<PAGE>

                                                                   EXHIBIT 10.53


Consumers Energy Company                                    Original Sheet No. 1
Rate Schedule No. 116
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001

                           PURCHASE AND SALE AGREEMENT

                             FOR ANCILLARY SERVICES

                                     Between

                            Consumers Energy Company

                                       And

                     Michigan Electric Transmission Company

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 2
Rate Schedule No. 116
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001
                           Purchase and Sale Agreement
                             For Ancillary Services

                                Table of Contents
<TABLE>
<S>                                                                           <C>
ARTICLE 1 - Definitions....................................................    5
   1.1    Ancillary Services...............................................    5
   1.2    Commission.......................................................    5
   1.3    Consumers' Resources.............................................    5
   1.4    ECAR.............................................................    5
   1.5    Firm Service.....................................................    5
   1.6    Good Utility Practice............................................    5
   1.7    NERC.............................................................    5
   1.8    Point of Receipt.................................................    6
   1.9    Reserved Capacity................................................    6
   1.10   Resources........................................................    6
   1.11   System Operator..................................................    6
   1.12   Tariff...........................................................    6
   1.13   Third Party......................................................    6
   1.14   Transmission Service Area........................................    6
   1.15   Transaction......................................................    6

ARTICLE 2 - Effective Date.................................................    6

ARTICLE 3 - Capacity, Energy and Reactive Power Sale By Consumers
   to Michigan Transco.....................................................    7
   3.1    Consumers' Responsibilities......................................    7
   3.2    Michigan Transco's Responsibilities..............................    7
   3.3    Ancillary Services...............................................    8
   3.4    Changes in Responsibilities......................................    9

ARTICLE 4 - Service Conditions.............................................   10
   4.1    Maintenance and Operation........................................   10
   4.2    Service Interruptions to Maintain Reliability....................   10

ARTICLE 5 - Compensation...................................................   10
   5.1    Payments to Consumers............................................   10
   5.2    Payments to Michigan Transco.....................................   11
   5.3    Applicable Tariff Rates..........................................   12

ARTICLE 6 - Forecasted Requirement for Generation Services.................   12

ARTICLE 7 - Priority and Nature of Service.................................   13
   7.1    Nature of Service................................................   13
   7.2    Use of Power.....................................................   13

ARTICLE 8 - Conditions Precedent...........................................   13

ARTICLE 9 - Operating Committee............................................   13
   9.1    Creation of the Operating Committee..............................   13
   9.2    Duties...........................................................   13
   9.3    Committee Expenses...............................................   14

ARTICLE 10 - Exchange of Information.......................................   14
   10.1   Data to be Furnished.............................................   14
   10.2   Records and Accounts.............................................   14
</TABLE>

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 3
Rate Schedule No. 116
EXECUTION COPY

<TABLE>
<S>                                                                           <C>
ARTICLE 11 - Settlements...................................................   14
   11.1   Accounting Period................................................   14
   11.2   Invoicing........................................................   14
   11.3   Payments.........................................................   14
   11.4   Interest Charges.................................................   15
   11.5   Disputed Invoices................................................   15

ARTICLE 12 - Indemnity.....................................................   15

ARTICLE 13 - Regulatory Authority..........................................   15

ARTICLE 14 - Term..........................................................   16
   14.1   Initial Term.....................................................   16
   14.2   Termination......................................................   16

ARTICLE 15 - Breach and Default............................................   16
   15.1   General..........................................................   16
   15.2   Events of Breach.................................................   16
   15.3   Cure and Default.................................................   17
   15.4   Right to Compel Performance......................................   17

ARTICLE 16 - Successors and Assigns........................................   17

ARTICLE 17 - Dispute Resolution Procedures.................................   18

ARTICLE 18 - Force Majeure.................................................   18

ARTICLE 19 - General.......................................................   19
   19.1   Authority........................................................   19
   19.2   Waivers..........................................................   19
   19.3   Governing Law....................................................   19
   19.4   Headings.........................................................   19
   19.5   Notices..........................................................   19
   19.6   Entirety.........................................................   20
   19.7   Severability.....................................................   20
</TABLE>

   APPENDIX A - Forecast Procedures
   APPENDIX B - Ancillary Services Rates

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 4
Rate Schedule No. 116
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001
                           PURCHASE AND SALE AGREEMENT
                             FOR ANCILLARY SERVICES

     This Amendment and Restatement of the April 1, 2001 Purchase and Sale
Agreement for Ancillary Services (herein referred to as "Agreement") is made and
entered into as of April 29, 2002, by and between Consumers Energy Company, a
Michigan corporation with offices at 212 West Michigan Avenue, Jackson, Michigan
(herein referred to as "Consumers") and Michigan Electric Transmission Company,
a Michigan corporation with offices at 540 Avis Drive, Suite H, Ann Arbor,
Michigan (herein referred to as "Michigan Transco"). The purpose of this
Agreement is to establish the terms and conditions under which Michigan Transco
may obtain Ancillary Services from Consumers. Consumers and Michigan Transco are
sometimes individually referred to herein as "Party" and collectively as
"Parties". This Agreement amends, restates and replaces the April 1, 2001
Purchase and Sale Agreement For Ancillary Services between the Parties,
effective on the date indicated above.

                                   WITNESSETH:

     WHEREAS, Consumers is in the business of generating electric capacity and
energy and selling electric capacity and energy and reactive power to wholesale
and retail customers; and

     WHEREAS, Michigan Transco is in the business of providing transmission
services under its Open Access Transmission Tariff on file with the Commission
and is obligated to provide or offer certain Ancillary Services within its
Transmission Service Area; and

     WHEREAS, the Parties have entered into an Operating Agreement, dated as of
April 1, 2001, as amended and restated, (herein referred to as the "Operating
Agreement") that defines the operating responsibilities of Michigan Transco over
its transmission system and the obligations, rights and responsibilities of
Consumers to provide electric capacity and energy as Ancillary Services and to
operate its Generation Resources in a manner that will not unduly interfere with
the provision of transmission services by Michigan Transco; and

     WHEREAS, the Parties have entered into a Network Operating Agreement, dated
as of April 1, 2001, as amended and restated, that governs Transmission
Provider's provision of Network Integration Transmission Service to Consumers as
a Network Customer under the Tariff, and

     WHEREAS, the Parties have entered into a Generator Interconnection
Agreement, dated as of April 1, 2001, as amended and restated, that describes
the general facilities and associated appurtenances that electrically connect
the Generation Resources to the transmission system, establishes the ownership
interests of the Parties in such facilities and establishes the respective
obligations and rights of the Parties with respect to the operating and
maintenance of such facilities; and

     WHEREAS, during the term of this Agreement, Michigan Transco desires to
purchase and Consumers desires to sell capacity and energy and Reactive Power to
at

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 5
Rate Schedule No. 116
EXECUTION COPY

least partially meet the Tariff obligations of Michigan Transco for provision of
Ancillary Services; and

     WHEREAS, under the Transmission Service Agreement between the Parties,
Consumers has elected to self-supply the optional Ancillary Services under the
Tariff to its native load customers.

     NOW THERFORE, in consideration of the covenants and mutual agreements
contained herein, Consumers and Michigan Transco agree as follows:

                                    ARTICLE 1
                                   Definitions

1.1 Ancillary Services

     Services identified by the Commission, as set forth in Section 3.3 below,
which Michigan Transco must include in its Tariff.

1.2 Commission

     The Federal Energy Regulatory Commission, or any successor regulatory
agency of the federal government of the United States of America.

1.3 Consumers' Resources

     Capacity and associated energy supplied from generation facilities owned
and/or operated by Consumers or from purchased power.

1.4 ECAR

     The East Central Area Reliability council, its successors and assigns.

1.5 Firm Service

     Service that is interrupted only to maintain the reliability of the
generation and transmission systems.

1.6 Good Utility Practice

     Any of the practices, methods and acts engaged in or approved by a
significant portion of the electric utility industry with respect to similar
facilities during the relevant time period which, in each case, in the exercise
of reasonable judgement in light of the facts known or that should have been
known at the time the decision was made, could have been expected to accomplish
the desired result at a reasonable cost consistent with good business practices,
reliability, safety, law, regulation, environmental protection and expedition.
Good Utility Practice is not intended to be limited to the optimal practices,
methods or acts to the exclusion of all others, but rather to delineate the
acceptable practices, methods or acts generally accepted in such industry.

1.7 NERC

     The North American Electric Reliability Council, its successors and
assigns.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 6
Rate Schedule No. 116
EXECUTION COPY

1.8 Point of Receipt

     The point at which capacity and energy is provided by Consumers to Michigan
Transco.

1.9 Reserved Capacity

     The maximum amount of capacity and energy that Consumers provides to
Michigan Transco during any specified period as Ancillary Services under Part II
of the Tariff. Reserved Capacity shall be expressed in terms to whole megawatts
on a sixty (60) minute interval (commencing on the clock hour) basis.

1.10 Resources

     Consumers' Generation committed or procured by Consumers to provide service
under this Agreement.

1.11 System Operator

     A generic term used to describe the individuals responsible for the
integrity or the operational control of Michigan Transco's transmission system,
and any successor thereto.

1.12 Tariff

     Either (a) the Open Access Transmission Tariff (OATT) of Michigan Transco
filed with the Commission on November 13, 2000, or (b) the Joint Open Access
Transmission Tariff (JOATT) filed by Michigan Transco and ITC with the
Commission on February 22, 2001 as they may subsequently be modified or
supplemented and accepted for filing by the Commission, or any superseding
tariff.

1.13 Third Party

     Parties other than Consumers or Michigan Transco.

1.14 Transmission Service Area

     The geographic region in which Michigan Transco operates transmission
facilities and provides transmission service as of the effective date of this
Agreement.

1.15 Transaction

     A particular purchase by Michigan Transco or sale by Consumers of capacity
and/or energy and/or reactive power to be performed under this Agreement, as
evidenced by the agreement of the Parties.

                                    ARTICLE 2
                                 Effective Date

     This Agreement shall become effective on May 1, 2002, or the date the
Michigan Transco begins operation under its filed Tariff, whichever date occurs
later, or such other date as is required by regulatory authority having
jurisdiction over this Agreement.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 7
Rate Schedule No. 116
EXECUTION COPY

                                    ARTICLE 3
                    Capacity, Energy and Reactive Power Sale
                        By Consumers to Michigan Transco

3.1 Consumers' Responsibilities

     (a)  During the term of this Agreement, Consumers shall provide capacity,
          energy and reactive power needed by Michigan Transco for Ancillary
          Services in amounts set forth in this Article 3. Capacity, energy and
          reactive power shall be supplied from one or more Resources as Firm
          Service. The quantities to be supplied shall be as specified in the
          pertinent forecasts or actual use for each type of service, as
          outlined in Article 6 and Appendix A hereof. Notwithstanding Ancillary
          Service obligations that Michigan Transco may enter into associated
          with Transmission Service Agreements that have a term that is longer
          than the term of this Agreement, Consumers shall not be obligated to
          provide Michigan Transco with Ancillary Services after this Agreement
          is terminated.

     (b)  Michigan Transco and Consumers agree that dispatch and scheduling
          decisions with respect to Consumers' Resources shall be as set forth
          in Section 4.6 of the Operating Agreement between the Parties.

     (c)  Subject to Consumers' obligation to supply capacity, energy and
          reactive power under this Agreement, Consumers may, under an
          applicable tariff, sell capacity and/or energy and reactive power to
          any other entity that is eligible to make purchases under such
          tariffs. Consumers is not obligated to curtail any previously
          committed sales from Consumers' Generation to provide service
          hereunder beyond the obligations set forth in Section 3.3.

     (d)  The energy delivered hereunder shall be of the character commonly
          known as three-phase, 60 Hertz (60 Hz) energy at a voltage, or
          voltages, mutually agreed upon by the Parties.

     (e)  Consumers shall continue the present practice of providing overlap
          regulation services for Michigan Transco's Transmission Service Area.

     (f)  Consumers shall cooperate with Michigan Transco in establishing
          billing practices and information transfer protocols to process and
          bill transactions under this Agreement.

3.2 Michigan Transco's Responsibilities

     (a)  Michigan Transco shall purchase from Consumers capacity, energy and
          reactive power in order to provide pertinent Ancillary Services in
          addition to transmission services pursuant to its Tariff. Nothing in
          this Agreement shall be construed to preclude Michigan Transco from
          procuring capacity, energy and/or reactive power from Third Party
          suppliers when available.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 8
Rate Schedule No. 116
EXECUTION COPY

     (b)  Michigan Transco will use services provided hereunder solely in order
          to meet its obligations under its Tariff, local, regional and national
          reliability requirements and its operating practice requirements.

     (c)  Michigan Transco shall provide Consumers with timely notification of
          forecasted requirements for Ancillary Services pursuant to Article 6
          hereof so that Consumers can plan its supply of such services.

     (d)  Michigan Transco will provide Consumers with necessary real-time and
          historic information for Consumers to forecast and identify its
          obligations under this Agreement.

     (e)  At Consumers' request, Michigan Transco will provide to Consumers the
          information Consumers may need to reassess the rates stated in Article
          5 hereof.

3.3 Ancillary Services

     The following Ancillary Services may be purchased by Michigan Transco at
quantities specified in the forecasts for same as outlined in Article 6 and
Appendix A hereof.

     (a)  Reactive Supply and Voltage Control from Generation Sources Service

          Michigan Transco will control transmission voltages on the Michigan
          Transco transmission facilities. Michigan Transco shall establish
          voltage schedules or reactive power schedules for each Resource,
          within its established capabilities, to maintain voltage levels in the
          Michigan Transco Transmission Service Area within stability limits
          that are generally accepted in the region and consistently adhered to
          by Michigan Transco. Michigan Transco shall provide to Consumers a
          daily forecast of reactive power requirements, and updates as needed
          the day ahead and throughout the day being forecasted, as an
          operational guide as outlined in Article 6 and Appendix A hereof.
          Within the limitations specified below, Consumers shall provide
          reactive power daily from operating Resources in a manner that will
          produce or absorb reactive power in amounts and over periods of time
          as needed by Michigan Transco. Under Michigan Transco's direction,
          Consumers may (i) vary the reactive power from its generating units in
          operation at the time or (ii) remove units from operation or place
          units in operation at its earliest convenience in a manner consistent
          with Good Utility Practice to allow for the delivery, absorption or
          redistribution among local units of reactive power; however, the
          removal of units from operation or the placing of units in operation
          shall be classified as a request for redispatch pursuant to Section 2
          of the Network Operating Agreement between the Parties and compensated
          pursuant to said Network Operating Agreement. Consumers will not be
          obligated to provide reactive power when, in its sole judgement, to do
          so would damage or otherwise adversely affect the reliability of its
          Generation Resources.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 9
Rate Schedule No. 116
EXECUTION COPY

     (b)  Regulation and Frequency Response Service

          Michigan Transco shall provide to Consumers, on a daily basis, a
          forecast (updated throughout the day, as necessary) of Regulation and
          Frequency Response Service which it is purchasing from Consumers, as
          outlined in Article 6 and Appendix A hereof.

     (c)  Energy Imbalance Service, Delivery Scheduling and Balancing Service
          and Generator Supply Imbalance Service

          Because Consumers will provide overlap regulation services to the
          Michigan Transco area, Michigan Transco will automatically be supplied
          with energy needed to maintain the balance between (i) real-time
          generation made available to Michigan Transco and (ii) the actual load
          in the Michigan Transco Transmission Service Area. In addition,
          Consumers will provide energy up to the daily operating reserve
          capacity defined in Sections 3.3(b), 3.3(d) and 3.3(e) to support
          Michigan Transco's obligations, including but not limited to
          contributions to frequency control and area control error. Michigan
          Transco shall provide to Consumers, on a daily basis, a forecast
          (updated throughout the day, as necessary) of energy Michigan Transco
          will purchase to maintain these obligations, as outlined in Article 6
          and Appendix A hereof. Consumers shall attempt at all times to provide
          this service from Consumers' Resources in a manner consistent with
          Good Utility Practice.

     (d)  Operating Reserve - Spinning Reserve Service

          Michigan Transco shall provide to Consumers, on a daily basis, a
          forecast (updated throughout the day, as necessary) of Spinning
          Reserve Service capacity which it is purchasing from Consumers, as
          outlined in Article 6 and Appendix A hereof.

     (e)  Operating Reserve - Supplemental Reserve Service

          Michigan Transco shall provide to Consumers, on a daily basis, a
          forecast (updated throughout the day, as necessary), of Supplemental
          Reserve Service capacity which it is purchasing from Consumers, as
          outlined in Article 6 and Appendix A hereof.

3.4 Changes in Responsibilities

     (a)  Mandated Changes

          In the event that a regulatory body having jurisdiction over the
          operations of Michigan Transco, or legislative action, either federal
          or state, or a regional or national reliability organization, alters,
          revises or otherwise restructures the electric utility industry such
          that Michigan Transco is no longer required to provide transmission
          and/or Ancillary Services, in whole or in part, then in such event,
          either Party may call for amendment to or termination of this
          Agreement as of the effective date of the relevant regulatory
          decision.

     (b)  Notice of Changes

          Michigan Transco agrees to provide Consumers reasonable notice of all
          forecasts and forecast revisions outlined in Article 6 and Appendix A
          hereof.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 10
Rate Schedule No. 116
EXECUTION COPY

                                    ARTICLE 4
                               Service Conditions

4.1 Maintenance and Operation

     The Parties shall maintain and operate their respective facilities in
accordance with Good Utility Practice in such a manner to minimize the
likelihood of disturbance. The Parties shall not be responsible to each other
for any damage or loss of revenue caused by any interruption that is not caused
by procedures within the responsible Party's control. Neither Party shall make
changes to equipment configurations which materially modify arrangements or
connections of equipment or computer systems related to the generation or
transmission systems, as the same existed prior to the effective date of this
Agreement, without giving advance notice to the other Party.

4.2 Service Interruptions to Maintain Reliability

     Any service being provided under this Agreement may be interrupted or
reduced: (a) by operation of automatic equipment installed for power system
protection, (b) after adequate notice to and consultation between the Parties
for installation, maintenance, inspection, repair or replacement of equipment,
or (c) when such interruption or reduction is necessary to preserve the
integrity of, to prevent or limit any instability on, or to avoid a burden on
the systems of the Parties. However, Consumers and Michigan Transco shall
exercise reasonable care to maintain the continuity and quality of all service
provided under this Agreement and to minimize the length and effects of any
interruption or disruption of service.

                                    ARTICLE 5
                                  Compensation

5.1 Payments to Consumers

     Michigan Transco agrees to pay for services provided hereunder as follows:

     (a)  Reactive Supply and Voltage Control from Generation Sources Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereto. Michigan Transco will pay Consumers a
          proportional amount of revenues received from its transmission
          customers each month. The proportion will be determined in accordance
          with Consumers' and Third Parties' supply of this service to Michigan
          Transco.

     (b)  Regulation and Frequency Response Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereto.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 11
Rate Schedule No. 116
EXECUTION COPY

     (c)  Energy Imbalance Service

          In the event that Michigan Transco determines that (i) the actual
          deliveries of electricity to a Third Party load located in its
          Transmission Service Area in any hour were less than the amounts
          scheduled for that hour and (ii) Consumers' Generation supplied said
          deficient energy, Michigan Transco agrees to pay Consumers for
          provision of this Energy Imbalance Service as rendered under this
          Agreement at the rates specified in Appendix B hereto.

     (d)  Delivery Scheduling and Balancing Service

          In the event that Michigan Transco determines that (i) the actual
          deliveries of electricity on behalf of a Third Party transmission
          customer in any hour were less than the amounts scheduled for that
          hour and (ii) Consumers' Generation supplied said deficient energy,
          Michigan Transco agrees to pay Consumers for provision of this
          Delivery Scheduling and Balancing Service as rendered under this
          Agreement at the rates specified in Appendix B hereof.

     (e)  Generator Supply Imbalances

          In the event that Michigan Transco determines that (i) the actual
          deliveries of electricity to it from a Third Party generator located
          in Michigan Transco's Transmission Service Area on behalf of a
          transmission customer in any hour were less than the amounts scheduled
          for that hour and (ii) Consumers' Generation supplied said deficient
          energy, Michigan Transco agrees to pay Consumers for provision of this
          Generator Supply Imbalance Service as rendered under this Agreement at
          the rates specified in Appendix B hereof.

     (f)  Operating Reserve - Spinning Reserve Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereof.

     (g)  Operating Reserve - Supplemental Reserve Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereof.

5.2 Payments to Michigan Transco

     Consumers agrees to pay Michigan Transco for imbalance-related energy it
receives hereunder as follows:

     (a)  Energy Imbalance Service

          Pursuant to Schedule 4 of Michigan Transco's Tariff, no payments are
          currently applicable.

     (b)  Delivery Scheduling and Balancing Service

          In the event that Michigan Transco determines that the actual
          deliveries of electricity to it on behalf of Third Party transmission
          customers in any hour

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]
<PAGE>

Consumers Energy Company                                   Original Sheet No. 12
Rate Schedule No. 116
EXECUTION COPY

          exceeded the amounts scheduled to be delivered to said customers in
          that hour, Consumers shall pay Michigan Transco a price equal to 90%
          of Consumers' cost of energy for the difference between the Third
          Party transmission customers' scheduled deliveries and actual
          deliveries in that hour.

     (c)  Generator Supply Imbalances

          In the event that Michigan Transco determines that the actual
          deliveries of electricity to it on behalf of Third Party transmission
          customers from Third Party generators located in Michigan Transco's
          Transmission Service Area in any hour exceeded the amounts scheduled
          for that hour, Consumers shall pay Michigan Transco a price equal to
          90% of Consumers' cost of energy for the difference between the Third
          Party transmission customers' scheduled deliveries and actual
          deliveries in that hour.

5.3 Applicable Tariff Rates

     Consumers and Michigan Transco recognize that the rates, terms and
conditions contained in the currently effective Michigan Transco Tariff and
Appendix B hereto were filed, and are under review by the Commission, in Docket
No OA96-77-000. If an unappealable Commission Order relating to that Docket
changes rates, terms and/or conditions for a period during which services had
been provided and invoices rendered under this Agreement at the originally filed
rates, terms and conditions, then adjustments will be made to those invoices
accordingly and this Agreement will be revised to reflect the new rates.

                                    ARTICLE 6
                 Forecasted Requirement for Generation Services

     Michigan Transco shall provide timely updates of forecasts, and commitments
as they become known, of the total amount of capacity and energy needed for each
Ancillary Service, as described in Section 3.3 hereof, to be purchased by
Michigan Transco for its use in the Michigan Transco Transmission Service Area.
Forecast procedures are set forth in Appendix A.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 13
Rate Schedule No. 116
EXECUTION COPY

                                    ARTICLE 7
                         Priority and Nature of Service

7.1 Nature of Service

     Consumers agrees to provide capacity, energy and reactive power subject
only to interruption for reasons of maintaining the reliability of the
generation and transmission systems. 7.2 Use of Power

     Capacity, energy and reactive power provided by Consumers hereunder shall
serve the specific defined purposes set forth herein. Such purposes shall not be
modified without the express written consent of Consumers.

                                    ARTICLE 8
                              Conditions Precedent

     The Parties' rights and obligations under this Agreement are contingent
upon acceptance for filing by the Commission of this Agreement and the Tariff
without modification or in a modified form that is acceptable to the Parties.

                                    ARTICLE 9
                               Operating Committee

9.1 Creation of the Operating Committee

     Pursuant to Section 6.4.3 of the Operating Agreement, an Operating
     Committee shall be established to carry out and coordinate the provisions
     of this Agreement. Said Operating Committee shall consist of one
     representative from each Party, as designated in writing from time to time.
     Either Party may change its designated representative by notifying the
     other Party in writing.

9.2 Duties

     With respect to this Agreement, the Operating Committee shall have the
     following duties:

     (a)  Consideration of any matters in connection with the administration of
          this Agreement as may, from time to time, arise.

     (b)  Develop operating procedures and practices needed in the conduct of
          business under this Agreement.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 14
Rate Schedule No. 116
EXECUTION COPY

     (c)  Oversee the invoices rendered for services provided pursuant to this
          Agreement.

     (d)  Provide coordination of other matters not specifically provided for
          herein which the Parties agree are necessary. 9.3 Committee Expenses

     Each Party shall be responsible for the expenses of its representative
serving on the Operating Committee.

                                   ARTICLE 10
                             Exchange of Information

10.1 Data to be Furnished

     The Parties shall furnish such data to each other as may reasonably be
required to provide service hereunder.

10.2 Records and Accounts

     All records and accounts pertaining to services hereunder shall be
available to either Party for audit and review at all reasonable times.

                                   ARTICLE 11
                                  Settlements

11.1 Accounting Period

     The accounting period for transactions hereunder shall be a calendar month,
unless otherwise specified by the Operating Committee.

11.2 Invoicing

     Within a reasonable time after the first day of each month, invoices for
amounts payable for services performed by either Party during the previous month
shall be prepared and delivered. Each invoice shall be paid by the Party
obligated to pay so that the other Party will receive the funds by the 20th day
following the date of the invoice, or the first business day thereafter if the
payment date falls on other than a business day. 11.3 Payments

     (a)  All payments to Consumers shall be made payable to Consumers Energy
          Company, and shall be sent to Consumers Energy Company, Attention:

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 15
Rate Schedule No. 116
EXECUTION COPY

          Treasurer, 212 West Michigan Avenue, Jackson, MI 49201, or by wire
          transfer to a bank designated by Consumers.

     (b)  All payments to Michigan Transco shall be payable to Michigan Electric
          Transmission Company, and shall be sent to Michigan Electric
          Transmission Company, Attention: Executive Vice President and Chief
          Operating Officer, 540 Avis Drive, Suite H, Ann Arbor MI 48108, or by
          wire transfer to a bank designated by Michigan Transco.

     Each Party may change the name and address of its contact person by giving
     the other Party written notice of the change.

11.4 Interest Charges

     Any payment not made on or before the due date shall bear interest, from
the date due until the date upon which payment is made, at an annual percentage
rate of interest equal to the lesser of a) the prime rate published by the Wall
Street Journal (which represents the base rate on corporate loans posted by at
least 75% of the nation's banks) on the date due, plus 2%, or b) the highest
rate permitted by law.

11.5 Disputed Invoices

          In the event a portion of any invoice is in dispute, the undisputed
amount shall be paid when due, and the disputed portion of the invoice shall be
paid promptly after the Parties have determined the correct amount. Said correct
amount shall include interest charges calculated from the date the disputed
amount was originally due until the date upon which payment is made.

                                   ARTICLE 12
                                   Indemnity

     Each Party shall at all times assume all liability for, and shall indemnify
and save the other Party harmless from any and all damages, losses, claims,
demands, suits, recoveries, costs, legal fees, expenses for injury to or death
of any person or persons whomsoever, or for any loss, destruction of or damage
to any property of third persons, firms, corporations or other entities that
occurs on its own system and that arises out of or results from, either directly
or indirectly, its own facilities or facilities controlled by it, unless caused
by the sole negligence, or intentional wrongdoing, of the other Party.

                                   ARTICLE 13
                              Regulatory Authority

13.1 This Agreement is made subject to any governmental authority or authorities
having jurisdiction in the premises. Nothing contained in this Agreement shall
be construed as affecting in any way the right of the party furnishing service
hereunder to unilaterally make application to the Commission for a change in
rates, charges, classification, conditions or

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 16
Rate Schedule No. 116
EXECUTION COPY

service, or any rule, regulation or contract relating thereto, under Section 205
of the Federal Power Act and pursuant to the Commission's Rules and Regulations
promulgated thereunder or under comparable statutes and regulations of a
successor agency or department.

                                   ARTICLE 14
                                      Term

14.1 Initial Term

     This Agreement shall become effective on the effective date set forth in
Article 2 and shall continue in effect for one calendar year (the Initial Term),
subject to the provisions of Section 3.4 above, unless terminated pursuant to
Section 14.2 below. Upon completion of the Initial Term, this Agreement shall
automatically renew each year for successive one-year periods, unless terminated
pursuant to Section 14.2 below.

14.2 Termination

     Either Party may terminate this Agreement as to itself at any time after
the conclusion of the Initial Term upon giving the other Party six (6) month's
prior written notice. However, any termination under this Section 14.2 will not
prevent the continued application of settlement and other provisions of this
Agreement where necessary to resolve outstanding matters related to services
already provided under the Agreement. This Agreement is subject to termination
or modification to the extent that performance hereunder may conflict with any
applicable provision of law or with any rule, regulation or order of any
regulatory agency having jurisdiction, whether adopted before or after the
making of this Agreement.

                                   ARTICLE 15
                               Breach and Default

15.1 General

     A breach of this Agreement ("Breach") shall occur upon the failure by a
Party to perform or observe any material term or condition of this Agreement.
Default of this Agreement ("Default") shall occur upon the failure of a Party in
Breach of this Agreement to cure such Breach in accordance with the provisions
of Section 15.3 of this Agreement.

15.2 Events of Breach

     A Breach of this Agreement shall include:

     (a)  The failure to pay any amount when due;

     (b)  The failure to comply with any material term or condition of this
          Agreement, including but not limited to any material Breach of a
          representation, warranty or covenant made in this Agreement;

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 17
Rate Schedule No. 116
EXECUTION COPY

     (c)  If a Party: (a) becomes insolvent; (b) files a voluntary petition in
          bankruptcy under any provision of any federal or state bankruptcy law
          or shall consent to the filing of any bankruptcy or reorganization
          petition against it under any similar law; (c) makes a general
          assignment for the benefit of its creditors or (d) consents to the
          appointment of a receiver, trustee or liquidator;

     (d)  Assignment of this Agreement in a manner inconsistent with the terms
          of this Agreement;

     (e)  Failure of either Party to provide such access rights, or a Party's
          attempt to revoke or terminate such access rights, as provided under
          this Agreement; or

     (f)  Failure of either Party to provide information or data to the other
          Party as required under this Agreement, provided the Party entitled to
          the information or data under this Agreement requires such information
          or data to satisfy its obligations under this Agreement.

15.3 Cure and Default

     Upon the occurrence of an event of Breach, the Party not in Breach
(hereinafter the "Non-Breaching Party"), when it becomes aware of the Breach,
shall give written notice of the Breach to the Breaching Party and to any other
person a Party to this Agreement identifies in writing to the other Party in
advance. Such notice shall set forth, in reasonable detail, the nature of the
Breach, and where known and applicable, the steps necessary to cure such Breach.
Upon receiving written notice of the Breach hereunder, the Breaching Party shall
have thirty (30) days to cure such Breach. If the Breach is such that it cannot
be cured within thirty (30) days, the Breaching Party will commence in good
faith all steps as are reasonable and appropriate to cure the Breach within such
thirty (30) day time period and thereafter diligently pursue such action to
completion. In the event the Breaching Party fails to cure the Breach, or to
commence reasonable and appropriate steps to cure the Breach, within thirty (30)
days of becoming aware of the Breach; the Breaching Party will be in Default of
the Agreement.

15.4 Right to Compel Performance

     Notwithstanding the foregoing, upon the occurrence of an event of Default,
the non-Defaulting Party shall be entitled to: (a) commence an action to require
the Defaulting Party to remedy such Default and specifically perform its duties
and obligations hereunder in accordance with the terms and conditions hereof and
(b) exercise such other rights and remedies as it may have in equity or at law
including commencing of an action to terminate this Agreement per Section 15.2
of this Agreement.

                                   ARTICLE 16
                             Successors and Assigns

          16.1 This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Parties hereto. This Agreement shall not be
transferred or otherwise alienated by either Party without the other Party's
prior written consent, which consent shall not unreasonably be withheld,
provided that any assignee shall expressly

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 18
Rate Schedule No. 116
EXECUTION COPY

assume assignor's obligations hereunder and, unless expressly agreed to by the
other Party, no assignment shall relieve the assignor of its obligations
hereunder in the event its assignee fails to perform. Any attempted assignment,
transfer or other alienation without such consent shall be void and not merely
voidable.

          16.2 Notwithstanding the above, the Michigan Transco shall be
permitted to assign or otherwise transfer this Agreement, or its rights, duties
and obligations hereunder, in whole or in part, by operation of law or
otherwise, without the prior written consent of Consumers, to (a) any Regional
Transmission Organization or Independent Transmission Company or (b) any
successor to or transferee of the direct or indirect ownership or operation of
all or part of the transmission system to which the Facility is to be connected.
Upon the assumption by any such permitted assignee of the assigning Michigan
Transco's rights, duties and obligations hereunder, the assigning Michigan
Transco shall be released and discharged therefrom to the extent provided in the
assignment agreement.

                                   ARTICLE 17
                          Dispute Resolution Procedures

     The Dispute Resolution Procedures set forth in Michigan Transco's Tariff
shall apply to all disputes arising under this Agreement. Under said Dispute
Resolution Procedures, the Transmission Provider shall be Michigan Transco, the
Transmission Customer shall be Consumers and the Tariff shall mean this
Agreement.

                                   ARTICLE 18
                                  Force Majeure

18.1 An event of Force Majeure means any act of God, labor disturbance, act of
the public enemy, war, insurrection, riot, fire, storm or flood, explosion,
breakage or accident to machinery or equipment, any curtailment, order,
regulation or restriction imposed by governmental military or lawfully
established civilian authorities, or any other cause beyond a Party's reasonable
control. A Force Majeure event does not include an act of negligence or
intentional wrongdoing by a Party.

18.2 If either Party is rendered unable, wholly or in part, by Force Majeure, to
carry out its obligations under this Agreement, then, during the continuance of
such inability, the obligation of such Party shall be suspended except that the
obligation to provide protection while operating in parallel shall not be
suspended. The Party relying on Force Majeure shall give written notice of Force
Majeure to the other Party as soon as practicable after such event occurs. Upon
the conclusion of Force Majeure, the Party heretofore relying on Force Majeure
shall, with all reasonable dispatch, take all necessary steps to resume the
obligation previously suspended.

18.3 Any Party's obligation to make payments already owing shall not be
suspended by Force Majeure.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 19
Rate Schedule No. 116
EXECUTION COPY

                                   ARTICLE 19
                                     General

19.1 Authority

     Each Party hereto represents to the other that this Agreement, the
transactions contemplated herein and the execution and delivery of the Agreement
have been duly authorized by all necessary corporate actions, including without
limitation, required action on the part of the officers and agents of the
representing Party and this Agreement, when executed and delivered, shall be
valid and binding on it.

19.2 Waivers

     Any waiver at any time of any rights as to any default hereunder or any
other matter arising hereunder shall not be deemed a waiver as to any subsequent
default or matter.

19.3 Governing Law

This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Michigan, exclusive of its conflict of laws principles.

19.4 Headings

     The headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.

19.5 Notices

     Unless otherwise specifically provided for in this Agreement, any written
notice or other communication shall be deemed to be given and received on the
date when such notice or communication is given by facsimile or e-mail, and
confirmed as received by the other Party, or the date received if given by
registered or certified mail, postage prepaid, addressed to:

For Consumers:

Consumers Energy Company
1945 West Parnall Road
Jackson, Michigan  49201-8658
Attention: Director of Transaction Strategies

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>
Consumers Energy Company                                   Original Sheet No. 20
Rate Schedule No. 116
EXECUTION COPY

For Michigan Transco:

Michigan Electric Transmission Company
540 Avis Drive, Suite H
Ann Arbor, MI 48108
Attention: Executive Vice President and Chief Operating Officer

Each Party may change the name and address of its contact person by giving the
other Party written notice of the change.

19.6 Entirety

     This Agreement, the appendices hereto and Tariff of Michigan Transco
constitute the entire agreement between the Parties hereto. The execution of
this Agreement supersedes all previous agreements, discussions, communications
and correspondence between the Parties with respect to said subject matter.

19.7 Severability

     Except as otherwise stated herein, any provision, Article or Section
declared or rendered unlawful by a court of law or regulatory agency with
jurisdiction over this Agreement, or deemed unlawful because of statutory change
will not otherwise affect the lawful obligations that arise under this
Agreement.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers.

                                        CONSUMERS ENERGY COMPANY


                                        By /s/ John Russell
                                           -------------------------------------
                                        Title: President
                                               ---------------------------------
                                        Date:  May 1, 2002
                                              ----------------------------------


                                        MICHIGAN ELECTRIC TRANSMISSION COMPANY


                                        By: /s/ Dennis DaPra
                                            ------------------------------------
                                        Title: Vice President
                                               ---------------------------------
                                        Date:  May 1, 2002
                                              ----------------------------------

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 21
Rate Schedule No. 116
EXECUTION COPY

                                   APPENDIX A

                               Forecast Procedures

1.   Michigan Transco will determine the amount of Ancillary Services that
     Consumers will need to supply to Michigan Transco for Third Party
     Regulation and Frequency Response Service, Spinning Reserve Service and
     Supplemental Reserve Service. Michigan Transco's forecasts of the need for
     such services shall be made available by 0800 of the preceding business
     day. Reactive Supply and Voltage Control from Generation Sources Service
     will be supplied by Consumer as described in paragraph 2(a) below.
     Consumers' provision of Energy Imbalance Service, Delivery Scheduling and
     Balancing Service and Generator Supply Imbalance Service will be determined
     by Consumers and Michigan Transco as described in paragraph 2(b) below.

2.   The amount of each Ancillary Service, described in Section 3.3 of this
     Agreement, that Consumers must provide to Michigan Transco will be
     determined as follows:

     (a)  Reactive Supply and Voltage Control from Generation Sources Service

          All Consumers' generation sources will be operated to support Michigan
          Transco's transmission system facilities voltage profile by regulating
          their respective reactive power output within established limits.

          (i)  Michigan Transco will be responsible for monitoring overall
               transmission system conditions and Consumers will take corrective
               action that is requested by Michigan Transco's System Operator.

          (ii) The applicable automatic voltage regulation mechanisms for
               pertinent Consumers' generation sources must be in service when
               those generation sources are on line, except when Consumers takes
               certain corrective action, as requested by the Michigan Transco
               System Operator. In the event any voltage regulation mechanism on
               a generation source of Consumers is out of service or operating
               improperly, Consumers will notify the Michigan Transco System
               Operator immediately.

          (iii) Consumers will maintain is speed governor settings as close as
               practical to a five percent (5%) speed regulation.

     (b)  Energy Imbalance Services

          Michigan Transco will send to Consumers one total value for the hourly
          day ahead energy imbalance forecast, the delivery scheduling and
          balancing forecast and the generator supply imbalance forecast. This
          day ahead forecasted imbalance schedule will supply Consumers with the
          projected needs of this service for use in their daily planning
          process. On the same day, Michigan Transco will provide Consumers with
          updates to the previous day's hourly imbalance forecast as well as
          real-time information relating to such service.

<PAGE>

Consumers Energy Company                                   Original Sheet No. 22
Rate Schedule No. 116
EXECUTION COPY

                                   APPENDIX B

                             Ancillary Service Rates

     As of the effective date of this Agreement, Consumers shall use the
following rates when providing Ancillary Services to Michigan Transco:

Reactive Supply and Voltage Control from Generation Sources Service

For supply to Third Party transmission customers under Part II of the Tariff.

     $0.21 per kW per month of Reserved Capacity.
     $0.049 per kW per week of Reserved Capacity.
     $0.0099 per kW per day of Reserved Capacity.
     $0.00062 per kW per hour of Reserved Capacity.

     The total demand charge in any week, pursuant to a request for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a request for hourly delivery, shall
not exceed the rate specified above times the highest amount in kilowatts of
Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$14,789,000 divided by 12.

Regulation and Frequency Response Service

For supply to Third Party transmission customers under Part II of the Tariff.

      $0.17 per kW per month of Reserved Capacity.
      $0.040 per kW per week of Reserved Capacity.
      $0.0080 per kW per day of Reserved Capacity.
      $0.00050 per kW per hour of Reserved Capacity.

     The total demand charge in any week, pursuant to a request for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a request for hourly delivery, shall
not exceed the rate specified above times the highest amount in kilowatts of
Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$11,913,000 divided by 12.

<PAGE>

Consumers Energy Company                                   Original Sheet No. 23
Rate Schedule No. 116
EXECUTION COPY

Energy Imbalance Service

Energy Imbalances less than or equal to the deviation band

     Any energy imbalances not paid back in-kind by the end of a monthly period
shall be paid for in a cash settlement. Cash settlements will be charged as set
forth below:

     On-Peak Imbalance    The greater of:

                          a) The actual replacement cost plus $0.01 per kWh, or

                          b) $0.10 per kWh

     Off-Peak Imbalance   The greater of:

                          a) The actual replacement cost plus $0.01 per kWh, or

                          b) $0.05 per kWh

Energy imbalances that are greater than the deviation band

     Demand Charge   $50 per kW, applied to the highest "Unauthorized Use"
                     demand incurred during the month.

     Energy Charge   $0.05 per kWh or the cost of replacement energy plus $0.01
                     per kWh, whichever is greater.

Delivery Scheduling and Balancing Service

     A price equal to 110% of Consumers' replacement cost of energy for the
difference between the transmission customer's scheduled deliveries and its
actual deliveries in the appropriate hour.

Generator Supply Imbalances

     A price equal to 110% of the greater of (a) Consumers' replacement cost of
energy or (b) the highest price at which Consumers sold energy during the
appropriate hour.

Operating Reserve - Spinning Reserve Service

For supply to Third Party transmission customers under Part II of the Tariff.

     $0.17 per kW per month of Reserved Capacity.
     $0.040 per kW per week of Reserved Capacity.
     $0.0080 per kW per day of Reserved Capacity.
     $0.00050 per kW per hour of Reserved Capacity.

<PAGE>

Consumers Energy Company                                   Original Sheet No. 24
Rate Schedule No. 116
EXECUTION COPY

     The total demand charge in any week, pursuant to a requested for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a requested for hourly delivery,
shall not exceed the rate specified above times the highest amount in kilowatts
of Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$11,913,000 divided by 12.

Operating Reserve - Supplemental Reserve Service

For supply to Third Party transmission customers under Part II of the Tariff.

     $0.35 per kW per month of Reserved Capacity.
     $0.080 per kW per week of Reserved Capacity.
     $0.016 per kW per day of Reserved Capacity.
     $0.0010 per kW per hour of Reserved Capacity.

     The total demand charge in any week, pursuant to a requested for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a requested for hourly delivery,
shall not exceed the rate specified above times the highest amount in kilowatts
of Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$23,826,000 divided by 12.