<PAGE>

                                                                   EXHIBIT 4.16

                          SECOND SUPPLEMENTAL INDENTURE

                                     between

                   MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC

                                       and

                              JPMORGAN CHASE BANK,
                                   as Trustee

                                   ----------

                          Dated as of December 10, 2003

                                   ----------

                   Supplementing the First Mortgage Indenture
                          Dated as of December 10, 2003

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          SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture"),
dated as of December 10, 2003, between MICHIGAN ELECTRIC TRANSMISSION COMPANY,
LLC, a limited liability company organized and existing under the laws of the
State of Michigan (the "Company"), having its principal office at 540 Avis
Drive, Suite H, Ann Arbor, Michigan 48108, and JPMORGAN CHASE BANK, a New York
banking corporation duly organized and existing under the laws of the State of
New York, as trustee (in such capacity, the "Trustee"), the office of the
Trustee at which on the date hereof its corporate trust business is administered
being 4 New York Plaza, New York, New York 10004.

                             RECITALS OF THE COMPANY

          WHEREAS, the Company has heretofore executed and delivered to the
Trustee a First Mortgage Indenture dated as of December 10, 2003 (the "Mortgage
Indenture") encumbering the real property as more particularly described on
Exhibit A and Exhibit B attached hereto and providing for (i) the issuance by
the Company from time to time of its bonds, notes or other evidences of
indebtedness (in the Mortgage Indenture and herein called the "Collateral
Securities") to be issued in one or more series, solely to provide security for
the payment of the principal of and premium, if any, and interest, if any, on
the Company's Senior Secured Debt other than the Debt Securities (in each case
as defined in the Mortgage Indenture) and (ii) the issuance from time to time of
Debt Securities (together with the Collateral Securities, in the Mortgage
Indenture and herein called the "Securities"); and

          WHEREAS, the Company has entered into the Credit Agreement, dated as
of December 10, 2003 (as amended, supplemented, restated or otherwise modified
from time to time, the "Credit Agreement"), among the Company, the lenders from
time to time party thereto (the "Lenders") and JPMorgan Chase Bank, as
administrative agent for the Lenders (in such capacity, together with any of its
successors, the "Administrative Agent"); and

          WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make Loans (as defined below) and other extensions of credit to the Company, and
it is a condition precedent to the obligation of the Lenders with respect
thereto that the Company execute and deliver this Second Supplemental Indenture
and deliver the Bond (as defined below) to the Administrative Agent pursuant
hereto; and


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          WHEREAS, the Company, in the exercise of the power and authority
conferred upon and reserved to it under the provisions of the Mortgage Indenture
and pursuant to appropriate resolutions, has duly determined to make, execute
and deliver to the Trustee this Second Supplemental Indenture to the Mortgage
Indenture as permitted by Sections 201, 301 and 1201 of the Mortgage Indenture
to establish the form and terms of, and to provide for the creation and issuance
of, a second series of Securities under the Mortgage Indenture in an aggregate
principal amount equal to the principal amount of Loans and any Reimbursement
Obligations (as defined below) from time to time outstanding under the Credit
Agreement and to amend and supplement the Mortgage Indenture as herein provided;
and

          WHEREAS, to secure the repayment of the Obligations incurred pursuant
to the Credit Agreement, the Company shall issue and hereby agrees to deliver
the Bond to the Administrative Agent, for its benefit and the ratable benefit of
the Lenders under the Credit Agreement; and

          WHEREAS, all things necessary to make the Bond, when executed by the
Company and authenticated and delivered by the Trustee or any Authenticating
Agent and issued upon the terms and subject to the conditions hereinafter and in
the Mortgage Indenture, set forth the valid, binding and legal obligations of
the Company and to make this Second Supplemental Indenture a valid, binding and
legal agreement of the Company, have been done;

          NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH that, to
establish the terms of a series of Securities, and for and in consideration of
the premises and of the covenants contained in the Mortgage Indenture and in
this Second Supplemental Indenture and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, it is mutually
covenanted and agreed as follows:

                                   ARTICLE ONE

                       DEFINITIONS AND OTHER PROVISIONS OF
                               GENERAL APPLICATION

                  Section 1.01. Mortgage Indenture Definitions.

          Each capitalized term that is used herein and is defined in the
Mortgage Indenture shall have the meaning specified in the Mortgage Indenture
unless such term is otherwise defined herein; provided, however, that any
reference to a "Section" or "Article" refers to a Section or Article, as the
case may be, of this Second Supplemental Indenture, unless otherwise expressly
stated.

                      Section 1.02. Additional Definitions.

          For purposes of this Second Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise requires, the
following capitalized terms shall have the meanings set forth below:


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          "Administrative Agent" has the meaning assigned to that term in the
second Recital.

          "Bond" has the meaning assigned to that term in Section 2.01(a) of
this Second Supplemental Indenture.

          "Closing Date" has the meaning assigned to that term in the Credit
Agreement.

          "Collateral Securities" has the meaning assigned to that term in the
first Recital.

          "Company" has the meaning assigned to that term in the preamble.

          "Credit Agreement" has the meaning assigned to that term in the second
Recital.

          "Final Maturity Date" has the meaning assigned to that term in the
Credit Agreement.

          "Interest Payment Date" has the meaning set forth in Section 2.01(d).

          "Lenders" has the meaning assigned to that term in the second Recital.

          "Loans" has the meaning assigned to that term in the Credit Agreement.

          "Maturity Date" has the meaning set forth in Section 2.01(h).

          "Mortgage Indenture" has the meaning assigned to that term in the
first Recital.

          "Obligations" has the meaning assigned to that term in the Credit
Agreement.

          "Reimbursement Obligations" has the meaning assigned to that term in
the Credit Agreement.

          "Second Supplemental Indenture" has the meaning assigned to that term
in the preamble.

          "Securities" has the meaning assigned to that term in the first
Recital.

          "Trustee" has the meaning assigned to that term in the preamble.

                         Section 1.03. Trustee Reliance.

          The Trustee shall be entitled conclusively to rely on any writing,
paper or notice purporting to be signed, sent or given by an authorized officer
of the Administrative Agent, unless the Trustee shall have received prior
written notice to the contrary.


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                                   ARTICLE TWO

                TITLE, FORM AND TERMS AND CONDITIONS OF THE BOND

                             Section 2.01. The Bond.

          (a) The Securities of the series to be issued under the Mortgage
Indenture pursuant to this Second Supplemental Indenture shall be designated as
"Senior Secured Bonds, Collateral Series A" (the "Bond") and shall be Collateral
Securities issued under the Mortgage Indenture. The Credit Agreement is the
Senior Secured Debt Agreement relating to the Bond, and is attached hereto as
Exhibit D.

          (b) The Trustee shall authenticate and deliver the Bond for original
issue on the Closing Date in an initial principal amount equal to the principal
amount of Loans and Reimbursement Obligations outstanding on the Closing Date,
upon a Company Order for the authentication and delivery thereof pursuant to
Section 401 of the Mortgage Indenture. Thereafter, the unpaid principal amount
of the Bond at any time shall be equal to the principal amount of Loans and any
Reimbursement Obligations outstanding at such time under the Credit Agreement.
Any borrowing or reborrowing by, or other extension of credit in favor of, the
Company under the Credit Agreement shall be deemed to increase the principal
amount of the Bond by the amount of such borrowing, reborrowing or other
extension of credit, and any payment by the Company of the principal of Loans or
any Reimbursement Obligations under the Credit Agreement shall be deemed to
reduce the principal amount of the Bond by the amount of such payment. To the
extent that the aggregate outstanding principal amount of the Loans and any
Reimbursement Obligations shall be reduced or increased from time to time
pursuant to the Credit Agreement, the Holder of the Bond shall duly note a like
reduction or increase in the principal amount of the Bond on Schedule I attached
to such Bond, which notation shall be conclusive in the absence of manifest
error, and, upon any transfer of said Bond, such Schedule I shall transfer to
the subsequently issued Bond.

          (c) The principal of the Bond shall be payable by the Company in whole
or in installments on such date or dates as the Company has any obligations
under the Credit Agreement to repay any Loans or any Reimbursement Obligations
to the Lenders (whether upon scheduled maturity, optional prepayment, required
prepayment, acceleration, demand or otherwise), but not later than the Maturity
Date. The amount of principal of the Bond due and payable by the Company on any
such date shall equal the aggregate outstanding principal amount of the Loans
and any Reimbursement Obligations due and payable on such date pursuant to the
Credit Agreement. Pursuant to Section 601 of the Mortgage Indenture, the
obligation of the Company to make any payment of the principal on the Bond shall
be fully or partially, as the case may be, deemed to have been paid or otherwise
satisfied and discharged to the extent that the Company has paid the principal
then due and payable on the Loans and any Reimbursement Obligations pursuant to
the Credit Agreement.

          (d) The Bond shall bear interest from the time hereinafter provided at
such rate per annum as shall cause the amount of interest payable on each
Interest Payment Date on the Bond to equal the amount of interest, fees, costs,
expenses or other amounts (other than amounts allocable to the principal of the
Bond) payable by the Company on such Interest


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Payment Date under the Credit Agreement. Such interest on the Bond shall be
payable on the same dates as interest, fees, costs, expenses or such other
amounts are payable by the Company from time to time under the Credit Agreement
(each such date herein called an "Interest Payment Date"). The Regular Record
Date with respect to each Interest Payment Date for the Bond shall be the
calendar day immediately preceding each Interest Payment Date (whether or not a
Business Day). The amount of interest, fees, costs, expenses or such other
amounts payable by the Company from time to time under the Credit Agreement, the
basis on which such interest, fees, costs, expenses and such other amounts are
computed and the dates on which such interest, fees, costs, expenses and such
other amounts are payable are set forth in the Credit Agreement. The Bond shall
bear interest (i) from the most recent Interest Payment Date to which interest
has been paid or duly provided for with respect to the Bond, or (ii) if no
interest has been paid on the Bond, then from the Closing Date. The obligation
of the Company to make any payment of interest on the Bond shall be fully or
partially, as the case may be, deemed to have been paid or otherwise satisfied
and discharged to the extent that the Company has paid the interest, fees,
costs, expenses and such other amounts then due and payable pursuant to the
Credit Agreement.

          (e) The Corporate Trust Office of JPMorgan Chase Bank in New York, New
York shall be the place at which (i) the principal of and interest on the Bond
shall be payable, (ii) registration of transfer of the Bond may be effected,
(iii) exchanges of the Bond may be effected and (iv) notices and demands to or
upon the Company in respect of the Bond and the Mortgage Indenture may be
served; and the Corporate Trust Office of JPMorgan Chase Bank shall be the
Security Registrar and the Paying Agent for the Bond; provided, however, that
the Company reserves the right to designate, by one or more Officer's
Certificates and with the consent of the Administrative Agent, its principal
office in Ann Arbor, Michigan as any such place or itself as the Security
Registrar; provided, however, that there shall be only a single Security
Registrar for the Bond. The principal of and interest on the Bond shall be
payable without the presentment or surrender thereof.

          (f) The Bond shall not be entitled to redemption pursuant to Section
501(a) of the Mortgage Indenture.

          (g) The Bond shall be issued in registered form and payable in
Dollars.

          (h) The Bond shall be dated the Closing Date and shall mature on the
earlier of (i) the Final Maturity Date and (ii) the date that (A) the Company
causes all commitments to extend credit to it under the Credit Agreement to be
terminated in accordance with the terms and conditions thereof and (B) all
Obligations of the Company under the Credit Agreement are paid in full in cash,
as such date shall be evidenced to the Trustee by a certificate signed by an
officer of the Administrative Agent (the "Maturity Date"). The Bond shall bear
interest at the rate specified in Section 2.01(d). The principal of and interest
on the Bond shall be payable as specified in Section 2.01(e). With reasonable
promptness following the Maturity Date, the Administrative Agent, as the Holder
of the Bond, shall deliver the Bond to the Trustee for cancellation in
accordance with the terms of the Mortgage Indenture.

          (i) The original Bond shall be identified by the number RA-1, and any
subsequent Bond issued upon transfer of the original or any subsequent Bond
shall be numbered consecutively from RA-2 upwards and issued in the same
denomination as the transferred Bond.


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          (j) For purposes of the Bond and this Second Supplemental Indenture,
"Business Day" shall have the meaning assigned to such term in the Credit
Agreement.

          (k) The Trustee may conclusively presume that the obligation of the
Company to make each payment of principal of and interest on the Bond when due
shall have been fully satisfied and discharged unless and until it shall have
received a written notice from the Administrative Agent, as the Holder of the
Bond, signed by an officer of the Administrative Agent, stating that such
payment of principal of or interest on the Bond has not been fully paid when due
and specifying the principal amount of the Bond then due and the amount of funds
required to make such payment, the amount of interest then due and the amount of
funds required to make such payment.

          (l) In connection with any determination by the Trustee as to the
principal amount of the Securities that are Outstanding at any time under the
Mortgage Indenture, the Trustee may conclusively rely on any certificate signed
by an officer of the Administrative Agent and delivered by the Administrative
Agent to the Trustee as to the principal amount of the Bond then Outstanding on
such determination date.

          (m) The Bond may not be transferred except to a Person acting as
Administrative Agent for the Lenders under the Credit Agreement or any other
Revolving Facility. No such transfer shall be effective unless the Bond shall be
surrendered to the Trustee, together with a notice signed by an officer of the
then Holder of the Bond, stating that such transfer is being made to a Person
permitted to be a Holder of the Bond pursuant to this paragraph, whereupon the
Company shall execute and the Trustee shall authenticate and deliver a
replacement Bond to such Person in accordance with the terms of the Mortgage
Indenture.

          (n) The Bond shall have such other terms and provisions as are
provided in the form thereof attached hereto as Exhibit C, and shall be issued
in substantially such form.

                                  ARTICLE THREE

                              DELIVERY OF THE BOND

                       Section 3.01. Delivery of the Bond.

          After the Bond is duly authenticated and delivered by the Trustee to
the Company under the Mortgage Indenture, the Company hereby agrees to deliver
the Bond on the Closing Date to the Administrative Agent, registered in the name
of the Administrative Agent, on behalf of itself and the Lenders, to secure
payment of the Obligations of the Company under the Credit Agreement.


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<PAGE>

                                  ARTICLE FOUR

                            MISCELLANEOUS PROVISIONS

            Section 4.01. Execution of Second Supplemental Indenture.

          Except as expressly amended and supplemented hereby, the Mortgage
Indenture shall continue in full force and effect in accordance with the
provisions thereof, and the Mortgage Indenture is in all respects hereby
ratified and confirmed. This Second Supplemental Indenture and all of its
provisions shall be deemed a part of the Mortgage Indenture in the manner and to
the extent herein and therein provided. The Bond that is executed, authenticated
and delivered under this Second Supplemental Indenture constitutes a series of
Securities and shall not be considered to be a part of a series of Securities
executed, authenticated and delivered under any other supplemental indenture
entered into pursuant to the Mortgage Indenture.

                        Section 4.02. Effect of Headings.

          The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.

                      Section 4.03. Successors and Assigns.

          All covenants and agreements in this Second Supplemental Indenture by
the Company shall bind its successors and assigns, whether so expressed or not.

                       Section 4.04. Severability Clause.

          In case any provision in this Second Supplemental Indenture or in the
Bond shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

             Section 4.05. Benefit of Second Supplemental Indenture.

          Except as otherwise provided in the Mortgage Indenture, nothing in
this Second Supplemental Indenture or in the Bond, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Second Supplemental Indenture.

                    Section 4.06. Execution and Counterparts.

          This Second Supplemental Indenture may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

                 Section 4.07. Conflict with Mortgage Indenture.

          If any provision hereof limits, qualifies or conflicts with another
provision of the Mortgage Indenture, such provision of this Second Supplemental
Indenture shall control, insofar


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<PAGE>

as the rights between the Company and the Administrative Agent, as the Holder of
the Bond, are concerned.

                             Section 4.08. Recitals.

          The recitals contained herein shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness and
makes no representations as to the validity or sufficiency of this Second
Supplemental Indenture.

                           Section 4.09. Governing Law.

          This Second Supplemental Indenture shall be governed by and construed
in accordance with the law of the State of New York (including, without
limitation, Section 5-1401 of the New York General Obligations Law or any
successor to such statute).


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<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year first above
written.

                                        MICHlGAN ELECTRIC TRANSMISSION COMPANY,
                                        LLC


                                        By: /s/ Royal P. Lefere Jr.
                                            ------------------------------------
                                        Name: Royal P. Lefere Jr.
                                              ----------------------------------
                                        Title: Senior Vice President-Finance
                                               ---------------------------------


                                        JPMORGAN CHASE BANK, as Trustee


                                        By: /s/ James D. Heaney
                                            ------------------------------------
                                        Name: James D. Heaney
                                              ----------------------------------
                                        Title: Vice President
                                               ---------------------------------

DRAFTED BY:

Gregory A. Weiss, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017

AFTER RECORDED, RETURN TO:

William R. Wineman
LandAmerica
National Commercial Services
1050 Wilshire Blvd., Suite 310
Troy, MI 48084

Second Supplemental Indenture
<PAGE>

ACKNOWLEDGMENT

STATE OF MICHIGAN   )
                    ) ss.
COUNTY OF           )

     On the __ day of December 2003, before me, _____________________________,
the undersigned notary public, personally came ______________________________ of
Michigan Electric Transmission Company, LLC, a limited liability company
organized under the laws of the State of Michigan, and acknowledged that he
executed the foregoing instrument in his authorized capacity, and that by his
signature on the instrument he, or the entity upon behalf of which he acted,
executed the instrument.

                                        Notary Public

Second Supplemental Indenture
<PAGE>

ACKNOWLEDGMENT

STATE OF NEW YORK    )
                     ) ss.
COUNTY OF NEW YORK   )

     On the __ day of December 2003, before me, ________, the undersigned notary
public, personally came ______________________ of JPMorgan Chase Bank, a banking
corporation organized under the laws of the State of New York, and acknowledged
that he executed the foregoing instrument in his authorized capacity, and that
by his signature on the instrument he, or the entity upon behalf of which he
acted, executed the instrument.

                                        Notary Public
Second Supplemental Indenture
<PAGE>

                                                                       EXHIBIT A

                                  Real Property

                              [Insert Description]

<PAGE>

                                                                       EXHIBIT B

                                  Easement Land

                              [Insert Description]

<PAGE>

                                                                       EXHIBIT C

                              [Insert Form of Bond]

<PAGE>

                                                                       EXHIBIT D

                            [Insert Credit Agreement]

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year first above
written.

                                        MICHIGAN ELECTRIC TRANSMISSION
                                        COMPANY, LLC


                                        By: /s/ Royal P. Lefere Jr.
                                            ------------------------------------
                                        Name: Royal P. Lefere Jr.
                                        Title: Senior Vice President - Finance


                                        JPMORGAN CHASE BANK, as Trustee


                                        By:
                                            ------------------------------------
                                        Name: James D. Heaney
                                        Title: Vice President


DRAFTED BY:

Gregory A. Weiss, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017

AFTER RECORDED, RETURN TO:

William R. Wineman
LandAmerica
National Commercial Services
1050 Wilshire Blvd., Suite 310
Troy, MI 48084

                                Signature Page to
                          Second Supplemental Indenture
                          dated as of December 10, 2003

<PAGE>

ACKNOWLEDGMENT

STATE OF MICHIGAN   )
                    ) ss.
COUNTY OF WAYNE     )

          On the 10th day of December 2003, before me, Beverly A. Potter, the
undersigned notary public, personally came Royal P. Lefere Jr. of Michigan
Electric Transmission Company, LLC, a limited liability company organized under
the laws of the State of Michigan, and acknowledged that he executed the
foregoing instrument in his authorized capacity, and that by his signature on
the instrument he, or the entity upon behalf of which he acted, executed the
instrument.


                                            /s/ Beverly A. Potter
                                            ------------------------------------
                                        By: Beverly A. Potter
                                            Notary Public - Michigan
                                            Wayne County
                                            My Commission Expires Oct. 7, 2007

                                 Notary Page to
                          Second Supplemental Indenture
                          dated as of December 10, 2003

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the day and year first above
written.

                                        MICHIGAN ELECTRIC TRANSMISSION
                                        COMPANY, LLC


                                        By:
                                            ------------------------------------
                                        Name: Royal P. Lefere Jr.
                                        Title: Senior Vice President - Finance


                                        JPMORGAN CHASE BANK, as Trustee


                                        By: /s/ James D. Heaney
                                            ------------------------------------
                                        Name: James D. Heaney
                                        Title: Vice President


DRAFTED BY:

Gregory A. Weiss, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017

AFTER RECORDED, RETURN TO:

William R. Wineman
LandAmerica
National Commercial Services
1050 Wilshire Blvd., Suite 310
Troy, MI 48084

                                Signature Page to
                          Second Supplemental Indenture
                          dated as of December 10, 2003

<PAGE>

ACKNOWLEDGMENT

STATE OF NEW YORK    )
                     ) ss.
COUNTY OF NEW YORK   )

          On the 10th day of December 2003, before me, James M. Foley, the
undersigned notary public, personally came James D. Heaney of JPMorgan Chase
Bank, a banking corporation organized under the laws of the State of New York,
and acknowledged that he executed the foregoing instrument in his authorized
capacity, and that by his signature on the instrument he, or the entity upon
behalf of which he acted, executed the instrument.


                                            /s/ James M. Foley
                                            ------------------------------------
                                        By: James M. Foley
                                            No. 01FO6348400
                                            Notary Public State of New York
                                            Qualified in New York County
                                            My Commission Expires Aug. 31, 2006

                                 Notary Page to
                          Second Supplemental Indenture
                          dated as of December 10, 2003