<PAGE>
                                                                    EXHIBIT 4.10


April 27, 2004


Special Situations Fund III, L.P.
Special Situations Cayman Fund, L.P.
Special Situations Private Equity Fund, L.P.
Special Situations Technology Fund, L.P.
Special Situations Technology Fund II, L.P.
153 East 53rd Street
55th Floor
New York, NY  10022

Attention: Stephen R. Becker

Dear Steve:

      As we have discussed, Metretek Technologies, Inc. (the "Company") is
currently contemplating the offering and sale of shares of its common stock, par
value $0.01 per share ("Common Stock"), and warrants to purchase shares of its
Common Stock (the "Investor Warrants") to one or more accredited investors (the
"2004 Offering"). In connection with the 2004 Offering, Special Situations Fund
III, L.P., Special Situations Cayman Fund, L.P., Special Situations Private
Equity Fund, L.P., Special Situations Technology Fund, L.P. and Special
Situations Technology Fund II, L.P. (each, a "Fund", and, collectively, the
"Funds") hereby agree to convert 1,000 of the shares (the "Excess Shares") of
the Company's Series B Preferred Stock, par value $0.01 per share (the "Series B
Preferred Stock"), held by them into shares of Common Stock effective as of the
closing date of the 2004 Offering (the "Closing Date") on the terms described
below.

      Each share of Series B Preferred Stock owned by the Funds would have an
accreted value (including accrued but unpaid dividends) (the "Per Share Accreted
Value") of $1,467.91 as of December 9, 2004 (the "Maturity Date"), and the
Excess Shares would have an aggregate accreted value of $1,467,910 as of the
Maturity Date. The Funds hereby irrevocably agree to convert on the Closing Date
the Excess Shares at the Per Share Accreted Value of such shares on the Closing
Date into newly issued, fully paid and non-assessable shares of Common Stock
(the "Conversion Shares") at a conversion price of $3.0571 per share. The
remainder of the shares of Series B Preferred Stock held by the Funds shall
remain outstanding and shall retain all of its existing rights, limitations and
preferences.

      In consideration of the conversion of the Excess Shares by the Funds, the
Company shall issue to the Funds not later than the Closing Date an additional
number of shares of Common Stock equal to the quotient obtained by dividing (x)
the difference between (A) the Per Share Accreted Value of the Excess Shares as
of the Maturity Date and (B) the Per Share Accreted Value of the Excess Shares
as of the Closing Date, by (y) $3.0571 (the "Additional Shares"). Accordingly,
upon conversion of the Excess Shares, the Company shall issue to the Funds an
aggregate of 480,164 share of Common Stock, constituting both the Conversion
Shares and the Additional Shares (i.e. $1,467,910 divided by $3.0571).

      As additional consideration for the conversion of the Excess Shares by the
Funds, the Company shall issue to the Funds not later than the Closing Date
warrants to purchase an aggregate of 480,164 shares of Common Stock, subject to
adjustment in certain circumstances (the "Warrant Shares"), at an exercise price
of $3.0571 per share, subject to customary adjustments in certain circumstances
(the "New Warrants"). The New Warrants shall be exercisable commencing on the
Closing Date through, and shall expire after the close of business on, June 9,
2005 and shall otherwise have the same terms and conditions as the Investor
Warrants issued in the 2004 Offering, except as described below. The Funds shall
be entitled to the same registration rights with respect to the Warrant Shares
<PAGE>
and the Additional Shares as any investor has with respect to any shares of
Common Stock issued or issuable pursuant to the 2004 Offering (the "Offering
Shares"). In the event that the registration statement covering the Offering
Shares, the Additional Shares and the Warrant Shares is not declared effective
on or prior to the effectiveness deadline specified in the registration rights
provisions of the 2004 Offering (the "Effectiveness Deadline"), in addition to
any other rights to which the Funds may be entitled, the expiration date of the
New Warrants shall be extended on a day-for-day basis for each day until the
registration statement is declared effective.

      The Funds also beneficially own warrants to purchase shares of Common
Stock originally issued by the Company to the Funds in February 2000 (the "2000
Warrants"). In the event that the issuance of the New Warrants to the Funds, or
the issuance of any similar warrants to purchase shares of Common Stock to other
holders of Series B Preferred Stock on or about the Closing Date with the same
exercise price, results in a reduction in the per share exercise price of the
2000 Warrants due to the anti-dilution adjustment provisions of the 2000
Warrants (the amount of such reduction in the per share exercise price, the
"Anti-Dilution Adjustment"), then the Funds agree, upon exercise of any 2000
Warrant, to pay to the Company a per share amount equal to the sum of (i) the
then-current per share exercise price of the 2000 Warrant, as payment for the
Common Stock issuable by the Company upon exercise thereof, and (ii) an amount
equal to the Anti-Dilution Adjustment, as partial reimbursement for the cost to
the Company of issuing the New Warrants to the Funds in connection with this
Agreement. Notwithstanding the provisions of this paragraph, the Company and the
Funds may agree to waive any Anti-Dilution Adjustment if they determine that
such waiver is in their respective best interests.

      The Series B Preferred Stock being converted by each Fund, and the number
of Conversion Shares and Warrants issuable to each Fund is set forth in Exhibit
A attached hereto.

      This Agreement shall be of no further force and effect if (i) the
effective price at which Common Stock is issued or deemed to be issued in the
2004 Offering (including shares issuable upon the exercise of the Investor
Warrants and/or other rights to acquire shares of Common Stock issued in the
2004 Offering) is less than $2.90 per share or (ii) the Closing Date does not
occur on or prior to May 31, 2004.

      The terms and conditions of this Agreement shall not be deemed to limit or
otherwise restrict the Funds' right to effect transactions in any securities of
the Company, including, without limitation, any shares of Series B Preferred
Stock held by the Funds or any shares of Common Stock, however acquired, or to
effect the conversion of any shares of Series B Preferred Stock otherwise than
as provided herein, except as specifically provided below.

      Each of the parties hereto hereby represents and warrants to the other
party hereto that this Agreement has been duly authorized executed and delivered
by it and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms. Further, the Company hereby represents
and warrants to the Funds that (a) the Company has full corporate power and
authority and has taken all requisite action on the part of the Company, its
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of this Agreement, the New Warrants and the registration
rights provisions of the 2004 Offering (the "Transaction Documents"), (ii)
authorization of the performance of all obligations of the Company hereunder or
thereunder, and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Conversion Shares, the Additional Shares, the New Warrants
and the Warrant Shares (collectively, the "Securities"); (b) the Transaction
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application; (c) the issuance and sale of
the Securities hereunder will not obligate the Company to issue shares of Common
Stock or other securities to any other person (other than the Funds) and will
not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security other than the Anti-Dilution Adjustment to the
2000 Warrants, including the 2000 Warrants held by persons other than the Funds;
(d) the Conversion Shares and the Additional Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Funds), except
for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws; (e) the Additional Shares and the New Warrants
have been duly and validly authorized; (f) upon their due
<PAGE>
issuance, the Additional Shares will be, and upon the due exercise of the New
Warrants the Warrant Shares will be, validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the Funds; (g) the
Company has reserved a sufficient number of shares of Common Stock for issuance
upon the issuance of the Additional Shares and upon the exercise of the New
Warrants, free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the Funds; (h) the
execution, delivery and performance by the Company of the Transaction Documents
and the offer, issuance and sale of the Securities require no consent of, action
by or in respect of, or filing with, any person, governmental body, agency, or
official other than filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable time
periods; (i) at or prior to the Closing Date, the Company shall have taken all
action necessary to exempt (i) the issuance and sale of the Conversion Shares,
(ii) the issuance of the Additional Shares and the issuance of the Warrant
Shares upon due exercise of the New Warrants, and (iii) the other transactions
contemplated by the Transaction Documents from the provisions of any shareholder
rights plan or other "poison pill" arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company or to which
the Company or any of its assets and properties may be subject and any provision
of the Company's Certificate of Incorporation or By-laws that is or could
reasonably be expected to become applicable to the Funds as a result of the
transactions contemplated hereby, including without limitation, the issuance of
the Securities and the ownership, disposition or voting of the Securities by the
Funds or the exercise of any right granted to the Funds pursuant to this
Agreement or the other Transaction Documents; (j) the execution, delivery and
performance of the Transaction Documents by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company's Certificate of Incorporation or the Company's Bylaws, both as in
effect on the date hereof (true and complete copies of which have been made
available to the Funds through the EDGAR system), or (ii)(a) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company, any subsidiary or any of their
respective assets or properties, or (b) any agreement or instrument to which the
Company or any subsidiary is a party or by which the Company or a subsidiary is
bound or to which any of their respective assets or properties is subject,
except such as would not, individually or in the aggregate, have or reasonably
be expected to result in a material adverse effect on the Company; and (k) in
connection with the 2004 Offering the Company has not and will not enter into
any agreement, arrangement, understanding or commitment with any other holder of
Series B Preferred Stock on terms and conditions more favorable to the holder
than those set forth herein. Moreover, each of the Funds hereby represents and
warrants to the Company that (a) the Fund has full partnership power and
authority and has taken all requisite action on the part of the Fund necessary
for (i) the authorization, execution and delivery of this Agreement, (ii) the
authorization of the performance of all obligations of the Fund hereunder, and
(iii) the conversion of the Excess Shares into the Conversion Shares; (b) this
Agreement constitutes the legal, valid and binding obligation of the Fund,
enforceable against the Fund in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application; (c) the execution, delivery
and performance by the Fund of this Agreement and the conversion of the Excess
Shares into the Conversion Shares by the Fund require no consent of, action by
or in respect of, or filing with, any person, governmental body, agency, or
official; (d) the execution, delivery and performance of this Agreement by the
Fund and the conversion of the Excess Shares into the Conversion Shares by the
Fund will not conflict with or result in a breach or violation of any of the
terms and provisions of, or constitute a default under (i) the Fund's
partnership agreement and/or other charter, governing and organizational
documents, as in effect on the date hereof, or (ii)(a) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Fund, or (b) any agreement or instrument
to which the Fund is a party or by which the Fund is bound, except such as would
not, individually or in the aggregate, have or reasonably be expected to result
in a material adverse effect on the Fund.
<PAGE>
      If the foregoing accurately reflects our agreement, please execute this
letter in the space provided below and return a copy to the undersigned. This
letter may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same instrument.
This letter shall be governed by, and construed in accordance with, the laws of
the State of New York, without regard to the choice of law principles thereof.

                                            METRETEK TECHNOLOGIES, INC.



                                            By: /s/ A. Bradley Gabbard
                                                ----------------------
                                            Name:   A. Bradley Gabbard
                                            Title:  Exec. V. P.


ACCEPTED AND AGREED:

Special Situations Fund III, L.P.
Special Situations Cayman Fund, L.P.
Special Situations Private Equity Fund, L.P.
Special Situations Technology Fund, L.P.
Special Situations Technology Fund II, L.P.


By: /s/ David Greenhouse
    --------------------
    Authorized Signatory
<PAGE>
                                                                       Exhibit A


<TABLE>
<CAPTION>
                                                                   Total Shares (includes
                                               Excess Shares       Conversion and
Name of Fund                                   Being Converted     Additional Shares)        New Warrants
<S>                                            <C>                 <C>                       <C>
Special Situations Fund III, L.P.                     413                    198,308            198,308
Special Situations Cayman Fund, L.P.                  137                     65,782             65,782
Special Situations Private Equity Fund, L.P.          251                    120,522            120,522
Special Situations Technology Fund, L.P.               32                     15,365             15,365
Special Situations Technology Fund, L.P.              167                     80,187             80,187
                                                    -----                    -------            -------
Totals                                              1,000                    480,164            480,164
                                                    =====                    =======            =======
</TABLE>