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                          EDISON SAULT ELECTRIC COMPANY

                          DIRECTOR'S FEE DEFERRAL PLAN









(DIRDEFPN.DIR)                                                   October 1, 1989

                                         
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                          EDISON SAULT ELECTRIC COMPANY

                          DIRECTOR'S FEE DEFERRAL PLAN



                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
 ARTICLE I     DEFINITIONS 
               A.  Purpose                                                   1
               B.  Definitions                                               1

ARTICLE II     PARTICIPATION AND DEFERRAL AGREEMENTS 
               A.  Purpose                                                   2
               B.  Eligibility to Participate                                2
               C.  Deferral Agreement                                        2
               D.  Amount of Deferral                                        3
               E.  Suspension of Participation                               3
               F.  Additional Participation Agreements                       3

ARTICLE III    BENEFIT AND PAYMENTS 
               A.  Purpose                                                   3
               B.  Payment of Benefits                                       4
               C.  Calculation of Benefits                                   5

ARTICLE IV     ADMINISTRATION OF PLAN
               A.  Purpose                                                   6
               B.  Administrator                                             6
               C.  Committee                                                 6

ARTICLE V      TERMINATION AND AMENDMENT
               A.  Purpose                                                   6
               B.  Amendment                                                 6
               C.  Termination                                               6

ARTICLE VI     MISCELLANEOUS
               A.  Purpose                                                   7
               B.  Creditor Status                                           7
               C.  Non-alienation                                            7
               D.  Facility of Payment                                       7
               E.  Non-Guarantee of Employment                               7
               F.  Cooperation                                               7
               G.  Governing Law                                             7
               H.  Merger                                                    8




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                          EDISON SAULT ELECTRIC COMPANY

                          DIRECTOR'S FEE DEFERRAL PLAN


ARTICLE I      DEFINITIONS 

A.   PURPOSE

     Throughout this Plan, certain words are used frequently.  Whenever a word
     is capitalized, it will have the meaning defined in this Article of the
     Plan unless the context clearly indicates otherwise.  

B.   DEFINITIONS

     (1)  "Anniversary Date" means January 1 of each Plan Year.  

     (2)  "Beneficiary" means the person(s) so designated in writing by the
          Participant, or the Participant's lawful spouse in the event that a
          proper designation is not made by the Participant.  In the event the
          Participant is not survived by a lawful Spouse and no other
          Beneficiary has been designated, the Participant's estate shall be the
          Beneficiary.  

     (3)  "Board" means the Board of Directors of the Employer.  

     (4)  "Committee" means the administrative committee, if any, which may be
          appointed by the Employer's Board of Directors to oversee the
          administration of the Plan.  

     (5)  "Deferral Agreement" means an agreement executed by a Director and
          filed with the Committee prior to the beginning of a period for which
          fees are to be deferred, pursuant to Article II of the Plan.   

     (6)  "Deferred Fee" means the portion of a Director's Fee for any Plan
          Year, or part thereof, that has been deferred pursuant to a Deferral
          Agreement.  

     (7)  "Director" means any member of the Board who receives a fee for
          service on the Board.  

     (8)  "Effective Date" means October 1, 1989.   

     (9)  "Employer" means EDISON SAULT ELECTRIC COMPANY, and any subsidiary or
          affiliate of Edison Sault Electric Company which has adopted the Plan
          with the consent of the Board of Directors of Edison Sault Electric
          Company.  

     (10) "Fee" means any compensation paid to a Director for services rendered
          to the Employer as a Director.  

     (11) "Normal Retirement Date" means the date the Participant attains his or
          her sixty-fifth (65th) birthday, or completes ten (10) years of
          participation in the Plan, whichever is later.  

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     (12) "Participant" means a Director who elects to participate in the Plan
          by filing a Deferral Agreement with the Committee on a timely basis.  

     (13) "Plan" means the EDISON SAULT ELECTRIC COMPANY DIRECTOR'S FEE DEFERRAL
          PLAN as set forth herein.  

     (14) "Plan Year" means the twelve (12) month period commencing on January 1
          and ending on December 31 of each calendar year.  

     (15) "Policy" means any insurance policy purchased by the Committee from a
          legal reserve life insurance company authorized to do business in the
          State of Michigan.  

     (16) "Termination of Service" means the termination of the Participant as a
          Director of the Employer or any subsidiary or affiliate thereof. 
          Total Disability shall not be considered a Termination of Service.  

     (17) "Total Disability" means a disability, whether temporary or permanent,
          which results from bodily injury, which is not self-inflicted, which
          prevents a Participant from engaging in any occupation for
          compensation or profit and which has existed continuously for a period
          of at least six (6) months.  


ARTICLE II     PARTICIPATION AND DEFERRAL AGREEMENTS

A.   PURPOSE

     This Article describes when a Director becomes eligible to participate in
the Plan and what steps must be taken to actually participate.

B.   ELIGIBILITY TO PARTICIPATE

     Any Director of the Employer is eligible to participate in the Plan upon
the execution of a Deferral Agreement and the filing of such Deferral Agreement
with the Committee in accordance with Section C below.  

C.    DEFERRAL AGREEMENT

     (1)  Each eligible Director who wishes to participate in the Plan, must
          execute a Deferral Agreement in the form approved by the Committee (a
          copy of which is attached to this Plan).  Except for the first Plan
          Year, the Deferral Agreement must be executed and filed with the
          Committee by November 30 of the Plan Year preceding the Plan Year for
          which the Deferral Agreement is to be effective.  

     (2)  For the first Plan Year commencing on the Effective Date, an eligible
          Director who wishes to participate must execute a Deferral Agreement
          not later than thirty (30) days after the date of adoption of the Plan
          by the Board.  Any such Deferral Agreement will apply only to Fees
          which have not yet been earned by or paid to the Director.  

     (3)  A Director who first becomes eligible during a Plan Year and who
          wishes to participate must execute a Deferral Agreement not later than
          thirty (30) days after the date the Committee notifies the Director of
          eligibility for the Plan.  Any such Deferral Agreement will apply only
          to Fees for the Plan Year which have not yet been earned by or paid to
          the Director.  

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D.   AMOUNT OF DEFERRAL

     (1)  A Participant may elect to defer all or any portion of the Fees which
          are expected to be earned by the Participant over a period of time
          stipulated in the Deferral Agreement.  

     (2)  With the exception of fixed dollar amount, all such elections shall
          automatically apply to any fee adjustment that become effective during
          the applicable deferral period.  

     (3)  The amount of Deferred Fees and the period of deferral will be
          specified in the Deferral Agreement executed by the Director.  A
          Director will not be permitted to change the amount of Fees elected to
          be deferred in any Deferral Agreement.  

E.   SUSPENSION OF PARTICIPATION

     (1)  An election by a Participant to enter into a Deferral Agreement will
          be irrevocable; provided however, that a Participant may elect to
          suspend the deferral of Fees after one (1) or more years of
          participation.  Any such election must be in writing and filed with
          the Committee not later than the fifteenth (15th) day preceding the
          regular Fee payment on which the suspension is to take effect.  

     (2)  Upon the suspension of participation in the Plan by a Director, the
          Committee will arrange to pay the Director a lump sum cash payment
          equal to the amount of Deferred Fees under the Plan as of the date of
          suspension, less any expenses incurred by the employer in providing
          for the Fee deferral for the Participant.  A Participant who has
          suspended the deferral of Fees will not be permitted to execute a
          subsequent Deferral Agreement to take effect prior to the Anniversary
          Date next following the expiration of a period of twelve (12) months
          from the date of suspension.  

F.   ADDITIONAL PARTICIPATION AGREEMENTS

     At any time, the Committee in its sole discretion may permit a Participant
to enter into an additional Deferral Agreement by executing and filing with the
with the Committee such a Deferral Agreement prior to November 30 of the Plan
Year preceding the Plan Year for which the additional Deferral Agreement is to
be effective.  Each additional Deferral Agreement will be subject to all of the
requirements of this Article II and will be treated as a completely separate
Deferral Agreement for all purposes under the Plan.  


ARTICLE III    BENEFIT PAYMENTS

A.   PURPOSE 

     This Article describes the conditions under which benefits will be paid
under the Plan, and the form of benefit payments.  

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B.   PAYMENT OF BENEFITS

     (1)  NORMAL RETIREMENT

               Upon the Participant's attainment of his or her Normal Retirement
          Date, the Committee will take steps to provide for the payment of
          monthly benefits in accordance with the provisions of Section C of
          this Article III, with such payments to continue for a period of one
          hundred and eighty (180) months, or until the death of the
          Participant, if earlier.  

     (2)  DEATH

          (a)  PRIOR TO NORMAL RETIREMENT:  In the event of the death of a
               Participant, or a terminated Participant whose benefit is being
               deferred under Section B (4)(b) of this Article III, prior to his
               or her Normal Retirement Date, the Committee will arrange to
               commence monthly benefit payments to the Participant's
               Beneficiary as of the first day of the month next following the
               date of death in accordance with Section C below, with such
               payments to continue for a period of one hundred and eighty (180)
               months.  

          (b)  AFTER NORMAL RETIREMENT:  In the event of the death of a
               Participant after his or her Normal Retirement Date and after the
               commencement of monthly benefit payments, but prior to the
               receipt of one hundred and eighty (180) monthly payments by the
               Participant, the Committee will arrange to have monthly benefits
               continued to the Participant's Beneficiary in accordance with
               Section C below, with such monthly benefits to continue until a
               total of one hundred and eighty (180) payments have been made to
               the Participant and the Beneficiary together.  

     (3)  TOTAL DISABILITY

          In the event the Participant suffers a Total Disability where the
     Participant no longer receives Fees, the Participant will not be required
     to continue the deferral of Fees.  Such disabled Participant will, however
     be eligible to receive full retirement or death benefits to the same extent
     as if the Participant had continued to defer Fees in accordance with the
     Deferral Agreement.  

     (4)  TERMINATION OF SERVICE

          (a)  WITH LESS THAN SIX (6) YEARS OF PARTICIPATION:  If a Participant
               with less than six (6) years of participation in the Plan incurs
               a Termination of Service prior to his or her Normal Retirement
               Date, for reasons other than death, Total Disability, or
               Governmental Service, with or without cause, voluntarily or
               involuntarily, and if the Participant's Termination of Employment
               was not due to fraudulent or dishonest conduct (as determined by
               the Committee), the Committee will arrange to pay the Director a
               lump sum cash payment equal to the amount of Fees deferred under
               the Plan, plus interest as determined by the Committee, less any
               expenses incurred by the Employer in providing for the Fee
               deferral for the Participant.  

          (b)  WITH SIX (6) OR MORE YEARS OF PARTICIPATION: If a Participant
               with six (6) or more years of participation in the Plan incurs a
               Termination of service prior to his or her Normal Retirement
               Date, for reasons other than, death, Total Disability, or
               Governmental Service, with or without cause, voluntarily or

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               involuntarily, and if the Participant's Termination of Employment
               was not due to fraudulent or dishonest conduct (as determined by
               the Committee), the Committee will arrange to pay the Director at
               his or her Normal Retirement Date, the benefit specified in
               Article III, Section B (1).  

     (5)  GOVERNMENTAL SERVICE

          In the event that a Participant becomes a member of a governmental
     agency which has regulatory jurisdiction over the activities of the
     Employer, the Participant will be deemed to have incurred a Termination of
     Service and benefits will be paid in accordance with Section 4 above.  

C.   CALCULATION OF BENEFITS

     (1)  ACCOUNT BALANCES:  At any time prior to the commencement of benefits,
          a Participant's Deferred Fee account balance shall be equal to amounts
          specified in the Deferral Agreement accumulated on a monthly basis,
          assuming beginning-of-month deposit, with interest compounded monthly
          at a rate equivalent to Edison's rate of return, as determined for the
          Incentive Investment Stock Ownership Plan, for the immediately
          preceding fiscal year.  

     (2)  BENEFIT DETERMINATION:  As of a Participant's Normal Retirement Date,
          or other benefit commencement date if earlier, and as of every January
          1 thereafter during the installment payment period, the monthly
          benefit, payable as of the first day of each month until the next
          January 1, shall be equal to the amount necessary to amortize the
          Participant's account balance as of the determination date over the
          remaining installment period, assuming beginning-of-month payments and
          a compounded monthly interest rate equivalent to Edison's rate of
          return, as determined for the Incentive Investment Stock Ownership
          Plan, for the immediately preceding fiscal year.  


ARTICLE IV     ADMINISTRATION OF PLAN

A.   PURPOSE

     This Article defines the responsibilities of the parties involved in the
administration of the Plan and establishes a claims and appeals procedure to
resolve disputes with Plan Participants.  

B.   ADMINISTRATOR

     The Employer will be the administrator of the Plan.  The Employer may
delegate administrative responsibilities to others by action of its Board of
Directors and with notice to the person or persons to whom the delegation is
made.  

C.   COMMITTEE

     The Board may, but need not, appoint a Committee of not less than one
member to serve at the pleasure of the Board.  Any member of the Committee may
resign upon written notice to the Board and the Board may remove any member of
the Committee for any reason.  

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     (1)  The Committee will act by a majority of its members by vote at a
          meeting, or in writing without a meeting.  If the Committee cannot
          reach a decision on an issue, a temporary Committee member will be
          appointed by unanimous vote of all Committee members to decide the
          issue.  In the event the Committee fails to agree on the selection of
          a temporary Committee member, an arbitrator will be selected by the
          American Arbitration Association in accordance with its rules.  

     (2)  The Committee may appoint from its members a chairman to preside over
          meetings and a secretary (who need not be a member) to keep records of
          meetings and activities of the Committee.  The Committee may also
          appoint one or more of its members to execute any document on its
          behalf.  

     (3)  The Committee will have all powers and authority to make rules and
          regulations with respect to the Plan and to determine all questions as
          to interpretation of the Plan provisions and/or the rights or status
          of Participants or Beneficiaries.  

     (4)  The Committee will establish a reasonable procedure for the filing of
          claims and the appeal by Participants of any decision of the
          Committee.  

     (5)  If a Committee is not appointed by the Board, the duties and
          responsibilities of the Committee will be carried out by the Employer.
          


ARTICLE V    TERMINATION AND AMENDMENT

A.   PURPOSE

     This Article establishes the circumstances under which the Plan can be
amended or terminated and how benefits will be distributed if the Plan is
terminated.  

B.   AMENDMENT

     The Board reserves the right to amend the Plan at any time and for any
reason.  No amendment will decrease or place further restrictions on a
Participant's accrued benefits at the time of such amendment.   

C.   TERMINATION

     (1)  The Board reserves the right to terminate the Plan or discontinue
          recognizing further Fee deferrals any time. 

     (2)  The Plan will be automatically terminated upon the Employer's legal
          dissolution, adjudication as bankrupt or insolvent, upon a general
          assignment for the benefit of creditors, upon receiver being
          appointed.  

     (3)  In the event of termination of the Plan, any Participant with six (6)
          or more years of participation will receive a benefit at Normal
          Retirement Date as provided in Article III, Section 4 (b).  Any
          Participant with less than six (6) years of participation will receive
          a lump sum cash payment determined in accordance with Article III,
          Section 4 (a).  Any benefits in pay status at the time of Plan
          termination to a retired Participant or Beneficiary will be continued
          to such Participant or Beneficiary in accordance with the terms of the
          Plan and any Deferral Agreement between the Participant and the
          Employer.  

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ARTICLE VI     MISCELLANEOUS

A.   PURPOSE

     This Article describes the creditor status of Participants and
Beneficiaries, discusses assignability of benefits, and other miscellaneous
items.  

B.   CREDITOR STATUS

     Participants and their Beneficiaries will have no legal or equitable
rights, interest or claims in any property or asset of the Employer, nor will
they be beneficiaries of, or have any rights, claims or interests in any life
insurance Policies, annuity contract Policies, or the proceeds therefrom owned
by or which may be acquired by the Employer.  Such Policies or other assets of
the Employer will not be held in trust for the benefit of Participants or their
Beneficiaries or held in any way as collateral security for the fulfilling of
the obligations of the Employer under this Plan.  Any and all of the Employer's
assets and Policies will be, and remain, the general, unpledged, unrestricted
assets of the Employer.  The Employer's obligation under the Plan will be merely
that of an unfunded and unsecured promise of the Employer to pay money in the
future.

C.   NON-ALIENATION

     Except as may be required by federal tax withholding rules, benefits
hereunder may not be assigned, alienated, commuted, sold, transferred,
mortgaged, hypothecated, or in any other way encumbered.  

D.   FACILITY OF PAYMENT

     If any individual entitled to a distribution under the Plan is a minor or
is adjudged mentally incompetent, the Committee may in its discretion make
payments to such individual or to his or her legal representative or to a
relative or friend of the individual for his or her benefit.  Any payment of a
benefit under this paragraph will be a complete discharge of any liability for
the making of such payment under the provisions of the Plan.  

E.   NON-GUARANTEE OF EMPLOYMENT

     Nothing contained in this Plan will be construed to be a contract of
service between the Employer and any Director, or as a guarantee of continued
retention of a Director by the Employer. 

F.   COOPERATION

     A Participant will cooperate with the Committee by furnishing any and all
information requested by the Committee in order to facilitate benefit payments,
and by taking such physical examinations as the Committee may deem necessary,
and by taking any other action requested by the Committee.  

G.   GOVERNING LAW

     The Plan shall be construed in accordance with and governed by the laws of
the State of Michigan.  


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H.   MERGER

     The Employer will not merge, consolidate, or combine with any other
business entity unless and until the obligations of the Employer under the terms
of this Plan are provided for adequately.   


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