paragraphs 9 and 10 the Authority shall, following
         consultation with the licensee, determine any question as to whether
         the criteria set out at sub-paragraphs 9(a), (b) or (c) are or continue
         to be satisfied.

12.      If the Authority is requested to issue any direction pursuant to
         paragraph 9 relating to the transmission business being managed or
         operated by the licensee together with any distribution business then
         that direction may provide that for the purposes of this condition and
         of standard condition D3 (Restriction on Use of Certain Information)
         the transmission business shall be taken to include any such
         distribution business and for the Managing Director of Transmission to
         take part in the management of and/or to be a director of any company
         carrying on any such distribution business.

13.      In this condition:

         "appropriate time"                        means 3 months, or such
                                                   shorter period as the
                                                   Authority may approve in
                                                   respect of any person or
                                                   class of persons.

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         "external transmission activities"        means any business of the
                                                   licensee or any affiliate or
                                                   related undertaking of the
                                                   licensee comprising or
                                                   ancillary to the maintenance,
                                                   repair or operation in an
                                                   emergency of any electricity
                                                   distribution or transmission
                                                   system other than the
                                                   licensee's transmission
                                                   system.

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<PAGE>

Condition D3B. Appointment of Compliance Officer

1.       The licensee shall prepare a statement in a form approved by the
         Authority setting out the practices, procedures and systems which the
         licensee has adopted (or intends to adopt) to ensure its compliance
         with the relevant duties.

2.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statement
         prepared in accordance with paragraph 1 and shall, at least once every
         year during which this licence is in force, review such statement in
         order that the information set out therein shall continue to be
         accurate in all material respects.

3.       The licensee shall send a copy of the statement prepared in accordance
         with paragraph 1, and of each revision of such statement in accordance
         with paragraph 2, to the Authority.

4.       The licensee shall, following consultation with the Authority, appoint
         a competent person (who shall be known as the "Compliance Officer") for
         the purpose of facilitating compliance by the licensee with the
         relevant duties.

5.       The licensee shall at all times engage the services of the Compliance
         Officer for the performance of such duties and tasks as the licensee
         considers it appropriate to assign to him for the purposes specified at
         paragraph 4, which duties and tasks shall include those set out at
         paragraph 8.

6.       The licensee shall procure that the Compliance Officer:

         (a)   is provided with such staff, premises, equipment, facilities and
               other resources; and

         (b)   has such access to its premises, systems, information and
               documentation

         as, in each case, he might reasonably expect to require for the
         fulfilment of the duties

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         and tasks assigned to him.

7.       The licensee shall make available to the Compliance Officer a copy of
         any complaint or representation received by it from any person in
         relation to any of the practices, procedures and systems adopted by the
         licensee in accordance with the statement referred to at paragraph 1.

8.       The duties and tasks assigned to the Compliance Officer shall include:

         (a)   providing relevant advice and information to the licensee for the
               purpose of ensuring its compliance with the Relevant Duties;

         (b)   monitoring the effectiveness of the practices, procedures and
               systems adopted by the licensee in accordance with the statement
               referred to at paragraph 1;

         (c)   investigating any complaint or representation made available to
               him in accordance with paragraph 7;

         (d)   recommending and advising upon the remedial action which any such
               investigation has demonstrated to be necessary or desirable;

         (e)   providing relevant advice and information to the licensee for the
               purpose of ensuring its effective implementation of:

               (i)   the practices, procedures and systems adopted in accordance
                     with the statement referred to at paragraph 1; and


               (ii)  any remedial action recommended in accordance with
                     sub-paragraph (d); and

         (f)   reporting annually to the directors of the licensee - in respect
               of the year ending 31 December 2001 and of each subsequent year -
               as to his activities during the period covered by the report,
               including the fulfilment of the other

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                  duties and tasks assigned to him by the licensee.

9.   As soon as is reasonably practicable following each annual report of the
     Compliance Officer, the licensee shall produce a report:

     (a)   as to its compliance during the relevant year with the relevant
           duties; and

     (b)   as to its implementation of the practices, procedures and systems
           adopted in accordance with the statement referred to at paragraph 1.

10.  The report produced in accordance with paragraph 9 shall in particular:

     (a)   detail the activities of the Compliance Officer during the relevant
           year;

     (b)   refer to such other matters as are or may be appropriate in relation
           to the implementation of the practices, procedures and systems
           adopted in accordance with the statement referred to at paragraph 1;
           and

     (c)   set out the details of any investigations conducted by the Compliance
           Officer, including:

           (i)    the number, type and source of the complaints or
                  representations on which such investigations were based;

           (ii)   the outcome of such investigations; and

           (iii)  any remedial action taken by the licensee following such
                  investigations.

11.  The licensee shall submit to the Authority a copy of the report produced in
     accordance with paragraph 9, and shall give or send a copy of the report to
     any person who requests such a copy.

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12.  In this condition:

     "relevant duties"           means the obligations set out in standard
                                 condition D3 (Restriction on Use of Certain
                                 Information).

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Condition D4. Transmission System Outages

1.   The licensee shall notify the Authority in writing forthwith in the event
     that the licensee and the transmission licence holder for the other
     transmission system in Scotland have not agreed a programme of planned
     outages for their respective transmission systems for the financial year
     commencing on 1 April 2002 or any subsequent financial year on or before
     the 1st day of January prior to the commencement of the relevant financial
     year.

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Condition D5. Supplementary Grid Code Condition for Scotland

1.   In addition to the list of items referred to in paragraph 5 of standard
     condition 7 (Licensee's Grid Code) which are to be included in the
     licensee's Grid Code, the licensee shall also include in the licensee's
     Grid Code procedures relating to outages of generation sets and a
     scheduling and despatch code specifying procedures for the scheduling and
     despatch of generating stations connected to the licensee's transmission
     system.

2.   The licensee shall keep and maintain such records concerning its
     implementation and compliance with the licensee's Grid Code as are in the
     opinion of the Authority, sufficient to enable the Authority to assess
     whether the licensee is performing the obligation imposed upon it under
     paragraph 9 of standard condition 7 (Licensee's Grid Code) concerning these
     matters and the licensee shall furnish to the Authority such records (or
     such of these as the Authority may require) in such manner and at such
     times as the Authority may require.

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Condition D6. Settlement Agreement for Scotland

1.   Insofar as the licensee transmits electricity to any premises situate in
     Scotland or to the extent that the Settlement Agreement for Scotland may
     apply in respect of the activities of the transmission business, the
     licensee shall comply with the relevant provisions of the Settlement
     Agreement for Scotland.

2.   In this condition:

     "Settlement Agreement for Scotland" means the agreement of that title, as
     nominated by the Authority for the purposes of this condition, to be
     prepared in accordance with and comprise such matters as are set out in
     special condition I (The Settlement Agreement for Scotland) of each of the
     electricity distribution licences of SP Distribution Limited, and Scottish
     Hydro-Electric Power Distribution limited (and any other name by which any
     of these companies come to be known).

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<PAGE>

Condition D7. Security Arrangements

         (a)    If so directed in directions issued by the Authority for the
                purposes of this condition, the licensee shall, not later than
                such date as may be specified in such directions, enter into
                an agreement designated by the Secretary of State for the
                purposes of this condition relating to compliance with
                directions issued by the Secretary of State under section 34
                and/or section 35 of the Act.

         (b)    The licensee shall comply with and perform its obligations
                under any agreement which it enters into pursuant to
                sub-paragraph (a) above.

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<PAGE>

Condition D8. Basis of charges for use of system and connection to system:
requirements for transparency

1.   The licensee shall as soon as practicable after this licence has come into
     force and, in any event, not later than such date as the Authority shall
     specify prepare a statement approved by the Authority setting out the basis
     upon which charges will be made for use of the licensee's transmission
     system and for connection to the licensee's transmission system, such
     statement to be in such form and to contain such detail as shall be
     necessary to enable any person to make a reasonable estimate of the charges
     to which it would become liable for the provision of such services, and
     (without prejudice to the foregoing) including such of the information set
     out in paragraphs 2 and 3 as is required by such paragraphs to be included
     in the relevant statement.

2.   Except to the extent that the Authority shall otherwise specify, the
     statement referred to in paragraph 1 shall in respect of use of system
     include:

     (a)  a schedule of charges for the transmission of electricity under use of
          system;

     (b)  the charge for maintaining voltage and frequency within statutory
          limits;

     (c)  a schedule of adjustment factors to be made in respect of transmission
          losses, in the form of additional supplies required to cover those
          transmission losses;

     (d)  the methods by which and the principles on which charges (if any) for
          availability of transmission capacity on the licensee's transmission
          system will be made;

     (e)  a schedule of the charges (if any) which may be made for the provision
          and installation of any meters or electrical plant at entry or exit
          points, the provision and installation of which is ancillary to the
          grant of use of system, and for the maintenance of such meters or
          electrical plant;

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     (f)  the methods by which and the principles on which entry and exit
          charges for connections in operation before the date on which this
          licence comes into force will be calculated; and

     (g)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this condition.

3.   The statement referred to in paragraph 1 shall in respect of connections to
     the licensee's transmission system include -

     (a)  a schedule listing those items (including the carrying out of works
          and the provision and installation of electric lines or electrical
          plant or meters) of significant cost liable to be required for the
          purpose of connection (at entry or exit points) to the licensee's
          transmission system for which connection charges may be made or levied
          and including (where practicable) indicative charges for each such
          item and (in other cases) an explanation of the methods by which and
          the principles on which such charges will be calculated;

     (b)  the methods by which and the principles on which any charges will be
          made in respect of extension or reinforcement of the licensee's
          transmission system rendered necessary or appropriate by virtue of
          providing connection to or use of system to any person seeking
          connection;

     (c)  the methods by which and the principles on which connection charges
          will be made in circumstances where the electric lines or electrical
          plant to be installed are (at the licensee's discretion) of greater
          size or capacity than that required for use of system by the person
          seeking connection;

     (d)  the methods by which and the principles on which any charges
          (including any capitalised charge) will be made for maintenance,
          replacement and repair required of electric lines, electrical plant or
          meters provided and installed for making a connection to the
          licensee's transmission system;

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<PAGE>

     (e)  the methods by which and principles on which any charges will be made
          for disconnection from the licensee's transmission system and the
          removal of electrical plant, electric lines and ancillary meters
          following disconnection; and

     (f)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this condition.

4.   Connection charges for those items referred to in paragraph 3 shall be set
     at a level which will enable the licensee to recover:

     (a)  the appropriate proportion of the costs directly or indirectly
          incurred in carrying out any works, the extension or reinforcement of
          the licensee's transmission system or the provision and installation,
          maintenance, replacement and repair or (as the case may be) removal
          following disconnection of any electric lines, electrical plant,
          meters or other items; and

     (b)  a reasonable rate of return on the capital represented by such costs.

5.   The licensee shall as soon as practicable after this licence has come into
     force and, in any event, not later than such date as the Authority shall
     specify prepare a statement approved by the Authority showing in respect of
     each of the 7 succeeding financial years circuit capacity, forecast power
     flows and loading on each part of its transmission system and fault levels
     for each transmission node, together with:

     (a)  such further information as shall be reasonably necessary to enable
          any person seeking use of system to identify and evaluate the
          opportunities available when connecting to and making use of such
          system;

     (b)  a commentary prepared by the licensee indicating the licensee's views
          as to those parts of the licensee's transmission system most suited to
          new connections and the transmission of further quantities of
          electricity; and

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<PAGE>

     (c)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this condition.

6.   The licensee shall include in every statement prepared or (as the case may
     be) given or sent under paragraph 5 the information required by such
     paragraph, save that the licensee may, with the prior consent of the
     Authority, omit from any such statement any details as to circuit capacity,
     power flows, loading or other information, disclosure of which would, in
     the view of the Authority, seriously and prejudicially affect the
     commercial interests of the licensee or any third party.

7.   In addition to, and without prejudice to, the licensee's obligations under
     paragraph 1, the licensee shall, upon being directed to do so in directions
     issued by the Authority from time to time for the purposes of this
     condition and within such period as shall be specified in the directions,
     prepare a statement or statements approved by the Authority providing that
     charges for use of the licensee's transmission system and/or for connection
     to the licensee's transmission system will be made on such basis as shall
     be specified in the directions and such statement or statements shall be in
     such form and contain such detail as shall be necessary to enable any
     person to make a reasonable estimate of the charges to which it would
     become liable for the provision of such services and (without prejudice to
     the foregoing) including such information as shall be specified in the
     directions. Each statement prepared in accordance with this paragraph
     shall, with effect from the date on which it is approved by the Authority
     or such later date as the Authority shall specify, replace the
     corresponding statement prepared by the licensee in accordance with
     paragraph 1 or, as the case may be, this paragraph (as from time to time
     revised in accordance with paragraph 8) which is in force at such date and
     the licensee shall, with effect from such date make charges in accordance
     with the statement (as from time to time revised in accordance with
     paragraph 8) which has replaced such corresponding statement.

8.   The licensee may periodically revise the statements prepared in accordance
     with paragraphs 1, 5 and 7 and shall, at least once in every year this
     licence is in force, make any necessary revisions to such statements in
     order that the information set out in the statements shall continue to be
     accurate in all material respects.

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<PAGE>

9.   The licensee shall send a copy of the statements prepared in accordance
     with paragraphs 1, 5 and 7, and of each revision of such statements in
     accordance with paragraph 8, to the Authority. Each such revision shall
     require to be approved by the Authority and shall not become effective
     until approved by the Authority.

10.  The licensee shall give or send a copy of the statements prepared in
     accordance with paragraphs 1, 5 and 7 or (as the case may be) of the latest
     revision of such statements in accordance with paragraph 8 approved by the
     Authority pursuant to such paragraph to any person who requests a copy of
     such statement or statements.

11.  The licensee may make a charge for any statement given or sent pursuant to
     paragraph 10 of an amount reflecting the licensee's reasonable costs of
     providing such a statement which shall not exceed the maximum amount
     specified in directions issued by the Authority for the purposes of this
     condition.

12.  The licensee shall, not less than 5 months prior to the date on which it
     proposes to amend its use of system charges in respect of any agreement for
     use of system, send to the Authority a notice setting out the licensee's
     proposals in relation to such amendment together with an explanation of the
     proposed amendment (including a statement of any assumptions on which such
     proposals are based), and the licensee shall send a copy of such notice to
     any person who has entered into an agreement for use of system under
     standard condition D8B (Requirement to Offer Terms).

13.  Except with the prior consent of the Authority, the licensee shall not
     amend its use of system charges in respect of any agreement for use of
     system save to the extent that it has given prior notice of the amendment
     in accordance with paragraph 12 and such amendment reflects the proposals
     made in the notice (subject only to revisions consequent upon material
     changes in the matters which were expressed, in the statement which
     accompanied the notice, to be assumptions on which the proposals were
     based).

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Condition D8A. Non-discrimination in the provision of use of system and
connection to system

1.   In the provision of use of system or in the carrying out of works for the
     purpose of connection to the licensee's system or in providing for the
     retention of a connection to its system the licensee shall not discriminate
     as between any persons or class or classes of person.

2.   Without prejudice to paragraph 1, and subject to paragraph 4, the licensee
     shall not make charges for use of system to any person or class or classes
     of persons which differ from the charges for such provision to any other
     person or class or classes of persons except insofar as such differences
     reasonably reflect differences in the costs associated with such provision.

3.   Notwithstanding paragraph 2, the licensee shall not make or levy use of
     system charges in respect of any item of charge separately identified in
     the statement referred to at paragraph 1 of standard condition D8 (Basis of
     Charges for Use of System and Connection to System: Requirement for
     Transparency) on any person whose contract does not provide for him to
     receive the service to which such item of charge refers.

4.   The licensee shall not in setting its charges for use of system restrict,
     distort or prevent competition in the generation, transmission,
     distribution or supply of electricity.

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<PAGE>

Condition D8B. Requirement to offer terms

1.   On application made by any authorised electricity operator, the licensee
     shall (subject to paragraph 5 ) offer to enter into an agreement for use of
     system:

     (a)  to accept into the licensee's transmission system at such entry point
          or points and in such quantities as may be specified in the
          application, electricity to be provided by or on behalf of such
          authorised electricity operator;

     (b)  to deliver such quantities of electricity as are referred to in
          sub-paragraph (a) (less any transmission losses) to such exit point or
          points on the licensee's transmission system and to such person or
          persons as the authorised electricity operator may specify;

     (c)  specifying the use of system charges to be paid by the authorised
          electricity operator, such charges (unless manifestly inappropriate)
          to be referable to the statement prepared in accordance with (as
          appropriate) paragraph 1 (or, as the case may be, paragraph 8 ) of
          standard condition D8 (Basis of Charges for Use of System and
          Connection to System: Requirement for Transparency) or any revision
          thereof; and

     (d)  containing such further terms as are or may be appropriate for the
          purposes of the agreement.

2.   On application made by any person the licensee shall (subject to paragraph
     5) offer to enter into an agreement for the provision of a connection or
     for the modification of an existing connection to the licensee's
     transmission system, and such offer shall make detailed provision
     regarding:

     (a)  the carrying out of works (if any) required to connect the licensee's
          transmission system to any other system for the transmission of
          electricity, and for the obtaining of any consents necessary for such
          purposes;

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<PAGE>

     (b)  the carrying out of works (if any) in connection with the extension or
          reinforcement of the licensee's transmission system rendered necessary
          or appropriate by reason of making the connection or modification to
          an existing connection and for the obtaining of any consents necessary
          for such purposes;

     (c)  the installation of appropriate meters (if any) required to enable the
          licensee to measure electricity being accepted into the licensee's
          system at the specified entry point or points or leaving such system
          at the specified exit point or points;

     (d)  the installation of such switchgear or other apparatus (if any) as may
          be required for the interruption of supply where the person seeking
          connection or modification of an existing connection does not require
          the provision by an affiliate or related undertaking of the licensee
          of top-up or standby supplies or sales of electricity;

     (e)  the date by which any works required so as to permit access to the
          licensee's transmission system (including for this purpose any works
          to reinforce or extend the licensee's transmission system) shall be
          completed and so that, unless otherwise agreed by the person making
          the application, a failure to complete such works by such date shall
          be a material breach of the agreement entitling the person to
          repudiate the agreement;

     (f)  the connection charges to be paid to the licensee, such charges
          (unless manifestly inappropriate):

          (i)  to be presented in such a way as to be referable to the
               statements prepared in accordance with (as appropriate) paragraph
               1 (or, as the case may be, paragraph 8) of standard condition D8
               (Basis of Charges for Use of System and Connection to System:
               Requirement for Transparency) or any revision thereof; and

          (ii) to be set in conformity with the requirements of paragraph 4 of
               standard condition D8 (Basis of Charges for Use of System and
               Connection to

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<PAGE>

               System: Requirement for Transparency) and (where relevant) of
               paragraph 3 of this condition;

     (g)  the installation of special metering or telemetry or data processing
          equipment (if any) for the purpose of enabling any person which is a
          party to the Settlement Agreement for Scotland to comply with its
          obligations in respect to metering thereunder or the performance by
          the licensee of any service in relation to such metering thereunder;
          and

     (h)  such further matters as are or may be appropriate for the purposes of
          the agreement.

3.   For the purpose of determining an appropriate proportion of the costs
     directly or indirectly incurred in carrying out works (or in relation to
     any of the other matters referred to in sub-paragraph 4(a) of standard
     condition D8 (Basis of Charges for Use of System and Connection to System:
     Requirement for Transparency)) under an agreement for making a connection
     or modification to an existing connection, the licensee shall have regard
     to:

     (a)  the benefit (if any) to be obtained or likely in the future to be
          obtained by the licensee or any other person as a result of the
          carrying out of such works (or of such other matters) whether by
          reason of the reinforcement or extension of the licensee's
          transmission system or the provision of additional entry or exit
          points on such system or otherwise; and

     (b)  the ability or likely future ability of the licensee to recoup a
          proportion of such costs from third parties.

4.   The licensee shall offer terms for agreements in accordance with paragraphs
     1 and 2 as soon as practicable and (save where the Authority consents to a
     longer period) in any event not more than the period specified in paragraph
     6 after receipt by the licensee (or its agent) of all such information as
     the licensee may reasonably require for the purpose of formulating the
     terms of the offer.

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<PAGE>

5.   The licensee shall not be obliged pursuant to this condition to offer to
     enter or to enter into any agreement:

     (a)  if to do so would be likely to involve the licensee being:

          (i)   in breach of its duties under section 9 of the Act;

          (ii)  in breach of any regulations made under section 29 of the Act or
                of any other enactment relating to safety or standards
                applicable in respect to the transmission business;

          (iii) in breach of the conditions to which this licence is subject; or

          (iv)  in breach of any relevant Grid Code;

     (b)  if the person making the application does not undertake to be bound,
          insofar as applicable, by the terms of any relevant Grid Code from
          time to time in force;

6.   For the purpose of paragraph 4, the period specified shall be:

     (a)  in the case of persons seeking use of system only, 28 days;

     (b)  in the case of persons seeking connection or a modification to an
          existing connection, 3 months; and

     (c)  in the case of person seeking use of system in conjunction with
          connection, 3 months.

7.   The licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the licensee as may be reasonably required by such person for the purpose
     of completing an application under the Application Regulations or such
     provisions to like effect contained in any further regulations then in
     force made pursuant to sections 6(3), 60 and 64(1) of the Act.

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<PAGE>

Condition D8C. Functions of the Authority

1.   If, after a period which appears to the Authority to be reasonable for the
     purpose, the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     standard condition D8B (Requirement to Offer Terms), the Authority may, on
     the application of that person or the licensee, settle any terms of the
     agreement in dispute between the licensee and that person in such manner as
     appears to the Authority to be reasonable having (insofar as relevant)
     regard in particular to the following considerations:

     (a)  that such person should pay to the licensee:

          (i)  in the case of provision of use of system, the use of system
               charges determined in accordance with paragraphs 1 and 2 of
               standard condition D8 (Basis of Charges for Use of System and
               Connection to System: Requirement for Transparency); and

          (ii) in the case of provision of a connection, or a modification to an
               existing connection, to the system the whole or an appropriate
               proportion (as determined in accordance with paragraph 3 of
               standard condition D8B (Requirement to Offer Terms)) of the costs
               referred to in sub-paragraph 4(a) of standard condition D8 (Basis
               of Charges for Use of System and Connection to System:
               Requirement for Transparency), together with a reasonable rate of
               return on the capital represented by such costs;

     (b)  that no such person should pay any charges such as are referred to in
          sub-paragraph 3(b) of standard condition D8 (Basis of Charges for Use
          of System and Connection to System: Requirement for Transparency) in
          respect of any connection to the licensee's transmission system or any
          modification to an existing connection made prior to such date as
          shall be specified in a direction issued by the Authority for the
          purposes of this condition and that no such charges should be paid in
          respect of any such connection or modification made after such date
          unless the Authority is satisfied that the extension or

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<PAGE>

          reinforcement in respect of which the charges are to be paid was
          rendered necessary or appropriate by virtue of providing connection to
          or use of system to the person or making such a modification;

     (c)  that the performance by the licensee of its obligations under the
          agreement should not involve the licensee in a breach such as is
          referred to in sub-paragraph 5 (a) of standard condition D8B
          (Requirement to Offer Terms);

     (d)  that any methods by which the licensee's transmission system is
          connected to any other system for the transmission of electricity
          accord (insofar as applicable to the licensee) with any relevant Grid
          Code and with any relevant Distribution Code; and

     (e)  that the terms and conditions of the agreement so settled by the
          Authority and of any other agreements entered into by the licensee
          pursuant to an application under standard condition D8B (Requirement
          to Offer Terms) should be, so far as circumstances allow, in as
          similar a form as is practicable.

2.   In so far as any person entitled or claiming to be entitled to an offer
     under standard condition D8B (Requirement to Offer Terms) wishes to proceed
     on the basis of the agreement as settled by the Authority, the licensee
     shall forthwith enter into and implement such agreement in accordance with
     its terms.

3.   If either party to such agreement proposes to vary the contractual terms of
     any agreement for the provision of a connection or for the modification of
     an existing connection to the licensee's transmission system, for the
     retention of an established connection to such system or for use of system
     entered into pursuant to standard condition D8B (Requirement to Offer
     Terms) or under this condition in any manner provided for under such
     agreement, the Authority may, at the request of that party, settle any
     dispute relating to such variation in such manner as appears to the
     Authority to be reasonable.

Department of Trade and Industry
September 2001

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SPECIAL CONDITIONS AND SCHEDULES

                           PART IV: SPECIAL CONDITIONS

Special Condition A: Interpretation

1.   Unless the context otherwise requires words and expressions used in the
     standard conditions of this licence shall bear the same meaning in these
     Special Conditions.

2.   Any reference in these Special Conditions to-

     (a) a provision thereof;

     (b) a provision of the standard conditions;

     (c) a provision of the standard conditions of electricity supply licences;

     (d) a provision of the standard conditions of electricity distribution
     licences;

     (e) a provision of the standard conditions of electricity generation
     licences;

     shall, if these or the standard conditions in question come to be modified,
     be construed, so far as the context permits, as a reference to the
     corresponding provision of these or the standard conditions in question as
     modified.

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Special Condition B:  Basis of charges for use of the Scottish interconnection

1.   Unless (and except for so long as) the Authority approves otherwise,
     charges for use of the Scottish interconnection shall be set at a level
     which will enable the licensee to recover no more than a reasonable rate of
     return on the relevant proportion of the capital represented by the
     Scottish interconnection.

2.   The licensee shall as soon as practicable after the transmission licence
     has come into force, and, in any event, not later than such date as the
     Authority shall specify, prepare a statement approved by the Authority
     setting out the basis upon which charges for use of the Scottish
     interconnection will be made, such statement to be in such form and to
     contain such detail as shall be necessary to enable any person to make a
     reasonable estimate of the charges to which it would become liable for use
     of the Scottish interconnection, and (without prejudice to the foregoing)
     including the information required to be included therein pursuant to
     paragraph 3.

3.   Except to the extent that the Authority shall otherwise specify, the
     statement referred to in paragraph 2 shall include:

     (a)  a schedule of charges for transport of electricity under use of the
          Scottish interconnection;

     (b)  the charge for maintaining voltage and frequency within statutory
          limits;

     (c)  a schedule of the adjustment factors to be made in respect of
          transmission losses, in the form of additional supplies required to
          cover those transmission losses;

     (d)  the methods by which and the principles on which charges (if any) will
          be made for availability of capacity on the Scottish interconnection;
          and

     (e)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this Condition.

4.   In addition to, and without prejudice to, the licensees obligations under
     paragraph 2, the licensee shall, upon being directed to do so in directions
     issued by the Authority from time to time for the purposes of this
     Condition and within such period as shall be specified in the directions,
     prepare a statement approved by the Authority providing that charges for
     use of the Scottish interconnection will be made on such basis as shall be
     specified in the directions and such statement shall be in such form and
     contain such

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     detail as shall be necessary to enable any person to make a reasonable
     estimate of the charges to which it would become liable for use of the
     Scottish interconnection and (without prejudice to the foregoing) including
     such information as shall be specified in the directions. Each statement
     prepared in accordance with this paragraph shall, with effect from the date
     on which it is approved by the Authority or such later date as the
     Authority shall specify, replace the corresponding statement prepared by
     the licensee in accordance with paragraph 2 or, as the case may be, this
     paragraph (as from time to time revised in accordance with paragraph 5)
     which is in force at such date and the licensee shall, with effect from
     such date, make charges for use of the Scottish interconnection in
     accordance with the statement (as from time to time revised in accordance
     with paragraph 5) which has replaced such corresponding statement.

5.   The licensee may periodically revise the statement prepared in accordance
     with paragraph 2 or, in the event that the licensee shall have prepared a
     statement in accordance with paragraph 4, that statement or the latest of
     such statements and shall, at least once in every year the transmission
     licence is in force, revise such statement in order that the information
     set out therein shall continue to be accurate in all material respects.
     Each such revision shall require to be approved by the Authority and shall
     not become effective until approved by the Authority.

6.   The licensee shall as soon as practicable after the transmission licence
     has come into force and, in any event, not later than such date as the
     Authority shall specify prepare a statement approved by the Authority
     showing:

     (a)  the amount of the capacity of the Scottish interconnection which the
          licensee anticipates will be available for the transfer of electricity
          from Scotland to England and England to Scotland during each remaining
          week of the year ending on 31 March 1991 as notified by the licensee
          to Scottish Hydro-Electric Transmission Limited pursuant to the
          Interconnector Agreement;

     (b)  the amount of that capacity in relation to which Scottish
          Hydro-Electric Transmission Limited has a right to require the
          licensee to receive and deliver electricity as referred to in
          sub-paragraph (b) of paragraph 13;

     (c)  the licensees forecast of the amount of the remainder of the capacity
          of the Scottish interconnection which will be used for the transfer of
          electricity from

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          Scotland to England and from England to Scotland during each week
          referred to in sub-paragraph (a) above; and

     (d)  such other matters (if any) as the Authority shall specify prior to
          its approval of the statement.

7.   The licensee shall, as soon as practicable (and, in any event, within such
     period as the Authority shall specify) after giving a notification such as
     is referred to in sub-paragraph (a) of paragraph 6 to Scottish Hydro
     Electric Transmission Limited in respect of the year ending on 31 March
     1992 and each subsequent year, prepare a statement approved by the
     Authority showing the matters referred to in sub-paragraphs (a) to (d) of
     paragraph 6 in respect of that year.

8.   The licensee shall send a copy of the statement prepared in accordance with
     paragraph 2 and any statement prepared in accordance with paragraph 4, and
     of each revision of such statements in accordance with paragraph 5, and of
     each statement prepared in accordance with paragraphs 6 and 7 and with
     paragraphs 3(a) and 8 of Special Condition D (Requirement to Offer Terms),
     to the Authority.

9.   The licensee shall give or send a copy of the statement prepared in
     accordance with paragraph 2, any statement prepared in accordance with
     paragraph 4 or (as the case may be) of the latest revision of the relevant
     statement in accordance with paragraph 5 approved by the Authority pursuant
     to such paragraph and of each statement prepared in accordance with
     paragraphs 6 and 7 to any person who requests a copy of such statement.

10.  The licensee shall also give or send a copy of each statement prepared in
     accordance with paragraphs 3(a) and 8 of Special Condition D (Requirement
     to Offer Terms) to any person who requests a copy of such statement.

11.  The licensee may make a charge for any statement given or sent pursuant to
     paragraph 9 of an amount reflecting the licensee's reasonable costs of
     providing such a statement which shall not exceed the maximum amount
     specified in directions issued by the Authority for the purposes of this
     Condition.

12.  The licensee may within 10 days after receipt of the relevant request
     provide an estimate of its reasonable costs in the preparation of any
     statement referred to in paragraph 10, and its obligation to provide such
     statement shall be conditional on the person requesting such

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     statement agreeing to pay the amount estimated or such other amount as the
     Authority may, upon the application of the licensee or the person
     requesting such statement, direct.

13.  For the purposes of this Condition and Special Conditions C
     (Non-discrimination in the provision of use of the Scottish
     Interconnection), D (Requirement to Offer Terms), E (Functions of the
     Authority) and G (Requests for Transit):

     "Combined Delivery Point"          means the points at the boundary between
                                        the licensee's authorised transmission
                                        area and Scottish Hydro-Electric
                                        Transmission Limited's authorised
                                        transmission area defined as such in
                                        the Interconnector Agreement.

     "co-operator"                      means any person other than the
                                        licensee who owns assets which are used
                                        in conjunction with the interconnection
                                        or who is able to exercise jointly with
                                        the licensee control over the use made
                                        of the interconnection.

     "interconnection"                  means:

                                        the 275 kV transmission circuits between
                                        and including the associated switchgear
                                        at Harker sub- station in Cumbria and
                                        the associated switchgear at Strathaven
                                        sub-station in Lanarkshire; the 275 kV
                                        transmission circuit between and
                                        including the associated switchgear at
                                        Cockenzie in East Lothian and the
                                        associated switchgear at Stella in Tyne
                                        and Wear; and the 400 kV transmission
                                        circuit between and including the
                                        associated switchgear at Tomess in East
                                        Lothian and the associated switchgear at
                                        Stella in Tyne and Wear all as existing
                                        at the date on which the transmission
                                        licence comes into force and as

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                                        from time to time maintained, repaired
                                        or renewed, together with any
                                        alteration, modification or addition
                                        (other than maintenance, repair or
                                        renewal) which is primarily designed to
                                        effect a permanent increase in one or
                                        more Particular Interconnection
                                        Capacities as they exist immediately
                                        prior to such alteration. modification
                                        or addition and as from time to time
                                        maintained, repaired or renewed; and the
                                        132 kV transmission circuit between and
                                        including (and directly connecting) the
                                        associated switchgear at Chapelcross and
                                        the associated switchgear at Harker
                                        sub-station in Cumbria; and the 132 kV
                                        transmission circuit between and
                                        including (and connecting, via Junction
                                        V) the associated switchgear at
                                        Chapelcross and the associated
                                        switchgear at Harker sub-station in
                                        Cumbria all as existing at the date on
                                        which the transmission licence comes
                                        into force and as from time to time
                                        maintained, repaired or renewed.

         "Interconnector Agreement"     means at any time the agreement relating
                                        to the matter referred to in
                                        sub-paragraph (a) of paragraph 2 of
                                        Special Condition F (Submission of
                                        Certain Agreements) in force at that
                                        time which has been entered into and
                                        submitted to the Authority pursuant to
                                        that Condition as the same may be
                                        amended from

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                                                      time to time with the
                                                      approval of the Authority
                                                      given pursuant to such
                                                      Condition.

         "Particular Capacity Interconnection"        means the capacity of the
                                                      interconnection for
                                                      transferring electricity
                                                      from Scotland to England
                                                      or vice versa in respect
                                                      of any particular system
                                                      conditions.

         "relevant proportion of the capital          means at any time, a
         represented by the Scottish                  proportion of such capital
         interconnection"                             equal to the percentage of
                                                      the Reserved Share (as
                                                      defined in the
                                                      Interconnector Agreement)
                                                      of the licensee at that
                                                      time.

         "Scottish interconnection"                   means such part of the
                                                      interconnection as is
                                                      situated in Scotland.


         "Southern Delivery Point"                    means the points at the
                                                      boundary between the
                                                      licensee's authorised
                                                      transmission area and the
                                                      Transmission Company's
                                                      authorised transmission
                                                      area defined as such in
                                                      the Interconnector
                                                      Agreement.

         "Transmission Company"                       means The National Grid
                                                      Company plc or any other
                                                      person who holds a
                                                      transmission licence
                                                      under Section 6(l)(b) of
                                                      the Act for an authorised
                                                      area in England and
                                                      Wales.

         "Upgrade"                                    means any alteration,
                                                      modification or addition
                                                      to the Interconnected
                                                      Scottish Power System (as
                                                      defined in the
                                                      Interconnector Agreement)
                                                      which is primarily
                                                      designed to effect a
                                                      permanent increase in one
                                                      or more Particular
                                                      Interconnection
                                                      Capacities.

         "use of the Scottish interconnection"        shall exclude:

                                                      the rights conferred upon
                                                      Scottish Hydro-Electric
                                                      Transmission Limited
                                                      under the Interconnector
                                                      Agreement to require the

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                                            licensee:

                                            (a)   to receive electricity from
                                                  Scottish Hydro- Electric
                                                  Transmission Limited at the
                                                  Combined Delivery Point (and
                                                  from certain generating
                                                  stations referred to in the
                                                  Interconnector Agreement) and
                                                  deliver such electricity (less
                                                  losses as referred to in the
                                                  lnterconnector Agreement) to
                                                  the Transmission Company at
                                                  the Southern Delivery Point;
                                                  and/or

                                            (b)   to receive electricity from
                                                  the Transmission Company at
                                                  the Southern Delivery Point
                                                  and deliver such electricity
                                                  (less losses as referred to in
                                                  the Interconnector Agreement)
                                                  to Scottish Hydro-Electric
                                                  Transmission Limited at the
                                                  Combined Delivery Point.

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Special Condition C:  Non-discrimination in the provision of use of the Scottish
interconnection

1.   In the provision of use of the Scottish interconnection the licensee shall
     not discriminate:

     (a)   between any person or class or classes of persons; or

     (b)   between any affiliate of the licensee which holds a supply licence or
           generation licence and any other person or class or classes of
           person.

2.   Without prejudice to paragraph 1, and subject to paragraph 3, the licensee
     shall not make charges for the provision of use of the Scottish
     interconnection to any person or class or classes of persons which differ
     from the charges for such provision:

     (a)   to any other person or class or classes of persons; or

     (b)   to any affiliate of the licensee holding a supply licence or a
           generation licence;

     except insofar as such differences reasonably reflect differences in the
     costs associated with such provision.

3.   Notwithstanding paragraphs I and 2, the licensee shall not make charges for
     use of the Scottish interconnection in respect of any item of charge
     separately identified in any statement such as is referred to at paragraphs
     2 and 4 of Special Condition B (Basis for Charges for use of the Scottish
     interconnection) on any person whose contract does not provide for it to
     receive the service to which such item of charge refers.

4.   The licensee shall not in setting its charges for use of the Scottish
     interconnection restrict. distort or prevent competition in the
     transmission, supply, distribution or generation of electricity.

5.   The licensee shall:

     (a)   comply with and perform its obligations under the Interconnector
           Agreement;

     (b)   exercise its rights and perform its obligations under the
           Interconnector Agreement in a manner which is designed to facilitate
           the carrying out of Upgrades proposed by Scottish Hydro-Electric
           Transmission Limited pursuant to the Interconnector Agreement (but,
           for the avoidance of doubt, so that the licensee shall have no
           obligation to participate in any Upgrade proposed by Scottish
           Hydro-Electric Transmission Limited;

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     (c)   not exercise or perform such rights or obligations in a manner which
           is designed to have the effect of inhibiting or preventing
           competition in the supply of electricity from Scotland to England or
           from England to Scotland; and

     (d)   not exercise or perform its rights or obligations under any related
           document in a manner which is designed to have the effect referred to
           in sub-paragraph (c) above.

6.   The licensee shall not be in breach of this Condition or Special Conditions
     B (Basis of Charges for use of the Scottish interconnection), D
     (Requirement to Offer Terms) or E (Functions of the Authority), by reason
     only of a failure to do or not do any thing which it is prevented from
     doing or not doing by reason of a failure by Scottish Hydro-Electric
     Transmission Limited to comply with and perform its obligations under the
     Interconnector Agreement or by a party to a related document or a person
     who is obliged to comply with a related document to comply with and perform
     its obligations under the related document in question.

7.   The licensee shall keep and maintain such records concerning the provision
     of use of the Scottish interconnection as are, in the opinion of the
     Authority, sufficient to enable the Authority to assess whether the
     licensee is performing its obligations under paragraph 1 and the licensee
     shall furnish to the Authority such records (or such of these as the
     Authority may require), in such manner and at such times as the Authority
     may require.

8.   In this Condition:

     "related document"                 means any agreement, code, rules, or
                                        arrangement relating to the use of the
                                        E&W interconnection for the time being
                                        in force and to which the licensee is a
                                        party or with which the licensee is
                                        obliged to comply.

     "E&W interconnection"              means such part of the interconnection
                                        as is not situated in Scotland.

     "generation licence"               means a licence granted under Section
                                        6(l)(a) of the Act.

     "supply licence"                   means a licence granted under Section
                                        6(l)(d) of the Act.

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Special Condition D: Requirement to offer terms

1.   On application made by any person, the licensee shall (except in a case
     where paragraph 2 applies and subject to paragraph 7) offer to enter into
     an agreement for use of the Scottish interconnection to transport across
     the Scottish interconnection in such quantities and for such periods as may
     be specified in the application, electricity to be provided by or on behalf
     of such person:

     (a)   specifying the charges for use of the Scottish interconnection to be
           paid by the person seeking use of the Scottish interconnection, such
           charges to be referable to the statement referred to at paragraph 2
           or (as the case may be) paragraph 4 of Special Condition B (Basis of
           Charges for use of the Scottish interconnection) or any revision
           thereof; and

     (b)   containing such further terms as are or may be appropriate for the
           purposes of the agreement.

2.   This paragraph applies in any case where, on the application of the
     licensee or any person entitled or claiming to be entitled to an offer
     pursuant to an application under paragraph 1, the Authority shall determine
     that (having regard to the part of the capacity of the Scottish
     interconnection already contracted to persons other than affiliates and
     related undertakings of the licensee and the part thereof approved by the
     Authority as being reserved to affiliates and related undertakings of the
     licensee) the capacity of the Scottish interconnection is insufficient to
     accommodate the requirements of the person who has made application for an
     offer pursuant to paragraph 1.

3.   In a case where paragraph 2 applies:

     (a)   the licensee shall (subject to paragraph 12 of Special Condition B
           (Basis of Charges for use of the Scottish interconnection)), if
           requested by the person who has made application for an offer
           pursuant to paragraph 1 and within such period as the Authority shall
           specify in its determination Linder paragraph 2, prepare a statement
           approved by the Authority setting out the basis upon which charges
           will be made for the costs which the licensee would incur if an
           Upgrade were to be carried out in accordance with the Interconnector
           Agreement to accommodate the requirements of the person who has made
           the application for an offer pursuant to paragraph 1 such statement
           to be in such form and to contain such detail as shall

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           be necessary to enable such person to make a reasonable estimate of
           the charges to which he would become liable in respect of the
           Upgrade; and

     (b)   following the preparation of a statement under sub-paragraph (a)
           above, the licensee shall, on the application of the person who has
           made the application for an offer pursuant to paragraph 1 offer to
           enter into:

           (i)   an agreement pursuant to which the licensee undertakes to
                 exercise its rights under the Interconnector Agreement to
                 require the carrying out of an Upgrade; and

           (ii)  an agreement such as is referred to in paragraph 1 but so that
                 the licensee shall not be bound to make use of the Scottish
                 interconnection available pursuant to such agreement until the
                 time of completion of the Upgrade.

4.   Charges in respect of Upgrades carried out pursuant to an agreement such as
     is referred to in sub-paragraph (b)(i) of paragraph 3 will be set at a
     level which will enable the licensee to recover:

     (a)   the appropriate proportion of the costs directly incurred by the
           licensee in connection with Upgrades; and

     (b)   a reasonable rate of return on the capital represented by such costs.

5.   For the purpose of determining an appropriate proportion of the costs
     directly incurred in connection with an Upgrade, the licensee shall have
     regard to:

     (a)   the benefit (if any) to be obtained or likely in the future to be
           obtained by the licensee or any other person from the increase in the
           capacity of the Scottish interconnection resulting from the Upgrade;
           and

     (b)   the ability or likely future ability of the licensee to recoup a
           proportion of such costs from third parties.


6.   The licensee shall offer terms for agreements in accordance with paragraph
     1 and paragraph 3(b) as soon as practicable and (save where the Authority
     consents to a longer period) in any event not more than the period
     specified in paragraph 9 after receipt by the licensee of an application
     containing all such information as the licensee may reasonably require for
     the purpose of formulating the terms of the offer.

7.   The licensee shall not be obliged pursuant to this Condition to offer to
     enter or to enter into any agreement:

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<PAGE>

     (a)   if to do so would involve the licensee:

           (i)   in breach of its duties under Section 9 of the Act; or

           (ii)  in breach of the Electricity Supply Regulations 1988 or of any
                 regulations made under Section 29 of the Act or of any other
                 enactment relating to safety or standards applicable to the
                 interconnection; or

           (iii) in breach of the standard conditions or Special Conditions of
                 this licence: or

     (b)   if the person making the application does not undertake to be bound
           by the terms of any code of general application or agreement between
           the licensee and any co-operator of the interconnection governing the
           operation of and maintenance of the interconnection approved for the
           time being by the Authority; or

     (c)   if (in the case of an application for an agreement for use of the
           Scottish interconnection to transport electricity from the Southern
           Delivery Point) the electricity to be so transported is to be
           transported from the northern end of the Scottish interconnection to
           the Combined Delivery Point under an agreement for use of the
           licensee's transmission system or the distribution system of the
           licensee's affiliate or related undertaking; or

     (d)   if (in the case of an application for an agreement for use of the
           Scottish interconnection to transport electricity to the Southern
           Delivery Point) the electricity to be so transported is to be
           transported from the Combined Delivery Point to the northern end of
           the Scottish interconnection under an agreement for use of the
           licensee's transmission system or the distribution system of the
           licensee's affiliate or related undertaking.

8.   If so requested by any person, the licensee shall (subject to paragraph 12
     of Special Condition B (Basis of Charges for use of the Scottish
     interconnection)), as soon as practicable and in any event not later than
     the expiry of such period as the Authority, on the application of the
     person making the request, shall determine for this purpose, give or send
     to such person a statement approved by the Authority setting out the basis
     upon which charges will be made for the costs which the licensee would
     incur if an Upgrade were to be carried out in accordance with the
     Interconnector Agreement to accommodate the requirements of such person as
     specified in the request, such statement to be in such

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     form and to contain such detail as shall be necessary to enable such person
     to make a reasonable estimate of the charges to which it would become
     liable in respect of the Upgrade.

9.   For the purpose of paragraph 1, the period specified shall be 28 days. For
     the purpose of paragraph 3(b), the period specified shall be 3 months.

10.  The licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the licensee as may be reasonably required by such person for the purpose
     of completing paragraph 8 of Part I and paragraphs 2(v) and (vi) of Part 2
     of Schedule 2 to the Electricity (Application for Licences and Extensions
     of Licences) Regulations 1990 or such provisions to like effect contained
     in any further regulations then in force made pursuant to Sections 6A(2),
     60 and 64(1) of the Act.

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Special Condition E:  Functions of the Authority

1.   If, after a period which appears to the Authority to be reasonable for the
     purpose the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     Special Condition D (Requirement to Offer Terms) the Authority may, on the
     application of such person or the licensee, settle any terms of the
     agreement in dispute between the licensee and that person in such manner as
     appears to the Authority to be reasonable having (insofar as relevant)
     regard in particular to the following considerations:

     (a)  that such person should pay to the licensee charges determined in
          accordance with Special Conditions B (Basis of Charges for use of the
          Scottish interconnection), C (Non-discrimination in the provision of
          use of the Scottish interconnection) and D (Requirement to Offer
          Terms); and

     (b)  that the performance by the licensee of its obligations under the
          agreement should not involve it in such a breach as is referred to in
          paragraph 7 of Special Condition D (Requirement to Offer Terms);

     (c)  that the obligations of the licensee under the agreement should not be
          in conflict with the provisions of the lnterconnector Agreement or any
          relevant document for the time being approved by the Authority; and

     (d)  that the terms and conditions of the agreement so settled by the
          Authority and of any other agreements entered into by the licensee
          pursuant to a request under Special Condition D (Requirement to Offer
          Terms) should be, so far as circumstances allow, in as similar a form
          as is practicable.

2.   If the person wishes to proceed on the basis of the agreement as settled by
     the Authority, the licensee shall forthwith enter into and implement such
     agreement in accordance with its terms.

3.   If the licensee proposes to vary the contractual terms of any agreement
     entered into pursuant to Special Condition D (Requirement to Offer Terms)
     or this Condition in any manner provided for under such agreement, the
     Authority may, at the request of the licensee or other party to such
     agreement, settle any dispute relating to such variation in such manner as
     appears to the Authority to be reasonable.

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Special Condition F: Submission of certain agreements

1.   The licensee shall not make an amendment to a specified agreement or enter
     into any agreement which amends a specified agreement except with the prior
     written approval of the Authority.

2.   For the purposes of this Condition:

     "specified agreements"             means agreements relating to the
                                        following matters, namely:

                                        (a)  the provision by the licensee
                                             to Scottish Hydro-Electric
                                             Transmission Limited of a share
                                             (initially 46%) of the export and
                                             import capacity of the
                                             Interconnector with England and
                                             Wales (after deduction of an
                                             allowance for the share of such
                                             capacity dedicated to the existing
                                             agreement between South of Scotland
                                             Electricity Board and British
                                             Nuclear Fuels plc relative to the
                                             transmission of output from
                                             Chapelcross Power Station); and

                                        (b)  operational provisions for the
                                             implementation of all or some of
                                             the agreements relating to the
                                             matters referred to in (a) above;
                                             provisions supporting the
                                             co-ordination, planning and
                                             operation of an electricity supply
                                             system within Scotland; an
                                             operational

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                                            basis to support trading
                                            relationships between SSE Generation
                                            Limited and the licensee and/or
                                            between either of them and any third
                                            party and/or between third parties
                                            using the electricity transmission
                                            systems in Scotland; and a framework
                                            for accommodating generators of
                                            electricity using the electricity
                                            transmission system of Scottish
                                            Hydro-Electric Transmission Limited
                                            and the licensee.

        "amendment"                    in relation to any agreement shall
                                       (without limiting the generality) include
                                       the making, entering into and granting
                                       of:

                                       (a)  any agreement which terminates.
                                            extends the duration of, varies or
                                            has the effect of affecting in any
                                            other way any right and/or
                                            obligation (or the enforceability of
                                            any right and/or obligation) of any
                                            person under the first mentioned
                                            agreement; and

                                       (b)  any waiver or purported waiver
                                            (whether or not constituted or
                                            evidenced by any written document,
                                            and whether express, implied or
                                            otherwise) of any right of any
                                            person under that agreement.

        "agreement"                    includes any contract or arrangement

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                                            (whether or not constituted or
                                            evidenced by any written document).

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Special Condition G: Requests for Transit

1.   In this Condition:

     "entity"                             means any of the entities referred to
                                          in Article 3.1 of the Directive of the
                                          Council of the European Communities,
                                          dated 29 October 1990, (No.90/547/EEC)
                                          on the transit of electricity through
                                          transmission grids ("the Directive").

     "grid"                               means any high-voltage electricity
                                          transmission grid for the time being
                                          listed in the Annexe to the Directive.

     "Member State"                       means a Member State of the European
                                          Union.

     "transit"                            means a transaction for the transport
                                          of electricity between grids where:

                                          (a)  the grid of origin or final
                                               destination is situated in a
                                               Member State; and

                                          (b)  the transport involves:

                                               (i)    the crossing of at least
                                                      one frontier between
                                                      Member States; and

                                               (ii)   the use of the licensee's
                                                      transmission system and at
                                                      least two other grids.

2.   The licensee shall, after receiving in connection with transit for a
     minimum duration of one year an application by an entity for an agreement
     for:

     (a)  use of system;

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     (b)   connection to the licensee's transmission system or modification to
           an existing connection; or

     (c)   use of the licensee's share of Scottish interconnection, notify the
           Secretary of State, the Authority and the European Commission without
           delay of the matters set out in paragraph 3 below.

3.   The matters of which notification must be given are:

     (a)   the application;

     (b)   if an agreement has not been concluded within 12 months of the date
           of receipt of the application, the reasons for the failure to
           conclude it;

     (c)   the conclusion of the agreement, whether it is concluded before or
           after the expiry of the period mentioned in sub-paragraph (b) above.

4.   If, in relation to an application for transit by any entity, the Authority
     has been requested to exercise its powers under standard condition D8C
     (Functions of the Authority) or Special Condition E (Functions of the
     Authority), the Authority may delay the exercise of its said powers until
     the terms have been considered by the body set up under Article 3.4 of the
     Directive and the Authority may give such weight to the opinion (if any) of
     that body as it thinks fit in exercising its said powers.

                                      160

<PAGE>

Special Condition H: Transmission System Security Standard and Quality of
Service (Scotland)

1.   The licensee shall:

     (a)   plan and develop its transmission system in accordance with the
           document number TDM13/10,001 and entitled Security of Supply (Issue 2
           dated October 1985) (incorporating Engineering Recommendation P2/5
           (October 1978 revision) of the Electricity Council Chief Engineers'
           Conference) and the planning document numbered NSP366 entitled
           Security of the 400kV and 275kV Systems in Scotland (each such
           document being as submitted by or on behalf of the licensee to the
           Authority on or before the date of grant of this licence or such
           later date as the Authority shall agree) as appropriate to the
           purpose under consideration, and the Grid Code or such other standard
           of planning as the licensee may, following consultation with any
           authorised electricity operator liable to be materially affected
           thereby and with the approval of the Authority adopt from time to
           time; and

     (b)   operate its transmission system in accordance with the document
           entitled Grid Control Instruction (system) BI-SSEB Operational
           Standards of Security of Supply (dated 30 March 1981) and (each such
           document being as submitted by or on behalf of the licensee to the
           Authority on or before the date of grant of this licence), as
           appropriate to the purpose under consideration and the Grid Code or
           such other standard of operation as the licensee may, following
           consultation with any authorised electricity operator liable to be
           materially affected thereby and with the approval of the Authority,
           adopt from time to time.

2.   The licensee shall, in consultation with authorised electricity operators
     liable to be materially affected thereby, review the documents (other than
     the Grid Code) referred to in paragraph 1 and their implementation on each
     occasion that it carries out a review of the Grid Code in accordance with
     paragraph 2 of standard condition 7 (Licensee's Grid Code).

     Following any such review, the licensee shall send to the Authority:

                                      161

<PAGE>

     (a)   a report on the outcome of such review; and

     (b)   any revision which the licensee proposes to make to such documents
           from time to time (having regard to the outcome of such review); and

     (c)   any written representations or objections from authorised electricity
           operators (including any proposals by such operators for revisions to
           such documents not accepted by the licensee in the course of the
           review) arising during the consultation process and subsequently
           maintained.

3.   Revisions to the documents (other than the Grid Code) referred to in
     paragraph 1 proposed by the licensee and sent to the Authority pursuant to
     paragraph 2 shall require to be approved by the Authority.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Authority may consider appropriate, the Authority may issue
     directions requiring the licensee to revise the documents (other than the
     Grid Code) referred to in paragraph 1 in such manner as may be specified in
     the directions, and the licensee shall forthwith comply with any such
     directions.

5.   The licensee shall within 3 months after the transmission licence comes
     into force draw up and submit to the Authority for its approval a statement
     setting out criteria by which the performance of the licensee in
     maintaining transmission system security and availability and quality of
     service may be measured.

6.   The licensee shall within 2 months after the end of each financial year
     submit to the Authority a report providing details of the performance of
     the licensee during the previous financial year against the criteria
     referred to in paragraph 5 of this condition.

7.   The Authority may (following consultation with the licensee and, where
     appropriate, any relevant authorised electricity operator) issue directions
     1 relieving the licensee of its obligations under paragraph 1 in respect of
     such parts of the licensee's transmission system and to such extent as may
     be specified in the directions.

8.   The licensee shall give or send a copy of the documents (other than the
     Grid Code) referred to in paragraph 1 (as from time to time revised) to the
     Authority.

______________________

/5/ Direction issued under Special Licence Condition H of this licence
    (12.11.01)

                                      162

<PAGE>

9.   The licensee shall (subject to paragraph 10) give or send a copy of such
     documents (as from time to time revised) to any person requesting the same.

10.  The licensee may make a charge for any copy given or sent pursuant to
     paragraph 9 of an amount which will not exceed any amount specified for the
     time being for the purposes of this condition in a direction issued by the
     Authority.

                                      163

<PAGE>

Special Condition I:  Definitions

In this condition and in Special Conditions J to N and Schedule A:

"average charge per regulated unit transmitted"   means the regulated
                                                  transmission revenue in the
                                                  relevant year divided by the
                                                  regulated quantity transmitted
                                                  in that year.

"average specified rate"                          means the average of the daily
                                                  base rates of Governor and
                                                  Company of the Bank of
                                                  Scotland (or such other bank
                                                  as the Authority shall specify
                                                  from time to time) current
                                                  from time to time during the
                                                  period in respect of which the
                                                  calculation falls to be made.

"charge restriction conditions"                   means Special Conditions I to
                                                  N inclusive together with
                                                  Schedule A to this licence, as
                                                  from time to time modified or
                                                  replaced in accordance with
                                                  the provisions of the Act.

"excluded services"                               means those services provided
                                                  as part of the transmission
                                                  business which in accordance
                                                  with the principles set out in
                                                  Part A of Schedule A fall to
                                                  be treated as excluded
                                                  services.

"maximum average charge per regulated unit        means the maximum average
transmitted"                                      charge per regulated unit
                                                  transmitted by the licensee
                                                  for relevant year commencing
                                                  on 1 April 1999 calculated in
                                                  accordance with the formula in
                                                  paragraph 2.1 of the Schedule
                                                  5 of the version of the
                                                  licence in force (or deemed to
                                                  be in force) as at 31 March
                                                  2000.


"maximum regulated transmission revenue"          means the regulated
                                                  transmission revenue of the
                                                  licensee calculated in
                                                  accordance with the

                                      164

<PAGE>

                                        formula contained in Special Condition J
                                        (Restriction of Transmission Charges).

"metered"                               means in relation to any quantity of
                                        units of electricity transmitted, as
                                        measured by a meter installed for such
                                        purpose or (where no such meter is
                                        installed) as otherwise reasonably
                                        calculated.

"notified value"                        means in relation to any term, such
                                        value as the Secretary of State shall
                                        ascribe to that term in a written notice
                                        given to the licensee as soon as
                                        practicable after the date of grant of
                                        this licence.

"regulated quantity transmitted"        means the aggregate quantity of units
                                        transmitted through the licensee's
                                        transmission system in that relevant
                                        year metered at exit points on leaving
                                        the licensee's transmission system.

"regulated transmission revenue"        means the revenue (measured on an
                                        accruals basis) derived from the
                                        provision of transmission services
                                        (including to any separate business,
                                        other than the transmission business) in
                                        the relevant year, after deduction of
                                        value added tax (if any) and any other
                                        taxes based directly on the amounts so
                                        derived.

"regulated unit transmitted"            means any unit within the regulated
                                        quantity transmitted.

"relevant year"                         means a financial year commencing on or
                                        after 1 April 1990.

"relevant year t"                       means that relevant year for the
                                        purposes of which any calculation falls
                                        to be made.

"relevant year t-1"                     means the relevant year preceding
                                        relevant year

                                      165

<PAGE>

                                        t or, in respect of the period prior to
                                        1 April 1990, the period of 12 calendar
                                        months commencing on 1 April 1989: and
                                        similar expressions shall be construed
                                        accordingly.

"transmission services"                 means all services provided as part of
                                        the transmission business other than
                                        excluded services.

"unit"                                  means a kilowatt hour.

                                      166

<PAGE>

Special Condition J:  Restriction of transmission charges

Basic Formula

1.   Without prejudice to Special Condition M (Allowances in respect of
     Security costs), the licensee shall in setting its charges for the
     provision of transmission services use its best endeavours to secure
     that in any relevant year the regulated transmission revenue shall not
     exceed the maximum regulated transmission revenue calculated in
     accordance with the following formula:

     TR\\t\\ = R\\t\\ - KK\\Tt\\ + LF\\t\\

     where:

     TR\\t\\  means the maximum regulated transmission revenue in relevant year
              t; and

     R\\t\\   in relation to the relevant year commencing 1 April 2000, shall
              have a value equal to (pound)114.36 million and in relation to any
              subsequent relevant year the value of it shall be derived from the
              following formula:

                                             /RPIt-X/T]
                     R\\t\\ = R\\t-1\\ [1+ ------------
                                                100
              where

     RPI\\t\\ means the percentage change (whether of a positive or a
              negative value) in the arithmetic average of the Retail Price
              Index figures published or determined with respect to each of
              the six months July to December (inclusive) in relevant year
              t-l and the arithmetic average of the Retail Price Index
              figures published or determined with respect to the same
              months in relevant year t-2.

     X\\T\\   means 0.

     KK\\Tt\\ means the correction factor (whether of a positive or negative
              value) to be applied to the regulated transmission revenue in
              relevant year t (subject to paragraph 3 of Special Condition K
              (Restriction of transmission charges: adjustments)) which
              factor is to be derived as follows:

              (a)    in the relevant year commencing 1 April 2000:

                          Q//t-1//    (C//t-1//-T//t-1)x-(1+//1Rt//)
              KK//Tt// = ---------- x--------------------------------
                            100                      100

              where

                                      167

<PAGE>

                  C\\t-1\\  means the average charge per regulated unit
                            transmitted in relevant year commencing 1 April
                            1999.

                  IR\\t\\   means that interest rate which is equal to, where
                            KK\\Tt\\ in relevant year commencing 1 April 2000
                            (taking no account of IR for this purpose) has a
                            positive value and C\\t-1\\ exceeds T\\t-1\\ by more
                            than 2 per cent, the average specified rate plus 4
                            or, where KK\\Tt\\ in that relevant year commencing
                            1 April 2000 (taking no account of IR for this
                            purpose) has a negative value and C\\t-1\\ does not
                            exceed T\\t-1\\ by more than 2 percent, the average
                            specified rate.

                  Q\\t-1\\  has the value 30, 399 (which represents the
                            regulated quantity transmitted (expressed in GWh) by
                            the licensee in relevant year commencing 1 April
                            1999).

                  T\\t-1\\  means the maximum average charge per regulated unit
                            transmitted in relevant year commencing 1 April
                            1999; as determined in accordance with Schedule 5 of
                            the form of ScottishPower's transmission licence in
                            force as at 31 March 2000; and

                  (b)       in subsequent relevant years KKdt is to be derived
                            from the following formula:

                                                          It
                  KK\\Tt\\ = (CR\\t-1\\ - TR\\t-1\\)(l+ -----)
                                                         100

                  where:

                  CR\\t-1\\ means the regulated transmission revenue in relevant
                            year t-1.

                  TR\\t-1\\ means the maximum regulated transmission revenue in
                            relevant year t-l.
                  I\\t\\    means that interest rate in relevantyear t which is
                            equal to, where KK\\Tt\\ (taking no account of I for
                            this purpose) has a positive value and CR\\t-1\\
                            exceeds TR\\t-1\\ by more than 2 percent, the
                            average specified rate plus 4 or, where KK\\Tt\\
                            (taking no account of I for this purpose) has a
                            negative value and CR\\t-1\\ does not exceed
                            TR\\t-1\\ by more than 2 per cent, the average
                            specified rate.

                                      168

<PAGE>

                 LFt       for the tenth and preceding years shall be zero and
                           in the eleventh and for any subsequent relevant year,
                           is derived from the following formula:

                           LF\\t\\ = LP\\t\\ - LA\\t\\ where:

                 LP\\t\\   means an amount equal to the payments made by the
                           licensee, in the relevant year t, in accordance with
                           its obligations set out in Standard Licence Condition
                           4 or, in respect of the eleventh relevant year,
                           payments made by the predecessor company of the
                           licence holder to the Director General of Electricity
                           Supply under the licence condition entitled 'Payment
                           of fees' in the Generation, Transmission and Public
                           Electricity Supply Licence referred to above.

                 LA\\t\\   is derived from the following formula:

                           LA\\t\\= PF.PIF\\t\\

                 PF        means, in the eleventh and all subsequent relevant
                           years, the amount given against the licensee's name
                           in column PF of Annex A to this Condition.

                 PIF\\t\\  is derived from the following formula:

                                          RPI//t//
                           PIF\\t\\= (1+---------- PIF\\t\\-1
                                           100

                           where for the ninth relevant year PIF\\t-1\\ equals
                           1.

                                      169

<PAGE>

ANNEX A TO SPECIAL CONDITION J (RESTRICTION OF TRANSMISSION CHARGES)
---------------------------------------------------------------------

--------------------------------------------------------------------------------
                                                                      PF
                                                                      --
--------------------------------------------------------------------------------
                                                                      (pound)m
                                                                      --------
--------------------------------------------------------------------------------
SP TRANSMISSION LIMITED                                               0.313
-----------------------                                               -----
--------------------------------------------------------------------------------
SCOTTISH HYDRO-ELECTRIC TRANSMISSION LIMITED                          0.117
--------------------------------------------                          -----
--------------------------------------------------------------------------------

                                      170

<PAGE>

Special Condition K:  Restriction of transmission charges: adjustments

1.   If, in respect of any relevant year, the regulated transmission revenue
     exceeds the maximum regulated transmission revenue by more than 3 per cent
     of the latter, the licensee shall furnish an explanation to the Authority
     and in the next following relevant year the licensee shall not effect any
     increase in charges for the provision of transmission services, the revenue
     from which is regulated under Special Conditions I to N, unless it has
     demonstrated to the reasonable satisfaction of the Authority that the
     regulated transmission revenue in that next following relevant year would
     not be likely to exceed the maximum regulated transmission revenue in that
     same relevant year.

2.   If, in respect of any two successive relevant years, the sum of the amounts
     by which the regulated transmission revenue has exceeded the maximum
     regulated transmission revenue is more than 4 per cent of the maximum
     regulated transmission revenue for the second of these relevant years, then
     in the next following relevant year the licensee shall, if required by the
     Authority, adjust its charges for the provision of transmission services,
     the revenue from which is regulated under the Special Conditions I to N,
     such that the regulated transmission revenue would not be likely, in the
     judgment of the Authority, to exceed the maximum regulated transmission
     revenue in that next following relevant year.

3.   If, in respect of any two successive relevant years, the regulated
     transmission revenue is less than 90 per cent of the maximum regulated
     transmission revenue, the Authority, after consultation with the licensee,
     may direct that in calculating KKTt, in respect of the next following
     relevant year, there shall be substituted for CRt-1 in the formula set out
     in paragraph 1 of Special Condition J (Restriction of transmission charges)
     such figure as the Authority may specify being not less than CRt-1 and not
     more than 0.90 (TR\\t-1\\).

                                      171

<PAGE>

Special Condition L:  Information to be provided to the Authority in connection
with the charge restriction conditions

1.   Where the licensee is intending to make any change in charges for the
     provision of transmission services regulated under Special Condition J
     (Restriction of transmission charges), the licensee shall not later than
     the time of publication of such changes provide the Authority with:

     (i)   a written forecast of the maximum regulated transmission revenue,
           together with its components, in respect of the relevant year t in
           which such a change is to take effect and in respect of the next
           following relevant year t+l; and

     (ii)  (ii) a written estimate of the maximum regulated transmission
           revenue, together with its components, in respect of the relevant
           year t-l immediately preceding the relevant year in which the change
           is to take effect unless a statement complying with paragraph 5 in
           respect of relevant year t-l has been furnished to the Authority
           before the publication of the proposed change.

2.   If within three months of the commencement of any relevant year t the
     licensee has not made any such change in charges as is referred to in
     paragraph 1, the licensee shall provide the Authority with a written
     forecast of the maximum regulated transmission revenue together with its
     components, in respect of relevant year t.

3.   Any forecast or estimate provided in accordance with paragraph 1 or 2 shall
     be accompanied by such information as regards the assumptions underlying
     the forecast or estimate as may be necessary to enable the Authority to be
     satisfied that the forecast or estimate has been properly prepared on a
     consistent basis.

4.   Not later than six weeks after the commencement of each relevant year t,
     the licensee shall send to the Authority a statement as to:

     (a)   whether or not the provisions of Special Condition K (Restriction of
           transmission charges: adjustments) are likely to be applicable in
           consequence of the regulated transmission revenue in the preceding
           relevant year t-l or the two preceding relevant years t-l and t-2;
           and

     (b)   its best estimate as to the relevant correction factor KKTt
           calculated in accordance with the formula set out in Special
           Condition J (Restriction of Transmission

                                      172

<PAGE>

           Charges) to be applied in calculating the maximum regulated
           transmission revenue in respect of relevant year t.

5.   Not later than three months after the end of each relevant year the
     licensee shall send to the Authority a statement, in respect of that
     relevant year, showing the specified items referred to in paragraph 7.

6.   The statement referred to in the preceding paragraph shall be:

     (a)   accompanied by a report from the Auditors that in their opinion such
           statement fairly presents each of the specified items referred to in
           paragraph 7 in accordance with the requirements of the charge
           restriction conditions and that the amounts shown in respect of each
           of the specified items are in accordance with the licensee's
           accounting records which have been maintained in respect of the
           transmission business in accordance with standard condition 5
           (Regulatory Accounts); and

     (b)   certified by a director of the licensee on behalf of the licensee
           that to the best of his knowledge, information and belief after
           having made all reasonable inquiries:

           (i)    there is no amount included in its calculations under Special
                  Condition J (Restriction of transmission charges) and Schedule
                  A which represents other than bona fide consideration for the
                  provision of transmission services the revenue from which is
                  regulated under Special Conditions I to N and Schedule A;

           (ii)   no service has been treated as an excluded service other than
                  a service permitted to be so treated in accordance with
                  Schedule A;  and

           (iii)  no amount included in the revenues stated in respect of
                  excluded services represents other than bona fide
                  consideration for the provision of the excluded service to
                  which it relates.

7.   The specified items to be shown in the statement referred to in paragraph 5
     shall be the following:

     (a)   the regulated quantity transmitted;

     (b)   [no longer used]

     (c)   the regulated transmission revenue;

                                      173

<PAGE>

     (d)   the nature of all services provided as part of the transmission
           business and treated as excluded services, together with a statement
           of the revenues derived from each service so treated;

     (e)   [no longer used]

     (f)   [no longer used]

     (g)   the details referred to in paragraph 5 of Special Condition M
           (Allowances in respect of security costs); and

     (h)   the value of the term LF\\t\\ together with the value of each of its
           component parts, as detailed in paragraph 1 of special condition J
           (Restriction of transmission charges)

     (i)   such other items as shall be specified in directions issued by the
           Authority for the purposes of Special Conditions I to N

8.   Where the Authority issues directions in accordance with paragraph 6 of
     Special Condition M (Allowances in respect of Security costs ) or paragraph
     7 of Schedule A (Supplementary provisions of the charge restriction
     conditions), the licensee shall, if so required by the Authority and within
     such period as the Authority shall specify, send to the Authority a revised
     statement in substitution for the licensee's statement under paragraph 5 in
     respect of the relevant year in question and such revised statement shall
     give effect to such directions.

                                      174

<PAGE>

Special Condition M:  Allowances in respect of security costs

1.   At any time during a security period, the licensee may give notice in
     writing to the Authority suspending, with effect from the date of receipt
     of the notice by the Authority ,application of such of the charge
     restriction conditions as may be specified in the notice, for the unexpired
     term of the security period.

2.   At any time during a security period, the Authority may (having regard to
     its duties under the Act) by means of directions:

     (a)   suspend or modify for the unexpired term of the security period the
           charge restriction conditions or any part or parts thereof; or

     (b)   introduce for the unexpired term of the security period new charge
           restriction conditions; in either case, so as to make such provision
           as in the opinion or estimation of the Authority is requisite or
           appropriate to enable the licensee to recover by means of a uniform
           percentage increase on all charges made in the course of the licence
           an amount estimated as being equal to the licensee's allowed security
           costs during such period, and the licensee shall comply with the
           terms of any directions so issued.

3.   Subject to paragraphs 4 and 6, the licensee shall in any relevant year be
     entitled to recover an aggregate amount equal to the licensee's allowed
     security costs in that year or (in so far as not previously recovered) any
     previous year, by means of appropriate equitable increases in the charges
     made by the licensee in the course of the transmission business.

4.   Paragraph 3 shall not apply in so far as such licensee's allowed
     transmission related security costs

     (a)   were otherwise recovered by the licensee; or

     (b)   were taken into account by the Authority in setting the charge
           restriction conditions by means of directions issued under paragraph
           2.

5.   The licensee shall following the end of each relevant year provide to the
     Authority details in respect of that relevant year of:

     (a)   the aggregate amounts charged under paragraph 3 on account of the
           licensee's allowed security costs; and

                                      175

<PAGE>

     (b)  the basis and calculation underlying the increases in charges made by
          the licensee in the course of the transmission business.

6.   Where the Authority is satisfied that the licensee has recovered amounts in
     excess of the licensee's allowed security costs, the Authority may issue
     directions requiring the licensee to take such steps as may be specified to
     reimburse customers of the licensee for the excess amounts charged to them,
     and the licensee shall comply with any directions so issued.

7.   No amounts charged by the licensee under this Condition (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the charge restriction provisions of Special Condition
     J (Restriction of transmission charges).

8.   In this Condition:

     "allowed security cost"                means any cost allowed by the
                                            Authority (upon receipt of such
                                            information, including a certificate
                                            from the auditors, as the Authority
                                            may request) as being a cost which
                                            is directly attributable to any
                                            action taken or omitted to be taken
                                            by the licensee in its capacity as
                                            holder of the license for the
                                            purpose of complying with directions
                                            issued by the Secretary of State
                                            under Section 34(4) of the Act.

     "security period"                      means a period commencing on the
                                            date on which any direction issued
                                            by the Secretary of State under
                                            Section 34(4)(b) of the Act enters
                                            effect and terminating on the date
                                            (being not earlier than the date
                                            such direction, as varied, is
                                            revoked or expires) as the
                                            Authority, after consultation with
                                            such persons (including without
                                            limitation, licence holders liable
                                            to be principally affected) as it
                                            shall consider appropriate, may with
                                            the consent of the

                                      176

<PAGE>

                                            Secretary of State by notice to all
                                            licence holders determine after
                                            having regard to the views of such
                                            persons.

                                      177

<PAGE>

Special Condition N:  Duration of charge restriction conditions

1.   The charge restriction conditions shall apply so long as this licence
     continues in force but shall cease to have effect (in whole or in part, as
     the case may be) if the licensee delivers to the Authority a disapplication
     request made in accordance with paragraph 2 and:

     (a)   the Authority agrees in writing to the disapplication request; or

     (b)   their application (in whole or in part) is terminated by notice given
           by the licensee in accordance with either paragraph 4 or paragraph 5.

2.   A disapplication request pursuant to this Condition shall

     (a)   be in writing addressed to the Authority;

     (b)   specify the charge restriction conditions (or any part or parts
           thereof) to which the request relates; and

     (c)   state the date from which the licensee wishes the Authority to agree
           that the specified charge restriction conditions shall cease to have
           effect.

3.   Save where the Authority otherwise agrees, no disapplication following
     delivery of a disapplication request pursuant to this Condition shall have
     effect earlier than the date which is the later of:

     (a)   the date being not less than 18 months after delivery of the
           disapplication request; and,

     (b)   31 March 2005.

4.   If the Authority has not made a reference to the Competition Commission
     under Section 12 of the Act relating to the modification of the charge
     restriction conditions before the beginning of the period of 12 months
     which will end with the disapplication date, the licensee may deliver
     written notice to the Authority terminating the application of such of the
     charge restriction conditions (or any part or parts thereof) as are
     specified in the disapplication request with effect from the disapplication
     date or a later date.

5.   If the Competition Commission makes a report on a reference made by the
     Authority relating to the modification of the charge restriction conditions
     (or any part or parts thereof) specified in the disapplication request and
     such report does not include a conclusion that the cessation of such
     transmission charge restriction conditions, in whole or in part, operates
     or may be expected to operate against the public interest, the licensee

                                      178

<PAGE>

     may within 30 days after the publication of the report by the Authority in
     accordance with Section 13 of the Act deliver to it written notice
     terminating the application of such charge restriction conditions (or any
     part or parts thereof) with effect from the disapplication date or a later
     date.

                                      179

<PAGE>

Schedule A: Supplementary Provisions of the Charge Restriction Conditions

Part A: Excluded services

1.   There may be treated as excluded services provided by the transmission
     business such services in respect of which charges are made:

     (a)   which fall within paragraph 6; or

     (b)   which:

           (i)    do not fall within paragraph 2; and

           (ii)   may be determined by the licensee as falling under one of the
                  principles  set out in paragraphs 3 to 5.

2.   No service provided as part of the transmission business shall be treated
     as an excluded service in so far as it relates to the provision of services
     remunerated under use of system charges in accordance with Condition D8 of
     Part II (Basis of Charges for Use of System and Connection to System:
     Requirement for transparency) including (without prejudice to the
     foregoing):

     (i)   the transport of electricity;

     (ii)  the carrying out of works for the installation of electric lines or
           electrical plant (not otherwise payable in the form of connection
           charges) for the purpose of maintaining or upgrading the licensees
           transmission system;

     (iii) the carrying out of works or the provision of maintenance or repair
           or other services for the purpose of enabling the licensee to comply
           with standard condition 7 (Licensee's Grid Code) and Special
           Condition H (Transmission System Security Standard and Quality of
           Service (Scotland)), the Electricity Supply Regulations 1988 or any
           regulations made under Section 29 of the Act or any other enactment
           relating to safety or standards applicable in respect of the
           transmission business; and

     (iv)  the provision, installation and maintenance of any meters, switchgear
           or other electrical plant ancillary to the grant of use of system.

3.   The whole or an appropriate proportion (as the case may be) of the charges
     of the type described in Condition D8 of Part II (Basis of Charges for Use
     of System and Connection to System) and borne by any person as connection
     charges in respect of connections made after the grant of this licence may
     be treated as excluded services.

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<PAGE>

4.   There may be treated as an excluded service charges for the relocation of
     electric lines or electrical plant and the carrying out of works associated
     therewith pursuant to a statutory obligation (other than under Section 9(2)
     of the Act) imposed on the licensee.

5.   There may with the approval of the Authority be treated as an excluded
     service any service of a type not above referred to which:

     (a)   consists in the provision of services for the specific benefit of a
           third party requesting the same; and

     (b)   is not made available as a normal part of the transmission business
           remunerated by use of system charges.

6.   Services may be regarded as excluded services where the charges are:

     (a)   the rental for transmission business assets hosting fibre-optic
           telecommunications systems and used by third parties;

     (b)   made for the provision of capacity for transferring electricity
           across any part of any Upgrade;

     (c)   to Scottish Hydro-Electric Transmission Limited for the provision of
           capacity for transferring electricity from its authorised
           transmission area to the Scottish interconnection;

     (d)   to the Scottish Hydro-Electric Transmission Limited for the provision
           of capacity for transferring electricity across any part of the
           Scottish interconnection apart from any Upgrade;

     (e)   made for the provision of capacity for transferring electricity
           across any interconnection between Scotland and Northern Ireland.

7.   Where the Authority is satisfied that, in light of the principles set out
     in paragraphs 3 to 6 inclusive, any service treated as being or not being
     an excluded service should not be so treated, the Authority shall issue
     directions to that effect, and such service shall cease to be treated as an
     excluded service with effect from the date of issue of such directions or
     (subject to paragraph 8 of Special Condition L (Information to be provided
     to the Authority in connection with the charge restriction conditions))
     such other date as may be specified in the directions.

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<PAGE>

8.   For the purpose of this Schedule "Scottish interconnection" shall have the
     meaning given in standard condition Dl (Interpretation of Section D
     (Supplementary Standard Conditions for Scotland)) and "Upgrade" shall have
     the meaning given in Special Condition B (Basis of Charges for Use of
     Scottish Interconnection).

                                      182

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Special Condition O: Restriction on Activity and Financial Ringfencing

1.   Save as provided by paragraphs 3 and 4, the licensee shall not conduct any
     business or carry out any activity other than the transmission business.

2.   The licensee shall not without the prior written consent of the Authority
     hold or acquire shares or other investments of any kind except:

     (a)  shares or other investments in a body corporate the sole activity of
          which is to carry on business for a permitted purpose; or

     (b)  shares or other investments in a body corporate which is a subsidiary
          of the licensee and incorporated by it solely for the purpose of
          raising finance for the transmission business; or

     (c)  investments acquired in the usual and ordinary course of the
          licensee's treasury management operations, subject to the licensee
          maintaining in force, in relation to those operations, a system of
          internal controls which complies with best corporate governance
          practice as required (or in the absence of any such requirement
          recommended) from time to time for listed companies in the United
          Kingdom.

3.   Subject to the provisions of paragraph 2, nothing in this Condition shall
     prevent:

     (a)  any affiliate in which the licensee does not hold shares or other
          investments from conducting any business or carrying on any activity;

     (b)  the licensee from holding shares as, or performing the supervisory or
          management functions of, an investor in respect of any body corporate
          in which it holds an interest consistent with the provisions of this
          licence;

     (c)  the licensee from performing the supervisory or management functions
          of a holding company in respect of any subsidiary; or

     (d)  the licensee from carrying on any business or conducting any activity
          to which the Authority has given its consent in writing.

4.   Nothing in this Condition shall prevent the licensee or an affiliate or
     related undertaking of the licensee in which the licensee holds shares or
     other investments (a "relevant associate") conducting de-minimis business
     as defined in this paragraph so long as the limitations specified in this
     paragraph are complied with:

                                      183

<PAGE>

     (a)  For the purpose of this paragraph "de-minimis business" means any
          business or activity carried on by the licensee or a relevant
          associate or relevant associates other than:-

          (i)  the transmission business;

          (ii) and any other business activity to which the Authority has given
               its consent in writing in accordance with paragraph 3(d).

     (b)  The licensee or a relevant associate may carry on de-minimis business
          provided that the relevant associate carries on no other business
          except activities of the transmission business and business activities
          authorised by the Authority under paragraph 3(d), and neither of the
          following limitations is exceeded, namely:

          (i)  the aggregate turnover of all the de-minimis business carried on
               by the licensee and all its relevant associates does not in any
               period of twelve months commencing on 1 April of any year exceed
               2 1/2 % of the aggregate turnover of the transmission business as
               shown by the most recent audited accounting statements of the
               licensee produced under paragraphs 2(b)(i) and (c) of standard
               condition 5 (Regulatory Accounts); and

          (ii) the aggregate amount (determined in accordance with sub-paragraph
               below) of all investments made by the licensee and all its
               relevant associates in their de-minimis business or de-minimis
               businesses does not at any time after the date this Special
               Condition takes effect in this licence exceed 2 1/2 % of the sum
               of share capital in issue, share premium and consolidated
               reserves of the licensee as shown by its most recent audited
               historical cost financial statements then available.

     (c)  For the purpose of sub-paragraph (b) of this paragraph, "Investment"
          means any form of financial support or assistance given by or on
          behalf of the licensee or a relevant associate for the de-minimis
          business whether on a temporary or permanent basis including (without
          limiting the generality of the foregoing) any commitment to provide
          any such support or assistance in the future.

     (d)  At any relevant time, the amount of an investment shall be the sum of:

          (i)  the value at which such investment was included in the audited
               historical cost balance sheet of the licensee or a relevant
               associate as at its latest

                                      184

<PAGE>

                accounting reference date to have occurred prior to the date
                this Special Condition takes effect in this licence (or, where
                the investment was not so included, zero);

          (ii)  the aggregate gross amount of all expenditure (whether of a
                capital or revenue nature) howsoever incurred by the licensee or
                a relevant associate in respect of such investment in all
                completed accounting reference periods since such accounting
                reference date; and

          (iii) all commitments and liabilities (whether actual or contingent)
                of the licensee or a relevant associate relating to such
                investment outstanding at the end of the most recently completed
                accounting reference period.

          (iv)  In this Condition and in Special Condition S (Indebtedness)
                "permitted purpose" means the purpose of all or any of the
                following:

                         (a)  the transmission business or any other business or
                              activity within the limits of paragraph 4 of this
                              Condition;

                         (b)  any business or activity to which the Authority
                              has given its consent in writing in accordance
                              with paragraph 3 (d) of this Condition; and

                         (c)  without prejudice to the generality of
                              sub-paragraph (a), any payment or transaction
                              lawfully made or undertaken by the licensee for a
                              purpose within sub-paragraphs I (b)(i) to (vii) of
                              Special Condition S (Indebtedness).

                                      185

<PAGE>

Special Condition P: Availability of Resources

1.   The licensee shall at all times act in a manner calculated to secure that
     it has available to it all such resources, including (without limitation)
     management and financial resources, personnel, fixed and moveable assets,
     rights, licences, consents and facilities on such terms and with all such
     rights as shall ensure that it is at all times able:

     (a)  properly and efficiently to carry on the transmission business; and

     (b)  to comply in all respects with its obligations under this licence and
          such obligations under the Act as apply to the transmission business
          including, without limitation, its duty to develop and maintain an
          efficient, co-ordinated and economical system of electricity
          transmission.

     2.   The licensee shall submit a certificate to the Authority, approved by
          a resolution of the board of directors of the licensee and signed by a
          director of the licensee pursuant to that resolution. Such certificate
          shall be submitted in June of each year. Each certificate shall be in
          one of the following forms:

          (a)  "After making enquiries, the directors of the licensee have a
               reasonable expectation that the licensee will have available to
               it, after taking into account in particular (but without
               limitation) any dividend or other distribution which might
               reasonably be expected to be declared or paid, sufficient
               financial resources and financial facilities to enable the
               licensee to carry on the transmission business for a period of 12
               months from the date of this certificate."

          (b)  "After making enquiries, the directors of the licensee have a
               reasonable expectation, subject to what is said below, that the
               licensee will have available to it, after taking into account in
               particular (but without limitation) any dividend or other
               distribution which might reasonably be expected to be declared or
               paid, sufficient financial resources and financial facilities to
               enable the licensee to carry on the transmission business for a
               period of twelve months from the date of this certificate.
               However, they would like to draw attention to the following
               factors which may cast doubt on the ability of the licensee to
               carry on the transmission business."

          (c)  "In the opinion of the directors of the licensee, the licensee
               will not have available to it sufficient financial resources and
               financial facilities to enable the licensee to

                                      186

<PAGE>

          carry on the transmission business for a period of 12 months from the
          date of this certificate".

3.   The licensee shall submit to the Authority with that certificate a
     statement of the main factors which the directors of the licensee have
     taken into account in giving that certificate.

4.   The licensee shall inform the Authority in writing immediately if the
     directors of the licensee become aware of any circumstance which causes
     them no longer to have the reasonable expectation expressed in the then
     most recent certificate given under paragraph 2.

5.   The licensee shall use its best endeavours to obtain and submit to the
     Authority with each certificate provided for in paragraph 2 a report
     prepared by its auditors and addressed to the Authority stating whether or
     not the auditors are aware of any inconsistencies between, on the one hand,
     that certificate and the statement submitted with it and, on the other
     hand, any information which they obtained during their audit work.

6.   The directors of the licensee shall not declare or recommend a dividend,
     nor shall the licensee make any other form of distribution within the
     meaning of section 263 of the Companies Act 1985, unless prior to the
     declaration, recommendation or making of the distribution (as the case may
     be) the licensee shall have issued to the Authority a certificate complying
     with the following requirements of this paragraph.

     (a)  The certificate shall be in the following form:

          "After making enquiries, the directors of the licensee are satisfied:

          (i)  that the licensee is in compliance in all material respects with
               all obligations imposed on it by standard condition 11 (Provision
               of Information to the Authority), Special Condition O
               (Restriction on Activity and Financial Ring- fencing), Special
               Condition P (Availability of Resources), Special Condition Q
               (Undertaking from ultimate controller), Special Condition R
               (Credit Rating of Licensee) and Special Condition S
               (Indebtedness) of the licence: and

          (ii) that the making of a distribution of [.] on [.] will not, either
               alone or when taken together with other circumstances reasonably
               foreseeable at

                                      187

<PAGE>

                    the date of this certificate, cause the licensee to be in
                    breach to a material extent of any of these obligations in
                    the future."

          (b)  The certificate shall be signed by a director of the licensee and
               approved by a resolution of the board of directors of the
               licensee passed not more than 14 days before the date on which
               the declaration, recommendation or payment will be made.

          (c)  Where the certificate has been issued in respect of the
               declaration or recommendation of a dividend, the licensee shall
               be under no obligation to issue a further certificate prior to
               payment of that dividend provided such payment is made within six
               months of that certificate.

                                      188

<PAGE>

Special Condition Q: Undertaking from ultimate controller

1.   The licensee shall procure from each company or other person which the
     licensee knows or reasonably should know is at any time an ultimate
     controller of the licensee a legally enforceable undertaking in favour of
     the licensee in the form specified by the Authority that that ultimate
     controller ("the convenantor") will refrain from any action, and will
     procure that any person (including, without limitation, a corporate body)
     which is a subsidiary of, or is controlled by, the covenantor (other than
     the licensee and its subsidiaries) will refrain from any action which would
     then be likely to cause the licensee to breach any of its obligations under
     the Act or this licence. Such undertaking shall be obtained within 7 days
     of the company or other person in question becoming an ultimate controller
     and shall remain in force for as long as the licensee remains the holder of
     this licence and the covenantor remains an ultimate controller of the
     licensee.

2.   The licensee shall:

     (a)  deliver to the Authority evidence (including a copy of each such
          undertaking) that the licensee has complied with its obligation to
          procure undertakings pursuant to paragraph 1;

     (b)  inform the Authority immediately in writing if the directors of the
          licensee become aware that any such undertaking has ceased to be
          legally enforceable or that its terms have been breached; and

     (c)  comply with any direction from the Authority to enforce any such
          undertaking; and shall not, save with the consent in writing of the
          Authority, enter (directly or indirectly) into any agreement or
          arrangement with any ultimate controller of the licensee or of any of
          the subsidiaries of any such corporate ultimate controller (other than
          the subsidiaries of the licensee) at a time when,

          (i)   an undertaking complying with paragraph 1 is not in place in
                relation to that ultimate controller, or

          (ii)  there is an unremedied breach of such undertaking; or

          (iii) the licensee is in breach of the terms of any direction issued
                by the Authority under paragraph 2 of this Condition.

                                      189

<PAGE>

3.   In this Condition

     "ultimate controller"                 means:

                                            (a)  a holding company of the
                                                 licensee which is not itself a
                                                 subsidiary of another company;
                                                 and

                                            (b)  any person who (whether alone
                                                 or with a person or persons
                                                 connected with him) is in a
                                                 position to control, or to
                                                 exercise significant influence
                                                 over, the policy of the
                                                 licensee or any holding company
                                                 of the licensee by virtue of:

                                            (i)  rights under contractual
                                                 arrangements to which he is a
                                                 party or of which he is a
                                                 beneficiary; or

                                            (ii) rights of ownership (including
                                                 rights attached to or deriving
                                                 from securities or rights under
                                                 a trust) which are held by him
                                                 or of which he is a
                                                 beneficiary; but excluding any
                                                 director or employee of a
                                                 corporate body in his capacity
                                                 as such; and

                                            (c)  for the purposes of
                                                 sub-paragraph (b), a person is
                                                 connected with another person
                                                 if they are party to any
                                                 arrangement regarding the
                                                 exercise of any such rights as
                                                 are described in that
                                                 paragraph.

                                      190

<PAGE>

Special Condition R: Credit Rating of Licensee

1.   The licensee shall use all reasonable endeavours to ensure that the
     licensee maintains at all times an investment grade issuer credit rating.

2.   In this Condition and in Special Condition S (Indebtedness): "investment
     grade issuer credit rating" means:

     (a)  an issuer rating of not less than BBB- by Standard & Poor's Ratings
          Group or any of its subsidiaries or a corporate rating of not less
          than Baa3 by Moody's Investors Service, Inc. or any of its
          subsidiaries or such higher rating as shall be specified by either of
          them from time to time as the lowest investment grade credit rating;
          or

     (b)  an equivalent rating from any other reputable credit rating agency
          which, in the opinion of the Authority, notified in writing to the
          licensee, has comparable standing in the United Kingdom and the United
          States of America.

                                      191

<PAGE>

Special Condition S: Indebtedness

1.   In addition to the requirements of standard condition 10 (Disposal of
     Relevant Assets), the licensee shall not without the prior written consent
     of the Authority 2 3 4 (following the disclosure by the licensee of all
     material facts):

     (a)  create or continue or permit to remain in effect any mortgage, charge,
          pledge, lien or other form of security or encumbrance whatsoever,
          undertake any indebtedness to any other person or enter into any
          guarantee or any obligation otherwise than:

          (i)   on an arm's length basis;

          (ii)  on normal commercial terms;

          (iii) for a permitted purpose; and

          (iv)  (if the transaction is within the ambit of standard condition 10
                (Disposal of Relevant Assets) in accordance with that condition.

     (b)  transfer, lease, license or lend any sum or sums, asset, right or
          benefit to any affiliate or related undertaking of the licensee
          otherwise than by way of:

          (i)   a dividend or other distribution omit of distributable reserves;

          (ii)  repayment of capital;

          (iii) payment properly due for any goods, services or assets provided
                on an arm's length basis and on normal commercial terms;

          (iv)  a transfer, lease, licence or loan of any sum or sums, asset,
                right or benefit on an arm's length basis, on normal commercial
                terms and made in compliance with the payment condition;

          (v)   repayment of or payment of interest on a loan not prohibited by
                subparagraph (a);

          (vi)  payments for group corporation tax relief or for the surrender
                of Advance Corporation Tax calculated on a basis not exceeding
                the value of the benefit received; or

          (vii) an acquisition of shares or other investments in conformity with
                paragraph 2 of Special Condition O (Restriction on Activity and
                Financial

_________________
6   Consent issued under Special Licence Condition S of this licence (01.10.01)
7   Consent issued under Special Licence Condition S of this licence and Annex
    thereto (01.10.01)
8   Consent issued under Special Licence Condition S of this licence (20.11.01)

                                      192

<PAGE>

               Ringfencing) made on an arm's length basis and on normal
               commercial terms.

     (c)  enter into an agreement or incur a commitment incorporating a
          cross-default obligation; or

     (d)  continue or permit to remain in effect any agreement or commitment
          incorporating a cross-default obligation subsisting at the date this
          Special Condition takes effect in this licence save that the licensee
          may permit any cross-default obligation in existence at that date to
          remain in effect for a period not exceeding twelve months from that
          date, provided that the cross-default obligation is solely referable
          to an instrument relating to the provision of a loan or other
          financial facilities granted prior to that date and the terms on which
          those facilities have been made available as subsisting on that date
          are not varied or otherwise made more onerous.

     (e)  the provisions of sub-paragraphs (c) and (d) of this paragraph shall
          not prevent the licensee from giving any guarantee permitted by and
          compliant with the requirements of paragraph (a).

     (f)  the payment condition referred to in sub-paragraph (b) (iv) is that
          the consideration due in respect of the transaction in question is
          paid in full when the transaction is entered into unless either:

          (i)  the counter-party to the transaction has and maintains until
               payment is made in full an investment grade issuer credit rating,
               or

          (ii) the obligations of the counter-party to the transaction are fully
               and unconditionally guaranteed throughout the period during which
               any part of the consideration remains outstanding by a guarantor
               which has and maintains an investment grade issuer credit rating.

2.   In this Condition:

     "cross-default obligation"               Means a term of any agreement or
                                              arrangement whereby the licensee's
                                              liability to pay or repay any debt
                                              or other sum arises or is
                                              increased or accelerated or is
                                              capable of arising, increasing or
                                              of acceleration by

                                      193

<PAGE>

                                        reason of a default (howsoever such
                                        default may be described or defined) by
                                        any person other than the licensee
                                        unless:

                                        (i)    that liability can arise only as
                                               the result of a default by a
                                               subsidiary of the licensee,

                                        (ii)   the licensee holds a majority of
                                               the voting rights in that
                                               subsidiary and has the right to
                                               appoint or remove a majority of
                                               its board of directors, and

                                        (iii)  that subsidiary carries on
                                               business only for a purpose
                                               within paragraph (a) of the
                                               definition of permitted purpose
                                               (as defined in Special Condition
                                               O (Restriction on Activity and
                                               Financial Ringfencing)).

        "indebtedness"                  means all liabilities now or hereafter
                                        due owing or incurred, whether actual or
                                        contingent, whether solely or jointly
                                        with any other person and whether as
                                        principal or surety, together with any
                                        interest accruing thereon and all costs,
                                        charges, penalties and expenses incurred
                                        in connection therewith.

                                      194

<PAGE>

                                   SCHEDULE 1

                                 AUTHORISED AREA

1.   Scotland (except the area specified in the Electricity Act 1989 (North of
     Scotland Specified Area) Order 1990 made on 7 March 1990), the Cruachan
     Transmission Line, and the Dalmally Switching Station.

2.   In this Schedule:

     "the Cruachan Transmission Line"

            means the double circuit 275 kV transmission line extending from the
            Cruachan Station Works, to the Dalmally Switching Station and
            thereafter to the Windyhill Substation together with all lattice
            towers, conductors, insulators, associated cables and connections,
            and all other items of plant or equipment making up or supporting
            said transmission line, with the benefit, subject to the applicable
            conditions therein, of all wayleaves and/or servitude rights
            relating thereto.

3.   Expressions used in the definition of the Cruachan Transmission Line which
     are defined in a transfer scheme shall have the same meaning in this
     Schedule as in such transfer scheme.

                                      195

<PAGE>

                                   SCHEDULE 2

                                   REVOCATION

1.   The Authority may at any time revoke the licence by giving no less than 30
     days' notice (24 hours' notice, in the case of a revocation under
     sub-paragraph 1(g)) in writing to the licensee:

     (a)   if the licensee agrees in writing with the Authority that the licence
           should be revoked:

     (b)   if any amount payable under standard condition 4 (Payments by
           licensee to the Authority) is unpaid 30 days after it has become due
           and remains unpaid for a period of 14 days after the Authority has
           given the licensee notice that the payment is overdue - provided that
           no such notice shall be given earlier than the sixteenth day after
           the day on which the amount payable became due;

     (c)   if the licensee fails:

           (i)   to comply with a final order (within the meaning of section 25
                 of the Act) or with a provisional order (within the meaning of
                 that section) which has been confirmed under that section and
                 (in either case) such failure is not rectified to the
                 satisfaction of the Authority within three months after the
                 Authority has given notice in writing of such failure to the
                 licensee - provided that no such notice shall be given by the
                 Authority before the expiration of the period within which an
                 application under section 27 of the Act could be made
                 questioning the validity of the final or provisional order or
                 before the proceedings relating to any such application are
                 finally determined; or

          (ii)   to pay any financial penalty (within the meaning of section 27A
                 of the Act) by the due date for such payment and such payment
                 is not made to the Authority within three months after the
                 Authority has given notice in writing of such failure to the
                 licensee - provided that no such notice shall be given by the
                 Authority before the expiration of the period within which an
                 application under section 27E of the Act could be made
                 questioning the validity or effect of the financial penalty or
                 before the proceedings relating to any such application are
                 finally determined;

                                      196

<PAGE>

     (d)   if the licensee fails to comply with:

           (i)    an order made by the Secretary of State under section 56, 73,
                  74 or 89 of the Fair Trading Act 1973; or

           (ii)   an order made by the court under section 34 of the Competition
                  Act 1998.

     (e)   if the licensee ceases to carry on the transmission business;

     (f)   if the licensee has not commenced carrying on the transmission
           business within 5 years of the date on which the licence comes into
           force;

     (g)   if the licensee:

           (i)    is unable to pay its debts (within the meaning of section
                  123(1) or (2) of the Insolvency Act 1986, but subject to
                  paragraphs 2 and 3 of this schedule) or has any voluntary
                  arrangement proposed in relation to it under section 1 of that
                  Act or enters into any scheme of arrangement (other than for
                  the purpose of reconstruction or amalgamation upon terms and
                  within such period as may previously have been approved in
                  writing by the Authority);

           (ii)   has a receiver (which expression shall include an
                  administrative receiver within the meaning of section 251 of
                  the Insolvency Act 1986) of the whole or any material part of
                  its assets or undertaking appointed;

           (iii)  has an administration order under section 8 of the Insolvency
                  Act 1986 made in relation to it;

           (iv)   passes any resolution for winding-up other than a resolution
                  previously approved in writing by the Authority; or

           (v)    becomes subject to an order for winding-up by a court of
                  competent jurisdiction; or

     (h)   if the licensee is convicted of having committed an offence under
           section 59 of the Act in making its application for the licence.

2.   For the purposes of sub-paragraph 1(g)(i), section 123(1)(a) of the
     Insolvency Act 1986 shall have effect as if for "(pound)750" there was
     substituted "(pound)l00,000" or such higher figure as the Authority may
     from time to time determine by notice in writing to the licensee.

                                      197

<PAGE>

3.   The licensee shall not be deemed to be unable to pay its debts for the
     purposes of sub- paragraph 1(g)(i) if any such demand as is mentioned in
     section 123(l)(a) of the Insolvency Act 1986 is being contested in good
     faith by the licensee with recourse to all appropriate measures and
     procedures or if any such demand is satisfied before the expiration of such
     period as may be stated in any notice given by the Authority under
     paragraph 1.

                                      198

<PAGE>

                             CONSENTS AND DIRECTIONS

                                      199

<PAGE>

Direction issued under Condition 7 (of Part IV) of the Generation, Transmission
and Public Electricity Supply Licence of Scottish Power UK plc now Standard
Condition 10 of this licence (01.04.92)

Our Ref: DIR/S/229
1 April 1992

Mr S R Bucknall
Regulation Manager
Scottish Power plc
Cathcart House
Spean Street

GLASGOW
G44 4BE

GENERATION, TRANSMISSION AND PUBLIC ELECTRICITY SUPPLY LICENCE

Part IV: Condition 7

Disposal of Relevant Assets

The Director General of Electricity Supply ("the Director") hereby directs that
for the purposes of Condition 7 of Part IV of the Generation, Transmission and
Public Electricity Supply Licence (the "Licence") issued to Scottish Power plc
(the "Licensee") on 28 March 1990:

1.   The Licensee may dispose of a relevant asset without giving prior notice if
     the relevant asset is obsolete or redundant.

2.   The consent in paragraph 1 shall not apply:

     (i)   in respect of a relevant asset if:

           (a)   the value of that asset;

           (b)   the value of that asset and other related relevant assets which
                 are being or intended to be disposed of at the same time; or

           (c)   the value of that asset and other relevant assets which
                 together formed a part of the Licensee's transmission system
                 and are being declared obsolete or redundant at the same time
                 or as part of the same operation;

           exceeds (pounds)250,000 (as amended on 1 April each year by the
           percentage change in the Retail Price Index since 1 April 1990);

     (ii)  in respect of a relevant asset which is obsolete unless an
           appropriate replacement or alternative arrangement has been installed
           in the Licensee's transmission

                                      200

<PAGE>

            system, or is being or is intended to be installed in such a manner
            that Continuity of the function of that asset is achieved;

     (iii)  where the disposal constitutes a sale and lease back arrangement; or

     (iv)   where the relevant asset is intended to remain in operational use
            but not under the operational control of the Licensee.

3.   The Licensee may without giving prior notice dispose of any relevant asset
     to a wholly owned subsidiary ("the subsidiary") (as defined in the
     Companies Act 1985 as amended or re-enacted from time-to time) of the
     Licensee if the Licensee has prior to the disposal delivered to the
     Director a document duly executed by the subsidiary and the Licensee (in a
     form capable of being enforced by the Director) undertaking to the Director
     that:

     (i)    the subsidiary in respect of the relevant asset will comply with the
            provision  of Condition 8 of Part II of the Licence as if it were
            the Licensee; and

     (ii)   the Licensee will not cause or permit the subsidiary to cease to be
            its wholly owned subsidiary without the prior written consent of the
            Director to the disposal of the relevant asset(s) owned by the
            subsidiary;

4.   The Licensee may without giving prior notice grant to a third party a
     servitude or easement, wayleave, licence or similar right over any land or
     property in which the Licensee has a legal or beneficial interest and which
     is a relevant asset, save where the grant of such a right would have a
     material adverse effect on the Licensee's ability to use or develop the
     land for the purposes of the Licensee's Transmission Business.

5.   The Licensee may without giving prior notice dispose of any relevant asset
     to another Licensee provided that:

     (i)    the Licensee to whom disposal is made is subject to the provisions
            of licence conditions equivalent to Condition 7 of Part IV and
            Condition 8 of Part II of the Licence;

     (ii)   the relevant asset will become a relevant asset under those
            equivalent licence conditions upon disposal;

     (iii)  the Licensee will be able to fulfil the duties arising under or by
            virtue of the Licence after disposal of the relevant asset.

6.   The consent contained in paragraphs 1, 3,4 and 5 relates only to Condition
     7 of Part IV of the Licence and shall not apply or be deemed to apply for
     the purpose of any consent or approval which the Director may or may be
     required to give in relation to a disposal under any other Condition of the
     Licence or under the Act.

7.   In this direction:

     "obsolete" means unable to perform its required function either in an
     efficient manner or at all through wear and tear, obsolescence, damage,
     failure, unsafe operation or advances in technology and includes equipment
     that the Licensee has decided to render obsolete as a result of inspection;

                                      201

<PAGE>

         "prior notice" means a notice to the Director under paragraph 2 of
         Condition 7 of Part IV of the Licence;

         "redundant" means no longer required or necessary in order to enable
         the Licensee to comply with its obligations under the Act or the
         Licence in relation to the Licensee's transmission system provided that
         a relevant asset shall not be regarded as being redundant solely
         because it is in the ownership or control of a third party;

         "value" means the estimated price that could be expected to be received
         in the market at the time of disposal;

and other words and phrases in this Direction which are defined for the purpose
of the Licence shall have the same meaning as in the Licence.


R N IRVINE
Authorised on behalf of the
Director General of Electricity Supply

                                      202

<PAGE>

Direction issued under Conditions 8 and 8A (of Part IV) of the Transmission
Licence of Scottish Power UK plc now Standard Conditions D3 and D3A of this
licence (28.07.00)

                            The Electricity Act 1989

                                Sections 6 and 7

   Electricity Transmission Licence granted to Scottish Power (UK) plc Public
 Electricity Supply Licences granted to Scottish Power (UK) plc and Manweb plc

                                    Direction
                                     of the
                     Director General of Electricity Supply

Whereas -

(1)  Scottish Power (UK) plc ("SP") is the holder of a transmission licence
     ("the Transmission Licence") granted under section 6(1)(b) of the
     Electricity Act 1989 ("the Act").

(2)  SP and Manweb plc ("Manweb") are the holders of public electricity supply
     licences granted under section 6(1)(c) of the Act ("the SP PES Licence" and
     "the Manweb PES Licence" respectively).

(3)  SP and Manweb are members of the same group of companies.

(4)  Condition 8 in Part IV of the Transmission Licence ("Condition ii")
     prohibits SP from disclosing confidential information.

(5)  Condition 8A in Part IV of the Transmission Licence ("Condition 8A")
     requires SP to maintain the full managerial arid operational independence
     of the Transmission Business of SP from other businesses of SP and of its
     affiliates and related undertakings.

(6)  Paragraph (9) of Condition 8A provides that the Director in certain
     circumstances may issue a direction relieving SP of its obligations under
     Condition 8 and under paragraphs 1(a), 2 and 8 of Condition 8A to such
     extent and subject to such terms and conditions as he may specify in that
     direction.

(7)  Condition 9 in Part V of the SP PES Licence ("Condition 9") and Condition
     12 of the Manweb PES Licence ("Condition 12") require the Distribution
     Businesses of SP and of Manweb to have information separation and
     managerial and operational independence from other businesses of SP and of
     Manweb.

(8)  Paragraph (7) of each of the Condition 9 and Condition 12 provides that the
     Director in certain circumstances may issue a direction relieving SP and
     Manweb from certain of their obligations under the Conditions.

(9)  SP and Manweb have requested the Director to issue directions relieving
     them from their above mentioned obligations to the extent necessary for the
     Transmission and Distribution

                                      203

<PAGE>

      Businesses of SP to be managed and operated as a single business with the
      Distribution Business of Manweb.

(10)  In response to the request the Director is satisfied that, having regard
      to the terms of paragraph (9) of Condition BA and to paragraph (7) of each
      of Condition 9 and Condition 12, he is entitled to issue a direction in
      the manner hereinafter appearing.

NOW THEREFORE THE DIRECTOR ISSUES THE FOLLOWING DIRECTION -

1.    Except where the context requires otherwise, any terms used in this
      direction that are defined in Part 1 of the composite document setting out
      the generation and public electricity supply licences of SP and the
      Transmission Licence shall have the meaning given to them in that Part.

2.    This direction is issued for the purposes of paragraph (9) of Condition 8A
      and of paragraph (7) of each of Condition 9 and Condition 12.

3.    SP is relieved of its obligations under Condition 8 and paragraphs 1(a), 2
      and 8 of Condition 8A and SP and Manweb are relieved of their obligations
      under paragraphs 1 to 6 of Condition 9 and Condition 12 respectively to
      such extent as is necessary for the Transmission and Distribution
      Businesses of SP to be managed and operated as a single business with the
      Distribution Business of Manweb subject to the conditions that:-

      (a)   any arrangements for the use of or access to premises, systems,
            equipment, facilities, property or personnel by the Transmission and
            Distribution Businesses of SP and the Distribution Businesses of
            Manweb:

            (i)    do not involve a cross-subsidy being given by any one of the
                   Transmission or Distribution Businesses of SP or the Manweb
                   Distribution Business to any other of those businesses;

            (ii)   obtain for the Transmission and Distribution Businesses of SP
                   and the Manweb Distribution Business, in the most efficient
                   and economical manner possible, the use of the relevant
                   premises, systems, equipment, facilities, property or
                   personnel; and

            (iii)  do not restrict, distort or prevent competition in the
                   generation or supply of electricity;

      (b)   nothing in this direction shall relieve either SP or Manweb from any
            obligation in respect of any Separation Plan prepared for the
            purpose of any of the conditions of the SP and Manweb PES Licences,
            and

      (c)   nothing in this direction shall relieve either SP or Manweb from any
            obligation imposed on them by Directive 96/92/EC.

4.    This direction shall cease to have effect on the earlier of:-

      (a)   notification by the Director to SP and to Manweb that he is
            satisfied that there has been a material failure to comply with the
            condition set out in paragraph 3 above,

                                      204

<PAGE>

          (b)  Condition 8, Condition 8A, Condition 9 or Condition 12 ceasing to
               have effect, or

          (c)  the expiry of 28 days from the date of service on the Director by
               either SP or Manweb of a request for the revocation of the
               direction.

The Official Seal of the Director General
of Electricity Supply hereunto affixed is
authenticated by

Charles Coulthard
Authorised in that behalf by the Director
General of Electricity Supply
Date 28 July 2000

                                      205

<PAGE>

Consent issued under Special Licence Condition S of this licence (01.10.01)


To
SP Transmission Ltd ("the Licensee")
1 Atlantic Quay
Glasgow
G2 8SP

Consent under Transmission Special Licence Condition S  (Indebtedness

1.   This consent is issued by the Gas and Electricity Markets Authority ("the
     Authority") to the Licensee under paragraph 1 of the above condition ("the
     Condition").

2.   The Authority hereby consents to the Licensee being a party to a group
     registration scheme with HM Customs & Excise for value added tax ("VAT")
     purposes, subject to the following condition namely that throughout the
     period during which such registration subsists, the Licensee shall have the
     benefit of a legally enforceable undertaking and indemnity from the
     controlling member of the VAT group in respect of which the registration
     has been made whereby the Licensee is kept indemnified from any liability
     to VAT (including interest, penalties and costs) which does not arise out
     of the authorised business of the Licensee under the Licence but which is
     claimed against the Licensee as a result of such group registration.

3.   This consent shall have effect on and from the date specified below. It
     shall remain in effect until the Authority shall withdraw it or replace it
     by a further consent made under the Condition.

4.   Words and expressions used in this consent have the meaning attributed to
     them in the said Special Licence Condition,

Dated:  1 October 2001
Signed

Charles Coulthard
Duly authorised in that behalf by the Authority

                                      206

<PAGE>

Consent issued under Special Licence Condition S of this licence and Annex
thereo (01.10.01)

ELECTRICITY TRANSMISSION LICENCE
SPECIAL LICENCE CONDITIONS

To SP Transmission Limited ("the Licensee")
1 Atlantic Quay
Glasgow
C2 8SP

Consent under Special Licence Condition S (Indebtedness)

1.   This consent is issued by the Gas and Electricity Markets Authority ("the
     Authority") to the Licensee under paragraph 1 of the above condition ("the
     Condition").

2.   The Authority refers to the application from Scottish Power UK plc ("SPUK"
     to the Authority dated 9 July (and forwarded by fax on 10 July) 2001 ("the
     Application") and hereby consents to the Licensee giving those guarantees
     given or to be given in support of or in relation to the borrowings which
     are referred to or set out in Annex A to the Application, subject to the
     conditions set out in the Annex to this consent.

3.   This consent is given subject to the further Condition that no change shall
     be made to the financial arrangements set out in the Application, or in the
     parties to them, without the prior written consent of the Authority.

4.   This consent shall have effect on and from the date specified below. It
     shall remain in effect until the Authority shall revoke or replace it by a
     further consent pursuant to condition 11 in the Annex to this consent.

5.   Save where the context otherwise requires, words and expressions used in
     this consent have the meaning attributed to them in the said Special
     Licence Conditions.

Dated 1 October 2001

Signed

Charles Coulthard
duly authorised in that behalf by the Authority

                                      207

<PAGE>

SP Transmission Limited ("the Licensee")

Annex to Consent issued under Special Licence Condition S (Indebtedness) in
respect of the Application of the licensee ("the Application") dated 10 July
2001

The following conditions, in addition to those contained in its transmission
licence, are applicable to the Licensee:

1.   any guarantee to be provided by the Licensee pursuant to this consent (each
     an "Upstream Guarantee") is to be in favour of the lender(s) or, as the
     case may be, contract counter-parties from time to time (or where
     applicable their nominee or agent as trustee for their interests) under one
     or more of the borrowing arrangements detailed in Annex A to the
     Application and directly related derivative contracts;

2.   Upstream guarantees may extend only to amounts due and payable from time to
     time by Scottish Power UK plc ("SPUK") (the "guaranteed indebtedness"
     under, and in accordance with the terms of, the bank facility, bonds, and
     notes existing on the date on which SPUK's Transfer Scheme under Schedule 7
     to the Utilities Act 2000 becomes effective ("the transfer date"), and to
     amounts becoming due and payable under, and in accordance with the terms
     of, derivative contracts from time to time entered into solely for the
     purpose of hedging interest rate or currency exposures arising under the
     guaranteed indebtedness ("directly related derivative contracts");

3.   Upstream Guarantees may not: (a) extend to amounts becoming due and payable
     under any extension, renewal or replacement of the bonds and notes other
     than in respect of amounts refinanced on the same terms as those existing
     as at the transfer date or upon terms more beneficial to the borrower (save
     that in no case may the stated maturity of the replacement instrument be
     later than the stated maturity of the instrument replaced); nor (b) may
     they cover amounts becoming due and payable under the bank facility if the
     terms and conditions of such facility are varied after the transfer date in
     any material respect so as to increase the amounts that may become payable
     under the bank facility or to extend its term or otherwise to impose
     additional or more onerous financial obligations on SPUK, nor (c) may they
     cover any other liabilities whatsoever (unless and to the extent incurred
     consistently with the conditions of the Licensee's transmission licence or
     any consent validly issued thereunder);

4.   for so long as any upstream Guarantee remains outstanding, the Licensee is
     to be fully and effectively indemnified, in a form satisfactory to Ofgem,
     against any and all costs, expenses, damages and losses it may incur or
     suffer as a result of any call made, or the performance of any obligation,
     under an Upstream Guarantee. Such indemnities are to be given by Scottish
     Power Investments Limited ("Investments"), may not be limited in time or
     amount, and shall comply with the requirements or paragraphs 5 and 6 below;

5.   it shall be a term of the indemnities that Investments has , for so long as
     the Upstream Guarantees remain in force, an investment grade corporate
     credit rating from either Standard & Poor's Ratings Group or Moody's
     Investors Services, Inc. In the event that such a rating is not held,
     Investments shall take such steps as the Licensee may require in accordance
     with a direction of the Authority, acting reasonably after consultation
     with the Licensee, to secure that the value of the indemnities to the
     Licensee is not materially reduced or, if this is nor practicable, that
     additional or alternative protections are put in place so as to leave the
     Licensee in a position not materially less favourable to it than that which
     would have obtained had such rating been held;

                                      208

<PAGE>

6.   it shall be a further term of the indemnities that, without prejudice to
     the requirement in paragraph 5 above, Investments undertakes not without
     the prior consent of the Authority notified to the Licensee in writing to
     dispose of or refinance the whole or any major part of its business or
     assets, or of the business or assets of Manweb plc, unless the proceeds of
     such sale or refinancing are applied to reduce pro tanto the aggregate
     amount of the obligations covered by Upstream Guarantees then outstanding
     or there are put in place alternative or additional indemnity arrangements
     satisfactory to the Authority, acting reasonably;

7.   for so long as any Upstream Guarantee remains outstanding, the Licensee
     shall, as soon as reasonably practicable, use all reasonable endeavours to
     obtain release of its obligations thereunder;

8.   before any Upstream Guarantee may be entered into, the Licensee shall
     obtain from SPUK legally enforceable undertakings to the following effect;

     (1)   until the occurrence of the Relevant Event (as defined below), SPUK
           shall not conduct any business nor carry on any activity provided,
           however, that this undertaking shall not prevent SPUK from

           (a)   continuing to conduct any business or carry on any activity
                 which it was conducting on the transfer date (or which arises
                 in the ordinary course of any such business or activity) but
                 (without prejudice to the provisions of sub-paragraphs (b), (c)
                 and (d) below) by the date twelve months from the transfer date
                 (or such later date as the Authority may specify to the
                 Licensee in writing) SPUK shall transfer to an affiliate or
                 otherwise cease to conduct or carry on any such business or
                 activity together (so far as reasonably practicable) with all
                 rights and/or obligations of SPUK arising in respect of
                 contracts or other arrangements entered into by SPUK on or
                 prior to such twelve month anniversary which survive such
                 twelve month anniversary. SPUK shall procure an indemnity in
                 respect of any such rights and obligations which are not so
                 transferred in form satisfactory to the Authority from such
                 person or persons as SPUK shall nominate (being in any case not
                 a subsidiary of SPUK. and having and agreeing, for so long as
                 any Upstream Guarantee remains outstanding, to maintain an
                 investment grade corporate credit rating) at such other person
                 or persons as the Authority, acting reasonably, shall approve;

           (b)   holding or acquiring shares or other securities in, or making
                 or receiving loans and advances to or from, any body corporate
                 as, or performing the supervisory or management functions of,
                 an investor, nor performing the supervisory or management
                 functions of a holding company in respect of any subsidiary
                 (including, for the avoidance of doubt, the provision of
                 customary corporate cervices to subsidiaries or holding
                 companies within SPUK's group, including those transport,
                 learning and procurement activities and services currently
                 provided by SPUK);

           (c)   conducting any business or carrying on any activity to which
                 the Authority has given its consent in writing (such consent
                 not to be unreasonably withheld or delayed); or

                                      209

<PAGE>

           (d)   conducting any other business or carrying on any other activity
                 which, were it carried on by the Licensee, would be de minimis
                 business (as defined in Special Condition O of the Licensee's
                 transmission licence but substituting respectively for the
                 turnover and for the aggregate of share capital, share premium
                 and reserves of the Licensee the equivalent figures for SPUK as
                 shown (in the case of turnover) in its consolidated financial
                 statements or (in the case of share capital and reserves) its
                 unconsolidated financial statements, all at the relevant date);

     (2)   until the occurrence of the Relevant Event, SPUK shall not enter into
           nor permit or suffer to exist any guarantee of any obligation nor
           enter into nor permit or suffer to subsist any agreement to which it
           is a party containing a cross-default obligation (as defined in
           Special Condition S of the Licensee's transmission licence) provided,
           however, that this undertaking shall not prevent SPUK from:

           (a)   (without prejudice to the provisions of sub-paragraphs (b) or
                 (C) of this paragraph 8 (2)) permitting or suffering to exist
                 any guarantee that was outstanding on the transfer date or
                 entering into further guarantees in respect of similar
                 obligations during the period commencing on the transfer date
                 and ending twelve months thereafter but by the end of such
                 period except with the consent of the Authority previously
                 notified to the Licensee in writing, SPUK must (so far as
                 reasonably practicable) have obtained unconditional release
                 from or otherwise ceased to have any continuing liability
                 whatsoever under such guarantees. SPUK shall procure an
                 indemnity for any such liability which survives the end of such
                 period in a form reasonably satisfactory to the Authority from
                 such person or persons as SPUK shall nominate (being in any
                 case not a subsidiary of SPUK and having and agreeing for so
                 long as any Upstream Guarantee remains outstanding to maintain
                 an investment grade corporate credit rating) or such other
                 person or persons as the Authority, acting reasonably, shall
                 approve;

           (b)   (without prejudice to the provisions of sub-paragraphs (a) or
                 (c) of this paragraph 8 (2)) permitting or suffering to subsist
                 any agreement subsisting at the transfer date provided that any
                 cross-default obligation therein contained is not referable to
                 the default of any person that is not a wholly owned subsidiary
                 of SPUK nor (save during the period of twelve consecutive
                 months commencing on the transfer date) to the default of
                 Scottish Power Energy Trading Limited ("SPETL" or of any other
                 person carrying on analogous activities to those carried on by
                 SPETL in succession to SPUK or otherwise;

           (c)   (without prejudice to the provisions of sub-paragraphs (a) or
                 (b) of this paragraph 8 (2)), entering into or permitting or
                 suffering to exist any agreement containing a cross-default
                 obligation referable solely to a default of the Licensee, SP
                 Distribution Limited or Manweb plc:

     (3)   until the occurrence of the Relevant event, SPUK (acknowledges that
           it should have a corporate credit rating no lower than either BBB
           from Standard & Poor's Ratings Group or Baa2 from Moody's Investors
           Services, Inc. and shall ensure that the aggregate gross principal
           amount outstanding from time to time in respect of indebtedness for
           money borrowed by it or amounts in the nature of such

                                      210

<PAGE>

           indebtedness shall not exceed(pound)5 billion, if at any relevant
           time SPUK does not hold such credit ratings or exceeds such limit it
           undertakes to procure that the obligations of the Licensee under all
           Upstream Guarantees then outstanding are fully and effectively
           indemnified by (i) an unrelated third party (such as a bank or credit
           insurer), or (ii) any holding company of SPUK (including one as is
           envisaged in terms of paragraph 12 below), or (iii) subject to
           approval the Authority, a Subsidiary or holding company of, or a
           subsidiary of a holding company of, SPUK, in each case having and at
           all times maintaining an investment grade corporate credit rating;

     (4)   until the occurrence of the Relevant Event, SPUK shall not without
           the prior consent of the Authority notified to the Licensee in
           writing dispose of or refinance the whole or any major part of its
           business or assets, or of the business or assets of any of its
           subsidiaries, unless the proceeds of such sale or refinancing are
           applied to reduce pro tanto the aggregate amount of the obligations
           covered by Upstream Guarantees then outstanding or there are put in
           place alternative or additional indemnity arrangements satisfactory
           to Ofgem acting reasonably;

     (5)   for the purposes of these undertakings, the Relevant Event shall be
           the earlier to occur of (a) the first date by which all upstream
           Guarantees have been released or the Licensee has otherwise ceased to
           have any continuing liability thereunder whatsoever, and (b the date
           of publication of the annual regulatory accounts of the Licensee and
           of SP Distribution Limited required by or under their respective
           licences issued pursuant to the Electricity Act 1989 (as amended)
           (or, if each is not published on the same day, the later of their
           respective dates of publication to occur) which first show the total
           combined indebtedness of the Licensee and of SP Distribution Limited
           to be below the level that is equivalent to 78% of their combined
           Regulatory Asset Values (as shown in such accounts or, if not so
           shown, the equivalent figures at the date to which such accounts are
           drawn up as certified by the relevant auditors). For these purposes,
           indebtedness shall include the gross amount of all liabilities for
           money borrowed by each of the Licensee and SP Distribution Limited
           and, in addition, the maximum total liability under all guarantees of
           indebtedness (including Upstream Guarantees) entered into by either
           of them and then outstanding (taking into account contributions to
           which either of them may be entitled as against the other in respect
           of liabilities assumed jointly or jointly and severally), but shall
           exclude liabilities for money borrowed from SPUK if and to the extent
           such liabilities are effectively subordinated to all other claims
           that might be validly brought against the Licensee or, as the case
           may be, SP Distribution Limited;

     (6)   for so long as any Upstream Guarantee remains outstanding, SPUK
           shall, as soon as reasonably practicable, use its reasonable
           endeavours to obtain release of its Obligations thereunder. For the
           avoidance of doubt, this undertaking shall not require SPUK to repay
           any amount or replace any facility before the due date for payment or
           termination thereof nor agree to any variation in the terms and
           conditions of any indebtedness covered by an Upstream Guarantee that
           is prejudicial to SPUK;

9.   the Licensee shall provide satisfactory evidence to the Authority that it
     has obtained the requisite indemnities and undertakings, including
     certified true copies of the indemnities and Deed of Covenant (or other
     instrument) setting forth the undertakings and the Licensee shall procure
     that all such indemnities and undertakings are legally enforceable;

                                      211

<PAGE>

10.  the Licensee shall use all reasonable endeavours to enforce its rights
     under the indemnities arid the undertakings, and shall comply with any
     reasonable directions from the Authority in relation thereto;

11.  the Authority reserves the right to, and if so requested by the Licensee
     shall, review this consent in the light of any material change of
     circumstance, and, if appropriate (and having due regard to the nature and
     extent of any obligations undertaken by the Licensee on the basis of this
     consent), amend or revoke it;

12.  it is acknowledged and agreed that none of the undertakings or restrictions
     hereby required of SPUK shall in any way prevent or restrict any such
     actions being undertaken by any holding company from time to time of SPUK
     (provided SPUK is not thereby prevented from fulfilling its undertakings to
     the Licensee);

13.  in determining the price control limits applicable to the Licensee under
     its transmission licence, the Authority shall be entitled to disregard any
     costs incurred by the Licensee in relation to any Upstream Guarantee or to
     the indemnities or undertakings or any of them (including legal and other
     costs relating to any proceedings whether taken by or against the Licensee)

Date:  27/9/01

                                      212

<PAGE>

Direction issued under Special Licence Condition H of this licence (12.11.01)


The Company Secretary
SP Transmission Limited
New Alderston House
Dove Wynd
Strathclyde Business Park
Bellshill
ML4 3FF

                                           Our Ref: CC.LF476L
                                           Direct Dial: 0141 331 1772
                                           Email: charles.coulthard@ofgem.gov.uk

                                           12 November, 2001


Dear Sir,

Direction issued by the Gas and Electricity Markets Authority under
SP Transmission Limited Licence Special Condition H
'Transmission System Security Standard and Quality of Service (Scotland)'

On 18 January 2001, ScottishPower Power Systems (now SP Transmission Limited)
submitted an application to Ofgem for a direction relieving it of certain
obligations laid on it by Part IV, Condition 4 of its licence. Particulars of
this application are attached to this direction.

The Authority hereby directs pursuant to paragraph 7 of special condition H of
SP Transmission Limited's licence that in respect of such entry in the attached
table, SP Transmission Limited is relieved for the period specified in that
entry in Column 2 of the Table, or until revoked or amended by further directive
of its obligations under paragraph 1 of Condition 4 to plan, develop, operate
and maintain the part of the transmission system specified in that entry in
Column 3 of the Table in accordance with the documents, or parts of them,
specified in that entry in Column 4 of the Table while it is not complying with
any preview included in Column 4 of that entry in the Table.

In respect of entries in column 1, the following additional requirements will
apply:

1.   The company is to publish the following information by the June preceding
     the year 1 April to which is relates:

     (a)   estimates of the number of occasions that the interconnector needs to
           be disconnected to ensure security of supply to customers within the
           licensees authorised area;

     (b)   estimates of the total and average number of minutes that the
           interconnector will be disconnected;

                                      213

<PAGE>

     (c)   estimates of restriction of capability of interconnector including
           but not comprising the level of restriction, frequency and duration
           of occurrence;

     Additionally, the following information should be submitted to Ofgem by the
     June following the year commencing 1 April to which it relates:

     (d)   the reasons for any of the occurrences estimated in (a) to (c) above
           that occurred;

     (e)   to identify by frequency of interruption for whichever case the
           interconnector users affected.


Dated:..........................2001

SIGNED on behalf of the Authority by

Charles Coulthard

Authorised for that purpose by the Authority.

                                      214

<PAGE>

--------------------------------------------------------------------------------
     1                 2                     3                        4
ENTRY NUMBER     PERIOD DURING          PART OF THE               NATURE OF
                   WHICH THE            TRANSMISSION                RELIEF
                   DIRECTION          SYSTEM FOR WHICH
                    APPLIES           RELIEF IS GIVEN
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1              Until                275Kv single circuit      Transmission
               30 November 2011     line from Coylton to      Planning Standard
                                    Auchencrosh               13/10001 Section A
                                                              Paragraph 2.1
--------------------------------------------------------------------------------
2              Until                2 x 275Kv circuits        Transmission
               30 November 2011     Kilmarnock South - Ayr    Planning Standard
                                    - Coylton                 13/10001 Section A
                                                              Paragraph 2.1
--------------------------------------------------------------------------------
3              Until                2 x 400Kv auto-           Transmission
               30 November 2006     transformer infeed at     Planning Standard
                                    Kilmarnock South          13/10001 Section A
                                                              Paragraph 2.1
--------------------------------------------------------------------------------

                                      215

<PAGE>

Consent issued under Special Licence Condition S of this licence (20.11.01)


The Company Secretary
SP Transmission Limited
("the Licensee")
1 Atlantic Quay
Glasgow
G2 8SP

                                                                20 November 2001

Dear Sir,

ELECTRICITY TRANSMISSION LICENCE
SPECIAL LICENCE CONDITIONS

Consent under Special Licence Condition S (Indebtedness)

1.   This consent is issued by the Gas and Electricity Markets Authority ("the
     Authority") to the Licensee under paragraph 1 of the above condition ("the
     condition").

2.   The Authority refers to the application from Scottish Power UK plc ("SPUK")
     to the Authority dated 9 July (and forwarded by fax on 10 July) 2001 ("the
     Application"), and to the consent ("the Principal Consent") given by the
     Authority, subject to the conditions specified therein, on 1 October 2001
     to certain guarantees by the Licensee pursuant to the Application.

3.   It has been brought to the Authority's notice that the borrowing
     arrangements specified in the Application contain certain cross-default
     obligations affecting SPUK pursuant to the Facility Agreement dated 5 June
     2001 made between SPUK, Royal Bank of Scotland (as agent) and Royal Bank of
     Scotland and others (as lenders) ("the RBoS Facility"), the effect of which
     would be, in the absence of consent thereto by the Authority, to constitute
     a breach of Special Licence Condition S in the Licensee's transmission
     licence notwithstanding the issue to the Licensee of the Principal Consent.

4.   The Authority hereby consents to the inclusion in the borrowing
     arrangements authorised by the Principal Consent of the cross-default
     obligations referred to in paragraph 3 above, subject to the two additional
     conditions set out in paragraphs 5 and 6 below (in addition to those
     imposed under the Principal Consent), and subject to the modification of
     the Principal Consent, in its application to such cross-default
     obligations, specified in paragraph 7 below.

5.   Within seven days of the date of this consent, the Licensee shall have
     obtained from SPUK (in addition to the undertakings required under the
     Principal Consent) enforceable undertakings in favour or the Licensee to
     the effect that:

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     (a)   until the occurrence of a Relevant Event or until the date on which
           the RBoS Facility determines or is renegotiated on a basis
           satisfactory to the Authority (whichever is the earlier to occur) and
           for so long as Thus plc ("Thus") is a Subsidiary of SPUK ,(within the
           meaning of the RBoS Facility) SPUK shall:

           (i)   procure that Thus does not at any time have any Borrowings
                 (within the meaning of the RBoS Facility) to which Clause 19.5
                 of the RBoS Facility applies, save Borrowings (as so defined)
                 from SPUK;

           (ii)  not make any demand on or exercise any right (other than the
                 exercise of any right to withhold the making of further
                 advances or to extend further credit to Thus) against Thus
                 which would, or would then be likely to, cause an Event of
                 Default (within the meaning of Clause 19 of the RBoS Facility)
                 to occur; and

           (iii) undertake that, if on the date which is twelve months after the
                 date of this consent Thus remains a Principal Subsidiary of
                 SPUK (within the meaning of the RBoS Facility) SPUK shall
                 forthwith transfer to an affiliate or related undertaking which
                 is not and does not thereafter become a subsidiary of SPUK or
                 otherwise dispose of its investment in Thus in such manner as
                 to ensure that Thus ceases forthwith to be, and does not again
                 become, such a Principal Subsidiary; and

     (b)   for so long as SPUK is a party to any agreement containing a
           cross-default obligation permitted by condition 8(2)(b) in the Annex
           to the Principal Consent (as modified by this consent SPUK shall
           procure that, in respect of all its subsidiaries other than Thus,
           SPUK holds a majority of the voting rights and has the power to
           appoint or remove a majority of the directors of those subsidiaries.

6.   Within seven days of the date of this consent the Licensee shall have
     obtained from Scottish Power plc ("Holdco") enforceable undertakings in
     favour of the Licensee to the effect that until the occurrence of a
     Relevant Event or until the date on which the RBoS Facility determines or
     is re-negotiated on a basis satisfactory to the Authority (whichever is the
     earlier to occur) Holdco shall not:

     (a)   incur or permit or suffer to subsist any Borrowings (within the
           meaning of the RBoS Facility) to which Clause 19.5 of the RBoS
           Facility applies save that for a period of twelve consecutive months
           commencing on the Transfer Date Holdco may permit or suffer to
           subsist any Borrowings to which such clause applies as were
           outstanding on The Transfer Date (but no others); nor

     (b)   enter into a Guarantor Accession Agreement or otherwise become an
           Obligor (within the meaning of the RBoS Facility).

7.   Under paragraph 8(2) in the Annex to the Principal Consent the Licensee is
     under obligation to obtain an undertaking from SPUK not to enter into nor
     permit or suffer to subsist as any agreement containing a cross default
     obligation (as there defined), save that under sub-paragraph 8(2)(b) SPUK
     may permit or suffer to subsist certain agreements provided that any
     cross-default obligation therein contained is not referable to the default
     of any person that is not a wholly-owned subsidiary of SPUK.
     Notwithstanding this provision, SPUK shall not be in breach of its
     obligations under the said paragraph 8(2) if

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     the default in relation to which the cross-default obligation is referable
     is that of a subsidiary of SPUK which is not a wholly-owned subsidiary of
     SPUK, so long as SPUK is and remains in compliance with the provisions of
     paragraph 5(b) of this consent in relation to the subsidiary in question.

8.   The Licensee shall comply with the requirements of paragraphs 9 and 10 in
     the Annex to the Principal Consent in relation to the undertakings required
     by this consent.

9.   This consent shall be deemed to have come into effect on and from the 1
     October 2001. it shall remain in effect for so long as the Principal
     Consent continues in force.

10.  Save where the context otherwise requires or this consent specifies
     otherwise, words and expressions used in this consent have the meaning
     attributed to them in the Principal Consent.

Dated 20 November 2001



Signed

duly authorised in that behalf by the Authority

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Direction issued under Standard Condition 10 of this licence (28.01.02)


Direction to SP Transmission Limited by the Gas and Electricity Markets
Authority under Paragraph 3(a)(i) of Standard Transmission Licence Condition 10

This Direction is issued by the Gas and Electricity Markets Authority ("the
Authority") under paragraph 3(a)(i) of Condition 10 (Disposal of relevant
assets) in the standard licence conditions of the licence of the above named
electricity transmission licensee granted or treated as granted under section
6(1)(b) of the Electricity Act 1989 (as amended) ("the licence").

The Authority hereby directs that the licensee may enter into an agreement or
arrangement whereby operational control of a relevant asset or relevant assets
ceases to be under the sole management of the licensee without giving prior
notice in any case where the agreement or arrangement (for these purposes called
"the transaction") complies in all respects with the terms set out below:

1.   The transaction shall be consistent with all applicable conditions
     contained in the licence.

2.   Any other consent or clearance required under statue or under the licence
     in respect of the transaction shall have been obtained.

3.   The transaction shall provide for the supply of a service or the provision
     of a resource which relates to a relevant asset or relevant assets by a
     counter-party ("the resource provider") on behalf of the licensee.

4.   The resource provider shall be and remain an affiliate of the licensee but
     shall not be a holding company of the licensee.

5.   The transaction shall be effected by contract made between the licensee and
     the resource provider; such contract shall be binding and enforceable both
     in Great Britain and in any

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other jurisdiction in which the resource provider has its principal place of
business; and the contract shall contain provisions to the following effect:

     (a)   no force majeure or equivalent provision in the contract shall excuse
           any failure on the part of the licensee, or the resource provider
           acting on its behalf, to comply with the licensee's statutory or
           licence obligations unless (and to the extent that) the event or
           circumstance in question would have excused the licensee under the
           licence if it had itself performed the service or provided the
           resource

     (b)   responsibility for performance of all obligations to which the
           contract relates shall be clearly specified, subject to the
           overriding requirement that the licensee remains ultimately
           responsible for all statutory and licence obligations applicable to
           the licensee's business

     (c)   the resource provider shall covenant with the licensee to refrain
           from any action which would then be likely to cause the licensee to
           breach any of its licence or statutory obligations

     (d)   the resource provider shall disclose to the licensee the basis or
           bases of all charges for services provided or supplies made pursuant
           to the contract, together with sufficient information and analysis to
           support the basis for the calculation of the total sum payable by the
           licensee; and the resource provider shall not raise any objection to,
           or seek to prevent, disclosure of such information to the Authority

     (e)   the licensee shall be free, at any time after the fifth anniversary
           of the commencement of the contract, without penalty and on
           reasonable notice, to resource any service or supply from an
           alternative source of its choosing if more favourable terms become
           available

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       (f)   the resource provider shall be under obligation to provide to the
             licensee any information within its possession or control which the
             licensee may from time to time require in order to enable the
             licensee:

             (i)    to comply with any request by the Authority for information
                    or reports pursuant to Condition 11 (Provision of
                    Information to the Authority) of the licence (subject to
                    paragraphs 2 and 4 of that condition);

             (ii)   to assess the performance or position of the resource
                    provider or any of its subsidiaries with respect to the
                    provision of any service or supply made to the licensee; or

             (iii)  to monitor adherence by the resource provider to the terms
                    of the contract.

6. (1) The licensee shall procure from that company or other corporate body
       which is from time to time the ultimate holding company of the licensee
       and the resource provider, or from such other corporate body as the
       Authority may from time to time agree, acknowledgements and legally
       enforceable undertakings in favour of the licensee in the form annexed to
       this Direction marked A. Such acknowledgements and undertakings shall be
       obtained within seven days of the company or other corporate body in
       question ("the covenantor") becoming such ultimate holding company and
       shall remain in force for so long as the covenantor remains such ultimate
       holding company.

   (2) For the purpose of this paragraph "ultimate holding company" means the
       company or other corporate body which is the holding company of both the
       licensee and the resource provider and is not itself a subsidiary of
       another company or corporate body.

   (3) The licensee shall:

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       (a)   deliver to the Authority evidence (including a copy of the
             acknowledgements and undertakings) that the licensee has complied
             with its obligation to procure acknowledgements and undertakings
             pursuant to this paragraph;

       (b)   inform the Authority immediately in writing if the directors of the
             licensee become aware that any such undertaking has ceased to be
             legally enforceable or that its terms have been breached; and

       (c)   comply with any direction from the Authority to enforce any such
             undertaking

   (4) The licensee shall not, save with the consent in writing of the
       Authority, obtain or continue to obtain the service or resource in
       question from the resource provider at any time when:

       (a)   the specified acknowledgements and undertakings are not in place;
             or

       (b)   there is an unremedied breach of any undertaking; or

       (c)   the licensee is in breach of any direction issued by the Authority
             under sub-paragraph (3) of this paragraph

7.   The consent given by this Direction applies only for the purpose of
     Condition 10 and shall not apply or be deemed to apply for any other
     purpose.

8.   Word or phrases in this direction which are defined for the purposes of the
     licence shall have the same meaning as in the licence.

Gas and Electricity Markets Authority
28 January 2002

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Form A

Acknowledgements and Undertakings


Acknowledgements

(1)  that it is in the best interests of the covenantor that the licensee
     complies with its statutory and licence obligations; and

(2)  that all matters relating to the enforcement of the licensee's rights under
     the relevant contract(s) shall be reserved to the directors of the licensee
     without regard to other interests.

Undertakings

(1)  to procure that the resource provider will:

     (a)  refrain from any action which would then be likely to cause the
          licensee to breach any of its statutory or licence obligations

     (b)  provide the licensee with any information within its possession or
          control which the licensee may from time to time require in order to
          enable the licensee:

          -    to comply with any request by the Authority for information or
               reports pursuant to Condition 11 (Provision of Information to the
               Authority) of the licence (subject to paragraphs 2 and 4 of that
               condition);

          -    to assess the performance or position of the resource provider or
               any of its subsidiaries with respect to the provision of any
               service or supply made to the licensee; or

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<PAGE>

          -   to monitor adherence by the resource provider to the terms of the
              contract

     (c)  not unduly discriminate in favour of, or against, the licensee in the
          provision to it of supplies or services

     (d)  not take any action which would constitute disposal of, or
          relinquishment of operational control over, any asset to which
          Condition 10 of the licence applies save in accordance with the
          requirements of that condition and any consent issued by the Authority
          under it (other than to the licensee upon the expiry or termination of
          any relevant contract in accordance with its terms)

(2)  to procure that any contract between the licensee and the resource provider
     shall comply with the requirements set out in the Direction to which this
     form is annexed and shall not be amended so as to cease in any way to be
     compliant with those requirements.

(3)  to procure that the resource provider has and maintains resources and
     operating capacity at a level sufficient to ensure efficient performance of
     the contract and the efficient discharge of the relevant obligations of the
     licensee.

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