<PAGE>

                                                                    Exhibit 10e.

                                   CONTENTS
                                   --------

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Section 1.   Term of Employment............................................    1

Section 2.   Position and Responsibilities.................................    2

Section 3.   Standard of Care..............................................    2

Section 4.   Compensation..................................................    2

Section 5.   Expenses......................................................    4

Section 6.   Employment Terminations other than during the Change in
             Control Period................................................    4

Section 7.   Change in Control.............................................    8

Section 8.   Confidentiality...............................................   12

Section 9.   Indemnification...............................................   12

Section 10.  Outplacement Assistance.......................................   12

Section 11.  Assignment....................................................   12

Section 12.  Dispute Resolution and Notice.................................   13

Section 13.  Miscellaneous.................................................   13

Section 14.  Governing Law.................................................   14
</TABLE>
<PAGE>

Providence Energy Corporation
Amended and Restated Employment Agreement

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and James M. Stephens (hereinafter referred to as the "Executive").

WHEREAS, the Executive is presently employed by the Company in the capacity of
President, of Providence Energy Services, Inc., a wholly-owned subsidiary of the
Company ("PES");

WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel, and operations; and

WHEREAS, the Company recognizes that the Executive's contribution has been
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company; and

WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, and Executive is desirous of having such
assurance.

NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements of the parties set forth in this Agreement, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

Section 1.  Term of Employment

The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.

The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter.  However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.

In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration).  However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company. The
Company also shall provide to Executive all benefits to which the Executive has
a vested right to at that time including, but not limited to, the retirement
benefits described in
<PAGE>

Paragraph 4.4 herein. However, regardless of the above, if at any time during
the initial period of employment or any successive term, a Change in Control of
the Company (as defined in Section 7 herein) occurs, then the term of this
Agreement shall automatically become the longer of: (a) three (3) years beyond
the month in which the effective date of such Change in Control occurs; or (b)
until all obligations of the Company hereunder have been fulfilled including
without limitation provision of all benefits to be provided hereunder.

Section 2.  Position and Responsibilities

During the term of this Agreement, the Executive agrees to serve as President of
PES.  In his capacity as President, the Executive shall maintain the level of
duties and responsibilities as in effect as of the Effective Date, or such
higher level of duties and responsibilities as he may be assigned during the
term of this Agreement.  The Executive shall have the same status, privileges,
and responsibilities normally inherent in such capacities in corporations of
similar size and character.

Section 3.  Standard of Care

During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business and shall not
be engaged in any other business activity, whether or not such business activity
is pursued for gain, profit, or other pecuniary advantage.  However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company.  The Executive covenants,
warrants, and represents that he shall:

(a)   Devote his full and best efforts to the fulfillment of his employment
       obligations; and

(b)  Exercise the highest degree of loyalty and the highest standards of conduct
       in the performance of his duties.

This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.

Section 4.  Compensation

As remuneration for all services to be rendered by the Executive during the term
of this Agreement, and as consideration for complying with the covenants herein,
the Company shall pay and provide to the Executive the following:

4.1  Base Salary.  The Company shall pay the Executive a Base Salary in an
amount which shall be established from time to time by the Board of Directors of
the Company or the Board's designee provided, however, that such Base Salary
shall not be less than $123,600 per year.  This Base Salary shall be paid to the
Executive in equal installments throughout the year, consistent with the normal
payroll practices of the Company.

The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, to ascertain
whether, in the judgment of the Board or the Board's designee, such Base Salary
should be increased, based primarily on the performance of the Executive during
the year and on the then current rate of inflation.  If so increased, the Base
Salary as stated above shall, likewise, be increased for all purposes of this
Agreement.
<PAGE>

4.2  Annual Cash Incentive Compensation.  The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive established annually by the Human Resources and Planning Committee
of the Board of Directors of the Company.

Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.

4.3  Long-Term Incentives.  The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive established
annually by the Human Resources and Planning Committee of the Board of Directors
of the Company.

Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.

4.4  Retirement Benefits.  The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans.  In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.

Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.

4.5  Employee Benefits.  During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position.  Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.

The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees.  The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.

4.6  Perquisites.  The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
<PAGE>

4.7  Right to Change Plans.  By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.

4.8  Deferrals.  The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation.  If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.

Section 5.  Expenses

The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing his duties under this Agreement including, but not limited to,
travel, entertainment, professional dues and subscriptions, and all dues, fees,
and expenses associated with membership in various professional, business, and
civic associations and societies of which the Executive's participation is in
the best interest of the Company.

Section 6.  Employment Terminations Other than During the Change of Control
Period

6.1  Termination Due to Retirement.  In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.

Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire.  However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.

6.2  Termination Due to Death.  In the event of the death of the Executive
during the term of this Agreement, or during any period of Disability during
which he is receiving compensation pursuant to Section 6.3 herein, the Company
shall pay to the Executive's surviving spouse, or other beneficiary as so
designated by the Executive during his lifetime, or to the Executive's estate,
as appropriate, all benefits to which the Executive had a vested right pursuant
to this Agreement.

6.3  Termination Due to Disability.  In the event that the Executive becomes
Disabled during the term of this Agreement and is, therefore, unable to perform
his duties herein for a period of more than ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement.  However, the Board shall deliver written notice to the Executive of
the Company's intent to terminate for Disability at least thirty (30) calendar
days prior to the effective date of such termination.
<PAGE>

A termination for Disability shall become effective upon the end of the thirty
(30) day notice period.  Upon such effective date, the Company's obligation to
pay and provide to the Executive Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.

The term "Disability" shall mean, for all purposes of this Agreement, the
incapacity of the Executive, due to injury, illness, disease, or bodily or
mental infirmity, to engage in the performance of substantially all of the usual
duties of employment with the Company as contemplated by Section 2 herein, such
Disability to be determined by the Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, who are qualified to give such professional
medical advice.

If the Executive and the Company shall not be in agreement as to whether the
Executive has suffered a Disability for the purposes of this Agreement, the
matter shall be referred to a panel of three medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two doctors as so selected, and the
decision of a majority of the panel with respect to the question of whether the
Executive has suffered a Disability shall be binding upon the Executive and the
Company.  The expenses of any such referral shall be borne by the party against
whom the decision of the panel is rendered.  The Executive may be required by
the Company to submit to medical examination at any time during the period of
his employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.

It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.

6.4  Voluntary Termination by the Executive.  The Executive may terminate this
Agreement at any time by giving the Board of Directors of the Company written
notice of intent to terminate, delivered at least thirty (30) calendar days
prior to the effective date of such termination .  The termination automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
positions as an officer or director of the Company and its subsidiaries and
affiliates.

Upon the effective date of such termination, the Company shall pay to the
Executive his full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program.  With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>

6.5  Involuntary Termination by the Company Without Cause.  Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, by notifying the Executive in writing of
the Company's intent to terminate, effective thirty (30) calendar days following
the date on which the Company gave notice.

Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").

Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right at the time, in accordance with the
provisions of the governing policy, plan or program.  With the exceptions of the
foregoing obligations of the Company and the Executive's covenants contained in
Section 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.

Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).

6.6  Termination For Cause.  Nothing in this Agreement shall be construed to
prevent the Board from terminating the Executive's employment under this
Agreement for "Cause." Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the unanimous
vote of the entire membership of the Board at a meeting of such Board duly
called and held for that purpose (after reasonable notice to the Executive and
an opportunity for the Executive, together with the Executive's counsel, to be
heard by the Board) finding that in the good faith opinion of the Board, the
Executive was guilty of conduct constituting "Cause" as set forth in the second
paragraph of this Section 6.6 and specifying the particulars thereof in detail.
In the event the Board determines that Cause exists, the Board shall deliver
written notice to the Executive of termination, setting forth the facts and
circumstances leading to the Board's determination.  The Company shall pay the
Executive his full Base Salary and accrued vacation time through the date notice
of a for Cause termination is delivered to the Executive, and will provide the
Executive with all other benefits to which the Executive has a vested right at
that time.  Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (which shall survive such termination),
upon delivery to the Executive of written notice of termination, the Company and
the Executive thereafter shall have no further obligations under this Agreement.

"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to him of such default.
<PAGE>

6.7  Termination for Good Reason.  The Executive may terminate this Agreement
for Good Reason (as defined below) by giving the Board of Directors of the
Company written notice of termination, stating in reasonable detail the facts
and circumstances claimed to provide a basis for such termination, effective
upon receipt of such notice.

In the event such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.

Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:

 (a) The assignment of the Executive to duties materially inconsistent with the
     Executive's authorities, duties, responsibilities, and status as an officer
     of the Company, or a reduction or alteration in the nature or status of the
     Executive's authorities, duties, or responsibilities from those in effect
     during the immediately preceding fiscal year;

(b)  The Company's requiring the Executive to be based at a location which is at
     least fifty (50) miles further from the Executive's current primary
     residence than is such residence from the Company's current headquarters,
     except for required travel on the Company's business to an extent
     substantially consistent with the Executive's business obligations as of
     the Effective Date;

(c)  A reduction by the Company in the Executive's Base Salary as in effect on
     the Effective Date, as provided in Section 4.1 herein, or as the same shall
     be increased from time to time;

(d)  A material reduction in the Executive's level of participation in any of
     the Company's incentive compensation plans, or employee benefit or
     retirement plans, Welfare Benefits (as defined in Section 7.1), policies,
     practices, or arrangements in which the Executive participates as of the
     Effective Date; provided, however, that reductions in the levels of
     participation in any such plans shall not be deemed to be "Good Reason" if
     the Executive's reduced level of participation in each such program remains
     substantially consistent with the average level of participation of other
     executives who have positions commensurate with the Executive's position;
     or

(e)  The failure of the Company to obtain a satisfactory agreement from any
     successor to the Company to assume and agree to perform this Agreement, as
     contemplated in Section 11.1 herein, or the failure by any successor to
     renew this Agreement or to offer the Executive a new employment agreement
     comparable to this Agreement containing substantially the same terms and
     conditions.

     The Executive's right to terminate employment for Good Reason shall not be
     affected by the Executive's incapacity due to physical or mental illness.
     The Executive's continued employment shall not constitute consent to, or a
     waiver of rights with respect to, any circumstance constituting Good Reason
     herein.

Section 7.  Change in Control

7.1  Employment Terminations in Connection with a Change in Control.  In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>

transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide him with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):

(a)   An amount equal to two (2) times the highest rate of the Executive's
      annualized Base Salary rate in effect at any time up to and including the
      effective date of termination;

(b)   An amount equal to two (2) times the Executive's target incentive award
      (both cash, restricted stock and long-term) established for the fiscal
      year in which the Executive's effective date of termination occurs; in
      addition, any restricted stock outstanding on the effective date of
      termination shall be deemed fully vested and exercisable, and shall be
      redeemed by the Company for an amount equal to the fair market value
      (determined without regard to any restrictions) of such restricted stock;

(c)   An amount equal to the Executive's unpaid Base Salary and accrued vacation
      pay through the effective date of termination;

(d)   An amount equal to the Executive's unpaid targeted annual bonus,
      established for the plan year in which the Executive's effective date of
      termination occurs, multiplied by a fraction, the numerator of which is
      the number of completed days in the then-existing fiscal year through the
      effective date of termination, and the denominator of which is three
      hundred sixty five (365);

(e)   A continuation of the welfare benefits then in effect, including without
      limitation medical insurance, dental insurance, and group term life and
      disability insurance (the "Welfare Benefits") for two (2) full years after
      the effective date of termination; to the extent any Welfare Benefits
      cannot be provided pursuant to a Company plan, the Company shall provide
      such Welfare Benefits outside such plan.  The Welfare Benefits shall be
      provided to the Executive at the same premium cost, and at the same
      coverage level, as in effect as of the Executive's effective date of
      termination.  However, in the event the premium cost and/or level of
      coverage shall change for all executive employees of the Company, the cost
      and/or coverage level, likewise, shall change for the Executive in a
      corresponding manner.

      The continuation of the Welfare Benefits shall be modified during such two
      (2) year period to the extent that during such two (2) year period, the
      Executive has available substantially similar benefits from a subsequent
      employer, as determined by the Company's Board of Directors or the Board's
      designee, in which event the Welfare Benefits provided by the Company
      shall be made secondary to those provided by such subsequent employer.

(f)   A lump-sum cash payment of the actuarial present value equivalent of the
      aggregate benefits accrued by the Executive as of the effective date of
      termination under the terms of any and all supplemental retirement plans
      in which the Executive participates.  For purposes of determining "final
      average pay" under such programs, the Executive's total annual
      compensation as of the effective date of termination shall be used.

      For purposes of this Section 7, a Qualifying Termination shall mean any
      termination of the Executive's employment other than: (1) by the Company
      for Cause (as provided in Section 6.6 herein); (2) by reason of death,
      Disability (as provided in Section 6.2
<PAGE>

      herein), or Retirement (as such term is then defined in the Company's tax
      qualified defined benefit retirement plan; provided that a termination
      which qualifies as a Retirement and which would otherwise qualify as a
      termination for Good Reason under Section 6.7 herein will be deemed to be
      a Qualifying Termination).

7.2  Definition of "Change in Control."  A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:

(a)   Any individual, corporation (other than PES or the Company), partnership,
      trust, association, pool, syndicate, or any other entity or any group of
      persons acting in concert becomes the beneficial owner, as that concept is
      defined in Rule 13d-3 promulgated by the Securities and Exchange
      Commission under the Securities Exchange Act of 1934, of securities of the
      Company possessing twenty percent (20%) or more of the voting power for
      the election of directors of the Company;

(b)   There shall be consummated any consolidation, merger, or other business
      combination involving PES or the Company or the securities of PES or the
      Company in which holders of voting securities of PES immediately prior to
      such consummation own, as a group, immediately after such consummation,
      voting securities of PES or the Company (or, if PES or the Company does
      not survive such transaction, voting securities of the corporation
      surviving such transaction) having less than sixty percent (60%) of the
      total voting power in an election of directors of PES or the Company (or
      such other surviving corporation);

(c)   During any period of two (2) consecutive years, individuals who at the
      beginning of such period constitute the directors of the Company cease for
      any reason to constitute at least a majority thereof unless the election,
      or the nomination for election by the Company's shareholders, of each new
      director of the Company was approved by a vote of at least two-thirds
      (2/3) of the directors of the Company then still in office who were
      directors of the Company at the beginning of any such period; or

(d)   There shall be consummated any sale, lease, exchange, or other transfer
      (in one transaction or a series of related transactions) of all, or
      substantially all, of the assets of PES or the Company (on a consolidated
      basis) to a party which is not controlled by or under common control with
      PES or the Company.

7.3  Excise Tax Equalization Payment.  In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total Payments will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the Company shall pay to the
Executive in cash an additional amount (the "Gross-Up Payment") such that the
net amount retained by the Executive after deduction of any Excise Tax upon the
Total Payments and any Federal, state and local income tax and Excise Tax upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments.  Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.

7.4  Tax Computation.  For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:
<PAGE>

(a)   Any other payments or benefits received or to be received by the Executive
      in connection with a Change in Control of the Company or the Executive's
      termination of employment (whether pursuant to the terms of this Agreement
      or any other plan, arrangement, or agreement with the Company, or with any
      person (which shall have the meaning set forth in Section 3(a)(9) of the
      Securities Exchange Act of 1934, including a "group" as defined in Section
      13(d) therein) whose actions result in a Change in Control of the Company
      or any person affiliated with the Company or such persons) shall be
      treated as "parachute payments" within the meaning of Section 280G(b)(2)
      of the Code, and all "excess parachute payments" within the meaning of
      Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless
      in the opinion of tax counsel as supported by the Company's independent
      auditors and acceptable to the Executive, such other payments or benefits
      (in whole or in part) do not constitute parachute payments, or such excess
      parachute payments (in whole or in part) represent reasonable compensation
      for services actually rendered within the meaning of Section 280G(b)(4) of
      the Code in excess of the base amount within the meaning of Section
      280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;

(b)   The amount of the Total Payments which shall be treated as subject to the
      Excise Tax shall be equal to the lesser of: (i) the total amount of the
      Total Payments; or (ii) the amount of excess parachute payments within the
      meaning of Section 280G(b)(1) (after applying clause (a) above); and

(c)   The value of any noncash benefits or any deferred payment or benefit shall
      be determined by the Company's independent auditors in accordance with the
      principles of Sections 280G(d)(3) and (4) of the Code.

      For purposes of determining the amount of the Gross-Up Payment, the
      Executive shall be deemed to pay federal income taxes at the highest
      marginal rate of Federal income taxation in the calendar year in which the
      Gross-Up Payment is to be made, and state and local income taxes at the
      highest marginal rate of taxation in the state and locality of the
      Executive's residence on the effective date of termination, net of the
      maximum reduction in federal income taxes which could be obtained from
      deduction of such state and local taxes.

7.5  Subsequent Recalculation.  In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.

7.6  Payment of Legal Fees.  To the extent permitted by law, the Company shall
pay all legal fees, costs of litigation, prejudgment interest, and other
expenses incurred in good faith by the Executive as a result of the Company's
refusal to provide the benefits under this Section 7 to which the Executive
becomes entitled under this Agreement, or as a result of the Company's
contesting the validity, enforceability, or interpretation of this Agreement, or
as a result of any conflict (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>

Section 8.  Confidentiality

8.1  Confidentiality.  During the term of this Agreement and thereafter in
perpetuity, the Executive will not directly or indirectly divulge or appropriate
to his own use, or to the use of any third party, any "trade secrets" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information of the Company or any of the Company's subsidiaries or
affiliates (hereinafter, the Company and its subsidiaries and affiliates shall
be collectively referred to as the "Company Group"), except as may be in the
public domain other than by violation of this Agreement.

8.2  Trade Secrets.  "Trade Secrets" as used herein means all secret
discoveries, invention, formulae, designs, methods, processes, techniques of
production and know-how relating to the Company Group's business.  "Confidential
Information" as used herein means the Company Group's internal policies and
procedures, suppliers, customers, financial information and marketing practices,
as well as secret discoveries, inventions, formulae, designs, techniques of
production, know-how and other information relating to the Company Group's
business not rising to the level of a trade secret under applicable law.

8.3  Breach by Executive.  The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.

Section 9.  Indemnification

The Company hereby covenants and agrees to indemnify and hold harmless the
Executive fully, completely, and absolutely against and in respect to any and
all actions, suits, proceedings, claims, demands, judgments, costs, expenses
(including attorney's fees), losses, and damages resulting from the Executive's
good faith performance of his duties and obligations under the terms of this
Agreement.

Section 10.  Outplacement Assistance

Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; provided, however, that the total
reimbursement shall be limited to an amount equal to fifteen percent (15%) of
the Executive's Base Salary as of the effective date of termination.

Section 11.  Assignment

11.1 Assignment by Company.  This Agreement may be assigned or transferred to,
and shall be binding upon and shall inure to the benefit of, any successor of
the Company, and any such successor shall be deemed substituted for all purposes
of the "Company" under the terms of this Agreement.  As used in this Agreement,
the term "successor" shall mean any person, firm, corporation, or business
entity which at any time, whether by merger, purchase, or otherwise, acquires
all or substantially all of the assets of the Company.  Notwithstanding such
assignment, the Company shall remain, with such successor, jointly and severally
liable for all its obligations hereunder.

Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall immediately
entitle the Executive to compensation from the Company in the same amount and on
the same terms as the Executive
<PAGE>

would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.

Except as herein provided, this Agreement may not otherwise be assigned by the
Company.

11.2 Assignment by Executive.  This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, and administrators, successors, heirs, distributees, devisees, and
legatees.  If the Executive should die while any amounts payable to the
Executive hereunder remain outstanding, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee or, in the absence of such
designee, to the Executive's estate.

Section 12.  Dispute Resolution and Notice

12.1 Arbitration.  Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before a panel of
three (3) arbitrators sitting in a location selected by the Executive within
fifty (50) miles from the location of his employment with the Company, in
accordance with the rules of the American Arbitration Association then in
effect.

Judgment may be entered on the award of the arbitrator in any court having
proper jurisdiction.  All expenses of such arbitration, including the fees and
expenses of the counsel for the Executive, shall be borne by the Company.

12.2 Notice.  Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company or, in the case of the Company, at its principal
offices.

Section 13.  Miscellaneous

13.1 Gender and Number.  Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

13.2 Entire Agreement.  This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.

13.3 Modification.  This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.

13.4 Severability.  In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.

13.5 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
<PAGE>

13.6 Tax Withholding.  The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.

13.7 Beneficiaries.  The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts to be
received under this Agreement.  Such designation must be in the form of a signed
writing acceptable to the Board or the Board's designee.  The Executive may make
or change such designation at any time.

Section 14.  Governing Law

To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.

  IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.

                              EXECUTIVE:


                              ______________________________________
                              James M. Stephens


ATTEST                        PROVIDENCE ENERGY CORPORATION


By:___________________        By:___________________________________
 Corporate Secretary             Chairman, President and CEO