Document:

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                                                                    Exhibit 10.9

                                                                  CONFORMED COPY

                                 POLR AGREEMENT

                                 by and between

                             DUQUESNE LIGHT COMPANY

                                       and

                  ORION POWER HOLDINGS, INC., the POLR SUPPLIER

                         Dated as of September 24, 1999
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                                 POLR AGREEMENT

                  This POLR Agreement (this "Agreement") is made and entered
into as of September 24, 1999 (the "Effective Date") by and between Duquesne
Light Company, a Pennsylvania corporation ("DLC"), and Orion Power Holdings,
Inc., a Delaware corporation (the "POLR Supplier"). DLC and the POLR Supplier
are referred to individually as a "Party" and collectively as the "Parties."

                                   WITNESSETH:

                  WHEREAS, DLC is selling its generating facilities and other
assets associated therewith through an auction process (such sale, the "Asset
Sale");

                  WHEREAS, notwithstanding the Asset Sale, DLC will continue to
have and retain its obligation as the electrical energy ("Energy") provider of
last resort (the "POLR") for its retail customers during a time period
established by the Pennsylvania Public Utility Commission;

                  WHEREAS, as a result of the Asset Sale, DLC will no longer
have the generating facilities necessary to supply Energy as the POLR;

                  WHEREAS, the POLR Supplier has or is willing to secure the
necessary resources to meet DLC's Energy obligations as the POLR;

                  WHEREAS, DLC desires to purchase from the POLR Supplier and
the POLR Supplier desires to sell Energy at wholesale rates to DLC to meet DLC's
Energy obligations as the POLR as provided herein;

                  NOW, THEREFORE, in consideration of the mutual covenants,
representations and agreements hereinafter set forth, and intending to be
legally bound hereby, the Parties agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  Definitions. As used in this Agreement, the following terms
have the meanings set forth below:

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"Administration Committee" means a committee for the administration of this
Agreement which shall consist of two members appointed by DLC and two members
appointed by the POLR Supplier. One member appointed by each Party shall
represent system operations and the other member appointed by each Party shall
represent finance and billing. DLC shall designate the chairperson of the
Administration Committee.

"Affiliate" means, with respect to a corporation, partnership, or other entity,
each such other corporation, partnership, or other entity that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such corporation, partnership, or other entity.

"Agreement" means this POLR Agreement together with the Schedules and Exhibits
attached hereto, as such may be amended from time to time.

"Ancillary Services" means all services or requirements necessary to support the
transmission of capacity and Energy from resources to loads while maintaining
reliable operation of the DLC Control Area in accordance with Good Utility
Practice. Ancillary Services includes, but is not limited to, scheduling, system
control and dispatch, reactive supply and voltage control from generation
sources, regulation and frequency response, energy imbalance, operating reserve
- spinning reserve and operating reserve - supplemental reserve.

"Asset Purchase Agreement" means that certain Asset Purchase Agreement by and
between DLC, the POLR Supplier and the Cleveland Electric Illuminating Company,
Ohio Edison Company and Pennsylvania Power Company dated as of the date hereof.

"Asset Sale" has the meaning set forth in the Recitals.

"Asset Sale Closing" means the transfer of DLC's ownership of its generating
facilities and other assets associated therewith through the consummation of the
Asset Sale pursuant to the terms of the Asset Purchase Agreement.

"Billed Generation Revenue" means the sum of the amounts that DLC bills to its
retail customers for generation pursuant to its Retail Tariff (except for Rider
10 and Rider 21 thereof, as set forth more specifically in Section 6.3 hereof)
or any applicable customer assistance program, including customers served under
the Special Contracts. A copy of the currently anticipated Retail Tariff for the
year 2000 is set forth on Schedule 2 attached hereto. A copy of the currently
anticipated Generation

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Rates to be used for the term of this Agreement is set forth on Schedule 3
attached hereto. The Special Contracts are identified on Schedule 6 attached
hereto.

"Borderline Purchase Agreements" means those agreements for borderline service
identified on Schedule 4 attached hereto.

"Borderline Supply Agreements" means those agreements for borderline service
identified on Schedule 5 attached hereto.

"Business Day" means any day other than Saturday, Sunday and any day which is a
day on which banking institutions in the Commonwealth of Pennsylvania are
authorized by law or other governmental action to close.

"Certifying Company" means either the POLR Supplier or the Corporate Guarantor,
whichever entity has provided the latest dated certification to DLC pursuant to
Article III of this Agreement.

"Closing Date" means the date on which the Asset Sale Closing occurs.

"Company Use Energy" means all the metered electricity used, in the ordinary
course of business, at or by DLC facilities and operations including, but not
limited to, substations, operating headquarters, construction and maintenance
facilities, office buildings, customer service operations, communications
facilities and towers and ash handling, ash treatment and ash disposal
facilities (but excluding on site station service electricity at generating
stations, which station service electricity shall be the responsibility of the
generating station owner). The Parties recognize and agree that Company Use
Energy and associated losses will be included in the POLR Amount, but will not
give rise to Billed Generation Revenue. The Parties further recognize and agree
that at no time shall the POLR Supplier be responsible for Company Use Energy in
excess of 67.5 GWH during any calendar year during the term of this Agreement.

"Commercial Bank" means a commercial bank reasonably acceptable to DLC with a
minimum credit rating of at least two of the following ratings: (i) AA as
determined by Standard & Poor's Corporation, or (ii) Aa2 as determined by
Moody's Investors Service, Inc., or (iii) a comparable rating by another
nationally recognized rating service reasonably acceptable to DLC.

"Corporate Guarantor" means Orion Power Holdings, Inc., a Delaware corporation.

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"CTC" means the Competitive Transition Charges to be recovered from DLC's retail
customers, as approved by the PUC in DLC's restructuring orders. A copy of the
currently anticipated CTC rates to be used for the term of this Agreement is set
forth on Schedule 3 attached hereto.

"Dispatch Notice" has the meaning set forth in the DLC Must-Run Agreements.

"DLC Control Area" has the meaning set forth in the OATT.

"DLC Must-Run Agreements" means the agreements governing the operation of the
Cheswick and Elrama generating plants, which agreements are entitled the
"Must-Run Agreement"(s) and dated the Closing Date, as such agreements may be
amended, modified, or superceded from time to time.

"DLC Must-Run Purchases" means all "Actual Must-Run Output" as defined in, and
provided to DLC pursuant to, the DLC Must-Run Agreements.

"DLC Transmission System" means the facilities owned, controlled, or operated by
DLC that are used to provide transmission service under its OATT.

"ECAR" means the East Central Area Reliability Council, a regional reliability
council established pursuant to the East Central Area Reliability Coordination
Agreement, and any successor entity thereto.

"Effective Date" has the meaning set forth in the first paragraph of this
Agreement.

"EGS" means an Electric Generation Supplier as defined in DLC's then-current
Electric Generation Supplier Coordination Tariff.

"Energy" has the meaning set forth in the Recitals.

"Escrow Account" has the meaning set forth in Section 7.4 hereof.

"Escrow Agreement" has the meaning set forth in Section 7.4 hereof.

"Event of Default" has the meaning set forth in Section 9.1 hereof.

"FERC" means the Federal Energy Regulatory Commission and any successor agency
thereto.

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"Force Majeure" has the meaning set forth in Section 8.2 hereof.

"GAAP" means United States generally accepted accounting principles.

"Generation Rates" means the currently anticipated generation rates, which
appear on the bills of DLC's retail customers and which include Pennsylvania
gross receipts taxes and charges for Ancillary Services, to be used for the term
of this Agreement, as set forth on Schedule 3 attached hereto and as such may be
amended or modified by the PUC from time to time, as contemplated by Section 6.2
hereof.

"Good Utility Practice" means any of the applicable practices, methods and acts:

         required by any Governmental Authority or applicable regional or
         national reliability council, including NERC or ECAR or the successor
         of any of them, whether or not the Party whose conduct is at issue is a
         member thereof; and

         otherwise engaged in or approved by a significant portion of the
         electric utility industry during the relevant time period, which, in
         the exercise of reasonable judgment in light of the facts known at the
         time the decision was made, could have been expected to accomplish the
         desired result at a reasonable cost consistent with law, regulation,
         good business practices, reliability, safety, environmental protection,
         economy and expediency. Good Utility Practice is not intended to be
         limited to the optimum practice, method, or act to the exclusion of all
         others, but rather to practices, methods, or acts generally accepted in
         the electric utility industry.

"Governmental Authority" means any foreign, federal, state, local or other
governmental, regulatory or administrative agency, court, commission,
department, board, or other governmental subdivision, legislature, rulemaking
board, tribunal, arbitrating body, or other governmental authority.

"Interruptible Service" means, with respect to certain DLC retail customers,
Energy service that may be interrupted consistent with DLC's past practice (as
set forth on Schedule 1 attached hereto) and pursuant to the terms and
conditions of certain tariffs, contracts and arrangements, as identified on
Schedule 1 attached hereto, as such Schedule 1 may be amended or modified from
time to time pursuant to the terms of this Agreement.

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"Law" means any law, treaty, code, rule, regulation, or order or determination
of an arbitrator, court or other Governmental Authority, or any franchise,
license, lease, permit, certificate, authorization, qualification, easement,
right of way, right or approval binding on a Party or any of its property.

"Minimum Investment Rating" of a Person means that such Person has a minimum
investment rating on its senior unsecured debt securities of at least two of the
following ratings: (i) BBB- as determined by Standard & Poor's Corporation, or
(ii) Baa3 as determined by Moody's Investors Service, Inc., or (iii) BBB- as
determined by Duff & Phelps Credit Rating Co.

"Minimum Tangible Net Worth" of a Person means that such Person has a Tangible
Net Worth of $300 million.

"Must-Run Charges" has the meaning set forth in Section 4.1(c) hereof.

"NERC" means the North American Electric Reliability Council and any successor
entity thereto.

"Net Billed Generation Revenue" means, for each retail customer of DLC, Billed
Generation Revenue attributable to such retail customer for its most recently
ended billing period (i.e., the current portion, including adjustments, of the
customer bill), less (i) Pennsylvania gross receipts taxes associated therewith
at a fixed rate of four and four-tenths percent (4.4%) (as well as any other
taxes associated therewith that are payable by DLC and that DLC is not permitted
to collect from such retail customer, but excluding income taxes) and (ii)
revenues attributable to Ancillary Services (except for energy imbalance)
associated therewith (at the prices then included in the OATT and billed to such
retail customer). In addition, in the event that (x) there is an increase in the
rate of the Pennsylvania gross receipts tax to a rate in excess of four and
four-tenths percent (4.4%) (such rate, the "Higher GRT Rate") and (y) DLC is
unable to fully recover from retail customers that portion of the Pennsylvania
gross receipts tax attributable to the difference between the Pennsylvania gross
receipts tax payable at the Higher GRT Rate and the Pennsylvania gross receipts
tax payable at a rate of four and four-tenths percent (4.4%) (such amount, the
"GRT Shortfall"), then Net Billed Generation Revenue shall also include an
offset in an amount sufficient to allow DLC to fully recover any such GRT
Shortfall.

"OATT" means DLC's Open Access Transmission Tariff, or its successor, filed with
the FERC.

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"Passthrough Power" means Energy that an Interruptible Service customer, that is
permitted to do so in the applicable tariff, contract or arrangement, elects, in
lieu of an interruption of service, to have DLC purchase, on its behalf, at the
prices then available in the regional power market, as contemplated by Section
4.1(f) hereof.

"Party" has the meaning set forth in the Recitals.

"Person" means any individual, partnership, limited liability company, joint
venture, corporation, trust, unincorporated organization or governmental entity
or any department or agency thereof.

"POLR" has the meaning set forth in the Recitals.

"POLR Energy Imbalance" means any difference between the hourly Energy supplied
by the POLR Supplier to the DLC Control Area and the POLR Supply Amount.

"POLR Supply Amount" means the actual hourly Energy requirements of the DLC
Control Area, after adjustment for the hourly Energy requirements or
transactions (including associated losses) of (i) customers served by an EGS,
(ii) wholesale customer(s) of others (including non-utility generators), (iii)
customers served under Borderline Purchase Agreements and Borderline Supply
Agreements and (iv) the owner(s) of the Cheswick, Elrama, Phillips and Brunot
Island generating plants included in the Asset Sale or any other generating
plants in the DLC Control Area. The Parties recognize and agree that (i) with
respect to each DLC retail customer for which DLC is the POLR, beginning at one
minute after 11:59 p.m. (eastern time) on the day prior to the Closing Date and
continuing until the respective termination of the Transition Period relating to
each such retail customer (or the earlier termination of this Agreement), the
POLR Supply Amount shall include the amount of Energy that DLC is required to
supply to each such retail customer, (ii) beginning at one minute after 11:59
p.m. (eastern time) on the day prior to the Closing Date and continuing until
the end of the term of this Agreement (or the earlier termination of this
Agreement), the POLR Supply Amount shall include the amount of Energy that DLC
is required to provide pursuant to the Special Contracts and (iii) beginning at
one minute after 11:59 p.m. (eastern time) on the day prior to the Closing Date
and continuing until the date on which the Transition Period for every Rate
Class shall have terminated (or the earlier termination of this Agreement), the
POLR Supply Amount shall include all Company Use Energy. The Parties further
recognize and agree that the POLR Supply Amount shall be determined as an
integrated value for each clock hour period.

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"POLR Supply Forecast" means, for each hour during the term of this Agreement,
DLC's forecast of the POLR Supply Amount, as provided to the POLR Supplier in
accordance with Section 5.1 hereof.

"POLR Supply Service" means the services and obligations identified in Article
IV of this Agreement.

"Preliminary Supplier Charges" means an estimate of Supplier Charges based on
forecast Energy requirements (and associated losses) and other data available at
the time of the estimate including, if available, actual meter readings.

"PUC" means the Pennsylvania Public Utility Commission and any successor agency
thereto.

"Purchase Price" has the meaning set forth in Section 3.1 hereof.

"Rate Class" means each rate classification of DLC's retail customers.

"Retail Tariff" means the schedules of rates pursuant to which DLC bills its
retail customers for generation, as filed with and approved by the PUC, and as
such may be amended or modified by the PUC from time to time.

"Shed Load" means (a) where "Shed Load" is used as a verb, the deliberate
interruption of service in the DLC Control Area (other than the interruption of
service pursuant to the terms of DLC's tariffs, contracts and arrangements for
Interruptible Service), whether manually, automatically, or through requiring
location-specific reductions, in accordance with Good Utility Practice to
maintain the integrity of the DLC Control Area, and (b) where "Shed Load" is
used as a noun, the amount of service, measured in megawatt-hours, that is
deliberately interrupted in the DLC Control Area (other than the interruption of
service pursuant to the terms of DLC's tariffs, contracts and arrangements for
Interruptible Service), whether manually, automatically, or through requiring
location-specific reductions, in accordance with Good Utility Practice to
maintain the integrity of the DLC Control Area.

"Special Contracts" means those agreements identified on Schedule 6 attached
hereto pursuant to which DLC is obligated to provide Energy to certain retail
customers on certain terms and conditions. The Parties recognize and agree that
the Special Contracts do not include contracts to provide Energy under customer
assistance programs. The Parties further recognize and agree that DLC shall
update Schedule 6 attached hereto whenever necessary to incorporate any
significant changes to such

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Schedule 6, including the modification or termination of any existing, or the
entering into of any additional, Special Contracts; provided, however, that DLC
shall not modify, terminate or extend beyond the respective termination date
listed on Schedule 6 attached hereto any existing or enter into any additional
Special Contracts during the term of this Agreement without the prior consent of
the POLR Supplier, which consent shall not be unreasonably withheld.

"Supplier Charges" means any charges to the POLR Supplier under this Agreement,
including Supply Violation Charges, and Must-Run Charges, and shall include (x)
any adjustments necessary to account for borderline services purchased pursuant
to the Borderline Purchase Agreements, the payment for which shall be the
responsibility of the POLR Supplier, and borderline services provided pursuant
to the Borderline Supply Agreements, the revenues for which shall be credited to
the POLR Supplier, as well as (y) any adjustments necessary to account for DLC's
costs in purchasing Energy for Passthrough Power under the Interruptible
Service, the payment for which shall be the responsibility of the POLR Supplier,
and the revenues received by DLC from Interruptible Service customers for the
incremental charges for Energy related to the amount of Passthrough Power
actually supplied to such customers, which revenues shall be credited to the
POLR Supplier to the extent such revenues have not been otherwise included in
the Billed Generation Revenue attributable to such Passthrough Power.

"Supplier Tariff" means DLC's Electric Generation Supplier Coordination Tariff,
or its successor, filed with and approved by the PUC.

"Supply Violation Charges" means the charges calculated pursuant to Section 4.3
hereof for the failure by the POLR Supplier to deliver to the DLC Control Area,
in any hour, the POLR Supply Amount in accordance with Section 4.1 hereof. The
Parties recognize and agree that Supply Violation Charges may apply when the
POLR Supplier delivers more or less than the POLR Supply Amount.

"System Control Center" means DLC's System Control Center currently located in
Pittsburgh, PA.

"Tangible Net Worth" of a Person means common stock plus redeemable and
unredeemable preferred and preference stock plus additional paid in capital plus
retained earnings (or minus accumulated deficits) minus intangible assets
determined on the basis of the most recent audited balance sheet of such Person.

"Transition Period" means, with respect to each Rate Class, the period of time
between one minute after 11:59 p.m. (eastern time) on the day prior to the
Closing

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Date and the earlier of (i) one minute after 11:59 p.m. (eastern time) on
December 31, 2005 and (ii) one minute after 11:59 p.m. (eastern time) on the
date on which DLC is no longer authorized to collect the CTC allocated to such
Rate Class. The Parties recognize and agree that the Transition Period for each
Rate Class shall be calculated separately and, accordingly, may terminate on a
date that is different than the termination date for each other Rate Class.

                  Certain Interpretive Matters. In this Agreement, unless
otherwise specified or the context otherwise requires, the singular shall
include the plural, the masculine shall include the feminine and neuter, and
vice versa. The term "includes" or "including" shall mean "including without
limitation." Unless otherwise specified or the context otherwise requires,
references to a Section, Article or Schedule mean a Section, Article or Schedule
of this Agreement and reference to a given agreement or instrument shall be a
reference to that agreement or instrument as modified, amended, supplemented or
restated through the date as of which such reference is made.

                                   ARTICLE II
                                      TERM

                  Term. Unless terminated earlier pursuant to the terms of this
Agreement, the term of this Agreement shall commence as of the Effective Date
and continue until the later of (x) the date on which the Transition Period for
every Rate Class shall have terminated or (y) the date on which all of the
Special Contracts shall have terminated. The POLR Supply Service shall commence
at one minute after 11:59 p.m. (eastern time) on the day prior to the Closing
Date. Following the date hereof, the Parties shall cooperate in good faith to
develop an arrangement, as may be permitted by Law and as to which the Parties
shall mutually agree, to supply Energy to retail customers who remain in a Rate
Class following the termination of the Transition Period relating to such Rate
Class.

                  Termination. This Agreement may be terminated before the end
of its term pursuant to Section 9.2 hereof.

                                   ARTICLE III

                     PURCHASE PRICE, SECURITY AND COMPLIANCE

1.1 Purchase Price. In consideration for the rights contained in this Agreement,
the POLR Supplier will pay, or cause to be paid, to DLC on the Closing Date an
amount of dollars (the "Purchase Price"), by electronic transmission of

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immediately available funds denominated in U.S. dollars to the bank account
designated by DLC in Section 15.3 hereof, or by such other means as are agreed
to by the Parties. The Parties recognize and agree that (i) the Purchase Price
under this Agreement is a portion of, and forms a part of, the Purchase Price as
defined in and under the Asset Purchase Agreement and (ii) as soon as
practicable following the date hereof, the POLR Supplier shall notify DLC as to
what portion of the Purchase Price under the Asset Purchase Agreement shall be
deemed to be, and allocated as, the Purchase Price under this Agreement.

         Security. As a condition of DLC's execution of this Agreement, at the
time of the POLR Supplier's execution of this Agreement, the POLR Supplier shall
comply with one of the following provisions:

                  The POLR Supplier shall provide a certificate from a duly
authorized corporate officer of the POLR Supplier (or the Corporate Guarantor)
certifying that, as of the Effective Date, the POLR Supplier (or the Corporate
Guarantor) has an investment rating equal to or higher than the Minimum
Investment Rating; or (b)

                  (b)      The POLR Supplier shall provide a certificate from a
duly authorized corporate officer of the POLR Supplier (or the Corporate
Guarantor) certifying that, as of the Effective Date, the POLR Supplier (or the
Corporate Guarantor) has a Tangible Net Worth equal to or greater than the
Minimum Tangible Net Worth.

         Letter of Credit.

                  (a)      On or before the Closing Date, the POLR Supplier
shall post a $10 million irrevocable letter of credit issued by a Commercial
Bank in form and substance reasonably acceptable to DLC, as such letter of
credit may be supplemented or replaced pursuant to the terms of this Agreement,
which letter(s) of credit shall remain in place for such amount (or such other
amount as may be determined pursuant to Section 3.3(b) hereof) for the entire
term of this Agreement. In the event that the POLR Supplier is required to
increase the amount of such letter(s) of credit pursuant to the terms of this
Agreement, then such letter(s) of credit for such increased amount shall remain
in place for such time as may be required under the terms of this Agreement,
provided, however, that, notwithstanding any other provision of this Agreement
to the contrary, at all times during the term of this Agreement following the
Closing Date the minimum amount of any such letter(s) of credit

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posted by the POLR Supplier shall be equal to or greater than $10 million (or
such other amount as may be determined pursuant to Section 3.3(b) hereof).

                  (b)      On each March 31, June 30, September 30 and December
31 following the date that is ninety (90) days after the Closing Date, the
minimum amount of the letter(s) of credit required to be posted by the POLR
Supplier under Section 3.3(a) hereof shall be reduced by $1.5 million.

         Compliance.

                  (a)      If at any time during the term of this Agreement, (i)
Standard & Poor's Corporation, Moody's Investors Service, Inc. or Duff & Phelps
Credit Rating Co. downgrades the investment rating of the Certifying Company or
(ii) the Certifying Company's Tangible Net Worth at the end of an accounting
period is below the Minimum Tangible Net Worth, then the POLR Supplier shall
provide DLC with written notice of such event within two (2) Business Days of
the occurrence of any such event. Within five (5) Business Days of DLC's receipt
of such written notice, DLC shall cause the chairperson of the Administration
Committee to convene a meeting of the Administration Committee for the purpose
of addressing such event and the POLR Supplier's compliance with the provisions
of this Agreement.

                  (b)      Within fifteen days of the end of each calendar
quarter during the term of this Agreement, the POLR Supplier shall deliver to
DLC a certificate from a duly authorized corporate officer of the Certifying
Company certifying that, as of the date of such certification, the Certifying
Company has either an investment rating equal to or higher than the Minimum
Investment Rating or a Tangible Net Worth equal to or greater than the Minimum
Tangible Net Worth (which certification shall include such calculations and
evidence as DLC shall reasonably request). The Parties recognize and agree that
in addition to, and without limiting in any way, the POLR Supplier's obligation
to deliver a certificate from a duly authorized corporate officer of the
Certifying Company contained in the immediately preceding sentence, the POLR
Supplier may deliver to DLC such a certificate at any time during the term of
this Agreement in order to change the Certifying Company or modify any
information relating thereto.

                  (c)      Within sixty (60) days after the end of each fiscal
year of the Certifying Company, the POLR Supplier shall deliver to DLC the
financial statements of the Certifying Company, which financial statements shall
have been

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prepared in conformity with GAAP and certified by a firm of certified public
accountants of national standing.

                  Additional Security.

                  (a)      If at any time during the term of this Agreement
following the Closing Date the Certifying Company's Tangible Net Worth is below
the Minimum Tangible Net Worth and the Certifying Company's investment rating is
below the Minimum Investment Rating, then DLC, in its sole discretion, may
require, upon ten (10) Business Days' written notice to the POLR Supplier, that
the POLR Supplier supplement or replace the letter(s) of credit then currently
posted pursuant to this Article III with another irrevocable letter of credit
issued by a Commercial Bank in form and substance reasonably acceptable to DLC
such that the aggregate amount of such letter(s) of credit equals $50 million
(or such other amount as may be determined pursuant to Section 3.5(b) hereof),
which letter(s) of credit shall remain in place for such aggregate amount until
such time as the Certifying Company's Tangible Net Worth is equal to or greater
than the Minimum Tangible Net Worth or the Certifying Company's investment
rating is equal to or greater than the Minimum Investment Rating (at which time,
although the letter of credit requirements of this Section 3.5 shall not apply,
the POLR Supplier shall continue to comply with any other applicable letter of
credit requirements set forth in this Article III).

                  (b)      On each March 31, June 30, September 30 and December
31 following the date that is ninety (90) days after the Closing Date, the
minimum amount of the letter(s) of credit required to be posted by the POLR
Supplier under Section 3.5(a) hereof shall be reduced by $7.5 million.

                  Reserved.

                  Reserved.

                  Administration Committee. Each Party shall inform the
Administration Committee of any and all (i) events which arise that may be
significant to or otherwise affect the matters contemplated by this Agreement,
(ii) matters affecting operating conditions or that could otherwise affect such
Party's ability to perform its obligations under this Agreement and (iii)
changes that occur with respect to information previously furnished to the
Administration Committee. The Administration Committee shall meet at least once
every calendar quarter, at such other times as may be provided by this Agreement
and at the call of the chairperson

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of the Administration Committee. The Administration Committee shall act only by
unanimous agreement of its members. All appointments to or changes in membership
of the Administration Committee by one Party shall be made upon written notice
to the other Party. In addition, the Administration Committee shall:

                  (a)      specify, review and revise, as necessary from time to
time, suitable operating and accounting procedures to implement the terms of
this Agreement and reevaluate, as appropriate from time to time, the security
and credit requirements contained in this Article III;

                  (b)      use its good faith best efforts to resolve disputes
and other matters arising under this Agreement, including payment disputes and
matters relating to marketing statements on DLC's retail customers' bills,
consistent with terms of Article X of this Agreement;

                  (c)      exercise authority as to each Party to make decisions
regarding this Agreement;

                  (d)      perform such other duties as the Parties may
determine from time to time;

                  (e)      in its discretion, establish one or more
subcommittees to perform any of its functions hereunder;

                  (f)      make and maintain a written record of its actions;

                  (g)      inform the Parties, in writing, as to matters that
the Administration Committee cannot resolve, together with any recommendations,
if appropriate.

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                                   ARTICLE IV

                               POLR SUPPLY SERVICE

         Obligations of POLR Supplier.

                  POLR Supply Amount Obligation. Subject to the terms and
conditions of this Agreement, beginning at one minute after 11:59 p.m. (eastern
time) on the day prior to the Closing Date and continuing, with respect to each
DLC retail customer for which DLC is the POLR, until the respective termination
of the Transition Period relating to each such retail customer's Rate Class (or
the earlier termination of this Agreement) and, with respect to each DLC retail
customer that is supplied Energy pursuant to a Special Contract, until the end
of the term of this Agreement (or the earlier termination of this Agreement),
the POLR Supplier shall deliver to DLC each hour, on a continuous basis, the
POLR Supply Amount at the delivery point(s) described in subparagraph (b) of
this Section 4.1. The POLR Supplier recognizes and agrees that it is responsible
for delivering the POLR Supply Amount as it may change over time for any reason,
including seasonal factors, daily load fluctuation, increased or decreased
usage, extremes in weather, and customer switching decisions regarding whether
to receive POLR service or purchase Energy from an EGS.

                  Points of Delivery. The POLR Supplier shall deliver the POLR
Supply Amount to the DLC Transmission System and shall schedule, except as
otherwise provided in Section 4.3(d) hereof, the POLR Supply Amount to the DLC
Control Area. (b) (c) Must-Run Purchases. If, pursuant to the DLC Must-Run
Agreement(s), DLC requires the owners(s) of Cheswick and/or Elrama generating
plants to deliver Must-Run Output, as that term is defined in such DLC Must-Run
Agreement(s), the POLR Supplier shall pay DLC the costs DLC incurs for such DLC
Must-Run Purchases (such costs collectively, the "Must-Run Charges"), which
Must-Run Charges shall appear as a Supplier Charge on the invoices and
statements of account prepared under Article VII hereof. Within two (2) hours of
receipt of a Dispatch Notice, the POLR Supplier shall submit to DLC a revised
schedule incorporating the DLC Must-Run Purchases referenced in such Dispatch
Notice.

                  Ancillary Services. The POLR Supplier acknowledges and agrees
that DLC shall be responsible for securing and providing all Ancillary Services
associated with DLC's retail customers (provided that by separate, mutual
agreement between the POLR Supplier and DLC, the POLR Supplier may provide

                                       15
<PAGE>   17
certain or all of such Ancillary Services) and that the revenues for such
Ancillary Services (except for energy imbalance) at the rates then set forth in
Schedule 9B to the OATT shall be netted against Billed Generation Revenues, as
provided under the terms of this Agreement. The POLR Supplier further
acknowledges and agrees that any POLR Energy Imbalance shall be hourly energy
imbalance attributable to the POLR Supplier for purposes of calculating Supply
Violation Charges.

                  Transmission and Distribution Losses. The POLR Supplier shall
provide all Energy necessary to compensate for transmission and distribution
losses in DLC's Control Area other than those losses that are the responsibility
of others.

                  (f)      Interruptible Service. The POLR Supplier may, by as
much advance notice to DLC as is practicable, but in no event less than one hour
prior to a desired interruption, request the interruption of the Interruptible
Service, provided that any such interruption is consistent with DLC's past
practice (as set forth on Schedule 1 attached hereto) and the terms and
conditions established by the applicable tariffs, contracts or arrangements
under which the Interruptible Service customers are served, including any
required notice period, any right of such customers to elect to purchase
Passthrough Power and any limitation on the number of hours of interruption
permitted in a year, month or other period.

                  (g)      Information. The POLR Supplier shall use its good
faith best efforts to cooperate with DLC in exchanging information regarding or
relating to the Parties' obligations hereunder.

                  IV.1     Obligations of DLC.

                  Receipt of POLR Supply Amount. DLC shall take delivery of the
POLR Supply Amount in the amounts and at the points of delivery set forth in
Sections 4.1(a) and 4.1(b), respectively, provided that the POLR Supplier has
satisfied its obligations thereunder.

                  Must-Run Output. DLC shall provide the POLR Supplier with a
copy of any Dispatch Notice issued pursuant to the DLC Must-Run Agreements at
the same time such Dispatch Notice is given to the owner(s) of the Cheswick
and/or Elrama generating plants. If, pursuant to the DLC Must-Run Agreement(s),
DLC requires the owner(s) of Cheswick and/or Elrama generating plants to deliver
Must-Run Output, as that term is defined in such DLC Must-Run Agreement(s), DLC
shall charge the POLR Supplier the Must-Run Charges, which Must-Run Charges
shall

                                       16
<PAGE>   18
appear as a Supplier Charge on the invoices and statements of account prepared
under Article VII hereof.

                  Dynamic Scheduling. At the request of the POLR Supplier, DLC
shall cooperate to dynamically schedule the POLR Supply Amount, provided that
(i) such dynamic scheduling is technically feasible, (ii) the POLR Supplier
reimburses DLC for all reasonable expenses and capital costs associated with
establishing such dynamic scheduling capability and (iii) the POLR Supplier
executes a service agreement in form and substance reasonably acceptable to DLC.

                  Interruptible Service. Upon the receipt of a request from the
POLR Supplier to interrupt the Interruptible Service, and provided that DLC
received such request no less than one hour before the desired interruption, DLC
shall interrupt the Interruptible Service to the extent that any such
interruption is consistent with DLC's past practice (as set forth on Schedule 1
attached hereto) and the terms and conditions established by the applicable
tariffs, contracts or arrangements under which the Interruptible Service
customers are served, including any required notice period, any right of such
customers to elect to purchase Passthrough Power and any limitation on the
number of hours of interruption permitted in a year, month or other period. Upon
any Interruptible Service customer's election to purchase Passthrough Power, DLC
shall notify the POLR Supplier of such customer's election and DLC's costs in
purchasing Passthrough Power on behalf of such customer. DLC shall update
Schedule 1 attached hereto whenever necessary to incorporate any significant
changes to such Schedule 1, including the modification or termination of any
existing, or the entering into of any additional, contracts or arrangements for
Interruptible Service, as well as any other changes in interruption rights
relating to DLC retail customers; provided, however, DLC shall not modify,
terminate or extend any existing or enter into any additional contracts or
arrangements for Interruptible Service during the term of this Agreement without
the prior consent of the POLR Supplier, which consent shall not be unreasonably
withheld.

                  Marketing Statement on DLC's Retail Customers' Bills. During
the Transition Period, DLC shall, to the extent permitted by Law and upon
sufficient notice from the POLR Supplier, include on DLC's retail customers'
bills such information relating to the POLR Supplier's provision of Energy as
the POLR Supplier shall reasonably request and DLC shall reasonably approve,
including the name and logo of the POLR Supplier, and such other information
upon which the Parties shall mutually agree.

                                       17
<PAGE>   19
                  Retail Services. DLC, or its designated agent or contractor,
shall continue to perform, at no cost to the POLR Supplier, all retail functions
and services associated with DLC's retail customers, including distribution,
metering, billing, customer collections, and universal service programs, in
accordance with Good Utility Practice.

                  Transmission and Distribution Outages. DLC shall not be
responsible to the POLR Supplier for any lost revenues or costs associated with
the interruption by DLC of POLR load due to outages on the DLC Transmission
System or DLC's distribution systems or actions taken by DLC to protect the
security and integrity of the DLC Transmission System or DLC's distribution
systems, as long as DLC is maintaining and operating the DLC Transmission System
and DLC's distribution systems in accordance with Good Utility Practice.

                  Information.

                  Upon such notice from the POLR Supplier as is sufficient to
                  permit DLC to compile the requested information, DLC shall
                  provide the POLR Supplier such information regarding DLC's
                  retail customers as the POLR Supplier shall reasonably
                  request, including customer account numbers, names, addresses,
                  phone numbers, rate classes and historical usage information,
                  provided that (x) the POLR Supplier agrees to reimburse DLC
                  for the incremental costs incurred in compiling and providing
                  such information and (y) the release of such information does
                  not conflict with any Law or agreement by which DLC is bound,
                  including those respecting the privacy of, or confidentiality
                  of information regarding, DLC's retail customers.

                  DLC shall use its good faith best efforts to cooperate with
                  the POLR Supplier in exchanging information regarding or
                  relating to the Parties' obligations hereunder.

                  (iii)    The POLR Supplier shall have the right to audit the
                  books and records of DLC to confirm the accuracy of the Billed
                  Generation Revenues and the Net Billed Generation Revenues,
                  provided that any such audit shall be at the POLR Supplier's
                  expense, consistent with standard business practices and
                  following reasonable notice to DLC.

                                       18
<PAGE>   20
                  (iv)     DLC shall notify the POLR Supplier of any changes in
                  the gross receipts tax rate and in the rates for Ancillary
                  Services set forth in Schedule 9B to the OATT to be applied
                  under this Agreement.

                           (i)      Ancillary Services. DLC shall be responsible
for securing and providing all Ancillary Services associated with DLC's retail
customers (provided that by separate, mutual agreement between the POLR Supplier
and DLC, the POLR Supplier may provide certain or all of such Ancillary
Services) and shall net the revenues for such Ancillary Services (except for
energy imbalance) at the rates then set forth in Schedule 9B to the OATT against
Billed Generation Revenues, as provided under the terms of this Agreement.

                           (j)      Regulatory Cooperation. DLC agrees to
reasonably cooperate with efforts by the POLR Supplier to seek, if warranted by
available evidence, regulatory relief from unfair practices by retail customers
who elect to receive Energy from an EGS at certain times of the year and who
return to POLR service at other times of the year. In addition, DLC agrees to
refrain from filing with the PUC any request for modification of the Generation
Rates (other than a request for a waiver of an adjustment of electric
distribution company rates for changes in state tax liability pursuant to
applicable Law), unless the Parties shall mutually agree otherwise.

         POLR Energy Imbalance and Supply Violations Charges. For any hour
during which there is POLR Energy Imbalance, the POLR Supplier shall pay to DLC,
in accordance with the billing procedures set forth in Article VII of this
Agreement, the following amounts, as applicable:

                  POLR Supplier Self-Schedules the POLR Supply Amount. In the
event that the POLR Supplier does not either schedule the POLR Supply Amount
according to the POLR Supply Forecast, as contemplated by Section 4.3(b) hereof,
or dynamically schedule the POLR Supply Amount, as contemplated by Section
4.3(c) hereof, then:

                                    (i)      If the POLR Supplier delivers, in
any hour, an amount of Energy that is between 90% and 110% of the POLR Supply
Amount for that hour, the POLR Supplier shall, in the event of an
under-delivery, pay to DLC an amount of dollars equal to the charge under the
OATT applicable to an under-delivery of an amount of Energy equal to the POLR
Energy Imbalance, and, in the event of an over-delivery, receive a credit from
DLC in an amount of dollars equal to the credit under the OATT applicable to an
over-delivery of an amount of Energy

                                       19
<PAGE>   21
equal to the POLR Energy Imbalance (net of any costs DLC incurs in disposing of
such excess Energy).

                                    (ii)     If the POLR Supplier delivers, in
any hour, an amount of Energy that is at least 75% but less than 90% of the POLR
Supply Amount for that hour, the POLR Supplier shall pay to DLC an amount of
dollars equal to 110% of the charge under the OATT applicable to an
under-delivery of an amount of Energy equal to the POLR Energy Imbalance. If the
POLR Supplier delivers, in any hour, an amount of Energy that is less than 75%
of the POLR Supply Amount for that hour, the POLR Supplier shall pay to DLC an
amount of dollars equal to 125% of the charge under the OATT applicable to an
under-delivery of an amount of Energy equal to the POLR Energy Imbalance.

                                    (iii)    If the POLR Supplier delivers, in
any hour, an amount of Energy that is greater than 110% of the POLR Supply
Amount for that hour, the POLR Supplier shall receive from DLC a credit in an
amount of dollars equal to the credit under the OATT applicable to an
over-delivery of an amount of Energy equal to that portion of the POLR Energy
Imbalance attributable to the portion of such over-delivery that does not exceed
110% of such POLR Supply Amount (net of any costs DLC incurs in disposing of
such excess Energy) as contemplated by Section 4.3(a) hereof and, for the
balance of such POLR Energy Imbalance, attributable to the portion of such
over-delivery that exceeds 110% of such POLR Supply Amount, reimburse DLC for
any costs it incurs in disposing of such excess Energy.

                                    (iv)     If the POLR Supplier's failure to
deliver the POLR Supply Amount in accordance with Section 4.1 hereof causes DLC
to Shed Load during any hour, the POLR Supplier shall pay to DLC, in addition to
any amounts due under Sections 4.3 (a) - (c) hereunder, $1,000 per megawatt-hour
of Shed Load attributable to such failure plus any out-of-pocket costs incurred
by DLC as the result of claims, penalties, repairs, expenses or other damages
resulting from such Shed Load. For purposes of this Section 4.3(a)(iv), DLC
shall determine the amount of such Shed Load using Good Utility Practice.

                  POLR Supplier Schedules the POLR Supply Amount According to
the POLR Supply Forecast. In the event that the POLR Supplier schedules to the
DLC Control Area, in any hour, an amount of Energy that is between 98% and 102%
of the amount of Energy forecast by DLC for such hour in the POLR Supply
Forecast for such hour last delivered by DLC to the POLR Supplier pursuant to
Section 5.1(a) hereof, the provisions of Section 4.3(a) and (c)

                                       20
<PAGE>   22
hereof shall not apply and in such an instance, if the POLR Supplier fails to
deliver to the DLC Control Area the POLR Supply Amount in accordance with
Section 4.1 hereof for such hour, the POLR Supplier shall, in the event of an
under-delivery, pay to DLC an amount of dollars equal to the charge under the
OATT applicable to an under-delivery of an amount of Energy equal to the POLR
Energy Imbalance and, in the event of an over-delivery, receive a credit from
DLC in an amount of dollars equal to the credit under the OATT applicable to an
over-delivery of an amount of Energy equal to the POLR Energy Imbalance (net of
any costs DLC incurs in disposing of such Energy).

                  POLR Supplier Dynamically Schedules the POLR Supply Amount. In
the event that the POLR Supplier dynamically schedules the POLR Supply Amount to
the DLC Control Area, subject to the terms of Section 4.2(c) hereof, in any
hour, the provisions of Section 4.3(a) and (b) hereof shall not apply and in
such an instance, if the POLR Supplier fails to deliver to the DLC Control Area
the POLR Supply Amount in accordance with Section 4.1 hereof for such hour, the
POLR Supplier shall, in the event of an under-delivery, pay to DLC an amount of
dollars equal to the charge under the OATT applicable to an under-delivery of an
amount of Energy equal to the POLR Energy Imbalance and, in the event of an
over-delivery, receive a credit from DLC in an amount of dollars equal to the
credit under the OATT applicable to an over-delivery of an amount of Energy
equal to the POLR Energy Imbalance (net of any costs DLC incurs in disposing of
such Energy).

                  (d)      Effect of Force Majeure and DLC T&D Outages. The
Parties agree that in the event that the POLR Supplier's failure to deliver the
POLR Supply Amount in accordance with Section 4.1 hereof resulted from (x) an
event of Force Majeure (and provided that the POLR Supplier complied with the
provisions of Article VIII hereof relating to events of Force Majeure) or (y)
outages on the DLC Transmission System or DLC's distribution system, the
provisions of Section 4.3(a) through (c) hereof shall not apply and in such an
instance, the POLR Supplier shall, in the event of an under-delivery, pay to DLC
an amount of dollars equal to the charge under the OATT applicable to an
under-delivery of an amount of Energy equal to the POLR Energy Imbalance and, in
the event of an over-delivery, receive a credit from DLC in an amount of dollars
equal to the credit under the OATT applicable to an over-delivery of an amount
of Energy equal to the POLR Energy Imbalance (net of any costs DLC incurs in
disposing of such Energy).

                  (e)      Liquidated Damages. The Parties agree that the
foregoing payment provisions are an integral part of this Agreement and form a
portion of the consideration for the execution of this Agreement. The Parties

                                       21
<PAGE>   23
recognize and agree that the amounts set forth in this Section 4.3 represent a
reasonable estimate of the damages that would be incurred by DLC in the event
the POLR Supplier in any hour fails to deliver the POLR Supply Amount in
accordance with Section 4.1 hereof. The Parties further recognize and agree that
the payment of such amounts by the POLR Supplier is an appropriate remedy in the
event of such a failure and that any such payment does not constitute a
forfeiture or penalty of any kind but rather constitutes liquidated damages
under the terms of this Agreement.

                  Demonstration of Ability to Perform. Each April 1 and
September 1 during the term of this Agreement, the POLR Supplier shall
demonstrate to DLC's reasonable satisfaction that the POLR Supplier has the
ability to perform its obligations under this Agreement during the following
calendar year. Such demonstration shall include a list of all resources,
including generation assets owned or operated by the POLR Supplier and Energy
purchase contracts, from which the POLR Supplier intends to obtain the Energy
necessary to satisfy its obligations under this Agreement, and shall provide
reasonable assurance that such resources satisfy any reserve margin or other
requirements then required by any Governmental Authority or applicable regional
or national reliability council, including NERC or ECAR, whether or not the POLR
Supplier is a member thereof. On or before the 15th day of each month during the
term of this Agreement, the POLR Supplier shall provide DLC with notice of any
significant changes in the POLR Supplier's list of resources described in the
preceding sentence.

                  POLR Supplier Operating Representative. At the request of DLC,
the POLR Supplier shall make available an operating representative to be present
in DLC's office at all times or, in the alternative, provide a dedicated
communication link with DLC that is staffed on a twenty-four hour basis. The
Parties agree that DLC and the POLR Supplier's operating representative shall
cooperate to reasonably balance the POLR Supply Forecast and the POLR Supply
Amount. Any access to the System Control Center provided to the POLR Supplier or
its operating representative shall be in accordance with all applicable laws,
including FERC's Order No. 889.

                                       22
<PAGE>   24
                                    ARTICLE V

                 LOAD FORECASTING, SCHEDULING AND RECONCILIATION

         Load Forecasting.

                  DLC shall provide POLR Amount Forecasts for each hour during
the term of this Agreement following the Closing Date to the POLR Supplier in
accordance with the terms and conditions of Article 6 -- Load Forecasting -- of
the Supplier Tariff (including any future modifications to such tariff), which
terms and conditions are hereby incorporated into this Agreement. DLC may update
any such POLR Amount Forecast delivered to the POLR Supplier by delivering to
the POLR Supplier another POLR Amount Forecast for such hour no later than three
(3) hours prior to such hour (or such shorter period of time in the event of
emergency operations as contemplated by the Supplier Tariff).

                  In addition, DLC shall deliver to the POLR Supplier, as often
as is practicable but in no event later than the end of each month, a report
listing known changes in the POLR Supply Amount, as well as any known changes to
the Schedules attached hereto, which changes shall be incorporated into and
become a part of the Schedules to which they relate, subject, however, to the
prior consent of the POLR Supplier to such changes to such Schedules if such
consent is required under this Agreement.

         Scheduling. The terms and conditions of Article 7 -- Scheduling -- of
the Supplier Tariff (including any future modifications to such tariff) are
hereby incorporated into this Agreement. DLC shall provide the POLR Supplier
with a copy of any Dispatch Notice issued pursuant to the DLC Must-Run
Agreements at the same time such Dispatch Notice is given to the owner(s) of the
Cheswick and/or Elrama generating plants. Within two (2) hours of receipt of any
such Dispatch Notice, the POLR Supplier shall submit to DLC a revised schedule
incorporating the DLC Must-Run Purchases referenced in such Dispatch Notice.

         Reconciliation. Notwithstanding the terms and conditions of Article 8 -
Reconciliation - of the Supplier Tariff (including any future modifications to
such tariff), any POLR Energy Imbalance shall be hourly energy imbalance
attributable to the POLR Supplier for purposes of calculating Supply Violation
Charges.

                                       23
<PAGE>   25
                  [Remainder of Page Intentionally Left Blank]

                                       24
<PAGE>   26
                                   ARTICLE VI

                         PAYMENT FOR POLR SUPPLY SERVICE

                  Net Billed Generation Revenue. The payment for the POLR Supply
Service shall be the Net Billed Generation Revenue.

                  Generation Rates. The currently anticipated Generation Rates
and CTC rates to be used for the term of this Agreement are set forth on
Schedule 3 attached hereto, and are based on the Pennsylvania gross receipts tax
rate of four and four-tenths percent (4.4%) in effect on December 31, 1998. The
Parties recognize that such Generation Rates and CTC rates are subject to
approval, and accordingly amendment or modification, by the PUC and hereby agree
that, if such Generation Rates and CTC rates are amended or modified by the PUC,
the payment for the POLR Supply Service, as set forth in Section 6.1 hereof,
shall be amended or modified accordingly.

                  6.3      Effect of Tax Changes on Generation Rates.
Notwithstanding anything contained in Section 6.2 hereof to the contrary, the
Parties recognize and agree that the payment for the POLR Supply Service, as set
forth in Section 6.1 hereof, and, for purposes of this Agreement, the Generation
Rates, shall not be modified due to any change in the Generation Rates as a
result of (i) any change in the Pennsylvania State Tax Adjustment Surcharge
("STAS"), (ii) any change to the Pennsylvania gross receipts tax rate, including
the decrease in the Pennsylvania gross receipts tax rate to four and two-tenths
percent (4.2%) pursuant to Section 2810(C) of the Pennsylvania Electricity
Generation Customer Choice and Competition Act and (iii) any change to the
universal service charge.

                  6.4      Taxes. The payment of any local, state and federal
taxes, fees, and levies attributable to the POLR Supplier's sale of Energy to
DLC under this Agreement shall be the responsibility of the POLR Supplier.

                                   ARTICLE VII

                      PAYMENT, INVOICING, ESCROW AND OFFSET

                                       25
<PAGE>   27
                  Daily Payment of Net Billed Generation Revenues. Except as may
otherwise be provided in this Article VII, beginning on the thirty-fifth day
following the Closing Date and continuing until the end of the term of this
Agreement (or the earlier termination of this Agreement), DLC shall pay to the
POLR Supplier the dollar amount equal to the aggregate amount of the sum of the
Net Billed Generation Revenue for the POLR Supply Amount supplied by the POLR
Supplier and attributable to each of DLC's retail customers that was billed by
DLC on the date that was thirty-five (35) days prior to such day, whether or not
such billed amounts have been paid by such retail customers. The Parties
recognize and agree that in calculating such Net Billed Generation Revenue, DLC
shall, as necessary, pro rate by kilowatt-hour usage the total amount of Net
Billed Generation Revenue attributable to such customers during such billing
period in order to account for that portion of such billing period during which
DLC supplied a portion of the POLR Supply Amount and that portion of such
billing period during which the POLR Supplier supplied a portion of the POLR
Supply Amount.

                  Monthly Invoicing for Preliminary Supplier Charges. DLC shall,
within ten (10) days following the end of each calendar month, invoice the POLR
Supplier for all Preliminary Supplier Charges attributable to such month.
Invoices rendered pursuant to this Section 7.2 shall be immediately due from the
POLR Supplier and payable to DLC by offset pursuant to Section 7.5 hereof.
Credits owing to the POLR Supplier reflected on any invoices rendered pursuant
to this Section 7.2 shall be immediately due from DLC and netted against any
payments owing to DLC on such invoice with any excess amount payable to the POLR
Supplier by increasing by the amount of any such excess the amount of Net Billed
Generation Revenue to be paid to the POLR Supplier under Section 7.1 hereof on
the day that the invoice reflecting such excess is rendered.

                  Monthly Statement of Account for Supplier Charges (True-up and
Adjustments). DLC shall, after all customer accounts have been fully metered for
a calendar month (which shall occur approximately forty-five (45) days following
the end of such calendar month), provide a statement of account to the POLR
Supplier adjusting one or more prior months' invoices rendered pursuant to
Section 7.2 hereof for the difference between Preliminary Supplier Charges and
Supplier Charges for such prior months. Payments owing to DLC reflected on such
statements of account rendered pursuant to this Section 7.3 shall be immediately
due from the POLR Supplier and payable to DLC by offset pursuant to Section 7.5
hereof. Credits owing to the POLR Supplier reflected on any statement of account
rendered pursuant to this Section 7.3 shall be immediately due from DLC and
netted against any payments owing to DLC on such statement of account with any
excess amount payable to the

                                       26
<PAGE>   28
POLR Supplier by increasing by the amount of any such excess the amount of Net
Billed Generation Revenue to be paid to the POLR Supplier under Section 7.1
hereof on the day that the statement of account reflecting such excess is
rendered.

                  DLC Right to Escrow. In addition to any other right to escrow
funds under this Agreement, DLC shall have the right to withhold payment of Net
Billed Generation Revenues otherwise owing to the POLR Supplier pursuant to
Section 7.1 hereof and to place such funds into an escrow account (the "Escrow
Account") subject to the terms and conditions of an escrow agreement
substantially in the form of that attached hereto as Exhibit A (the "Escrow
Agreement"), in the amounts and under the circumstances provided below (and as
further illustrated in the examples attached hereto as Exhibit B):

                           Each Monday, DLC shall estimate the total Net Billed
Generation Revenue that was billed by DLC to DLC's retail customers within the
preceding seven (7) days. The amount so estimated is defined as the "Weekly NBGR
Estimate."

                           Each Monday, DLC shall estimate that portion of the
Preliminary Supplier Charges that would be invoiced to the POLR Supplier under
Section 7.2 hereof and is attributable to the preceding (7) days. The amount so
estimated is defined as the "Weekly Supplier Charge Estimate."

                           Each Monday, DLC shall sum all Weekly NBGR Estimates
made during the current calendar month (including the Weekly NBGR Estimate made
that day). The sum so calculated is defined as the "Cumulative Weekly NBGR
Estimate."

                           Each Monday, DLC shall sum all Weekly Supplier Charge
Estimates made during the current calendar month (including the Weekly Supplier
Charge Estimate made that day together with any known adjustments included in
any statement of account prepared by DLC pursuant to Section 7.3 hereof). The
sum so calculated is defined as the "Cumulative Weekly Supplier Charge
Estimate."

                           On any Monday of a calendar month, if the Cumulative
Weekly Supplier Charge Estimate calculated pursuant to Section 7.4 (d) is
greater than the Cumulative Weekly NBGR Estimate calculated pursuant to Section
7.4 (c), then, except as may otherwise be provided in Section 7.5 hereof, DLC
may direct payment to the Escrow Account of the Net Billed Generation Revenue
that would

                                       27
<PAGE>   29
otherwise be payable to the POLR Supplier pursuant to Section 7.1 hereof, until
the earlier of the end of that calendar month or the next Monday in that
calendar month.

                  If DLC is unable to escrow any amount of funds pursuant to
Section 7.4 (e) because the funds are also subject to offset pursuant to Section
7.5 hereof (the "Escrow Shortfall"), then DLC may extend the period for escrow
under Section 7.4 (e) until the dollar amount of the Escrow Shortfall has been
withheld from payment of Net Billed Generation Revenues otherwise owing to the
POLR Supplier pursuant to Section 7.1 hereof and placed into the Escrow Account.

                  DLC Right to Offset. In addition to any other right to offset
against payments to the POLR Supplier under this Agreement, DLC shall have the
right to offset any amounts the POLR Supplier owes to DLC pursuant to Sections
7.2 and 7.3 hereof (except for such amounts reasonably disputed by the POLR
Supplier), against the amounts owed by DLC pursuant to Section 7.1 hereof. DLC
may exercise the right to offset granted by this Section 7.5 in the amounts and
under the circumstances provided below: 1.8 (a) If the amount owing to DLC on
the invoice to be rendered by DLC pursuant to Section 7.2 hereof, or the
statement of account to be rendered by DLC pursuant to Section 7.3 hereof, is
less than or equal to the balance of the Escrow Account on the last day of the
month (the "Month-End Escrow Balance"), then any amounts in the Escrow Account
up to the amount owing to DLC on such invoice or statement of account shall be
released to DLC as an offset in satisfaction thereof, and the difference between
the Month-End Escrow Balance and the amount owing to DLC on such invoice or
statement of account shall be released to the POLR Supplier.

                  If the amount owing to DLC on the invoice to be rendered by
DLC pursuant to Section 7.2 hereof, or the statement of account to be rendered
by DLC pursuant to Section 7.3 hereof, is greater than the Month-End Escrow
Balance, then any amounts in the Escrow Account up to the Month-End Escrow
Balance shall be released and retained by DLC as an offset, and DLC may withhold
further payments of Net Billed Generation Revenue otherwise owing to the POLR
Supplier under Section 7.1 hereof as an offset until the difference between the
Month-End Escrow Balance and the amount owing to DLC on such invoice or
statement of account has been fully recovered by DLC.

                  DLC's right to offset Net Billed Generation Revenue under
Section 7.5 (b) shall take precedence over DLC's right to escrow Net Billed
Generation Revenue under Section 7.4 (e) hereof.

                                       28
<PAGE>   30
         Right to Immediate Payment and to Draw on Letter of Credit. In addition
to the rights to escrow under Section 7.4 hereof and the rights to offset under
Section 7.5 hereof, DLC shall further have the right to immediate payment from
the POLR Supplier, and to draw upon the letter(s) of credit posted by the POLR
Supplier under the terms of this Agreement, in the amounts and under the
circumstances provided below:

                  In each calendar month, as of the date of the invoice rendered
pursuant to Section 7.2 hereof, DLC shall estimate the Net Billed Generation
Revenue that would become payable to the POLR Supplier under Section 7.1 hereof
during the remainder of such month (ignoring any potential escrow of funds
pursuant to Section 7.4 hereof or potential offset of funds pursuant to Section
7.5 hereof). The amount so estimated is defined as the "Residual Monthly NBGR
Estimate."

                  If in any calendar month the sum of the net amount of the most
recent invoice rendered pursuant to Section 7.2 hereof and the net amount of the
most recent statement of account rendered pursuant to Section 7.3 hereof (and
less any offset from the Escrow Account made pursuant to Section 7.5 hereof) is
greater than the Residual Monthly NBGR Estimate for the current month, then the
difference between such sum and the Residual Monthly NBGR Estimate is defined as
the "Forecast Supplier Charge Shortfall."

                  DLC may give notice to the POLR Supplier of a Forecast
Supplier Charge Shortfall, and, upon receipt thereof, the POLR Supplier shall
make immediate payment to DLC of the dollar amount of the Forecast Supplier
Charge Shortfall in immediately available funds to the bank account designated
by DLC in Section 15.3 hereof.

                  If, within ten (10) days following notice to the POLR Supplier
given by DLC pursuant to Section 7.6 (c), DLC has not received payment in full
of the Forecast Supplier Charge Shortfall so noticed, then DLC has the right to
draw upon the letter(s) of credit posted by the POLR Supplier under the terms of
this Agreement in an amount up to, but not exceeding, any portion of the
Forecast Supplier Charge Shortfall then unpaid by the POLR Supplier, and,
regardless of whether DLC draws on such letter(s) of credit, DLC shall also have
the right to terminate this Agreement upon ten (10) days written notice to the
POLR Supplier.

         7.7      Payments. Except as may otherwise be provided in this
Agreement, beginning on the Closing Date and continuing on each Business Day
thereafter until

                                       29
<PAGE>   31
the end of the term of this Agreement (or the earlier termination of this
Agreement), all payments then due hereunder shall be made to the Party owed such
payments by electronic transmission to the bank account designated by such Party
in Section 15.3 hereof. All such payments shall be denominated and paid in U.S.
dollars.

         7.8      Payment Disputes. The Parties shall use their good faith best
efforts to resolve all disputes relating to payments hereunder pursuant to the
dispute resolution provisions of Article X of this Agreement.

         7.9      Survival. Notwithstanding any other provision of this
Agreement to the contrary, the provisions of this Article VII, and the rights
and obligations of the Parties thereunder, shall survive the expiration of the
term of this Agreement (or earlier termination of this Agreement) for a period
not to exceed one hundred twenty (120) days from the date of the expiration or
termination of this Agreement for the purpose of satisfying the rights and
obligations of the Parties under this Article VII relating to the POLR Supply
Service provided through the date of expiration or termination of this
Agreement.

                                  ARTICLE VIII

                                  FORCE MAJEURE

                  8.1      Force Majeure. Notwithstanding anything in this
Agreement to the contrary, neither Party shall be liable in damages, or
otherwise responsible to the other Party, for its failure to perform or observe
any of its obligations under this Agreement if and only to the extent that it is
unable to so perform or is prevented from performing by an event of Force
Majeure; provided, however, that to the extent that the POLR Supplier fails in
any hour to deliver the POLR Supply Amount in accordance with Section 4.1
hereof, whether as a result of an event of Force Majeure or for any other
reason, the provisions of Section 4.3 hereof shall apply to such failure. The
Parties recognize and agree that an event of Force Majeure will not relieve any
Party of its obligation to make payments when due hereunder.

                  8.2      Definition of Force Majeure. The term "Force Majeure"
as used herein means those causes beyond the reasonable control of the Party
affected that, by the exercise of reasonable diligence, including Good Utility
Practice, such Party is unable to prevent, avoid, mitigate, or overcome,
including an act of God, labor dispute (including a strike), act of the public
enemy, war, civil disturbance, insurrection, riot, fire (unless resulting from
the fault or negligence of the Party asserting Force Majeure), storm or flood,
lightning, explosion (unless resulting from the fault or negligence of the Party
asserting Force Majeure), order, government

                                       30
<PAGE>   32
decree or rule, regulation or restriction imposed by governmental, military or
lawfully-established civilian authorities, or any other cause of a similar
nature beyond such Party's reasonable control. Events that cause a change in the
market value of Energy, the POLR Supplier's generation costs or otherwise affect
the POLR Supplier's cost of performance under this Agreement shall not be
considered Force Majeure events.

                  8.3      Force Majeure Procedures. Upon the occurrence of an
event of Force Majeure, the Party affected by such event shall (a) provide
prompt written notice of such Force Majeure event to the other Party, including
an estimation of its expected duration and the probable impact on the
performance of its obligations hereunder; (b) exercise all reasonable efforts in
accordance with Good Utility Practice to continue to perform its obligations
under this Agreement; (c) expeditiously take action to correct or cure the event
or condition excusing performance, provided, however, that settlement of labor
disputes will be completely within the sole discretion of the Party affected by
such labor dispute; (d) exercise all reasonable efforts to mitigate or limit
damages to the other Party; and (e) provide prompt notice to the other Party of
the cessation of the event or condition giving rise to its excuse from
performance. Any obligation under this Agreement shall be suspended only to the
extent caused by such Force Majeure event and only during the continuance of any
inability of performance caused by such Force Majeure event but for no longer
period.

                                   ARTICLE IX

                             DEFAULT AND TERMINATION

                  Event of Default. Unless excused by Force Majeure, each of the
following events shall be considered an Event of Default:

                           The material breach by either Party of any agreement,
covenant or obligation under this Agreement; provided that such breach is not
caused by the material breach of the other Party, and provided further that, if
such breach is curable, a default shall not occur until the Party in breach has
failed to cure such breach within thirty (30) days after receipt of written
notice thereof by the non-defaulting Party;

                           The failure by the POLR Supplier to post, supplement,
replace or maintain any letter of credit required to be so posted, supplemented,
replaced or maintained pursuant to the terms of this Agreement;

                                       31
<PAGE>   33
                  The discovery that any representation, warranty or
certification made by a Party (or the Certifying Company, if applicable)
hereunder was false or misleading in any material respect when made that is not
cured within thirty (30) days and which has a material adverse effect on the
ability of the Party making such representation or warranty to perform its
obligations hereunder;

                  The filing of an involuntary petition in bankruptcy against
either Party (or the Certifying Company) or the appointment of a receiver or
liquidator or trustee for either Party (or the Certifying Company) or of any
property of a Party (or the Certifying Company), and such petition, receiver,
liquidator or trustee is not stayed, dismissed or discharged within sixty (60)
days;

                  The entry of a decree adjudicating a Party (or the Certifying
Company) or any substantial part of the property of a Party (or the Certifying
Company) bankrupt or insolvent, and such decree is continued undischarged and
unstayed for a period of sixty (60) days;

                  The filing of a voluntary petition in bankruptcy under any
provision of any federal or state bankruptcy law by a Party (or the Certifying
Company) or against it;

                  The failure of DLC to pay the POLR Supplier undisputed amounts
owed within ten (10) days after receiving written notice from the POLR Supplier
that any such amount is overdue;

                  A failure by the POLR Supplier to deliver the POLR Supply
Amount in accordance with Section 4.1 hereof that causes DLC to Shed Load during
any hour (other than any such failure that results from an event of Force
Majeure or outages on the DLC Transmission System or DLC's distribution system),
provided that DLC has requested reasonable assurances from the POLR Supplier
that the circumstances that caused such failure have been corrected and the POLR
Supplier has not, within sixty (60) days of such request, provided DLC with such
assurances;

                  A default by the POLR Supplier (or the Certifying Company) on
its indebtedness to third parties, resulting in obligations of the POLR Supplier
(or the Certifying Company) in an amount of $50,000,000 or more being
accelerated;

         Termination Upon the occurrence of an Event of Default, the
non-defaulting Party may terminate this Agreement by providing sixty (60) days'
written notice to the defaulting Party of a specified date of termination. The
non-defaulting

                                       32
<PAGE>   34
Party may exercise all such rights and remedies as may be available to it to
recover damages caused by such Event of Default.

         Letter(s) of Credit. Upon the occurrence of an Event of Default (other
than an Event of Default for which DLC is responsible), DLC may draw on any and
all letter(s) of credit posted pursuant to the terms of this Agreement to cure
any monetary default. Unless DLC has given written notice of its intent to
terminate this Agreement, within five (5) Business Days prior to the expiration
of any letter(s) of credit posted pursuant to the terms of this Agreement, or
within twenty (20) Business Days of the day on which DLC draws on any letter(s)
of credit posted pursuant to the terms of this Agreement, the POLR Supplier
shall replace such letter(s) of credit with another letter of credit issued by a
Commercial Bank of like amount and in form and substance reasonably acceptable
to DLC.

         Additional Remedies. The POLR Supplier acknowledges and specifically
agrees that its obligations under this Agreement are essential to ensure the
reliability of the DLC Control Area; that breach of the POLR Supplier's
obligations may result in irreparable harm and damage to DLC which cannot
adequately be compensated by a monetary award; and that, as a consequence
thereof, DLC shall, in addition to any other remedy to which DLC may be entitled
by reason of the POLR Supplier's breach of this Agreement, be entitled to seek
and obtain temporary, preliminary and permanent injunctive relief from any court
or Governmental Authority of competent jurisdiction restraining the POLR
Supplier from committing or continuing any breach of this Agreement.

         Reimbursement for Replacement Costs. Upon the termination of this
Agreement by DLC pursuant to Section 9.2 hereof, the POLR Supplier shall be
liable to DLC for all costs reasonably incurred by DLC as a direct result of the
POLR Supplier's failure to deliver Energy pursuant to the terms of this
Agreement. Such amounts shall include the excess, if any, between the cost of
Energy from a replacement POLR supplier or suppliers and the Net Billed
Generation Revenues (less offsets made pursuant to Section 7.5 hereof) under
this Agreement (which calculation shall apply to time periods in which DLC is
not compensated pursuant to Section 4.3 hereof), such replacement cost to
include all reasonable costs associated with the procurement of replacement
Energy, including fuel costs, emission allowances, or variable operation and
maintenance expenses, Energy, demand, capacity, or reservation charges, and any
transmission costs associated with procuring such replacement Energy. In
addition to the amounts associated with the purchase of replacement Energy, the
POLR Supplier shall be liable for reasonable administrative and legal expenses
incurred as a result of the POLR Supplier's failure to perform.

                                       33
<PAGE>   35
The Parties expressly agree that such amounts do not constitute liquidated
damages and that the obligations of each Party under this Section 9.5 shall
survive and continue in full force and effect regardless of whether this
Agreement expires or terminates or is canceled, surrendered or completed.

                                   ARTICLE X

                               DISPUTE RESOLUTION

         Disputes. A Party with a claim or dispute under this Agreement shall
submit to the other Party a notification of such claim or dispute within sixty
(60) days after the occurrence of the circumstances that gave rise to the claim
or the question or issue in dispute, and shall provide the Administration
Committee with a copy of such notification. Any such notification shall be in
writing and shall include a concise statement of the claim or the issue or
question in dispute, a statement of the relevant facts and documentation to
support the claim. The Administration Committee shall use its good faith best
efforts to resolve the claim or dispute within thirty (30) days after its
receipt of a notification specifying the claim, issue or question in dispute. If
the Administration Committee is unable to do so, the Parties shall refer the
claim or dispute to their respective senior management. Subject to Section 10.4
hereof, if, after using their good faith best efforts to resolve the dispute,
the Parties' senior management cannot resolve the dispute within thirty (30)
days, the Parties may, if they both so agree in writing, utilize the alternative
dispute resolution procedures set forth below in Sections 10.2 and 10.3 hereof.

         Arbitration. Any arbitration initiated under this Agreement shall be
conducted before a single neutral arbitrator appointed by the Parties within
thirty (30) days of receipt by respondent of the demand for arbitration. If the
Parties are unable to agree on an arbitrator, such arbitrator shall be appointed
by the American Arbitration Association. Unless the Parties agree otherwise, the
arbitrator shall be an attorney or retired judge with at least fifteen (15)
years of experience and shall not have any current or past substantial business
or financial relationships with any Party to the arbitration. In addition, if
possible, the arbitrator shall have significant system operations experience in
the electric utility industry. Unless otherwise agreed, the arbitration shall be
conducted in accordance with the American Arbitration Association's Commercial
Arbitration Rules, then in effect, in Pittsburgh, Pennsylvania. Any arbitration
proceedings, decision or award rendered hereunder and the validity, effect and
interpretation of this arbitration agreement shall be governed by the Federal
Arbitration Act of the United States, 9 U.S.C. Sections 1 et seq.

                                       34
<PAGE>   36
         Arbitration Terms. The arbitration shall, if possible, be concluded not
later that six (6) months after the date that it is initiated. The arbitrator
shall be authorized only to interpret and apply the provisions of this Agreement
or any related agreements entered into under this Agreement and shall have no
power to modify or change any of the above in any manner. The arbitrator shall
have no authority to award punitive or multiple damages or any damages
inconsistent with this Agreement. The arbitrator shall, within thirty (30) days
of the conclusion of any hearing, unless such time is extended by agreement of
the Parties, notify the Parties in writing of his or her decision, stating his
or her reasons for such decision and separately listing his or her findings of
fact and conclusions of law. The decision of the arbitrator rendered in such a
proceeding shall be final and binding on the Parties. Judgment on any award made
by the arbitrator may be entered in any court having jurisdiction.

         FERC Jurisdiction. Notwithstanding any other provision of this
Agreement to the contrary, nothing in this Agreement shall preclude, or be
construed to preclude, any Party from filing a petition or complaint with FERC
with respect to any arbitrable claim over which FERC has jurisdiction. In such a
case, the other Party may request FERC to reject or to waive jurisdiction. If
FERC rejects or waives jurisdiction with respect to all or a portion of such
claim, the portion of such claim not so accepted by FERC may be resolved through
arbitration, as provided in this Agreement. To the extent that FERC asserts or
accepts jurisdiction over such claim, the decision, findings of fact or order of
FERC shall be final and binding, subject to judicial review under the Federal
Power Act, and any arbitration proceedings that may have commenced with respect
to such claim prior to the assertion or acceptance of jurisdiction by FERC shall
be terminated.

                                   ARTICLE XI

                                   ASSIGNMENT

         Assignment. The POLR Supplier shall not assign this Agreement in whole
or in part, or any of the rights, interests, or obligations hereunder, without
the prior written consent of DLC, which consent shall not be unreasonably
withheld; provided, however, that (i) on or before the Closing Date, the POLR
Supplier may assign this Agreement to an Affiliate of the POLR Supplier provided
that such Affiliate, as a result of the consummation of the transactions
contemplated by the Asset Purchase Agreement, will own the Plants (as defined in
the Asset Purchase Agreement) pursuant to the terms of the Asset Purchase
Agreement and/or (ii) at any time during the term of this Agreement, in order to
facilitate the POLR Supplier obtaining or maintaining Exempt Wholesale Generator
("EWG") status, the POLR

                                       35
<PAGE>   37
Supplier may assign to one of its Affiliates its obligations hereunder relating
to obtaining Energy on behalf of retail customers, including providing Company
Use Energy to DLC, so long as the POLR Supplier provides written notice to DLC
of any such assignment. For purposes hereof, the merger, consolidation or sale
of all or substantially all of the assets of the POLR Supplier shall constitute
an assignment subject to this Article XI. It shall not be unreasonable for DLC
to refuse to consent to any assignment by the POLR Supplier to a Person that
does not have both an investment rating equal to or greater than the Minimum
Investment Rating and a Tangible Net Worth equal to or greater than the Minimum
Tangible Net Worth or that, in DLC's reasonable judgment, is otherwise unable to
perform the obligations of the POLR Supplier hereunder.

                  Notwithstanding the foregoing, the POLR Supplier, or its
permitted assignee, may assign, transfer, pledge or otherwise dispose of its
rights and interests hereunder to a trustee, lending institution, or other
Person for the purposes of financing or refinancing the POLR Supply Service
opportunity or the generating facilities and other assets associated with the
Asset Sale, including upon or pursuant to the exercise of remedies under such
financing or refinancing, or by way of assignments, transfers, conveyances of
dispositions in lieu thereof; provided, however, that no such assignment or
disposition shall relieve or in any way discharge the POLR Supplier or any such
permitted assignee from the performance of the duties and obligations of the
POLR Supplier under this Agreement. DLC agrees to execute and deliver such
documents as may be reasonably necessary to accomplish any such assignment,
transfer, conveyance, pledge or disposition of rights hereunder for purposes of
such financing or refinancing, so long as DLC's rights under this Agreement are
not materially altered, amended, diminished or otherwise impaired thereby.

                  Release of Rights and Obligations. No assignment (including a
merger, consolidation or sale of all or substantially all of the assets of the
POLR Supplier), transfer, conveyance, pledge or disposition of rights,
interests, duties or obligations under this Agreement by a Party shall relieve
that Party from liability and financial responsibility for the performance
thereof after any such transfer, assignment, conveyance, pledge or disposition
unless and until (i) the transferee or assignee shall agree in writing to assume
the obligations and duties of that Party under this Agreement and, in the case
of the transferee or assignee of the POLR Supplier, certify in writing that it
has either an investment rating equal to or greater than the Minimum Investment
Rating or a Tangible Net Worth equal to or greater than the Minimum Tangible Net
Worth and (ii) the non-assigning Party has consented in writing to such
assumption and to a release of the assigning Party from such liability,

                                       36
<PAGE>   38
such consent not to be unreasonably conditioned, delayed or withheld.
Notwithstanding the foregoing, an assignment by the POLR Supplier to an
Affiliate that will own the Plants (as defined in the Asset Purchase Agreement)
pursuant to Section 11.1 hereof shall relieve the assignor from liability and
financial responsibility, effective the date that such Affiliate assumes
ownership of the Plants as defined in the Asset Purchase Agreement.

                  Successors & Assigns. This Agreement and all of the provisions
hereof are binding upon, and inure to the benefit of, the Parties and their
respective successors and permitted assigns.

                                   ARTICLE XII

                         REPRESENTATIONS OF THE PARTIES

         Representations of the POLR Supplier . The POLR Supplier hereby
represents and warrants to DLC as follows:

                  Incorporation. The POLR Supplier is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Delaware, and has all requisite corporate power and authority to own, lease and
operate its material assets and properties and to carry on its business as now
being conducted.

                  Authority. The POLR Supplier has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and, subject to the procurement of applicable
regulatory approvals, to carry out the actions required of it by this Agreement.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action required on the part of the POLR Supplier. This
Agreement has been duly and validly executed and delivered by the POLR Supplier
and, assuming that it is duly and validly executed and delivered by DLC,
constitutes a legal, valid and binding agreement of the POLR Supplier.

                  Regulatory Approval. The POLR Supplier has obtained, or will
obtain by the Closing Date, any and all approvals of, and has given, or will
give, any notices to, any Governmental Authority that are required for the POLR
Supplier to execute and deliver this Agreement and consummate the transactions
contemplated hereby (including authority from FERC to sell Energy at wholesale
market-based rates).

                                       37
<PAGE>   39
                  Compliance With Law. The POLR Supplier is not in violation of
any applicable law, statute, order, rule, regulation, or judgment promulgated or
entered by any federal, state, or local Governmental Authority, which violation
could reasonably be expected to materially adversely affect the POLR Supplier's
performance of its obligations under this Agreement. (h) (i) Resource Schedule.
The POLR Supplier has sufficient resources owned or under contract to provide
the POLR Supply Amount for the first two (2) years of this Agreement and has
provided evidence, to DLC's satisfaction, of such resources in the form of a
list of such resources that has been certified by a duly authorized officer of
the POLR Supplier as to its accuracy.

                  Representations of DLC. DLC represents and warrants to the
POLR Supplier as follows: 1.3 (a) Incorporation. DLC is a corporation duly
incorporated, validly existing and is in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to own, lease and operate its material assets and properties and to
carry on its business as now being conducted.

                  Authority. DLC has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and, subject to the procurement of applicable regulatory
approvals, to carry out the actions required of it by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action required on the part of DLC. This Agreement has been
duly and validly executed and delivered by DLC and, assuming that it is duly and
validly executed and delivered by the POLR Supplier, constitutes a legal, valid
and binding agreement of DLC.

                  Regulatory Approval. DLC has obtained, or will obtain by the
Closing Date, any and all approvals of, and has given, or will give, any notices
to, any Governmental Authority that are required for DLC to execute and deliver
this Agreement and consummate the transactions contemplated hereby.

                  Compliance With Law. DLC is not in violation of any applicable
law, statute, order, rule, regulation, or judgment promulgated or entered by any
federal, state, or local Governmental Authority, which violation could

                                       38
<PAGE>   40
reasonably be expected to materially adversely affect DLC's performance of its
obligations under this Agreement.

                  Representations of Both Parties . The representations and
warranties in this Article XII shall survive the Closing Date and continue in
full force and effect for the term of this Agreement.

                                  ARTICLE XIII

                                 INDEMNIFICATION

                  DLC's Indemnification . DLC shall indemnify, hold harmless and
defend the POLR Supplier, its parent, its Affiliates, and its and their
successors, officers, directors, employees, shareholders, agents, contractors,
subcontractors, invitees and successors, from and against any and all claims,
demands, suits, obligations, payments, liabilities, costs, losses, judgments,
damages and expenses (including the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements, and compromises
relating thereto, reasonable attorneys' and expert fees and reasonable
disbursements in connection therewith) for damage to property, injury to or
death of any Person, including the POLR Supplier's employees, DLC's employees
and their Affiliates' employees, or any third parties, to the extent caused
wholly or in part by any act or omission, negligent or otherwise, by DLC or its
officers, directors, employees, agents, contractors, subcontractors and invitees
arising out of or connected with DLC's performance or breach of this Agreement,
or the exercise by DLC of its rights hereunder. In furtherance of the foregoing
indemnification and not by way of limitation thereof, DLC hereby waives any
defense it otherwise might have under applicable workers' compensation laws.

                  POLR Supplier's Indemnification . The POLR Supplier shall
indemnify, hold harmless and defend DLC, its parent, Affiliates, and its and
their successors, officers, directors, employees, shareholders, agents,
contractors, subcontractors, invitees and successors, from and against any and
all claims, demands, suits, obligations, payments, liabilities, costs, losses,
judgments, damages and expenses (including the costs and expenses of any and all
actions, suits, proceedings, assessments, judgments, settlements, and
compromises relating thereto reasonable attorneys' and expert fees and
reasonable disbursements in connection therewith) for damage to property, injury
to or death of any Person, including DLC's employees, the POLR Supplier's
employees and their Affiliates' employees, or any third parties, to the extent
caused wholly or in part by any act or omission, negligent or otherwise, by the
POLR Supplier or its officers, directors, employees, agents, contractors,
subcontractors and invitees arising out of or connected with the POLR Supplier's

                                       39
<PAGE>   41
performance or breach of this Agreement, or the exercise by the POLR Supplier of
its rights hereunder. In furtherance of the foregoing indemnification and not by
way of limitation thereof, the POLR Supplier hereby waives any defense it
otherwise might have under applicable workers' compensation laws.

                  Indemnification Procedures . Any Party seeking indemnification
under this Agreement shall give the other Party notice of such claim promptly
but in any event on or before the earlier of the fifteenth (15th) day after the
Party's actual knowledge of such claim or action or the ninetieth (90th) day
from commencement of the event or circumstance giving rise to the claim. Such
notice shall describe the claim in reasonable detail, and shall indicate the
amount (estimated if necessary) of the claim that has been, or may be sustained
by, said Party. To the extent that the other Party will have been actually and
materially prejudiced as a result of the failure to provide such notice, such
notice will be a condition precedent to any liability of the other Party under
the indemnification provisions contained in this Agreement. Neither Party may
settle or compromise any claim for which indemnification is sought under this
Agreement without the prior consent of the other Party, provided that such
consent shall not be unreasonably withheld or delayed.

                  Survival . The indemnification obligations of each Party under
this Article for acts or occurrences that occur prior to expiration,
termination, or cancellation of this Agreement shall survive and continue in
full force and effect regardless of whether this Agreement expires or
terminates, or is canceled, surrendered or completed. Such indemnification
obligations shall not be limited in any way by any limitation on insurance, by
the amount or types of damages, or by any compensation or benefits payable by
the Parties under worker's compensation acts, disability benefit acts or other
employee acts, or otherwise.

                                   ARTICLE XIV

                                 CONFIDENTIALITY

         Generally.

                  (a)      Each Party (i) shall maintain the confidentiality of
all information provided to it by the other Party under the terms of this
Agreement (including all customer data), (ii) shall not disclose such
information to third parties (other than its Affiliates, advisors and
prospective financing parties) without the prior written consent of the other
Party, unless otherwise provided hereunder, and (iii) agrees to use such
information only for such purposes and in such manner as is contemplated by the
terms of this Agreement. Notwithstanding the foregoing, each

                                       40
<PAGE>   42
Party shall be permitted to use any information provided to it by the other
Party under the terms of this Agreement in support of any claim or counterclaim
respecting an alleged breach of such other Party's obligations under this
Agreement.

                  (b)      Upon the other Party's prior written approval (which
shall not be unreasonably withheld), either Party may provide information
provided to it by the other Party under the terms of this Agreement to the PUC,
FERC or other Governmental Authority with jurisdiction, as may be necessary, to
obtain required regulatory approvals or to comply generally with any applicable
Law. In such an instance, the disclosing Party shall seek confidential treatment
for such information provided to any Governmental Authority and will notify the
other Party, as far in advance as is practicable, of its intention to release
such information to any Governmental Authority.

         Customer Information. The POLR Supplier shall comply with PUC
confidentiality guidelines in connection with all customer-specific information
supplied to it by DLC and shall not disclose such information to third parties
without the prior authorization of such customers.

                                   ARTICLE XV

                                  MISCELLANEOUS

         Limitation of Liability. Except as specifically provided in Section 4.3
hereof, Section 9.4 hereof, Section 9.5 hereof and Article XIII hereof, neither
DLC nor the POLR Supplier, nor their respective officers, directors, agents,
employees, parents, Affiliates, successors, assigns, contractors or
subcontractors shall be liable to the other Party or its shareholders,
subsidiaries, Affiliates, officers, directors, agents, employees, successors,
assigns, contractors or subcontractors for claims, suits, actions, causes of
action or otherwise for incidental, punitive, special, indirect, multiple, or
consequential damages (including attorneys' fees or litigation costs and lost
profits) connected with, or resulting from, performance or non-performance of
this Agreement, or any actions undertaken in connection with or related to this
Agreement, including any such damages which are based upon causes of action for
breach of contract, tort (including negligence and misrepresentation), breach of
warranty, or strict liability.

         Amendments . This Agreement may be amended, modified or supplemented
only by written agreement of both DLC and the POLR Supplier. Such amendments or
modifications shall become effective only after the Parties have

                                       41
<PAGE>   43
received all authorizations, if any, as may be required from the relevant
Governmental Authorities.

         Notices and Bank Account Information. All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by facsimile transmission, or mailed by overnight
courier or registered or certified mail (return receipt requested), postage
prepaid, to the recipient Party at its address, and all transfer of funds
hereunder shall be made to the recipient Party at its bank account, set forth
below (or at such other address or facsimile number, or bank account, for a
Party as shall be designated by such Party in a notice delivered hereunder;
provided however, that notices of a change of address, or change of bank
account, shall be effective only upon receipt thereof):

                        If to the POLR Supplier to:

                        Orion Power Holdings, Inc.
                        7 East Redwood Street
                        10th Floor
                        Baltimore, MD 21202
                        Attn: Tom Webb
                        Fax:  410-234-0994

                        with a copy to:

                        Bank Account:  see Schedule 7

                        If to DLC to:

                        Duquesne Light Company
                        System Operations (N2-S0)
                        2839 New Beaver Avenue
                        Pittsburgh, PA 15233
                        Attn: J.F. Rosser
                        Fax:  412-393-8647

                        with a copy to:

                        Bank Account:  see Schedule 7

                                       42
<PAGE>   44
         No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any other Person except the Parties hereto any
rights, interests, obligations or remedies hereunder.

         Waiver . A waiver of any failure of a Party to comply with any
obligation, covenant, agreement, or condition herein by the Party entitled to
the benefits thereof shall be effective only by a written instrument signed by
the Party granting such waiver, but such waiver of such obligation, covenant,
agreement, or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent failure to comply therewith.

         Severability . Each covenant, condition, restriction and other term of
this Agreement is intended to be, and shall be construed as, independent and
severable from each other covenant, condition, restriction and other term. If
any covenant, condition, restriction or other term of this Agreement is held to
be invalid by any Governmental Authority, the invalidity of such covenant,
condition, restriction or other term shall not affect the validity of the
remaining covenants, conditions, restrictions or other terms hereof. In such an
event, the Parties shall, to the extent possible, negotiate an equitable
adjustment to any provision of this Agreement as necessary to effect the purpose
of this Agreement.

         Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the Commonwealth of Pennsylvania, without giving
effect to the conflict of law principles thereof (except to the extent that such
law is preempted by federal law). THE PARTIES HERETO AGREE THAT VENUE IN ANY AND
ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT
SHALL BE IN THE STATE AND FEDERAL COURTS IN AND FOR PITTSBURGH, PENNSYLVANIA,
WHICH COURTS SHALL HAVE EXCLUSIVE PERSONAL AND SUBJECT MATTER JURISDICTION FOR
SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS
MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM
ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

                                       43
<PAGE>   45
         Independent Contractors . The Parties acknowledge and agree that: (i)
they are independent contractors, (ii) neither Party shall have any right, power
or authority to enter into any agreement or commitment, act on behalf of, or
otherwise bind the other Party in any way, and (iii) nothing contained in this
Agreement shall create any relationship between DLC and the POLR Supplier other
than that of independent contractors.

         Counterparts . This Agreement may be executed in more than one (1)
counterpart, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         Entire Agreement . This Agreement, including the Schedules and Exhibits
hereto, embodies the entire agreement and understanding of the Parties in
respect of the obligations and requirements set forth in this Agreement. There
are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings between the Parties
with respect to the subject matter contained herein.

         Article, Section and Schedule Headings . The Article, Section and
Schedule headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the Parties and shall not in any way
affect the meaning or interpretation of this Agreement.

         Further Assurances . The Parties hereto agree to execute and deliver
promptly, at the expense of the Party requesting such action, any and all other
and further instruments, documents and information which may be reasonably
requested in order to consummate the transactions contemplated hereby. Each
Party agrees to cooperate with, assist and accommodate all reasonable requests
made by the other Party in respect of any regulatory approval necessary for, or
any regulatory proceeding relating to, the execution and deliver of this
Agreement and the consummation of the transactions contemplated hereby. Each
Party further agrees to comply with all Laws of all Governmental Authorities
relating to this Agreement and the consummation of the transactions contemplated
hereby.

                                       44
<PAGE>   46
                  IN WITNESS WHEREOF, each of DLC and the POLR Supplier has
caused this Agreement to be executed as of the Effective Date.

                                               DUQUESNE LIGHT COMPANY

                                               By:    /s/ MORGAN K. O'BRIEN
                                                     ----------------------
                                               Name: Morgan K. O'Brien
                                               Title: Vice President, Finance

                                               ORION POWER HOLDINGS, INC.

                                               By:    /s/ JACK A. FUSCO
                                                     ------------------
                                               Name: Jack A. Fusco
                                               Title: Chief Operating Officer

(244851)<PAGE>   1
                                                                   EXHIBIT 10.10

                       TRANSITION POWER PURCHASE AGREEMENT
                                     (Hydro)

      This Transition Power Purchase Agreement (the "Agreement) is entered into
as of this ______ day of ________________, 1999 between Niagara Mohawk Power
Corporation ("Niagara Mohawk"), a New York Corporation, and Erie Boulevard
Hydropower, L.P., a Delaware Limited Partnership ("Producer") (each individually
a "Party", or collectively the "Parties").

      WHEREAS in November 1997 and on March 6, 1998 Niagara Mohawk filed its
Plan for Divestiture of its Non-Nuclear Electric Generating Facilities (the
"Plan") with the New York State Public Service Commission;

      WHEREAS on May 6, 1998 the New York State Public Service Commission
approved the Plan subject to certain conditions;

      WHEREAS Niagara Mohawk has conducted a Non-Nuclear Generation Divestiture
Auction ("Auction") to divest itself of its non-nuclear electrical generating
facilities, including seventy-two of its hydroelectric generating facilities;

      WHEREAS Producer has entered into an agreement ("Asset Sales Agreement, or
ASA") to acquire certain facilities from Niagara Mohawk, consisting of the
hydroelectric generating facilities (the "Units") listed in the ASA;

      WHEREAS Producer, will enter into an interconnection agreement with
NIAGARA MOHAWK on the Closing Date for the interconnection of the facilities
under this agreement; and

      WHEREAS pursuant to the ASA Niagara Mohawk and Producer agreed to enter
into Transition Power Purchase Agreements pursuant to which, for a certain
period of time, Niagara Mohawk is to purchase from Producer certain quantities
of capacity and electricity generated by the Units;

      NOW THEREFORE, in consideration of the mutual representations, covenants
and agreements set forth herein, and intending to be legally bound hereby, the
Parties agree as follows:

                                   ARTICLE 1.
                                   DEFINITIONS

      Whenever used in this Agreement with initial capitalization, the following
terms shall have the meanings specified or referred to in this Article 1.
<PAGE>   2

      "Agreement" shall mean this Transition Power Purchase Agreement dated as
of _______________, 1999, between Niagara Mohawk Power Corporation and Erie
Boulevard Hydropower, L.P. and all attached schedules.

      "Asset Sales Agreement" or "ASA" shall mean the Asset Sales Agreement
dated as of December 2, 1998, between Niagara Mohawk Power Corporation and Erie
Boulevard Hydropower, L.P.

      "Business Day" shall mean any day other than Saturday, Sunday and any day
which is a legal holiday or a day on which baking institutions in New York City
are authorized by law or other governmental action to close; and a Business Day
shall open at 8:00 a.m. and close at 5:00 p.m. Eastern Standard (or Daylight)
time.

      "Calendar Quarter" shall include four time periods, each of the calendar
months of (i) January, February, and March, (ii) April, May, and June, (iii)
July, August, and September, (iv) October, November, and December.

      "Closing" shall mean the closing of the transactions contemplated by the
ASA.

      "Closing Date" shall mean the date and time at which the Closing actually
occurs.

      "Delivery Point" shall mean the point at which the interconnection
facility is connected to the transmission system as is indicated on a one-line
diagram included as part of Exhibit A of the Interconnection Agreement, or, as
provided herein, the interconnection facility between Carr Street Generating
Station, L.P.'s electric generation facility in East Syracuse, New York and
Niagara Mohawk's transmission system.

      "Force Majeure" means (with respect to Firm Transactions) an event not
anticipated as of the Effective Date which is not within the reasonable control
of the Party claiming Force Majeure (the "Claiming Party"), and which, by the
exercise of due diligence, the Claiming Party, is unable to overcome or avoid or
cause to be avoided. Force Majeure includes, but is not restricted to: acts of
God; fire; civil disturbance; labor dispute, labor or material shortage;
sabotage; action or restraint by court order to public or governmental authority
(so long as the Claiming Party has not applied for or assisted in the
application for, and has opposed where and to the extent reasonable, such
government action); provided, however, that an event of Force Majeure shall not
include (i) the loss of Niagara Mohawk's power markets; (ii) Niagara Mohawk's
inability economically to use or resell Power purchased hereunder, (iii) the
loss or failure of Producer's Power Supply; (iv) Producer's ability to sell
Power to a market at a more advantageous price. A party's year 2000 computer
compliance failure shall not constitute fore majeure.

      "Good Utility Practice" shall mean any of the practices, methods and acts
engaged in or approved by a significant portion of the electric utility industry
during the relevant time period, or any of the practices, methods and acts
which, in the exercise of reasonable judgment in light of the facts known at the
time the decision was made, could have been expected to accomplish the desired
result at the lowest reasonable cost consistent with
<PAGE>   3

good business practices, reliability, safety and expedition. Good Utility
Practice is not intended to be limited to the optimum practice, method, or act,
to the exclusion of all others, but rather to be acceptable practices, methods,
or acts generally accepted in the region and consistently adhered to by Niagara
Mohawk. Good Utility Practices shall include, but not be limited to North
American Electric Reliability Council ("NERC") Criteria & Guidelines, Northeast
Power Coordinating Council ("NPCC") Criteria & Guidelines, New York State
Reliability Council ("NYSRC") if any, and New York Power Pool ("NYPP") criteria,
rules and standards, as they may be amended from time to time including the
rules, guidelines and criteria of any successor organization to the foregoing
entities.

      "Interconnection Agreement" shall mean a separate Interconnection
Agreement dated as of the Closing Date between Niagara Mohawk Power Corporation
and Erie Boulevard Hydropower, L.P.

      "Interest Rate" means, for any date, the interest equal to the prime rate
of Citibank as may from time to time be published in The Wall Street Journal
under "Money Rates".

      "New York Independent System Operator" or NYISO" shall mean an
organization formed in accordance with orders of the Federal Energy Regulatory
Commission to administer the operation of the transmission system of New York
State, to provide equal access to the bulk power-transmission system and to
maintain the reliability of the transmission system of New York State.

      "Off-Peak" means 11:00 p.m. until 7:00 a.m. on any Business Day and any
day other than a Business Day.

      "On-Peak" means 7:00 a.m. until 11:00 p.m. on any Business Day.

      "Power" means electric capacity as measured in MW or KW and/or energy as
measured in MWh or KWh. Energy purchased hereunder will include applicable
reserves (operating capacity), unless the Parties expressly agree otherwise.

      "Price" means the price to be paid per unit as specified by Niagara Mohawk
to Producer for the purchase of Power, including the energy price, demand
charges, transmission charges and any other charges pursuant to Article 2.

      "Quantity" means that quantity of Power that Producer agrees to make
available or sell and deliver, or cause to be delivered, to Niagara Mohawk, and
that Niagara Mohawk agrees to purchase and receive, or cause to be received,
from Producer pursuant to Article 3.

      "Replacement Price" means the locational based marginal price as defined
by the NYISO for the load zone 'E' which includes Niagara Mohawk's Northern
Operating Region.
<PAGE>   4

      "Scheduling" or "Schedule" means the acts of Producer, Niagara Mohawk
and/or their designated representatives, including each Party's Transmission
Providers, if applicable, of notifying, requesting and confirming to each other
the quantity and type of Power to be delivered on a given hour, day or days at a
specified Delivery Point.

      "Transmission Providers" means the entity or entities transmitting or
transporting the Power on behalf of Producer or Niagara Mohawk from the Delivery
Point.

                                   ARTICLE 2.
                                  TRANSACTIONS

2.1.  Term of Agreement. Term of Agreement will begin upon the Closing Date of
the ASA (the Effective Date) and will end on September 30, 2001.

2.2.  Compensation. For each month during the term, Niagara Mohawk shall pay
Producer a Fixed Payment equal to one twelfth of the applicable Annual Fixed
Payment (as set forth in Schedule A), (one third of the applicable payment in
the first period set forth in Schedule A). For each Calendar Quarter during the
term, Niagara Mohawk shall pay Producer a Variable Payment calculated by
multiplying the applicable Variable Price (as set forth in Schedule A) by the
amount of energy delivered during the Calendar Quarter that is in excess of the
First Tier Quantity set forth in Schedule B for the applicable Calendar Quarter.

2.3  Compensation Adjustment. In the event Producer fails to deliver the First
Tier amount during any Calendar Quarter as set forth in Schedule B, Niagara
Mohawk shall reduce the Fixed Payment due by an amount of the product of (X) the
difference between the First Tier amount and the amount actually delivered (the
"Delivery Shortfall"), times (Y) the average Replacement Price for the
respective Calendar Quarter; provided, however, Producer shall have the option
to supply the Delivery Shortfall from Carr Street Electric Generating Station,
L.P.'s electric generating facility in East Syracuse, New York, subject to the
limitations: (i) that On-peak deliveries in MWh are equal to Off peak deliveries
in MWh, (ii) Niagara Mohawk is physically capable of receiving such energy and
(iii) Producer agrees to pay any incremental transmission and distribution costs
incurred by Niagara Mohawk as a result of such deliveries. Niagara Mohawk shall
have the right to schedule any such make-up deliveries by Producer. Niagara
Mohawk shall not be entitled to any other relief due to Producer's failure to
deliver the First Tier amount during any Calender Quarter.

     In the event Producer does not use Good Utility Practice and fails to
provide energy and ancillary services to Niagara Mohawk relative to historic
capability and operation of the Units, per Article 3.2, the Producer shall pay
Niagara Mohawk the product of (X) the difference between the actual energy and
ancillary services delivered to Niagara Mohawk and what would have been
delivered based upon historic capability,

<PAGE>   5

times (Y) the Replacement Price. Schedule C sets forth the historical energy
production shape of the Units for purposes of this Section 2.3.

      Niagara Mohawk shall reimburse Producer for payments Producer incurs to
Niagara Mohawk for electric service under Niagara Mohawk's Service
Classification Tariff during hours in which Niagara Mohawk requests the Producer
to synchronize its generating Units without generating electricity ("Motor") to
provide voltage support. Producer shall provide such invoices to Niagara Mohawk
in accordance with Article 4.

2.4   Ancillary Service. Niagara Mohawk may request and Producer must commit
Unit(s) to be utilized for ancillary services to the NYISO. Producer may receive
ancillary service payments from the NYISO for such services, or for other
ancillary services it provides. Fixed Payments due from Niagara Mohawk to
Producer in accordance with paragraph 2.2 above shall be reduced by the amount
of all payments Producer receives from the NYISO for such services during the
applicable month. At the request of Niagara Mohawk, Producer must supply
supporting documentation illustrating such payments. Niagara Mohawk shall have
the right to audit Producer's payments from the NYISO.

2.5   Sell-All. Producer will sell and Niagara Mohawk will purchase all of the
electric capacity and all associated energy output and ancillary services of the
hydro generating Units operated by Producer. Niagara Mohawk shall have the right
to claim the capacity.

2.6   Delivery Point. Producer will make all of the capacity, energy, and
ancillary services of the Units available to Niagara Mohawk at the Delivery
Point.

2.7   Condemnation Adjustment. In the event that Producer ceases to own one of
the Units due to an action under the New York State Eminent Domain Procedure Law
or any other law governing acquisition by eminent domain, condemnation or other
taking by any public authority or any Person (collectively, "Condemnation"), (a)
the First Tier Quantities (Schedule B) shall be reduced by an amount equal to
the ten year average GWh produced at such Unit during each period multiplied by
0.776, and (b) the Annual Fixed Payment (Schedule A) shall be reduced by the
percentage that the ten year average GWh produced at such Unit represents in
relation to the ten year average GWh produced at all of the Units (including
such Unit). In the event that the Comdenation occurs during any period in
Schedule A or Schedule B, such schedules shall be adjusted on a pro rata basis
to reflect the remainder of such period.

                                   ARTICLE 3.
                                   SCHEDULING

3.1   Scheduling. Niagara Mohawk shall have the right during the term of the
Agreement to commit, schedule, and designate for dispatch (if the Unit is
capable of receiving base points from the NYISO) any and all of the Units.
Niagara Mohawk shall have the right to require Unit(s) be available for economic
dispatch for purposes of

<PAGE>   6

providing ancillary services to the NYISO and may rely on Unit(s) to provide
voltage support, load following, regulation, reserves, and other similar
ancillary services.

3.2   Scheduling. Niagara Mohawk shall provide to Producer, its projection of
hourly energy prices at least 10 Business Hours prior to the time the day ahead
bids and schedule requests are due to the NYISO. Business Hours shall mean the
hours between 8:00 AM and 5:00 PM (EST) Monday through Friday. Producer shall be
obligated to schedule the hydro Units, consistent with historic usage, including
weekends, to minimize to the extent possible (recognizing operating
constraints), the power costs, including ancillary services, of Niagara Mohawk.
This shall be completed on a timely basis, in accordance with Good Utility
Practice such that Niagara Mohawk shall have the schedule 4 Business Hours prior
to the day ahead bids and schedule requests to the NYISO. At the request of
Niagara Mohawk, Producer must provide documentation supporting the process used
to assure Producer has developed schedules, consistent with historical energy
production shape to minimize the production cost, including ancillary services,
of Niagara Mohawk. In the event Producer does not use Good Utility Practice and
fails to provide schedule consistent with historic usage, Niagara Mohawk shall
be compensated in accordance with Article 2.3.

3.3   Scheduling Updates. Niagara Mohawk and Producer shall update the schedule
at the request of NIAGARA MOHAWK to accommodate the "Balancing Market Evaluation
for the Real Time Market" described in the NYISO tariff filed with Federal
Energy Regulatory Commission.

                                   ARTICLE 4.
                                     PAYMENT

4.1   Payment. Producer shall provide Niagara Mohawk with an invoice setting
forth the quantity of power which was delivered to Niagara Mohawk, (unless
otherwise specified for any applicable Transaction(s)), during the preceding
month, the total amount due from Niagara Mohawk including any applicable
Variable Payment and Compensation Adjustment, net of ancillary service payments
received by Producer from the NYISO, and any applicable supporting
documentation. Niagara Mohawk shall remit the amount due by wire transfer, or as
otherwise agreed, pursuant to Producer's invoice instructions, on the later of
fifteen days from receipt of Producer's invoice or the twenty-fifth (25th) day
of the calendar month in which the invoice is rendered.

4.2   Overdue Payments. Overdue payments shall accrue interest at the Interest
Rate from, and including, the due date to, but excluding, the date of payment.

4.3   Billing Dispute. If Niagara Mohawk, in good faith, disputes an invoice,
Niagara Mohawk shall immediately notify Producer of the Basis for the dispute
and pay the portion of such statement conceded to be correct no later than the
due date. If any amount withheld under dispute by Niagara Mohawk is ultimately
determined (under the
<PAGE>   7

terms herein) to be due to Producer, it shall be paid within one (1) day of such
determination along with interest accrued at the Interest Rate until the date
paid. Inadvertent overpayments shall be returned by Producer upon request or
deducted by Producer from subsequent payments, with interest accrued at the
Interest Rate until the date paid or deducted.

                                   ARTICLE 5.
                                  FORCE MAJEURE

5.1   Performance Excused. If either Party is rendered unable by an event of
Force Majeure to carry out, in whole or part, its obligations under the
Agreement, then, for only the pendency of such Force Majeure, the Party affected
by the event (other than the obligation to make payments then due or becoming
due with respect to performance which occurred prior to the event) shall be
temporarily relieved of its obligations insofar as they are affected by Force
Majeure but for no longer period. The Party affected by an event of Force
Majeure shall provide the other Party with written notice setting forth the full
details thereof within two (2) business days after the occurrence of such event
and shall take all reasonable measures to mitigate or minimize the effects of
such event of Force Majeure; provided, however, that this provision shall not
require Producer to deliver, or Niagara Mohawk to receive, Power at points other
than the Delivery Point.

                                   ARTICLE 6.
                            TITLE TRANSFER; LIABILITY

6.1   Title and Risk of Loss. Title to and risk of loss related to the Quantity
shall transfer from Producer to Niagara Mohawk at the Delivery Point. Producer
warrants that it will deliver to Niagara Mohawk the Quantity free and clear of
all liens, claims and encumbrances arising prior to the Delivery Point.

6.2   Indemnity. Each Party shall indemnify, defend and hold harmless the other
Party from any Claims arising from any act or incident occurring during the
period when control and title to Power is vested, as between the Parties as
provided in Article 7.1, in the indemnifying Party. "Claims" means all claims or
actions, threatened or filed and, whether groundless, false or fraudulent, that
directly or indirectly relate to the subject matter of an indemnity, and the
resulting losses, damages, expenses, attorneys' fees and court costs, whether
incurred by settlement or otherwise, and whether such claims or actions are
threatened or filed prior to or after the termination of this Agreement.

6.3   Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages
and covenants and that it will use commercially reasonable efforts to minimize
any damages it may incur as a result of the other Party's performance or
non-performance of this Agreement.

<PAGE>   8

                                  ARTICLE 7.
                                     LAW

7.1   Governing Law and Jurisdiction. THIS AGREEMENT AND THE RIGHTS AND DUTIES
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND
PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. Except as provided in Article 9.2, any law
suits arising under this AGREEMENT shall be instituted in the Federal or State
courts of New York located in the City of Syracuse and each party hereby
irrevocably submits to the in personam jurisdiction of such courts. Each party
herein waives its respective right to a jury trial with respect to any
litigation arising under or in connection with this Agreement or any
Transaction.

                                   ARTICLE 8.
                                  MISCELLANEOUS

8.1   Assignment. Neither Party shall assign this Agreement or its rights
hereunder without the prior written consent of the other Party; provided,
however, either Party may, without the consent of the other Party (and without
relieving itself from liability hereunder), (i) transfer, sell, pledge, encumber
or assign this Agreement or the accounts, revenues or proceeds hereof in
connection with any financing or other financial arrangements, (ii) transfer or
assign this Agreement to an affiliate of such Party which affiliate's
creditworthiness is not materially different than that of such Party, or (iii)
transfer or assign this Agreement to any person or entity succeeding to all or
substantially all of the assets of such Party; provided, however, that in each
such case, any such assignee shall agree to in writing be bound by the terms and
conditions hereof and creditworthiness is not materially different than that of
such Party.

8.2   Notices. Set for the in the:

TO NIAGARA MOHAWK:

<TABLE>
<CAPTION>
NOTICES & CORRESPONDENCE                  INVOICES:
------------------------                  --------
<S>                                       <C>
Clement E. Nadeau                         Niagara Mohawk Power Corporation
Vice-President Marketing and Planning     Power Scheduling and Billing - HCB#3
Niagara Mohawk Power Corporation          300 Erie Boulevard West
300 Erie Boulevard West                   Syracuse, New York 13202-4250
Syracuse, New York 13202-4250             Phone: (315) 460-2190
Phone: (315) 428-6492                     Fax: (315) 460-2494
Fax:  (315) 428-5722
</TABLE>

<PAGE>   9

<TABLE>
<CAPTION>
<S>                                   <C>
SCHEDULING:                           CHECK PAYMENTS:
----------                            --------------
(315) 460-2468                        Niagara Mohawk Power Corporation
(315) 460-2425                        Misc. Accounts Receivable C-3
Fax - (315) 460-2122                  300 Erie Boulevard West
                                      Syracuse, New York 13202-4250
DISPATCHERS:
-----------
(315) 460-2120                        PAYMENTS BY WIRE:
(315) 460-2130                        ----------------
Fax - (315) 460-2197
                                      ABA Routing #:  021000089
Citibank New York                     Credit To:  Niagara Mohawk Power Corp.
Account #:  40662754

TO PRODUCER:
-----------
   NOTICES & CORRESPONDENCE:          PAYMENTS:
   ------------------------           --------
   Erie Boulevard Hydropower, L.P
   c/o Orion Power Holdings, Inc.
   111 Market Place, Suite 250
   Baltimore, MD 21202
   Attn:
         ----------------------
   Fax:
        ----------------------
   Phone: 410-468-3680

   INVOICES:
   --------
   Attn:                               ABA Routing #

   Fax No.:                            Confirmation:

   (______)______-__________           Credit & Collections

   Phone No.:                          (______) ______-_____________

   (______)______-__________
                                       SCHEDULING:
                                       ----------
                                       Attn:

                                       Fax No.:

                                       (______)_________________

                                       Phone No.:

                                       (______)_________________

</TABLE>

8.3   General. This Transition Power Agreement (including the Exhibit hereto) as
well as the ASA constitutes the entire Agreement between the Parties to the
subject matter contemplated by this Agreement. The Agreement shall be considered
for all purposes as prepared through the joint efforts of the Parties and shall
not be construed against one
<PAGE>   10

party or the other as a result of the preparation, substitution, submission or
other event of negotiation, drafting or execution hereof. No amendment or
modification to this Transition Power Agreement shall be enforceable unless
reduced to writing and executed by both Parties. This Transition Power Agreement
shall not impact any rights enforceable by any third party (other than a
permitted successor or assignee bound to this Agreement). No waiver by a Party
of any default by the other Party shall be construed as a waiver of any other
default. Any provision declared or rendered unlawful by any applicable court of
law or regulatory agency or deemed unlawful because of a statutory change will
not otherwise affect the remaining lawful obligations that arise under this
Agreement. The term "including" when used in this Agreement shall be by way of
example only and shall not be considered in any way to be in limitation. The
headings used herein are for convenience and reference purposes only. All
indemnity and audit rights shall survive the termination of this Agreement for
six years.

8.4   Audit. If requested, a Party shall provide to the other Party statements
evidencing the quantities of Power delivered at the Delivery Point. If any such
examination reveals any inaccuracy in any statement, the necessary adjustments
in such statement and the payments thereof will be made promptly and shall bear
interest calculated at the Interest Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for any
statement or payment will be made unless objection to the accuracy thereof was
made prior to the lapse of one (1) year from the rendition thereof.

<PAGE>   11

      The Parties have executed this Master Power Agreement in multiple
counterparts to be construed as one effective as of the Effective Date.

<TABLE>
<S>                                    <C>
ERIE BOULEVARD HYDROPOWER, L.P.        NIAGARA MOHAWK POWER CORPORATION

By:                                    By:

Name: Jack Fusco                       Name:  Clement E. Nadeau

Title: Chief Operating Officer         Title:  Vice President Marketing
                                       and Planning
Date:
                                       Date:

</TABLE>

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