Document:

<PAGE>   1
                                    ANNEXURE
                                    --------

CONDITION 1A: POWER TO BRING CONDITIONS INTO EFFECT
---------------------------------------------------

1.       The Conditions to which this paragraph applies shall not come into
         effect until the Secretary of State has made a direction specifying a
         date on which they come into effect and served a copy of the direction
         on the Licensee (but the date so specified may be the same date as that
         on which this Condition comes into effect or if later that on which a
         copy of the direction is so served).

2.       The Secretary of State may make more than one direction under paragraph
         1, and may bring different Conditions or parts of Conditions into force
         at different times.

3.       The Conditions to which paragraph 1 applies are:

         Condition 4C    (Prohibition of cross-subsidies and of discrimination
                         in selling electricity)

         Condition 15A   (Balancing and Settlement Code and NETA Implementation)

         Condition 15B   (Change Co-ordination for NETA)

         Condition 15C   (Pooling and Settlement Agreement Run-off)

4.       The Conditions to which this paragraph applies (or parts of them) shall
         cease to have effect on such date as is specified in a direction made
         by the Secretary of State pursuant to this paragraph, a copy of which
         has previously been served on the Licensee (but the date so specified
         may be

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<PAGE>   2
         the same date as that on which this Condition comes into effect or if
         later that on which a copy of the direction is so served).

5.       The Secretary of State may make more than one direction under paragraph
         4, and may direct that different Conditions or parts of Conditions
         cease to have effect on different dates.

6.       The Conditions to which paragraph 4 applies are:

         Condition 1    (Interpretation)

         Condition 4    (Prohibition of cross-subsidies and of discrimination
                        in electricity sale contracts)

         Condition 10   (Generation Security Standard)

         Condition 15   (Pooling and Settlement Agreement)

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<PAGE>   3
CONDITION 4C: PROHIBITION OF CROSS-SUBSIDIES AND OF DISCRIMINATION IN SELLING
-----------------------------------------------------------------------------
              ELECTRICITY
              -----------

1.       The Licensee shall procure that no Separate Business gives any
         cross-subsidy to, or receives any cross-subsidy from, any other
         business of the Licensee or an affiliate or related undertaking of the
         Licensee (whether or not a Separate Business).

2.       The Licensee shall not, and shall procure that any affiliate or related
         undertaking of the Licensee shall not, sell or offer to sell
         electricity to any one purchaser or person seeking to become a
         purchaser on terms as to price which are materially more or less
         favourable than those on which it sells or offers to sell electricity
         to comparable purchasers. For these purposes regard shall be had to the
         circumstances of the sale to such purchasers including (without
         limitation) volumes, load factors, conditions of interruptibility and
         the dates and durations of the relevant agreements.

3.       For the purposes of paragraph 2, references to selling or sale of
         electricity:

         (a)      do not include sale by way of supply to premises;

         (b)      include entering into or disposing of the benefit of a
                  contract, which has (or taken together with any other
                  arrangement has) the commercial effect of selling electricity,
                  by conferring rights or obligations (including rights or
                  obligations by way of option) in relation to or by reference
                  to the sale, purchase or delivery of electricity at any time
                  or the price at which electricity is sold or purchased at any
                  time,

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<PAGE>   4
         and "purchaser", "purchasing" and "purchase" shall be construed
         accordingly.

4.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.

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<PAGE>   5
CONDITION 15A: BALANCING AND SETTLEMENT CODE AND NETA IMPLEMENTATION
--------------------------------------------------------------------

1.       The Licensee shall be a party to the BSC Framework Agreement and shall
         comply with the BSC.

2.       The Licensee shall comply with the programme implementation scheme
         established in accordance with paragraph 3 as modified from time to
         time in accordance with paragraph 5.

3.       The programme implementation scheme shall be a scheme designated by the
         Secretary of State setting out the steps, including without limitation
         steps as to the matters referred to in paragraph 4, to be taken (or
         procured) by the Licensee (and/or by Authorised Electricity Operators)
         which are, in the Secretary of State's opinion, appropriate in order to
         give full and timely effect to:

         (a)      the modifications made to this licence and to the licences of
                  Authorised Electricity Operators by the Secretary of State
                  pursuant to the power vested in him under section 15A of the
                  Act;

         (b)      any conditions imposed by any exemption from the requirement
                  to hold any such licence; and

         (c)      the matters envisaged by such modifications and conditions.

4.       The programme implementation scheme may include provisions, inter alia,

         (a)      to secure or facilitate the amendment of any of the Core
                  Industry Documents;

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<PAGE>   6
         (b)      to secure that any systems, persons or other resources
                  employed in the implementation of the Pooling and Settlement
                  Agreement may be employed in the implementation of the BSC;

         (c)      for the giving of the indemnities against liabilities to which
                  parties to the Pooling and Settlement Agreement may be
                  exposed;

         (d)      for securing the co-ordinated and effective commencement of
                  implementation of and operations under the BSC, including the
                  testing, trialling and start-up of the systems, processes and
                  procedures employed in such implementation and employed by
                  Authorised Electricity Operators and others in connection with
                  such operations;

         (e)      for co-ordinating the administration and implementation of the
                  BSC and the Pooling and Settlement Agreement;

         (f)      for the Licensee to refer to the Director for determination,
                  whether of its own motion or as provided in the programme
                  implementation scheme, disputes, as to matters covered by the
                  scheme, between persons who are required (by conditions of
                  their licences or exemptions) or who have agreed to comply
                  with the scheme or any part of it; and

         (g)      for the Director, in the circumstances set out in the scheme,
                  to require that consideration be given to the making of a
                  proposal to modify the BSC and, if so, to require the making
                  of such proposal in the manner set out in the scheme, such
                  power to be exercisable at any time within the period of 12
                  months after the Effective Time (as defined in Condition 15C).

5.       (a)      The Secretary of State may at any time direct, in accordance
                  with the provisions of the programme implementation scheme,
                  that the programme implementation scheme be modified in the
                  manner set out in the direction, in order to give (or continue
                  to give) full and

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<PAGE>   7
                  timely effect to the matters described in paragraph 3.

         (b)      The Secretary of State shall serve a copy of any such
                  direction on the Licensee, and thereupon the Licensee shall
                  comply with the scheme as modified by the direction.

6.       If there is any conflict between the requirements contained in the
         programme implementation scheme pursuant to paragraph 4(a) and imposed
         on the Licensee by paragraphs 2 and 5 of this Condition, and those
         imposed on the Licensee by any other Condition, the provisions of this
         Condition shall prevail.

7.       Without prejudice to paragraph 2, the Licensee shall use all reasonable
         endeavours to do such things as may be requisite and necessary in order
         to give full and timely effect to the modifications made to this
         Licence as determined by the Secretary of State pursuant to the power
         vested in him under section 15A of the Act (and to give full and timely
         effect to the matters envisaged by such modifications).

8.       In this Condition:

         "BSC"                            means the balancing and settlement
                                          code required to be in place, pursuant
                                          to the Transmission Licence granted to
                                          the Transmission Company, as from time
                                          to time modified.

         "BSC Framework Agreement"        means the agreement of that title, in
                                          the form approved by the Secretary of
                                          State, by which the BSC is made
                                          contractually binding between the
                                          parties to that agreement, as from
                                          time to time amended, with the consent
                                          of

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<PAGE>   8
                                          the Secretary of State.

         "Core Industry Documents"        mean those documents which

                                          a. in the Secretary of State's opinion
                                             are central industry documents
                                             associated with the activities of
                                             the Licensee and Authorised
                                             Electricity Operators, the subject
                                             matter of which relates to or is
                                             connected with the BSC or the
                                             balancing and settlement
                                             arrangements, and

                                          b. have been so designated by the
                                             Secretary of State.

9.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.

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<PAGE>   9
CONDITION 15B: CHANGE CO-ORDINATION FOR NETA
--------------------------------------------

1.       The Licensee shall take all reasonable measures to secure and implement
         (consistently with the procedures applicable under or in relation to
         those documents as modified or replaced from time to time), and shall
         not take any steps to prevent or unduly delay, changes to the Core
         Industry Documents to which it is party (or in relation to which it
         holds rights in respect of amendment), such changes being changes which
         are appropriate in order to give full and timely effect to and/or in
         consequence of any modification which has been made to the BSC.

2.       In paragraph 1, Core Industry Documents has the meaning given in
         paragraph 8 of Condition 15A.

3.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.

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<PAGE>   10
CONDITION 15C: POOLING AND SETTLEMENT AGREEMENT RUN-OFF
-------------------------------------------------------

1.       The Licensee shall continue to be a party to and a pool member under,
         and shall comply with, the Pooling and Settlement Agreement for the
         purposes of Run-off, until the provisions of the BSC relating to
         Run-Off become effective.

2.       This Condition shall apply to the extent that the Licensee was party to
         and a pool member under the Pooling and Settlement Agreement
         immediately prior to the Effective Time.

3.       In this Condition:

"Effective Time"                          means the start of the first period
                                          for trading under the BSC as
                                          determined by the Secretary of State.

"Run-off"                                 means the determination and settlement
                                          (including by way of reconciliation)
                                          of amounts due arising under or in
                                          connection with the Pooling and
                                          Settlement Agreement in relation to
                                          settlement periods up to and including
                                          the settlement period immediately
                                          prior to the Effective Time (including
                                          the resolution of disputes in respect
                                          thereof).

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<PAGE>   11
4.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.

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<PAGE>   12
             MODIFICATIONS TO THE PUBLIC ELECTRICITY SUPPLY LICENCE
                    ISSUED TO YORKSHIRE ELECTRICITY GROUP PLC

                                    SCHEDULE
                                    --------

The following modifications shall apply on and after 1 September 2000.

1.       In the definition of "Permitted Purpose" in Condition 1, sub-paragraph
         (b) shall be deleted; the words "(other than the Generation Business)"
         shall be inserted after the words "any business conducted or activity
         carried on" in sub-paragraph (c); and the word "and" shall be
         substituted for the word "to" in the first line of sub-paragraph (d).

2.       In Condition 6, paragraph 1 shall be deleted and replaced by the
         following new paragraph 1:

         "The Licensee shall procure that, with effect from 1 September 2000,
         the Generation Business is held as a Separate Business by an affiliate
         of the Licensee in which the Licensee has no shareholding interest of
         any kind, whether direct or indirect".

3.       New Condition 12C (the terms of which are set out at Annex A hereto)
         shall be inserted immediately after existing Condition 12B.
<PAGE>   13
                                                                         ANNEX A
                                                                         -------

CONDITION 12C. REQUIREMENT TO FACILITATE COMPETITION IN THE GENERATION AND
--------------------------------------------------------------------------
SUPPLY OF ELECTRICITY
----------------------

1.       The Licensee shall, in pursuance of its authorised activities, conduct
         its Distribution Business so as to facilitate:

         (a)      competition in the generation of electricity; and

         (b)      competition in the supply of electricity within the authorised
                  area.
<PAGE>   14
                                                                   [SEAL]

To:                                                           DEPARTMENT OF
                                                              TRADE AND INDUSTRY

                                                              1 Victoria Street
                                                              London SW1H 0ET

                                                              Enquiries
                                                              020-7215 5000
Direct line 020-7215 2779
        Fax 020-7630 9570
    Our ref
   Your ref
       Date 7 August 2000

         MODIFICATIONS TO PUBLIC ELECTRICITY SUPPLY LICENCE

         Whereas :

(a)      In this document, the Act means the Electricity Act 1989 as amended;

(b)      holds a licence ("the Licence") under section 6 of the Act subject to
         the Conditions contained in the Licence;

(c)      the Secretary of State considers that it is necessary or expedient to
         modify these Conditions for the purpose set out in section 15A of the
         Act; and

(d)      the Secretary of State has consulted on the modifications which he
         proposes as required of section 15A of the Act;

         Now in exercise of the power conferred upon him by section 15A of the
         Act the Secretary of State hereby modifies the Conditions contained in
         the Licence in the manner specified in the attached schedule and the
         Conditions shall be modified on the 7th August 2000 .

         Yours sincerely

         DAVID HALLDEARN
         For and on behalf of
         the Secretary of State for Trade and Industry
<PAGE>   15
ANNEX A

Condition 18: Code of practice on the payment of bills and guidance for dealing
with customers in difficulty

Condition 18A: Code of practice on the use of prepayment meters

Condition 19: Record of and report on performance

Condition 19A: Provision of services for persons who are blind or deaf

Condition 20: Provision of services for persons who are of pensionable age or
disabled or chronically sick

Condition 22: Efficient use of electricity

Condition 23A: Preparation, review of and compliance with customer service codes
<PAGE>   16
         CONDITION 18: CODE OF PRACTICE ON PAYMENT OF BILLS AND GUIDANCE FOR
         -------------------------------------------------------------------
         DEALING WITH CUSTOMERS IN DIFFICULTY
         -------------------------------------

1.       The Licensee shall, no later than 1 September 2000, prepare and submit
         to the Director for his approval a code of practice concerning the
         payment of electricity bills by its Domestic Customers, including
         appropriate guidance for the assistance of such customers who, through
         misfortune or inability to cope with electricity supplied on credit
         terms, may have difficulty in paying such bills.

2.       The code of practice shall include procedures by which the Licensee can
         distinguish, so far as reasonably practicable, customers in difficulty
         (the "relevant customers") from others in default and can:

         (a)      provide general information as to how relevant customers might
                  reduce their bills in the future by the more efficient use of
                  electricity;

         (b)      where such a facility is available, accept in payment for
                  electricity supplied sums which are deducted at source from
                  social security benefits payable to relevant customers;

         (c)      detect failures by relevant customers to comply with
                  arrangements entered into for paying by instalments charges
                  for electricity supplied;

         (d)      make such arrangements as to take into account the customers'
                  ability to comply with them;

         (e)      ascertain, with the assistance of any information provided by
                  other persons or organisations, the ability of customers to
                  comply with such arrangements; and

         (f)      provide for customers who have failed to comply with such
                  arrangements, or procure for them the provision of, a
                  prepayment meter (where safe and practicable to do so).

3.       In formulating the procedures referred to at paragraph 2 the Licensee
         shall have particular regard:

         (a)      to the purpose of avoiding in so far as is practicable, the
                  disconnection of premises occupied by relevant customers
                  otherwise than following compliance by the Licensee with such
                  procedures; and

         (b)      to the interests of relevant customers who are of pensionable
                  age or disabled or chronically sick and to the purpose of
                  avoiding, in so far as is practicable, the disconnection of
                  premises occupied by such customers during the winter months
                  of each year,
<PAGE>   17
         and the procedures shall be designed for the achievement of such
         purposes.

4.       This Condition is subject to the provisions of Condition 23A.
<PAGE>   18
         CONDITION 18A: CODE OF PRACTICE ON THE USE OF PREPAYMENT METERS
         ---------------------------------------------------------------

1.       The Licensee shall, no later than 1 September 2000, prepare and submit
         to the Director for his approval a code of practice concerning the use
         of prepayment meters by its Domestic Customers, including appropriate
         guidance for the assistance of its prepayment meter customers who wish
         to take a supply of electricity on other terms.

2.       The code of practice shall set out the Licensee's policy on the
         installation of prepayment meters and shall include procedures by which
         the Licensee will where appropriate:

         (a)      provide general information for customers on the operation,
                  usefulness, advantages and disadvantages of prepayment meters,
                  including details of:

                  (i)      token outlets and card or key charging facilities
                           within the areas supplied with electricity by the
                           Licensee;

                  (ii)     the actions available to customers on the malfunction
                           of a prepayment meter or a prepayment card or key;
                           and

                  (iii)    any standards of performance (and associated
                           payments) applying to the Licensee in relation to
                           premises supplied by it through prepayment meters;

         (b)      arrange for the calibration of any prepayment meter provided
                  in accordance with sub-paragraph 2(f) of Condition 18 so as to
                  take into account, having due regard to all information
                  available to the Licensee (including any information provided
                  by other persons or organisations), the relevant customer's
                  ability to pay any charges due from him under the arrangements
                  contemplated by that Condition in addition to the other
                  charges lawfully being recovered through the prepayment meter;

         (c)      arrange for the re-calibration of prepayment meters:

                  (i)      in the case of an individual customer, at the
                           conclusion of any such arrangements applying to that
                           customer; and

                  (ii)     generally, following changes in the price at which
                           the Licensee supplies electricity to prepayment meter
                           customers; and
<PAGE>   19
         (d)      remove prepayment meters, setting out the timescale and the
                  conditions under which such removal might be expected to take
                  place.

3.       This Condition is subject to the provisions of Condition 23A.
<PAGE>   20
         CONDITION 19: RECORD OF AND REPORT ON PERFORMANCE
         -------------------------------------------------

1.       The Licensee shall keep a record of its general operation of the
         arrangements mentioned in Conditions 18, 18A, 19A, 20, 20A, 21, 22 and
         23 and if the Director so directs in writing, of its operation of any
         particular cases specified, or of a description specified, by him.

2.       The Licensee shall keep a statistical record of its performance in
         relation to the provision of electricity supply to its Domestic
         Customers under the terms of contracts or in accordance with tariffs
         fixed under Section 18 of the Act.

3.       The Licensee shall, from time to time as required by the Director,
         provide to the Director and to the Relevant Consumers' Committee such
         of the information contained in the records prepared in accordance with
         paragraphs 1 and 2 as the Director may request in writing.

4.       As soon as is reasonably practicable after the end of each calendar
         year, the Licensee shall submit to the Director and the Relevant
         Consumers' Committee a report dealing with the matters mentioned in
         paragraphs 1 and 2 in relation to that year and shall:

         (a)      publish the report so submitted in such manner as will in the
                  reasonable opinion of the Licensee secure adequate publicity
                  for it; and

         (b)      send a copy of it free of charge to any person requesting one,

         except that, in performing its obligations under sub-paragraphs (a) and
         (b), the Licensee shall exclude from the report such information as
         appears to it to be necessary or expedient to ensure that, save where
         they consent, individual Domestic Customers referred to therein cannot
         readily be identified.

5.       The report shall be presented, so far as is reasonably practicable, in
         a standard form designated by the Director for the purposes of this
         Condition.
<PAGE>   21
         CONDITION 19A: PROVISION OF SERVICES FOR PERSONS WHO ARE BLIND OR DEAF
         ----------------------------------------------------------------------

1.       The Licensee shall, no later than 1 September 2000, prepare and submit
         to the Director for his approval a code of practice detailing the
         special services the Licensee will make available for its Domestic
         Customers who are disabled by virtue of being blind or partially
         sighted, or deaf or hearing impaired.

2.       The code of practice shall include arrangements by which the Licensee
         will, on request, in each case free of charge:

         (a)      make available to its blind and partially sighted customers,
                  by telephone or other appropriate means, information
                  concerning the details of any bill relating to the supply of
                  electricity to them and a facility for enquiring or
                  complaining in respect of any such bill or any service
                  provided by the Licensee; and

         (b)      make available to its deaf and hearing impaired customers,
                  being in possession of appropriate equipment, facilities to
                  assist them in enquiring or complaining about any bill
                  relating to the supply of electricity to them or any service
                  provided by the Licensee.

3.       This Condition is subject to the provisions of Condition 23A.
<PAGE>   22
         CONDITION 20: PROVISION OF SERVICES FOR PERSONS WHO ARE OF PENSIONABLE
         ----------------------------------------------------------------------
         AGE OR DISABLED OR CHRONICALLY SICK
         -----------------------------------

1.       The Licensee shall, no later than 1 September 2000, prepare and submit
         to the Director for his approval a code of practice detailing the
         special services the Licensee will make available for Domestic
         Customers who are of pensionable age or disabled or chronically sick.
         The code of practice shall include arrangements by which the Licensee
         will on request of such customers, where reasonably practicable and
         appropriate, and in each case free of charge:

         (a)      provide special controls and adaptors for electrical
                  appliances and meters (including prepayment meters) and
                  reposition meters;

         (b)      provide special means of identifying persons acting on behalf
                  of the Licensee;

         (c)      give advice on the use of electricity;

         (d)      send bills in respect of the supply of electricity to a
                  customer to any person who is willing to be sent such bills
                  and is nominated by that customer (without prejudice, however,
                  to the right of the Licensee to send such bills both to the
                  customer and to the nominated person where that appears
                  appropriate to the Licensee); and

         (e)      provide, where neither the customer nor anyone living with him
                  is able to read the electricity meter, for the meter to be
                  read once in each quarter and for the customer to be informed
                  of the readings so obtained.

2.       The code of practice shall further include arrangements whereby the
         Licensee will:

         (a)      establish a list (the "Priority Service Register") of
                  customers who, by virtue of being of pensionable age or
                  disabled or chronically sick, require:

                  (i)      information and advice in respect of the matters set
                           out at paragraph 1; or

                  (ii)     advance notice of planned interruptions to the supply
                           of electricity;
<PAGE>   23
         (b)      notify its customers at least once each year of the existence
                  of the Priority Service Register and of how they may be
                  included on it; and

         (c)      maintain the Priority Service Register, comprising the
                  relevant details of each customer who requests (or, in the
                  case of a customer supplied by a private electricity supplier,
                  whose supplier requests) his inclusion on it and:

                  (i)      give to those of its own customers so registered, in
                           respect of the matters set out at paragraph 1; and

                  (ii)     give to all customers so registered, in respect of
                           interruptions to the supply of electricity,

                  such information and advice as may be appropriate and is of
                  such nature as shall be set out in the code of practice.

3.       This Condition is subject to the provisions of Condition 23A.
<PAGE>   24
         CONDITION 22: EFFICIENT USE OF ELECTRICITY
         ------------------------------------------

1.       The Licensee shall, no later than 1 September 2000, prepare and submit
         to the Director for his approval a code of practice setting out the
         ways in which the Licensee will make available to customers such
         guidance on the efficient use of electricity, in each case given or
         prepared by a suitably qualified person, as will, in the opinion of the
         Licensee enable customers to make informed judgments on measures to
         improve the efficiency with which they use the electricity supplied to
         them.

2.       The code of practice shall include, but shall not be limited to:

         (a)      the preparation and making available free of charge to any
                  customer who requests it of a statement, in a form approved by
                  the Director, setting out information and advice for the
                  guidance of customers in the efficient use of electricity
                  supplied to them;

         (b)      the making of arrangements for maintaining sources from which
                  customers may obtain further information about the efficient
                  use of electricity supplied to them, including the maintenance
                  of a telephone information service; and

         (c)      the preparation and making available free of charge to any
                  customer who requests it of a statement or statements of
                  sources (to the extent that the Licensee is aware of the same)
                  outside the Licensee's organisation from which customers may
                  obtain additional information or assistance about measures to
                  improve the efficiency with which they use the electricity
                  supplied to them, such statement or statements to include
                  basic information which is publicly available on financial
                  assistance towards the costs of such measures available from
                  central or local Government or through bodies in receipt of
                  financial support from Government in connection with measures
                  to promote the efficiency of energy use.

3.       Where the Director (who may have regard to the need for economy,
         efficiency and effectiveness before giving directions under this
         paragraph) gives directions to do so, the Licensee shall:

         (a)      review and prepare a revision of the code of practice;
<PAGE>   25
         (b)      take steps to bring to the attention of customers information
                  on the efficient use of electricity supplied to them; and

         (c)      send to each customer a copy of any information in relation to
                  the efficient use of electricity published by the Director
                  pursuant to Section 48 of the Act

         in such manner and at such times as will comply with those directions.

4.       This Condition is subject to the provisions of Condition 23A.
<PAGE>   26
         CONDITION 23A: PREPARATION, REVIEW OF AND COMPLIANCE WITH CUSTOMER
         ------------------------------------------------------------------
         SERVICE CODES
         -------------

1.       This Condition applies to any code of practice required to be prepared
         by the Licensee pursuant to Conditions 18, 18A, 19A, 20, 20A, 22 and 23
         of this Licence.

2.       In first preparing such a code the Licensee shall, prior to submitting
         that code to the Director, consult the Relevant Consumers' Committee
         and shall have regard to any representations made by the committee
         about such code or the manner in which it is likely to be operated.

3.       Where before the expiry of 30 days of the Licensee first submitting
         such code to the Director for his approval the Director notifies the
         Licensee that the Director considers the code is not sufficient for the
         purposes of meeting the requirements of this Licence, the Licensee
         shall forthwith make such changes as the Director may require.

4.       The Licensee shall, whenever requested to do so by the Director, review
         such code and the manner in which it has been operated, with a view to
         determining whether any modification should be made to it or to the
         manner of its operation.

5.       In carrying out any such review the Licensee shall consult the Relevant
         Consumers' Committee and shall have regard to any representations made
         by it about such code or the manner in which it is likely to be or (as
         the case may be) has been operated.

6.       The Licensee shall submit any revision of such code which, after
         consulting the Relevant Consumers' Committee in accordance with
         paragraph 5, it wishes to make, to the Director for his approval and
         following his approval in writing shall then revise the code.

7.       The Licensee shall:

         (a)      as soon as practicable following the preparation of any code
                  or any revision made to it send to the Director and the
                  Relevant Consumers' Committee a copy of such code or such
                  revision (in each case in the form approved by the Director);
<PAGE>   27
         (b)      at least once in each year, draw the attention of those of its
                  customers to whom such code applies to the existence of the
                  code and of each substantive revision of it and to the means
                  by which they may inspect a copy of such code in its latest
                  form; and

         (c)      give or send free of charge a copy of such code (as from time
                  to time revised) to any person who requests it.

8.       No changes may be made to any code otherwise than in accordance with
         the foregoing procedures.

9.       The Licensee shall ensure, so far as reasonably practicable, that it
         complies with such arrangements or procedures (as the case may be) as
         are contained in or described by any code to which this Condition
         applies and approved by the Director or any revision to such code
         approved by the Director.
<PAGE>   28
ANNEX B

Condition 35: Contractual terms

Condition 37: Security deposits
<PAGE>   29
         CONDITION 35: CONTRACTUAL TERMS
         -------------------------------

1.       Where the Licensee offers to supply electricity to Domestic Premises
         under Designated Supply Contracts, it shall have available forms of
         Designated Supply Contract which provide for the payment of charges for
         electricity supplied to Domestic Premises:

         (a)      by prepayment through a prepayment meter;

         (b)      by different methods, including:

                  (i)      by cash, at such places and to such persons as are
                           reasonable in all the circumstances; and

                  (ii)     by cheque, and

         (c)      at a reasonable range of different intervals, including:

                  (i)      paying twice-monthly or fortnightly or more
                           regularly, such sums as agreed;

                  (ii)     paying monthly a predetermined sum; and

                  (iii)    paying quarterly in arrears.

2.       Before entering into any contract to supply electricity to Domestic
         Premises (other than through a prepayment meter) the Licensee shall
         inform the customer of and offer to enter into Designated Supply
         Contracts which comply with sub-paragraphs 1(b) and (c).

3.       The Licensee shall process all requests for a supply of electricity to
         Designated Premises without undue preference or undue discrimination.

4.       The Licensee shall send copies of each of the forms of Designated
         Supply Contract (as revised from time to time) under which it supplies
         or offers to supply electricity:
<PAGE>   30
         (a)      on receipt of a request, to any person; and

         (b)      not later than the date on which it first offers to supply
                  electricity under each such form of Designated Supply Contract
                  (or revision thereof), to the Director.

5.       The Licensee shall prepare, in respect of each form of Designated
         Supply Contract:

         (a)      a document which sets out an accurate summary of the Principal
                  Terms of that form of Designated Supply Contract; and

         (b)      particulars of inducements offered to any person entering into
                  such a contract which might reasonably be expected materially
                  to influence the decision whether or not to enter into it.

6.       The Licensee shall publish the documents and particulars referred to at
         paragraph 5 in a manner that will in the opinion of the Licensee secure
         adequate publicity for them, and shall send copies of them to the
         Director no later than the date on which they are published.
<PAGE>   31
         CONDITION 37: SECURITY DEPOSITS
         -------------------------------

1.       The Licensee shall not, in respect of the supply of electricity under
         any Designated Supply Contract, require a deposit:

         (a)      where the customer is prepared to be supplied through a
                  prepayment meter and it is reasonably practicable in all the
                  circumstances (including in particular the risk of loss or
                  damage) for the Licensee to provide such a meter; or

         (b)      where it is otherwise unreasonable in all the circumstances to
                  do so.

2.       Any deposit required of a Designated Customer may be 1 1/2 times the
         value of the average quarterly consumption of electricity reasonably
         expected at the relevant premises, or more if that is reasonable in all
         the circumstances.

3.       Where the Licensee requires a deposit from a Designated Customer it
         shall at the same time inform that customer of the effect of paragraphs
         5 and 7.

4.       Where the Licensee holds any deposit for more than a month, it shall
         pay the customer simple interest on the deposit at the rate which is
         from time to time equivalent to the base rate of Barclays Bank Plc or,
         if there is no such base rate, not less than such base rate as the
         Director may designate for the purposes thereof.

5.       Subject to paragraph 6, any deposit given by a Designated Customer
         shall be repaid (with interest) by the Licensee:

         (a)      within 14 days where, in the previous 12 months, the customer
                  has paid all charges for electricity supplied within 28 days
                  of each written demand made; or

         (b)      as soon as reasonably practicable, and in any event within 1
                  month, where the Licensee has ceased to supply the customer
                  and the customer has paid all charges for electricity
                  supplied.

6.       Sub-paragraph 5(a) shall not apply where it is reasonable in all the
         circumstances for the Licensee to retain the deposit.
<PAGE>   32
7.       Any dispute arising under this Condition between the Licensee and a
         Designated Customer may be referred by either party to the Director.
         The Director shall determine any such dispute, following such practice
         and procedure as he considers appropriate.
<PAGE>   33
                                  THE SCHEDULE

               MODIFICATIONS TO PUBLIC ELECTRICITY SUPPLY LICENCE

1.       At the end of Conditions 1, 4, 10 and 15, the following additional
         paragraph is inserted:

         "This Condition or parts of it shall cease to have effect on the date
         specified in a direction to that effect made pursuant to paragraph 4 of
         Condition 1A".

2.       The following Conditions, the provisions of which are set out in the
         Annexure, are inserted:

         Condition 1A    (Power to Bring Conditions into Effect)

         Condition 4C    (Prohibition of cross-subsidies and of discrimination
                         in selling electricity)

         Condition 15A   (Balancing and Settlement Code and NETA Implementation)

         Condition 15B   (Change Co-ordination for NETA)

         Condition 15C   (Pooling and Settlement Agreement Run-off).

3.       In Condition 1 the following new definition is inserted:

         "the Director"                  means, until both section 1(1) and
                                         section 3(1) of the Utilities Act 2000
                                         are brought into force, the Director
                                         General of Electricity Supply, but
                                         thereafter the Authority established by
                                         section 1(1) of the Utilities Act 2000.

Seeboard plc                                   Public Electricity Supply Licence<PAGE>   1

             MODIFICATIONS TO THE PRIVATE ELECTRICITY SUPPLY LICENCE
            ISSUED TO YORKSHIRE ELECTRICITY GROUP PLC IN RELATION TO
                          SUPPLY IN ENGLAND AND WALES

                                    SCHEDULE
                                    --------

     The following modifications shall apply on and after 1 September 2000.

1.   New Condition 1A (the terms of which are set out at Annex A hereto) shall
     be inserted immediately after existing Condition 1.
<PAGE>   2

                                                                         ANNEX A
                                                                         -------

CONDITION 1A.  PROHIBITION ON SUPPLY TO CERTAIN PREMISES
--------------------------------------------------------

1.  Subject to paragraph 2, the Licensee shall not, on or after the appropriate
    date:

    (a)  offer to supply electricity or enter into a contract for the supply of
         electricity to any Designated Premises in the authorised area of
         SEEBOARD plc;

    (b)  supply electricity to any Designated Premises in the authorised area of
         SEEBOARD plc other than to those which it has entered into a contract
         to supply where the date of the contract is prior to the appropriate
         date; or

    (c)  make or permit any variation of a contract for the supply of
         electricity to Designated Premises in the authorised area of SEEBOARD
         plc subsisting at the appropriate date, the effect of which would be to
         extend the duration of that contract.

2.  The Director may, on receipt of a written request by the Licensee, consent
    in writing to the Licensee supplying, offering to supply or entering into a
    contract for the supply of electricity to any Designated Premises in the
    authorised area of SEEBOARD plc after the appropriate date, subject to such
    terms and conditions as the Director may think fit.

3.  In this Condition:

         "appropriate date"     means the date on which this Condition comes
                                into force.
<PAGE>   3
                                    ANNEXURE
                                    ---------

                         YORKSHIRE ELECTRICITY GROUP PLC

CONDITION 1A: POWER TO BRING CONDITIONS INTO EFFECT
---------------------------------------------------

1.       The Conditions to which this paragraph applies shall not come into
         effect until the Secretary of State has made a direction specifying a
         date on which they come into effect and served a copy of the direction
         on the Licensee (but the date so specified may be the same date as that
         on which this Condition comes into effect or if later that on which a
         copy of the direction is so served).

2.       The Secretary of State may make more than one direction under paragraph
         1, and may bring different Conditions or parts of Conditions into force
         at different times.

3.       The Conditions to which paragraph 1 applies are:

         Condition 11A (Balancing and Settlement Code and NETA Implementation)

         Condition 11B (Change Co-ordination for NETA)

         Condition 11C (Pooling and Settlement Agreement Run-off)

4.       The Conditions to which this paragraph applies (or parts of them) shall
         cease to have effect on such date as is specified in a direction made
         by the Secretary of State pursuant to this paragraph, a copy of which
         has previously been served on the Licensee (but the date so specified
         may be the same date as that on which this Condition comes into effect
         or if later that on which a copy of the direction is so served).

<PAGE>   4

5.       The Secretary of State may make more than one direction under paragraph
         4, and may direct that different Conditions or parts of Conditions
         cease to have effect on different dates.

6.       The Conditions to which paragraph 4 applies are:

         Condition 1  (Interpretation)

         Condition 11 (Pooling and Settlement Agreement)

         Condition 13 (Generation Security Standard)

<PAGE>   5

 CONDITION 11A: BALANCING AND SETTLEMENT CODE AND NETA IMPLEMENTATION
---------------------------------------------------------------------

1.       The Licensee shall be a party to the BSC Framework Agreement and shall
         comply with the BSC.

2.       The Licensee shall comply with the programme implementation scheme
         established in accordance with paragraph 3 as modified from time to
         time in accordance with paragraph 5.

3.       The programme implementation scheme shall be a scheme designated by the
         Secretary of State setting out the steps, including without limitation
         steps as to the matters referred to in paragraph 4, to be taken (or
         procured) by the Licensee (and/or by Authorised Electricity Operators)
         which are, in the Secretary of State's opinion, appropriate in order to
         give full and timely effect to:

         (a)      the modifications made to this licence and to the licences of
                  Authorised Electricity Operators by the Secretary of State
                  pursuant to the power vested in him under section 15A of the
                  Act;

         (b)      any conditions imposed by any exemption from the requirement
                  to hold any such licence; and

         (c)      the matters envisaged by such modifications and conditions.

4.       The programme implementation scheme may include provisions, inter alia,

         (a)      to secure or facilitate the amendment of any of the Core
                  Industry Documents;

<PAGE>   6

         (b)      to secure that any systems, persons or other resources
                  employed in the implementation of the Pooling and Settlement
                  Agreement may be employed in the implementation of the BSC;

         (c)      for the giving of the indemnities against liabilities to
                  which parties to the Pooling and Settlement Agreement may be
                  exposed;

         (d)      for securing the co-ordinated and effective commencement of
                  implementation of and operations under the BSC, including the
                  testing, trialling and start-up of the systems, processes and
                  procedures employed in such implementation and employed by
                  Authorised Electricity Operators and others in connection with
                  such operations;

         (e)      for co-ordinating the administration and implementation of the
                  BSC and the Pooling and Settlement Agreement;

         (f)      for the Licensee to refer to the Director for determination,
                  whether of its own motion or as provided in the programme
                  implementation scheme, disputes, as to matters covered by the
                  scheme, between persons who are required (by conditions of
                  their licences or exemptions) or who have agreed to comply
                  with the scheme or any part of it; and

         (g)      for the Director, in the circumstances set out in the scheme,
                  to require that consideration be given to the making of a
                  proposal to modify the BSC and, if so, to require the making
                  of such proposal in the manner set out in the scheme, such
                  power to be exercisable at any time within the period of 12
                  months after the Effective Time (as defined in Condition 11C).

5.       (a)      The Secretary of State may at any time direct, in accordance
                  with the provisions of the programme implementation scheme,
                  that the programme implementation scheme be modified in the
                  manner set out in the direction, in order to give (or continue
                  to give) full and

<PAGE>   7

                  timely effect to the matters described in paragraph 3.

         (b)      The Secretary of State shall serve a copy of any such
                  direction on the Licensee, and thereupon the Licensee shall
                  comply with the scheme as modified by the direction.

6.       If there is any conflict between the requirements contained in the
         programme implementation scheme pursuant to paragraph 4(a) and imposed
         on the Licensee by paragraphs 2 and 5 of this Condition, and those
         imposed on the Licensee by any other Condition, the provisions of this
         Condition shall prevail.

7.       Without prejudice to paragraph 2, the Licensee shall use all reasonable
         endeavours to do such things as may be requisite and necessary in order
         to give full and timely effect to the modifications made to this
         Licence as determined by the Secretary of State pursuant to the power
         vested in him under section 15A of the Act (and to give full and timely
         effect to the matters envisaged by such modifications).

8.       In this Condition:
         "BSC"                                       means the balancing and
                                                     settlement code required to
                                                     be in place, pursuant to
                                                     the Transmission Licence
                                                     granted to the Transmission
                                                     Company, as from time to
                                                     time modified.

         "BSC Framework Agreement"                   means the agreement of that
                                                     title, in the form approved
                                                     by the Secretary of State,
                                                     by which the BSC is made
                                                     contractually binding
                                                     between the parties to that
                                                     agreement, as from time to
                                                     time amended, with the
                                                     consent of the Secretary of
                                                     State.

<PAGE>   8

         "Core Industry Documents"                   mean those documents which
                                                     (a)      in the Secretary
                                                              of State's opinion
                                                              are central
                                                              industry documents
                                                              associated with
                                                              the activities of
                                                              the Licensee and
                                                              Authorised
                                                              Electricity
                                                              Operators, the
                                                              subject matter of
                                                              which relates to
                                                              or is connected
                                                              with the BSC or
                                                              the balancing and
                                                              settlement
                                                              arrangements, and

                                                     (b)      have been so
                                                              designated by the
                                                              Secretary of
                                                              State.

9.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.

<PAGE>   9

CONDITION 11B: CHANGE CO-ORDINATION FOR NETA
--------------------------------------------

1.       The Licensee shall take all reasonable measures to secure and implement
         (consistently with the procedures applicable under or in relation to
         those documents as modified or replaced from time to time), and shall
         not take any steps to prevent or unduly delay, changes to the Core
         Industry Documents to which it is party (or in relation to which it
         holds rights in respect of amendment), such changes being changes which
         are appropriate in order to give full and timely effect to and/or in
         consequence of any modification which has been made to the BSC.

2.       In paragraph 1, Core Industry Documents has the meaning given in
         paragraph 8 of Condition 11A.

3.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.

<PAGE>   10

CONDITION 11C: POOLING AND SETTLEMENT AGREEMENT RUN-OFF
-------------------------------------------------------

1.       The Licensee shall continue to be a party to and a pool member under,
         and shall comply with, the Pooling and Settlement Agreement for the
         purposes of Run-off, until the provisions of the BSC relating to
         Run-Off become effective.

2.       This Condition shall apply to the extent that the Licensee was party to
         and a pool member under the Pooling and Settlement Agreement
         immediately prior to the Effective Time.

3.       In this Condition:

         "Effective Time"                            means the start of
                                                     the first period for
                                                     trading under the BSC as
                                                     determined by the Secretary
                                                     of State.

         "Run-off"                                   means the determination
                                                     and settlement (including
                                                     by way of reconciliation)
                                                     of amounts due arising
                                                     under or in connection with
                                                     the Pooling and Settlement
                                                     Agreement in relation to
                                                     settlement periods up to
                                                     and including the
                                                     settlement period
                                                     immediately prior to the
                                                     Effective Time (including
                                                     the resolution of disputes
                                                     in respect thereof).

<PAGE>   11

4.       This Condition or parts of it shall not come into effect until the date
         specified in a direction to that effect made pursuant to paragraph 1 of
         Condition 1A.
<PAGE>   12

                                  THE SCHEDULE
                                  ------------

                         YORKSHIRE ELECTRICITY GROUP PLC

             MODIFICATIONS TO SECOND TIER ELECTRICITY SUPPLY LICENCE

                              FOR ENGLAND AND WALES

1.       At the end of Conditions 1, 11 and 13,  the following additional
         paragraph is inserted:

         "This Condition or parts of it shall cease to have effect on the date
         specified in a direction to that effect made pursuant to paragraph 4 of
         Condition 1A".

2.       The following Conditions, the provisions of which are set out in the
         Annexure, are inserted:

         Condition 1A               (Power to Bring Conditions into Effect)

         Condition 11A              (Balancing and Settlement Code and NETA
                                    Implementation )

         Condition 11B              (Change Co-ordination for NETA)

         Condition 11C              (Pooling and Settlement Agreement Run-off).

3.       In Condition 1 the following new definition is inserted:

         "the                                       Director" means, until both
                                                    section 1(1) and section3(1)
                                                    of the Utilities Act 2000
                                                    are brought into force, the
                                                    Director General of
                                                    Electricity Supply, but
                                                    thereafter the Authority
                                                    established by section1(1)
                                                    of the Utilities Act 2000.

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