Document:

<PAGE>
                                                                 Exhibit 10(b)-3

                             PRIEST RAPIDS PROJECT

                             PRODUCT SALES CONTRACT

<PAGE>
                               INDEX TO SECTIONS

<Table>
<Caption>
Section                                                               Page
-------                                                               ----
<S>            <C>                                                    <C>
Section 1.     Term of Contract......................................    1
Section 2.     Definitions...........................................    1
Section 3.     Priest Rapids Project Products and Purchaser Product
               Percentages; Regulatory Approvals.....................    6
Section 4.     Treatment of the Sale of the Reasonable Portion.......    9
Section 5.     Determination of Product Availability, District
               Reserved Share and Risk Premium.......................   10
Section 6.     Annual Power Costs....................................   12
Section 7.     Payment for Priest Rapids Project Products and
               Risk Premium..........................................   16
Section 8.     Support and Cooperation...............................   19
Section 9.     Scheduling of Deliveries of Surplus and Displacement
               Products..............................................   20
Section 10.    Payment of Proceeds From the Sale of Displacement
               Product...............................................   23
Section 11.    Point of Delivery.....................................   23
Section 12.    Metering and Transmission Losses......................   23
Section 13.    Information to be Made Available to the Purchaser.....   23
Section 14.    Insurance.............................................   24
Section 15.    Additional Facilities and Products....................   24
Section 16.    Project Integration...................................   26
Section 17.    Liability of Parties..................................   26
Section 18.    Notices and Computation of Time.......................   27
Section 19.    District's Bond Resolutions and License...............   27
Section 20.    Governing Law.........................................   27
Section 21.    Assignment of Contract................................   27
Section 22.    Remedies on Default...................................   27
Section 23.    Venue and Attorney Fees...............................   29
Section 24.    Compliance With Law...................................   29
Section 25.    Headings..............................................   30
Section 26.    Entire Agreement; Modification; Conflict in
               Precedence............................................   30
Section 27.    No Partnership or Third Party Rights..................   30
Section 28.    Purchasers' Committee; Arbitration....................   30
Section 29.    Representations and Warranties........................   31
Section 30.    Counterparts..........................................   32
</Table>
Exhibits
Exhibit A--Monthly Amounts of Displacement Resource
Exhibit B--Bond Resolution Sections
Exhibit C--Areas Served Outside Grant County

                                      -i-

<PAGE>
                  PRIEST RAPIDS PROJECT PRODUCT SALES CONTRACT

                                  Executed by
                         PUBLIC UTILITY DISTRICT NO. 2
                                OF GRANT COUNTY
                                      And
                               AVISTA CORPORATION

This contract is entered into as of December 12, 2001 between Public Utility
District No. 2 of Grant County, Washington (the "District"), a municipal
corporation of the State of Washington, and Avista Corporation (the
"Purchaser"), a corporation organized and existing under the laws of the State
of Washington. The District and the Purchaser are referred to as a "Party" and
collectively as "Parties."

SECTION 1. TERM OF CONTRACT
(a) Except as otherwise provided herein, this contract shall be in full force
    and effect from and after it has been executed by the District and the
    Purchaser. Unless sooner terminated pursuant to other provisions, this
    contract shall remain in effect until the earlier of expiration or
    termination of the New FERC License or such time that the District no longer
    has authority to market Priest Rapids Project Products. Except as otherwise
    provided herein, all obligations accruing under this contract are preserved
    until satisfied.

(b) By executing this contract, the Purchaser has exercised all of the
    Purchaser's rights, and the District has fulfilled and satisfied all of the
    District's obligations, under Section(1)(b) of the 1956 and 1959 Contracts.
    Upon execution of this contract by the District and the Purchaser,
    Section 1(b) of the 1956 and 1959 Contracts shall have no further force or
    effect; provided, however, by executing this contract the Parties intend to
    preserve the right of Purchaser to exercise the first right of refusal under
    Section 1(b) of the 1956 and 1959 Contracts against a successor licensee
    other than the District.

(c) Notwithstanding Section 1(a), the affirmative obligations of the Parties in
    Sections 3(a), (b) and (c), 4 through 7, 9 through 14, 16, 17 and 28 (a) and
    (b)(1-4) shall take effect on November 1, 2005.

(d) Parties to the 1956 Contract and the Idaho Cooperatives shall have until
    October 31, 2005 to execute this contract. Parties to the 1959 Contract
    shall have until October 31, 2009 to execute this contract.

SECTION 2. DEFINITIONS.
As used in this contract, the following terms when initially capitalized shall
have the following meanings:

"1956 Contract" shall mean the contract entered into by the District and
various parties during May 1956 for the sale of capacity and energy from the
Priest Rapids Development as supplemental and amended from time to time.
<PAGE>
"1959 Contract" shall mean the contract entered into by the District and
various parties during June 1959 for the sale of capacity and energy from the
Wanapum Development as supplemented and amended from time to time.

"Annual FERC License" shall mean a license for the Priest Rapids Project issued
by FERC to the District for an interim period before a New FERC License.

"Bond Resolution" shall mean each and all of the resolutions adopted by the
District authorizing the issuance of outstanding Debt for the Priest Rapids
Project.

"Contract Year" shall mean the 12 month period commencing at 12:01 a.m. on
January 1 of each year and ending at 12:01 a.m. on the following January 1;
provided, however, that the first Contract Year shall commence on November 1,
2005, and end the following January 1, 2006, and that the last Contract Year
shall end on the last day of the New FERC License, or such time that the
District no longer has authority to market Priest Rapids Project Products.

"Contract(s)" shall mean this contract and similar contracts between the
District and other Purchasers.

"Debt" shall mean any bonds, notes, or other debt obligations of the District,
including, but not limited to all bonds outstanding at the effective date of
this contract, a line of credit, installment purchase agreement, financing
lease, interfund loan, derivative securities or payment obligations and any
other obligation for borrowed money, the proceeds of which will be used for the
benefit of the Priest Rapids Project, including to finance betterments,
renewals, replacements and additions to the Priest Rapids Project, to refund
other debt, or any other lawful purpose related to the Priest Rapids Project.
Debt does not include the Columbia River-Priest Rapids Hydro-Electric
Production System Revenue Bonds, Series 1956, which have been paid, or the
Wanapum Hydroelectric Refunding Revenue Bonds, Series 1963, which are scheduled
to be repaid on or prior to January 1, 2004.

"Displacement Resource" means the monthly amounts of capacity and energy set
forth in Exhibit A to this contract. If the District obtains a Replacement
Contract, or if the District and the Purchaser mutually agree in writing to use
some other resource as a Displacement Resource, the District and the Purchaser
will revise Exhibit A to reflect the capacity and energy of such Replacement
Contract or resource.

"Electric System" shall mean the separate electric utility system of the
District, including all associated generation, transmission and distribution
facilities and any betterments, renewals, replacements and additions of such
system, but does not include the Priest Rapids Project or any other utility
properties designated as a separate utility system of the District.

"Eligible Purchasers" means the parties to the 1956 and 1959 Contracts, and the
Kootenai Electric Cooperative, Inc., Clearwater Power Company, Idaho County
Light and Power Cooperative Association, Inc., Northern Lights, Inc. and the
electric cooperative members of the

                                      -2-

<PAGE>
Snake River Power Association, Inc. (collectively, the "Idaho Cooperatives") as
of October 31, 2000.

"FERC" shall mean the Federal Energy Regulatory Commission or its successor.

"FERC License" shall mean any license for the Priest Rapids Project issued by
FERC to the District.

"Market Price" shall mean the price (in dollars per megawatt-hour) on the
wholesale power market for firm power in amounts equal to the Surplus Product
and Displacement Product, respectively, forecast to be available to Purchaser
during the next Contract Year pursuant to Sections 5(d) and 5(h), multiplied by
such amounts of Surplus Product and Displacement Product.

"Marketing Plan" shall mean the plan for making available in a fair, equitable,
and non-discriminatory manner pursuant to market-based principles and
procedures the Reasonable Portion as required by applicable law or PL 83-544
Orders.

"New FERC License" shall mean the license issued by FERC to the District
following the expiration of the Original FERC License for operation of the
Priest Rapids Project for a duration of 30 years or longer, not including any
subsequent annual or other license.

"Operating Agreements" shall mean any agreements to which the District is or
may become a party, which provide for operation of the Priest Rapids Project,
including but not limited to, the Pacific Northwest Coordination Agreement, the
Agreement for the Hourly Coordination of Projects on the Mid-Columbia River,
the Western Systems Coordinating Council Agreement, the Agreement Relating to
Wanapum Development Encroachment on the Rock Island Project and the Northwest
Power Pool, which is the voluntary association of utilities formed in the
Pacific Northwest for the purpose of ensuring the adequacy and reliability of
the electric power systems in the Pacific Northwest.

"Original FERC License" shall mean the Federal Power Commission License for the
Priest Rapids Project issued to the District on November 4, 1955, together with
amendments thereto.

"Pacific Northwest" shall have the meaning ascribed thereto in Section 3(14) of
the Regional Act.

"Priest Rapids Development" shall mean the separate utility system of the
District, including a dam at the Priest Rapids Development, all generation and
transmission facilities associated therewith, and all betterments, renewals,
replacements, and additions to such system, as further described in Section
2(f) of Exhibit 1 of District Resolution No. 390 which is attached as Exhibit
B, but shall not include any additional generation, transmission and
distribution facilities hereafter constructed or acquired by the District as a
part of the Electric System or the Wanapum Development or any other utility
properties of the District acquired or constructed as a separate utility system.

"Priest Rapids Project" shall mean the hydroelectric project on the Columbia
River in the State of Washington designated by the Federal Power Commission as
Project No. 2114. The Priest Rapids Project consists of the Priest Rapids
Development and the Wanapum Development.

                                      -3-

<PAGE>
"Priest Rapids Project Output" shall mean the amount of capacity, energy (both
firm and non-firm), pondage, reactive power, ancillary services and any other
product from the Priest Rapids Development from November 1, 2005 to November 1,
2009 and from the Priest Rapids Project from November 1, 2009 through the term
of this contract under the operating conditions which exist during the term,
including periods when the Priest Rapid Project may be wholly or partially
inoperable for any reason, after correction for encroachment, Canadian
entitlement, station and project use, and depletions required by the FERC
License or other regulatory requirements.

"Priest Rapids Project Products" means those products that the District agrees
to sell to the Purchaser, and the Purchaser agrees to purchase as more
particularly described in Sections 3 and 5 hereof, and is limited to the
Surplus Product and the Displacement Product.

"Prudent Utility Practice" means those practices, methods and acts which: (i)
when engaged in are commonly used in prudent engineering and operations to
operate electric equipment and associated mechanical and civil facilities
lawfully and with safety, reliability, efficiency and expedition or (ii) in the
exercise of reasonable judgment considering the facts known when engaged in,
could have been reasonably expected to achieve the desired result consistent
with applicable law, safety, reliability, efficiency and expedition. "Prudent
Utility Practice" is not intended to be the optimum practice, method or act, to
the exclusion of all others, but rather to be a spectrum of commonly used
practices, methods or acts.

"Public Law 83-544" (or "PL 83-544") shall mean the legislation passed by the
83rd Congress authorizing the District to develop the Priest Rapids Project.

"Purchasers" shall mean the Purchaser and each person or entity that has
entered into a contract with the District substantially similar to this
contract.

"Purchaser Product Percentage" shall mean the fixed percentage (stated to the
second decimal point, e.g., 0.01%) as set forth in Section 3 for each of the
individual Priest Rapids Project Products made available under this contract.
For parties to the 1956 and 1959 Contracts, Purchaser Product Percentage for
any one Priest Rapids Project Product in this contract may not exceed twice the
average of their participation in the 1956 and 1959 Contracts except that for
those Purchasers that were parties to the 1956 Contracts but were not parties
to the 1959 Contracts their Purchaser Product Percentage for the period
November 1, 2005 to October 31, 2009 may not exceed twice their participation
in the 1956 Contract. For any individual Idaho Cooperative, Purchaser Product
Percentage shall not exceed the Purchaser Product Percentage of any individual
party to the 1956 or 1959 Contract that is one of the Purchasers except when
the provisions of Section 3(c) are applied. Each of such fixed percentages is
subject to revision pursuant to Sections 3(c), (d), (e), (f), and 5(j).

"Reasonable Portion" shall mean that 30% portion of the Priest Rapids Project
Output required by FERC pursuant to Public Law 83-544 to be offered for sale by
the District.

"Regional Act" shall mean Public Law 96-501, the Pacific Northwest Electric
Power Planning and Conservation Act.

                                      -4-
<PAGE>
"Risk Premium" shall mean the sum of the following: (i) for the Surplus Product,
the positive difference for a year determined by subtracting from the Market
Price of the Surplus Product the cost to the Purchaser of the Surplus Product
during each year pursuant to Section 7(a)(3); and (ii) for the Displacement
Product, the positive difference for a year determined by subtracting from the
Market Price of the Displacement Product the cost to the Purchaser of the
Displacement Product during each year pursuant to Section 7(a)(4).

"Risk Premium Revenues" shall mean the payments received by the District from
all Purchasers pursuant to Section 7(a)(5).

"Uncontrollable Forces" shall mean any cause reasonably beyond the control of
the Party and which the Party subject thereto has made reasonable efforts to
avoid, remove or mitigate, including but not limited to acts of God, fire,
flood, explosion, strike, sabotage, act of the public enemy, civil or military
authority, including court orders, injunctions, and orders of government
agencies with proper jurisdiction, insurrection or riot, an act of the elements,
failure of equipment or contractors, or inability to obtain or ship materials or
equipment because of the affect of similar causes on suppliers or carriers;
provided, however, that in no event shall an Uncontrollable Force excuse the
Purchaser from the obligation to pay any amount when due and owing under this
contract.

"Wanapum Development" shall mean the second stage of the Priest Rapids Project
as more fully described in Section 2.2 of District Resolution No. 474, which is
attached as Exhibit B, but shall not include any generation, transmission and
distribution facilities hereafter constructed or acquired by the District as
a part of the Electric System or the Priest Rapids Development, or any other
utility properties of the District acquired or constructed as a separate
utility system.

The following terms are defined in the cited sections of this contract:

     "Act of Default" at Section 22(a).
     "Annual Power Costs" at Section 6(a).
     "Committee" at Section 28.
     "Coverage Requirement" at Section 6(a)(9).
     "Displacement Product" at Section 3(b).
     "District Reserved Share" at Section 5(b)(3).
     "Estimated District Loads" at Section 5(b)(1).
     "Estimated Unmet District Loads" at Section 5(f).
     "Excess Costs" at Section 7(g).
     "Financing Costs" at Section 6(a)(3).
     "Idaho Cooperatives" at "Eligible Purchasers."
     "Improvements" at Section 5(j)(4).
     "New FERC License Costs" at Section 6(a)(6).
     "Party" and "Parties" at the Preamble.
     "PL 83-544 Orders" at Section 3(f).
     "Purchaser Actual Cost" at Section 7(g).
     "Purchaser Allocation of Pondage" at Section 9(d)(5).
     "Purchaser Estimated Cost" at Section 7(a)(8).

                                      -5-

<PAGE>
     "Purchaser Power Allocation" at Section 5(b)(4).
     "Purchaser Product Percentage of Displacement Product" at Section 3(b).
     "Purchaser Product Percentage of Surplus Product" at Section 3(a).
     "Purchaser Risk Premium" at Section 7(a)(5).
     "Refund Costs" at Section 7(g).
     "Replacement Contract" at Section 3(b).
     "Rock Island Hydroelectric Project" at Section 16(b).
     "Supplemental Displacement Product Agreement" at Section 3(b).
     "Surplus Product" at Section 3(a).

SECTION 3.  PRIEST RAPIDS PROJECT PRODUCTS AND PURCHASER PRODUCT PERCENTAGES;
REGULATORY APPROVALS.

Upon execution of this contract, Purchaser shall select a Purchaser Product
Percentage for each of the Priest Rapids Project Products described below;
provided, however, that Purchaser must select a Purchaser Product Percentage of
Surplus Product other than zero in order to select Purchaser Product Percentage
for Displacement Product. Each of the Purchaser Product Percentages selected may
be a difference percentage, and the Purchaser Product Percentages for
Displacement Product may be zero.

(a)  SURPLUS PRODUCT.  The District desires to market Priest Rapids Project
     Output that is surplus to its needs. To minimize the volatility of such
     marketing and in order to achieve stable retail rates, the District desires
     to market this surplus in a manner that the Purchaser assumes the
     uncertainty of future Priest Rapids Project Output, costs and market
     prices. To accomplish these objectives the District believes that the price
     for the Surplus Product should be at cost.

     The District shall sell to the Purchaser and the Purchaser shall purchase
     25 percent of Surplus Product ("Purchaser Product Percentage of Surplus
     Product"). The amount and cost of the Surplus Product is defined in
     Sections 5 and 6, respectively.

     (b)  DISPLACEMENT PRODUCT.  The District desires to enhance its success in
     obtaining a New FERC License by making available to other electric
     utilities in the Pacific Northwest benefits that would not otherwise be
     possible but for the Priest Rapids Project. For this purpose, the District
     may, pursuant to this contract, offer the Purchaser Priest Rapids Project
     Output that otherwise would be used by the District to meet Estimated
     District Loads but for capacity and energy acquired by the District from
     Displacement Resources.

     The District shall sell to the Purchaser and the Purchaser shall purchase
     25 percent of Displacement Product ("Purchaser Product Percentage of
     Displacement Product"). The amount and cost of Displacement Product is
     defined in Sections 5 and 6, respectively. The Displacement Product does
     not entail the resale of federal power available to the District.

     By notification to the District by October 1, 2005, the Purchaser may elect
     to have the District market the Purchaser Product Percentage of the
     Displacement Product pursuant to a supplementary agreement between the
     Purchaser and the District. The District will assign to the Purchaser the
     cost incurred by the District in marketing such Displacement Product.

                                      -6-

<PAGE>
     The District may at its discretion seek a resource to extend the
     availability of the capacity and energy identified in Exhibit A beyond 2011
     ("Replacement Contract"). If the District has determined to not seek a
     Replacement Contract, nevertheless upon the request of the Purchaser and
     after execution of an agreement or agreements ("Supplemental Displacement
     Product Agreement") by the District and all requesting Purchasers setting
     forth the term of the Replacement Contract, the product to be purchased,
     and the obligation of requesting Purchasers to pay the District an amount
     equal to any and all costs, charges, surcharges and penalties payable under
     such Replacement Contract, the District will use reasonable efforts to
     obtain a Replacement Contract. If such a Replacement Contract is obtained,
     an amount equal to the capacity and energy available thereunder will be
     offered to the Purchaser pursuant to the terms of this contract as the
     Displacement Product, subject to the terms of any Supplemental Displacement
     Product Agreement.

(c)  REALLOCATION. If collectively Purchasers subscribe to Purchaser Product
     Percentages for any Priest Rapids Project Product that total more than
     100%, either initially or at any time before the time limits set forth in
     Section 1(d), then Purchaser Product Percentages for such Priest Rapids
     Project Product will be determined as follows; provided, however, that the
     application of the following formula shall not result in the Purchaser
     being assigned a Purchaser Product Percentage larger than that included in
     this contract on the date of execution:

     (1) Step 1. Each such Priest Rapids Project Product will be divided between
         parties to the 1956 and 1959 Contracts, as a group, and the Idaho
         Cooperatives, as a group, in proportion to the number of retail
         electric customers located in the Pacific Northwest (determined by the
         number of retail meters) served by each group as of October 31, 2000.

     (2) Step 2. Each Purchaser Product Percentage of such Priest Rapids
         Project Product will be determined as follows:

         (A)For parties to the 1956 and 1959 Contracts, the proportion of such
            Priest Rapids Project Product from Step 1 above will be distributed
            to individual Purchasers as follows:

            (i)     For November 1, 2005 through October 31, 2009 the Surplus
                    Product shall be distributed in proportion to participation
                    in the 1956 Contract and the Displacement Product shall be
                    distributed in proportion to participation in the 1956
                    Contract and 1959 Contract weighted 25% and 75%,
                    respectively.
            (ii)    For the period after November 1, 2009 the Surplus Product
                    and Displacement Product shall be distributed in proportion
                    to the sum of participation in the 1956 Contract and 1959
                    Contract divided by two.
            (iii)   Notwithstanding any other provision of this contract, for
                    those Eligible Purchasers that sign this contract after
                    December 31, 2001, the Purchaser Product Percentage for the
                    Surplus Product and the Displacement Product may not exceed
                    the average of the Purchaser's Power Allocations, as those
                    terms are defined in the 1956 and 1959 Contracts, divided by
                    63.5 percent.
            (iv)    Notwithstanding any other provision of this contract, for
                    those Eligible Purchasers that sign this contract after
                    October 31, 2005, their participation in

                                      -7-
<PAGE>
                    the Priest Rapids Development shall be deemed to be zero for
                    purposes of determining their Purchaser Product Percentage
                    for the Surplus Product and the Displacement Product under
                    this contract.

          (B)For the Idaho Cooperatives, the proportion of such Priest Rapids
             Project Product from Step 1 will be distributed to individual
             cooperatives in proportion to the number of retail electric
             customers located in the Pacific Northwest (determined by number of
             retail meters) each cooperative served as of October 31, 2000.

(d) If the reallocation procedure of Section 3(c) is implemented, then for the
period November 1, 2005 through October 31, 2009, the following shall apply to
those Purchasers who were parties to the 1956 Contracts but were not parties to
the 1959 Contracts:

    (1) The Purchaser Product Percentage of Displacement Product shall be
        adjusted to be in proportion to participation in the 1956 Contract (the
        Purchaser's percent participation in the 1956 Contract divided by
        63.5%).
    (2) The District shall be obligated to provide the Displacement Product
        pursuant to Section 5 using the Purchaser Product Percentage of
        Displacement Product as calculated pursuant to Section 3(d)(1), and the
        Purchaser shall be obligated to make payments for the Displacement
        Product pursuant to Sections 6 and 7 using such Purchaser Product
        Percentage of Displacement Product.

    The adjustments to Purchaser Product Percentage of Displacement Product will
    have no effect on the Purchaser Product Percentage of any other Product
    hereunder, nor on the Purchaser Product Percentage of any other Purchaser.

(e) If a Contract with one of the Purchasers is terminated pursuant to Section
    22 as a result of such Purchaser's Act of Default, the District shall give
    the non-defaulting Purchasers notice of such default. Beginning with the
    first month that is at least 30 days following such notice, the Purchaser
    Product Percentages of Surplus and Displacement Products (other than zero)
    of non-defaulting Purchasers shall be increased pro rata until either: (i)
    the Purchaser Product Percentages of Surplus and Displacement Products of
    the defaulting Purchaser have been fully allocated or (ii) a further pro
    rata increase to the Purchaser Product Percentages of Surplus and
    Displacement Products of the non-defaulting Purchasers would adversely
    affect the tax-exempt status of any outstanding Debt. In the event of (ii),
    the portion of the Purchaser Product Percentages of Surplus and Displacement
    Products of the defaulting Purchaser not yet allocated will be offered to
    all Purchasers that can accept such allocation without adversely affecting
    the tax-exempt status of any outstanding Debt. If after such offer there
    remains some portion of the Purchaser Product Percentages of Surplus and
    Displacement Products of the defaulting Purchaser not yet allocated, the
    District, at its discretion may elect to accept such unallocated portion. If
    after all of the foregoing there remains unallocated Purchaser Product
    Percentages of Surplus and Displacement Products of the defaulting
    Purchaser, the Purchaser Product Percentages of Surplus and Displacement
    Products (other than zero) of non-defaulting Purchasers shall be increased
    pro rata based on each such non-defaulting Purchaser's Purchaser Product
    Percentages of Surplus and Displacement Products before any allocation under
    this Section 3(c). In the event that the allocation described in the
    immediately preceding sentence

                                      -8-
<PAGE>
     adversely affects the tax-exempt status of Debt, any increased costs
     resulting therefrom will be included in Annual Power Costs. Nothing in this
     subsection is intended to limit any claims the non-defaulting Purchasers
     may assert against the defaulting Purchaser.

(1)  REGULATORY APPROVALS. The District and the Purchaser believe that this
     contract fully complies with the requirements of Public Law 83-544. FERC
     has ordered that a Reasonable Portion of the Priest Rapids Project Output
     be offered for sale based on market principles and that Eligible
     Purchasers are to receive a meaningful priority. Additionally, FERC has
     stated that the District may negotiate power contracts as part of the
     license application process provided that implementation of such contracts
     is contingent on receipt of license authority. The District and the
     Purchaser agree that nothing in this contract limits in any way the
     District's ability to conform to these FERC requirements. Nothing in this
     contract, other than Section 8, limits the ability of the Purchaser from
     participating in any FERC or court proceedings that may address Public Law
     83-544.

     The Parties understand that FERC's orders of February 11, 1998 and June 12,
     1998 in Docket No. EL95-35 (the "PL 83-544 Orders") require the District,
     as part of its application for a New FERC License, to file the Marketing
     Plan for making available the Reasonable Portion in a fair, equitable and
     non-discriminatory manner pursuant to market-based principles and
     procedures. The Parties further understand and agree that nothing in this
     contract is intended to affect or limit in anyway the right of the District
     to develop and file the Marketing Plan which it determines is consistent
     with the PL 85-544 Orders.

     In the event that FERC or a court of competent jurisdiction shall by order
     determine that any provision of this contract violates a requirement of
     either PL 83-544 or of any of the PL 83-544 Orders, the Parties shall,
     within 30 days of the entry of such an order, commence negotiations for the
     purpose of reaching agreement on such amendments to this contract, if any,
     as may be needed for the purpose of complying with that order and for the
     purpose of preserving the basic benefits and obligations of the Parties.
     If, within 90 days of commencement of negotiations, the Parties are not
     able to resolve their differences and to agree upon any necessary
     amendments, either Party may, after notice to the other Party, cause the
     matter to be submitted to binding arbitration as provided in Section 28.

     If following the issuance of the arbitration decision, a Party reasonably
     determines that acceptance of such amendments will result in materially
     decreased benefits or materially increased obligations when compared to
     this contract, the Party may by notice to the other Party explain its
     reasons for the determination and, if given within 10 days of the
     arbitration decision, terminate this contract.

SECTION 4. TREATMENT OF THE SALE OF THE REASONABLE PORTION.

Pursuant to the PL 83-544 Orders, the Reasonable Portion must be offered for
sale. Purchaser has no claim or right under this contract to receive any of the
Reasonable Portion, or any proceeds from the sale thereof; provided, however,
that nothing in this contract shall be interpreted as prohibiting the District
and the Purchaser from entering one or more separate agreements regarding the
Reasonable Portion and the disposition of the proceeds of the sale of the
Reasonable Portion.

                                      -9-
<PAGE>
SECTION 5.     DETERMINATION OF PRODUCT AVAILABILITY, DISTRICT RESERVED \
               SHARE AND RISK PREMIUM.

(a)  The Priest Rapids Project Products available to Purchaser during each
     Contract Year will be determined by the sequential application of the
     following provisions of this Section 5 (i.e., Section 5(b), then Section
     5(c), then Section 5(d), etc.).

(b)  For the purpose of determining the estimated amount of Surplus Product to
     be made available to the Purchaser, on or before 30 days prior to the
     beginning of each Contract Year, the District shall prepare and mail to the
     Purchaser a pro forma statement showing for the next Contract Year:

     (1)  "Estimated District Loads," which shall mean all projected retail
          electric energy loads for the next Contract Year based on average
          weather conditions, plus aggregated losses, projected to be used at
          locations served by the District during the next Contract Year with
          the exception of (i) locations outside of the geographic boundaries
          shown on Exhibit C and (ii) that portion of loads of individual retail
          customers that during a consecutive 12 month period after 2000 exceed
          by ten average megawatts or more the energy load of such customer for
          the immediately preceding consecutive 12 month period. Once load at a
          location is included in Estimated District Loads, loads at such
          location shall continue to be included in full in future Contract
          Years without regard to the source of supply for such load. For
          example, if a load is expected to be served in all or part by an
          entity other than the District during the next Contract Year, the
          entire load shall continue to be included in Estimated District Loads.
          If a new load or increased load of one average megawatt or more at a
          single retail customer has been included in Estimated District Loads
          in the current Contract Year, and less than 90% of such new or
          increased load was actually measured in the current year, then
          Estimated District Loads shall be reduced for the next Contract Year
          by the difference between the amount included in the current Contract
          Year and the amount measured. If there are more than one such new or
          increased loads for the current Contract Year, they shall be combined
          for determining both the 90% and the amount of any reduction. If in
          the current Contract Year a load of one average megawatt or more is
          placed on the District which was not included in the current Contract
          Year's Estimated District Loads, then the next Contract Year's
          Estimated District Loads shall be increased by the amount of such load
          measured in the current Contract Year. Except for such load correction
          calculations, Estimated District Loads for the next Contract Year
          shall be not less than the current Contract Year's Estimated District
          Loads.

     (2)  Estimated amount of firm energy from the Priest Rapids Project for the
          next Contract Year based on critical water planning using the
          procedures of Operating Agreements in effect on October 31, 2000,
          unless the District and Purchasers whose Purchaser Product Percentages
          of Surplus Product total 66% or more mutually agree to use procedures
          from a subsequent Operating Agreement.

     (3)  The "District Reserved Share" for the next Contract Year shall be; (A)
          prior to November 1, 2009, the smaller of; (i) the ratio of Estimated
          District Loads from

                                      -10-
<PAGE>
          Section 5(b)(1) less the District's 36.5% of the estimated firm energy
          output of the Wanapum Development, to the estimated firm energy
          output of the Priest Rapids Development from Section 5(b)(2),
          expressed as a percentage or (ii) 100% minus the Reasonable Portion;
          and (b) on and after November 1, 2009, the smaller of: (i) the ratio
          of Estimated District Loads from Section 5(b)(1) to the estimated firm
          energy output of the Priest Rapids Project from Section 5(b)(2),
          expressed as a percentage or (ii) 100% minus the Reasonable Portion.

     (4)  The "Purchaser Power Allocation" shall be the product of: (i) 100%
          minus the sum of the District Reserved Share as determined in Section
          5(b)(3) and the Reasonable Portion and (ii) the Purchaser Product
          Percentage of the Surplus Product.

(c)  During each Contract Year, the District shall have available for its use
     and shall take the District Reserved Share multiplied by the actual Priest
     Rapids Project Output. The District shall have the unilateral right,
     without obligation to the Purchaser, to use Priest Rapids Project Output
     resulting from the District Reserved Share for any purpose. In no event
     shall the Purchaser have any right under this contract to any portion of
     the District Reserved Share of Priest Rapids Project Output or the
     associated revenues. The District may use the District Reserved Share of
     the non-firm portion of the actual output of the Priest Rapids Project in
     any manner the District deems appropriate, and shall have no obligation to
     use such non-firm portion to serve the District's retail loads during any
     Contract Year.

(d)  The Surplus Product available to the Purchaser in each Contract Year shall
     be the actual Priest Rapids Project Output multiplied by the Purchaser
     Power Allocation from Section 5(b)(4).

(e)  For the purpose of determining the estimated amount of Displacement Product
     to be made available to the Purchaser, on or before 30 days prior to the
     beginning of each Contract Year, the District shall prepare and mail the
     Purchaser a pro forma statement showing for the next Contract Year the
     estimated amount of capacity and energy from Displacement Product.

(f)  The monthly amount of "Estimated Unmet District Load" shall be determined
     as the Estimated District Load as calculated in Section 5(b)(1), less the
     estimated firm Priest Rapids Project Output from Section 5(b)(2). The
     difference so determined will be shaped on a monthly basis using the
     District's historic load patterns.

(g)  In those Contract Years when there is Estimated Unmet District Load
     forecasted pursuant to Section 5(f), the District shall be entitled to take
     and shall take from the Displacement Product that is not subject to a
     Supplemental Displacement Product Agreement pursuant to Section 3(b) an
     amount equal to the Estimated Unmet District Load from Section 5(f).

(h)  The Purchaser shall have available for its use and shall take Displacement
     Product equal to the actual Displacement Resource available during the
     Contract Year minus the amount of Displacement Resource used by the
     District in such Contract Year as determined in Section 5(g), multiplied by
     the Purchaser Product Percentage of Displacement Product; provided,
     however, if the Purchaser has elected to have the District make sales
     pursuant to

                                      -11-
<PAGE>
          Section 3(b), then Purchaser will receive proceeds from such sales as
          set forth in Section 10 in lieu of the amounts of capacity and energy
          described in this Section 5(h).

     (i)  On or before 30 days prior to the beginning of each Contract Year, the
          District shall prepare and mail the Purchaser a pro forma statement
          showing for the next Contract Year an estimate of the Purchaser Risk
          Premium to be paid by the Purchaser, using a Risk Premium calculated
          with a Market Price determined by the District not more than 60 days
          prior to the start of the next Contract Year by reference to published
          future price data for the next Contract Year, and the applicable
          percentage from Section 7(a)(5).

     (j)  Deliveries of Priest Rapids Project Products may be reduced if the
          District does not obtain an Annual FERC License or New FERC License,
          or under any of the following conditions as determined by the
          District:

          (1)  Pursuant to Sections 5 or 9.

          (2)  If the District is unable to deliver Priest Rapids Project
               Products to the Purchaser due to Uncontrollable Forces.

          (3)  If failure to reduce deliveries, together with deliveries to all
               other Purchasers and deliveries to the District, would result in
               exceeding the capability of the Priest Rapids Project or subject
               it or its operation to undue hazard or violate the FERC
               License, any applicable law, regulation, or Operating Agreement.

          (4)  In case of emergencies or in order to install equipment in, make
               repairs to, make betterments, renewals, replacements, and
               additions to ("Improvements"), investigations and inspections of,
               or perform other maintenance work on the Priest Rapids Project.

          The District will use its reasonable efforts to give advance notice to
          the Purchaser regarding any planned interruption or reduction, giving
          the reason therefor and stating the probable duration thereof.

     (k)  Notwithstanding any other Section of this contract, if the Priest
          Rapids Project is capable of producing Priest Rapids Project Output,
          but the amount of each Priest Rapids Project Product to be made
          available to the Purchaser is projected to be zero for a Contract
          Year, the Purchaser may give the District written notice, no later
          than 100 days after the start of the Contract Year, that the Purchaser
          elects to terminate this contract. In such event, this contract shall
          terminate effective upon receipt of such written notice by the
          District.

SECTION 6. ANNUAL POWER COSTS.

     (a)  "Annual Power Costs" as used in this contract shall include, for the
          Priest Rapids Development beginning November 1, 2005 and for the
          Priest Rapids Project beginning November 1, 2009, all of the
          District's costs and expenses of every type, both direct and indirect,
          resulting from the ownership, operation, maintenance of and
          Improvements that are incurred or paid by the District during each
          Contract Year and that are incurred consistent

                                      -12-
<PAGE>
with Prudent Utility Practice. Such costs and expenses shall for any Contract
Year include, but not be limited to the following, in each case without
duplication:

(1)  All operations, costs, maintenance costs, administrative costs, taxes, in
     lieu of tax payments relating to production and delivery of Priest Rapids
     Project Output (excluding depreciation) including, but not limited to,
     those specified in the Uniform System of Accounts as prescribed by the FERC
     for electric utilities and licensees.

(2)  Amounts that the District determines are needed to pay for the prevention
     or correction of any loss or damage and for Improvements to keep the
     Priest Rapids Project in good operating condition. Subject to Section 28,
     the Purchaser agrees that the District shall have the sole right to
     determine what costs and expenses shall be incurred in connection with the
     ownership, operation, and maintenance of and Improvements to the Priest
     Rapids Project.

(3)  Subject to Section 6(c), interest that accrues and is payable into the
     debt service fund with respect to outstanding Debt; principal that accrues
     and is payable into the debt service fund with respect to outstanding
     Debt, whether at maturity or by reason of redemption (including premiums
     for redeeming Debt prior to its scheduled maturity), amounts required to
     restore any reserve accounts maintained to secure Debt to the level
     required by the resolution authorizing the Debt and Financing Costs.
     "Financing Costs" include, but are not limited to, discounts, insurance
     premiums, letter of credit fees, costs of hedging interest rates, costs of
     compliance with disclosure requirements, legal and bond counsel fees,
     independent auditors, printing, financial advisor, bond registrar and
     trustee costs.

(4)  Subject to Section 6(c), costs of creating and replenishing any reserve or
     contingency fund required to be maintained by any Bond Resolutions and
     working capital funds.

(5)  Any liability or cost, including settlements and judgments, incurred as a
     result of or related to the ownership, operation or maintenance of the
     Priest Rapids Project and not covered by insurance.

(6)  Costs incurred by the District in applying for a New FERC License as
     recorded on the District's books of account for the Priest Rapids Project
     (account number 183090), including but not limited to those costs and
     interest expenses incurred before November 1, 2005 ("New FERC License
     Costs"). New FERC License Costs incurred prior to November 1, 2005 will be
     recovered uniformly over a 15-year amortization period commencing with the
     Contract Year starting on January 1, 2006. The estimated New FERC License
     Costs incurred by the District after November 1, 2005 will be included in
     Annual Power Costs. In the event of termination of this contract for any
     reason subsequent to the effective date of the New FERC License, the
     Purchaser shall pay the District an amount equal to the unrecovered New
     FERC License Costs multiplied by the Purchaser Power Allocation at the
     time of termination. In the event of termination of this contract for any
     reason prior to the effective date of the New FERC License, Purchaser
     shall have no liability for unrecovered New FERC License Costs.

                                      -13-
<PAGE>
     (7) Obligations entered into by the District as part of its effort to
         obtain a New FERC License, including but not limited to the cost of
         replacing Priest Rapids Project Products that may be committed in such
         obligations.

     (8) Cost incurred by the District to fulfill obligations, if any, to
         parties to the 1956 and 1959 Contracts who do not sign this contract,
         as such costs are required or approved by a court, or reasonably
         approved by the District after notice to the Purchaser.

     (9) An amount equal to 15% of debt service in that Contract Year or such
         higher amount as may be required by a Bond Resolution ("Coverage
         Requirement").

(b) The District shall credit against Annual Power Costs the following:

     (1) Any insurance or other proceeds received by the District as
         reimbursement for damages, losses, costs or expenses included in the
         Annual Power Costs, and any insurance or other proceeds received as a
         result of the interruption or reduction of Priest Rapids Project
         Output.

     (2) Revenue, if any, received from obligations entered into by the District
         as part of its effort to obtain a New FERC License.

     (3) Revenue, if any, received as a result of the District fulfilling
         obligations to parties to the 1956 or 1959 Contracts that do not sign
         this contract, pursuant to Section (I)(b) of those contracts, excluding
         revenue required to be paid pursuant to the 1959 Contract.

     (4) The Coverage Requirement, to the extent that it is not expended during
         a Contract Year for capital or other costs of the Priest Rapids Project
         (the amount not spent shall be credited against Annual Power Costs for
         the following Contract Year).

     (5) Interest earnings on funds of the Priest Rapids Project that are not
         required to be retained by such fund by a Bond Resolution.

     (6) An estimate of the cost of the Reasonable Portion, which shall be an
         amount equal to the product of the Reasonable Portion and the Annual
         Power Costs.

(c) Costs directly or indirectly associated with the District's Electric System
    or any other separate system of the District shall not be part of Annual
    Power Costs other than the payment of Debt held by the Electric System.

(d) Any payment received by the District as a result of the taking of the whole
    or any portion of the Priest Rapids Project Output by any state or federal
    government agency shall be used by the District to credit Annual Power Costs
    or to retire, at or prior to maturity, Debt, whichever shall be proper under
    the circumstances existing at the time of the taking.

                                      -14-
<PAGE>
(c) The Purchaser agrees that the District shall have the sole discretion to
    determine what portion, if any, of the Priest Rapid Project financing will
    be accomplished by issuance of Debt and the terms and covenants of any Debt.

    (1) To the extent that the District makes Improvements to the Priest Rapids
        Project that are not financed by Debt proceeds, Annual Power Costs will
        include a cost as determined by the following: the District shall
        determine all of the Improvements anticipated for the Priest Rapids
        Project for the Contract Year and the District shall estimate the
        weighted average economic service life of the Improvements, and shall
        calculate a weighted average market interest rate assuming the District
        were to issue Debt to finance such Improvements, both as reasonably
        determined by the District. Based on such calculations the District
        shall include in Annual Power Costs an amount sufficient to amortize the
        costs (including both interest and principal pursuant to this Section
        6(e)(1)) of such Improvements on a level basis over a period equal to
        the estimated weighted average economic service life of the
        Improvements. The amortization period for any Improvements shall not
        exceed 30 years and land shall be deemed to have a service life of 30
        years. The District may adjust prospectively the amortization of any
        Improvements to reflect the actual costs of such Improvements, to
        correct any error in computation or to reflect a material change in the
        District's estimate of the average economic life of the Improvements.
        The District shall not be required to amortize capital expenditures that
        are estimated to cost below the amount that in accordance with the
        District's capitalization policy are not required to be capitalized and
        may include such costs in Annual Power Costs.

    (2) To the extent that the District issues Debt (i) with a final maturity
        that is not earlier than the expiration of the estimated weighted
        average service life of the Improvements, to be financed with the Debt
        and (ii) the total annual amounts required for the payment of interest,
        principal and sinking fund requirements of such Debt when due in a
        Contract Year do not vary by more than 10% from those required in any
        other Contract Year, then Annual Power Costs shall include the actual
        principal and sinking fund requirements that accrues and is payable into
        the debt service fund for that Debt for the Contract Year. To the extent
        that the District issues Debt that does not meet the requirements of (i)
        and (ii) in the prior sentence, then Annual Power Costs will include,
        with respect to such Debt, an amount as determined by the District as of
        the date of issuance of the Debt, sufficient to amortize the original
        principal amount of such Debt on a level debt service basis over a
        period equal to the estimated weighted average economic service life of
        the Improvements financed or refinanced by such Debt, commencing on the
        later of (a) the date of issuance of the Debt or (b) the in service date
        of such Improvements, and based on an interest rate equal to, at the
        election of the District, either (i) the weighted average interest rate
        of the Debt or (ii) the weighted average market rate at the time of
        issuance of the Debt for debt with similar terms and borrowers similar
        to the District, as reasonably determined by the District. The
        amortization period for any Debt shall not exceed 30 years, land shall
        be deemed to have an economic useful life of 30 years, and any Debt
        proceeds deposited into a reserve account shall be credited against
        Annual Power Cost in the final year of the Debt. The District may adjust
        prospectively the amortization of the principal amount of any Debt to
        correct any error in computation or to reflect a material

                                      -15-

<PAGE>
          change in the District's reasonable estimate of the in service date
          or the average economic life of the Improvements.

     (3)  To the extent that the District creates or replenishes reserve and
          contingency funds required by Bond Resolutions or working capital
          funds that are not financed by Debt proceeds, Annual Power Costs will
          include a cost determined in a manner analogous to the calculation in
          Section 6(e)(2) with such amounts amortized over 15 years. Upon
          termination of this contract, any such funds will belong to the
          District.

(f)  On or prior to July 31st of each year, for budgetary purposes only and not
     for determining Priest Rapids Project Products or Purchaser's payment
     obligations under this contract, the District shall provide the Purchaser a
     pro forma budget showing an estimate of Annual Power Costs, Priest Rapids
     Project Output, and Estimated District Loads for the following Contract
     Year.

SECTION 7. PAYMENT FOR PRIEST RAPIDS PROJECT PRODUCTS AND RISK PREMIUM.

(a)  On or before 30 days prior to the beginning of each Contract Year beginning
     in 2005, the District shall prepare and mail the Purchaser a pro forma
     statement for the next Contract Year showing:

     (1)  An estimate of Annual Power Costs specifically assigned to the
          Purchaser. Specific assignment shall occur whenever a Purchaser or a
          group of Purchasers cause identifiable costs to be placed on the
          Priest Rapids Project, including but not limited to increased interest
          costs of Debt that can not be issued as tax-exempt because of the
          Purchaser's expected use of any Priest Rapids Project Product or
          violation of Section 24(b).

     (2)  A detailed estimate of the Annual Power Costs, less those costs
          specifically assigned in section 7(a)(1), for the Contract Year.

     (3)  An estimate of the cost to the Purchaser of the Surplus Product, which
          shall be an amount obtained by multiplying the estimated Annual Power
          Costs from section 7(a)(2) by the Purchaser Power Allocation
          calculated in section 5(b)(4).

     (4)  An estimate of the cost to the Purchaser of the Displacement Product,
          which shall be the cost, including the costs of transmission and
          necessary services, to the District of acquiring Displacement
          Resources multiplied by the ratio of the Displacement Product
          available to Purchaser determined pursuant to Section 5(h) and the
          total Displacement Resource determined pursuant to Section 5(h).

     (5)  An estimate of the "Purchaser Risk Premium" to be paid by Purchaser
          equal to the product of the Risk Premium determined pursuant to
          Section 5(i) and the applicable percentage determined as follows:

          (A)  The applicable percentage is zero if the Purchaser has executed
               this contract on or before December 31, 2001 or, in the case of
               the City of Forest Grove, McMinnville,

                                      -16-
<PAGE>
               Milton-Freewater or Seattle City Light, has provided to the
               District written assurances on or before December 31, 2001 that
               the superintendent or city manager supports this contract and
               will so recommend to its respective city council and this
               contract is executed on or before March 31, 2002 in the case of
               Seattle City Light, and on or before February 1, 2002, in the
               case of Forest Grove, McMinnville or Milton-Freewater.
          (B)  If Purchaser executed this contract after December 31, 2001, but
               on or before December 31, 2002, the applicable percentage is 25
               percent.
          (C)  If Purchaser executed this contract after December 31, 2002, but
               on or before December 31, 2003, the applicable percentage is 50
               percent.
          (D)  If Purchaser executed this contract after December 31, 2003, but
               on or before December 31, 2004, the applicable percentage is 75
               percent.
          (E)  If Purchaser executed this contract after December 31, 2004, but
               on or before December 31, 2009, the applicable percentage is 100
               percent.
          (F)  If Purchaser has violated any provision of Section 8, the
               applicable percentage is 100 percent.

     (6)  If the percentage of Risk Premium applicable to Purchaser, pursuant to
          Section 7(a)(5), is zero, Purchaser shall be entitled to a credit
          against Purchaser Estimated Cost equal to the sum of:

          (A)  The product of the Purchaser Product Percentage of Surplus
               Product as set forth in Section 3(a) (or as reallocated pursuant
               to Section 3(c) or (d) among Purchasers with a Risk Premium
               percentage of zero) and the Risk Premium Revenues from the
               Surplus Product.
          (B)  The product of the Purchaser Product Percentage of the
               Displacement Product as set forth in Section 3(b) (or as
               reallocated pursuant to Section 3(c) or (d) among Purchasers with
               a Risk Premium percentage of zero) and the Risk Premium Revenues
               from the Displacement Product.

          The District shall retain for its own use any Risk Premium Revenues
          that are not allocated pursuant to Section 7(a)(6).

     (7)  An estimate of the cost to the District of selling capacity and energy
          using the Displacement Product, as elected by the Purchaser pursuant
          to Section 3(b).

     (8)  The sum of amounts (expressed in dollars) calculated pursuant to
          Sections 7(a)(1), (3), (4), (5) and (6), hereinafter referred to as
          the "Purchaser Estimated Cost."

     (9)  The amount of the monthly payments to be made by the Purchaser to pay
          the Purchaser Estimated Cost during the next Contract Year.

(b)  The pro forma statement provided pursuant to Section 7(a) shall be in lieu
     of the issuance of monthly bills to the Purchaser by the District, and the
     Purchaser shall be obligated to pay the monthly amounts contained therein
     in accordance with this Section 7.

                                      -17-
<PAGE>
(c)  In the event of receipts or payments substantially affecting the Annual
     Power Costs during any Contract Year, the District shall prepare and mail
     to the Purchaser a revised statement of estimated Annual Power Costs and
     Purchaser Estimated Cost, which revised statement shall supersede any
     previous statement or revised statement, and the Purchaser shall be
     obligated to make monthly payments set forth on such revised statement for
     the balance of the Contract Year.

(d)  Purchaser Estimated Cost shall continue to accrue and the Purchaser shall
     make payment for the same up to the time of termination of this contract
     for whatever reason, irrespective of the condition of the Priest Rapids
     Project and whether or not it is capable of producing Priest Rapids Project
     Products. If the Priest Rapids Project is not capable of producing Priest
     Rapids Project Products, then the Purchaser Estimated Cost will be based on
     Priest Rapids Project Output in the last full year of operation. In this
     event, at the request of the Purchaser, the District will make its
     reasonable best efforts to acquire replacement Priest Rapids Products the
     cost of which will be added to the Purchaser Estimated Cost.

(e)  The monthly payments of Purchaser Estimated Costs set forth in the
     statement or revised statement shall be due and payable by electronic funds
     transfer to the District's account, designated in writing by the District,
     on the 20th calendar day of each month.

(f)  If payment in full of any monthly payment amount set forth on a statement
     or revised statement is not received by the District on or before the close
     of business on the 20th day of the month, a delayed payment charge of 2% of
     the unpaid amount due will be made. Any bill which remains unpaid for more
     than 30 days after the due date shall, in addition to the delayed payment
     charge, accrue interest at the lesser of 1.5% per month or the maximum rate
     allowed by law. If the 20th calendar day of the month is a Saturday, Sunday
     or a District recognized holiday, the next following business day shall be
     the last day on which payment may be received without the addition of the
     delayed-payment charge. Additionally, if payment due to the District under
     this Section 7 remains unpaid 30 days after the due date, the District may
     thereafter suspend delivery of Priest Rapids Project Products to the
     Purchaser which would otherwise occur until payment in full of all amounts
     due and owing (including any interest and delay charges) is received by the
     District.

(g)  On or before 150 days after the end of each Contract Year, the District
     will submit to the Purchaser a detailed statement of the Purchaser
     Estimated Cost and the Purchaser Actual Cost for the Contract Year.
     "Purchaser Actual Cost" on such statement shall be calculated in the same
     manner as Purchaser Estimated Cost as set forth in Sections 7(a)(1)-(7) but
     using the actual costs incurred by the District in the preceding Contract
     Year; provided, however, that the estimated values calculated pursuant to
     Sections 5(b)(1)-(2) shall not be modified. If the Purchaser Actual Costs
     exceed the Purchaser Estimated Costs on such statement ("Excess Costs"),
     the District shall bill the Purchaser for an amount equal to such Excess
     Costs, and the Purchaser shall pay such bill within 30 days or be subject
     to the delayed-payment and interest charges as provided in Section 7(f). If
     the Purchaser Actual Costs are less than the Purchaser Estimated Costs, or
     if credits are due pursuant to Section 6(b)(1)-(5) or both ("Refund
     Costs"), the District shall give credit to the Purchaser against the
     Purchaser Estimated Costs for the current Contract Year in an amount equal
     to such Refund Costs;

                                      -18-
<PAGE>
     provided, that if Refund Costs are due to Purchaser following the
     expiration of this contract, the District shall make a cash refund of such
     amount to the Purchaser.

(h)  The District may use any payments received from the Purchaser under this
     contract in any manner that the District, in its sole discretion, shall
     determine. The District agrees to pay or cause to be paid for the Priest
     Rapids Project from lawfully available money of the District, including
     payments from the Purchaser and other Purchasers, all the operating costs,
     taxes and assessments, capital expenditures, payments required for Debt and
     other costs of the Priest Rapids Project. If the District issues tax-exempt
     Debt based on the governmental use of the Priest Rapids Project Output by
     the Purchaser, the Purchaser covenants that it shall not use any Priest
     Rapids Project Output in a manner, or take any other action, that will or
     is likely to adversely affect the tax-exempt status of any Debt.

SECTION 8. SUPPORT AND COOPERATION.
(a)  The District shall make application and use reasonable efforts to obtain a
     New FERC License and obtain FERC approval of this contract, if required.
     The District reserves the right to determine when such applications should
     be made.

(b)  In accordance with FERC direction contained in the PL 83-544 Orders, the
     District commits to providing the Eligible Purchasers with a meaningful
     priority in the sale of the Reasonable Portion.

(c)  Purchasers may also participate in the development by the District of a
     proposed Marketing Plan. This Marketing Plan will be submitted to FERC for
     approval as part of the relicensing process application; provided,
     however, that nothing in this Section shall be construed as compelling the
     Purchaser to comment on or refrain from commenting on the Marketing Plan.

(d)  Purchaser covenants that it shall provide reasonable support, cooperation
     and assistance to the District in the District's acquisition of a New and
     Annual FERC License, any necessary federal, state or local permits
     relating to the Priest Rapids Project, FERC approval of this contract, if
     FERC approval is requested by the District; provided, however, that
     nothing in this contract shall preclude the Purchaser from filing comments
     with FERC to protect the Purchaser's economic benefits provided by this
     contract.

(e)  In the event that the District believes that the Purchaser has violated
     any of the above covenants of Section 8(d), the District may by written
     notice to the Purchaser describe the alleged violation in reasonable
     detail and give the Purchaser no less than 10 business days within which
     to cease the activity in question or to provide to the District a written
     explanation as to why the Purchaser believes the activity does not
     constitute a violation of any of the aforementioned covenants. If the
     Purchaser does not cure the alleged default and the District continues to
     consider the action to be in breach of the covenants, the matter shall be
     resolved pursuant to arbitration conducted under Section 28. If the
     Purchaser is determined to be in breach of the covenants, the District
     shall have the right to terminate this contract effective immediately upon
     written notice to the Purchaser, without any liability or further
     obligation on the part of the District. In the event of such termination,
     the District

                                      -19-
<PAGE>
     shall have the right to use or sell, in any manner the District determines,
     any Priest Rapids Project Product the Purchaser would have been otherwise
     entitled to under this contract.

(f)  Purchaser covenants that it shall refrain from filing or supporting any
     FERC license application for the Priest Rapids Project other than that
     filed by the District and refrain from filing or supporting any effort that
     would lead to modification of the FERC decisions on Public Law 83-544
     contained in the PL 83-544 Orders, unless such a request or petition is
     filed by the District and the Purchaser agrees with that request or
     petition. For purposes of this Section 8(f), "refrain from supporting"
     means prepare no documents, sign no other agreement or contract other than
     this contract for Priest Rapids Project Output or for other products or
     that is contingent upon an entity other than the District receiving a
     license from FERC to operate the Priest Rapids Project, submit no
     testimony, engage in no lobbying and provide no funding.

(g)  The Purchaser covenants that it will not take any action which, in the
     opinion of a neutral third party, would likely be construed as: (i) having
     a material adverse effect on the District's ability to obtain an Annual
     FERC License or a New FERC License or the anticipated economic benefits of
     this contract or (ii) constituting a judicial challenge to the authority of
     the District or the Purchaser to enter into and implement the provisions of
     this contract. This covenant does not apply to anticipated economic
     benefits under other agreements between the District and third parties,
     such as with the Bonneville Power Administration.

(h)  In the event that the District believes that the Purchaser has violated any
     of the above covenants of Section 8(f) or (g), the District may by written
     notice to the Purchaser describe the alleged violation in reasonable detail
     and give the Purchaser no less than 4 business days after receipt of such
     written notice by Purchaser within which to cease the activity in question
     or to provide to the District a written explanation as to why the Purchaser
     believes the activity does not constitute a violation of any of the
     aforementioned covenants. If the Purchaser does not cure the alleged
     default and the District continues to reasonably consider the action to be
     in breach of the covenants, the District shall have the right to terminate
     this contract and the 1956 and 1959 Contracts, effective immediately upon
     written notice to the Purchaser, without any liability or further
     obligation on the part of the District. In the event of such termination,
     the District shall have the right to use or sell, in any manner the
     District determines, any Priest Rapids Project Product the Purchaser would
     have been otherwise entitled to under this contract and any output from the
     Priest Rapids Project under the 1956 or 1959 Contracts.

SECTION 9. SCHEDULING OF DELIVERIES OF SURPLUS AND DISPLACEMENT PRODUCTS.

(a)  This Section 9 shall apply only to the scheduling of the Surplus and
     Displacement Products.

(b)  It is the intent of the Parties that Priest Rapids Project Output shall be
     fully coordinated with other resources available to the Purchaser and with
     the resources of other Purchasers and that the operation of the Priest
     Rapids Project shall be consistent with existing Operating Agreements
     unless mutually agreed to by the Parties. If provisions of this Section 9
     conflict with the provisions of any Operating Agreement to which both the
     District and the Purchaser

                                      -20-
<PAGE>
    are parties, the conflicting provisions of such Operating Agreement shall
    prevail. Scheduling of Priest Rapids Project Output shall be as requested by
    the Purchaser, acting singly or as a member of a group of Purchasers,
    subject to the limitations set forth in this contract.

(c) The Purchaser, acting singly or as a member of a group of Purchasers, shall
    make available to the District each normal working day, in conformance with
    then prevailing scheduling procedures for scheduling Pacific Northwest
    generating resources, hourly schedules of desired Surplus Product deliveries
    for the following day or days. The schedules will be completed in a time
    frame consistent with standard industry practices in the Pacific Northwest.
    Such schedule shall be based upon the probable water supply to the Priest
    Rapids Project (inflows) and the resulting probable output. Revisions in the
    schedule may be made at any time upon the request of the Purchaser if
    required by changes in estimated river flows or system loads. Deviations
    from schedules shall be held to a minimum by the District and corrected for
    as promptly as practicable on an hourly basis under conditions as nearly
    equivalent as practicable to those occurring when the deviations occurred.
    Alternatively, the Purchaser may provide scheduling information via a
    dynamic electronic signal.

(d) The schedules for Surplus Product requested by the Purchaser shall be in
    accordance with the following:

    (1) The net hourly schedule for delivery or spill shall be within the
        limitations of the Purchaser Power Allocation and the Purchaser Power
        Allocation of the minimum discharge as determined by the District.

    (2) The District shall make all determinations concerning the Priest Rapids
        Project maximum output and minimum discharge; the District shall have
        the unilateral right to determine the maximum allowable amount of change
        in Priest Rapids Project Output during any time period and the maximum
        number of unit starts and stops allowable during any time period. Such
        operating guidelines will be reviewed annually with the Purchaser. The
        District will consider suggestions by the Purchaser, then make its final
        determination consistent with Prudent Utility Practice. The Purchaser
        shall schedule Priest Rapids Project Output requests within such
        guidelines.

    (3) Each Purchaser's schedule shall not be less than the Purchaser Power
        Allocation of the minimum operating capability of the Priest Rapids
        Project; provided, however, that if at times one or more Purchasers
        schedule more than their Purchaser Power Allocation of the minimum
        operating capability of the Priest Rapids Project, the Purchasers that
        have scheduled their Purchaser Power Allocation of such minimum
        operating capability may reduce their schedules during such times
        subject to meeting the minimum operating requirements of the Priest
        Rapids Project.

    (4) Subject to Section 5(j), the Purchaser shall be entitled to a share of
        the Priest Rapids Project Output each hour, determined by multiplying
        the total Priest Rapids Project inflows by the Purchaser Power
        Allocation.

                                      -21-

<PAGE>
     (5) In addition to Priest Rapids Project Output available under Section
         9(d)(4), the Purchaser shall be entitled to a share of the pondage
         available at the Priest Rapids Project (the "Purchaser Allocation of
         Pondage"), determined by multiplying the total of the pondage available
         by the Purchaser Power Allocation. The pondage available at the Priest
         Rapids Project shall be determined by the District as the volume of
         water that can be stored between the then current maximum forebay
         elevation and the then current minimum forebay elevation.

     (6) The District will establish and maintain for Purchaser a pondage
         account that will reflect the use of pondage by the Purchaser. The
         Purchaser may schedule more or less than its share of the Priest Rapids
         Project inflows determined in accordance with Section 9(c) by
         scheduling from or to such pondage account. The aggregate amount of the
         energy scheduled from the pondage account shall not exceed the
         Purchaser Allocation of Pondage determined in accordance with Section
         9(d)(5) and scheduling by the Purchaser to its pondage account shall be
         only against its prior accumulated pondage draft.

     (7) During any hour that spill is occurring at the Priest Rapids Project in
         order to control the forebay elevation, the spill shall first reduce
         the inflow of each of the Purchasers whose pondage account is overfull
         proportionate to the amount of the overfill, but not exceeding the
         amount of the overfill. If unallocated spill remains, it shall next be
         allocated to reduce the inflow of each of the Purchasers whose request
         for generation is less than its entitlement during the hour, in
         proportion to the amount by which its request is less that its
         entitlement. Any remaining unallocated spill shall be allocated to
         reduce the inflow of all Purchasers in proportion to each Purchaser
         Power Allocation.

     (8) During any hour that spill is occurring at the Priest Rapids Project
         for fish or any other non-power purpose determined necessary or
         desirable by the District, the spill shall be allocated to reduce the
         inflow of all Purchasers in proportion to each Purchaser Power
         Allocation.

     (9) The District has the right to operate the Priest Rapids Project in such
         manner as it deems to be in its best interests so long as the same is
         consistent with the FERC License, applicable laws and regulations,
         Prudent Utility Practice and this contract.

    (10) The District shall have the unilateral right to restrict deliveries
         hereunder as may be necessary to fulfill any non-power regulatory or
         other legal requirements and shall have the unilateral right to
         determine the amounts of spill required at the Priest Rapids Project.

(c) The Displacement Project shall be scheduled to the Purchaser by the
District from the Priest Rapids Project on the same basis that the capacity and
energy from the Displacement Resource is scheduled to the District. The
Purchaser may request an alternative schedule for the delivery of the
Displacement Product, and the District will agree to such request if the
District reasonably determines that doing so will not result in financial loss
or operational harm to the District.

                                      -22-

<PAGE>
SECTION 10.  PAYMENT OF PROCEEDS FROM THE SALE OF DISPLACEMENT PRODUCT.

If the Purchaser has elected to have the District market Purchaser Percentage of
Displacement Product, then the proceeds from the sale of such portion of the
Displacement Product, less any costs incurred by the District in making such
sale, will be paid monthly to the Purchaser, in the month following receipt of
such proceeds by the District.

SECTION 11. POINT OF DELIVERY.

     (a)  Priest Rapids Project Output supplied hereunder shall be approximately
          230 kV, three-phase, alternating current, at approximately 60 hertz.

     (b)  The Surplus Product and the Displacement Product to be delivered
          hereunder shall be made available to the Purchaser, at its option,
          exercisable from time to time, at any one or more of the following
          points:

          (1)  The 230 kV bus of the Bonneville Power Administration's Midway
               Substation;

          (2)  The 230 kV bus of the switchyard of the Wanapum Development;

          (3)  The 230 kV bus of the Vantage Substation; or

          (4)  At any other location mutually agreed to by the District and
               Purchaser.

SECTION 12.  METERING AND TRANSMISSION LOSSES.

     (a)  The District shall provide and maintain suitable meters in the
          generator leads of the Priest Rapids Project to indicate and record
          the Priest Rapids Project Output. The actual Priest Rapids Project
          Output shall be determined from totaled readings from the meters. The
          District shall also arrange for suitable metering at the point of
          delivery specified in Section 11 or at other points as agreed upon.
          The District or an agent of the District shall read meters and records
          thereof shall be made available to the Purchaser as may be reasonably
          requested.

     (b)  All losses of Purchaser Percentage of Surplus and Displacement
          Products purchased hereunder resulting from transformation and
          transmission shall be borne by the Purchaser.

SECTION 13.  INFORMATION TO BE MADE AVAILABLE TO THE PURCHASER.

     (a)  The District agrees to keep records of the Priest Rapids Project in
          accordance with the Uniform System of Accounts as prescribed by FERC
          for electric utilities and licensees; provided, if there are
          inconsistencies between the Uniform System of Accounts and this
          contract, this contract shall control. The Purchaser, upon at least
          30 days advance written notice to the District, shall have the right
          to audit or examine operating and financial records relating to the
          Priest Rapids Project during the District's normal business hours.
          To the extent practicable, the Purchasers shall conduct any such
          audit or examination jointly to minimize the disruption to the
          District's business operations. All costs incurred by the District
          associated with such audit,

                                      -23-
<PAGE>
          including, but not limited to, District labor, materials and
          reproduction services shall be billed to the Purchaser, and shall be
          promptly reimbursed by the Purchaser in accordance with Section 7(c).

     (b)  Upon request, any audit reports of the Priest Rapids Project by a firm
          of certified public accountants employed by the District or by the
          State Auditor's Office of the State of Washington will be provided to
          the Purchaser.

     (c)  Policies of insurance carried by the District pursuant to Section 14
          shall be available at the office of the District for inspection by the
          Purchaser.

     (d)  The Purchaser's representatives shall at all times be given reasonable
          access to the Priest Rapids Project, subject to the District's
          applicable safety rules and regulations.

     (e)  Upon request, the Purchaser may obtain information to document the
          capability of the Priest Rapids Project to produce Priest Rapids
          Project Output.

SECTION 14. INSURANCE.

          The District shall have the right to self-insure and/or obtain and
maintain insurance with policies payable to the District for the following
coverage:

     (a)  Obligations of the District under any state or federal Workmen's
          Compensation laws or other employer's liability;

     (b)  Public liability for bodily injury and property damage;

     (c)  Physical loss or damage to the Priest Rapids Project on a replacement
          cost basis; and

     (d)  Any other insurance determined to be necessary.

SECTION 15. ADDITIONAL FACILITIES AND PRODUCTS.

     (a)  From time to time during the term of this contract the District may
          decide in its sole discretion, and in the absence of any requirement
          by FERC or any state or federal agency, to take actions to increase
          the Priest Rapids Project Output, including but not limited to
          installation of additional generating facilities or raising the
          forebay elevation. Whenever the District proposes to so increase the
          Priest Rapids Project Output, it shall give notice in writing of such
          intent to the Purchaser stating:

          (1)  The estimated additional Priest Rapids Project Output that is
               expected to be available as a result of the installation of the
               proposed changes;

          (2)  The estimated incremental cost (i.e. the costs which will be
               incurred as a result of installing the proposed changes which
               costs would not be incurred were such proposed additional
               facilities not installed) of the additional Priest Rapids Project
               Output on an annual basis;

                                      -24-

<PAGE>
          (3)  The estimated construction period for the installation of the
               proposed changes; and

          (4)  Other available pertinent information.

     (b)  Following the issuance of notice of a proposal as provided in
          Section 15(a), the Purchaser shall have the following options:
          (i) Purchaser may terminate this contract effective one year after the
          date of the issuance of a FERC order approving the changes to the
          Priest Rapids Project; or (ii) Purchaser may elect not to participate
          in the proposed increase in the Priest Rapids Project Output and to
          retain this contract, in which case the Parties shall attempt in good
          faith to negotiate a mutually acceptable agreement setting out, among
          other matters, any adjustments to Purchaser Product Percentages of
          Priest Rapids Project Products and Purchaser's responsibility for the
          Annual Power Costs. Such options shall be exercised by giving written
          notice to the District of Purchaser's election on or before the
          expiration of 90 days from the date of receipt of the written notice
          issued pursuant to Section 15(a). In the event that Purchaser has
          elected option (ii) above and the Parties fail to negotiate a mutually
          acceptable agreement, Purchaser may elect to terminate this contract
          pursuant to option (i) so long as the written notice of termination is
          received by the District on or before the expiration of 180 days from
          the date of receipt of the written notice issued pursuant to
          Section 15(a). If the Purchaser does not exercise either of its
          options pursuant to this Section 15(b) or if the Parties fail to
          negotiate a mutually acceptable agreement and the Purchaser does not
          timely provide the District with a notice of termination, then the
          Purchaser shall be obligated to pay its proportionate share of the
          costs and expenses related to the additional generating capability as
          provided in Sections 6 and 7, and shall be entitled to receive a
          percentage of such additional Priest Rapids Project Output determined
          on the basis of the Purchaser Power Allocation.

     (c)  If at any time the District determines that it is not desirable for it
          to proceed with the changes as proposed pursuant to Section 15(a), the
          District shall be under no obligation to proceed with such changes and
          shall so notify the Purchaser in writing of such determination not to
          proceed. If the Purchaser has exercised its option to terminate this
          contract pursuant to Section 15(b), such termination shall be
          cancelled upon the issuance of the written notification by the
          District pursuant to this Section 15(c), but only if such written
          notification by the District is issued within one year of the date of
          the issuance of a FERC order approving the changes.

     (d)  All costs of studies, engineering, and administrative activities
          necessary to apply for and receive FERC approval of the proposed
          changes to the Priest Rapids Project shall be included as Annual Power
          Costs and the Purchaser shall pay its share of such costs pursuant to
          Section 7; provided, however, if the Purchaser has given notice of
          termination of this contract in accordance with Section 15(b) and such
          termination has not been cancelled pursuant to Section 15(c), then the
          Purchaser shall not be liable for any such costs.

     (e)  Notwithstanding any other provisions of this Section 15, whenever the
          District determines that it is necessary or in its best interest to
          modify the Priest Rapids Project in any way or to install additional
          facilities at or in the Priest Rapids Project to comply with any law,
          rule, regulation, or order of FERC or any state or federal agency with
          authority to issue or make and enforce such an order, rule, regulation
          or decision, the Purchaser shall share the benefits and costs

                                      -25-

<PAGE>
     resulting from the modification or installation of the additional
     facilities in the same manner and to the same extent as provided above,
     except that the Purchaser shall not have the option to terminate or adjust
     its interest and participation in this contract as provided in Section
     15(b).

(l)  At any time a Purchaser may request the District to modify the Priest
     Rapids Project or propose conservation projects within Grant County. The
     District commits to consider such requests in good faith; however, the
     District is under no obligation to agree to implement such requests.

SECTION 16. PROJECT INTEGRATION.

(a)  It is the intention of the Parties hereto that the operation of the Priest
     Rapids Project shall be integrated and that all benefits accruing as a
     result of such integration shall be shared equally by the Priest Rapids and
     Wanapum Developments. It is also agreed that before November 1, 2009 and
     after such date if required by any Bond Resolution, all joint costs of the
     Priest Rapids and Wanapum Developments shall be equitably allocated between
     them as determined by the District.

(b)  The Parties agree that any compensation (whether energy or money) due or
     which may become due the owner of the Rock Island Hydroelectric Project
     because of encroachment by the Priest Rapids Project after November 1, 2009
     on the Rock Island Hydroelectric Project will either proportionately reduce
     the amount of Priest Rapids Project Output or be included in Annual Power
     Costs, as appropriate, but shall not reduce the amount required to be paid
     by the Purchaser under Sections 6 and 7. "Rock Island Hydroelectric
     Project" shall mean the FERC Hydroelectric Project No. 943 currently
     operated by Public Utility District No. 1 of Chelan County, Washington.

SECTION 17. LIABILITY OF PARTIES.

(a)  Except as otherwise provided in this contract, each Party hereby releases
     the other Party and its commissioners, officers, directors, agents and
     employees from any claim for loss or damage arising out of the ownership,
     operation, and maintenance of the Priest Rapids Project including any loss
     of profits or revenues, loss of use of power system, cost of capital, cost
     of purchased or replacement power, other substantially similar liability or
     other direct or indirect consequential loss or damage, except as provided
     in the Agreement Limiting Liability Among Western Interconnected Systems
     for parties to that agreement. This release shall not include any claim by
     the Purchaser for refunds for over-payments made to the District nor any
     claim for specific performance of the District's obligation to deliver to
     the Purchaser during the term of this contract the Priest Rapids Project
     Products to which the Purchaser is entitled under this contract.

(b)  The Purchaser shall have no claim of any type or right of action against
     the District: (i) as a result of a FERC or court order or amendment
     described in Section 3(f); (ii) as a result of the failure to receive an
     Annual FERC License or a New FERC license or the adjustment of delivery of
     Priest Rapids Products pursuant to Section 5(j) whether arising under the
     terms of this contract or otherwise; or (iii) as a result of the District's
     purchasing or selling power or energy on behalf of the Purchaser pursuant
     to Section 3(b), and the Purchaser hereby releases the District and its
     commissioners, officers, agents and employees from any claim for loss or
     damage arising out of the events described in this paragraph.

                                      -26-
<PAGE>
SECTION 18. NOTICES AND COMPUTATION OF TIME.
Any notice or demand, except those provided for in Section 7, by the Purchaser
under this contract to the District shall be deemed properly given if mailed
postage prepaid and addressed to Manager, Public Utility District No. 2 of
Grant County, Box 878, Ephrata Washington 98823; any notice or demand by the
District to the Purchaser under this contract shall be deemed properly given if
mailed postage prepaid and addressed to Vice President, Energy Resources,
Avista Corporation, P.O. Box 3727, Spokane, Washington 99220.

In computing any period of time from such notice, such period shall commence at
12:00 A.M. (midnight) on the date mailed. The designations of the name and
address to which any such notice or demand is directed may be changed at any
time by either Party giving notice as provided above.

SECTION 19. DISTRICT'S BOND RESOLUTIONS AND LICENSE.
It is recognized by the Parties that the District, in its operation of the
Priest Rapids Project, must comply with the requirements of the Bond Resolution
and with the FERC License together with amendments thereof from time to time
made, and the District is hereby authorized to take such actions as the
District determines are necessary and appropriate to comply with such Bond
Resolution and FERC License.

SECTION 20. GOVERNING LAW.
The Parties agree that the laws of the State of Washington shall govern this
contract.

SECTION 21. ASSIGNMENT OF CONTRACT.
Neither the Purchaser nor the District shall by contract, operation of law or
otherwise, assign this contract or any right or interest in this contract
without the prior written consent of the other Party, which shall not be
unreasonably withheld; provided, however, a Party may, without the consent of
the other Party (and without relieving itself from liability hereunder): (i)
transfer or assign this contract to an affiliate of the Party provided that the
affiliate's creditworthiness is equal or higher than that of the Party; or (ii)
transfer or assign this contract to any person or entity succeeding to all or
substantially all of the distribution and generating facilities of the Party
whose creditworthiness is equal or higher than that of the Party; provided,
however, that in each such case, any such assignee shall agree in writing to be
bound by the terms and conditions in this contract and the transferring Party
shall deliver such tax and enforceability assurance as the other Party may
reasonably request.

SECTION 22. REMEDIES ON DEFAULT.
(a) "Act of Default" shall mean:

    (1) The failure of a Party to make, when due, any payment required under
        this contract if such failure is not remedied within three days after
        written notice, provided that the payment is not the subject of a good
        faith dispute pursuant to Section 28. If requested by the District, the
        Purchaser shall deposit the disputed amount in escrow with a bank
        acceptable to the Parties.

                                      -27-

<PAGE>
    (2) Any representation or warranty in this contract is false or misleading
        in any material respect when made or ceases to remain true during the
        term of this contract.

    (3) The failure of the Purchaser, after Section 8 or any provision thereof
        has been found by a court to be void, unlawful or unenforceable, to
        perform in accordance with the provisions of Section 8, including
        without limitation any provision or provisions found to be void,
        unlawful or unenforceable.

    (4) A Party shall make an assignment or any general arrangement for the
        benefit of creditors; file a petition or otherwise commence or acquiesce
        in the commencement of a proceeding under any bankruptcy or similar law
        for the protection of creditors; or otherwise becomes bankrupt or
        insolvent or unable to pay its debts as they fall due.

(b) If a Party commits an Act of Default during the term of this contract, the
    non-defaulting Party may take any one or more of the following remedial
    steps:

    (1) Take any action or exercise any remedy provided to the Party under the
        provisions of Sections 7 or 8.

    (2) Except where a different time period is set forth herein, if the
        defaulting Party fails to remedy an Act of Default within ten days after
        receiving written notification of the default, then the non-defaulting
        Party may give a written notice of termination of this contract on a
        date specified in such notice, which date shall be not less than 30 days
        after the date of such notice. If the Purchaser is given written notice
        as provided herein, this contract shall terminate upon the date
        specified in such notice, the Purchaser thereafter shall have no right,
        title, or interest in, to, or with respect to the Priest Rapids Project,
        or any Priest Rapids Project Product, or any Priest Rapids Project
        Output, but the Purchaser shall remain liable for all amounts due the
        District which have accrued prior to the date of termination.

    (3) The District may, prior to the termination of this contract pursuant to
        Section 22(b)(2), at any time suspend any and all rights of the
        Purchaser to the Priest Rapids Project Products upon not less than five
        days' notice to the Purchaser. The District may, without further notice
        to the Purchaser, grant any or all of such suspended rights to any
        person or entity for the duration of the suspension. In such event, the
        Purchaser shall, in addition to its other obligations under this
        contract, upon demand, pay to the District all expenses and any losses
        incurred in connection with such suspension and any grant of the
        suspended rights to another person or entity. No suspension of any or
        all of the rights of the Purchaser to Priest Rapids Project Products
        shall be construed as an election to terminate the interests of the
        Purchaser in, to, and under this contract unless a written notice of
        termination is given to the Purchaser pursuant to this contract or
        unless such termination be decreed by a court of competent jurisdiction.

    (4) The non-defaulting Party may begin and maintain successive proceedings
        against the defaulting Party for the recovery of damages or for a sum
        equal to any and all payments required to be made pursuant to this
        contract.

                                      -28-

<PAGE>
    (5) A Party may take whatever action at law or in equity as may appear
        necessary or desirable to collect the amounts payable by the defaulting
        Party under this contract then due and thereafter to become due, or to
        enforce performance and observation of any obligation, agreement or
        covenant of the defaulting Party under this contract.

    (6) No right or remedy conferred upon or reserved to a Party is intended to
        be exclusive of any other right or remedy, and each and every right and
        remedy shall be cumulative and in addition to any other right or remedy
        given hereunder, or now or hereafter legally existing, upon the
        occurrence of any Act of Default. Failure of the District to insist at
        any time on the strict observance or performance by the Purchaser of any
        of the provisions of this contract, or to exercise any right or remedy
        provided for in this contract shall not impair any such right or remedy
        nor be construed as a waiver or relinquishment thereof for the future.
        Receipt by the District of any payment required to be made hereunder
        with knowledge of the breach of any provisions of this contract shall
        not be deemed a waiver of such breach. In addition to all other remedies
        provided in this contract, the District shall be entitled, to the extent
        permitted by applicable law, to injunctive relief in case of the
        violation, or attempted or threatened violation, of any of the
        provisions of this contract, or to a decree requiring performance of any
        of the provisions of this contract or to any other remedy legally
        allowed to the District.

    (7) The District shall not have the right to accelerate future payment
        obligations of the Purchaser in the event of default under this
        contract.

SECTION 23. VENUE AND ATTORNEY FEES.
Venue of any action filed to enforce or interpret the provisions of this
contract shall be exclusively in the United States District Court for the
Eastern District of Washington or the Superior Court of the State of Washington
for Grant County and the Parties irrevocably submit to the jurisdiction of any
such court. In the event of litigation to enforce the provisions of this
contract, the prevailing Party shall be entitled to reasonable attorney's fees
in addition to any other relief allowed.

SECTION 24. COMPLIANCE WITH LAW.

(a) The Parties shall conform to and comply with all laws, rules, regulations,
    license conditions or restrictions promulgated by the FERC or any other
    governmental agency or entity having jurisdiction over the Priest Rapids
    Project. The Purchaser shall cooperate and take whatever action is necessary
    to cooperate fully with the District in meeting such requirements.
    Obligations of the District contained in this contract are hereby expressly
    made subordinate and subject to such compliance.

(b) The Purchaser shall ensure that Priest Rapids Project Products available to
    Purchaser under this contract are not sold, resold, distributed for use or
    used outside the Pacific Northwest in violation of the Bonneville Project
    Act, Public Law 75-329, the Pacific Northwest Consumer Power Preference Act,
    Public Law 88-552, the Regional Act or in contravention of any applicable
    state or federal law, order, regulation, or policy. If such sales occur in
    violation of the foregoing, the Purchaser shall reimburse the District for
    any penalties imposed on and costs incurred by the District as a consequence
    of such violation.

                                      -29-
<PAGE>
SECTION 25. HEADINGS.
The headings of sections and paragraphs of this contract are for convenience of
reference only and are not intended to restrict, affect or be of any weight in
the interpretation or construction of the provisions of such sections and
paragraphs.

SECTION 26. ENTIRE AGREEMENT; MODIFICATION; CONFLICT IN PRECEDENCE.
This contract does not modify the terms and conditions contained in the 1956
and 1959 Contracts except as provided in Sections 1(b) and 8. This contract
constitutes the entire agreement between the Parties with respect to the
subject matter of this contract, and supersedes all previous communications
between the Parties, either verbal or written, with respect to such subject
matter. No modifications of this contract shall be binding upon the Parties
unless such modifications are in writing signed by each Party. To the extent
there are any conflicting provisions between this contract and the 1956
Contract, or this contract and the 1959 Contract after November 1, 2009, the
terms and conditions in this contract shall take precedence and be controlling
and the 1956 and 1959 Contracts are hereby amended accordingly.

SECTION 27. NO PARTNERSHIP OR THIRD PARTY RIGHTS.
(a)  This contract shall not be interpreted or construed to create an
     association, joint venture, or partnership between the Parties, or to
     impose any partnership obligations or liability upon any Party. Without
     limiting the foregoing, Purchaser shall not be liable for, and the District
     hereby releases the Purchaser from, the payment of Debt except as provided
     in Sections 6 and 7.

(b)  This contract shall not be construed to create rights in or grant remedies
     to any third party as a beneficiary of this contract.

SECTION 28. PURCHASERS' COMMITTEE; ARBITRATION.
(a)  There is hereby established a Purchasers' committee (the "Committee"). Each
     Purchaser may appoint one representative (and one alternate) as a Committee
     member to attend Committee meetings. The members of the Committee shall
     elect a chair, and may adopt such rules for the conduct of business as it
     deems appropriate. Meetings between the District and Purchasers shall be
     held routinely, but not more frequently than once a quarter, provided,
     however, that such meetings may be held more frequently than once each
     quarter at the request of the District or upon the request of members of
     the Committee whose Purchaser Product Percentage of Surplus Product totals
     66% or more. All meetings between the District and Purchaser will be held
     in Grant County, Washington, unless the District and the Purchaser agree to
     another location.

(b)  In addition to other matters subject to arbitration pursuant to other
     provisions of this contract, if approved by members of the Committee whose
     Purchaser Product Percentage of Surplus Product totals 66% or more, the
     Committee may submit to binding arbitration the following issues:

     (1)  Have the Estimated District Loads been forecast in accordance with
          Prudent Utility Practice and, if not, what is the appropriate
          Estimated District Loads in accordance with Prudent Utility Practice
          for the Contract Year?

                                      -30-

<PAGE>
    (2) Have the Annual Power Costs been determined by the District in
        accordance with Prudent Utility Practice and have such costs been
        incurred for the benefit of Priest Rapids Project Output and, if not,
        what are the appropriate Annual Power Costs in accordance with Prudent
        Utility Practice for the Contract Year; provided that nothing in this
        Section shall be interpreted to limit the ability of the District to
        meet its payment obligations under a Bond Resolution?

    (3) Are discretionary outages that would reduce Priest Rapids Project Output
        by more than 25% scheduled so as to be fair to both the District and
        Purchases given that the benefit of the Priest Rapids Project to the
        Purchasers declines over time and, if not, what should be the
        appropriate schedule for outages? Current or future market conditions
        for electricity will not be a factor in arbitrating this issue. If
        failure to perform the proposed outage would reasonably reduce Priest
        Rapids Project Output or conflict with Section 18, the outage will not
        be subject to arbitration.

    (4) What modifications to this contract, pursuant to Section 3(f), are
        necessary to comply with FERC or court orders and to preserve the basic
        benefits and obligations of the Parties?

    (5) Has the Purchaser violated the covenants in Section 8(e)?

(b) The board of arbitrators shall be composed of three persons, one of whom
shall be appointed by the District, one of whom shall be appointed by majority
vote of the Committee, and the third person to be appointed by the two persons
so appointed. The District and the Committee shall appoint their arbitrator
within 15 days after notification of the Committee's vote to submit a matter to
binding arbitration. In the event the two members cannot agree upon the
appointment of a third person within 10 days, then such third person shall be
appointed by the presiding judge of the Superior Court of Kittitas County,
Washington. The arbitration shall be conducted jointly by the participating
Purchasers, and under rules as may be determined by the arbitrators; provided,
however, that all parties shall be afforded discovery consistent with the
Federal Rules of Civil Procedure; and, provided further, if the arbitrators do
not unanimously agree on the rules governing the arbitration, the arbitration
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The board so designated shall conduct a
hearing within 30 days of completion of their selection, and within 15 days
after the hearing (unless such time is extended by agreement of the Parties)
shall notify the Parties of their decision in writing, stating the reasons
therefore and separately listing their findings of fact, conclusions of law and
order. Insofar as the Parties hereto may legally do so, they agree to abide by
the decision of the board. All factual determinations made by the board shall
be conclusive and binding on the Parties and not subject to judicial review.
Any conclusions of law made by the board shall be subject to review by a court
specified in Section 23; provided, that the order issued by the board shall be
effective unless and until a stay is issued by the board or such court suspends
the effectiveness of the order.

SECTION 29. REPRESENTATION AND WARRANTIES.
Each Party represents and warrants to the other Party that:

                                      -31-
<PAGE>
     (a) It is duly organized, validly existing and in good standing under the
         laws of the jurisdiction of its formation.

     (b) The execution, delivery and performance of this contract are within its
         powers, have been duly authorized by all necessary action and do not
         violate any of the terms and conditions in its governing documents, any
         contracts to which it is a party or any law, rule, regulation, or order
         applicable to it.

     (c) This contract constitutes a legally valid and binding obligation
         enforceable against it in accordance with its terms, subject to
         equitable defenses and applicable bankruptcy, insolvency and similar
         laws affecting creditors' rights generally.

     The District hereby represents and warrants to the Purchaser that during
     the term of this contract, the District will not waive, reduce or otherwise
     forego the collection of the Risk Premium pursuant to Section 7 of this and
     all other Contracts.

     SECTION 30. COUNTERPARTS.
     This contract may be executed in counterparts, each of which shall be an
     original and all of which shall constitute the same contract.

                                      PUBLIC UTILITY DISTRICT NO. 2
                                      OF GRANT COUNTY, WASHINGTON

                                      By:  /s/ Mike Conley
          (SEAL)                      ------------------------
                                      President

                                      ATTEST:

                                      /s/ Thomas W. Flint
                                      ------------------------
                                      Secretary

                                      AVISTA CORPORATION

                                      By:  /s/ Gary G. Ely
                                      ------------------------
                                               Gary G. Ely
          (SEAL)                      Title: Chairman of the Board,
                                      President and CEO

                                      -32-

<PAGE>
                                   EXHIBIT A

                    MONTHLY AMOUNTS OF DISPLACEMENT RESOURCE

A.  For the period November 1, 2005 through September 30, 2006:

<Table>
<Caption>

------------------------------------------------------------------------------------------------------------------------------------
                 JAN       FEB       MAR       APR       MAY       JUN       JUL       AUG       SEP       OCT     NOV       DEC
------------------------------------------------------------------------------------------------------------------------------------

<S>          <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>      <C>      <C>

Capacity
 (MW)            123       123       121        197       249       252       219       151      138     n/a       123       124

------------------------------------------------------------------------------------------------------------------------------------

Energy
 (MWh)        91,512    82,656    90,024    141,643   185,256   181,440   162,936   112,344   99,360     n/a    88,560    92,256

------------------------------------------------------------------------------------------------------------------------------------

</Table>

B.  For the period October 1, 2006 through September 30, 2011:

<Table>
<Caption>

------------------------------------------------------------------------------------------------------------------------------------
                  JAN      FEB(1)     MAR      APR        MAY      JUN     JUL      AUG       SEP      OCT      NOV       DEC

------------------------------------------------------------------------------------------------------------------------------------

<S>          <C>        <C>       <C>       <C>      <C>      <C>      <C>      <C>       <C>      <C>       <C>       <C>

Capacity
 (MW)             148       149       150       222       270      268      234      167      161       159       163       163

------------------------------------------------------------------------------------------------------------------------------------

Energy
 (MWh)        110,112   100,128   111,600   159,618   200,880  192,960  174,096  124,248  115,920   118,455   117,360   121,272

------------------------------------------------------------------------------------------------------------------------------------
</Table>

-------------------------
(1)  MWh in February 2008 are 103,704

                                      A-1
<PAGE>
                                   EXHIBIT B
                    DEFINITIONS OF PRIEST RAPIDS DEVELOPMENT
                            AND WANAPUM DEVELOPMENT

RESOLUTION NO. 390 -- DEFINITION OF PRIEST RAPIDS DEVELOPMENT

     Section 2(f) of Exhibit 1. "Priest Rapids Development" shall mean those
     properties and facilities consisting of the Priest Rapids dam, site,
     reservoir, switchyard and power plant, including all generating facilities
     associated therewith up to and including the first ten (10) main turbine
     generator units each with a nameplate rating of approximately 78,850
     kilowatts and any additional generating facilities which may be installed
     as provided for in Section 19 of the Original Power Sales Contract,
     together with the associated transmission facilities consisting of two 230
     KV transmission lines and terminal facilities interconnecting the Priest
     Rapids switchyard and the Bonneville Power Administration's Midway
     Substation and an undivided one-half (1/2) interest in the interconnecting
     facilities' between the Priest Rapids switchyard and the Wanapum
     switchyard.

RESOLUTION NO. 474 -- DEFINITION OF WANAPUM DEVELOPMENT

     Section 2.2. The District specifies and adopts the plan and system
     hereinafter set forth for the acquisition, by purchase or condemnation, and
     construction of the following generation and transmission facilities as a
     separate utility system of the District constituting the Wanapum
     Development of the District, to wit:

          A. The District shall construct an electric generating plant and
     associated facilities on the Columbia River at approximately river mile 415
     from the mouth of said river at the Wanapum site on said river, in Grant
     and Kittitas Counties, Washington, as authorized by the Federal Power
     Commission License for Project No. 2114, originally issued November 4,
     1955, and all amendments thereto; said generating plant to have an
     installed nameplate rating of approximately 831,250 kilowatts, and said
     generating plant and associated facilities to include, but not limited to,
     a concrete gravity dam, a fully enclosed reinforced concrete powerhouse
     containing ten (10) turbo-generating units with provisions in the intake
     structure for the installation of six (6) additional turbo-generating
     units, a reservoir, waterways, fish ladders and other fish protective
     devices; provisions for future installation of navigation locks;
     transforming facilities; a switchyard; transmission facilities necessary to
     connect the powerhouse to the existing transmission facilities of the
     Priest Rapids Development and to the transmission facilities of the
     Bonneville Power Administration in the vicinity of said Project; railroad
     siding, shops, warehouses, construction camp, offices, and dwellings; and
     all other structures, fixtures,

                                      B-1

<PAGE>
equipment or facilities used or useful in the construction, maintenance and
operation of the Wanapum Development; and all necessary water rights,
development rights, permits and licenses, casements, rights-of-way, flowage
rights and rights permitting the storage of water, riparian rights and shore
rights.

                                      B-2

<PAGE>
                             AMENDMENT NO. 1 TO THE
                  PRIEST RAPIDS PROJECT PRODUCT SALES CONTRACT

    The Public Utility District No. 2 of Grant County, Washington, ("District"),
and Avista Corporation ("Purchaser"), hereby agree to this Amendment No. 1 to
the Priest Rapids Project Product Sales Contract dated December 12, 2001 (the
"Product Contract"). Unless otherwise defined herein, all capitalized terms
defined in the Product Contract shall have the meanings set forth therein when
used in this Amendment.

    1. Term of Amendment No. 1

    This Amendment No. 1 shall take effect on upon the execution by the District
    and Purchaser, and shall expire on the earlier of the expiration or
    termination date of the Product Contract.

    2. Amendments to Provisions of the Product Contract

    Purchaser and the District agree that the Product Contract is hereby
amended as follows:

       2.1 The definition of the term Priest Rapids Project Output set forth in
           Section 2 is deleted in its entirety and replace with the following:

              "Priest Rapids Project Output" shall mean the amount of capacity,
              energy (both firm and non-firm), pondage, reactive power,
              ancillary services (including dynamic load following services) and
              any other product from the Priest Rapids Development from November
              1, 2005 to November 1, 2009 and from the Priest Rapids Project
              from November 1, 2009 through the term of this contract under the
              operating conditions which exist during the term, including
              periods when the Priest Rapid Project may be wholly or partially
              inoperable for any reason, after correction for encroachment,
              Canadian entitlement, station and project use, and depletions
              required by the FERC License or other regulatory requirements.

       2.2 Section 6(b)(6) is deleted in its entirety.

       2.3 Section 7(a)(4) is deleted in its entirety and replaced with the
           following:

              An estimate of the cost to the Purchaser of the Displacement
              Product, which shall be the Purchaser Product Percentage of (i)
              the cost, including the costs of transmission and necessary
              services, to the District of acquiring Displacement Resources,
              (ii) less the cost, including the costs of transmission and
              necessary services, of that portion of the total Displacement
              Resources reserved by the District pursuant to Section 5(b).

Priest Rapids Project Product
Sales Contract
Amendatory Agreement No. 1

                                      -1-

<PAGE>
       2.4 Section 8(h) is deleted in its entirety and replaced with the
           following:

              In the event that the District believes that the Purchaser has
              violated any of the above covenants of Section 8(f) or (g), the
              District may by written notice to the Purchaser describe the
              alleged violation in reasonable detail and give the Purchaser no
              less than 4 business days after receipt of such written notice by
              Purchaser within which to cease the activity in question or to
              provide to the District a written explanation as to why the
              Purchaser believes the activity does not constitute a violation of
              any of the aforementioned covenants. If the Purchaser does not
              cure the alleged default and the District continues to reasonably
              consider the action to be in breach of the covenants, the District
              shall have the right to terminate this contract, effective
              immediately upon written notice to the Purchaser, without any
              liability or further obligation on the part of the District. In
              the event of such termination, the District shall have the right
              to use or sell, in any manner the District determines, any Priest
              Rapids Project Product the Purchaser would have been otherwise
              entitled to under this contract.

       2.5 Section 9(d)(8) of the Product Contract is amended by adding at the
           end of such Section 9(d)(8) the following sentence:

              For purposes of Section 9(d)(7) and (8), spill shall mean the
              product of the spill occurring at the Priest Rapids Project during
              any hour and the sum of the Purchaser Power Allocations of all
              Purchasers. Any actual spill that is not allocated to Purchasers
              pursuant to such sections shall be allocated to the District.

       2.6 The Product Contract is amended by adding a new Exhibit D, Purchasers
           Product Percentage Allocations, which is attached hereto.

Priest Rapids Project Production
Sales Contract
Amendatory Agreement No. 1            -2-
<PAGE>
In Witness Whereof, Purchaser and the District have caused this Amendment No. 1
to be executed in their respective names by their duly authorized officers.

AVISTA CORPORATION                   PUBLIC UTILITY DISTRICT NO. 2 OF
                                     GRANT COUNTY, WASHINGTON

By: /s/ Gary G. Ely                     By:  /s/ Mike Conley
    -----------------------------          ------------------------------------

Title:  Chairman, President & CEO     Title:  President, Board of Commissioners
       --------------------------            ----------------------------------

Date Signed:  Feb. 6, 2002             Date Signed:  Feb. 11, 2002
             --------------------                  ----------------------------

                                        /s/ Thomas W. Flint
                                       -----------------------------------
                                       Secretary, Board of Commissioners

Priest Rapids Project Product
Sales Contract
Amendatory Agreement No. 1

                                      -3-
<PAGE>
EXHIBIT A. AMENDMENT 1
                               Purchasers Product Percentage Allocations

<TABLE>
                                                  Requested   Number of      Section 3c/e   Section 3c/e Step 2
                               Historical Shares  Purchaser   Customers         Step 1         Allocation(1)
Purchaser Name                 1956       1959     Product%      2000         Allocation     Surplus    Displace
--------------                 ----       ----    ---------   ---------      ------------   --------    --------
<S>                            <C>        <C>     <C>         <C>            <C>            <C>         <C>
A. 1956/1959 PURCHASERS
   Pacific Corp                13.9%      18.7%      32.6%       768,446                       25.03%      25.03%
   Portland General            13.9%      18.7%      32.6%       726,039                       25.03%      25.03%
   Puget Sound Energy           8.0%      10.8%      18.8%       915,851                       14.43%      14.43%
   Avista Utilities             6.1%       8.2%      25.0%       309,986                       10.98%      10.98%
   Cowlitz PUD                  2.0%       2.7%       4.7%        44,361                        3.61%       3.61%
   Eugene Water & Elec          1.7%       2.3%       4.0%        80,097                        3.07%       3.07%
   City of Forest Grove         0.5%       0.7%      (5)           8,592                        0.92%       0.92%
   City of McMinnville          0.5%       0.7%      (5)          13,973                        0.92%       0.92%
   City of Milton-Freewater     0.5%       0.7%      (5)           4,581                        0.92%       0.92%

B. 1956 ONLY PURCHASERS(2)
   Seattle City Light           8.0%       n/a       (5)         349,557                        6.14%       6.14%
   Tacoma Power                 8.0%       n/a       16.0%       147,819                        6.14%       6.14%
   Kittitas PUD                 0.4%       n/a                     3,078                        0.31%       0.31%
                                                               ---------                      -------     -------
     Total A + B                                               3,392,380      97.51%           97.51%      97.51%

C. NO. IDAHO PURCHASERS
   Clearwater                   n/a        n/a      10.43%         9,314                        0.27%       0.27%
   Idaho Co. Light & Power      n/a        n/a       2.41%         3,007                        0.09%       0.09%
   Kootenai                     n/a        n/a      16.28%        16,244                        0.47%       0.47%
   Northern Lights              n/a        n/a      12.30%        14,541                        0.42%       0.42%

D. SNAKE RIVER PURCHASERS
   Fall River Rural Elec        n/a        n/a      (6)           10,992                        0.32%       0.32%
   Lost River Electric          n/a        n/a      (6)            2,327                        0.07%       0.07%
   Lower Valley Electric        n/a        n/a      (6)           19,182                        0.55%       0.55%
   Ralt River Rural Elec        n/a        n/a      (6)            2,927                        0.08%       0.08%
   Salmon River Electric        n/a        n/a      (6)            2,570                        0.07%       0.07%
   United Electric              n/a        n/a      (6)            5,515                        0.16%       0.16%
                                                   ---------------------                      -------     -------
     Association Total                               1.24%        43,513                        1.25%       1.25%
                                                                --------                      -------     -------
       Total C & D                                                86,619       2.49%            2.49%       2.49%
                                                                             -------          -------     -------
   Total                       63.5%      63.5%                              100.00%          100.00%     100.00%
</TABLE>

<TABLE>
                              Section 3c/e Step 2 Allocation (1)                  Adjustment for 2005-2009
                              ----------------------------------                  ------------------------
                                Reasonable            Added                                      Reasonable       Added
Purchaser Name                   Portion            Products(7)    Surplus(2)     Displace(3)    Portion(4)     Products(7)
--------------                  ----------          -----------    ----------     -----------    ----------     -----------
<S>                          <C>                  <C>             <C>            <C>           <C>             <C>

A. 1956/1959 PURCHASERS
   Pacific Corp               25.03%                25.67%         21.34%         26.87%        23.19%          21.89%
   Portland General           25.03%                25.67%         21.43%         26.87%        23.19%          21.89%
   Puget Sound Energy         14.43%                14.80%         12.28%         15.51%        13.36%          12.60%
   Avista Utilities           10.98%                11.26%          9.37%         11.79%        10.17%           9.61%
   Cowlitz PUD                 3.61%                 3.70%          3.07%          3.88%         3.34%           3.15%
   Eugene Water & Elec         3.07%                 3.15%          2.61%          3.39%         2.84%           2.68%
   City of Forest Grove        0.92%                 0.94%          0.77%          1.00%         0.84%           0.79%
   City of McMinnville         0.92%                 0.94%          0.77%          1.00%         0.84%           0.79%
   City of Milton-Freewater    0.92%                 0.94%          0.77%          1.00%         0.84%           0.79%

B. 1956 ONLY PURCHASE(2)
   Seattle City Light          6.14%                6.30%          12.28%         12.28%        12.28%          12.60%
   Tacoma Power                6.14%                6.30%          12.28%         12.28%        12.28%          12.60%
   Kittitas PUD                0.31%                0.31%           0.61%          0.61%         0.61%           0.63%
                             -------              -------         -------        -------       -------         -------
       Total A + B            97.51%              100.00%          97.51%        116.40%       103.81%         100.00%

C. NO. IDAHO PURCHASERS
   Clearwater                  0.27%                n/a             0.27%          0.27%         0.27%            n/a
   Idaho Co. Light & Power     0.09%                n/a             0.09%          0.09%         0.09%            n/a
   Kootenai                    0.47%                n/a             0.47%          0.47%         0.47%            n/a
   Northern Lights             0.42%                n/a             0.42%          0.42%         0.42%            n/a

D. SNAKE RIVER PURCHASERS
   Fall River Rural Elec       0.32%                n/a             0.32%          0.32%         0.32%            n/a
   Lost River Electric         0.07%                n/a             0.07%          0.07%         0.07%            n/a
   Lower Valley Electric       0.55%                n/a             0.55%          0.55%         0.55%            n/a
   Ralt River Rural Elec       0.08%                n/a             0.08%          0.08%         0.08%            n/a
   Salmon River Electric       0.07%                n/a             0.07%          0.07%         0.07%            n/a
   United Electric             0.16%                n/a             0.16%          0.16%         0.16%            n/a
     Association Total       -------              -------         -------        -------       -------         -------
       Total C & D             1.25%                n/a             1.25%          1.25%         1.25%            n/a
   Total                     -------              -------         -------        -------       -------         -------
                               2.49%                n/a             2.49%          2.49%         2.49%            n/a
                             -------              -------         -------        -------       -------         -------
                             100.00%              100.00%         100.00%        118.89%       106.30%         100.00%
</TABLE>

NOTES: (1) Allocated per average of 1956 and 1956 Shares or, for Idaho
           Purchasers, per number of customers.
       (2) Allocated per 1956 Shares Surplus Product and, for Idaho Purchasers,
           per number of customers.
       (3) Allocated per 75% of 1956 Shares and 25% of 1959 Shares for
           1956/1959 Purchaser, per 1956 Shares for the Only 1955 Purchaser, and
           number of customers for No. Idaho and Snake River Purchasers.
       (3) Allocated per 75% of 1956 Shares and 25% of 1959 Shares for
           1955/1959 Purchasers, per 1956 Shares for the Only 1956 Purchaser,
           and number of customers for No. Idaho and Snake River Purchasers.
       (5) Have Intent to Sign Contract Letter without Requested Purchaser
           Product Percent.
       (6) Snake River Purchaser's Contract with the Association.
       (7) Allocated only to the 1956/1959 and Only 1956 Purchasers per 1956
           Shares for 2005-2009, then average of 1956 and 1959 Shares post-2009.<PAGE>
                                                                 Exhibit 10(b)-4

                             PRIEST RAPIDS PROJECT

                               REASONABLE PORTION

                              POWER SALES CONTRACT

<PAGE>
                               INDEX TO SECTIONS

<Table>
<Caption>
SECTION                                                                     PAGE
-------                                                                     ----
<C>         <C>                                                             <C>
Section 1.  Term of Contract...................................................1
Section 2.  Definitions........................................................1
Section 3.  Proceeds From the Sale of the Reasonable Portion...................5
Section 4.  Determination of Estimated Purchaser Revenue Allocation of
            Reasonable Portion Proceeds........................................8
Section 5.  Annual Power Costs................................................11
Section 6.  Payment For Priest Rapids Project Purchaser Revenue Allocation....14
Section 7.  Support and Cooperation...........................................16
Section 8.  Payment of the Reasonable Portion Proceeds........................17
Section 9.  Information to be Made Available to the Purchaser.................18
Section 10. Insurance.........................................................19
Section 11. Project Integration...............................................19
Section 12. Liability of Parties..............................................19
Section 13. Notices and Computation of Time...................................20
Section 14. District's Bond Resolutions and License...........................20
Section 15. Governing Law.....................................................20
Section 16. Assignment of Contract............................................20
Section 17. Remedies on Default...............................................21
Section 18. Venue and Attorney Fees...........................................22
Section 19. Compliance With Law...............................................23
Section 20. Headings..........................................................23
Section 21. Entire Agreement; Modification; Conflict in Precedence............23
Section 22. No Partnership of Third Party Rights..............................23
Section 23. Purchasers' Committee; Arbitration................................23
Section 24. Representations and Warranties....................................25
Section 25. Counterparts......................................................26

Exhibits
--------
Exhibit A - Bond Resolution Sections
Exhibit B - Areas Served Outside Grant County
</Table>

                                      -i-

<PAGE>
                    PRIEST RAPIDS PROJECT REASONABLE PORTION
                              POWER SALES CONTRACT

                                  Executed by
                         PUBLIC UTILITY DISTRICT NO. 2
                                OF GRANT COUNTY
                                      And
                               AVISTA CORPORATION

This contract is entered into as of December 12, 2001 between Public Utility
District No. 2 of Grant County, Washington (the "District"), a municipal
corporation of the State of Washington, and Avista Corporation (the
"Purchaser"), a corporation organized and existing under the laws of the State
of Washington. The District and the Purchaser are referred to as a "Party" and
collectively as "Parties."

SECTION 1. TERM OF CONTRACT.
(a) Except as otherwise provided herein, this contract shall be in full force
    and effect from and after it has been executed by the District and the
    Purchaser. Unless sooner terminated pursuant to other provisions, this
    contract shall remain in effect until the earlier of expiration or
    termination of the New FERC License or such time that the District no longer
    has authority to market Priest Rapids Project Output. Except as otherwise
    provided herein, all obligations accruing under this contract are preserved
    until satisfied.

(b) Notwithstanding Section 1(a), the affirmative obligations of the Parties in
    Sections 3(a), (b), (c), (d) and (g), 4 through 6, 8 through 12 and 23 (a)
    and (b) (1-2, and 5) shall take effect on November 1, 2005.

(c) Except as provided in Section 1(d), all Eligible Purchasers shall have
    until December 31, 2001 to execute this contract.

(d) If the City of Forest Grove, McMinnville, Milton-Freewater or Seattle City
    Light provides the District written assurance on or before December 31,
    2001, that its superintendent or its city manager supports the execution of
    this contract and will so recommend to its city council, then if Seattle
    City Light provides such written assurance it shall have until March 31,
    2002, to execute this contract, and if Forest Grove, McMinnville or Milton
    Freewater provides the District such written assurance, the city providing
    such written assurance shall have until February 1, 2002, to execute this
    contract.

SECTION 2. DEFINITIONS.
As used in this contract, the following terms when initially capitalized shall
have the following meanings:

"1956 Contract" shall mean the contract entered into by the District and
various parties during May 1956 for the sale of capacity and energy from the
Priest Rapids Development as supplemented and amended from time to time.

                                       1

<PAGE>
"1959 Contract" shall mean the contract entered into by the District and
various parties during June 1959 for the sale of capacity and energy from the
Wanapum Development as supplemented and amended from time to time.

"Annual FERC License" shall mean a license for the Priest Rapids Project
issued by FERC to the District for an interim period before a New FERC License.

"Bond Resolution" shall mean each and all of the resolutions adopted by the
District authorizing the issuance of outstanding Debt for the Priest Rapids
Project.

"Contract Year" shall mean the 12 month period commencing at 12:01 a.m. on
January 1 of each year and ending at 12:01 a.m. on the following January 1;
provided, however, that the first Contract Year shall commence on November 1,
2005, and end the following January 1, 2006, and that the last Contract Year
shall end on the last day of the New FERC License, or such time that the
District no longer has authority to market Priest Rapids Project Output.

"Contract(s)" shall mean this contract and similar contracts between the
District and other Purchasers.

"Debt" shall mean any bonds, notes, or other debt obligations of the District,
including, but not limited to all bonds outstanding at the effective date of
this contract, a line of credit, installment purchase agreement, financing
lease, interfund loan, derivative securities or payment obligations and any
other obligation for borrowed money, the proceeds of which will be used for the
benefit of the Priest Rapids Project, including to finance betterments,
renewals, replacements and additions to the Priest Rapids Project, to refund
other debt, or any other lawful purpose related to the Priest Rapids Project.
Debt does not include the Columbia River-Priest Rapids Hydro-Electric Production
System Revenue Bonds, Series 1956, which have been paid, or the Wanapum
Hydroelectric Refunding Revenue Bonds, Series 1963, which are scheduled to be
repaid on or prior to January 1, 2004.

"Electric System" shall mean the separate electric utility system of the
District, including all associated generation, transmission and distribution
facilities and any betterments, renewals, replacements and additions of such
system, but does not include the Priest Rapids Project or any other utility
properties designated as a separate utility system of the District.

"Eligible Purchasers" means the Purchasers who are parties to the 1956 and 1959
Contracts, and the Kootenai Electric Cooperative, Inc., Clearwater Power
Company, Idaho County Light and Power Cooperative Association, Inc., Northern
Lights, Inc. and the electric cooperative members of the Snake River Power
Association, Inc. (collectively, the "Idaho Cooperatives") as of October 31,
2000.

"FERC" shall mean the Federal Energy Regulatory Commission or its successor.

"FERC License" shall mean any license for the Priest Rapids Project issued by
FERC to the District.
<PAGE>
"Marketing Plan" shall mean the plan for making available in a fair, equitable,
and non-discriminatory manner pursuant to market-based principles and
procedures the Reasonable Portion as required by applicable law or PL 83-544
Orders.

"New FERC License" shall mean the license issued by FERC to the District
following the expiration of the Original FERC License for operation of the
Priest Rapids Project for a duration of 30 years or longer, not including any
subsequent annual or other license.

"Operating Agreements" shall mean any agreements to which the District is or
may become a party, which provide for operation of the Priest Rapids Project,
including but not limited to, the Pacific Northwest Coordination Agreement, the
Agreement for the Hourly Coordination of Projects on the Mid-Columbia River,
the Western Systems Coordinating Council Agreement, the Agreement Relating to
Wanapum Development Encroachment on the Rock Island Project and the Northwest
Power Pool, which is the voluntary association of utilities formed in the
Pacific Northwest for the purpose of ensuring the adequacy and reliability of
the electric power systems in the Pacific Northwest.

"Original FERC License" shall mean the Federal Power Commission License for the
Priest Rapids Project issued to the District on November 4, 1955, together with
amendments thereto.

"Pacific Northwest" shall have the meaning ascribed thereto in Section 3(14) of
the Regional Act.

"Priest Rapids Development" shall mean the separate utility system of the
District, including a dam at the Priest Rapids Development, all generation and
transmission facilities associated therewith, and all betterments, renewals,
replacements, and additions to such system, as further described in Section
2(f) of Exhibit 1 of District Resolution No. 390 which is attached as Exhibit
A, but shall not include any additional generation, transmission and
distribution facilities hereafter constructed or acquired by the District as a
part of the Electric System or the Wanapum Development or any other utility
properties of the District acquired or constructed as a separate utility system.

"Priest Rapids Project" shall mean the hydroelectric project on the Columbia
River in the State of Washington designated by the Federal Power Commission as
Project No. 2114. The Priest Rapids Project consists of the Priest Rapids
Development and the Wanapum Development.

"Priest Rapids Project Output" shall mean the amount of capacity, energy (both
firm and non-firm), pondage, reactive power, ancillary services and any other
product from the Priest Rapids Development from November 1, 2005 to November 1,
2009, and from the Priest Rapids Project from November 1, 2009 through the term
of this contract under the operating conditions which exist during the term,
including periods when the Priest Rapid Project may be wholly or partially
inoperable for any reason, after correction for encroachment, Canadian
entitlement, station and project use, and depletions required by the FERC
License or other regulatory requirements.

"Prudent Utility Practice" means those practices, methods and acts which: (i)
when engaged in are commonly used in prudent engineering and operations to
operate electric equipment and associated mechanical and civil facilities
lawfully and with safety, reliability, efficiency and expedition or (ii) in the
exercise of reasonable judgment considering the facts known when engaged in,
could

                                      -3-
<PAGE>
have been reasonably expected to achieve the desired result consistent with
applicable law, safety, reliability, efficiency and expedition. Prudent Utility
Practice is not intended to be the optimum practice, method or act, to the
exclusion of all others, but rather to be a spectrum of commonly used practices,
methods or acts.

"Public Law 83-544" (or "PL 83-544") shall mean the legislation passed by the
83rd Congress authorizing the District to develop the Priest Rapids Project.

"Purchasers" shall mean the Purchaser and each person or entity that has entered
into a contract with the District substantially similar to this contract.

"Purchaser Revenue Allocation" shall mean the fixed percentage (stated to the
second decimal point, e.g., 0.01%) as set forth in Section 3(b) of the proceeds
from and the costs of the sale of the Reasonable Portion made available under
this contract. For parties to the 1956 and 1959 Contracts, Purchaser Revenue
Allocation may not exceed twice the average of their participation in the 1956
and 1959 Contracts except that for those Purchasers that were parties to the
1956 Contracts but were not parties to the 1959 Contracts their Purchaser
Revenue Allocation for the period November 1, 2005 to October 31, 2009 may not
exceed twice their participation in the 1956 Contract. For any individual Idaho
Cooperative, Purchaser Revenue Allocation shall not exceed the Purchaser Product
Percentage of any individual party to the 1956 or 1959 Contract that is one of
the Purchasers except when the provisions of Section 3(e) are applied. The
Purchaser Revenue Allocation set forth in Section 3(b) is subject to revision
pursuant to Sections 3(e), 3(f), 3(g), 3(h) and 4(f).

"Reasonable Portion" shall mean that 30% portion of the Priest Rapids Project
Output required by FERC pursuant to Public Law 83-544 to be offered for sale by
the District.

"Reasonable Portion Proceeds" shall mean the proceeds derived from the sale of
the Reasonable Portion pursuant to the Marketing Plan.

"Regional Act" shall mean Public Law 96-501, the Pacific Northwest Electric
Power Planning and Conservation Act.

"Uncontrollable Forces" shall mean any cause reasonably beyond the control of
the Party and which the Party subject thereto has made reasonable efforts to
avoid, remove or mitigate, including but not limited to acts of God, fire,
flood, explosion, strike, sabotage, act of the public enemy, civil or military
authority, including court orders, injunctions, and orders of government
agencies with proper jurisdiction, insurrection or riot, an act of the elements,
failure of equipment or contractors, or inability to obtain or ship materials or
equipment because of the affect of similar causes on suppliers or carriers;
provided, however, that in no event shall an Uncontrollable Force excuse the
Purchaser from the obligation to pay any amount when due and owing under this
contract.

"Wanapum Development" shall mean the second stage of the Priest Rapids Project
as more fully described in Section 2.2 of District Resolution No. 474, which is
attached as Exhibit A, but shall not include any generation, transmission and
distribution facilities hereafter constructed or

                                      -4-

<PAGE>
acquired by the District as a part of the Electric System or the Priest Rapids
Development, or any other utility properties of the District acquired or
constructed as a separate utility system.

The following terms are defined in the cited sections of this contract:

     "Act of Default" at Section 17(a).
     "Annual Power Costs" at Section 5(a).
     "Committee" at Section 23.
     "Coverage Requirement" at Section 5(a)(9).
     "Estimated District Loads" at Section 4(c)(1).
     "Estimated District Power Costs" at Section 4(c)(4).
     "Estimated Power Cost Shortfall" at Section 8(a)(4).
     "Estimated Unmet District Load" at Section 4(c)(3).
     "Excess Costs" at Section 6(g).
     "Financing Costs" at Section 5(a)(3).
     "Idaho Cooperatives" at "Eligible Purchasers."
     "Improvements" at Section 4(f)(4).
     "Multi-Year Contracts" at Section 8(a)(3).
     "New FERC License Costs" at Section 5(a)(6).
     "Party" and "Parties" at the Preamble.
     "PL 83-544 Orders" at Section 3(h).
     "Purchaser Estimated Costs" at Section 6(a)(5).
     "Refund Costs" at Section 6(g).
     "Rock Island Hydroelectric Project" at Section 11(b).
     "Zero Year" at Section 8(a)(3).

SECTION 3. PROCEEDS FROM THE SALE OF THE REASONABLE PORTION.
(a)  Pursuant to the PL 83-544 Orders, the Reasonable Portion must be offered
     for sale. The District, therefore, desires to mitigate the risk associated
     with generating the Reasonable Portion including, but not limited to, the
     uncertainty of future Priest Rapids Project Output, costs and market
     prices. The District believes that this can be best accomplished by
     allocating to Purchasers the costs and proceeds from the sale of the
     Reasonable Portion.

(b)  Upon execution of this contract, Purchaser shall select a percentage
     allocation of the costs and proceeds from the sale of the Reasonable
     Portion as described below. The percentage allocation of the costs and
     proceeds from the sale of the Reasonable Portion ("Purchaser Revenue
     Allocation") shall be 25 percent. The amount of the proceeds and the costs
     from the sale of the Reasonable Portion are defined in Sections 4 and 6,
     respectively.

(c)  The District will use the Purchaser Revenue Allocation of the Reasonable
     Portion Proceeds to purchase capacity and energy for the Purchaser pursuant
     to a supplementary agreement between the Purchaser and the District. The
     District will directly assign to the Purchaser the cost incurred by the
     District in using the Purchaser Revenue Allocation to purchase such
     capacity and energy.

                                      -5-
<PAGE>
(d)  By notification to the District pursuant to Section 4(b), the Purchaser may
     elect to receive its Purchaser Revenue Allocation of Reasonable Portion
     Proceeds in cash rather than receiving energy and capacity.

(e)  REALLOCATION. If collectively Purchasers subscribe to Purchaser Revenue
     Allocations that total more than 100%, then Purchaser Revenue Allocations
     will be determined as follows; provided, however, that the application of
     the following formula shall not result in the Purchasers being assigned a
     Purchaser Revenue Allocation larger than that included in this contract on
     the date of execution:

     (1)  Step 1.  One-hundred percent of the Purchaser Revenue Allocation will
          be divided between the Purchasers who are parties to the 1956 and 1959
          Contracts, as a group, and the Purchasers who are included in the
          Idaho Cooperatives, as a group, in proportion to the number of retail
          electric customers located in the Pacific Northwest (determined by the
          number of retail meters) served by each group as of October 31, 2000.

     (2)  Step 2.  Each Purchaser's Revenue Allocation will be determined as
          follows:

          (A)  For Purchasers who are parties to the 1956 and 1959 Contracts,
               the proportion of such Purchaser Revenue Allocations from Step 1
               above will be distributed to individual Purchasers as follows:

               (i)  For November 1, 2005 through October 31, 2009 the Purchaser
                    Revenue Allocations shall be distributed in proportion to
                    participation in the 1956 Contract and 1959 Contract
                    weighted 75% and 25%, respectively.

               (ii) For the period after November 1, 2009 the Purchaser Revenue
                    Allocations shall be distributed in proportion to the sum of
                    participation in the 1956 Contract and 1959 Contract divided
                    by two.

          (B)  For the Purchasers who are included in the Idaho Cooperatives,
               the proportion of such Purchaser Revenue Allocations from Step 1
               will be distributed to such individual cooperatives in proportion
               to the number of retail electric customers located in the Pacific
               Northwest (determined by number of retail meters) each
               cooperative served as of October 31, 2000.

(f)  If the reallocation procedure of Section 3(e) is implemented, then for the
     period November 1, 2005 through October 31, 2009, the following shall apply
     to Purchasers who were parties to the 1956 Contracts but were not parties
     to the 1959 Contracts:

     (1)  The Purchaser Revenue Allocation shall be adjusted to be in proportion
          to participation in the 1956 Contract (the Purchaser's percent
          participation in the 1956 Contract divided by 63.5%),

     (2)  The District shall be obligated to provide the Reasonable Portion
          Proceeds pursuant to Section 5 using the Purchaser Revenue Allocation,
          calculated pursuant to Section 3(f)(1), and the Purchaser shall be
          obligated to make payments pursuant to Sections 5 and 6 using such
          Purchaser Revenue Allocation.

                                      -6-
<PAGE>
    The adjustments to Purchaser Revenue Allocation pursuant to this Section
    3(f) will have no effect on the Purchaser Revenue Allocation of any other
    Purchaser.

(g) If a Contract with one of the Purchasers is terminated pursuant to Section
    17 as a result of such Purchaser's Act of Default, the District shall give
    the non-defaulting Purchasers notice of such default. Beginning with the
    first month that is at least 30 days following such notice, the Revenue
    Allocations (other than zero) of non-defaulting Purchasers shall be
    increased pro rata until either: (i) the Purchaser Revenue Allocation of the
    defaulting Purchaser have been fully allocated or (ii) a further pro rata
    increase to the Purchaser Revenue Allocations of the non-defaulting
    Purchasers would adversely affect the tax-exempt status of any outstanding
    Debt. In the event of (ii), the portion of the Purchaser Revenue Allocation
    of the defaulting Purchaser not yet allocated will be offered to all
    Purchasers that can accept such allocation without adversely affecting the
    tax-exempt status of any outstanding Debt. If after such offer there remains
    some portion of the Purchaser Revenue Allocation of the defaulting Purchaser
    not yet allocated, the District at its discretion may elect to accept such
    unallocated portion. If after all of the foregoing there remains unallocated
    Purchaser Revenue Allocation of the defaulting Purchaser, the Purchaser
    Revenue Allocations (other than zero) of non-defaulting Purchasers shall be
    increased pro rata based on each such non-defaulting Purchaser's Purchaser
    Revenue Allocation before any allocation under this Section 3(g). In the
    event that the allocation described in the immediately preceding sentence
    adversely affects the tax-exempt status of Debt, any increased costs
    resulting therefrom will be included in Annual Power Costs. Nothing in this
    subsection is intended to limit any claims the non-defaulting Purchasers may
    assert against the defaulting Purchaser.

(h) REGULATORY APPROVALS. The District and the Purchaser believe that this
    contract fully complies with the requirements of Public Law 83-544. FERC has
    ordered that a Reasonable Portion of the Priest Rapids Project Output be
    offered for sale based on market principles and that Eligible Purchasers are
    to receive a meaningful priority. Additionally, FERC has stated that the
    District may negotiate power contracts as part of the license application
    process provided that implementation of such contracts is contingent on
    receipt of license authority. The District and the Purchaser agree that
    nothing in this contract limits in any way the District's ability to conform
    to these FERC requirements. Nothing in this contract, other than Section 7,
    limits the ability of the Purchaser from participating in any FERC or court
    proceedings that may address Public Law 83-544.

    The Parties understand that FERC's orders of February 11, 1998 and June 12,
    1998 in Docket No. EL95-35 (the "PL 83-544 Orders") require the District,
    as part of its application for a New FERC License, to file the Marketing
    Plan for making available the Reasonable Portion in a fair, equitable and
    non-discriminatory manner pursuant to market-based principles and
    procedures. The Parties further understand and agree that nothing in this
    contract is intended to affect or limit in any way the right of the District
    to develop and file the Marketing Plan which it determines is consistent
    with the PL 83-544 Orders.

    In the event that FERC or a court of competent jurisdiction shall by order
    determine that any provision of this contract violates a requirement of
    either PL 83-544 or of any of the PL 83-

                                      -7-

<PAGE>
     544 Orders, the Parties shall, within 30 days of the entry of such an
     order, commence negotiations for the purpose of reaching agreement on such
     amendments to this contract, if any, as may be needed for the purpose of
     complying with that order and for the purpose of preserving the basic
     benefits and obligations of the Parties. If, within 90 days of commencement
     of negotiations, the Parties are not able to resolve their differences and
     to agree upon any necessary amendments, either Party may, after notice to
     the other Party, cause the matter to be submitted to binding arbitration as
     provided in Section 23.

     If following the issuance of the arbitration decision, a Party
     reasonably determines that acceptance of such amendments will result in
     materially decreased benefits or materially increased obligations when
     compared to this contract, the Party may by notice to the other Party
     explain its reasons for the determination and, if given within 10 days of
     the arbitration decision, terminate this contract.

SECTION 4. DETERMINATION OF ESTIMATED PURCHASER REVENUE ALLOCATION OF
REASONABLE PORTION PROCEEDS.

(a)  The estimated Purchaser Revenue Allocation of the Reasonable Portion
     Proceeds expected to be available to Purchaser during each Contract Year
     will be determined by application of the following provisions of this
     Section 4.

(b)  On or before 60 days prior to the beginning of each Contract Year,
     Purchaser shall provide the District with written notification if it wishes
     to elect, pursuant to Section 3(d), to receive its Purchaser Revenue
     Allocation of Reasonable Portion Proceeds in cash instead of the District
     purchasing energy and capacity therewith. In the event that Purchaser fails
     to make such annual election pursuant to this section, the District will
     provide Purchaser with energy and capacity pursuant to Section 3(c).

(c)  For the purpose of determining the estimated Purchaser Revenue Allocation
     of the Reasonable Portion Proceeds for the next Contract Year, on or before
     30 days prior to the beginning of each Contract Year, the District shall
     prepare and mail to the Purchaser a pro forma statement showing for the
     next Contract Year:

          (1)  "Estimated District Loads," which shall mean all projected retail
               electric energy loads for the next Contract Year based on average
               weather conditions, plus aggregated losses, projected to be used
               at locations served by the District during the next Contract Year
               with the exception of (i) locations outside of the geographic
               boundaries shown on Exhibit B and (ii) that portion of loads of
               individual retail customers that during a consecutive 12 month
               period after 2000 exceed by ten average megawatts or more the
               energy load of such customer for the immediately preceding
               consecutive 12 month period. Once load at a location is included
               in Estimated District Loads, loads at such location shall
               continue to be included in full in future Contract Years without
               regard to the source of supply for such load. For example, if a
               load is expected to be served in all or part by an entity other
               than the District during the next Contract Year, the entire load
               shall continue to be included in Estimated District Loads. If a
               new load or increased load of one average megawatt or more at a
               single retail customer has been included in Estimated District
               Loads in the current Contract Year, and less than 90% of such new
               or increased load was actually measured in

                                        -8-
<PAGE>
     the current year, then Estimated District Loads shall be reduced for the
     next Contract Year by the difference between the amount included in the
     current Contract Year and the amount measured. If there are more than one
     such new or increased loads for the current Contract Year, they shall be
     combined for determining both the 90% and the amount of any reduction. If
     in the current Contract Year a load of one average megawatt or more is
     placed on the District which was not included in the current Contract
     Year's Estimated District Loads, then the next Contract Year's Estimated
     District Loads shall be increased by the amount of such load measured in
     the current Contract Year. Except for such load correction calculations,
     Estimated District Loads for the next Contract Year shall be not less than
     the current Contract Year's Estimated District Loads.

(2)  The estimated amount of firm energy from the Priest Rapids Project for the
     next Contract Year based on critical water planning using the procedures of
     Operating Agreements in effect on October 31, 2000, unless the District and
     Purchasers whose Purchaser Revenue Allocation total 66% or more mutually
     agree to use procedures from a subsequent Operating Agreement.

     (3)  The monthly amount of "Estimated Unmet District Load" determined as
          follows:

     (A)  Prior to November 1, 2009, the Estimated District Load as calculated
          in Section 4(c)(1) less 70% of the estimated firm energy output of the
          Priest Rapids Development less 36.5% of the estimated firm energy
          output of the Wanapum Development both as calculated in Section
          4(c)(2).

     (B)  On or after November 1, 2009, the Estimated District Loads as
          calculated in Section 4(c)(1) less 70% of the estimated firm energy
          output of the Priest Rapids Project as calculated in Section 4(c)(2).

     (C)  In the event that the calculation in Section 4(c)(3)(A) or (B) above
          is less than zero the Estimated Unmet District Load will be zero.

     (D)  The difference so determined will be shaped on a monthly basis using
          the District's historic load patterns.

(4)  The "Estimated District Power Costs" which shall equal the estimated cost,
     including the costs of transmission and other necessary services, of
     acquiring the monthly amount of capacity and energy identified in Section
     4(c)(3) determined by references to published futures price data and firm
     power supply contracts entered into by the District, and rates for
     transmission and other necessary services. Prior to the start of the next
     Contract Year, any Purchaser may provide the District with a written firm
     and irrevocable bid(s) for all or part of the capacity and energy needed to
     serve the Estimated Unmet district Load from Section 4(c)(3) for the next
     Contract Year, and for which the District has not procured a firm power
     supply. If such bid(s), or in the case of a partial supply bid the
     combination of the bid and the Estimated Power Cost for the remaining
     Estimated Unmet District Load, is less costly than the Estimated District
     Power Cost set forth in the pro forma statement as determined by the
     District, the District may either: (i) acquire from the Purchaser the

                                      -9-

<PAGE>
          capacity and energy offered, and use the bid price in the calculation
          of the Estimated District Power Costs for the Estimated Unmet District
          load so served; or (ii) substitute the bid price for the portion of
          the Estimated Unmet District Load that could have been served with the
          capacity and energy so bid in the calculation of Estimated District
          Power Costs.

     (5)  The estimated Reasonable Portion Proceeds.

(d)  Subject to Section 8, in those Contract Years when the District has
     Estimated District Power Costs as determined pursuant to Section 4(c)(4),
     the District shall be entitled to and shall take from the actual Reasonable
     Portion Proceeds the Estimated District Power Costs calculated pursuant to
     Section 4(c)(4).

(e)  Subject to Section 8, the Purchaser shall have available the capacity and
     energy purchased pursuant to Section 3(c) with an amount equal to the
     actual Reasonable Portion Proceeds received by the District, minus the
     Estimated District Power Costs as calculated in Section 4(c)(4), multiplied
     by the Purchaser Revenue Allocation; provided, however, if the Purchaser
     has elected to receive cash rather than capacity and energy, Purchaser
     shall be entitled to receive in cash an amount equal to the actual
     Reasonable Portion Proceeds received by the District, minus the Estimated
     District Power Costs as calculated in Section 4(c)(4), multiplied by the
     Purchaser Revenue Allocation.

(f)  The Purchaser Revenue Allocation of the Reasonable Portion Proceeds
     available to Purchaser may be reduced if the District does not obtain an
     Annual FERC License or New FERC License, and under any of the following
     conditions as determined by the District:

     (1)  Pursuant to Section 4.

     (2)  If the district is unable to produce the Reasonable Portion due to
          Uncontrollable Forces.

     (3)  If failure to reduce deliveries of the Reasonable Portion would result
          in exceeding the capability of the Priest Rapids Project or subject it
          or its operation to undue hazard or violate the FERC License, any
          applicable law, regulation, or Operating Agreement.

     (4)  In case of emergencies or in order to install equipment in, make
          repairs to, make betterments, renewals, replacements, and additions to
          ("Improvements"), investigations and inspections of, or perform other
          maintenance work on the Priest Rapids Project.

     The District will use its reasonable efforts to give advance notice to the
     Purchaser regarding any planned interruption or reduction, giving the
     reason therefor and stating the probable duration thereof.

(g)  Notwithstanding any other Section of this contract, if the Priest Rapids
     Project is capable of producing Priest Rapids Project Output, but the
     Purchaser Revenue Allocation of the Reasonable Portion Proceeds to be made
     available to the Purchaser is projected to be zero for a Contract Year, the
     Purchaser may give the District written notice, no later than 100 days
     after

                                      -10-

<PAGE>
     the start of the Contract Year, that the Purchaser elects to terminate this
     contract. In such event, this contract shall terminate effective upon
     receipt of such written notice by the District.

SECTION 5. ANNUAL POWER COSTS.

(a)  "Annual Power Costs" as used in this contract shall include, for the Priest
     Rapids Development beginning November 1, 2005 and for the Priest Rapids
     Project beginning November 1, 2009, all of the District's costs and
     expenses of every type, both direct and indirect, resulting from the
     ownership, operation, maintenance of and Improvements that are incurred or
     paid by the District during each Contract Year and that are incurred
     consistent with Prudent Utility Practice. Such costs and expenses shall for
     any Contract Year include, but not be limited to the following, in each
     case without duplication:

     (1)  All operations costs, maintenance costs, administrative costs, taxes,
          in lieu of tax payments relating to production and delivery of Priest
          Rapids Project Output (excluding depreciation) including, but not
          limited to, those specified in the Uniform System of Accounts as
          prescribed by the FERC for electric utilities and licensees.

     (2)  Amounts that the District determines are needed to pay for the
          prevention or correction of any loss or damage and for Improvements to
          keep the Priest Rapids Project in good operating condition. Subject to
          Section 23, the Purchaser agrees that the District shall have the sole
          right to determine what costs and expenses shall be incurred in
          connection with the ownership, operation, and maintenance of and
          Improvements to the Priest Rapids Project.

     (3)  Subject to Section 5(e), interest that accrues and is payable into the
          debt service fund with respect to outstanding Debt; principal that
          accrues and is payable into the debt service fund with respect to
          outstanding Debt, whether at maturity or by reason of redemption
          (including premiums for redeeming Debt prior to its scheduled
          maturity), amounts required to restore any reserve accounts maintained
          to secure Debt to the level required by the resolution authorizing the
          Debt and Financing Costs. "Financing Costs" include, but are not
          limited to, discounts, insurance premiums, letter of credit fees,
          costs of hedging interest rates, costs of compliance with disclosure
          requirements, legal and bond counsel fees, independent auditors,
          printing, financial advisor, bond registrar and trustee costs.

     (4)  Subject to Section 5(e), costs of creating and replenishing any
          reserve or contingency fund required to be maintained by any Bond
          Resolutions and working capital funds.

     (5)  Any liability or cost, including settlements and judgments, incurred
          as a result of or related to the ownership, operation or maintenance
          of the Priest Rapids Project and not covered by insurance.

     (6)  Costs incurred by the District in applying for a New FERC License as
          recorded on the District's books of account for the Priest Rapids
          Project (account number 183090), including but not limited to those
          costs and interest expenses incurred before November 1, 2005 ("New
          FERC License Costs"). New FERC License Costs incurred prior to
          November 1, 2005 will be recovered uniformly over a 15-year
          amortization period.

                                      -11-
<PAGE>
        commencing with the Contract Year starting on January 1, 2006. The
        estimated New FERC License Costs incurred by the District after November
        1, 2005 will be included in Annual Power Costs. In the event of
        termination of this contract for any reason subsequent to the effective
        date of the New FERC License, the Purchaser shall pay the District an
        amount equal to the unrecovered New FERC License Costs multiplied by the
        Purchaser Power Allocation at the time of termination. In the event of
        termination of this contract for any reason prior to the effective date
        of the New FERC License, Purchaser shall have no liability for
        unrecovered New FERC License Costs.

   (7)  Obligations entered into by the District as part of its effort to obtain
        a New FERC License, including but not limited to the cost or replacing
        Priest Rapids Project Products that may be committed in such
        obligations.

   (8)  Costs incurred by the District to fulfill obligations, if any, to the
        parties to the 1956 and 1959 Contracts who do not sign this contract, as
        such costs are required or approved by a court, or reasonably approved
        by the District after notice to the Purchaser.

   (9)  An amount equal to 15% of debt service in that Contract Year or such
        higher amount as may be required by a Bond Resolution ("Coverage
        Requirement").

(b)  The District shall credit against Annual Power Costs the following:

     (1)  Any insurance or other proceeds received by the District as
          reimbursement for damages, losses, costs or expenses included in the
          Annual Power Costs, and any insurance or other proceeds received as a
          result of the interruption or reduction of Priest Rapids Project
          Output.

     (2)  Revenue, if any, received from obligations entered into by the
          District as part of its effort to obtain a New FERC License.

     (3)  Revenue, if any, received as a result of the District fulfilling
          obligations to parties to the 1956 or 1959 Contract that do not sign
          this contract, pursuant to Section (1)(b) of those contracts,
          excluding revenue required to be paid pursuant to the 1959 Contract.

     (4)  The Coverage Requirement, to the extent that it is not expended during
          a Contact Year for capital or other costs of the Priest Rapids Project
          (the amount not spent shall be credited against Annual Power Costs for
          the following Contract Year).

     (5)  Interest earnings on funds of the Priest Rapids Project that are not
          required to be retained by such fund by a Bond Resolution.

(c)  Costs directly or indirectly associated with the District's Electric System
     or any other separate system of the District shall not be part of Annual
     Power Costs other than the payment of Debt held by the Electric System.

                                      -12-

<PAGE>
(d)  Any payment received by the District as a result of the taking of the whole
     or any portion of the Priest Rapids Project Output by any state or federal
     government agency shall be used by the District to credit Annual Power
     Costs or to retire, at or prior to maturity, Debt, whichever shall be
     proper under the circumstances existing at the time of the taking.

(e)  The Purchaser agrees that the District shall have the sole discretion to
     determine what portion, if any, of the Priest Rapid Project financing will
     be accomplished by issuance of Debt and the terms and covenants of any
     Debt.

     (1)  To the extent that the District makes Improvements to the Priest
          Rapids Project that are not financed by Debt proceeds, Annual Power
          Costs will include a cost as determined by the following: the District
          shall determine all of the Improvements anticipated for the Priest
          Rapids Project for the Contract Year and the District shall estimate
          the weighted average economic service life of the Improvements, and
          shall calculate a weighted average market interest rate assuming the
          District were to issue Debt to finance such Improvements, both as
          reasonably determined by the District. Based on such calculations the
          District shall include in Annual Power Costs an amount sufficient to
          amortize the costs (including both interest and principal pursuant to
          this Section 5(e)(1)) of such Improvements on a level basis over a
          period equal to the estimated weighted average economic service life
          of the Improvements. The amortization period for any Improvements
          shall not exceed 30 years and land shall be deemed to have a service
          life of 30 years. The District may adjust prospectively the
          amortization of any Improvements to reflect the actual costs of such
          Improvements, to correct any error in computation or to reflect a
          material change in the District's estimate of the average economic
          life of the Improvements. The District shall not be required to
          amortize capital expenditures that are estimated to cost below the
          amount that in accordance with the District's capitalization policy
          are not required to be capitalized and may include such costs in
          Annual Power Costs.

     (2)  To the extent that the District issues Debt (i) with a final maturity
          that is not earlier than the expiration of the estimated weighted
          average service life of the Improvements, to be financed with the Debt
          and (ii) the total annual amounts required for the payment of
          interest, principal and sinking fund requirements of such Debt when
          due in a Contract Year do not vary by more than 10% from those
          required in any other Contract Year, then Annual Power Costs shall
          include the actual principal and sinking fund requirements that
          accrues and is payable into the debt service fund for that Debt for
          the Contract Year. To  the extent that the District issues Debt that
          does not meet the requirements of (i) and (ii) in the prior sentence,
          then Annual Power Costs will include, with respect to such Debt, an
          amount as determined by the District as of the date of issuance of the
          Debt, sufficient to amortize the original principal amount of such
          Debt on a level debt service basis over a period equal to the
          estimated weighted average economic service life of the Improvements
          financed or refinanced by such Debt, commencing on the later of (a)
          the date of issuance of the Debt or (b) the in service date of such
          Improvements, and based on an interest rate equal to, at the election
          of the District, either (i) the weighted average interest rate of the
          Debt or (ii) the weighted average market rate at the time of issuance
          of the Debt for debt with similar terms and borrowers similar to the
          District, as reasonably

                                      -13-

<PAGE>
          determined by the District. The amortization period for any Debt shall
          not exceed 30 years, land shall be deemed to have an economic useful
          life of 30 years, and any Debt proceeds deposited into a reserve
          account shall be credited against Annual Power Cost in the final year
          of the Debt. The District may adjust prospectively the amortization of
          the principal amount of any Debt to correct any error in computation
          or to reflect a material change in the District's reasonable estimate
          of the in service date or the average economic life of the
          Improvements.

     (3)  To the extent that the District creates or replenishes reserve and
          contingency funds required by Bond Resolutions or working capital
          funds that are not financed by Debt proceeds, Annual Power Costs will
          include a cost determined in a manner analogous to the calculation in
          Section 5(c)(2) with such amounts amortized over 15 years. Upon
          termination of this contract, any such funds will belong to the
          District.

(f)  On or prior to July 31st of each year, for budgetary purposes only and not
     for determining Priest Rapids Project Products or Purchaser's payment
     obligations under this contract, the District shall provide the Purchaser a
     pro forma budget showing an estimate of Annual Power Costs, Priest Rapids
     Project Output, Purchaser Revenue Allocation and Estimated District Loads
     for the following Contract Year.

SECTION 6.  PAYMENT FOR PRIEST RAPIDS PROJECT PURCHASER REVENUE ALLOCATION.
(a)  On or before 30 days prior to the beginning of each Contract Year beginning
     in 2005, the District shall prepare and mail the Purchaser a pro forma
     statement for the next Contract Year showing:

     (1)  An estimate of Annual Power Costs specifically assigned to the
          Purchaser. Specific assignment shall occur whenever a Purchaser or a
          group of Purchasers cause identifiable costs to be placed on the
          Priest Rapids Project.

     (2)  A detailed estimate of the Annual Power Costs, less those costs
          specifically assigned in Section 6(a)(1), for the Contract Year.

     (3)  An estimate of the cost to the Purchaser attributable to the Purchaser
          Revenue Allocation of the costs of the Reasonable Portion, which shall
          be an amount equal to the product of the Reasonable Portion and the
          Annual Power Costs from Section 6(a)(2) multiplied by the ratio of the
          estimated Reasonable Portion Proceeds to be received by the Purchaser
          calculated pursuant to Section 4(c) to the estimated total Reasonable
          Portion Proceeds from Section 4(c)(5).

     (4)  An estimate of the cost of purchasing capacity and energy with the
          Purchaser Revenue Allocation of the Reasonable Portion Proceeds
          pursuant to Section 3(c).

     (5)  The sum of amounts (expressed in dollars) calculated pursuant to
          Sections 6(a)(1),(3), and (4), hereinafter referred to as the
          "Purchaser Estimated Cost."

                                      -14-
<PAGE>
     (6)  The amount of the monthly payments to be made by the Purchaser to pay
          the Purchaser Estimated Cost during the next Contract Year.

 (b) The pro forma statement provided pursuant to Section 6(a) shall be in lieu
     of the issuance of monthly bills to the Purchaser by the District, and the
     Purchaser shall be obligated to pay the monthly amounts contained therein
     in accordance with this Section 6.

 (c) In the event of receipts or payments substantially affecting the Annual
     Power Costs during any Contract Year, the District shall prepare and mail
     to the Purchaser a revised statement of estimated Annual Power Costs and
     Purchaser Estimated Cost, which revised statement shall supersede any
     previous statement or revised statement, and the Purchaser shall be
     obligated to make monthly payments set forth on such revised statement for
     the balance of the Contract Year.

 (d) Purchaser Estimated Cost shall continue to accrue and the Purchaser shall
     make payment for the same up to the time of termination of this contract
     for whatever reason, irrespective of the condition of the Priest Rapids
     Project and whether or not it is capable of producing Priest Rapids Project
     Output, the Reasonable Portion or the Purchaser Revenue Allocation of the
     Reasonable Portion Proceeds. If the Priest Rapids Project is not capable of
     producing Priest Rapids Project Output then the Purchaser Estimated Cost
     will be based on Priest Rapids Project Output in the last full year of
     operation. In this event, at the request of the Purchaser, the District
     will make its reasonable best efforts to acquire replacement Priest Rapids
     Products the cost of which will be added to the Purchaser Estimated Cost.

 (e) The monthly payments of Purchaser Estimated Costs set forth in the
     statement or revised statement shall be due and payable by electronic funds
     transfer to the District's account, designated in writing by the District,
     on the 20th calendar day of each month.

 (f) If payment in full of any monthly payment amount set forth on a statement
     or revised statement is not received by the District on or before the close
     of business on the 20th day of the month, a delayed payment charge of 2% of
     the unpaid amount due will be made. Any bill which remains unpaid for more
     than 30 days after the due date shall, in addition to the delayed payment
     charge, accrue interest at the lesser of 1.5% per month or the maximum
     rate allowed by law. If the 20th calendar day of the month is a Saturday,
     Sunday or a District recognized holiday, the next following business day
     shall be the last day on which payment may be received without the addition
     of the delayed-payment charge. Additionally, if payment due to the District
     under this Section 6 remains unpaid 30 days after the due date, the
     District may thereafter suspend payment of the Purchaser Revenue Allocation
     to the Purchaser which would otherwise occur until payment in full of all
     amounts due and owing (including any interest and delay charges) is
     received by the District.

 (g) On or before 150 days after the end of each Contract Year, the District
     will submit to the Purchaser a detailed statement of the Purchaser
     Estimated Cost and the Purchaser Actual Cost for the Contract Year.
     Purchaser Actual Cost on such statement shall be calculated in the same
     manner as Purchaser Estimated Cost as set forth in Sections 6(a)(1)-(5) but
     using the actual costs incurred by the District in the preceding Contract
     Year; provided, however, that

                                      -15-
<PAGE>
     the estimated values calculated pursuant to Sections 4(c)(1)-(2) and
     4(c)(5) shall not be modified. If the Purchaser Actual Costs exceed the
     Purchaser Estimated Costs on such statement ("Excess Costs"), the District
     shall bill the Purchaser for an amount equal to such Excess Costs, and the
     Purchaser shall pay such bill within 30 days or be subject to the
     delayed-payment and interest charges as provided in Section 6(f). If the
     Purchaser Actual Costs are less than the Purchaser Estimated Costs, or if
     credits are due pursuant to Section 5(b) or both ("Refund Costs"), the
     District shall give credit to the Purchaser against the Purchaser Estimated
     Costs for the current Contract Year in an amount equal to such Refund
     Costs; provided, that if Refund Costs are due to Purchaser following the
     expiration of this contract, the District shall make a cash refund of such
     amount to the Purchaser.

(h)  The District may use any payments received from the Purchaser under this
     contract in any manner that the District, in its sole discretion, shall
     determine. The District agrees to pay or cause to be paid for the Priest
     Rapids Project from lawfully available money of the District, including
     payments from the Purchaser and other Purchasers, all the operating costs,
     taxes and assessments, capital expenditures, payments required for Debt and
     other costs of the Priest Rapids Project. If the District issues tax-exempt
     Debt based on the governmental use of the Priest Rapids Project Output by
     the Purchaser, the Purchaser covenants that it shall not use any Priest
     Rapids Project Output in a manner, or take any other action, that will or
     is likely to adversely affect the tax-exempt status of any Debt.

SECTION 7. SUPPORT AND COOPERATION.

(a)  The District shall make application and use reasonable efforts to obtain a
     New FERC License and obtain FERC approval of this contract, if required.
     The District reserves the right to determine when such applications should
     be made.

(b)  In accordance with FERC direction contained in the PL 83-544 Orders, the
     District commits to providing the Eligible Purchasers with a meaningful
     priority in the sale of the Reasonable Portion.

(c)  Purchasers may also participate in the development by the District of a
     proposed Marketing Plan. This Marketing Plan will be submitted to FERC for
     approval as part of the relicensing process application; provided, however,
     that nothing in this Section shall be construed as compelling the Purchaser
     to comment on or refrain from commenting on the Marketing Plan.

(d)  Purchaser covenants that it shall provide reasonable support, cooperation
     and assistance to the District in the District's acquisition of a New and
     Annual FERC License, any necessary federal, state or local permits relating
     to the Priest Rapids Project, FERC approval of this contract, if FERC
     approval is requested by the District; provided, however, that nothing in
     this contract shall preclude the Purchaser from filing comments with FERC
     to protect the Purchaser's economic benefits provided by this contract.

(e)  In the event that the District believes that the Purchaser has violated any
     of the above covenants of Section 7(d), the District may by written notice
     to the Purchaser describe the alleged violation in reasonable detail and
     give the Purchaser no less than 10 business days within which to cease the
     activity in question or to provide to the District a written

                                      -16-

<PAGE>
     explanation as to why the Purchaser believes the activity does not
     constitute a violation of any of the aforementioned covenants. If the
     Purchaser does not cure the alleged default and the District continues to
     consider the action to be in breach of the covenants, the matter shall be
     resolved pursuant to arbitration conducted under Section 23. If the
     Purchaser is determined to be in breach of the covenants, the District
     shall have the right to terminate this contract effective immediately upon
     written notice to the Purchaser, without any liability or further
     obligation on the part of the District. In the event of such termination,
     the District shall have the right to use or sell, in any manner the
     District determines, the Purchaser Revenue Allocation the Purchaser would
     have been otherwise entitled to under this contract.

(f)  Purchaser covenants that it shall refrain from filing or supporting any
     FERC license application for the Priest Rapids Project other than that
     filed by the District and refrain from filing or supporting any effort that
     would lead to modification of the FERC decisions on Public Law 83-544
     contained in the PL 83-544 Orders, unless such a request or petition is
     filed by the District and the Purchaser agrees with that request or
     petition. For purposes of this Section 7(f), "refrain from supporting"
     means prepare no documents, submit no testimony, sign no other agreement or
     contract other than this contract for Priest Rapids Project Output or for
     other products or that is contingent upon a party other than the District
     receiving a license from FERC to operate the Priest Project, engage in no
     lobbying and provide no funding.

(g)  The Purchaser covenants that it will not take any action which, in the
     opinion of a neutral third party, would likely be construed as: (i) having
     a material adverse effect on the District's ability to obtain an Annual
     FERC License or a New FERC License or on the anticipated economic benefits
     of this contract or (ii) constituting a judicial challenge to the authority
     of the District or the Purchaser to enter into and implement the provisions
     of this contract. This covenant does not apply to anticipated economic
     benefits under other agreements between the District and third parties,
     such as with the Bonneville Power Administration.

(h)  In the event that the District believes that the Purchaser has violated any
     of the above covenants of Section 7(f) or (g), the District may by written
     notice to the Purchaser describe the alleged violation in reasonable detail
     and give the Purchaser no less than 4 business days after receipt of such
     written notice by Purchaser within which to cease the activity in question
     or to provide to the District a written explanation as to why the Purchaser
     believes the activity does not constitute a violation of any of the
     aforementioned covenants. If the Purchaser does not cure the alleged
     default and the District continues to reasonably consider the action to be
     in breach of the covenants, the District shall have the right to terminate
     this contract and the 1956 and 1959 Contracts, effective immediately upon
     written notice to the Purchaser, without any liability or further
     obligation on the part of the District. In the event of such termination,
     the District shall have the right to use or sell, in any manner the
     District determines, the Purchaser Revenue Allocation the Purchaser would
     have been otherwise entitled to under this contract and any output from the
     Priest Rapids Project under the 1956 or 1959 Contracts.

SECTION 8. PAYMENT OF THE REASONABLE PORTION PROCEEDS.

                                      -17-
<PAGE>
(a) The Purchaser Revenue Allocation of the Reasonable Portion Proceeds shall be
    paid to the Purchaser monthly, as follows:

    (1) The monthly payment to the Purchaser shall be the product of the
        Purchaser Revenue Allocation and the difference between the actual
        monthly payments of the Reasonable Portion Proceeds received by the
        District and the monthly Estimated District Power Costs pursuant to
        Section 4(c)(4); provided, however, if the Purchaser has elected to have
        the District make purchases of capacity and energy under a supplementary
        agreement pursuant to Section 3(c), then Purchaser will receive such
        capacity and energy in lieu of the proceeds described in this Section
        8(a)(1). Nothing in this Section 8(a)(1) will result in a negative
        payment or a bill to the Purchaser when such Estimated District Power
        Costs exceed the actual monthly Reasonable Portion Proceeds received by
        the District.

    (2) Payments due from the District to Purchaser pursuant to Section 8(a)(1)
        shall be made in accordance with the provisions of Section 6, and such
        payment shall be due not later than the 20th calendar day of each month.

    (3) During the term of this contract, the District may be entitled to take
        during a Contract Year all of the Reasonable Portion Proceeds pursuant
        to Section 4(d) resulting in a zero payment to purchaser ("Zero Year").
        If in any Zero Year the District has in place one or more multiple year
        contracts, the terms of which include or span the Zero Year ("Multi-Year
        Contracts"), then the payments to the Purchaser from such Multi-Year
        Contracts included in the calculations performed pursuant to Section
        4(c) shall be proportional to the annual market price of power as
        forecast at the time the Multi-Year Contracts were agreed to by the
        District.

    (4) If in any month the Estimated District Power Costs from Section 4(c)(4)
        exceed the actual Reasonable Portion Proceeds received in such month
        ("Estimated Power Cost Shortfall"), the Estimated Power Cost Shortfall
        shall be carried forward to the next month or months remaining in the
        Contract Year in which such Estimated Power Cost Shortfall occurred
        until paid in full from the Reasonable Portion Proceeds received by the
        District.

SECTION 9. INFORMATION TO BE MADE AVAILABLE TO THE PURCHASER.

(a) The District agrees to keep records of the Priest Rapids Project in
    accordance with the Uniform System of Accounts as prescribed by FERC for
    electric utilities and licensees; provided, if there are inconsistencies
    between the Uniform System of Accounts and this contract, this contract
    shall control. The Purchaser, upon at least 30 days advance written notice
    to the District, shall have the right to audit or examine operating and
    financial records relating to the Priest Rapids Project during the
    District's normal business hours. To the extent practicable, the Purchasers
    shall conduct any such audit or examination jointly to minimize the
    disruption to the District's business operations. All costs incurred by the
    District associated with such audit, including, but not limited to, District
    labor, materials and reproduction services shall be billed to the Purchaser,
    and shall be promptly reimbursed by the Purchaser in accordance with Section
    6(c).

                                      -18-

<PAGE>
(b) Upon request, any audit reports of the Priest Rapids Project by a firm of
    certified public accountants employed by the District or by the State
    Auditor's Office of the State of Washington will be provided to the
    Purchaser.

(c) Policies of insurance carried by the District pursuant to Section 10 shall
    be available at the office of the District for inspection by the Purchaser.

(d) The Purchaser's representatives shall at all times be given reasonable
    access to the Priest Rapids Project, subject to the District's applicable
    safety rules and regulations.

(e) Upon request, the Purchaser may obtain information to document the
    capability of the Priest Rapids Project to produce Priest Rapids Project
    Output.

SECTION 10. INSURANCE.

The District shall have the right to self-insure and/or obtain and maintain
insurance with policies payable to the District for the following coverage:

(a) Obligations of the District under any state or federal Workmen's
    Compensation laws or other employer's liability;

(b) Public liability for bodily injury and property damage;

(c) Physical loss or damage to the Priest Rapids Project on a replacement cost
    basis; and

(d) Any other insurance determined to be necessary.

SECTION 11. PROJECT INTEGRATION.

(a) It is the intention of the Parties hereto that the operation of the Priest
    Rapids Project shall be integrated and that all benefits accruing as a
    result of such integration shall be shared equally by the Priest Rapids and
    Wanapum Developments. It is also agreed that before November 1, 2009 and
    after such date if required by any Bond Resolution, all joint costs of the
    Priest Rapids and Wanapum Developments shall be equitably allocated between
    them as determined by the District.

(b) The Parties agree that any compensation (whether energy or money) due or
    which become due the owner of the Rock Island Hydroelectric Project because
    of encroachment by the Priest Rapids Project after November 1, 2009 on the
    Rock Island Hydroelectric Project will either proportionately reduce the
    amount of Priest Rapids Project Output or be included in Annual Power Costs,
    as appropriate, but shall not reduce the amount required to be paid by the
    Purchaser under Sections 5 and 6. "Rock Island Hydroelectric Project" shall
    mean the FERC Hydroelectric Project No. 943 currently operated by Public
    Utility District No. 1 of Chelan County, Washington.

SECTION 12. LIABILITY OF PARTIES.

(a) Except as otherwise provided in this contract, each Party hereby releases
    the other Party and its commissioners, officers, directors, agents and
    employees from any claim for loss or damage

                                      -19-

<PAGE>
     arising out of the ownership, operation, and maintenance of the Priest
     Rapids Project including any loss of profits or revenues, loss of use of
     power system, cost of capital, cost of purchased or replacement power,
     other substantially similar liability or other direct or indirect
     consequential loss or damage, except as provided in the Agreement Limiting
     Liability Among Western Interconnected Systems for parties to that
     agreement. This release shall not include any claim by the Purchaser for
     refunds for over-payments made to the District nor any claim for specific
     performance of the District's obligation to deliver to the Purchaser during
     the term of this contract the Purchaser Revenue Allocation to which the
     Purchaser is entitled under this contract.

(b)  The Purchaser shall have no claim of any type or right of action against
     the District: (i) as a result of a FERC or court order or amendment
     described in Section 3(h); (ii) as a result of the failure to receive an
     Annual FERC License or a New FERC license or the adjustment of delivery of
     Priest Rapids Products pursuant to Section 4(f) whether arising under the
     terms of this contract or otherwise; or (iii) as a result of the District's
     purchasing power or energy on behalf of the Purchaser pursuant to Sections
     3(c), and the Purchaser hereby releases the District and its commissioners,
     officers, agents and employees from any claim for loss or damage arising
     out of the events described in this paragraph.

SECTION 13. NOTICES AND COMPUTATION OF TIME.
Any notice or demand, except those provided for in Section 6, by the Purchaser
under this contract to the District shall be deemed property given if mailed
postage prepaid and addressed to Manager, Public Utility District No. 2 of Grant
County, Box 878, Ephrata Washington 98823; any notice or demand by the District
to the Purchaser under this contract shall be deemed properly given if mailed
postage prepaid and addressed to the Vice President, Energy Resources, Avista
Corporation, P.O. Box 3727, Spokane, Washington 99220.

In computing any period of time from such notice, such period shall commence at
12:00 A.M. (midnight) on the date mailed. The designations of the name and
address to which any such notice or demand is directed may be changed at any
time by either Party giving notice as provided above.

SECTION 14. DISTRICT'S BOND RESOLUTIONS AND LICENSE.
It is recognized by the Parties that the District, in its operation of the
Priest Rapids Project, must comply with the requirements of the Bond Resolution
and with the FERC License together with amendments thereof from time to time
made, and the District is hereby authorized to take such actions as the District
determines are necessary and appropriate to comply with such Bond Resolution and
FERC License.

SECTION 15. GOVERNING LAW.
The Parties agree that the laws of the State of Washington shall govern this
contract.

SECTION 16. ASSIGNMENT OF CONTRACT.
Neither the Purchaser nor the District shall by contract, operation of law or
otherwise, assign this contract or any right or interest in this contract
without the prior written consent of the other Party, which shall not be
unreasonably withheld; provided, however, a Party may, without the consent of
the other Party (and without relieving itself from liability hereunder): (i)
transfer or

                                      -20-

<PAGE>
assign this contract to an affiliate of the Party provided that the affiliate's
creditworthiness is equal or higher than that of the Party; or (ii) transfer or
assign this contract to any person or entity succeeding to all or substantially
all of the distribution and generating facilities of the Party whose
creditworthiness is equal or higher than that of the Party; provided, however,
that in each such case, any such assignee shall agree in writing to be bound by
the terms and conditions in this contract and the transferring Party shall
deliver such tax and enforceability assurance as the other Party may reasonably
request.

SECTION 17. REMEDIES ON DEFAULT.

(a) "Act of Default" shall mean:

     (1)  The failure of a Party to make, when due, any payment required under
          this contract if such failure is not remedied within three days after
          written notice, provided that the payment is not the subject of a good
          faith dispute pursuant to Section 23. If requested by the District,
          the Purchaser shall deposit the disputed amount in escrow with a bank
          acceptable to the Parties.

     (2)  Any representation or warranty in this contract is false or misleading
          in any material respect when made or ceases to remain true during the
          term of this contract.

     (3)  The failure of the Purchaser, after Section 7 or any provision thereof
          has been found by a court to be void, unlawful or unenforceable, to
          perform in accordance with the provisions of Section 7, including
          without limitation any provision or provisions found to be void,
          unlawful or unenforceable.

     (4)  A Party shall make an assignment or any general arrangement for the
          benefit of creditors; file a petition or otherwise commence or
          acquiesce in the commencement of a proceeding under any bankruptcy or
          similar law for the protection of creditors; or otherwise becomes
          bankrupt or insolvent or unable to pay its debts as they fall due.

(b)  If a Party commits an Act of Default during the term of this contract, the
     non-defaulting Party may take any one or more of the following remedial
     steps:

     (1)  Take any action or exercise any remedy provided to the Party under the
          provisions of Sections 6 or 7.

     (2)  Except where a different time period is set forth herein, if the
          defaulting Party fails to remedy an Act of Default within ten days
          after receiving written notification of the default, then the
          non-defaulting Party may give a written notice of termination of this
          contract on a date specified in such notice, which date shall be not
          less than 30 days after the date of such notice. If the Purchaser is
          given written notice as provided herein, this contract shall terminate
          upon the date specified in such notice, the Purchaser thereafter shall
          have no right, title, or interest in, to, or with respect to the
          Priest Rapids Project, or any Purchaser Revenue Allocation, or any
          Priest Rapids Project Output, but the Purchaser shall remain liable
          for all amounts due the District which have accrued prior to the date
          of termination.

                                      -21-
<PAGE>
     (3)  The District may, prior to the termination of this contract pursuant
          to Section 17(b)(2), at any time suspend any and all rights of the
          Purchaser to the Purchaser Revenue Allocation upon not less than five
          days' notice to the Purchaser. The District may, without further
          notice to the Purchaser, grant any or all of such suspended rights to
          any person or entity for the duration of the suspension. In such
          event, the Purchaser shall, in addition to its other obligations under
          this contract, upon demand, pay to the District all expenses and any
          losses incurred in connection with such suspension and any grant of
          the suspended rights to another person or entity. No suspension of any
          or all of the rights of the Purchaser Revenue Allocation shall be
          construed as an election to terminate the interests of the Purchaser
          in, to, and under this contract unless a written notice of termination
          is given to the Purchaser pursuant to this contract or unless such
          termination be decreed by a court of competent jurisdiction.

     (4)  The non-defaulting Party may begin and maintain successive proceedings
          against the defaulting Party for the recovery of damages or for a sum
          equal to any and all payments required to be made pursuant to this
          contract.

     (5)  A Party may take whatever action at law or in equity as may appear
          necessary or desirable to collect the amounts payable by the
          defaulting Party under this contract then due and thereafter to become
          due, or to enforce performance and observation of any obligation,
          agreement or covenant of the defaulting Party under this contract.

     (6)  No right or remedy conferred upon or reserved to a Party is intended
          to be exclusive of any other right or remedy, and each and every right
          and remedy shall be cumulative and in addition to any other right or
          remedy given hereunder, or now or hereafter legally existing, upon the
          occurrence of any Act of Default. Failure of the District to insist at
          any time on the strict observance or performance by the Purchaser of
          any of the provisions of this contract, or to exercise any right or
          remedy provided for in this contract shall not impair any such right
          or remedy nor be construed as a waiver or relinquishment thereof for
          the future. Receipt by the District of any payment required to be made
          hereunder with knowledge of the breach of any provisions of this
          contract shall not be deemed a waiver of such breach. In addition to
          all other remedies provided in this contract, the District shall be
          entitled, to the extent permitted by applicable law, to injunctive
          relief in case of the violation, or attempted or threatened violation,
          of any of the provisions of this contract, or to a decree requiring
          performance of any of the provisions of this contract or to any other
          remedy legally allowed to the District.

     (7)  The District shall not have the right to accelerate future payment
          obligations of the Purchaser in the event of default under this
          contract.

SECTION 18. VENUE AND ATTORNEY FEES.

Venue of any action filed to enforce or interpret the provisions of this
contract shall be exclusively in the United States District Court for the
Eastern District of Washington or the Superior Court of the State of Washington
for Grant County and the Parties irrevocably submit to the jurisdiction of any
such court. In the event of litigation to enforce the provisions of this
contract, the prevailing Party shall be entitled to reasonable attorney's fees
in addition to any other relief allowed.

                                      -22-

<PAGE>
SECTION 19. COMPLIANCE WITH LAW.
The Parties shall conform to and comply with all laws, rules, regulations,
license conditions or restrictions promulgated by the FERC or any other
governmental agency or entity having jurisdiction over the Priest Rapids
Project. The Purchaser shall cooperate and take whatever action is necessary to
cooperate fully with the District in meeting such requirements. Obligations of
the District contained in this contract are hereby expressly made subordinate
and subject to such compliance.

SECTION 20. HEADINGS.
The headings of sections and paragraphs of this contract are for convenience of
reference only and are not intended to restrict, affect or be of any weight in
the interpretation or construction of the provisions of such sections and
paragraphs.

SECTION 21. ENTIRE AGREEMENT; MODIFICATION; CONFLICT IN PRECEDENCE.
This contract does not modify the terms and conditions contained in the 1956
and 1959 Contracts except as provided in Sections 1(b) and 7. This contract
constitutes the entire agreement between the Parties with respect to the
subject matter of this contract, and supersedes all previous communications
between the Parties, either verbal or written, with respect to such subject
matter. No modifications of this contract shall be binding upon the Parties
unless such modifications are in writing signed by each Party. To the extent
there are any conflicting provisions between this contract and the 1956
Contract, or this contract and the 1959 Contract after November 1, 2009, the
terms and conditions in this contract shall take precedence and be controlling
and the 1956 and 1959 Contracts are hereby amended accordingly.

SECTION 22. NO PARTNERSHIP OR THIRD PARTY RIGHTS.
(a)  This contract shall not be interpreted or construed to create an
     association, joint venture or partnership between the Parties, or to impose
     any partnership obligations or liability upon any Party. Without limiting
     the foregoing, the Purchaser shall not be liable for, and the District
     hereby releases the Purchaser from, the payment of Debt except as provided
     in Sections 5 and 6.

(b)  This contract shall not be construed to create rights in or grant remedies
     to any third party as a beneficiary of this contract.

SECTION 23. PURCHASERS' COMMITTEE; ARBITRATION.
(a)  There is hereby established a Purchasers' committee (the "Committee"). Each
     Purchaser may appoint one representative (and one alternate) as a Committee
     member to attend Committee meetings. The members of the Committee shall
     elect a chair, and may adopt such rules for the conduct of business as it
     deems appropriate. Meetings between the District and Purchasers shall be
     held routinely, but not more frequently than once a quarter, provided,
     however, that such meetings may be held more frequently than once each
     quarter at the request of the District or upon the request of members of
     the Committee whose Purchaser Revenue Allocations total 66% or more. All
     meetings between the District and Purchaser will be held in Grant County,
     Washington, unless the District and the Purchasers agree to another
     location.

                                        -23-
<PAGE>
(b)  In addition to other matters subject to arbitration pursuant to other
     provisions of this contract, if approved by members of the Committee whose
     Purchaser Revenue Allocations total 66% or more, the Committee may submit
     to binding arbitration the following issues:

     (1)  Have the Estimated District Loads been forecast in accordance with
          Prudent Utility Practice and, if not, what is the appropriate
          Estimated District Loads in accordance with Prudent Utility Practice
          for the Contract Year?

     (2)  Have the Annual Power Costs been determined by the District in
          accordance with Prudent Utility Practice and have such costs been
          incurred for the benefit of Priest Rapids Project Output and, if not,
          what are the appropriate Annual Power Costs in accordance with Prudent
          Utility Practice for the Contract Year; provided that nothing in this
          Section shall be interpreted to limit the ability of the District to
          meet its payment obligations under a Bond Resolution?

     (3)  What modifications to this contract, pursuant to Section 3(h), are
          necessary to comply with FERC or court orders and to preserve the
          basic benefits and obligations of the Parties?

     (4)  Has the Purchaser violated the covenants in Section 7(e)?

     (5)  Are the annual proceeds from the sales of the Reasonable Portion
          pursuant to Multi-Year Contracts proportional to the annual market
          price of power, as forecast at the time the Multi-Year Contracts were
          agreed to by the District, and if not, what adjustments are necessary
          to the payments to Purchaser pursuant to Section 4(e) to reflect such
          forecast annual market price of power for sales made pursuant to such
          Multi-Year Contracts?

(c)  The board of arbitrators shall be composed of three persons, one of whom
     shall be appointed by the District, one of whom shall be appointed by
     majority vote of the Committee, and the third person to be appointed by the
     two persons so appointed. The District and the Committee shall appoint
     their arbitrator within 15 days after notification of the Committee's vote
     to submit a matter to binding arbitration. In the event the two members
     cannot agree upon the appointment of a third person within 10 days, then
     such third person shall be appointed by the presiding judge of the Superior
     Court of Kittitas County, Washington. The arbitration shall be conducted
     jointly by the participating Purchasers, and under rules as may be
     determined by the arbitrators; provided, however, that all parties shall be
     afforded discovery consistent with the Federal Rules of Civil Procedure;
     and, provided further, if the arbitrators do not unanimously agree on the
     rules governing the arbitration, the arbitration shall be conducted in
     accordance with the Commercial Arbitration Rules of the American
     Arbitration Association. The board so designated shall conduct a hearing
     within 30 days of completion of their selection, and within 15 days after
     the hearing (unless such time is extended by agreement of the Parties)
     shall notify the Parties of their decision in writing, stating the reasons
     therefore and separately listing their findings of fact, conclusions of law
     and order. Insofar as the Parties hereto may legally do so, they agree to
     abide by the decision of the board. All factual determinations made by the
     board shall be conclusive and binding on the

                                      -24-

<PAGE>
     Parties and not subject to judicial review. Any conclusions of law made by
     the board shall be subject to review by a court specified in Section 23;
     provided, that the order issued by the board shall be effective unless and
     until a stay is issued by the board or such court suspends the
     effectiveness of the order.

SECTION 24. REPRESENTATIONS AND WARRANTIES.

Each party represents and warrants to the other Party that:

(a)  It is duly organized, validly existing and in good standing under the laws
     of the jurisdiction of its formation.

(b)  The execution, delivery and performance of this contract are within its
     powers, have been duly authorized by all necessary action and do not
     violate any of the terms and conditions in its governing documents, any
     contracts to which it is a party or any law, rule, regulation, or order
     applicable to it.

(c)  This contract constitutes a legally valid and binding obligation
     enforceable against it in accordance with its terms, subject to equitable
     defenses and applicable bankruptcy, insolvency and similar laws affecting
     creditors' rights generally.

                                      -25-
<PAGE>
SECTION 25. COUNTERPARTS.

This contract may be executed in counterparts, each of which shall be an
original and all of which shall constitute the same contract.

                                             PUBLIC UTILITY DISTRICT NO. 2
                                             OF GRANT COUNTY, WASHINGTON

                                             By  /s/ Mike Conley
                                             -----------------------------
               (SEAL)                        President

                                             ATTEST:
                                                 /s/ Thomas W. Flint
                                             -----------------------------
                                             Secretary

                                             AVISTA CORPORATION

                                             By: /s/ Gary G. Ely
                                                --------------------------
                                                     Gary G. Ely
               (SEAL)                        Title:  Chairman of the Board,
                                                     President and CEO

                                      -26-
<PAGE>
                                   EXHIBIT A

                    DEFINITIONS OF PRIEST RAPIDS DEVELOPMENT
                            AND WANAPUM DEVELOPMENT

         RESOLUTION NO. 390 -- DEFINITION OF PRIEST RAPIDS DEVELOPMENT

               Section 2(f) of Exhibit 1. "Priest Rapids Development" shall mean
               those properties and facilities consisting of the Priest Rapids
               dam, site, reservoir, switchyard and power plant, including all
               generating facilities associated therewith up to and including
               the first ten (10) main turbine generator units each with a
               nameplate rating of approximately 78,850 kilowatts and any
               additional generating facilities which may be installed as
               provided for in Section 19 of the Original Power Sales Contract,
               together with the associated transmission facilities consisting
               of two 230 KV transmission lines and terminal facilities
               interconnecting the Priest Rapids switchyard and the Bonneville
               Power Administration's Midway Substation and an undivided
               one-half (1/2) interest in the interconnecting facilities between
               the Priest Rapids switchyard and the Wanapum switchyard.

         RESOLUTION NO. 474 -- DEFINITION OF WANAPUM DEVELOPMENT

               Section 2.2. The District specifies and adopts the plan and
               system hereinafter set forth for the acquisition, by purchase or
               condemnation, and construction of the following generation and
               transmission facilities as a separate utility system of the
               District constituting the Wanapum Development of the District, to
               wit:

               A. The District shall construct an electric generating plant and
               associated facilities on the Columbia River at approximately
               river mile 415 from the mouth of said river at the Wanapum site
               on said river, in Grant and Kittitas Counties, Washington, as
               authorized by the Federal Power Commission License from Project
               No. 2114, originally issued November 4, 1955, and all amendments
               thereto; said generating plant to have an installed nameplate
               rating of approximately 831,250 kilowatts, and said generating
               plant and associated facilities to include, but not limited to, a
               concrete gravity dam, a fully enclosed reinforced concrete
               powerhouse containing ten (10) turbo-generating units with
               provisions in the intake structure for the installation of six
               (6) additional turbo-generating units, a reservoir, waterways,
               fish ladders and other fish protective devices; provisions for
               future installation of navigation locks; transforming facilities;
               a switchyard; transmission facilities necessary to connect the
               powerhouse to the existing transmission facilities of the Priest
               Rapids Development and to the transmission facilities of the
               Bonneville Power Administration in the vicinity of said Project;
               railroad siding, shops, warehouses, construction camp, offices,
               and dwellings; and all other structures, fixtures,

                                      A-1

<PAGE>
equipment or facilities used or useful in the construction, maintenance and
operation of the Wanapum Development; and all necessary water rights,
development rights, permits and licenses, casements, rights-of-way, flowage
rights and rights permitting the storage of water, riparian rights and shore
rights.

                                      A-2
<PAGE>
                             AMENDMENT NO. 1 TO THE
                    PRIEST RAPIDS PROJECT REASONABLE PORTION
                              POWER SALES CONTRACT

     The Public Utility District No. 2 of Grant County, Washington,
("District"), and Avista Corporation ("Purchaser"), hereby agree to this
Amendment No. 1 to the Priest Rapids Project Reasonable Portion Power Sales
Contract dated December 12, 2001 (the "Reasonable Portion Contract"). Unless
otherwise defined herein, all capitalized terms defined in the Reasonable
Portion Contract shall have the meanings set forth therein when used in this
Amendment.

     1.   Term of Amendment No. 1
     This Amendment No. 1 shall take effect on upon the execution by the
     District and Purchaser, and shall expire on the earlier of the expiration
     or termination date of the Reasonable Portion Contract.

     2.   Amendments to Provisions of the Reasonable Portion Contract
          Purchaser and the District agree that the Reasonable Portion Contract
          is hereby amended as follows:

          2.1  The definition of the term Priest Rapids Project Output set forth
               in Section 2 is deleted in its entirety and replaced with the
               following:

                    "Priest Rapids Project Output" shall mean the amount of
                    capacity, energy (both firm and non-firm), pondage, reactive
                    power, ancillary services (including dynamic load following
                    services) and any other product from the Priest Rapids
                    Development from November 1, 2005 to November 1, 2009 and
                    from the Priest Rapids Project from November 1, 2009 through
                    the term of this contract under the operating conditions
                    which exist during the term, including periods when the
                    Priest Rapid Project may be wholly or partially inoperable
                    for any reason, after correction for encroachment, Canadian
                    entitlement, station and project use, and depletions
                    required by the FERC License or other regulatory
                    requirements.

          2.2  Section 4(c)(4) is amended by adding the following sentence after
               the last sentence thereof:

                    After the District has acquired capacity and energy as
                    needed to serve its Estimated Unmet District Load, the
                    District shall not subsequently substitute therefore more
                    costly capacity and energy, in order to provide the less
                    costly capacity and energy to other wholesale or retail
                    power customers of the District.

Priest Rapids Project Reasonable
Portion Power Sales Contract
Amendatory Agreement No. 1

                                      -1-

<PAGE>
     2.3 Section 7(h) is deleted in its entirety and is replaced with the
         following:

               In the event that the District believes that the Purchaser has
               violated any of the above covenants of Section 7(f) or (g), the
               District may by written notice to the Purchaser describe the
               alleged violation in reasonable detail and give the Purchaser no
               less than 4 business days after receipt of such written notice by
               Purchaser within which to cease the activity in question or to
               provide to the District a written explanation as to why the
               Purchaser believes the activity does not constitute a violation
               of any of the aforementioned covenants. If the Purchaser does not
               cure the alleged default and the District continues to reasonably
               consider the action to be in breach of the covenants, the
               District shall have the right to terminate this contract,
               effective immediately upon written notice to the Purchaser,
               without any liability or further obligation on the part of the
               District. In the event of such termination, the District shall
               have the right to use or sell, in any manner the District
               determines, the Purchaser Revenue Allocation the Purchaser would
               have been otherwise entitled to under this contract.

     2.4 The Reasonable Portion Contract is amended by adding a new Exhibit C,
         Purchasers Product Percentage Allocations, which is attached hereto.

In Witness Whereof, Purchaser and the District have caused this Amendment No. 1
to be executed in their respective names by their duly authorized officers.

AVISTA CORPORATION                      PUBLIC UTILITY DISTRICT NO. 2 OF
                                        GRANT COUNTY, WASHINGTON

By:  /s/ Gary G. Ely                    By:  /s/ Mike Conley
   --------------------------              ------------------------

Title: Chairman, President              Title: President, Board of
       & CEO                                   Commissioners
      -----------------------                 ---------------------

Date Signed: Feb. 6, 2002               Date Signed: 2/11/02
            -----------------                       ---------------

                                             /s/ Thomas W. Flint
                                             ---------------------
                                             Secretary, Board of
                                             Commissioners

Priest Rapids Project Reasonable
Portion Power Sales Contract
Amendatory Agreement No. 1
                                      -2-
<PAGE>
EXHIBIT A. AMENDMENT 1
                               Purchasers Product Percentage Allocations

<TABLE>
                                                  Requested   Number of      Section 3c/e   Section 3c/e Step 2
                               Historical Shares  Purchaser   Customers         Step 1         Allocation(1)
Purchaser Name                 1956       1959     Product%      2000         Allocation     Surplus    Displace
--------------                 ----       ----    ---------   ---------      ------------   --------    --------
<S>                            <C>        <C>     <C>         <C>            <C>            <C>         <C>
A. 1956/1959 PURCHASERS
   Pacific Corp                13.9%      18.7%      32.6%       768,446                       25.03%      25.03%
   Portland General            13.9%      18.7%      32.6%       726,039                       25.03%      25.03%
   Puget Sound Energy           8.0%      10.8%      18.8%       915,851                       14.43%      14.43%
   Avista Utilities             6.1%       8.2%      25.0%       309,986                       10.98%      10.98%
   Cowlitz PUD                  2.0%       2.7%       4.7%        44,361                        3.61%       3.61%
   Eugene Water & Elec          1.7%       2.3%       4.0%        80,097                        3.07%       3.07%
   City of Forest Grove         0.5%       0.7%      (5)           8,592                        0.92%       0.92%
   City of McMinnville          0.5%       0.7%      (5)          13,973                        0.92%       0.92%
   City of Milton-Freewater     0.5%       0.7%      (5)           4,581                        0.92%       0.92%

B. 1956 ONLY PURCHASERS(2)
   Seattle City Light           8.0%       n/a       (5)         349,557                        6.14%       6.14%
   Tacoma Power                 8.0%       n/a       16.0%       147,819                        6.14%       6.14%
   Kittitas PUD                 0.4%       n/a                     3,078                        0.31%       0.31%
                                                               ---------                      -------     -------
     Total A + B                                               3,392,380      97.51%           97.51%      97.51%

C. NO. IDAHO PURCHASERS
   Clearwater                   n/a        n/a      10.43%         9,314                        0.27%       0.27%
   Idaho Co. Light & Power      n/a        n/a       2.41%         3,007                        0.09%       0.09%
   Kootenai                     n/a        n/a      16.28%        16,244                        0.47%       0.47%
   Northern Lights              n/a        n/a      12.30%        14,541                        0.42%       0.42%

D. SNAKE RIVER PURCHASERS
   Fall River Rural Elec        n/a        n/a      (6)           10,992                        0.32%       0.32%
   Lost River Electric          n/a        n/a      (6)            2,327                        0.07%       0.07%
   Lower Valley Electric        n/a        n/a      (6)           19,182                        0.55%       0.55%
   Ralt River Rural Elec        n/a        n/a      (6)            2,927                        0.08%       0.08%
   Salmon River Electric        n/a        n/a      (6)            2,570                        0.07%       0.07%
   United Electric              n/a        n/a      (6)            5,515                        0.16%       0.16%
                                                   ---------------------                      -------     -------
     Association Total                               1.24%        43,513                        1.25%       1.25%
                                                                --------                      -------     -------
       Total C & D                                                86,619       2.49%            2.49%       2.49%
                                                                             -------          -------     -------
   Total                       63.5%      63.5%                              100.00%          100.00%     100.00%
</TABLE>

<TABLE>
                              Section 3c/e Step 2 Allocation (1)                  Adjustment for 2005-2009
                              ----------------------------------                  ------------------------
                                Reasonable            Added                                      Reasonable       Added
Purchaser Name                   Portion            Products(7)    Surplus(2)     Displace(3)    Portion(4)     Products(7)
--------------                  ----------          -----------    ----------     -----------    ----------     -----------
<S>                          <C>                  <C>             <C>            <C>           <C>             <C>

A. 1956/1959 PURCHASERS
   Pacific Corp               25.03%                25.67%         21.34%         26.87%        23.19%          21.89%
   Portland General           25.03%                25.67%         21.43%         26.87%        23.19%          21.89%
   Puget Sound Energy         14.43%                14.80%         12.28%         15.51%        13.36%          12.60%
   Avista Utilities           10.98%                11.26%          9.37%         11.79%        10.17%           9.61%
   Cowlitz PUD                 3.61%                 3.70%          3.07%          3.88%         3.34%           3.15%
   Eugene Water & Elec         3.07%                 3.15%          2.61%          3.39%         2.84%           2.68%
   City of Forest Grove        0.92%                 0.94%          0.77%          1.00%         0.84%           0.79%
   City of McMinnville         0.92%                 0.94%          0.77%          1.00%         0.84%           0.79%
   City of Milton-Freewater    0.92%                 0.94%          0.77%          1.00%         0.84%           0.79%

B. 1956 ONLY PURCHASE(2)
   Seattle City Light          6.14%                6.30%          12.28%         12.28%        12.28%          12.60%
   Tacoma Power                6.14%                6.30%          12.28%         12.28%        12.28%          12.60%
   Kittitas PUD                0.31%                0.31%           0.61%          0.61%         0.61%           0.63%
                             -------              -------         -------        -------       -------         -------
       Total A + B            97.51%              100.00%          97.51%        116.40%       103.81%         100.00%

C. NO. IDAHO PURCHASERS
   Clearwater                  0.27%                n/a             0.27%          0.27%         0.27%            n/a
   Idaho Co. Light & Power     0.09%                n/a             0.09%          0.09%         0.09%            n/a
   Kootenai                    0.47%                n/a             0.47%          0.47%         0.47%            n/a
   Northern Lights             0.42%                n/a             0.42%          0.42%         0.42%            n/a

D. SNAKE RIVER PURCHASERS
   Fall River Rural Elec       0.32%                n/a             0.32%          0.32%         0.32%            n/a
   Lost River Electric         0.07%                n/a             0.07%          0.07%         0.07%            n/a
   Lower Valley Electric       0.55%                n/a             0.55%          0.55%         0.55%            n/a
   Ralt River Rural Elec       0.08%                n/a             0.08%          0.08%         0.08%            n/a
   Salmon River Electric       0.07%                n/a             0.07%          0.07%         0.07%            n/a
   United Electric             0.16%                n/a             0.16%          0.16%         0.16%            n/a
     Association Total       -------              -------         -------        -------       -------         -------
       Total C & D             1.25%                n/a             1.25%          1.25%         1.25%            n/a
   Total                     -------              -------         -------        -------       -------         -------
                               2.49%                n/a             2.49%          2.49%         2.49%            n/a
                             -------              -------         -------        -------       -------         -------
                             100.00%              100.00%         100.00%        118.89%       106.30%         100.00%
</TABLE>

NOTES: (1) Allocated per average of 1956 and 1956 Shares or, for Idaho
           Purchasers, per number of customers.
       (2) Allocated per 1956 Shares Surplus Product and, for Idaho Purchasers,
           per number of customers.
       (3) Allocated per 75% of 1956 Shares and 25% of 1959 Shares for
           1956/1959 Purchaser, per 1956 Shares for the Only 1955 Purchaser, and
           number of customers for No. Idaho and Snake River Purchasers.
       (3) Allocated per 75% of 1956 Shares and 25% of 1959 Shares for
           1955/1959 Purchasers, per 1956 Shares for the Only 1956 Purchaser,
           and number of customers for No. Idaho and Snake River Purchasers.
       (5) Have Intent to Sign Contract Letter without Requested Purchaser
           Product Percent.
       (6) Snake River Purchaser's Contract with the Association.
       (7) Allocated only to the 1956/1959 and Only 1956 Purchasers per 1956
           Shares for 2005-2009, then average of 1956 and 1959 Shares post-2009.

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