Document:

AMENDMENT NO. 1
                                     TO THE
                            ALASKA INTERTIE AGREEMENT
                      ARTICLE 17 - INSURANCE AND LIABILITY

This Amendment No. 1 is made this 28th day of March,  1991, by the Participants,
ALASKA POWER AUTHORITY, now the Alaska Energy Authority, a public corporation of
the State of  Alaska  ("AEA");  the  MUNICIPALITY  OF  ANCHORAGE,  ALASKA  d/b/a
MUNICIPAL  LIGHT  &  POWER  ("AML&P");   CHUGACH  ELECTRIC   ASSOCIATION,   INC.
("Chugach"); THE CITY OF FAIRBANKS, ALASKA, MUNICIPAL UTILITIES SYSTEM ("FMUS");
GOLDEN  VALLEY  ELECTRIC  ASSOCIATION,   INC.  ("GVEA");   and  ALASKA  ELECTRIC
GENERATION AND  TRANSMISSION  COOPERATIVE,  INC.  ("AEG&T"),  signatories to the
Alaska Intertie Agreement,  dated December 23, 1985,  hereinafter referred to as
"Agreement."   The   signatory   parties   are   hereinafter   referred   to  as
"Participants."

                                                              WITNESSETH

WHEREAS THE  MUNICIPALITY OF ANCHORAGE,  ALASKA,  d/b/a MUNICIPAL LIGHT & POWER;
CHUGACH ELECTRIC  ASSOCIATION,  INC.; THE CITY OF FAIRBANKS,  ALASKA,  MUNICIPAL
UTILITIES SYSTEM; GOLDEN VALLEY ELECTRIC ASSOCIATION,  INC.; and ALASKA ELECTRIC
GENERATION AND TRANSMISSION COOPERATIVE,  INC., are all Utility Participants and
signatories  to  the  Alaska  Intertie  Agreement;  and  WHEREAS  the  AEA  is a
Participant and signatory to the Alaska Intertie Agreement; and

WHEREAS the signatories to the Alaska Intertie  Agreement desire to have Article
17 amended;

NOW THEREFORE, the Participants agree as follows:

                                   ARTICLE 17
                             Insurance and Liability

Section 17.1      Insurance

         During the term of this Agreement,  each Participant shall purchase and
         maintain  insurance  with a carrier  or  carriers  satisfactory  to the
         Operating  Committee and the AEA covering injury to persons or property
         suffered by any  Participant  or a third party,  as a result of errors,
         omissions,  or operations which arise both out of and during the course
         of this contract by the  Participant  or by any of its  subcontractors.
         The coverage  shall also  provide  protection  against  injuries to all

                                      -1-
<PAGE>

         employees of the Utility  Participant  and the  employees of any of its
         subcontractors engaged in work under this Agreement.

         If approved by the Operating Committee and the AEA, AML&P, FMUS and the
         AEA  may  qualify  for  certain  levels  of  self-insurance.  Any  such
         undertaking to self-insure will be furnished to the Operating Committee
         and the AEA before beginning operations under this Agreement.1

         As an additional alternative,  group policies shall be acceptable under
         Section 17.2 of this  Agreement  if such  policies  meet the  expressed
         coverage requirements individually and collectively for the signatories
         of this Agreement.  Any other  alternative  allowed under Sections 17.2
         must provide identical or better limits of coverages  required for each
         of the exposures, as specified in that Section 17.2.

Section 17.2               Types of Insurance

         17.2.1 The following  insurance must be provided by each Participant to
cover those operations of the Participants performed under this Agreement:

         Worker's  Compensation  Insurance:  Each Participant  shall provide and
         maintain,  for all employees of the  Participant  engaged in work under
         this  Agreement,  Worker's  Compensation  Insurance  as  required by AS
         23.30.045.  Statutory  worker's  compensation  coverage may be provided
         through  purchase of insurance,  self- insurance (in the case of AML&P,
         FMUS and the AEA  only) or a  combination  of  both.  A  self-insurance
         program  must  provide  a high  level  of  statutory  excess  over  the
         self-insured level.

         Each Participant shall require Worker's Compensation  Insurance for any
         of its subcontractors who directly or indirectly provide services under
         this Agreement. Each insurance policy must include:

         (a)  Statutory  coverage for states in which  employees are engaging in
         work;

         (b)  Employer's  Liability  Protection  of not less than  $500,000  per
         occurrence;

         (c) Broad Form All States Endorsement;

--------
         1 Where in this  Article 17 the AEA is entitled to  self-insurance  and
there are requirements for approval by the Operating  Committee and AEA for such
self-insurance, the AEA shall not participate in such approval.

                                      -2-
<PAGE>

         (d)   Coverage  as  required  by  all  State  and  Federal  Acts  where
         applicable;

         The Worker's  Compensation  Insurance  policy shall contain a waiver of
         subrogation in favor of the other Participants.  Any Participant who is
         self-insured   hereby  waives   subrogation   in  favor  of  the  other
         Participants.

         AML&P,  FMUS  and the AEA may  self-insure  for  Worker's  Compensation
         Insurance  up  to  the  maximum  filed  and  approved  with  the  State
         Department of Labor.

         A copy of the insurance policies and/or  descriptions of self-insurance
         program  will be furnished to the  Operating  Committee  and the AEA on
         February 1 of each year.

         17.2.2  Comprehensive  General  Liability  Insurance:  Each Participant
shall purchase and maintain comprehensive general liability insurance subject to
the following limits of liability:

         (a)      Bodily  Injury and Property  Damage  Liability of a minimum of
                  $5,000,000   Combined   Single  Limits  each   occurrence  and
                  affording  insurance  for  Premises-  Operations,  Owners' and
                  Contractors'     Protective,      Independent     Contractors,
                  Products/Completed  Operations, Blanket Contractual Liability,
                  Broad Form Property Damage, and Personal Injury Liability.

         (b)      Automobile  Liability  Insurance  covering all vehicles.  Such
                  insurance  shall provide  coverage of not less than $5,000,000
                  Combined  Single Limit each  occurrence  for Bodily Injury and
                  Property Damage Liability.

         (c)      Owned  Aircraft (if  applicable)  and Non-Owned  Aircraft with
                  seating  capacity  of five seats or less,  except  commercial,
                  scheduled  flights,  with limits of  liability  not less than:
                  $5,000,000  -Bodily  Injury  per  occurrence;  $1,000,000  for
                  Passenger  Liability  per seat;  and  $5,000,000  for Property
                  Damage  Liability per occurrence.  Coverage must include Slung
                  Cargo  exposures.  If an  aircraft  with more  than  five-seat
                  capacity is used, special coverage and limits must be obtained
                  and approved by the Operating Committee.

         (d)      Owned Watercraft (if applicable) and Non-Owned  Watercraft (if
                  applicable)  with limits of liability not less than $5,000,000
                  per single  occurrence as provided in the "In Rem  Endorsement
                  under "Maritime Coverage B."

         If approved by Operating Committee and the AEA, AML&P, FMUS and the AEA
         may self-insure any or all of the required  coverages in (a), (b), (c),

                                      -3-
<PAGE>

         and (d)  above.  Participants  intending  to  pursue  this  alternative
         coverage must provide proof of solvency to be approved  annually by the
         Operating  Committee and the AEA. The  Operating  Committee and the AEA
         shall  establish the  guidelines to insure such  solvency.  Members who
         have in place approved  alternative coverage shall notify the Operating
         Committee and the AEA on semi-annual basis of any  fluctuation(s)  that
         may  reduce or limit  their  solvency  as  originally  approved  by the
         Operating Committee and the AEA.

         The other  Participants  shall be  included  as  additional  insured as
         respects  insurance  required in this Section  17.2.2 of Article 17 and
         shall not by their  inclusion be responsible  to the Insurance  carrier
         for payment of premium  therefor.  These  insurance  policies must also
         contain a cross liability or severability of interest endorsement.

Section 17.3               Other Insurance Coverage Requirements

         17.3.1 Bach Participant  will bear the cost of the required  insurance.
Insurance  required to be maintained  under this Article 17 may be maintained as
part of any other policy or policies of the  Participant so long as the coverage
of such policy or policies is  substantially  the same as if such  coverage were
maintained under a separate policy.

         17.3.2 These policies must provide that any  cancellation,  non-renewal
or  material  change  be  upon  30  days'  notice  to all  named  insured.  Each
Participant  must provide the  Operating  Committee and the AEA with evidence of
insurance.  Insurance companies,  or self-insurers,  shown on the certificate of
insurance must have financial ratings  acceptable to the AEA. Failure to furnish
satisfactory  evidence of insurance or lapse of the policy is a material  breach
of this Agreement.

                                      -4-
<PAGE>

IN WITNESS WHEREOF,  the Participants  have executed this Amendment No. 1 to the
Alaska Intertie Agreement in several  counterparts by their authorized  officers
or representatives as of the day and year first above written.

Approved as to form:                       ALASKA ENERGY AUTHORITY

              /s/      2-25/91             By:          /s/
--------------------------------               ---------------------------
Office of the Attorney General                   Executive Director
                                           -------------------------------
                                           Title

SUBSCRIBED AND SWORN TO before me this 26th day of February, 1991.

                                                        /s/
                                           -----------------------------

                                      -4-

                                           Notary Public, State of Alaska
                                           My Commission Expires:  Oct. 12, 1993

                                           MUNICIPALITY  OF  ANCHORAGE,   ALASKA
                                           d/b/a MUNICIPAL LIGHT & POWER

                                           By:          /s/
                                               ---------------------------
                                                      Exec Manager
                                           -------------------------------
                                           Title

SUBSCRIBED AND SWORN TO before me this 23rd day of January, 1991.

                                                        /s/
                                           ------------------------------
                                           Notary  Public,  State of  Alaska
                                           My Commission Expires: 2-29-92

                                           CHUGACH ELECTRIC ASSOCIATION, INC.

                                           By:          /s/
                                              ---------------------------
                                              General Manager

SUBSCRIBED AND SWORN TO before me this 16th day of January, 1991.

                                                        /s/
                                           ------------------------------
                                           Notary Public, State of Alaska
                                           My Commission Expires:  5-13-92

                                           CHUGACH ELECTRIC ASSOCIATION, INC.

                                           By:          /s/
                                              ---------------------------
                                              President of the Board

SUBSCRIBED AND SWORN TO before me this 16th day of January, 1991.

                                                        /s/
                                           ---------------------------
                                           Notary Public, State of Alaska
                                           My Commission Expires:  5-13-92

                                      -5-
<PAGE>

                                           CHUGACH ELECTRIC ASSOCIATION, INC.

                                           By:          /s/
                                              ---------------------------
                                              Vice President of the Board

SUBSCRIBED AND SWORN TO before me this 16th day of January, 1991.

                                                        /s/
                                           ---------------------------
                                           Notary  Public,  State of  Alaska
                                           My Commission Expires: 5-13-92

                                           CITY OF FAIRBANKS, ALASKA
                                           MUNICIPAL UTILITIES SYSTEM

                                           By:          /s/
                                              ---------------------------
                                              Deputy City Manager Utilities
                                              ---------------------------
                                              Title

SUBSCRIBED AND SWORN TO before me this 27th day of March, 1991.

                                                        /s/
                                           ------------------------------
                                           Notary Public, State of Alaska
                                           My Commission Expires:  July 18, 1994

                                           GOLDEN VALLEY ELECTRIC
                                           ASSOCIATION, INC.

                                           By:          /s/
                                               ---------------------------
                                               General Manager

SUBSCRIBED AND SWORN TO before me this 17th day of December, 1990.

                                                        /s/
                                               ------------------------------
                                               Notary Public, State of Alaska
                                               My Commission Expires:  12-27-92

                                      -6-
<PAGE>

                                               ALASKA ELECTRIC GENERATION and
                                               TRANSMISSION COOPERATIVE, INC.

                                               By:      /s/
                                                  ---------------------------
                                                  Interim General manager
                                                  ---------------------------
                                                  Title

SUBSCRIBED AND SWORN TO before me this 28th day of March, 1991.

                                                        /s/
                                               ------------------------------
                                               Notary Public, State of Alaska
                                               My Commission Expires:  12-27-92

                                      -7-1993 ALASKA INTERTIE PROJECT

                             PARTICIPANTS AGREEMENT

                                  by and among

          ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC.,
          The Municipality OF ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER,
                       CHUGACH ELECTRIC ASSOCIATION, INC.,
                          The MUNICIPALITY OF FAIRBANKS
                   d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM,
                    GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.,
                The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,
                                ("Participants")

                                       and

                        HOMER ELECTRIC ASSOCIATION, INC.,
                      MATANUSKA ELECTRIC ASSOCIATION, INC.,
                             ("Additional Parties")

                                January 24, 1994

<PAGE>
<TABLE>
<CAPTION>

                                Index of Sections

Section                                                                                                       Page
<S>                                                                                                           <C>
Recitals..........................................................................................................1
Section 1.        Parties.........................................................................................1
Section 2.        Term of Agreement...............................................................................2
Section 3.        Definition and Scope of the Project.............................................................2
Section 4.        The Participants................................................................................3
Section 5.        Rights & Obligations of Participants............................................................7
Section 6.        Decision Making by the Participants.............................................................8
Section 7.        Construction Matters...........................................................................13
Section 8.        Construction Financing.........................................................................15
Section 9.        Operation & Maintenance; Related Matters is....................................................18
Section 10.       Project Costs & Cost Recovery..................................................................18
Section 11.       Use of Project Capacity........................................................................22
Section 12.       Miscellaneous Provisions.......................................................................24
Section 13.       Definitions....................................................................................28
Section 14.       Defaults and Remedies..........................................................................32

</TABLE>

<PAGE>

                             PARTICIPANTS AGREEMENT

         THIS AGREEMENT ("Agreement") dated as of December ____ 1993, is entered
into by and among the Parties hereto,  namely the ALASKA  ELECTRIC  GENERATION &
TRANSMISSION  COOPERATIVE,  INC., The  MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL
LIGHT & POWER,  the CHUGACH  ELECTRIC  ASSOCIATION,  INC., The  MUNICIPALITY  OF
FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM, the GOLDEN VALLEY ELECTRIC
ASSOCIATION,  INC.,  The CITY OF SEWARD d/b/a SEWARD  ELECTRIC  SYSTEM,  each of
which shall be a "Participant,"  and the HOMER ELECTRIC  ASSOCIATION,  INC., and
the MATANUSKA ELECTRIC ASSOCIATION,  INC., each of which shall be an "Additional
Party."

                                   WITNESSETH:

         WHEREAS,  the State of Alaska ("State") has by statute authorized,  and
has  partially  funded,  the design and  construction  of two  segments  of high
voltage electric power transmission line, namely (1) a Healy-Fairbanks  Segment,
and (2) an  Anchorage-Kenai  Peninsula  Segment  (said two Segments  referred to
collectively as "the Project"); and

         WHEREAS,  the State's  action is intended to benefit the general public
through greater electric power  reliability and improved  efficiency of electric
power  supply  for   consumers   served  by  electric   utilities   that  agree,
collectively,  to provide  the  remaining  funds  needed to  design,  construct,
operate and maintain the Project; and

         WHEREAS,  each Party  hereto is an  electric  utility or operates as an
electric  utility,  and is entitled  under the relevant  State  statutes to be a
party  to this and  other  contractual  agreements  that  are  necessary  to the
Project; and

         WHEREAS,  each Party hereto has already  executed  the  Intertie  Grant
Agreement  ("Grant  Agreement") and Grant Transfer And Delegation  Agreement for
the Project, which are attached to this Agreement as Exhibits A(1) and A(2); and

         WHEREAS, each Party has independently determined that its participation
in the  Project  under the terms and  conditions  set forth in this and  related
Agreements is prudent under the circumstances, and that over its expected useful
life the  Project is likely to  produce  net  economic  benefits  (directly  and
through improved reliability) for the electric ratepayers served by that Party;

NOW THEREFORE,  IN CONSIDERATION  of the mutual covenants set forth herein,  the
Parties agree as follows:

                               Section 1. PARTIES

         (a) Participants  And Additional  Parties As Parties To This Agreement.
The Parties to this Agreement are the Participants,  as defined in Section 1(b),
and the Additional  Parties, as defined in Section 1(c). As further set forth in
Section 5(a) and in other provisions of this Agreement,  the  Participants  will
own (as tenants in common) certain transmission  facilities that are the subject

                                       1
<PAGE>

of this Agreement, and will exercise the rights and bear the responsibilities of
such ownership.  The Additional  Parties are electric utilities who collectively
constitute Alaska Electric Generation and Transmission Cooperative, Inc., one of
the Participants,  and whose systems will be electrically  interconnected  with,
and will affect and be affected  by, the  transmission  facilities  that are the
subject of this  Agreement.  The  Additional  Parties  will  participate  in the
governance and control of the Project,  but will not be among the owners of such
facilities.

     (b)  Participants.  The Participants  are the ALASKA ELECTRIC  GENERATION &
TRANSMISSION  COOPERATIVE,  INC. ("AEG&T"),  The MUNICIPALITY OF ANCHORAGE d/b/a
MUNICIPAL  LIGHT  & POWER  ("ML&P"),  the  CHUGACH  ELECTRIC  ASSOCIATION,  INC.
("Chugach"),  The MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS  MUNICIPAL UTILITIES
SYSTEM ("FMUS"), the GOLDEN VALLEY ELECTRIC ASSOCIATION,  INC. ("GVEA"), and The
CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("SES").

     (c)  Additional  Parties.  The  Additional  Parties are the HOMER  ELECTRIC
ASSOCIATION, INC. ("HEA") and the MATANUSKA ELECTRIC ASSOCIATION, INC., ("MEA").

                          Section 2. TERM OF AGREEMENT

     (a) Effective Date. This Agreement shall become effective at 24:00 hours on
the  first  date that it has been  executed  by all of the  Parties  ("Effective
Date").

         (b)  Expiration  Date.  Unless  earlier  terminated  pursuant  to other
provisions of this Agreement,  this Agreement shall expire at 24:00 hours on the
first  date that the  Project  has  reached  the end of its actual  useful  life
("Expiration Date"), as reasonably determined by the Intertie Participants Group
("IPG").

                 Section 3. DEFINITION AND SCOPE OF THE PROJECT

         (a) The Healy-Fairbanks  Segment.  The  Healy-Fairbanks  Segment of the
Project shall consist of a 138-kV  (minimum)  electric power  transmission  line
between Healy,  Alaska,  and the proposed Wilson  Substation in south Fairbanks,
Alaska,  the  routing  and design of which will be  approved  by the IPG,  and a
description  of which  will  thereafter  be  attached  hereto  as  Exhibit B and
incorporated  by reference  herein.  The  proposed  Wilson  Substation  shall be
designed to accommodate  appropriate direct  interconnection  for FMUS, and FMUS
shall  interconnect to the Project at that location within 18 months of the Date
of Commercial Operation of the Healy-Fairbanks Segment.

         (b)  The   Anchorage-Kenai   Peninsula  Segment.   The  Anchorage-Kenai
Peninsula  Segment of the Project shall consist of a 138-kV  (minimum)  electric
power  transmission line between  Anchorage,  Alaska, and the Kenai Peninsula of
Alaska,  the  routing  and design of which will be  approved  by the IPG,  and a
description  of which  will  thereafter  be  attached  hereto  as  Exhibit C and
incorporated by reference herein.

                                       2
<PAGE>

                           Section 4. THE PARTICIPANTS

         (a)  Participants'   Shares.  Each  Participant's   rights  to  Project
capacity,  and each  Participant's  responsibility  for Project costs,  shall be
determined  as set forth in this  Agreement  on the basis of that  Participant's
Share of each Project  Segment.  The Parties  have  computed and agreed upon the
respective   individual   Participants'  Shares  in  a  manner  consistent  with
applicable  statutory  provisions.  Unless otherwise  changed in accordance with
this  Agreement,  each  Participant's  Share with respect to both Segments shall
initially be as follows:
                           AEG&T.......................................25.79%
                              of which:
                                 HEA.........................11.60%
                                 MEA.........................14.19%
                           ML&P........................................22.43%
                           Chugach.....................................30.23%
                           FMUS........................................4.70%
                           GVEA........................................15.41%
                           SES.........................................1.44%

         (b) Changes In Participants' Shares.  Except as otherwise  specifically
provided herein,  changes in Participants'  Shares shall be subject to the terms
and  conditions  set forth in this Section  4(b).  If either or both  Additional
Parties  change their  Shares  independently  of one another,  then the Share of
AEG&T shall be divided into separate  Shares of HEA and MEA in  accordance  with
their interests in each Segment of the Project as applicable at the time of such
division.  In the event of such  division  and for the  purposes of this Section
4(b), the Additional Parties shall be deemed Participants.

                  (1)  General Conditions.

                           (A) Except as provided in Sections 4(b)(3),  4(b)(4),
                  and 4(b)(6),  no  Participant's  Share or any portion  thereof
                  shall   be   assigned   or    transferred,    voluntarily   or
                  involuntarily, to any entity, unless said entity:

                                    (i) is  capable  of  being a  "participating
                           electric utility" for purposes of Sections 1 and 2 of
                           Chapter 19 SLA 1993,  which  authorize  and partially
                           fund the Project; and

                                    (ii)  is  capable  of  carrying  out all the
                           electric utility services, duties,  obligations,  and
                           functions of a Participant,  as reasonably determined
                           by the IPG;

                                    (iii) has validly assumed,  in writing;  all
                           of   the   transferring   Participant's   obligations
                           hereunder,  provided that such assignment or transfer
                           shall not relieve the transferring Participant of its
                           obligations  under  this  Agreement   (although  said
                           transferring   Participant  may  become   secondarily
                           liable  and  the  transferee  may  become   primarily
                           liable) without the express  written  approval of the
                           IPG; and

                                       3
<PAGE>

                                    (iv)  has   provided  the  Parties  with  an
                           opinion of counsel that this Agreement is enforceable
                           against the transferee or assignee.

                           (2) Consent.  Except as provided in sections  4(b)(3)
                  and 4(b)(4),  no  Participant's  Share shall be changed (i.e.,
                  increased or  decreased,  including  eliminated  or reduced to
                  zero),  either voluntarily or involuntarily,  by assignment or
                  otherwise, except with the prior written consent of:

                           (A)  each and every Participant, which consent shall
                  not be unreasonably withheld;

                           (B)  any  Project  lender,   bondholder,   bond  fund
                  trustee, or other party whose consent is a precondition to any
                  such a change by that Participant as a result of agreements or
                  arrangements  entered into by that Participant for the purpose
                  of financing the Project; and

                           (C) if  applicable,  any lender or regulatory  agency
                  whose  consent  the  Participant(s)  may  require  in order to
                  increase,   decrease,  or  eliminate  its  (their)  respective
                  Participant's Share(s).

                  (3)  Limited automatic rights of withdrawal.

                           (A) Generally.  Each Participant  other than GVEA and
                  FMUS shall have a limited  automatic  right of withdrawal from
                  participation  in  the  Healy-Fairbanks   Segment,   and  each
                  Participant  (including  GVEA and FMUS)  shall be  entitled to
                  withdraw from participation in the  Anchorage-Kenai  Peninsula
                  Segment,  but,  in each  case,  only in  accordance  with  the
                  provisions of this Section 4(b)(3).

                           (B)  Timing.   A  Participant   that  withdraws  from
                  participation  in either  Segment may do so only by delivering
                  written  notice  to the  other  Participants  on or  before  a
                  particular date  (hereinafter the "decision date")  reasonably
                  established  by the IPG.  The  decision  date  shall be a date
                  certain,  after  completion of the  requisite  Anchorage-Kenai
                  Peninsula Segment route studies and cost estimates, on which a
                  final  decision will be made to proceed or not to proceed with
                  construction of that Segment along a particular route and with
                  particular end points.  The  Participants  will cooperate with
                  one  another in good faith to help devise and  implement  such
                  additional   procedures,   including  reasonable  meeting  and
                  notification  schedules,  as the IPG may  adopt to  facilitate
                  decisionmaking  on the potential  transfers and assumptions of
                  rights  and  obligations  among  Participants  that may  occur
                  pursuant to this Section 4(b)(3).

                           (C) Effect of  withdrawal on  Participant  Shares and
                  related   obligations.   The   Participant's   Share   of  any
                  withdrawing  Participant  shall  be  reallocated  among  other
                  Participants  in  accordance  with  paragraph  (D) below.  The
                  withdrawal  of  any  Participant   from  the   Healy-Fairbanks
                  Segment,  however,  shall become effective only one year after

                                       4
<PAGE>

                  the Date of  Commercial  Operation  of that  Segment,  or,  if
                  later,   one  year  after  the  date  of  that   Participant's
                  withdrawal  notice.  Until its withdrawal  becomes  effective,
                  such  Participant  shall  remain  liable  for  all  costs  and
                  obligations  associated  with its  Participant's  Share of the
                  Healy-Fairbanks  Segment.  The  withdrawal of any  Participant
                  from  the  Anchorage-Kenai   Peninsula  Segment  shall  become
                  effective sixty (60) days after the decision date,  subject to
                  the last sentence of Section 4(b)(3)(D)(ii).

                           (D)  Reallocation  of the  Participant's  Share  of a
                  withdrawing Participant.

                                    (i)     Healy-Fairbanks     Segment.     The
                           Participant's  Share of a Participant  that withdraws
                           from  the  Healy-Fairbanks  Segment  shall  first  be
                           offered  to other  Participants  in that  Segment  in
                           proportion to the respective  Participant's Shares of
                           such other Participants in that Segment.  Any portion
                           of the withdrawing  Participant's  Share that remains
                           available after this first-round  offer shall next be
                           accepted  by FMUS  and  GVEA in  proportion  to their
                           respective  Participant's Shares, provided, that FMUS
                           shall not be required  to accept said  portion to the
                           extent  FMUS's  total   Participant's  Share  of  the
                           Healy-Fairbanks  Segment would thereby exceed 15%. If
                           any portion of the  withdrawing  Participant's  Share
                           remains available after this second-round offer, then
                           that portion shall be accepted by GVEA.

                                    (ii) Anchorage-Kenai  Peninsula Segment. The
                           Participant's  Share of a Participant  that withdraws
                           from  the  Anchorage-Kenai  Peninsula  Segment  shall
                           first be offered  to all  remaining  Participants  in
                           that  Segment,  in  proportion  to  their  respective
                           Shares  in  that   Segment.   Any   portion   of  the
                           withdrawing    Participant's   Share   that   remains
                           available after this first-round  offer shall next be
                           offered to all Participants in that Segment that have
                           committed  to  withdraw   from  the   Healy-Fairbanks
                           Segment  ("South-only  Participants").  If and to the
                           extent that the  South-only  Participants  decline to
                           accept this second-round  offer, then the withdrawing
                           Participant's   Share  (or  any   remaining   portion
                           thereof)  shall  again be  offered  to all  remaining
                           Participants   in   that   Segment   (including   the
                           South-only   Participants)   in   proportion  to  the
                           respective  Participant's Shares of such Participants
                           in that Segment.  Each such Participant  shall either
                           accept such third-round offer,  obtain agreement from
                           another Participant to accept such third-round offer,
                           or shall itself withdraw from  participation  in that
                           Segment.  In the event this process leads one or more
                           additional     Participants    to    withdraw    from
                           participation    in   that   Segment,    then   their
                           Participant's   Shares   shall  be   offered  to  the
                           remaining   Participants   in  a  like   first-round,
                           second-round,  and  third-round  manner.  If,  at the
                           conclusion of this process,  one or more Participants
                           have   accepted    Participant's    Shares   in   the
                           Anchorage-Kenai  Peninsula  Segment  that  total  one
                           hundred  percent  (100%),  then  construction  of the
                           Segment shall  commence and there shall be no farther
                           automatic  rights  of  withdrawal  available  to  any
                           Participant;  otherwise this Project Segment shall be
                           considered  Abandoned  and  all  Participants  in  it

                                       5
<PAGE>

                           (notwithstanding  the attempted  withdrawal of any of
                           them  under  this   paragraph)   shall  proceed,   in
                           accordance  with  procedures the IPG shall adopt,  to
                           wind up this Project Segment. No Participant shall in
                           that event be excused from its Participant's Share of
                           any obligations  associated with this Project Segment
                           until all such obligations have been satisfied.

                           (E) Financial  arrangements  with a Participant  that
                  withdraws from participation in the  Healy-Fairbanks  Segment.
                  Upon  acceptance  of a transfer and  assumption by one or more
                  other  Participants of the rights and  obligations  associated
                  with the  Participant's  Share of a Participant that withdraws
                  from participation in the Healy-Fairbanks  Segment,  and after
                  such  withdrawal   becomes   effective   pursuant  to  Section
                  4(b)(3)(C),   the  Participant(s)  assuming  such  rights  and
                  obligations shall proceed to pay the withdrawing Participant's
                  Annual Payment  Obligations  and  Assessments for that Project
                  Segment.  Such  payment  shall  include  any  then-unamortized
                  amounts of the transferring Participant's Share of such Design
                  and  Construction  Costs as may  exceed  the sum  total of the
                  Grant Funds plus available  interest thereon for that Segment.
                  In the  event  that  the  withdrawing  Participant's  Share of
                  Design and  Construction  Costs for that  Segment has not been
                  financed through a collective financing arrangement,  then the
                  Participant(s)  assuming such Share shall pay the  withdrawing
                  Participant directly,  over a period of twenty-five (25) years
                  (unless   otherwise   agreed)   and   on   a   mutually-agreed
                  amortization  schedule, for amounts that would at that time be
                  unamortized, assuming said withdrawing Participant's Share had
                  been financed by means of a collective  financing  arrangement
                  or other loan.

                           (F) In the event a Participant  exercises the limited
                  right of  withdrawal  pursuant to Section  4(b)(3),  then each
                  remaining  Participant  shall  continue  to be a Member with a
                  single   vote,   notwithstanding   its   assumption   of   the
                  transferring  Participant's  Share,  but  the  Share  of  said
                  remaining   Participant  shall  be  increased  by  the  amount
                  transferred for all other purposes,  including for purposes of
                  determining the affirmative  vote of Members whose  percentage
                  Shares exceed 50% under Section 6(e)(3)(a).

                  (4)  Default  and  Step-up.  If, by reason of a  Participant's
         default or otherwise by  operation  of law  (including  by order of any
         regulatory body with jurisdiction), a Participant's Share is reduced or
         eliminated,  or a Participant  ceases to be a Participant and ceases to
         pay the costs associated with its Participant's  Share, then the Shares
         of the remaining  Participants  shall be  proportionately  increased so
         that the total of all Shares  continues  to equal 100%.  No Party shall
         initiate or otherwise seek such an order  reducing or  eliminating  its
         Share or terminating its role as a Participant.

                  (5)  Voluntary  Transfers.  In the  event  that a  Participant
         transfers or assigns its Share or portion thereof to another Party, the
         Share of the transferee  shall be increased  accordingly,  but it shall
         continue  to be a Member  with a single  vote on the IPG.  In the event
         that a Participant transfers or assigns its Share or portion thereof to
         an entity that is not a Party,  the transferee may become a Member with
         a single vote on the IPG.

                                       6
<PAGE>

                  (6)  Assignment  for  Security   Purposes.   Nothing  in  this
         Agreement shall prevent an assignment of a Party's rights hereunder for
         security  purposes  only,  or shall  prevent a  financing  entity  with
         recorded or secured  rights  from  exercising  all rights and  remedies
         available to it under law or contract,  provided  that  performance  of
         this  Agreement  is not thereby  impaired.  The Parties  shall have the
         right to be reasonably  notified by the  financing  entity prior to the
         time of exercise that it is exercising such rights or remedies.

                 Section 5. RIGHTS & OBLIGATIONS OF PARTICIPANTS

         (a) Ownership As Tenants In Common. The Participants shall be owners of
each Segment of the Project  (including all personal and real property interests
thereof) as tenants in common,  with undivided  interests and  obligations  with
respect to all  Project  Segment  assets and  liabilities  in the  proportionate
amounts of their respective  Participants'  Shares. Except as otherwise provided
hereunder,  the  Participants  shall  share in the Project  Segment's  benefits,
burdens, and risks only in proportion to their respective  Participants' Shares,
notwithstanding  that the IPG may select one or more individual  Participants to
manage, design, build, finance,  operate, and/or maintain the Project Segment or
portions thereof on behalf of the Participants collectively.

                  (b)  Waivers.

                           (1)  Right  of  partition.  Each  Participant  hereby
                  waives (on behalf of itself and of any assignee or  transferee
                  of all or any portion of its respective  Participant's  Share)
                  any right or power  that a tenant in  common  might  otherwise
                  possess to compel a  partition  of the  Project or any element
                  thereof  as  commonly  held  property,   provided,  that  this
                  provision  shall not  prevent  the  Additional  Parties or any
                  other  Parties  from seeking to divide  AEG&T's  Participant's
                  Share  into two  Participant's  Shares  in  proportion  to the
                  actual interests of said Additional Parties applicable at that
                  time.

                           (2) Claims against other Parties. Each Party shall be
                  entitled to enforce this  Agreement;  provided,  that no Party
                  shall be entitled,  without the prior  approval of the IPG, to
                  assert claims against a Participant based on or arising out of
                  that Participant's acts or omissions as a Construction Manager
                  or an O&M Manager.

                  (c) Payment  Obligations.  Each Participant  shall (1) meet in
         timely fashion each and all of its  obligations  under this  Agreement,
         including without  limitation its obligations to make payments of money
         for or with respect to the Project, and (2) make such payments of money
         in such amount, in such manner,  and at such time as may be required by
         this Agreement, or by operation of law.

                  (d)  Rights And Duties Regarding Use Of Party's Facilities.

                           (1)  Duty  of  Parties  to  allow  use of  their  own
                  transmission capacity.  Each Party shall make available to the
                  other Parties, on a just and reasonable and  nondiscriminatory
                  basis,  and in the manner and  subject to the  conditions  set

                                       7
<PAGE>

                  forth in this  Section  5(d),  capacity  in that  Party's  own
                  non-Project  electric  power  transmission  facilities for the
                  purpose of  affording  the  Participants  access  to/from  the
                  Project in order that each may make use of the Project.

                           (2) Initial terms and  conditions  governing  Chugach
                  facilities. Subject to approval by the Alaska Public Utilities
                  Commission ("Commission"), the use of Chugach's facilities for
                  access to/from the Anchorage-Kenai  Peninsula Segment by other
                  Parties   shall  be  governed   initially  by  the  terms  and
                  conditions,   including  rates,  described  in  Exhibit  D(1),
                  attached  hereto and  incorporated  by this reference  herein.
                  Chugach  shall  submit  said  terms  and   conditions  to  the
                  Commission for review and shall seek approval thereof.

                           (3) Terms and conditions  governing GVEA  facilities.
                  The terms and conditions  governing use of GVEA facilities are
                  set forth in Exhibit D(2), attached hereto and incorporated by
                  this reference herein.

                           (4) Other terms and conditions.  When  appropriate to
                  effect   the  duty  set  forth  in   Section   5(d)(l)   under
                  circumstances  other than those described in Sections  5(d)(2)
                  and  5(d)(3),  the Parties  shall  promptly  negotiate in good
                  faith in an effort to reach agreement on reasonable  terms and
                  conditions, including rates, that will apply when a particular
                  Party provides to  Participants  access to/from either Project
                  Segment over its non-Project transmission facilities. Any such
                  terms and conditions that become  effective shall be set forth
                  in Exhibit D, and shall be attached hereto and incorporated by
                  reference herein during such time as they remain effective.

                           (5)   Submission  of  terms  and  conditions  to  the
                  Commission.  If, despite the good faith negotiation efforts of
                  the  Parties,  agreement  is  not  reached  on the  terms  and
                  conditions  governing the  Participants' use of any particular
                  Party's non-Project transmission  facilities,  then that Party
                  shall  submit to the  Commission  for review and  approval the
                  terms  and  conditions,  including  rates,  which  that  Party
                  proposes with respect to its facilities.

                           (6) Additions to Exhibit D. Any terms and conditions,
                  including  rates,  that ultimately  become  effective  through
                  order of the  Commission or of a reviewing  court shall be set
                  forth  in  Exhibit  D,  and  shall  be  attached   hereto  and
                  incorporated  by  reference  herein  during  such time as they
                  remain effective.

                 Section 6. DECISION MAKING BY THE PARTICIPANTS

         (a)  Nature of the IPG.

                  (1) Each Participant or Additional  Party, as the case may be,
         shall  exercise  certain  of its  rights  and carry out  certain of its
         responsibilities  with respect to the design,  planning,  construction,
         operation,  management  and,  as  appropriate,  partial  funding of the
         Project by acting through the LPG in accordance  with this Agreement or
         with rules adopted by the IPG pursuant to this Agreement.  When used in
         this  Agreement,   the  term  "IPG"  refers  to  the  Participants  and

                                       8
<PAGE>

         Additional Parties acting collectively as set forth herein.  Nothing in
         this  Agreement is intended to establish the IPG as a separate  entity,
         nor do the  Parties  intend to  delegate  any  authority  or confer any
         powers or impose any  obligations on the IPG, apart from the authority,
         powers  and  obligations  of  each  Participant  and  Additional  Party
         expressly  conferred pursuant to this Agreement.  The IPG shall have no
         power  or  authority  to  take  actions  which   modify,   directly  or
         indirectly, the terms and conditions of this Agreement.

                  (2) The IPG, in making  certain  decisions  and  carrying  out
         certain Project activities with respect to the ownership and management
         of the  Project,  shall at all  times  act in  accordance  with  voting
         procedures  and  rules  set  forth  in  or  adopted  pursuant  to  this
         Agreement.

         (b) Membership.  The IPG shall consist of the following initial members
("Members'),  each of which  shall be  entitled to one vote as further set forth
herein: ML&P, Chugach,  FMUS, GVEA, SES, HEA, and MEA. No Member shall obtain an
additional  vote through  merger with,  acquisition  of, or assignment  from any
other Member.  In the event a Party ceases to have a Share,  either directly or,
in the case of an Additional Party,  indirectly,  then said Party shall cease to
be a Member.

         (c)  Designation of  representatives.  Each Member shall  designate one
representative and one alternative  representative to the IPG. Each Member shall
notify all other  Members in writing  of the  names,  addresses,  and  telephone
numbers of its  representative and designated  alternate.  Any Member may change
its designated  representative or alternate representative at any time and shall
promptly  provide written notice of such change to the Members.  The alternative
representative  shall serve as the designated  representative  in the absence of
the designated representative.

         (d)  Meetings.

                  (1) Annual Meeting. The annual meeting of the IPG shall be the
         first regular  meeting of each Project Year,  and shall be convened for
         the purpose of electing officers and transacting such other business as
         may come before the meeting.

                  (2) Regular Meetings.  Regular meetings shall be held at least
         quarterly, with the specific date and time to be determined by the IPG.

                  (3)  Special  Meetings.  Special  meetings  of the  IPG may be
         called by the  Chairman or by three  Members at any time by so advising
         the  Secretary  of the IPG.  Business  at a special  meeting of the IPG
         shall be limited to the  purpose  stated in the notice of such  special
         meeting.

                  (4) Quorum.  At all  meetings of the IPG,  the presence of the
         representatives  of any five Members shall  constitute a quorum for the
         transaction of business.

                                       9
<PAGE>

         (e)  Manner of Acting.

                  (1) IPG actions may be taken by any reasonable  voting method,
         provided  that any Member may request an open roll call vote.  A Member
         may not vote on a matter  solely or  primarily  affecting  a Segment of
         which said Member  does not hold a Share,  either  directly  or, in the
         case of an Additional Party, indirectly. Telephonic participation shall
         constitute  presence  at a meeting of the IPG.  All  actions  taken via
         teleconferencing shall be taken by roll call vote.

                  (2) Except as otherwise  provided  herein,  all actions of the
         IPG that are  decided  by vote  shall  require a  majority  vote of the
         Members, such vote to be taken during a meeting at a time when a quorum
         is present.

                  (3) The actions  listed in this Section  6(e)(3) shall require
         (a) the  affirmative  vote of a majority  of the  Members,  and (b) the
         affirmative vote of those Members whose Participant's Shares of Project
         capacity  total  greater than 50% ("double  majority"),  but only if at
         least three Members are eligible to vote on such actions. Otherwise the
         actions  listed in this Section  6(e)(3) shall require the  affirmative
         vote of those  Members  whose  Participant's  Shares total greater than
         50%,  and  shall be made in good  faith  and  consistent  with  Prudent
         Utility Practice for the benefit of both Segment Participants.

                           (A) Approval and modification of Construction Budget.

                           (B) For each Project Segment, selection,  removal, or
                  replacement of the  Construction  Manager and the O&M Manager,
                  subject to the  requirements of Sections 7 and 9, and approval
                  of  terms  and   conditions  of  the   Construction   and  O&M
                  Agreements.

                           (C) Adoption and modification of the budget of Annual
                  Project Costs.

                           (D)  Establishing for each Project Year the estimated
                  Annual Payment Obligation of each Participant, together with a
                  schedule   for  each   Participant   of  payments   that  such
                  Participant shall be required to make during the year.

                           (E)  Determination   after  the  conclusion  of  each
                  Project Year of the actual Annual Project Costs for that Year.

                           (F)  Evaluation of necessity for and  scheduling  for
                  major  change  orders,  Required  Project  Work  and  Optional
                  Project  Work;  provided,  that  Optional  Project Work may be
                  undertaken  only  if all  Parties  agree  that  said  Work  is
                  consistent with the terms of this Agreement, including Section
                  6(a) hereof.

                           (G)  Determination  of the appropriate  amount of and
                  method for obtaining insurance for or related to the Project.

                                       10
<PAGE>

                           (H) Creation of specific  Project  accounts or funds,
                  if any, and  determination  of minimum funding amounts for the
                  same.

                           (I) Adoption or amendments of procedural rules of the
                  IPG (except for procedures for dispute resolution, which shall
                  be adopted or amended by unanimous agreement).

                           (J) Final approval of maintenance schedules,  breaker
                  settings,  and  similar  protocols  for  each  Segment  (to be
                  proposed  to  the  IPG  in  the  first  instance  by  the  O&M
                  Managers).

                           (K) Determination of when the Project has reached the
                  end of its actual useful life.

                           (L)  Determination  of whether claims may be asserted
                  against any Party providing  Project  services under a related
                  agreement.

                           (M) Adoption of procedures for  Assessments  pursuant
                  to Section 10(e)(2).

                           (N) Approval of material routing and design decisions
                  for each Project Segment. The IPG shall select among potential
                  alternative  routings and end points for the Project  Segments
                  reasonably  and in good  faith in order  to (1)  satisfy  such
                  reasonable  objectives  for  electric  reliability,   transfer
                  capability,  safety,  feasibility,  environmental quality, and
                  similar  objectives  as the IPG  may  adopt  for  the  Project
                  consistent  with Prudent Utility  Practice,  at (2) the lowest
                  reasonably expected Project cost; provided,  that the northern
                  terminus of the  Healy-Fairbanks  Segment  shall be located at
                  the proposed  Wilson  substation  and designed to  accommodate
                  direct  interconnection  by FMUS unless FMUS  expressly and in
                  writing approves a different location or design.

                           (O)  Relief  of  a  Participant  of  its  obligations
                  pursuant to this  Agreement as a consequence  of assignment or
                  transfer.

                           (P) Adoption of standards and procedures  pursuant to
                  which  a  Party  may be  compensated  by the  others  for  any
                  reasonable  cost,  expense,  or loss (or portion thereof) that
                  (i) such Party would not have  incurred  but for the  Project,
                  and (ii) should properly be considered a cost of the Project.

                           (Q) All  other  matters  that  this  Agreement  would
                  otherwise  allow to be  decided  by a simple  majority  of the
                  Members,  but that the IPG decides,  by double  majority vote,
                  should require the affirmative vote of a double majority.

                  (4) All significant actions or determinations of the IPG shall
         be reduced to writing and promptly  disseminated among the Participants
         in the  form of  meeting  minutes  or IPG  Resolutions,  provided  that
         failure  to comply  strictly  with this  provision  shall not by itself
         render said action or determination invalid.

                                       11
<PAGE>

                  (5)  Decisions  on which only two Members are eligible to vote
         shall be subject to notice and  opportunity  to comment by the minority
         Participant,  and to appeal to the Commission for consistency with good
         faith and Prudent  Utility  Practice  for the  benefit of both  Segment
         Participants.

         (f)  Committees.

                  (1) Designation.  The IPG may appoint  committees from time to
         time,  subject to such  conditions as may be prescribed by the IPG. The
         designation  of any such  committee  shall not  relieve  the IPG or any
         Member of any responsibility by law or the Agreement.

                  (2) Powers. Any delegation of decisionmaking  authority by the
         IPG to any committee,  officer,  or other individual shall be evidenced
         in writing.

         (g)  Officers.

                  (1) Number. The officers of the IPG shall initially consist of
         a Chairman,  a Vice Chairman, a Secretary,  and a Treasurer,  who shall
         serve at the  pleasure of the IPG. The IPG may reduce the number of its
         officers and may elect such other  officers and agents as it shall deem
         necessary, who shall hold office for such terms and shall exercise such
         powers and perform such duties  consistent with this Agreement as shall
         be  determined  from time to time by the IPG.  The IPG may, by separate
         resolution,  provide for the indemnification of its officers,  Members,
         and the members of any special purpose committees appointed by the IPG.

                  (2) Election and Term of Office.  Officers shall be elected by
         the IPG at its  annual  meeting.  Only  designated  representatives  of
         Members shall be eligible to serve as officers. Each officer shall hold
         office  until a  successor  is elected and  accepts  office  unless the
         officer resigns or is removed by the IPG.

                  (3) Vacancies.  In the event any vacancy occurs in any elected
         office of the IPG,  the  remaining  members  of the IPG  shall  elect a
         successor to the office at the next  regular or special  meeting of the
         IPG.

         (h)  Auditing Standards and Procedures.

                  (1) Unless  otherwise  waived by the IPG,  an annual  audit of
         each  Project  Segment  shall be  performed  by  qualified  independent
         auditors  selected by the IPG. The primary  purpose of the audits shall
         include  verification of Project expenses and  determination of amounts
         to be carried  forward or  collected  pursuant to an annual  true-up of
         Project costs.

                  (2) In accordance  with rules  established by the IPG, the IPG
         shall (a) keep or cause to be kept  complete and  accurate  records and
         accounts for each Segment of the  Project,  which  records and accounts
         shall be subject at reasonable  times to inspection by any Participant,
         and (b)  require  Construction  Managers  and O&M  Managers  to provide
         progress reports, transaction records, Project certifications, or other

                                       12

<PAGE>

         information that the IPG reasonably deems relevant to Project ownership
         or operation.

                         Section 7. CONSTRUCTION MATTERS

         (a) Construction  Manager. GVEA shall serve as the Construction Manager
of the  Healy-Fairbanks  Segment,  and Chugach  shall serve as the  Construction
Manager of the Anchorage-Kenai  Peninsula Segment, unless said Managers elect to
withdraw or are removed  pursuant to Section  7(j).  Each  Construction  Manager
shall be responsible  for the  preparation of its Project  Segment's  design for
approval  by the IPG and  shall  be  responsible  for  the  construction  of its
respective  Segment of the  Project  utilizing  Prudent  Utility  Practices  and
subject to construction  budgets approved by the IPG. Each Construction  Manager
shall be responsible for selecting and supervising any design  engineering firms
or subcontractors necessary for the successful completion of construction of its
Segment of the Project.

         (b) Project  Schedules/Commercial  Operation. Each Construction Manager
shall, upon execution of the apposite Construction  Agreement,  proceed with the
design,  right-of-way acquisition,  permits, and construction with due diligence
and in accordance with Prudent Utility Practice;  provided, that detailed design
and  construction of the  Anchorage-Kenai  Peninsula  Segment shall not commence
until  after  completion  of the  process  described  in Section  4(b)(3).  Each
Construction  Manager shall submit a Project  schedule to the IPG, and shall use
its  reasonable  best  efforts  to achieve  the  scheduled  dates of  commercial
operation,  but  shall not be  responsible  for  delays  which  are  beyond  its
reasonable control.

         (c)  Protect  Budgets/Construction  Costs.  Each  Construction  Manager
shall,  immediately  upon  execution  of the  apposite  Construction  Agreement,
prepare a budget of the total  estimated  Design and  Construction  Costs of the
Healy-Fairbanks or Anchorage-Kenai  Peninsula Segments,  as the case may be, and
submit that Construction  Budget to the IPG, together with Construction  Budgets
for the 1994 calendar year, for approval by the IPG; provided,  that in the case
of the  Anchorage-Kenai  Peninsula  Segment,  the  first  such  budget  shall be
prepared  for  submission  to the IPG only after the  Segment's  routing and end
points have first been selected. Thereafter, no less than one hundred and twenty
(120) days before the  beginning  of each  succeeding  Construction  Year,  each
Construction  Manager  shall submit to the IPG for its approval a budget (or, as
the case may be, a revised  budget) for each succeeding  Construction  Year. The
IPG shall  approve a budget or  revised  budget no less than 60 days  before the
beginning of each succeeding Construction Year.

         The Construction Managers shall not without the express approval of the
IPG incur costs or obligate finds beyond those amounts  contained in an approved
budget.

         The  Construction   Managers  shall  not  make  material   intra-budget
transfers without the IPG's approval.

         The  Construction  Managers shall not be compensated for their services
as  Construction  Managers,  except that each  Construction  Manager may include
within the Project  budget a reasonable  amount for labor  (i.e.,  compensation,
including  associated  payroll  benefits) to the extent directly assigned to the
Project  by that  Construction  Manager.  Any such  costs  contained  in Project

                                       13
<PAGE>

budgets shall be set out in  sufficient  detail so as to allow the IPG to assess
the  reasonableness  of those costs. The Construction  Managers may also include
within the Project Budget an amount for its general and administrative overhead,
including construction overhead, of 0.5% of Design and Construction Costs.

         (d)  Advancement  of Funds.  The IPG shall  instruct the  administrator
under the Grant  Administration  Agreement  ("Grant  Administrator")  to advance
finds to each  Construction  Manager (1) either upon the  submission of progress
payment  invoices  from   subcontractors   certified  as  to  accuracy  by  said
Construction  Manager or direct labor  invoices  submitted by said  Construction
Manager showing personnel and hours involved in connection with the Project,  or
(2) otherwise in accordance with the Grant Administrative Agreement.

         (e) Change  Orders.  The  Construction  Managers  may not enter into or
agree to major  change  orders  without  the  prior  approval  of the IPG.  Each
Construction  Manager may,  however,  agree to minor change  orders  without the
approval of the IPG; the Construction Manager shall report all such minor change
orders in that Construction Manager's next applicable construction report to the
IPG.  Minor  change  orders  are  defined  as those  changes  to the  design  or
construction  of the  Project  which  are not  expected  to affect  the  Project
capacity,  general routing,  points of  interconnection,  or basic design of the
structures, and which are not expected to exceed $50,000 individually or, in the
aggregate,  exceed  the  approved  budget  for  that  phase  of  the  design  or
construction.

         (f)  Separate  Books  and  Records.  Each  Construction  Manager  shall
maintain  separate  books and  records  for the design and  construction  of its
Segment  of the  Project.  Such  books and  records  shall be  available  to the
Participants  for their  inspection.  Copies of such books and records  shall be
made available to any Participant  upon request  provided that such  Participant
reimburses the  Construction  Manager for the reasonable  cost of reproducing or
otherwise making available such books and records.

         (g) Monthly Reports.  During  construction,  each Construction  Manager
shall submit  monthly  reports to the IPG setting out in  sufficient  detail the
status of the design and  construction  of its  Segment of the  Project so as to
allow the IPG to compare the  percentage of completion of the Project with total
expenditures  as a percentage of budgeted  amounts.  Each  Construction  Manager
shall  immediately  inform  the  members  of the  IPG by  fax of any  design  or
construction problems encountered which, in that Construction Manager's opinion,
might result in significant  future  litigation,  the request for a major change
order, or a significant  deviation from the Project  schedule.  The IPG may from
time to time establish  standards and criteria for determining  what constitutes
"significant"  litigation  and  "major"  change  orders  for  purposes  of  this
provision.

         (h) Audit. The IPG. or any  Participant,  shall have the right to audit
the books and  records of each  Construction  Manager at any time.  The costs of
such an audit shall be borne by the party requesting the audit unless such audit
discloses  that the  Construction  Manager  has (1)  failed in some  significant
manner  or (2) acted in bad  faith,  in  performing  its  obligations  under the
Construction  Agreement,  in which case the  Construction  Manager shall pay the
reasonable costs of the audit.

                                       14
<PAGE>

         (i) Liability of Construction Manager. The Participants are entitled to
compel each  Construction  Manager to disgorge any unjust  enrichment  gained in
connection  with  its  performance  under  the  Construction   Agreement.   Each
Construction  Manager shall also be responsible for the  consequences of its own
intentional  or  willful  misconduct,  or of its  grossly  negligent  action  in
performance of its obligations under the Construction  Agreement (including such
actions by its officers,  employees, or agents); provided, that the Construction
Manager shall not be liable (except with other  Participants,  and to the extent
of its Participant's Share of Project liabilities) for:

                  (1) Damages  resulting from design or  construction  decisions
         presented to and approved by the IPG; and/or

                  (2) The  intentional or negligent  acts of engineering  design
         firms or subcontractors retained by the Construction Manager,  provided
         that the Construction Manager has made a good-faith effort to supervise
         and  inspect  the  activities  of  such  engineering  design  firms  or
         subcontractors, and/or

                  (3) Damages or other  costs and  expenses  resulting  from the
         Construction  Manager's  ordinary  negligence in the performance of its
         duties as Construction Manager.

The Participants  shall treat such damages,  costs, and expenses as costs of the
Project,   to  be  recovered  from  all  Participants  in  proportion  to  their
Participants  Shares;  provided.,  that the  Construction  Manager  shall remain
obligated as a Participant to pay its Participant's  Share of any Project costs,
including the costs of any indemnification.

         (j) Removal or Withdrawal of Construction  Manager.  The IPG may remove
the Construction Manager for reasonable cause, and may replace that Construction
Manager with another Party; provided that the IPG gives the Construction Manager
at least thirty (30) days' prior notice in writing and reasonable opportunity to
cure.  All Members of the IPG may  participate  in the vote for such removal and
replacement.  The Construction Manager may, for any reason, voluntarily withdraw
from its duties as Construction Manager if written notice thereof is tendered no
less than 60 days prior to the anticipated date of commencement of construction.
After commencement of construction,  the Construction  Manager may withdraw from
said duties only upon reasonable notice (but not less than 90 days) and only for
good cause  shown.  In either  event,  the  Construction  Manager  shall use its
reasonable best efforts to cooperate with the new Construction  Manager,  and to
mitigate  any  costs  arising  from  the  withdrawal  and   replacement  of  the
Construction Manager.

         (k)  Duty  to  Negotiate  Construction  Agreement.  The  Parties  shall
negotiate in good faith in an effort to reach agreement on reasonable  terms and
conditions for, and to enter into, a Construction Agreement containing terms and
conditions substantially as set forth in this Section 7.

                        Section 8. CONSTRUCTION FINANCING

         (a) Disbursement of Grant Funds. Grant Funds deposited to each Intertie
Grant Account established pursuant to the Grant  Administration  Agreement shall
be disbursed  and expended for the design and  construction  of the  appropriate
Segment of the Project in accordance  with the provisions of this Section 8, the
Construction Agreement, and the Grant Administration Agreement.

                                       15
<PAGE>

                  (1) The  Participants  shall exercise overall control over the
         disbursement  of Grant  Funds  through  the  IPG,  which  shall  act in
         accordance with its rules,  the Construction  Agreement,  and the Grant
         Administration  Agreement.  Upon approval by the IPG, Grant Funds shall
         be disbursed for the purpose of undertaking  preliminary  investigation
         and design work,  including but not limited to environmental  and route
         studies.  No Grant Funds shall be disbursed for the actual construction
         of the Project unless and until the IPG has considered and approved the
         construction budget and schedule,  as provided for in Sections 6 and 7,
         whereupon the  Participants  shall cause the  appropriate  Construction
         Manager to  commence  design  and  construction  of its  Segment of the
         Project as set forth in the Construction Agreement.

                  (2)  Thereafter,  and  from  time to time  until  the  Date of
         Commercial  Operation,  the IPG shall  consider  and either  approve or
         disapprove (i) any design or  construction  activities  required by the
         IPG to be  approved  prior  to  commencing  said  activities,  (ii) any
         payments  or  reimbursements  to the  Construction  Manager  for  costs
         incurred  and  expenditures  made that are not in  accordance  with the
         approved construction budget and schedule, and (iii) any changes to the
         construction budget and schedule.  The procedure for such consideration
         and approval shall be as set forth in rules and procedures duly adopted
         by the IPG as provided for in Section 6.

                  (3)  Payments  and  reimbursements  from  the  Intertie  Grant
         Accounts  shall be made only for costs incurred and  expenditures  made
         pursuant to the approved  construction budget and schedule or otherwise
         as approved by the IPG.  Documentation  required to make draws  against
         the appropriate  Intertie Grant Account shall be provided in the manner
         determined  by the IPG in  accordance  with  the  Grant  Administration
         Agreement,  and shall be evidenced by a  certification  executed by the
         Chairman or  Treasurer  of the IPG. or otherwise as the IPG may by rule
         determine.

                  (4) The Participants,  through the IPG, shall consider and act
         upon such  modifications and amendments to the construction  budget and
         schedule as are proposed by the appropriate  Construction Manager or on
         the initiative of any Participant.

                  (5) Each  Participant  hereby pledges all Grant Funds received
         to payment of Design and  Construction  Costs,  except as  provided  in
         paragraph (c) of this section.  "Design and  Construction  Costs" means
         all  capital  costs  of the  Project,  including  but  not  limited  to
         planning,  permitting,  design, acquisition of real property interests,
         construction,   equipment,   testing,  and  insurance  costs,  but  not
         administrative  and general  costs of any  Participant,  State  agency,
         political  subdivision,  or  Construction  Manager,  except pursuant to
         Section 7(c), unless such costs are expressly approved by the IPG prior
         to being incurred.

         (b) Additional  Financing.  Notwithstanding any other provision of this
Agreement,  and in order to complete the Project, each Participant shall pay its
Participant's  Share of any Design and  Construction  Costs that  exceed the sum
total of the Grant Funds plus available interest thereon ("Additional Costs").

                                       16
<PAGE>

                  (1) The Parties  recognize the  possibility  of completing the
         Project  through  collective  financing  arrangements,  including bonds
         issued by AIDEA or other State  agency,  as may be provided by separate
         agreement.

                  (2)  If  the  Parties  agree  unanimously,  each  in  its  own
         discretion, to participate in a collective financing arrangement and to
         approve  the Bond  Resolution  adopted  to  implement  said  collective
         financing  arrangement,  then  amounts  required to be paid during each
         Project Year by the Participants pursuant to said Bond Resolution shall
         be included in Annual Project Costs.  Each Participant  shall discharge
         its obligation,  in whole or in part, to pay its Participant's Share of
         Additional Costs through payment of its  Participant's  Share of Annual
         Debt Service and certain other Annual Project Costs in accordance  with
         Section 10 and any applicable Bond Resolution.

                  (3) Each Participant  reserves the right to finance separately
         its  Participant's  Share of Additional  Costs,  or any other  payments
         required by this  Agreement.  Such separate  financing shall not impair
         any Party's legal rights or obligations  under this  Agreement.  In the
         event the Parties do not agree to a collective  financing  arrangement,
         then each Party shall pay, by any lawful means,  its own  Participant's
         Share  of  Additional  Costs  and  other  payments   required  by  this
         Agreement.

                  (4) The time and manner of payment  of such  Additional  Costs
         shall be  determined  by the IPG in  accordance  with its  rules.  Each
         Participant shall pay its Participant's  Share of Additional Costs upon
         receipt of certification in the same manner as is provided in paragraph
         8(a)(3) for the disbursement of Grant Funds by the Trustee.

                  (5)  The  IPG  may  take  appropriate  actions  to  facilitate
         collective financing among some or all of the Parties, but the costs of
         collective  financing  arrangements  undertaken by less than all of the
         Participants shall not be considered Project Costs or be borne by other
         Participants.

         (c) Disposition of Unexpended  Grant Funds. To the extent  permitted by
applicable  law,  any  Grant  Funds  that  remain  unexpended  after the Date of
Commercial  Operation  each Segment of the Project shall be held and applied for
use in  connection  with the  Project for the  benefit of the  Participants,  as
provided  for in rules to be adopted  by the IPG.  Any Grant  Funds that  remain
unexpended  after  Abandonment  of the  Project  and  discharge  of  outstanding
obligations in connection  therewith  shall be deposited to the account of AIDEA
for return to the State.

         (d) Insurance.  The Participants shall obtain and maintain insurance on
the Project  during design and  construction  if and as determined by the IPG in
accordance with Section 6.

                  Section 9. OPERATION & MAINTENANCE; RELATED MATTERS

         (a) Selection Of O&M Managers.  GVEA shall serve as the O&M Manager for
the Healy-Fairbanks  Segment,  and shall be removable only for reasonable cause,
after  reasonable  notice and opportunity to cure.  Chugach shall be the initial
O&M Manager for the Anchorage-Kenai  Peninsula Segment for a period of three (3)
years from and after the Date of Commercial  Operation of that  Segment;  during

                                       17
<PAGE>

such period,  the IPG may remove Chugach for reasonable  cause after  reasonable
notice and  opportunity to cure, and thereafter the IPG may remove Chugach after
reasonable notice by the affirmative vote of Members whose Participant's  Shares
in total exceed fifty percent (50%). Chugach shall subcontract with AEG&T and/or
HEA to provide  some or all of the  Project  maintenance  services  for  Project
facilities  located on the Kenai  Peninsula,  if and to the extent that doing so
will reduce Project  expenses.  The Parties shall  negotiate in good faith in an
effort to reach  agreement on reasonable  terms and conditions for, and to enter
into, an O&M Agreement  containing  terms and  conditions  consistent  with this
Agreement.  The rights and  obligations of the O&M Manager(s) and of the IPG and
its  Members  with  respect to the  Project  shall also be  governed  by the O&M
Agreement(s) for the Project.

         (b) Duties Of Parties Re: Electrical Connection & Coordination. Because
each Party's own facilities  will be  electrically  interconnected,  directly or
indirectly,  with the  Project,  each Party shall  operate and  maintain its own
facilities in a prudent and reasonable manner. The Parties agree that:

                  (1) they will  negotiate  in good faith to reach  agreement on
         such  protocols  as may be  necessary  to  ensure  that  the  efficient
         operation of the Project is consistent with and adequately supported by
         (A)  the   Parties'   interconnected   systems,   and  (B)   reasonable
         coordination of the Parties' respective system operations; and

                  (2) each Party shall in good faith operate its own system in a
         manner that will reasonably  accommodate  operation of the Project, but
         nothing in this  Agreement  shall obligate any Party to (A) operate its
         system in a manner inconsistent with its own needs and requirements, or
         (B) incur  solely for the benefit of the Project or its  operation,  or
         for the benefit of the other Parties,  any uncompensated cost, expense,
         or loss in the design, construction,  maintenance, or operation of that
         Party's own system.

         (c)  Intervening  Taps & Other  Connections.  No Party or other  entity
shall be allowed to establish an intervening tap or other electrical  connection
to the Project except in accordance with standards and rules  promulgated by the
IPG to protect the  Project's  operation,  financing,  capability,  and electric
integrity.

                    Section 10. PROJECT COSTS & COST RECOVERY

         (a) Funds & Accounts.  The following  finds and accounts shall be owned
by the  Participants  in  proportion  to  their  Participants'  Shares,  or,  if
established  through  Participants'  contributions,  then in  proportion to said
contributions.  Said  funds  and  accounts  shall  be held and  administered  in
accordance with the provisions of this Agreement, with rules adopted by the IPG,
or with applicable requirements set forth in any controlling Bond Resolution:

                  (1)  Grant  Account.  All  Grant  Funds,  including  available
         interest thereon, as described in Section 8(a) above.

                  (2) Funds and Accounts  established pursuant to any applicable
         Bond Resolution.

                                       18
<PAGE>

                  (3)  Operating  Fund,  including  a  Working  Capital  Account
         therein.

         (b)  Operating Budget.

                  (1) The IPG shall adopt in each  Operating Year (and revise as
         necessary or prudent during such Operating  Year),  in accordance  with
         its  rules,  an  Operating  Budget  of  Annual  Project  Costs for that
         Operating Year, which budget shall be in an amount estimated by the IPG
         to be sufficient to pay all Annual Project Costs. Such budget of Annual
         Project Costs shall be composed of separate budgets for each Segment of
         the Project,  and shall be broken down into categories  approved by the
         IPG.  No less than 120 days prior to the  beginning  of each  Operating
         Year the O&M Managers for each Segment  shall prepare and submit to the
         IPG an annual budget of costs,  which budget (or a revised  budget) the
         IPG shall  approve or disapprove no later than sixty (60) days prior to
         the beginning of said Operating Year, provided,  that the annual budget
         shall  include costs  attributable  to overhead or  administrative  and
         general  costs of the O&M Manager,  any  Participant,  or any agency or
         political  subdivision  of the State only to the extent that said costs
         are  approved  by the IPG  before  they are  incurred,  are  reasonably
         incurred for labor directly employed by that O&M Manager in performance
         of its duties under the O&M Agreement, and would not have been incurred
         but for the activities undertaken as O&M Manager.

                  (2) In  accordance  with  rules  established  by the IPG,  the
         Participants  shall  establish  for each  Operating  Year the estimated
         Annual Payment Obligation of each Participant, together with a schedule
         for  each  Participant  of  payments  that  such  Participant  shall be
         required to make during the Operating Year pursuant to Section 10(d) of
         this Agreement, which payment schedule shall be (i) designed to recover
         such estimated Annual Payment  Obligation from that Participant  during
         the Operating  Year,  and (ii) revised  during such  Operating  Year to
         reflect any revisions to the Operating Budget.  After the conclusion of
         each Operating  Year, the IPG shall determine the actual Annual Project
         Costs for that Project Year,  the actual Annual  Payment  Obligation of
         each  Participant  for  that  Operating  Year,  and the  amount  of any
         additional  payment  required  from (or the  amount of any refund to be
         returned to) each  Participant to ensure that the total of all payments
         received from each Participant for each Operating Year is equal to that
         Participant's  Annual Payment  Obligation for that Operating Year. Said
         payment  or  refund  shall  be  made  in  periodic  installments  as an
         adjustment  to  the  Participants'  billing  statement  over  the  next
         succeeding Operating Year, unless otherwise determined by the IPG.

         (c)  Expenditure of Project Funds.

                  (1) The  Participants  shall exercise overall control over the
         disbursement  of funds to pay Annual  Project  Costs  through  the IPG,
         which  shall  act in  accordance  with its  rules,  the  Operation  and
         Maintenance  Agreement,   and  any  applicable  Bond  Resolution.   The
         Participants  shall  exercise  their  powers as  members  of the IPG to
         consider and-either approve or disapprove (i) any activities related to
         managing the Project that are required by the IPG to be approved  prior
         to commencing said activities,  (ii) any payments or  reimbursements to
         the O&M Manager for costs incurred and  expenditures  made that are not

                                       19
<PAGE>

         in accordance with the approved operating budget, and (iii) any changes
         to the operating budget, as provided for in Section 6.

                  (2) Payments and reimbursements for Annual Project Costs shall
         be made only for costs incurred and  expenditures  made pursuant to the
         approved   annual   budget  or   otherwise  as  approved  by  the  IPG.
         Documentation  required to make draws against the Operating  Fund shall
         be provided in the manner  determined by the IPG in accordance with the
         O&M Agreement,  and shall be evidenced by a  certification  executed by
         the  Chairman or  Treasurer  of the IPG, or otherwise as the IPG may by
         rule determine.

                  (3) The Participants, through the IPG, shall also consider and
         act  upon  such  modifications  and  amendments  to the  budget  as are
         proposed by the O&M Manager or on the  initiative  of any  Participant.
         Any revisions to the operating  budget shall be made in accordance with
         Section 9(b)(2) of this Agreement.

         (d)  Recovery of Annual Project Costs.

                  (1) Each Participant agrees and is hereby obligated to pay all
         Annual  Payment  Obligations,  Energy Charges and  Assessments  for the
         appropriate Project Segment, as set forth in this Section 10(d). To the
         extent provided in the Bond Resolution,  if any, each Participant shall
         make said  payment  whether  or not the  Project  is  completed  or its
         operation is terminated,  interrupted or suspended in whole or in part.
         A  Participant's  Annual Payment  Obligation  for each Project  Segment
         equals the actual Annual Project Costs for that Segment, less the total
         amount of actual Energy  Charges  incurred by all  Participants  during
         each Project  Year for that  Segment,  and less any  revenues  received
         during said Project Year that are allocable to said Segment, multiplied
         by the  Participant's  Percentage  Share in that  Segment.  Such Annual
         Payment  Obligation  is exclusive of any  Assessments  for that Segment
         duly adopted by the Participants acting through the IPG.

                  (2) "Annual  Project  Costs" for each  Project  Segment  means
         costs and expenses of every type,  except as provided in subsection (3)
         of this Section  10(d),  resulting  from the  ownership,  operation and
         maintenance  of  that  Segment,  that  are  incurred  or  paid  by  the
         Participants,  acting  through  the IPG,  during each  Project  Year in
         connection  with  that  segment,  including  but  not  limited  to  the
         following:

                           (A) Operation and  maintenance  costs relating to the
                  Project ("O&M");

                           (B) Other costs,  reimbursements  or  compensation as
                  may be allowed under any O&M Agreement;

                           (C) Insurance, as determined by the IPG in accordance
                  with Section 6 of this Agreement;

                           (D)   Amounts   required  to  be  set  aside  by  the
                  Participants  for  the  payment  of debt  service,  or for any
                  reserve or contingency fluid, by any Bond Resolution;

                                       20
<PAGE>

                           (E) Professional services,  including accountants and
                  auditors,   insurance   consultants,   attorneys,   engineers,
                  arbitration or alternative dispute resolution professionals;

                           (F) Costs of the IPG, but only to the extent approved
                  by the IPG prior to being incurred; and

                           (G) Other necessary and appropriate  costs,  but only
                  to the extent approved by the IPG.

                  (3)  "Annual Project Costs" shall exclude:

                           (A)  Design and  Construction  costs  financed  under
                  Section 8 of this Agreement (but not the costs of debt service
                  and related expenses associated with such financing);

                           (B)  Renewals  and  replacements  funded by insurance
                  proceeds or by Assessment or any specially-dedicated  funds or
                  accounts.

                  (4) From and after the Date of  Commercial  Operation  of each
         Segment,  each  Participant  shall  make  payment,  in a  manner  to be
         provided by IPG resolution,  for that individual  Participant's  Energy
         Charge amounts.

                           (A)  "Energy Charge" means

                                    (i) for the  Anchorage-Kenai  segment of the
                           Project,   a  1.5  mill/kwh  charge  for  all  energy
                           generated by the Bradley Lake Hydroelectric  Project,
                           to be paid by each  Participant  for its Bradley Lake
                           energy  (including,  in the  case of  AEG&T,  for the
                           Bradley Lake energy of HEA and MEA); and

                                    (ii) for the Healy-Fairbanks  segment of the
                           Project,  a 1.5 mill/kwh charge for energy  generated
                           by the Bradley Lake Hydroelectric Project for receipt
                           by  utilities in  Fairbanks,  and an  additional  1.5
                           mill/kwh  charge to be paid by the receiving  utility
                           for  60  percent  of  the  non-Bradley   Lake  energy
                           transmitted  on the existing GVEA  transmission  line
                           and the  Healy-Fairbanks  segment of the Project,  in
                           each case net of losses.

                                    (B) The IPG may  provide by  resolution  for
                           the Participants to pay Energy Charges in advance, in
                           which  case the IPG  Treasurer  shall  estimate  each
                           Participant's   Energy   Charges  for  the   upcoming
                           Operating  Year. The Treasurer may rely on historical
                           data,  energy transfer  forecasts,  or other relevant
                           information in preparing such estimates.

                                    (C) The IPG shall  establish  procedures for
                           collecting  information  regarding each Participant's
                           Energy Charges due, and the manner of their payment.

                                       21
<PAGE>

                           (5) Prior to the beginning of each Project Year,  the
                  Treasurer   of  the  IPG  shall   prepare  and  mail  to  each
                  Participant a pro forma statement  showing a detailed estimate
                  of the  Annual  Project  Costs,  a  detailed  estimate  of the
                  Participant's  Annual  Payment  Obligation,  and the amount of
                  equal  payments to be made by the  Participant in the upcoming
                  Project Year. Said statement may be in lieu of the issuance of
                  periodic bills to each Participant.

                           (6) The IPG  shall  adopt all  other  procedures  for
                  billing and collection, including accounting for extraordinary
                  receipts.

         (e)  Assessments.

                  (1) The Participants  agree to fund by Assessment amounts that
         the  Participants  determine  are needed to pay for the  prevention  or
         correction of any major loss or damage,  and for major  replacements or
         renewals,  to keep each Project Segment in good operating  condition to
         the extent that such costs are not covered by  insurance or by borrowed
         money,  the debt service of which is included in Annual  Project Costs.
         "Assessment"  means the Participants'  duly-approved  obligation to pay
         the total amount,  according to each Participant's Share and any agreed
         schedule, of any such contingency.

                  (2) When a Construction  Manager,  O&M Manager, or Participant
         requests an Assessment for any contingency or renewal and  replacement,
         the IPG shall  consider  such  request  at its next  regular or special
         meeting. The IPG may, in its discretion, continue consideration of such
         request  to  future  meetings.  The IPG  shall  approve  an  Assessment
         pursuant to the procedures established in Section 6 of this Agreement.

                       Section 11. USE OF PROJECT CAPACITY

         (a) Use Of Protect  Capacity When No Transmission  Capacity  Constraint
Exists.  At all times after the Date of  Commercial  Operation  of each  Project
Segment  when (1)  that  Segment's  facilities  and any  parallel  utility-owned
transmission facilities are both in normal operation, and (2) the total combined
transfer  capabilities  of those  facilities are sufficient to allow all desired
transmission  by  all  Participants  to  take  place   simultaneously   between,
respectively,  Healy and Fairbanks, and Anchorage and the Kenai Peninsula (i.e.,
at all times when  parallel  facilities  are in  operation  and no  transmission
capacity  constraint  exists),  then no  distinction  will be made between power
transmitted  over the facilities of that Project  Segment and power  transmitted
over the parallel utility-owned transmission facilities,  and, instead, all such
power  shall be deemed  to move  over the  facilities  of the  Project  Segment.
Transmission  access  to/from the  facilities  of the Project  Segment  over the
facilities of any Participant  shall be in accordance with the applicable  terms
and conditions set forth in Section 5(d).

         (b)  Operation  For  Stability.  If, on  either  Segment,  the  Project
facilities and the parallel  utility-owned  transmission  facilities are both in
operation, then the combined total transfer capability or operating limit of the
parallel transmission  facilities will be the stability-limited  amount, not the
thermal limit of those facilities,  as reasonably  established through agreement

                                       22
<PAGE>

between the IPG and the owner of the parallel utility-owned  facilities.  If, on
either  Segment,  either the Project  facilities  or the parallel  utility-owned
transmission  facilities are not in operation,  then the operating  limit of the
remaining facilities shall be that which is reasonably established,  as the case
may be,  by the IPG for the  relevant  Project  Segment,  or by the owner of the
parallel utility-owned transmission facilities,  under the circumstances as they
exist at that time.

         (c)  Fixed Capacity Shares When Capacity Is Or May Be Constrained.

                  (1) If either Project Segment is in operation but the parallel
         utility-owned  transmission  facilities are not, then each  Participant
         shall be entitled to its Participant's Share of the transfer capability
         of the facilities of that Project Segment, as established by the IPG.

                  (2) If the parallel utility-owned  transmission facilities are
         in operation but the  facilities  of the Project  Segment are not, then
         the owner of the parallel  utility-owned  transmission  facilities will
         provide wheeling and related services to the other  Participants  under
         the applicable terms and conditions set forth in Section 5(d).

                  (3) If the Project  facilities and the parallel  utility-owned
         transmission  facilities are both in operation,  but for either Segment
         their total combined transfer  capabilities are not sufficient to allow
         all   desired   transmission   by  all   Participants   to  take  place
         simultaneously  (i.e.,  if Project and parallel  facilities are both in
         operation but a transmission  capacity constraint exists), then so long
         as such constraint exists the available  transmission capacity shall be
         allocated  between the applicable  Project  facilities and the parallel
         utility-owned facilities by one of the following methods:

                           (A)  The  IPG  and   the   owner   of  the   parallel
                  utility-owned   facilities  may  by  agreement  establish  any
                  reasonable allocation of such capacity, or

                           (B) The parallel  utility-owned  facilities  shall be
                  deemed to have the transfer capability that they would have if
                  operated alone, less some amount reasonably adopted by the IPG
                  to reflect the reliability/stability  benefits such facilities
                  receive from the existence of the parallel Project facilities.
                  The remainder of the total combined transfer  capability shall
                  be deemed to be that of the Project  facilities,  and shall be
                  available  to  each   Participant   in  accordance   with  its
                  Participant's Share.

         (d) No Duty To  Transmit  Power For  Ultimate  Consumers.  The  Project
represents a bulk power  transmission  facility whose benefits are made possible
by the agreement of the Participants to assume  responsibility for various costs
on behalf of their  respective  customers  collectively.  The  Project  is not a
common carrier.  No Party has assumed any duty to use its Participant's Share of
Project  capacity  to  transmit  power  for  individual  users/consumers  or for
non-utility generators.

                      Section 12. MISCELLANEOUS PROVISIONS

         (a) Waiver Not Continuing.  Any waiver at any time by any Party to this
Agreement  of its rights with respect to any default of another  Party,  or with

                                       23
<PAGE>

respect to any other matter arising in connection with this Agreement, shall not
be considered a waiver with respect to any prior or subsequent default, right or
matter.

         (b) Applicable Law. The laws of the State of Alaska (including  without
limitation the equal opportunity laws set forth in AS 18.80.220, as the same may
be amended from time to time) shall govern the interpretation and application of
this Agreement and the actions of the parties hereunder.

         (c) Section  Headings.  The Section  headings in this Agreement are for
convenience only, and do not purport to and shall not be deemed to define, limit
or extend the scope or intent of the section to which they pertain.

         (d) No Third  Party  Beneficiaries.  In  promising  performance  to one
another  under  this  Agreement,  the  Parties  intend to create  binding  legal
obligations  to and  rights  of  enforcement  in (a) one  another,  and (b) such
assignees  or  successors  in  interest  of the  Parties as may enjoy a right to
enforce this  Agreement by virtue of provisions of this Agreement that expressly
create such a right in such  assignees or  successors  in interest.  By entering
into  this  Agreement,  the  Parties  expressly  do not  intend  to  create  any
obligation or liability,  or promise any  performance  to, any third party,  nor
have  the  Parties  created  for any  third  party  any  right to  enforce  this
Agreement.

         (e) Execution In  Counterparts.  This  agreement may be executed in any
number  of  counterparts,  and each  such  counterpart  shall be deemed to be an
original  instrument,  but all such  counterparts  together shall constitute one
agreement.

         (f) Severability; Effect Of Partial Invalidity. If after this Agreement
has  become  effective  any  article,  paragraph,  clause or  provision  of this
Agreement shall be finally adjudicated by a court of competent jurisdiction or a
regulatory   agency  with  jurisdiction  over  the  parties  to  be  invalid  or
unenforceable,  or if any administrative  agency with authority over the parties
shall require  changes to this  Agreement,  then the parties shall in good faith
meet promptly to negotiate lawful  amendments or modifications to this Agreement
that will  effectuate  the  original  intent of this  Agreement  and  return the
parties as nearly as possible to the  position  that each would have  enjoyed in
the absence of such judicial, regulatory, or administrative action.

         (g)  Notices  &  Computation  Of  Time.  Any  notice  required  by this
Agreement  to be given to any Party  shall be  effective  when it is received by
such Party,  and in computing  any period of time from such notice,  such period
shall commence at 12:01 p.m. prevailing time at the place of receipt on the date
of  receipt  of such  notice.  Whenever  this  Agreement  calls for notice to or
notification  by any Party the same  (unless  otherwise  specifically  provided)
shall be in writing and directed to the General  Manager of the Party  notified.
If the date for  making  any  payment  or  performing  any act is a day on which
banking  institutions  are closed in the place where  payment is to be made or a
legal holiday,  payment may be made or the act performed on the next  succeeding
day which is neither a legal  holiday nor a day when  banking  institutions  are
closed in such place.

         (h)  Inspection Of  Facilities.  For purposes of this  Agreement,  each
Party may, but shall not be obligated to,  inspect any other Party's  facilities
relating to the Project at any time upon reasonable  notice, but such inspection

                                       24
<PAGE>

or failure to inspect  shall not render  the  inspecting  party,  its  officers,
agents or employees,  liable or responsible  for any injury,  loss,  damage,  or
accident resulting from defects in such electric installation,  or for violation
of this Agreement.

         (i) Remedies  Cumulative.  No remedy  conferred upon or reserved to the
Parties  hereto is  intended  to be  exclusive  of any other  remedy or remedies
available  hereunder or now or hereafter  existing at law, in equity, by statute
or otherwise, but each and every such remedy shall be cumulative and shall be in
addition to every other such remedy.

         (j)  Covenant of good faith and fair  dealing.  In order to permit this
Agreement,  throughout  its term, to be fully  effective in accordance  with the
original intent of the Parties, each Party agrees that it shall at all times act
in good  faith  and with fair  dealing  in  performing  its  obligations  and in
exercising its rights under this Agreement.

         (k) Exhibits  Incorporated By Reference.  The exhibits attached to this
Agreement  shall  be  incorporated  by  reference  into  this  Agreement  if the
provisions of this Agreement identifying such exhibits so specify, but otherwise
shall be attached for convenience only.

         (l)  Successors  &  Assigns.   Subject  to  Section  4(b)(6)  governing
assignment  for  security  purposes,  this  Agreement  and all of the  terms and
provisions  hereof  shall be  binding  upon  and  inure  to the  benefit  of the
respective successors and assignees of the Parties.

         (m) Performance  Pending Resolution Of Disputes.  Pending resolution of
any dispute,  each Party shall  continue to perform its  obligations  under this
Agreement,  including  but not limited to the  obligation  to make the  payments
required  by this  Agreement.  All Parties  shall be entitled to seek  immediate
judicial enforcement of this continued  performance  obligation  notwithstanding
the existence of a dispute.  Application for such  enforcement  shall be made to
the Superior Court for the State of Alaska, at Anchorage.

         (n)  Force  Maieure.   In  the  event  any  Party,   by  reason  of  an
Uncontrollable  Force,  is rendered  unable,  wholly or in part,  to perform its
obligations under the Agreement (other than its obligations to pay money),  then
upon said Party giving notice and particulars of such Uncontrollable  Force, its
obligation to perform shall be suspended or  correspondingly  reduced during the
continuance  of any inability so caused,  but in no greater amount than required
by the  Uncontrollable  Force and for no longer period,  and the effects of such
cause shall,  so far as possible,  be remedied  with all  reasonable  and prompt
dispatch.  The  affected  Party  shall  not be  responsible  for  its  delay  in
performance  under this  Agreement  during delays  caused by the  Uncontrollable
Force.

         (o) Other Agreements.  Except as otherwise  expressly  provided herein,
this Agreement does not modify,  alter, or amend any other contract or agreement
that may exist between or among any of the Parties.

         (p) Amendment Of Agreement. This Agreement may be amended, extended, or
terminated  at any  time by the  written  consent  of all  Parties,  but no such
amendment,  extension,  or termination shall be effective unless approved by the
federal and state agencies (if any) whose approval is required at the time.

                                       25
<PAGE>

         (q)  Records.  The Parties  shall make  available  to each  other,  for
inspection and copying during  business  hours,  all books,  records,  plans and
other  information  relating  to the  Project;  including  but  not  limited  to
information  relating  to  its  cost,   construction  and  operation,   and  any
calculation or  determination  made pursuant to this  agreement.  In addition to
meter  records,  the Parties  shall keep log sheets and other  records as may be
needed for the purposes of this  Agreement.  In keeping  books of account,  each
Party  will,  to the extent  that  different  rules are not  prescribed  by this
Agreement  or by  federal  and state  laws or  agencies,  follow  the  system of
accounts  prescribed  for public  utilities and licensees by the Federal  Energy
Regulatory  Commission,  except  that as long as a Party is a borrower  from REA
then it shall follow the system of accounts  prescribed  by REA for its electric
borrowers.

         (r) Obligations Several. Notwithstanding any Party's failure to perform
its obligations  under this Agreement,  or any IPG action or inaction under this
Agreement,  each Party's  obligation to perform as called for by this Agreement,
including the  obligation to make  payments  under the terms of this  Agreement,
shall be  absolute  and  unimpaired.  Except  where  specifically  stated in the
Agreement  to be  otherwise,  the duties,  obligations  and  liabilities  of the
parties  are  intended  to be  several  and not  joint  or  collective.  Nothing
contained in this  Agreement  shall ever by construed to create an  association,
trust,  partnership or joint venture or to impose a trust or  partnership  duty,
obligation  or  liability  on or with  regard to any party.  Each party shall be
individually and severally liable for its own obligations under this Agreement.

         (s)  Mutual Covenants & Warranties.

                  (1) Retail rate approval.  Each Party will  affirmatively  and
         promptly pursue all  administrative  and judicial remedies necessary to
         secure  Commission  approval of retail rates required to meet the terms
         of this Agreement where Commission approval is required.

                  (2)  Compliance  with law.  Each Party will take all necessary
         steps to comply with applicable federal and state laws and regulations,
         licenses and permits  relating to the use and  operation of the Party's
         System.

                  (3) Licenses and permits.  The Parties will take all necessary
         steps within their control to comply with applicable  federal and state
         laws and  regulations,  and to obtain and  thereafter  comply  with all
         applicable  licenses and permits relating to the construction,  use and
         operation of the Project.

                  (4) Sales and mergers. No Party shall abandon, sell, mortgage,
         lease or  otherwise  dispose of a  substantial  portion of the  Party's
         system (including by sale to or merger with any other utility),  unless
         such disposal is evaluated by a consultant approved by the IPG and that
         consultant  certifies that taking into account the other obligations of
         the Party that Party  will have (a)  substantially  the same or greater
         ability to produce sufficient  revenues to meet its payment obligations
         as would the Party  absent  the  transaction,  and (b) the  ability  to
         perform all obligations under this Agreement.

         (t)  Indemnification.  To the extent  permitted by applicable law, each
Party shall protect,  indemnify, defend and hold harmless every other Party, its

                                       26
<PAGE>

officers, directors, employees, agents, attorneys, contractors,  subcontractors,
and successors and. assigns from and against any and all  liabilities,  damages,
claims,  demands,  judgments,  losses, harm, costs, expenses,  suits or actions,
including  but not limited to appeals and  reasonable  attorneys'  fees,  to the
extent caused by the negligent or wrongful acts or omissions of the indemnifying
Party,  its officers,  directors,  employees,  agents,  attorneys,  contractors,
subcontractors, and successors and assigns arising out of or as a result of this
Agreement or the performance of any obligations  hereunder,  provided.  that the
indemnification  set forth in this  Section is subject to Section 7(i) and shall
not require the  Construction  Manager to indemnify  other Parties in any manner
inconsistent with Section 7(i).

         (u)  Guarantees  by Additional  Parties.  If AEG&T at any time fails to
meet any of its  obligations  under this  Agreement,  then to the extent of such
failure by AEG&T and for so long as such  failure  continues,  HEA and MEA shall
each be  obligated  to meet  directly  its  respective  Share of AEG&Ts  payment
obligation and every other  obligation in the same manner as if HEA and MEA were
individual Participants obligated to make payments and perform other obligations
in  accordance  with this  Agreement.  All rights and remedies  available to the
other Parties against AEG&T shall also be available to the other Parties against
HEA and/or MBA, as applicable.  For purposes of this Section 12(u),  HEA's Share
and MEA's Share of Project  capacity  shall be as set forth in Section  4(a), as
modified by Section 4(b).

         (v)  Relationship  To  The   Transmission   Services   Agreement.   The
Transmission  Services  Agreement  (attached as Exhibit E to this  Agreement for
reference only) shall not be terminated by this Agreement, but from and after:

                  (1)  January 1, 1997,  any Party may elect to pay  Chugach for
         wheeling  services the applicable  Chugach wheeling rate as approved by
         the  Commission  pursuant  to  Section  5(d) and  Exhibit  D(1) of this
         Agreement,  in lieu of paying  the  applicable  Chugach  wheeling  rate
         computed in accordance with the Transmission Services Agreement; and

                  (2) the Effective  Date,  the  provisions of the  Transmission
         Services  Agreement  requiring  Chugach to provide  free  Bradley  Lake
         energy  storage  services in Chugach's  Cooper Lake  reservoir  will no
         longer apply.

         (w)  Consideration  Of Other Benefits  Facilitated  By The Project.  In
order  to  ensure  that  all  potentially  beneficial  uses of the  Project  are
appropriately  investigated,   the  Parties  agree  that,  promptly  after  this
Agreement  becomes  effective,  they will begin to meet periodically in order to
discuss and explore in good faith potential mutually agreeable  opportunities to
reduce  the  costs of  providing  electric  power  service  to their  respective
consumers  through  power  pooling,   transmission  pooling,   reserve  sharing,
exchanges,   economic  dispatch,   hydrothermal  coordination,   maintenance  of
competitive economy energy markets, and other arrangements.

                            Section 13. DEFINITIONS.

         The following  terms shall,  for purposes of this  Agreement,  have the
meaning specified.

         (a)  "Additional  Costs"  shall  have the same  meaning  given to it in
Section 8(b) of this Agreement.

                                       27
<PAGE>

         (b)  "Additional  Parties"  shall have the same meaning  given to it in
Section 1 of this Agreement.

         (c) "Agreement"  means this 1993 Alaska Intertie  Project  Participants
Agreement, also referred to herein as Participants Agreement.

         (d) "Annual Debt Service"  means the amount payable by a Participant in
or for a Project Year pursuant to the Bond Resolution.

         (e) "Annual Payment Obligation" shall have the same meaning given to it
in Section 10(d)(1) of this Agreement.

         (f) "Annual  Project  Cost" shall have the same meaning  given to it in
Section 10(d)(2) of this Agreement.

         (g)  "Assessment"  shall have the same  meaning  given to it in Section
10(e)(1) of this Agreement.

         (h) "Bond  Resolution"  means a resolution,  ordinance,  indenture,  or
similar  instrument,  approved by all of the  Parties,  pursuant to which bonds,
notes or other  evidences  of  indebtedness  (including  refunding  bonds),  are
issued,  the  proceeds of which are used to pay or reimburse  Additional  Costs,
pursuant to a collective financing arrangement entered into by all Parties under
Section 8(b).

         (i)  "Construction  Agreement" means an agreement entered into pursuant
to Section 7(k) between the  Construction  Manager of a Project  Segment and the
Participants  acting through the IPG setting forth the rights and obligations of
the  Construction  Manager  and of the IPG  and its  Members  and  such  details
regarding  the  design  and   construction   of  that  Project  Segment  as  the
Construction Manager and the IPG determine to be necessary.

         (j)  "Construction  Budget"  means the  annual  budget  for  Design and
Construction  Costs  for  a  Project  Segment  as  adopted  or in  effect  for a
particular  Construction  Year, and amended or supplemented from time to time as
provided for in this Agreement.

         (k) "Construction  Manager" means the Participant that, for the benefit
of all of the  Participants,  manages or carries out the design and construction
of either Segment of the Project. As provided in Section 7(a) of this Agreement,
Golden Valley Electric  Association,  Inc. shall be the Construction  Manager of
the Healy-Fairbanks Segment and Chugach Electric Association,  Inc. shall be the
Construction Manager of the Anchorage-Kenai  Peninsula Segment (unless and until
either is  replaced  by another  Participant  by action of the IPG  pursuant  to
Section  7(j)),  and may be  referred  to  collectively  herein as  Construction
Managers.

         (i)  "Construction  Schedule" means a projection of significant  design
and  construction  milestones  marking  progress from the Effective Date of this

                                       28
<PAGE>

Agreement to the projected Date of Commercial Operation of a Project Segment, to
be prepared by the Construction Manager for that Segment.

         (m)  "Construction  Year" means a Project  Year during  which a Project
Segment is being designed or is under construction.  The first Construction Year
starts on the  Effective  Date of this  Agreement and  corresponds  to the first
Project Year.  The last  Construction  Year for a Project  Segment shall be that
portion of the  twelve-month  period  between the last full (i.e.  twelve month)
Project Year and the Date of Commercial  Operation.  The  Construction  Year for
both Project Segments shall run concurrently,  except that the conclusion of the
last Construction Year for one of the Project Segments (when it reaches its Date
of Commercial  Operation) shall not affect the calculation of Construction Years
for the other Project  Segment,  which shall continue until that segment reaches
its Date of Commercial Operation.

         (n)  "Date  of  Commercial   Operation"  means  the  date  on  which  a
Construction  Manager reasonably declares that a Segment of the Project is fully
available  to be  operated on a  commercial  basis and in  accordance  with this
Agreement.

         (o)  "Design and  Construction  Costs"  means all capital  costs of the
Project, including but not limited to planning,  permitting, design, acquisition
of real property  interests,  construction,  equipment,  testing,  and insurance
costs,  but not  administrative  and  general  costs of any  Participant,  State
agency,  political  subdivision,  or  Construction  Manager,  except pursuant to
Section 7(c), unless such costs are expressly approved by the IPG prior to being
incurred.

         (p) "Effective Date" shall have the same meaning given to it in Section
2(a) of this Agreement.

         (q) "Energy  Charge" shall have the same meaning given to it in Section
10(d)(4).

         (r)  "Expiration  Date"  shall  have  the same  meaning  given to it in
Section 2(b) of this Agreement.

         (s) "Grant Account" means the  Healy-Fairbanks  Intertie Account or the
Anchorage-Kenai Intertie Account, or both, as established by Section 2.02 of the
Grant Administration Agreement.

         (t) "Grant Administration  Agreement" means the agreement dated _______
among the Alaska Industrial  Development and Export Authority and the Parties to
this   Agreement   setting  forth  the  terms  and   conditions   governing  the
administration of Grant Accounts.

         (u) "Grant Funds" means the  $43,200,000  appropriated  by Section 1 of
ch. 19, SLA 1993, for payment as a grant under AS 37.05.316 for  construction of
the Healy-Fairbanks Segment and the $46,800,000 appropriated by Section 2 of ch.
19, SLA 1993, for payment as a grant under AS 37.05.316 for  construction of the
Anchorage-Kenai Peninsula Segment.

         (v) "Intertie  Grant  Agreement"  means the agreement dated October 26,
1993 among the Parties to this Agreement,  the Alaska Industrial Development and

                                       29
<PAGE>

Export  Authority and the State of Alaska,  Department of  Administration  (DOA)
satisfying  the statutory  conditions  precedent to DOA's  transfer of the Grant
Funds and providing for DOA's transfer of such Grant Funds.

         (w) "IPG" is an  abbreviation  for  "lntertie  Participants  Group" and
means the Participants and Additional  Parties acting  collectively as set forth
hi this  Agreement.  As provided  elsewhere in this  agreement,  AEG&T,  while a
Participant,  is not a  Member  of the  IPG.  The  Additional  Parties  to  this
Agreement,  HEA and MEA,  collectively  constitute  AEG&T  and are  individually
Members of the IPG.

         (x)  "Member"  means a member of the IPG.  The  members  of the IPG are
identified in Section 6(b).

         (y)  "Operating  Budget"  means the budget for Annual  Project Costs as
adopted  or  in  effect  for  a  particular   Operating  Year,  and  amended  or
supplemented from time to time as provided for in this Agreement.

         (z) "Operating Fund" means a fund established pursuant to Section 10(a)
of this  Agreement,  consisting of Annual Payment  Obligations,  Energy Charges,
Assessments,  insurance  proceeds  and other  revenues  available  to pay Annual
Project Costs.

         (aa) "Operating Year" means that Project Year, and is a period used for
computation of Annual  Project Costs for a Project  Segment or both Segments and
preparation of annual budgets for recovery of the same pursuant to Section 10 of
this Agreement.  The initial  Operating Year for each Segment shall start on the
Date of  Commercial  Operation of that Segment and continue  through and include
the last day of that Project Year.  Subsequently,  the  Operating  Year for that
Segment shall be the Project Year.

         (bb) "Operation & Maintenance Agreement" may also be referred to herein
as O&M Agreement and means an agreement pursuant to Section 9(a) between the O&M
Manager of the Project or a Project Segment and the Participants  acting through
the IPG detailing the rights and  obligations  of the O&M Manager and of the IPG
and its members with regard to the operation and  maintenance  of the Project or
relevant Project Segment.

         (cc)  "Operation & Maintenance  Manager" may also be referred to herein
as O&M Manager and means the Participant selected by the IPG pursuant to Section
9(a) of this  Agreement to be responsible  for the operation and  maintenance of
the Project or a Project  Segment,  for the benefit of all of the  Participants.
The O&M Manager may exercise this  responsibility  by  conducting  operation and
maintenance  activities  with its own personnel,  or by supervising a contractor
selected  by the O&M  Manager  expressly  for the  purpose  of  conducting  such
activities.

         (dd)  "Optional  Project  Work" means  project  repairs,  renewals  and
replacements,  improvements,  betterments,  additions, or expansions that do not
constitute Required Project Work.

         (ee) "Participants"  shall have the same meaning given to it in Section
1 of this Agreement.

                                       30
<PAGE>

         (ff) "Participant's  Share" means the percentage interest a Participant
holds in the Project or a Project Segment under the terms of this  Agreement.  A
Participant's  Share  is  used  to  calculate  its  Annual  Payment  Obligation,
including  its share of Annual  Project  Costs,  and to  determine  its share of
Assessments,   Additional  Costs,  or  Annual  Debt  Service,   and  includes  a
Participant's Energy Charges.

         (gg) "Project" means the Intertie Project to be designed,  constructed,
operated and maintained  pursuant to this Agreement,  which shall consist of two
Segments; the Healy-Fairbanks  Segment defined by Section 3(a) of this Agreement
and the  Anchorage-Kenai  Peninsula  Segment  defined  by  Section  3(b) of this
Agreement,  which  may also be  referred  to  individually  herein  as a Project
Segment.

         (hh)  "Project  Year" means that calendar year unless and until the IPG
converts the  calculation  of the Project Year to a fiscal year  consisting of a
twelve-month  period starting on such date as the IPG shall select.  The initial
Project Year for purposes of this Agreement shall start on the Effective Date of
this Agreement and continue  through and include  December 31, 1994. When and if
calculation  of the Project Year is  converted  to a fiscal year,  the IPG shall
provide for a transition  from  calendar  year to fiscal year by  shortening  or
lengthening  the first  Project  Year  calculated  on a fiscal  basis.  The last
Project  Year  for  purposes  of this  Agreement  shall be that  portion  of the
twelve-month period between the end of the last full (i.e. twelve month) Project
Year and the  expiration  of this  Agreement.  For each Project  Segment,  those
Project Years, or portions  thereof:  prior to the Date of Commercial  Operation
are designated  Construction  Years (see the definition of  Construction  Years,
above) and those  Project  Years,  or portions  thereof:  following  the Date of
Commercial  Operation  axe  designated  Operating  Years (see the  definition of
Operating Years, above).

         (ii) "Prudent  Utility  Practice" means at a particular time any of the
practices,  methods and acts engaged in or approved by a significant  portion of
the  electric  utility  industry  at such time,  or which,  in the  exercise  of
reasonable  judgment  in light of facts  known at such  time,  could  have  been
expected  to  accomplish  the  desired  results  at the lowest  reasonable  cost
consistent  with good business  practices,  reliability,  safety and  reasonable
expedition. Prudent Utility Practice is not required to be the optimum practice,
method or act to the  exclusion  of all  others,  but rather to be a spectrum of
possible practices, methods or acts which could have been expected to accomplish
the desired result at the lowest  reasonable cost  consistent with  reliability,
safety  and  expedition.  Prudent  Utility  Practice  includes  due  regard  for
manufacturer's  warranties  and the  requirements  of  governmental  agencies of
competent  jurisdiction  and  shall  apply not only to  functional  parts of the
Project,  but also to  appropriate  structures,  landscaping,  painting,  signs,
lighting and other facilities.

         (jj)  "Required  Project Work" means  repairs,  maintenance,  renewals,
replacements,  improvements,  or betterments required by federal or state law, a
licensing or  regulatory  agency with  jurisdiction  over the  Project,  or this
Agreement,  or  otherwise  necessary  to keep the Project in good and  efficient
operating condition, consistent with (1) sound economics for the Project and (2)
Prudent Utility Practice.

                                       31
<PAGE>

         (kk)  "Segment"  means  either of the two electric  power  transmission
lines  and  associated  facilities  constituting  the  Project  to be  designed,
constructed, operated and maintained under the terms of this Agreement

         (ll)  "Uncontrollable  Force"  means any cause  beyond the control of a
Party hereto and which by the exercise of due diligence  that Party is unable to
prevent or overcome,  including but not limited to an act of God,  fire,  flood,
volcano, earthquake,  explosion, sabotage, and act of the public enemy, civil or
military   authority,   including  court  orders,   injunctions  and  orders  of
governmental agencies of competent  jurisdiction,,  insurrection or riot, an act
of the  elements,  failure  of  equipment,  or the  inability  to obtain or ship
equipment  or materials  because of the effect of similar  causes on carriers or
shippers.  Strikes,  lockouts,  and other labor disturbances shall be considered
Uncontrollable  Forces, and nothing in this Agreement shall require any Party to
settle a labor  dispute  against its best  judgment;  provided,  that during any
labor  dispute  all  Parties  shall  make  all  reasonable   efforts  under  the
circumstances, including, to the extent permitted by law, the use of replacement
personnel  and  or  management   personnel  and/or  other  personnel  under  the
provisions  of a mutual aid  agreement,  to ensure,  if possible  the  continued
ability of the Parties to carry out their obligations under this Agreement.

         (mm) "Working  Capital  Account"  means an account within the Operating
Fund which is to be managed so that finds from that  account  are  available  to
meet reasonable  current expenses and  contingencies as they arise in the course
of the design, construction, operation and maintenance of the Project.

                       Section 14. DEFAULTS AND REMEDIES.

         (a)  Each of the following shall constitute an Event of Default:

                  (1) A material  breach in  performance  of this Agreement by a
         Party,  which breach has continued for a period in excess of sixty (60)
         days after the defaulting Participant has been notified in writing that
         such  breach  will,   unless   corrected  within  such  60-day  period,
         constitute an Event of Default;  such material  breaches shall include,
         but not be limited  to, the  failure to make any  payments  required by
         this Agreement, including but not limited to Annual Payment Obligation,
         Energy Charges, Assessments, and Additional Costs;

                  (2) A continual  or repeated  failure or refusal by a Party to
         perform, substantially in accordance with this Agreement, all or any of
         its obligations under this Agreement,  thereby materially impairing the
         value of this Agreement to the other Parties,  which failure or refusal
         recurs after the breaching Party has been notified in writing that such
         breach will, if repeated, constitute an Event of Default;

                  (3)  A  filing  by  a  Party  to  seek  protection  under  any
         applicable  bankruptcy,  reorganization,   insolvency,  dissolution  or
         liquidation law, which filing has not been dismissed within 90 days;

                  (4) Default under the Bond  Resolution  or separate  financing
         instrument  used  by a  Participant  to  finance  all  or  part  of its
         obligation under this Agreement.

                                       32
<PAGE>

         (b) Upon the  occurrence of any Event of Default by a Party,  any other
Party may exercise any remedy or  combination of available  remedies,  including
but not limited to the following:

                  (1)  Termination  of  this  Agreement  with  respect  to  that
         defaulting  Party,  provided however that said termination shall not be
         effective to increase the Annual Payment  Obligations or Assessments of
         non-defaulting  Parties unless termination is first approved in writing
         by all Members whose Annual Payment Obligations or Assessments would be
         increased as a consequence of said termination;

                  (2) Suspension or expulsion of the  defaulting  Party from the
         IPG and loss of the defaulting Party's right to use the Project;

                  (3)  An  action  to  recover  compensatory  or  other  damages
         provided  by  law,  or to  seek  specific  performance  of any  and all
         obligations required under this Agreement.

         (c)  The  remedies  provided  herein  for  Events  of  Default  are not
exclusive  and the Parties  retain all rights of action that exist at law and in
equity,  or pursuant to this  Agreement,  to remedy any breach,  irrespective of
whether said breach constitutes an Event of Default or results in termination of
the Agreement.

                                       33
<PAGE>

         IN WITNESS  WHEREOF,  the  Parties  have caused  this  Agreement  to be
executed the day and year first above written.

ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC.

By              /s/
        ------------------------------

As      Executive Manager
        ------------------------------

The MUNICIPALITY OF ANCHORAGE d/b/a/ MUNICIPAL LIGHT & POWER

By              /s/
        ------------------------------

As      Mayor
        ------------------------------

CHUGACH ELECTRIC ASSOCIATION, INC.

By              /s/
        ------------------------------

As      General Manager
        ------------------------------

The MUNICIPALITY OF FAIRBANKS d/b/a SYSTEM FAIRBANKS MUNICIPAL UTILITIES

By              /s/
        ------------------------------

As      Deputy City Manager-Utilities
        ------------------------------

GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.

By              /s/
        ------------------------------

As      General Manager
        ------------------------------

                                       34
<PAGE>

The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM

By              /s/
        ------------------------------

As      Manager, Engineering & Utilities
        ------------------------------

HOMER ELECTRIC ASSOCIATION, INC.

By             /s/
        ------------------------------

As      General Manager
        ------------------------------

MATANUSKA ELECTRIC ASSOCIATION, INC.

By              /s/
        -----------------------------

As      General Manager
        ------------------------------

                                       35
<PAGE>

                                                    EXHIBIT D(1)

                INITIAL CHUGACH WHEELING RATES & RELATED MATTERS

         The following  rates,  terms,  and  conditions  shall apply pursuant to
Section 5(d)(2) for use of Chugach's facilities under Section 5(d)(1):

         1. Effective  date and term. The wheeling rates and related,  terms and
conditions  described herein shall become effective on January 1, 1997 and shall
remain in effect for fifteen (15) years, i.e., through December 31, 2011.

         2.  Applicability.

         (a) The rates and related terms and  conditions  described  herein will
apply to electric  power  transmitted to or from the  Anchorage-Kenai  Peninsula
Segment (i) by  Participants  in, or  Additional  Parties who are  participating
through  a  Participant  in,  that  Segment,  and (ii) from  generators  already
existing as of December 1, 1993.

         (b) If for any  reason  the  Segment  is not  completed  but is instead
terminated/ abandoned by the Participants,  then the rates and related terms and
conditions   described  herein  will  apply  under  the  Transmission   Services
Agreement,  during the term  described in Paragraph 1 of this Exhibit  D(1),  to
electric power that is:

                  (i)  the  power  of a  Wheeling  Utility  (as  defined  in the
         Transmission  Services  Agreement)  that is also a  Participant  in the
         Healy-Fairbanks Segment of the Project at the time;

                  (ii)  generated either:

                           (A)  by the Bradley Lake Hydroelectric Project, or,

                           (B) by the Soldotna No. 1 generating  unit, if and to
                  the extent  that power  generated  by such unit is eligible to
                  receive  wheeling  services under the terms and conditions set
                  forth in Section 8(f) of the Transmission  Services Agreement;
                  and

                  (iii)  transmitted  from  the  Soldotna   Substation  to  that
         Wheeling  Utility's  Delivery  Point,  as the  latter is defined in the
         Transmission Services Agreement.

         (c) For wheeling  services not within the scope of  Paragraphs  2(a) or
2(b) of this Exhibit D(1) and not within the scope of the Transmission  Services
Agreement, Chugach will prepare (on request and/or periodically) and will submit
to the  Commission  for  review  and  approval,  nondiscriminatory  and just and
reasonable  (i) wheeling  rates,  and (ii) terms and  conditions  governing such
wheeling services. Such rates, terms, and conditions may be revised from time to
time.

                                       36
<PAGE>

         3. Basic wheeling  rate. In each year,  the basic  wheeling rate,  "R,"
will be computed in  accordance  with the formula set forth in Appendix A of the
Transmission  Services  Agreement,  with the exception  that the value of "K" in
such formula shall be established at "0.50" in each year.

         4.  Cost review and control.

         (a)  Standard.   After  the  effective  date,  the  costs  of  any  new
transmission  investment  by Chugach shall be added to the costs used to compute
the wheeling  rate only if and to the extent that such  transmission  investment
supports  Chugach's bulk power network  transmission  system,  and not Chugach's
retail distribution  system. If any investment supports both such systems,  then
the costs of that investment shall be allocated equitably and reasonably between
such systems for purposes of applying the foregoing standard.

         (b)  Procedure.   Chugach  will  provide   reasonable   notice  to  the
Participants  of the  costs  of any new  transmission  investment  that  Chugach
proposes  to add to the costs  used to  compute  the  wheeling  rate.  With such
notice,  Chugach will also explain in writing why the inclusion of such costs in
the wheeling rate meets the standard set forth above.  On request,  Chugach will
meet with the Participants to discuss these matters. If, after such meeting, any
Participant  believes  that  including  any such  costs  (hereinafter  "disputed
costs") in the wheeling  rate would  violate the standard set forth above,  that
Participant  shall so notify Chugach and provide a written  explanation for that
Participant's  position.  In response to any such  notice and  explanation,  and
before  Chugach makes any final  decision to include any such disputed  costs in
the wheeling  rate,  Chugach may, but shall not be obligated to, offer to engage
in further  discussions  with that  Participant,  and/or afford that Participant
additional  opportunities  to present its  position to the Chugach  staff and/or
Board, or to a joint Board or other  inter-utility  panel that Chugach may elect
to convene.

         (c) Review. Chugach's final decision to include or not include any such
costs in the wheeling  rate, if disputed,  shall be submitted to the  Commission
for  resolution.  Each  Participant  shall be  entitled to  challenge  Chugach's
decision  before  the  Commission,  but  only  if and to the  extent  that  such
Participant took part in the pre-filing discussions and presentations  described
in Paragraph 4(b) above.

         5.  Rate  applies  during   Intertie   outages.   "R"  would  apply  to
transmission  even at times when the Segment,  having been completed,  is out of
service and Chugach's parallel  transmission  facilities alone are available for
wheeling services.

         6. Other services.  Under the Transmission Services Agreement,  Chugach
will continue to provide (a) assured wheeling services, for periods of up to two
weeks at a time,  at a rate  computed in the same  manner as the basic  wheeling
rate but  using a value of "1.15"  for the  constant  "K," and (b)  displacement
energy purchase services for the Bradley Lake energy of Wheeling  Utilities that
cannot be  transmitted  from the Kenai  Peninsula.  From and after the Effective
Date of this  Agreement,  Chugach  will  no  longer  continue  to  provide  free
reservoir storage for such energy in Cooper Lake.

                                       37
<PAGE>

         7.  Other  terms and  conditions.  Such  matters as the  scheduling  of
transmission or displacement purchase services,  accounting for line losses, the
effect of offsetting  flows, and other matters -dealt with in the  Transmission-
Services Agreement (including Chugach's duties,  limitations on such duties, and
priority  use  of  its  own  facilities),   as  reasonably   applicable  to  the
circumstances-of   this   Agreement,   will  continue  to  be  governed  by  the
Transmission-Service Agreement.

         8. Reciprocal  services.  Each  Participant and Additional Party agrees
that, at Chugach's request,  it will make wheeling services available to Chugach
over its system,  subject to like  conditions and limitations as those set forth
in this Exhibit  D(1),  at a rate no higher than the rate computed in accordance
with the following formula:

                Rate              =                C/E x 0.5

Where "C" represents the applicable utility's annual costs of bulk power network
transmission  investments,  and "E"  represents the firm energy and Bradley Lake
energy transmitted annually over that utility's system.

                                       38
<PAGE>

                                                       EXHIBIT D(2)

                     GVEA WHEELING RATES AND RELATED MATTERS

         The  following  rates,  terms and  conditions  shall apply  pursuant to
Section 5(d)(3):

         (a) Wheeling  Rate.  The  wheeling  rate for any use of the GVEA system
shall  initially be 1.5  mills/kwh  for the period  commencing  with the Date of
Commercial Operation of the Healy-Fairbanks  Segment, and shall remain in effect
at least  until  the  third  anniversary  thereof.  Thereafter,  the rate may be
revised  either by mutual  agreement of GVEA and FMUS or by the  Commission in a
proceeding initiated by either GVEA or FMUS.

         (b) Use of Lines and Calculation of Charges.  For purposes of computing
wheeling charges, GVEA and FMUS are deemed to transmit 60% of energy transmitted
from Healy to Fairbanks on the Healy-Fairbanks  Segment, and 40% on the existing
GVEA transmission line. At. any time the GVEA line is inoperable, FMUS shall pay
to the IPG 1.5  mills/kwh  for  100% of power  transmitted.  At any time the new
Healy-Fairbanks  Segment is inoperable,  FMUS shall pay to GVEA the then-current
rate for 100% of power  transmitted.  During  any  period  in which  FMUS is not
directly  connected  to the Wilson  substation,  FMUS shall be  responsible  for
payment of wheeling  charges to GVEA for 100% of energy  transmitted  and to the
IPG for 60% of energy transmitted.

         (c)  Losses.

         (1)  Existing  GVEA  Line.  FMUS  losses  shall be  incremental  on the
existing GVEA line.

         (2)   Healy-Fairbanks   Segment.   FMUS   and   GVEA   Losses   on  the
Healy-Fairbanks Segment shall be computed on an average basis.

                                       39

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