Document:

<PAGE>

                                                                    EXHIBIT 10.5

PPL EnergyPlus, LLC                                         Original Sheet No. 1
Rate Schedule FERC No. 9

                           GENERATION SUPPLY AGREEMENT

                                     BETWEEN

                       PPL ELECTRIC UTILITIES CORPORATION

                                       AND

                               PPL ENERGYPLUS, LLC

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       1

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PPL EnergyPlus, LLC                                         Original Sheet No. 2
Rate Schedule FERC No. 9

                                TABLE OF CONTENTS

ARTICLE 1: DEFINITION OF TERMS ..............................................  7
1.1      Affiliate ..........................................................  7
1.2      Alternate Supplier .................................................  7
1.3      Assumed Ongoing POLR Revenues ......................................  7
1.4      Bankrupt ...........................................................  7
1.5      Business Day .......................................................  8
1.6      Capacity Deficiency Changes ........................................  8
1.7      CDS ................................................................  8
1.8      Collateral Termination Payment .....................................  8
1.9      Collateral Threshold ...............................................  8
1.10     Company Use Energy .................................................  9
1.11     Credit Rating ......................................................  9
1.12     Cross Default Amount ...............................................  9
1.13     Delivery Point .....................................................  9
1.14     Early Termination Date .............................................  9
1.15     EGS ................................................................  9
1.16     Energy .............................................................  9
1.17     Equitable Defenses ................................................. 10
1.18     FERC ............................................................... 10
1.19     Firm ............................................................... 10
1.20     FitchIBCA .......................................................... 10
1.21     Force Majeure ...................................................... 10
1.22     Generation Shopping Credits ........................................ 10
1.23     Good Utility Practice .............................................. 11
1.24     Gross Receipts Tax ................................................. 11
1.25     Guarantor .......................................................... 11
1.26     Imbalance Charges .................................................. 11
1.27     Interest Rate ...................................................... 11
1.28     Letter of Credit ................................................... 12
1.29     Load Management Actions ............................................ 12
1.30     Load Management Energy ............................................. 12
1.31     Load Management Energy Cost ........................................ 12
1.32     Market Value of Energy and Unforced Capacity ....................... 12
1.33     Monthly Generation Revenue ......................................... 13
1.34     Moody's ............................................................ 13
1.35     Performance Assurance .............................................. 13
1.36     PJM ................................................................ 13
1.37     PJM Ancillary Services ............................................. 13
1.38     PJM Standards ...................................................... 14
1.39     PJM Tariff ......................................................... 14

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       2

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 3
Rate Schedule FERC No. 9

1.40     POLR or Provider of Last Resort .................................... 14
1.41     POLR Capacity Obligation ........................................... 14
1.42     POLR Service ....................................................... 14
1.43     POLR Supply Amount ................................................. 15
1.44     PPL Electric Call Option ........................................... 15
1.45     PPL Electric Downgrade ............................................. 15
1.46     PPL EnergyPlus ..................................................... 16
1.47     PPL Zone ........................................................... 16
1.48     Primary Supplier ................................................... 16
1.49     PUC ................................................................ 16
1.50     RAA ................................................................ 16
1.51     Replacement Price .................................................. 16
1.52     Restructuring Settlement ........................................... 17
1.53     Retail Customers ................................................... 17
1.54     Retail Tariff ...................................................... 17
1.55     RFP ................................................................ 17
1.56     S&P ................................................................ 17
1.57     Sales Price ........................................................ 17
1.58     Schedule ........................................................... 18
1.59     Supplier Downgrade Event ........................................... 18
1.60     Supplier's Percentage .............................................. 18
1.61     Taxes .............................................................. 18
1.62     Termination Payment ................................................ 18
1.63     Third-Party Ancillary Services ..................................... 19
1.64     Transmission Provider .............................................. 19
1.65     Unforced Capacity .................................................. 19

ARTICLE 2: TERM ............................................................. 19
2.1      Term ............................................................... 19
2.2      Provisions Surviving Termination ................................... 19

ARTICLE 3: DESCRIPTION OF SERVICES .......................................... 20
3.1      Energy ............................................................. 20
3.2      Unforced Capacity .................................................. 20
3.3      Transmission Service ............................................... 22
3.4      Ancillary Services ................................................. 23
3.5      Primary Supplier ................................................... 23
3.6      Supply to Customers Under New Rate Schedules or Rate Riders ........ 23

ARTICLE 4: FORECASTING AND SCHEDULING ....................................... 24
4.1      Energy Forecasts ................................................... 24

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       3

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 4
Rate Schedule FERC No. 9

4.2      Reliance on Forecasts .............................................. 24
4.3      Scheduling ......................................................... 24

ARTICLE 5: TAXES ............................................................ 25
5.1      Taxes .............................................................. 25

ARTICLE 6: RECONCILIATIONS AND PAYMENTS ..................................... 25
6.1      Reconciliation with PJM ............................................ 25
6.2      Payment of Monthly Generation Revenue .............................. 26
6.3      Transition Periods ................................................. 26
6.4      Advance Payment .................................................... 27
6.5      Distribution of Capacity Deficiency Revenues ....................... 27
6.6      PPL Electric Resettlement Process .................................. 28
6.7      Payment Disputes ................................................... 28

ARTICLE 7: FORCE MAJEURE .................................................... 28
7.1      Force Majeure ...................................................... 28
7.2      Force Majeure Event ................................................ 29
7.3      Transmission Service ............................................... 29
7.4      Force Majeure Procedures ........................................... 29

ARTICLE 8: CREDITWORTHINESS AND SECURITY .................................... 30
8.1      Supplier Creditworthiness and Security ............................. 30
8.2      PPL Electric Creditworthiness and Security ......................... 32

ARTICLE 9: REPRESENTATIONS AND WARRANTIES ................................... 34
9.1      Representations .................................................... 34
9.2      Duration ........................................................... 35

ARTICLE 10: EVENTS OF DEFAULT AND REMEDIES .................................. 35
10.1     Parties - Events of Default ........................................ 35
10.2     Guarantors - Events of Default ..................................... 36
10.3     Remedies ........................................................... 36
10.4     Declaration of an Early Termination Date and Calculation
                          Of Termination Payment ............................ 37
10.5     Failure to Deliver/Accept .......................................... 38

ARTICLE 11: DISAGREEMENTS ................................................... 39
11.1     Informal Resolution ................................................ 39
11.2     Arbitration ........................................................ 39
11.3     FERC Jurisdiction .................................................. 40

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       4

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 5
Rate Schedule FERC No. 9

ARTICLE 12: INDEMNIFICATION AND LIABILITY ................................... 41
12.1     Title Transfer ..................................................... 41
12.2     Supplier's Indemnification of PPL Electric ......................... 41
12.3     PPL Electric's Indemnification of Supplier ......................... 42
12.4     Indemnification Procedures ......................................... 42
12.5     Limitation of Liability ............................................ 42
12.6     Limitation of Liability for Retail Tariff Actions .................. 43
12.7     Limitation of Liability for Outages and Reliability Actions ........ 44
12.8     RFP Information .................................................... 44

ARTICLE 13: AUDITING AND CONFIDENTIALITY .................................... 45
13.1     Auditing ........................................................... 45
13.2     PJM Requirements ................................................... 45
13.3     Confidentiality .................................................... 45

ARTICLE 14: ASSIGNMENT ...................................................... 46
14.1     Assignment ......................................................... 46
14.2     Release of Rights .................................................. 46
14.3     Non-complying Transfers ............................................ 47
14.4     Successors and Assigns ............................................. 47

ARTICLE 15: REGULATORY ...................................................... 47
15.1     Regulatory Approvals ............................................... 47
15.2     EGS Status ......................................................... 48
15.3     Future Laws ........................................................ 48
15.4     Regulatory Risk .................................................... 48
15.5     Sections 205 and 206 of the Federal Power Act ...................... 49

ARTICLE 16: GENERAL PROVISIONS .............................................. 49
16.1     Governing Law and Venue ............................................ 49
16.2     Notices ............................................................ 49
16.3     Relationship ....................................................... 50
16.4     Entire Agreement ................................................... 50
16.5     Waiver ............................................................. 51
16.6     Interpretation of Agreement ........................................ 51
16.7     Counterparts ....................................................... 51
16.8     Severability ....................................................... 51
16.9     No Third Party Beneficiaries ....................................... 52

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       5

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 6
Rate Schedule FERC No. 9

                           GENERATION SUPPLY AGREEMENT
                                     BETWEEN
                       PPL ELECTRIC UTILITIES CORPORATION
                                       AND
                              PPL ENERGY PLUS, LLC

                                    PREAMBLE

         This GENERATION SUPPLY AGREEMENT ("Agreement") is made and entered into
this 20th day of June, 2001, between PPL ELECTRIC UTILITIES CORPORATION, a
Pennsylvania corporation ("PPL Electric"), and PPL ENERGY PLUS, LLC, a
Pennsylvania limited liability company ("Supplier") (PPL Electric and Supplier
are sometimes referred to herein individually as a "Party" and collectively as
the "Parties").

                                    RECITALS

         WHEREAS, the Pennsylvania Public Utility Commission approved a
settlement of PPL Electric's restructuring proceeding in Docket No. R-00973954
on August 27, 1998, which among other things required that PPL Electric serve as
the Provider of Last Resort ("POLR") until December 31, 2009 for retail electric
customers in PPL Electric's service territory that do not take service from
other suppliers;

         WHEREAS, the sale of PPL Electric's generating facilities and other
assets require that PPL Electric obtain from a third party the capacity and
energy necessary to meet its POLR obligations;

         WHEREAS, Supplier has or is willing to secure the wholesale capacity
and energy necessary to meet one hundred percent (100%) of PPL Electric's POLR
obligations;

         WHEREAS, PPL Electric desires to purchase and Supplier desires to sell
to PPL Electric the wholesale capacity and energy necessary to meet one hundred
percent 100% of PPL Electric's POLR obligation; and

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       6

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 7
Rate Schedule FERC No. 9

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

                         ARTICLE 1: DEFINITION OF TERMS

1.1       Affiliate means, with respect to any person or entity, any other
          ---------
          person or entity (other than an individual) that, directly or
          indirectly, through one or more intermediaries, controls, or is
          controlled by, or is under common control with, such person or entity.
          For this purpose, there shall be a rebuttable presumption that
          "control" is established by the direct or indirect ownership of ten
          percent or more of the outstanding capital stock or other equity
          interests having ordinary voting power.

1.2       Alternate Supplier means an EGS that is providing retail generation
          ------------------
          service to a PPL Electric customer that has elected a new supplier.

1.3       Assumed Ongoing POLR Revenue means the value of Monthly Generation
          ----------------------------
          Revenue for the period used to determine the Collateral Termination
          Payment, as established by agreement of the Parties pursuant to
          Section 1.8.

1.4       Bankrupt means with respect to any entity, such entity: (a) files a
          --------
          petition or otherwise commences, authorizes or acquiesces in the
          commencement of a proceeding or cause of action under any bankruptcy,
          insolvency, reorganization or similar law, or has any such petition
          filed or commenced against it; (b) makes an assignment or any general
          arrangement for the benefit of creditors; (c) otherwise becomes
          bankrupt or insolvent (however evidenced); (d) has a liquidator,
          administrator, receiver, trustee, conservator or similar official
          appointed with respect to it or any substantial portion of its
          property or assets; or (e) is generally unable to pay its debts as
          they fall due.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       7

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 8
Rate Schedule FERC No. 9

1.5       Business Day means any day except a Saturday, Sunday, or a Federal
          ------------
          Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close
          at 5:00 p.m. local time for the relevant Party's principal place of
          business. When evaluating the Business Day on which notice, payment or
          delivery must be sent, the relevant Party shall be the Party from whom
          the notice, payment or delivery is being sent. When evaluating the
          Business Day on which notice, payment or delivery must be received,
          the relevant Party shall be the Party by whom the notice or payment or
          delivery is to be received.

1.6       Capacity Deficiency Charges shall have the meaning set forth in the
          ---------------------------
          RAA. Capacity Deficiency Charges shall be deemed to include any
          successor charges approved by PJM, and those successor charges shall
          have the meaning established by PJM.

1.7       CDS means the Competitive Default Service provided by a POLR other
          ---
          than PPL Electric in accordance with the terms and conditions of the
          Restructuring Settlement.

1.8       Collateral Termination Payment shall mean Supplier's Percentage of the
          ------------------------------
          absolute difference between the Assumed Ongoing POLR Revenue and the
          Market Value of Energy and Unforced Capacity required to meet the POLR
          Supply Amount and the POLR Capacity Obligation, as calculated for the
          remaining term of this Agreement on any day that a Party evaluates the
          other Party's compliance with Article 8 to this Agreement. Within 30
          days of the date of this Agreement, the Parties shall agree upon the
          method by which the Collateral Termination Payment, Assumed Ongoing
          POLR Revenue, and Market Value of Energy and Unforced Capacity are
          calculated and the information used in such calculation.

1.9       Collateral Threshold shall be, in the case of Supplier, an amount
          --------------------
          equal to $100 million dollars and, in the case of PPL Electric, an
          amount equal to $150 million dollars.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       8

<PAGE>

PPL EnergyPlus, LLC                                         Original Sheet No. 9
Rate Schedule FERC No. 9

1.10      Company Use Energy means the actual hourly Energy used at or by the
          ------------------
          facilities and operations of PPL Electric and certain Affiliates,
          including substations, operating headquarters, construction and
          maintenance facilities, office buildings, customer service operations,
          communications facilities and towers.

1.11      Credit Rating means, with respect to any entity, the rating then
          -------------
          assigned to such entity's unsecured, senior long-term debt obligations
          (not supported by third party credit enhancements) or if such entity
          does not have a rating for its senior unsecured long-term debt, the
          rating then assigned to such entity as an issues rating by S&P,
          Moody's, FitchIBCA or any other rating agency agreed by the Parties.

1.12      Cross Default Amount shall be an amount equal to $100 million dollars
          --------------------
          with respect to both Supplier and PPL Electric.

1.13      Delivery Point means the PPL Zone as defined herein.
          --------------

1.14      Early Termination Date means the day designated by the Non-Defaulting
          ----------------------
          Party as the day this Agreement is terminated due to an Event of
          Default by the Defaulting Party. The Early Termination Date shall be
          no earlier than the day notice of an Early Termination Date is
          effective and no later than 20 days after such notice is effective.

1.15      EGS means an electric generation supplier that is licensed by the PUC
          ---
          to provide retail electricity services to end-use customers.

1.16      Energy means the electrical output of an electric generating unit,
          ------
          usually stated in kilowatt-hours or megawatt-hours.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       9

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 10
Rate Schedule FERC No. 9

1.17      Equitable Defenses means any bankruptcy, insolvency, reorganization
          ------------------
          and other laws affecting creditors' rights generally, and with regard
          to equitable remedies, the discretion of the court before which
          proceedings to obtain same may be pending.

1.18      FERC means the Federal Energy Regulatory Commission or any successor
          ----
          government agency.

1.19      Firm means that quality of electric service that requires the Supplier
          ----
          to provide Unforced Capacity and Energy without interruption or
          curtailment, except in circumstances qualifying as a Force Majeure
          event under this Agreement.

1.20      FitchIBCA means Fitch, Inc. or its successor.
          ---------

1.21      Force Majeure shall have the meaning set forth in Article 7.
          -------------

1.22      Generation Shopping Credits mean the rates and charges billed to
          ---------------------------
          Retail Customers for capacity and energy under the Retail Tariff
          (including Gross Receipts Taxes), pursuant to the Restructuring
          Settlement, the Retail Tariff and the PUC procedures and rules in
          effect as of the date of this Agreement and as modified during the
          term of this Agreement by the PUC, including any changes to those
          rates and charges that are contemplated by the Restructuring
          Settlement, but excluding any changes to those rates and charges that
          are not contemplated by the Restructuring Settlement. For purposes of
          this section, changes contemplated by the Restructuring Settlement
          shall include changes to those rates and charges made pursuant to
          Section C of the Restructuring Settlement, and changes not
          contemplated by the Restructuring Settlement shall include changes to
          those rates and charges made pursuant to the qualified rate order
          entered by the PUC on May 21, 1999 at Docket No. R-00994637 (Exhibit
          A, Paragraph 37). The Generation Shopping Credits in effect at the
          commencement of this Agreement are contained in the Retail Tariff.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       10

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 11
Rate Schedule FERC No. 9

1.23      Good Utility Practice means the practices, methods and acts engaged in
          ---------------------
          or approved by a significant portion of the electric power industry
          during the relevant time period, or the practices, methods and acts
          which, in the exercise of reasonable judgment in light of the facts
          known at the time the decision was made, could have been expected to
          accomplish the desired result consistent with reliability, safety,
          expedition, the requirements of governmental agencies having
          jurisdiction and, if appropriate or relevant under the transaction in
          question, at the lowest reasonable cost. Good Utility Practice is not
          intended to be limited to the optimum practice, method or act to the
          exclusion of all others, but rather to constitute a spectrum of
          acceptable practices, methods or acts.

1.24      Gross Receipts Tax means the Pennsylvania state tax that is collected
          ------------------
          by PPL Electric and is levied on every dollar of retail revenue
          collected by PPL Electric, as amended or modified from time to time.

1.25      Guarantor means an entity that provides a corporate guaranty on one
          ---------
          Party's behalf in a form acceptable to the other Party.

1.26      Imbalance Charges shall include any scheduling penalties, imbalance
          -----------------
          penalties, or unauthorized overrun penalties, congestion charges,
          additional transmission charges, cash out charges, oversupply charges,
          undersupply charges, spot or balancing market charges, emergency
          energy charges, banking charges or similar penalties, fees or charges
          assessed by PJM, an independent system operator, Regional Transmission
          Organization or Transmission Provider for failure to satisfy balance,
          nomination or scheduling requirements.

1.27      Interest Rate means, for any date, the lesser of: (a) the per annum
          -------------
          rate of interest equal to the prime lending rate as may from time to
          time be published in The Wall Street Journal under "Money Rates" on
          such day (or if not published on such day on the most recent preceding
          day on which

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       11

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 12
Rate Schedule FERC No. 9

          published), plus two percent (2%); and (b) the maximum rate permitted
          by applicable law.

1.28      Letter of Credit means one or more irrevocable, transferable standby
          ----------------
          letters of credit issued by a U.S. commercial bank or a foreign bank
          with a U.S. branch, with such bank having a credit rating of at least
          "A-" from S&P or "A3" from Moody's, in a form acceptable to the Party
          requiring the Letter of Credit.

1.29      Load Management Actions mean load interruptions for economic and
          -----------------------
          emergency load control pursuant to the Interruptible Service Rate
          provisions of the Retail Tariff and/or the cancellation of Demand Free
          Days pursuant to Rate Schedules LP-5 and/or LP-6 of the Retail Tariff.

1.30      Load Management Energy means the hourly amount of Energy consumed by
          ----------------------
          Retail Customers during the hours the Load Management Action was
          requested by Primary Supplier that would not have been consumed had
          PPL Electric instituted the Load Management Action as directed by
          Primary Supplier.

1.31      Load Management Energy Cost means the sum of the products of the
          ---------------------------
          hourly PPL Zonal locational marginal price, as reported by PJM, and
          the Load Management Energy. Primary Supplier shall not be required to
          utilize or change its utilization of its owned or controlled assets,
          including contractual assets, or market positions to minimize PPL
          Electric's liability for Load Management Energy.

1.32      Market Value of Energy and Unforced Capacity means the sum of the
          --------------------------------------------
          market values, respectively, of the POLR Supply Amount and POLR
          Capacity Obligation for the period used to determine the Collateral
          Termination Payment, as established by agreement of the Parties
          pursuant to Section 1.8.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       12

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 13
Rate Schedule FERC No. 9

1.33      Monthly Generation Revenue means the amount of revenue attributable to
          --------------------------
          all Retail Customers that were billed by PPL Electric for energy and
          capacity during a particular month, whether or not such billed amounts
          have actually been paid by such Retail Customers, net of the
          following: (a) Gross Receipts Tax; (b) any revenue collected under the
          State Tax Adjustment Surcharge; and (c) the amount owed to PPL
          EnergyPlus for purchases under the PPL Electric Call Option; provided
          that any change in Tax rates from those in effect on the date of this
          Agreement, and/or the imposition of any Tax not currently in effect,
          shall not operate to change the Monthly Generation Revenue, and
          further provided that if any customer or class of customers that would
          have been served under a rate schedule or rate rider in effect on the
          date of this Agreement, is required by an order of the PUC to be
          served either under (a) a different rate schedule or rate rider; or
          (b) a rate schedule or rate rider that is not in effect as of the date
          of this Agreement, then the Monthly Generation Revenue shall be
          calculated to include the revenues that would have been attributable
          to such customer or class of customers had such order not been issued.

1.34      Moody's means Moody's Investor Services, Inc. or its successor.
          -------

1.35      Performance Assurance means collateral in the form of either cash,
          ---------------------
          Letter(s) of Credit, or other security acceptable to the Party
          requesting the Performance Assurance. Notwithstanding any provision in
          this Agreement to the contrary, either Party shall be entitled to
          require Letters of Credit or other Performance Assurance in an amount
          not to exceed $300 million dollars.

1.36      PJM means the PJM Interconnection, L.L.C., the PJM Office of
          ---
          Interconnection, and any successor entities, including a Regional
          Transmission Organization.

1.37      PJM Ancillary Services means the services (or their successors)
          ----------------------
          defined as "Ancillary Services" under the PJM Tariff, as modified from
          time to time, including the following: PJM Scheduling, System Control
          and Dispatch Service Charges; RTO Scheduling, System Control Dispatch
          Service Charges; Reactive Supply and Voltage Control from Generation

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       13

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 14
Rate Schedule FERC No. 9

          Sources Service; Regulation and Frequency Response; Energy Imbalance;
          Operating Reserves--Spinning Reserve Service; Operating
          Reserves--Supplemental Reserve Service; and Ramapo PAR Facilities.

1.38      PJM Standards mean all criteria, rules and standards, billing system
          -------------
          procedures, operating procedures, manuals, tariffs and market rules
          adopted by PJM, as amended from time to time, and any successor
          standards.

1.39      PJM Tariff means the PJM Open Access Transmission Tariff, including
          ----------
          any schedules, appendices or exhibits attached thereto, as amended and
          revised from time-to-time, and any successor transmission tariff.

1.40      POLR or Provider of Last Resort means the entity satisfying the
          -------------------------------
          obligations set forth in the Pennsylvania Electricity Generation
          Customer Choice and Competition Act and the Restructuring Settlement.

1.41      POLR Capacity Obligation means the amount of Unforced Capacity,
          ------------------------
          expressed in megawatts, equal to: (a) the actual amount of PPL
          Electric's Unforced Capacity requirements with respect to all Retail
          Customers as determined by PJM under the RAA and PJM Standards; minus
          (b) the actual amount of Unforced Capacity, if any, supplied to PPL
          Electric by PPL EnergyPlus under the PPL Electric Call Option. It is
          understood that the POLR Capacity Obligation may change over time as a
          result of several factors, including: changes in peak load
          responsibility; changes in Unforced Capacity requirements; the
          requirement that certain residential customers be assigned to CDS; and
          customer decisions regarding whether to take retail service from PPL
          Electric (as POLR), a CDS supplier, or an Alternate Supplier.

1.42      POLR Service means retail electric service provided to Retail
          ------------
          Customers that do not take service from Alternate Suppliers or CDS
          suppliers, subject to the terms and conditions set forth in the

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       14

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 15
Rate Schedule FERC No. 9

          Pennsylvania Electricity Generation Customer Choice and Competition
          Act, the Retail Tariff and the Restructuring Settlement.

1.43      POLR Supply Amount means the amount of Energy, expressed in kilowatts
          ------------------
          per hour, equal to: (a) the actual hourly Energy, including all
          losses, necessary to serve all Retail Customers; plus (b) Company Use
          Energy; minus (c) the actual hourly Energy, if any, supplied to PPL
          Electric by PPL EnergyPlus under the PPL Electric Call Option. It is
          understood that the POLR Supply Amount may change over time as a
          result of several factors, including: seasonal factors; load
          fluctuation; increased or decreased usage; transmission or
          distribution outages; extremes in weather; the requirement that
          certain residential customers be assigned to CDS; and customer
          decisions regarding whether to take retail service from PPL Electric
          (as POLR), a CDS supplier, or an Alternate Supplier.

1.44      PPL Electric Call Option means the contractual right of PPL Electric
          ------------------------
          to purchase an amount of Energy and Unforced Capacity from PPL
          EnergyPlus, under Article 4 of the Power Sales Agreement between PPL
          Electric and PPL EnergyPlus designated as PPL EnergyPlus' FERC
          Electric Rate Schedule No. 4.

1.45      PPL Electric Downgrade Event means any of the following: (a) the
          ----------------------------
          Credit Rating of PPL Electric or its Guarantor(s) by S&P is below
          "BBB-"; (b) the Credit Rating of PPL Electric or its Guarantor(s) by
          Moody's is below "Baa3"; (c) the Credit Rating of PPL Electric or its
          Guarantor(s) by FitchIBCA below "BBB-"; (d) neither PPL Electric's nor
          its Guarantor(s) Credit Rating has a Credit Rating by either S&P,
          Moody's, or FitchIBCA; or (e) with respect to PPL Electric or its
          Guarantor(s), the occurrence and continuation of a default or other
          similar condition or event under one or more agreements or
          instruments, individually or collectively, relating to indebtedness
          for borrowed money which in aggregate is in excess of the Cross
          Default Amount, which results in such indebtedness becoming
          immediately due and payable.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       15

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 16
Rate Schedule FERC No. 9

1.46      PPL EnergyPlus means PPL EnergyPlus, LLC.
          --------------

1.47      PPL Zone shall have the meaning set forth in the PJM Tariff. If the
          --------
          PJM Tariff does not establish a meaning for the PPL Zone, or if PJM
          otherwise eliminates the PPL Zone, then the PPL Zone shall mean the
          collection of buses constituting the PPL Electric system.

1.48      Primary Supplier means the Supplier designated by PPL Electric to
          ----------------
          exercise management responsibility for Load Management Actions. The
          Primary Supplier shall be permitted to use the ALM credits allowed to
          PPL Electric pursuant to and as calculated under the RAA in such
          manner, as in its sole discretion, it shall determine.

1.49      PUC means the Pennsylvania Public Utility Commission and any successor
          ---
          government agency.

1.50      RAA means the Reliability Assurance Agreement Among Load Serving
          ---
          Entities in the PJM Control Area, or any successor agreement.

1.51      Replacement Cost means the cost at which PPL Electric, acting in a
          ----------------
          commercially reasonable manner, purchases a replacement for Unforced
          Capacity and Energy specified in this Agreement but not delivered by
          Supplier, plus: (a) costs reasonably incurred by PPL Electric in
          purchasing such substitute Unforced Capacity and Energy; (b)
          additional transmission and congestion charges, if any, reasonably
          incurred by PPL Electric; and (c) any penalties, ratcheted demand or
          similar charges, including Imbalance Charges. Alternatively, at PPL
          Electric's option, Replacement Cost shall mean the market price for
          the Unforced Capacity and Energy not delivered, as determined by PPL
          Electric in a commercially reasonable manner. PPL Electric shall not
          be required to utilize or change its utilization of its owned or
          controlled assets, including contractual assets, or market positions
          to minimize Supplier's liability.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       16

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 17
Rate Schedule FERC No. 9

1.52      Restructuring Settlement means the settlement of PPL Electric's
          ------------------------
          restructuring proceeding approved by the PUC in Docket No. R-00973954
          on August 27, 1998, including all appendices, attachments, or exhibits
          thereto.

1.53      Retail Customers means the end-use electric customers in PPL
          ----------------
          Electric's service territory that take POLR Service from PPL Electric
          under the Retail Tariff, excluding any and all customers taking
          service under Rate Schedule LPEP.

1.54      Retail Tariff means the schedules of terms, conditions and rates
          -------------
          pursuant to which PPL Electric intends to bill all retail customers,
          excluding any and all customers under Rate Schedule LPEP, during the
          term of this Agreement, as may be amended from time to time subject to
          PUC approval.

1.55      RFP means the PPL Electric Request for Proposals that led to this
          ---
          Agreement.

1.56      S&P means the Standard & Poor's Rating Group (a division of
          ---
          McGraw-Hill, Inc.) or its successor.

1.57      Sales Price means the price at which Supplier, acting in a
          -----------
          commercially reasonable manner, resells any Unforced Capacity and
          Energy not accepted by PPL Electric, deducting from such proceeds any:
          (a) costs reasonably incurred by Supplier in reselling such Unforced
          Capacity and Energy; (b) additional transmission and congestion
          charges, if any, reasonably incurred by Supplier in delivering such
          Unforced Capacity and Energy to the third party purchasers; and (c)
          any penalties, ratcheted demand or similar charges. Alternatively, at
          Supplier's option, Sales Price shall mean the market price for such
          Unforced Capacity or Energy not accepted, as determined by Supplier in
          a commercially reasonable manner. Supplier shall not be required to
          utilize or change its utilization of its owned or controlled assets,
          including contractual assets, or market positions to minimize PPL
          Electric's liability.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       17

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 18
Rate Schedule FERC No. 9

1.58      Schedule(ing) means the actions of Supplier or its designated
          -------------
          representatives, including Transmission Providers if applicable, of
          notifying, requesting and confirming to each other and any other
          necessary entities of the quantity of Unforced Capacity and Energy to
          be delivered on any given hour during the term of this Agreement.

1.59      Supplier Downgrade Event shall mean any of the following: (a) the
          ------------------------
          Credit Rating of Supplier's Guarantor(s) by S&P is below "BBB-"; (b)
          the Credit Rating of Supplier's Guarantor(s) by Moody's is below
          "Baa3"; (c) the Credit Rating of Supplier's Guarantor(s) by FitchIBCA
          is below "BBB-"; (d) Supplier's Guarantor(s) has no Credit Rating by
          either S&P, Moody's, or FitchIBCA; or (e) with respect to Supplier or
          its Guarantor(s), the occurrence and continuation of a default or
          other similar condition or event under one or more agreements or
          instruments, individually or collectively, relating to indebtedness
          for borrowed money which in aggregate is in excess of the Cross
          Default Amount, which results in such indebtedness becoming
          immediately due and payable.

1.60      Supplier's Percentage shall mean one hundred percent (100%).
          ---------------------

1.61      Tax(es) means all ad valorem, property, occupation, utility, gross
          -------
          receipts, sales use, excise, and other taxes or governmental charges,
          licenses, permits, and assessments, other than taxes based on net
          income or net worth.

1.62      Termination Payment shall have the meaning provided below depending on
          -------------------
          whether Supplier or PPL Electric is the Defaulting Party. Where
          Supplier is the Defaulting Party, Termination Payment shall mean the
          sum of: (a) the amount of any damages under Section 10.5 for any
          failure to deliver prior to (and including) the Early Termination
          Date; plus (b) any amount due to PPL Electric under Section 3.2.4.
          Where PPL Electric is the Defaulting Party, Termination Payment shall
          mean the sum of: (a) the amount of any damages under Section 10.5 for

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       18

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 19
Rate Schedule FERC No. 9

          any failure to accept prior to (and including) the Early Termination
          Date; plus (b) all amounts owed but not yet paid by PPL Electric,
          whether or not such amounts are then due, for performance provided
          prior to the Early Termination Date under this Agreement.

1.63      Third-Party Ancillary Services means all services or requirements
          ------------------------------
          necessary to support the transmission of capacity and Energy from
          resources to loads while maintaining reliable operation of any
          third-party transmission systems (other than the PJM transmission
          system) in accordance with Good Utility Practice, including:
          Scheduling, System Control and Dispatch Service Charges; Reactive
          Supply and Voltage Control from Generation Service; Regulation and
          Frequency Response; Energy Imbalance; Operating Reserves--Spinning
          Reserve Service; and Operating Reserves--Supplemental Reserve Service.

1.64      Transmission Provider means an entity transmitting Energy to the
          ---------------------
          Delivery Point.

1.65      Unforced Capacity shall have the meaning set forth in the RAA.
          -----------------
          Unforced Capacity shall be deemed to include a successor product
          approved by PJM, and that successor product shall have the meaning
          established by PJM.

                                 ARTICLE 2: TERM

2.1       Term. The term of this Agreement shall commence at 0000 hours on
          ----
          January 1, 2002, and shall terminate automatically at 2400 hours on
          December 31, 2009, unless terminated earlier pursuant to Article 10 or
          15.

2.2       Provisions Surviving Termination. The provisions of Articles 5-8,
          --------------------------------
          10-13 and 16 and Section 15.4 shall survive any termination of this
          Agreement, including any definitions under Article 1 applicable to the
          surviving Articles and Sections.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       19

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 20
Rate Schedule FERC No. 9

                       ARTICLE 3: DESCRIPTION OF SERVICES

3.1       Energy. For every hour during the term of this Agreement, Supplier
          ------
          shall provide and sell, and PPL Electric shall accept and purchase, an
          amount of energy equal to Supplier's Percentage of the POLR Supply
          Amount, rounded upward to the nearest kilowatt-hour. Supplier shall
          provide its fixed percentage of the POLR Supply Amount on a Firm,
          continuous and hourly basis.

          3.1.1     Actual Energy Required. Supplier is responsible for
                    ----------------------
                    providing the amount of Energy equal to its percentage of
                    the POLR Supply Amount.

          3.1.2     Character of Energy. All energy delivered under this
                    -------------------
                    Agreement shall be in the form of three-phase alternating
                    current having a nominal frequency of sixty cycles per
                    second.

          3.1.3     PPL Electric Call Option. PPL Electric shall purchase Energy
                    ------------------------
                    under the PPL Electric Call Option during each hour of every
                    day during the term of this Agreement. Energy purchased
                    under the PPL Electric Call Option shall be accounted for as
                    provided for under Section 1.43.

3.2       Unforced Capacity. Supplier shall provide and sell, and PPL Electric
          -----------------
          shall accept and purchase, an amount of Unforced Capacity equal to
          Supplier's Percentage of the POLR Capacity Obligation. Supplier shall
          provide Unforced Capacity on the same basis (daily, seasonal or any
          other basis) as PJM requires PPL Electric to provide Unforced Capacity
          under the RAA, and may meet the Unforced Capacity obligations in this
          Agreement through any mechanism acceptable to PJM.

          3.2.1     Actual Unforced Capacity Required. Supplier is also
                    ---------------------------------
                    responsible for providing the amount of Unforced Capacity
                    equal to its percentage of the POLR Capacity.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       20

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 21
Rate Schedule FERC No. 9

          3.2.2     PPL Electric Call Option. PPL Electric shall purchase
                    ------------------------
                    Unforced Capacity under the PPL Electric Call Option every
                    day during the term of this Agreement, and such Unforced
                    Capacity shall be accounted for as provided under Section
                    1.41.

          3.2.3     PJM Requirements. Supplier shall take all action, including
                    ----------------
                    cooperating with PPL Electric so PPL Electric can take any
                    necessary action, required to ensure that the Unforced
                    Capacity that the Supplier is responsible for providing
                    under this Agreement is available to PPL Electric to be
                    credited against PPL Electric's Unforced Capacity obligation
                    as determined by PJM. Supplier will allow PPL Electric
                    reasonable access to and the opportunity to comment on data
                    submitted by Supplier to PJM relating to Supplier's
                    provision of Unforced Capacity. The obligation of
                    confidentiality provided in Article 13 will apply to all
                    data and information to which Supplier provides PPL Electric
                    access.

          3.2.4     Capacity Deficiency Charges. If PPL Electric fails to
                    ---------------------------
                    satisfy fully its Unforced Capacity obligation under the RAA
                    for a period for which an Unforced Capacity obligation is
                    established, and Supplier has failed to meet its obligations
                    under this Agreement pursuant to Sections 3.2 and 3.2.1 to
                    provide Unforced Capacity for such period, then Supplier
                    shall pay to PPL Electric a dollar amount equal to the sum
                    of: (1) the Capacity Deficiency Charges assessed by PJM for
                    such period attributable to the Supplier's failure to meet
                    its obligations to provide Unforced Capacity; and (2) the
                    distribution of capacity deficiency revenues that PPL
                    Electric would have received from PJM for such period had
                    PPL Electric fully satisfied its Unforced Capacity
                    obligation under the RAA for such period. In the event that
                    a person or persons other than Supplier was obligated to PPL
                    Electric to provide Unforced Capacity for a period, and such
                    other person(s) failed to provide all of the Unforced
                    Capacity each was obligated to provide, the amount payable
                    under (2) above shall be apportioned among Supplier and all
                    other persons failing to provide Unforced Capacity for such
                    period in proportion to the amount of Unforced Capacity that
                    each had failed to provide. For purposes of this section, a
                    period for which an Unforced Capacity obligation is

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       21

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 22
Rate Schedule FERC No. 9

                    established shall mean an interval, portion of an interval,
                    or such other period established by the RAA as amended from
                    time to time. In the event that any persons other than
                    Supplier are obligated to PPL Electric to provide Unforced
                    Capacity for a period, Supplier shall not be obligated to
                    make the payment under (2) above, unless all such persons
                    are under the same obligation as Supplier to make such
                    payments.

          3.2.5     Successor Unforced Capacity Requirements. Supplier and PPL
                    ----------------------------------------
                    Electric agree that the intent of this Article is for
                    Supplier to provide a fixed percentage, equal to Supplier's
                    Percentage, of the POLR Capacity Obligation, which is
                    currently measured by the Unforced Capacity requirements
                    determined by PJM under the RAA and PJM Standards. If PJM
                    Standards or the RAA relating to Unforced Capacity are
                    modified, Supplier will comply with the modified PJM
                    Standards and RAA and will remain obligated to provide the
                    required amount of Unforced Capacity. Should Unforced
                    Capacity be replaced with some other service or product,
                    then Supplier shall provide and sell, and PPL Electric shall
                    accept and purchase, an amount of such replacement product
                    or service equal to Supplier's Percentage of PPL Electric's
                    requirements for such replacement product or service
                    associated with POLR Service. In that event, the provisions
                    of this Agreement relating to Unforced Capacity shall apply
                    to the replacement product or service instead of Unforced
                    Capacity.

3.3       Transmission Service. Supplier shall be responsible for all
          --------------------
          transmission service necessary to deliver the Energy and Unforced
          Capacity supplied under this Agreement to the Delivery Point. PPL
          Electric shall be responsible for transmission service at and from the
          Delivery Point to the points at which PPL Electric delivers energy to
          its customers, including network integration transmission service, or
          its successor, under the PJM Tariff.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       22

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 23
Rate Schedule FERC No. 9

3.4      Ancillary Services.
         -------------------

          3.4.1     PJM Ancillary Services. PPL Electric or its agent/contractor
                    ----------------------
                    shall be responsible for securing and providing the
                    following Ancillary Services, or their successors as defined
                    by PJM, required to deliver the POLR Supply Amount within
                    PJM: PJM Scheduling, System Control and Dispatch Service
                    Charges; PPL Electric's RTO Scheduling, System Control
                    Dispatch Service Charges; Reactive Supply and Voltage
                    Control from Generation Sources Service; Regulation and
                    Frequency Response; Operating Reserves--Spinning Reserve
                    Service; Operating Reserves--Supplemental Reserve Service;
                    and Ramapo PAR Facilities. Supplier shall be responsible for
                    all other services and their costs within PJM, ancillary or
                    otherwise, necessary to meet its obligations to provide
                    Energy and Unforced Capacity at the Delivery point,
                    including Energy Imbalance.

          3.4.2     Third-Party Ancillary Services. Supplier will be responsible
                    ------------------------------
                    for all Ancillary Services and any other services required
                    to deliver its share of the POLR Supply Amount across any
                    transmission system other than the PJM transmission system.

3.5       Primary Supplier. Supplier shall also serve as PPL Electric's Primary
          ----------------
          Supplier and shall have the responsibilities and benefits of the
          Primary Supplier as provided herein.

3.6       Supply to Customers Under New Rate Schedules or Rate Riders. The
          -----------------------------------------------------------
          Parties agree to negotiate, in good faith, for Supplier to provide the
          Energy and Unforced Capacity necessary to serve any customer or class
          customers that are required by an order of the PUC to be served under
          a rate schedule or rate rider of the Retail Tariff that is not in
          effect as of the date of this Agreement.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       23

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 24
Rate Schedule FERC No. 9

                      ARTICLE 4: FORECASTING AND SCHEDULING

4.1       Energy Forecasts. Each Business Day during the term of this Agreement,
          ----------------
          PPL Electric shall provide Supplier a seven-day, hourly forecast of
          the POLR Supply Amount. The daily forecasts shall be provided
          electronically each Business Day. At all times during the term of this
          Agreement, PPL Electric shall provide Supplier a real-time data signal
          providing a general indication of the POLR Supply Amount, based on
          currently available metered interchange data and bilateral
          transactions.

4.2       Reliance on Forecasts. Supplier has the option of independently
          ---------------------
          generating forecasts of its Unforced Capacity and Energy obligations
          or utilizing the forecasts provided by PPL Electric. Supplier and PPL
          Electric acknowledge and agree that all forecasts provided by PPL
          Electric under this Agreement and as part of the RFP process are based
          on large numbers of assumptions and are subject to significant
          uncertainties and contingencies, many of which are outside the control
          of PPL Electric. Therefore, Supplier and PPL Electric also agree that
          the forecasts provided under this Agreement and the RFP process are
          non-binding and PPL Electric shall not have any liability for any
          information contained, or not contained, in those forecasts. Nothing
          in this Article, and no amount of reliance on the forecasts described
          herein, reduces or eliminates Supplier's obligation to meet its
          percentage of the POLR Supply Amount and the POLR Capacity Obligation
          as set out in this Agreement.

4.3       Scheduling. Supplier shall be responsible for all Scheduling
          ----------
          requirements necessary to ensure the delivery of the Unforced Capacity
          and Energy delivered under this Agreement. In accordance with PJM
          Standards, PPL Electric shall cooperate to establish an account for
          Supplier with PJM. Supplier shall utilize this account to Schedule
          with PJM, on PPL Electric's behalf, a load forecast reflecting
          Supplier's proportionate responsibility for the POLR Supply Amount.
          This load forecast may be based on the forecasts provided by PPL
          Electric or Supplier's independently generated forecasts, but in
          either event, Supplier retains all responsibility for the load

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       24

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 25
Rate Schedule FERC No. 9

          forecast it submits to PJM. Supplier shall also use its account to
          Schedule with PJM all transmission service and generation services,
          including Unforced Capacity and Energy, that Supplier is required to
          provide under this Agreement. Supplier shall comply with all PJM
          Standards when submitting data to and Scheduling with PJM.

                                ARTICLE 5: TAXES

5.1       Taxes. Supplier shall pay or cause to be paid all Taxes imposed by any
          -----
          government authority on or with respect to the Unforced Capacity and
          Energy provided under this Agreement that arise prior to the Delivery
          Point ("Supplier's Taxes"). New Taxes or changes in Tax rates imposed
          directly on Supplier shall be borne by Supplier. PPL Electric shall
          pay or cause to be paid all Taxes imposed by any government authority
          on or with respect to the Unforced Capacity and Energy that arise at
          and from the Delivery Point, other than ad valorem, franchise or
          income taxes which are related to the sale of Unforced Capacity and
          Energy under this Agreement and are, therefore, the responsibility of
          the Supplier ("PPL Electric's Taxes"). If Supplier is required by law
          or regulation to remit or pay PPL Electric's Taxes, PPL Electric shall
          promptly reimburse Supplier for such Taxes. If PPL Electric is
          required by law or regulation to remit or pay Supplier's Taxes,
          Supplier shall promptly reimburse PPL Electric for such Taxes, and PPL
          Electric may deduct the amount of any such Taxes from the sums due to
          Supplier under Article 6 of this Agreement. Nothing shall obligate or
          cause a Party to pay or be liable to pay any Taxes imposed by any
          government authority for which it is exempt under the law. Both
          Parties shall use reasonable efforts to administer this Agreement and
          implement the provisions in accordance with their intent to minimize
          Taxes.

                     ARTICLE 6: RECONCILIATIONS AND PAYMENTS

6.1       Reconciliation with PJM. The Parties acknowledge and agree that
          -----------------------
          Supplier shall be responsible for all reconciliations and settlements
          required by PJM and associated with the sale of Unforced Capacity and

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       25

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 26
Rate Schedule FERC No. 9

          Energy under this Agreement, including the reconciliations required in
          the real-time and balancing markets, or their successors, as defined
          by PJM. Supplier shall be solely responsible for any credits and
          charges, including Imbalance Charges, in connection with or relating
          to the PJM reconciliations and settlements. To the extent any of these
          credits and charges are assessed to PPL Electric's PJM account, rather
          than Supplier's account, Supplier and PPL Electric agree to cooperate
          so that PJM can make the appropriate adjustment in the next PJM
          reconciliation to transfer the charges or credits to Supplier's
          account. If PJM Standards relating to reconciliation, settlements, the
          real-time market or the balancing market are modified, Supplier shall
          comply with the modified PJM Standards and shall remain responsible
          for all reconciliations and settlements with PJM. These provisions
          shall not apply to any reconciliations or settlements required as part
          of PJM's market for the Regulation Ancillary Service, or its
          successor.

6.2       Payment of Monthly Generation Revenue. For each calendar month during
          -------------------------------------
          the term of this Agreement, PPL Electric shall remit to Supplier the
          dollar amount equal to Supplier's Percentage of the Monthly Generation
          Revenue, net of any payments due PPL Electric under Section 3.2.4. The
          remission of Monthly Generation Revenue shall occur as soon as
          practicable following the end of the calendar month to which the
          Monthly Generation Revenue applies. The Parties recognize and agree
          that in calculating the Monthly Generation Revenue, PPL Electric shall
          pro rate by kilowatt-hour adjusted by time-use Supplier's portion of
          the Monthly Generation Revenue, to the extent that Supplier supplied
          only a portion of its obligations under this Agreement. PPL Electric
          shall include with each payment of Monthly Generation Revenue an
          accounting of the amount of kilowatt-hours by rate schedule or rate
          rider that forms the basis of that month's payment.

6.3       Transition Periods. The Parties recognize that, during the first two
          ------------------
          months of the term of this Agreement, the Monthly Generation Revenue
          distributed by PPL Electric to Supplier will include revenue
          attributable to service provided in December of 2001 and not under the

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       26

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 27
Rate Schedule FERC No. 9

          terms of this Agreement. As soon as practicable, PPL Electric shall
          prorate the Monthly Generation Revenue remitted to Supplier during the
          first two months of this Agreement such that Supplier receives only
          those revenues associated with service provided on those days that
          fall within the term of this Agreement. The Parties further recognize
          that the initial Monthly Generation Revenue distributed by PPL
          Electric to Supplier for December of 2009 will not include all revenue
          attributable to service provided during that month. As soon as
          practicable, PPL Electric shall remit to Supplier the remainder of the
          Monthly Generation Revenue attributable to service provided in
          December of 2009 such that Supplier receives all revenues associated
          with service provided on those days that fall within the term of this
          Agreement.

6.4       Advance Payment. In addition to the payment of Monthly Generation
          ---------------
          Revenue, on or before January 1, 2002, PPL Electric shall remit to
          Supplier for performance under this Agreement, the following amount:
          $89,769,000.00.

6.5       Distribution of Capacity Deficiency Revenues. If PPL Electric receives
          --------------------------------------------
          a distribution of capacity deficiency revenues from PJM pursuant to
          Schedule 11 of the RAA or any success thereto, and Supplier has met
          its obligations under this Agreement pursuant to Sections 3.2 and
          3.2.1 to provide Unforced Capacity for the period covered by such
          capacity deficiency revenues, then PPL Electric shall distribute to
          Supplier Supplier's Percentage of the capacity deficiency revenues
          received from PJM. If PPL Electric would have received such a
          distribution of capacity deficiency revenues but did not receive such
          revenues because PPL Electric did not fully satisfy its Unforced
          Capacity obligation under the RAA for the period covered by such
          capacity deficiency revenues, and Supplier has met its obligations
          under this Agreement pursuant to Sections 3.2 and 3.2.1 to provide
          Unforced Capacity for such period, then PPL Electric shall calculate
          and pay to Supplier the dollar amount equal to Supplier's Percentage
          of the distribution of capacity deficiency revenues that PPL Electric
          would have received from PJM had PPL Electric fully satisfied its
          Unforced Capacity obligation under the RAA for such period.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       27

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 28
Rate Schedule FERC No. 9

6.6       PPL Electric Resettlement Process. The Parties recognize that from
          ---------------------------------
          time to time during the term of this Agreement, Retail Customers may
          not be billed or may be billed incorrectly for POLR Service. As these
          incorrect billings are discovered and corrected by PPL Electric, PPL
          Electric shall account for such corrections in the next Monthly
          Generation Revenue payment and will either remit or charge Supplier
          according to the corrected billing.

6.7       Payment Disputes. In the event any portion of any payment is in
          ----------------
          dispute, PPL Electric shall pay the undisputed amount to Supplier and
          shall submit a detailed written explanation of the basis for the
          dispute. The Parties shall use their best efforts to attempt to
          resolve such disputes on a timely basis. Upon determination of the
          correct payment amount, the adjusted payment shall be paid promptly
          after such determination with interest at the Interest Rate and
          computed from the date payment was originally due to the date payment
          is made. If the Parties are unable to resolve the dispute, either
          Party may exercise its available administrative or legal remedies,
          including those set forth in Article 11.

                            ARTICLE 7: FORCE MAJEURE

7.1       Force Majeure. To the extent either Party is prevented by Force
          -------------
          Majeure from carrying out, in whole or part, its obligations under
          this Agreement and such Party (the "Claiming Party") has complied with
          the procedures in Section 7.4, then the Claiming Party shall be
          excused from the performance of its obligations with respect to this
          Agreement (other than the obligation to make payments then due or
          becoming due with respect to performance prior to the Force Majeure).
          The Claiming Party shall remedy the Force Majeure with all reasonable
          dispatch. The non-Claiming Party shall not be required to perform or
          resume performance of those obligations that correspond to the
          obligations of the Claiming Party excused by Force Majeure; provided,
          however, that the non-Claiming Party shall only be excused from
          performing or resuming performance to the same extent that the
          Claiming Party is excused by Force Majeure.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       28

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 29
Rate Schedule FERC No. 9

7.2       Force Majeure Event. Force Majeure means an event or circumstance that
          -------------------
          prevents one Party from performing its obligations under this
          Agreement, which event or circumstance was not foreseeable as of the
          date this Agreement was agreed to, which is not within the reasonable
          control of, or the result of the negligence of, the Claiming Party,
          and which, by the exercise of due diligence, the Claiming Party is
          unable to overcome or avoid or cause to be avoided. Force Majeure
          shall not be based on: (a) PPL Electric's inability economically to
          use or resell the services purchased hereunder; (b) the loss, failure
          or cost of Unforced Capacity and Energy needed by Supplier to meet its
          obligations under this Agreement; or (c) Supplier's ability to sell
          the Unforced Capacity and Energy at a price greater than the payment
          specified in this Agreement.

7.3       Transmission Service. Supplier may not raise a claim of Force Majeure
          --------------------
          based in whole or in part on curtailment or interruption by a
          Transmission Provider unless: (a) Supplier has contracted for firm
          transmission with a Transmission Provider for the Unforced Capacity
          and Energy to be delivered to or accepted at the Delivery Point; (b)
          equivalent amounts of Unforced Capacity and Energy are otherwise
          unavailable to Supplier for delivery to the Delivery Point; (c) such
          curtailment or interruption is due to "force majeure" or
          "uncontrollable force" or a similar term as defined under the
          Transmission Provider's transmission tariff; provided, however, that
          existence of the foregoing factors shall not be sufficient to
          conclusively or presumptively prove the existence of a Force Majeure
          absent a showing of other facts and circumstances which in the
          aggregate with such factors establish that a Force Majeure, as defined
          in Section 7.2, has occurred.

7.4       Force Majeure Procedures. Upon the occurrence of an event of Force
          ------------------------
          Majeure, the Claiming Party shall: (a) provide prompt written notice
          of such Force Majeure event to the other Party, including an
          estimation of its expected duration and the probable impact on the
          performance of its obligations hereunder; (b) exercise all reasonable
          efforts in accordance with Good Utility Practice to continue to

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       29

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 30
Rate Schedule FERC No. 9

          perform its obligations under this Agreement; (c) expeditiously take
          action to correct or cure the event or condition excusing performance,
          provided, however, that settlement of labor disputes will be
          completely within the sole discretion of the Party affected by such
          labor dispute; (d) exercise all reasonable efforts to mitigate or
          limit damages to the other Party; and (e) provide prompt notice to the
          other Party of the cessation of the event or condition giving rise to
          its excuse from performance. Any obligation under this Agreement shall
          be suspended only to the extent caused by such Force Majeure event and
          only during the continuance of any inability of performance caused by
          such Force Majeure event but for no longer period.

                    ARTICLE 8: CREDITWORTHINESS AND SECURITY

8.1      Supplier Creditworthiness and Security.
         ---------------------------------------

          8.1.1     Financial Information. If requested by PPL Electric,
                    ---------------------
                    Supplier or any Guarantor shall deliver: (a) within 120 days
                    following the end of each fiscal year, a copy of their
                    respective annual reports containing audited consolidated
                    financial statements for such fiscal year; and (b) within 60
                    days after the end of each of their respective first three
                    fiscal quarters of each fiscal year, a copy of their
                    quarterly reports, containing unaudited consolidated
                    financial statements for such fiscal quarter. In all cases,
                    the statements shall be for the most recent accounting
                    period and prepared in accordance with generally accepted
                    accounting principles; provided, however, that should any
                    such statements not be available on a timely basis due to a
                    delay in preparation or certification, such delay shall not
                    be an Event of Default so long as Supplier and any Guarantor
                    diligently pursue the preparation, certification and
                    delivery of the statements.

          8.1.2     Collateral Threshold. If at any time and from time to time
                    --------------------
                    during the term of this Agreement (and notwithstanding
                    whether an Event of Default has occurred), the Collateral

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       30

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 31
Rate Schedule FERC No. 9

                    Termination Payment exceeds the Collateral Threshold, then,
                    on any Business Day, PPL Electric may request Supplier to
                    provide Performance Assurance in an amount equal to the
                    amount by which the Collateral Termination Payment exceeds
                    the sum of the relevant Collateral Threshold (rounding
                    upwards for any fractional amount to the next $200,000) plus
                    any amounts owed but not yet paid by PPL Electric, whether
                    or not such amounts are then due, for performance provided
                    under this Agreement prior to such request. The Performance
                    Assurance shall be delivered within two Business Days of the
                    date of such request. No more frequently than weekly, the
                    Supplier, at its sole cost, may request that the posted
                    Performance Assurance be reduced to the amount by which the
                    Collateral Termination Payment then exceeds the relevant
                    Collateral Threshold (rounding upwards for any fractional
                    amount to the next $200,000).

          8.1.3     Downgrade Event. If at any time there shall occur a Supplier
                    ---------------
                    Downgrade Event in respect of Supplier's Credit Rating, then
                    PPL Electric may require Supplier to establish and maintain
                    for so long as the Supplier Downgrade Event is continuing,
                    Performance Assurance in an amount determined by PPL
                    Electric in a commercially reasonable manner. In the event
                    Supplier shall fail to provide such Performance Assurance or
                    a guaranty or other credit assurance acceptable to PPL
                    Electric within three Business Days of receipt of notice,
                    then an Event of Default shall be deemed to have occurred
                    and PPL Electric shall be entitled to the remedies set forth
                    in Article 10 of this Agreement. Supplier shall provide PPL
                    Electric with written notice of the occurrence of any
                    Supplier Downgrade Event, within two Business Days of such
                    occurrence.

          8.1.4     Credit Assurances. In addition to the Downgrade Events
                    -----------------
                    specified in the previous section, if PPL Electric has
                    reasonable grounds to believe that Supplier's
                    creditworthiness or performance under this Agreement will
                    become unsatisfactory, PPL Electric will provide Supplier
                    with written notice requesting Performance Assurance in an
                    amount determined by PPL Electric in a commercially
                    reasonable manner. Upon receipt of such notice, Supplier

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       31

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 32
Rate Schedule FERC No. 9

                    shall have three Business Days to remedy the situation by
                    providing such Performance Assurance to PPL Electric. In the
                    event that Supplier fails to provide such Performance
                    Assurance, or a guaranty or other credit assurance
                    acceptable to PPL Electric within three Business Days of
                    receipt of notice, then an Event of Default under Article 10
                    will be deemed to have occurred and PPL Electric will be
                    entitled to the remedies set forth in Article 10 of this
                    Agreement.

          8.1.5     Grant of Security Interest. To secure its obligations under
                    --------------------------
                    this Agreement and to the extent Supplier delivers
                    Performance Assurance hereunder, Supplier hereby grants to
                    PPL Electric a present and continuing security interest in,
                    and lien on (and right of setoff against), and assignment
                    of, all Performance Assurance, cash collateral and cash
                    equivalent collateral and any and all proceeds resulting
                    therefrom or the liquidation thereof, whether now or
                    hereafter held by, on behalf of, or for the benefit of, PPL
                    Electric, and Supplier agrees to take such action as PPL
                    Electric reasonably requires in order to perfect PPL
                    Electric's first-priority security interest in, and lien on
                    (and right of setoff against), such collateral and any and
                    all proceeds resulting therefrom or from the liquidation
                    thereof.

8.2       PPL Electric Creditworthiness and Security.
          ------------------------------------------

          8.2.1     Financial Information. If requested by Supplier, PPL
                    ---------------------
                    Electric and any Guarantor shall deliver: (a) within 120
                    days following the end of each fiscal year, a copy of their
                    respective annual reports containing audited consolidated
                    financial statements for such fiscal year; and (b) within 60
                    days after the end of each of their respective first three
                    fiscal quarters of each fiscal year, a copy of their
                    quarterly reports, containing unaudited consolidated
                    financial statements for such fiscal quarter. In all cases,
                    the statements shall be for the most recent accounting
                    period and prepared in accordance with generally accepted
                    accounting principles; provided, however, that should any
                    such statements not be available on a timely basis due to a
                    delay in preparation or certification, such delay shall not

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       32

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 33
Rate Schedule FERC No. 9

                    be an Event of Default so long as PPL Electric and any
                    Guarantor diligently pursue the preparation, certification
                    and delivery of the statements.

          8.2.2     Collateral Threshold. If at any time and from time to time
                    --------------------
                    during the term of this Agreement (and notwithstanding
                    whether an Event of Default has occurred), the Collateral
                    Termination Payment exceeds the Collateral Threshold, then,
                    on any Business Day, Supplier may request PPL Electric to
                    provide Performance Assurance, in an amount equal to the
                    amount by which the Collateral Termination Payment exceeds
                    the relevant Collateral Threshold (rounding upwards for any
                    fractional amount to the next $200,000). The Performance
                    Assurance shall be delivered within two Business Days of the
                    date of such request. No more frequently than weekly, PPL
                    Electric, at its sole cost, may request that the posted
                    Performance Assurance be reduced to the amount by which the
                    Collateral Termination Payment then exceeds the relevant
                    Collateral Threshold (rounding upwards for any fractional
                    amount to the next $200,000).

          8.2.3     Downgrade Event. If at any time there shall occur a PPL
                    ---------------
                    Electric Downgrade Event in respect of PPL Electric, then
                    Supplier may require PPL Electric to establish and maintain
                    for so long as the PPL Electric Downgrade Event is
                    continuing, Performance Assurance in an amount determined by
                    Supplier in a commercially reasonable manner. In the event
                    PPL Electric shall fail to provide such Performance
                    Assurance or a guaranty or other credit assurance acceptable
                    to Supplier within three Business Days of receipt of notice,
                    then an Event of Default shall be deemed to have occurred
                    and Supplier shall be entitled to the remedies set forth in
                    Article 10 of this Agreement. PPL Electric shall provide
                    Supplier with written notice of the occurrence of any PPL
                    Electric Downgrade Event, within two Business Days of such
                    occurrence.

          8.2.4     Credit Assurances. In addition to the Downgrade Events
                    -----------------
                    specified in the previous section, if Supplier has
                    reasonable grounds to believe that PPL Electric's

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       33

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 34
Rate Schedule FERC No. 9

                    creditworthiness or performance under this Agreement will
                    become unsatisfactory, PPL Electric will provide Supplier
                    with written notice requesting Performance Assurance in an
                    amount determined by Supplier in a commercially reasonable
                    manner. Upon receipt of such notice, PPL Electric shall have
                    three Business Days to remedy the situation by providing
                    such Performance Assurance to Supplier. In the event that
                    PPL Electric fails to provide such Performance Assurance, or
                    a guaranty or other credit assurance acceptable to Supplier
                    within three Business Days of receipt of notice, then an
                    Event of Default under Article 10 will be deemed to have
                    occurred and Supplier will be entitled to the remedies set
                    forth in Article 10 of this Agreement.

          8.2.5     Grant of Security Interest. To secure its obligations under
                    --------------------------
                    this Agreement and to the extent PPL Electric delivers
                    Performance Assurance hereunder, PPL Electric hereby grants
                    to Supplier a present and continuing security interest in,
                    and lien on (and right of setoff against), and assignment
                    of, all Performance Assurance, cash collateral and cash
                    equivalent collateral and any and all proceeds resulting
                    therefrom or the liquidation thereof, whether now or
                    hereafter held by, on behalf of, or for the benefit of,
                    Supplier, and PPL Electric agrees to take such action as
                    Supplier reasonably requires in order to perfect Supplier's
                    first-priority security interest in, and lien on (and right
                    of setoff against), such collateral and any and all proceeds
                    resulting therefrom or from the liquidation thereof.

                   ARTICLE 9: REPRESENTATIONS AND WARRANTIES

9.1       Representations. As of the date this Agreement is first executed, each
          ---------------
          Party represents and warrants to the other Party that: (a) it is duly
          organized, validly existing and in good standing under the laws of the
          jurisdiction of its formation; (b) it will obtain all regulatory
          authorizations necessary for it to legally perform its obligations
          under this Agreement; (c) the execution, delivery and performance of
          this Agreement is within its powers, have been duly authorized by all
          necessary action and do not violate any of the terms and conditions in

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       34

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 35
Rate Schedule FERC No. 9

          its governing documents, any contracts to which it is a party or any
          law, rule, regulation, order or the like applicable to it; (d) this
          Agreement constitutes its legally valid and binding obligation
          enforceable against it in accordance with its terms, subject to any
          Equitable Defenses; (e) it is not Bankrupt and there are no
          proceedings pending or being contemplated by it or, to its knowledge,
          threatened against it which would result in it being or becoming
          Bankrupt; (f) there is not pending or, to its knowledge, threatened
          against it or any of its Affiliates any legal proceedings that could
          materially adversely affect its ability to perform its obligations
          under this Agreement; (g) no Event of Default or potential Event of
          Default with respect to it has occurred and is continuing and no such
          event or circumstance would occur as a result of its entering into or
          performing its obligations under this Agreement; and (h) it is acting
          for its own account, has made its own independent decision to enter
          into this Agreement and, as to whether this Agreement is appropriate
          or proper for it based upon its own judgment, is not relying upon the
          advice or recommendations of the other Party in so doing, and is
          capable of assessing the merits of and understanding, and understands
          and accepts, the terms, conditions and risks of this Agreement. As of
          the date this Agreement is first executed, Supplier represents and
          warrants to PPL Electric that it has entered into this Agreement in
          connection with the conduct of its business and it has the ability to
          provide the Unforced Capacity and Energy referred to in this
          Agreement.

9.2       Duration. The representations in this Article shall continue in full
          --------
          force and effect for the term of this Agreement.

                   ARTICLE 10: EVENTS OF DEFAULT AND REMEDIES

10.1      Parties - Events of Default. An "Event of Default" shall mean, with
          ---------------------------
          respect to a Party (a "Defaulting Party"), the occurrence of any of
          the following: (a) the failure to make, when due, any payment required
          pursuant to this Agreement if such failure is not remedied within
          three Business Days after written notice; (b) any representation or

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       35

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 36
Rate Schedule FERC No. 9

          warranty made by such Party herein is false or misleading in any
          material respect when made or when deemed made or repeated; (c) the
          failure to perform, unless excused by Force Majeure, any material
          covenant or obligation set forth in this Agreement (except to the
          extent constituting a separate Event of Default); (d) such Party
          becomes Bankrupt; (e) the failure to satisfy the
          creditworthiness/collateral requirements, including Performance
          Assurances, agreed to pursuant to Article 8; (f) such Party
          consolidates or amalgamates with, or merges with or into, or transfers
          all or substantially all of its assets to another entity and such
          Party fails to comply with Article 14; and (g) a Force Majeure event
          that prevents Supplier from delivering Unforced Capacity and Energy
          for longer than seven days or multiple Force Majeure events that
          prevent Supplier from delivering Unforced Capacity and Energy for a
          cumulative period of fourteen days in any one year.

10.2      Guarantors - Events of Default. An "Event of Default" shall mean, with
          ------------------------------
          respect to the Guarantor of a Party, the occurrence of any of the
          following: (a) if any representation or warranty made by a Guarantor
          in connection with this Agreement is false or misleading in any
          material respect when made or when deemed made or repeated; (b) the
          failure of a Guarantor to make any payment required or to perform any
          other material covenant or obligation in any guaranty made in
          connection with this Agreement and such failure shall not be remedied
          within three Business Days after written notice; (c) a Guarantor
          becomes Bankrupt; (d) the failure of a Guarantor's guaranty to be in
          full force and effect for purposes of this Agreement (other than in
          accordance with its terms) prior to the satisfaction of all
          obligations of such Party under each Transaction to which such
          guaranty shall relate without the written consent of the other Party;
          and (e) a Guarantor shall repudiate, disaffirm, disclaim, or reject,
          in whole or in part, or challenge the validity of any guaranty.

10.3      Remedies. If an Event of Default shall have occurred and be
          --------
          continuing, the other Party (the "Non-Defaulting Party") shall, at its
          sole discretion, have the right: (a) to terminate this Agreement,
          designate an Early Termination Date and accelerate all amounts owing

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       36

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 37
Rate Schedule FERC No. 9

          between the Parties, including the Termination Payment; (b) withhold
          any payments due to the Defaulting Party under this Agreement,
          including the right to setoff, recoup and counterclaim any amounts
          owed under this Agreement until such time (if any) as judgment is
          given against such set-off, recoupment or counterclaim; (c) suspend
          performance; (d) exercise any rights and remedies, under this
          Agreement or any law currently in effect, with respect to all
          Performance Assurance; (e) commence an action to require the
          Defaulting Party to remedy the Event of Default and specifically
          perform its obligations under this Agreement; (f) seek recovery of
          damages as provided under Section 10.5; (g) require the return of the
          amount of any advance payments attributable to performance not
          provided, to the extent such amount has not been recovered through a
          Termination Payment; and (h) exercise such other remedies it may have
          in equity or at law.

10.4      Declaration of an Early Termination Date and Calculation of
          -----------------------------------------------------------
          Termination Payment. If the Non-Defaulting Party elects to declare an
          -------------------
          Early Termination Date, it shall calculate, in accordance with Section
          1.62, the Termination Payment by the Early Termination Date or as soon
          thereafter as is reasonably practicable.

          10.4.1    Notice of Payment of Termination Payment. As soon as
                    ----------------------------------------
                    practicable after calculation of the Termination Payment,
                    notice shall be given by the Non-Defaulting Party to the
                    Defaulting Party of the amount of the Termination Payment
                    and whether the Termination Payment is due to or due from
                    the Non-Defaulting Party. The notice shall include a written
                    statement explaining in reasonable detail the calculation of
                    such amount. The Termination Payment shall be made by the
                    Party that owes it within two Business Days after such
                    notice is effective.

          10.4.2    Disputes With Respect to Termination Payment. If the
                    --------------------------------------------
                    Defaulting Party disputes the Non-Defaulting Party's
                    calculation of the Termination Payment, in whole or in part,
                    the Defaulting Party shall, within two Business Days of
                    receipt of Non-Defaulting Party's calculation of the

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       37

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 38
Rate Schedule FERC No. 9

                    Termination Payment, provide to the Non-Defaulting Party a
                    detailed written explanation of the basis for such dispute;
                    provided, however, that the Defaulting Party shall transfer,
                    along with the written explanation, Performance Assurance to
                    the Non-Defaulting Party in an amount equal to the
                    Termination Payment.

10.5      Failure to Deliver/Accept. In the event that Supplier fails to sell or
          -------------------------
          deliver, or PPL Electric fails to accept or purchase, the Parties
          shall calculate damages in the manner specified below; provided
          however, that nothing in this Agreement limits the right of the
          non-Defaulting Party to elect any other remedy identified in Section
          10.3, in addition to or in lieu of, the damages remedy set out below.

          10.5.1    Supplier Failure. If Supplier fails to schedule and/or
                    ----------------
                    deliver all or part of the Unforced Capacity or Energy
                    required under this Agreement, and such failure is not
                    excused by Force Majeure, then Supplier shall pay PPL
                    Electric, on the earlier of the date payment would otherwise
                    be due in respect of the month in which the failure occurred
                    or within five Business Days of invoice receipt, an amount
                    for such deficiency equal to the positive difference, if
                    any, obtained by subtracting the amount of Monthly
                    Generation Revenue that Supplier would have received for the
                    undelivered Unforced Capacity or Energy from the Replacement
                    Cost. On the same day of the payment identified above,
                    Supplier shall also return to PPL Electric the amount of any
                    advance payment attributable performance not provided, as
                    calculated on a kilowatt-hour basis and adjusted for
                    seasonal variations. The invoice submitted by PPL Electric
                    for these amounts shall include a written statement
                    explaining in reasonable detail the calculation of such
                    amount.

          10.5.2    PPL Electric Failure. Subject to the limitations set forth
                    --------------------
                    in Section 12.7, if PPL Electric fails to accept all or part
                    of the Unforced Capacity or Energy required under this
                    Agreement, and such failure is not excused by Force Majeure,
                    then PPL Electric shall pay Supplier, on the earlier of the
                    date payment would otherwise be due in respect of the month

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       38

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 39
Rate Schedule FERC No. 9

                    in which the failure occurred or within five Business Days
                    of invoice receipt, an amount for such deficiency equal to
                    the positive difference, if any, obtained by subtracting the
                    Sales Price from the amount of Monthly Generation Revenue
                    that Supplier would have received for the unaccepted
                    Unforced Capacity or Energy. The invoice submitted by
                    Supplier for such amount shall include a written statement
                    explaining in reasonable detail the calculation of such
                    amount.

                            ARTICLE 11: DISAGREEMENTS

11.1      Informal Resolution. Except to the extent otherwise provided in
          -------------------
          Section 6.7, if any disagreement arises on matters concerning this
          Agreement, the disagreement shall be referred to one representative of
          each Party, who shall attempt to timely resolve the disagreement. If
          such representatives cannot resolve the disagreement within a
          reasonable time, or a Party fails to appoint a representative within
          ten days of written notice of the existence of a disagreement, then
          either Party may request, but not require, that the matter proceed to
          arbitration as provided below.

11.2      Arbitration. If pursuant to the previous section the Parties are
          -----------
          unable to resolve a disagreement arising on a matter pertaining to
          this Agreement, such disagreement may be settled by arbitration,
          provided that both Parties agree that the disagreement should be
          resolved by arbitration; except with respect to arbitration under
          Section 15.4 which shall be mandatory and shall not require the
          agreement of both Parties. The arbitration shall be governed by the
          United States Arbitration Act (9 U.S.C. ss.1 et seq.), and any award
          issued pursuant to such arbitration may be enforced in any court of
          competent jurisdiction. An agreement to arbitrate under this section,
          the requirement to arbitrate under Section 15.4, and any other
          agreement or consent to arbitrate entered into in accordance herewith
          will be specifically enforceable under the prevailing arbitration law
          of any court having jurisdiction. Notice of demand for arbitration

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       39

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 40
Rate Schedule FERC No. 9

          must be filed in writing with the other Party to this Agreement.
          Arbitration shall be conducted as follows:

          11.2.1    Arbitrators. The Parties shall attempt to agree on a person
                    -----------
                    with special knowledge and expertise with respect to the
                    matter at issue to serve as arbitrator. If the Parties
                    cannot agree on an arbitrator within ten days, each shall
                    then appoint one person to serve as an arbitrator and the
                    two thus appointed shall select a third arbitrator with such
                    special knowledge and expertise to serve as chairperson of
                    the panel of arbitrators; and such three arbitrators shall
                    determine all matters by majority vote. Prior to
                    appointment, each arbitrator shall agree to conduct such
                    arbitration in accordance with the terms of this Agreement.

          11.2.2    Arbitration Terms. To the extent not in conflict with the
                    -----------------
                    procedures set forth herein, which shall govern, such
                    arbitration shall be held in accordance with the prevailing
                    rules of the American Arbitration Association for Commercial
                    Arbitration in Philadelphia, Pennsylvania. The arbitrator(s)
                    shall have the right only to interpret and apply the terms
                    and conditions of this Agreement and to order any remedy
                    allowed by this Agreement, but may not change any term or
                    condition of this Agreement, deprive either Party of any
                    right or remedy expressly provided hereunder, or provide any
                    right or remedy that has been expressly excluded hereunder.
                    The arbitrator(s) shall give a written decision to the
                    Parties stating their findings of fact and conclusions of
                    law, and shall furnish to each Party a copy thereof signed
                    by the arbitrator(s) within five calendar days from the date
                    of their determination. The arbitrator's(s') decision shall
                    be final and binding upon the Parties. Each Party shall pay
                    the cost of the arbitrator(s) with respect to those issues
                    as to which they do not prevail, as determined by the
                    arbitrator(s).

11.3      FERC Jurisdiction. Subject to the limitations stated in Section 15.5,
          -----------------
          nothing in this Agreement shall preclude any Party from filing a
          petition or complaint with FERC with respect to any arbitrable claim
          over which FERC has exclusive jurisdiction. To the extent that FERC

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       40

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 41
Rate Schedule FERC No. 9

          asserts or accepts jurisdiction over such claim, the decision,
          findings of fact or order of FERC shall be final and binding, subject
          to judicial review under the Federal Power Act, and any arbitration
          proceedings that may have commenced with respect to such claim prior
          to the assertion or acceptance of jurisdiction by FERC shall be
          terminated.

                   ARTICLE 12: INDEMNIFICATION AND LIABILITY

12.1      Title Transfer. Title to, possession of, and risk of loss of the
          --------------
          Unforced Capacity and Energy scheduled and accepted or delivered
          hereunder shall transfer from Supplier to PPL Electric at the Delivery
          Point. Supplier warrants that at the time of delivery Supplier shall
          have good title to the Unforced Capacity and Energy sold and delivered
          hereunder and the right to sell such to PPL Electric.

12.2      Supplier's Indemnification of PPL Electric. Supplier hereby agrees to
          ------------------------------------------
          indemnify, defend and hold harmless PPL Electric, its agents, servants
          and Affiliates and the respective officers, directors, employees and
          representatives (collectively, "PPL Electric's Indemnitees") of each,
          from and against any and all losses, claims, damages or liabilities
          (including reasonable attorneys' fees actually incurred, damage to
          property, penalties or fines imposed by government authorities, and
          injury to or death of any person) arising out of: (a) the fraud,
          negligence, or willful misconduct of Supplier relating to the Unforced
          Capacity and Energy delivered under this Agreement until such Unforced
          Capacity and Energy has been delivered to PPL Electric at the Delivery
          Point; and (b) Supplier's breach of this Agreement or failure to
          perform any of the obligations hereunder. Supplier shall not be
          responsible to indemnify, defend or hold harmless PPL Electric to the
          extent the losses, claims, damages or liabilities are caused by the
          fraud, negligence or the willful misconduct of the PPL Electric's
          Indemnitees.

12.3      PPL Electric's Indemnification of Supplier. PPL Electric hereby agrees
          ------------------------------------------
          to indemnify, defend and hold harmless Supplier, its agents, servants
          and Affiliates and the respective officers, directors, employees and

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       41

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 42
Rate Schedule FERC No. 9

          representatives (collectively, "Supplier's Indemnitees") of each, from
          and against any and all losses, claims, damages or liabilities
          (including reasonable attorneys' fees actually incurred, the loss
          of/or claims for loss or damage to property, penalties or fines
          imposed by government authorities, and injury to or death of any
          person) arising out of: (a) the fraud, negligence, or willful
          misconduct of PPL Electric relating to the Unforced Capacity and
          Energy delivered under this Agreement after such Unforced Capacity and
          Energy has been delivered to PPL Electric at the Delivery Point; and
          (b) PPL Electric's breach of this Agreement or failure to perform any
          of the obligations hereunder. PPL Electric shall not be responsible to
          indemnify, defend or hold harmless Supplier to the extent the losses,
          claims, damages or liabilities are caused by the fraud, negligence or
          the willful misconduct of the Supplier's Indemnitees.

12.4      Indemnification Procedures. Any Party seeking indemnification under
          --------------------------
          this Agreement shall give the other Party prompt notice of such claim.
          To the extent that the other Party will have been actually and
          materially prejudiced as a result of the failure of the other Party to
          provide such prompt notice, such notice will be a condition precedent
          to any liability of the other Party under the indemnification
          provisions contained in this Agreement. Neither Party may settle or
          compromise any claim for which indemnification is sought under this
          Agreement without the prior consent of the other Party, provided that
          such consent shall not be unreasonably withheld or delayed. Each
          Party's obligations under this Agreement towards the other Party and
          the other Party's Indemnitees are conditioned upon such other Party's
          Indemnitees providing such cooperation as the indemnifying Party may
          reasonably request in connection with its defense or settlement of the
          claim or suit against such other Party's Indemnitees.

12.5      LIMITATION OF LIABILITY. IN NO EVENT OR UNDER ANY CIRCUMSTANCES SHALL
          -----------------------
          EITHER PARTY (INCLUDING SUCH PARTY'S AFFILIATES AND THEIR RESPECTIVE
          REPRESENTATIVES, AGENTS, SERVANTS, OFFICERS, DIRECTORS, EMPLOYEES AND
          AGENTS) BE LIABLE TO THE OTHER PARTY (INCLUDING SUCH PARTY'S

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       42

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 43
Rate Schedule FERC No. 9

          AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES, AGENTS, SERVANTS,
          OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS) FOR ANY SPECIAL,
          INCIDENTAL, EXEMPLARY, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
          DAMAGES IN THE NATURE OF LOST PROFITS, WHETHER SUCH LOSS IS BASED ON
          CONTRACT, WARRANTY OR TORT (INCLUDING INTENTIONAL ACTS, ERRORS OR
          OMISSIONS, NEGLIGENCE, INDEMNITY, STRICT LIABILITY OR OTHERWISE).

12.6      Limitation of Liability for Retail Tariff Actions. Subject to the
          -------------------------------------------------
          requirements set forth in the Retail Tariff and the Restructuring
          Settlement (as applied by the PUC) and Section 12.6.1 of this
          Agreement, PPL Electric, or its designated agent or contractor, shall
          remain the POLR for retail customers in its service territory and
          shall continue to perform the retail functions, services and
          customer-care responsibilities associated with PPL Electric's retail
          customers, including management of the Retail Tariff's Demand Free
          Days Program, Interruptible Service Rate and Price Response Service.
          Accordingly, except as provided in Section 12.6.1 of this Agreement,
          Supplier and PPL Electric agree that PPL Electric shall be entitled to
          take those actions that PPL Electric deems appropriate, in its sole
          discretion, in complying with its obligations under the Retail Tariff,
          the Restructuring Settlement and the laws of the Commonwealth of
          Pennsylvania. PPL Electric shall not be responsible to Supplier for
          any losses, claims, damages or liabilities of any kind for those
          actions it determines, in its sole discretion, are appropriate in
          meeting those obligations. Except as provided in Section 12.6.1 of
          this Agreement, PPL Electric shall not be responsible to Supplier for
          any losses, claims, damages or liabilities of any kind for any action
          or inaction taken pursuant to the load management provisions of the
          Retail Tariff, including Demand Free Days Program, Interruptible
          Service Rate and Price Response Service.

          12.6.1    Failure to Comply With Directions of Primary Supplier. PPL
                    -----------------------------------------------------
                    Electric shall institute Load Management Actions at such
                    times and for such duration as directed by the Primary
                    Supplier. If PPL Electric fails to institute a Load
                    Management Action when so directed by the Primary Supplier,

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       43

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 44
Rate Schedule FERC No. 9

                    and the implementation of the Load Management Action would
                    have been consistent with the requirements of the Retail
                    Tariff, PPL Electric shall pay Supplier, on the earlier of
                    the date payment would otherwise be due in respect of the
                    month in which the failure to call such Load Management
                    Action occurred or within five Business Days of invoice
                    receipt, an amount equal to the positive difference, if any,
                    obtained by subtracting: (a) the sum of the Monthly
                    Generation Revenue attributable to the Load Management
                    Energy and the amount of any advance payment attributable to
                    the Load Management Energy as calculated on a kilowatt-hour
                    basis and adjusted for seasonal variations; from (b) the
                    Load Management Energy Cost. The invoice submitted by
                    Supplier for these amounts shall include a written statement
                    explaining in reasonable detail the calculation of such
                    amount.

12.7      Limitation of Liability for Outages and Reliability Actions. Provided
          -----------------------------------------------------------
          that PPL Electric manages and maintains its transmission and
          distribution systems in accordance with Good Utility Practice, PPL
          Electric shall not be responsible to Supplier for any losses, claims,
          damages or liabilities associated with the failure to accept all or
          part of the Unforced Capacity and Energy under this Agreement or the
          interruption by PPL Electric of POLR Service due to: (a) outages or
          failures on PPL Electric's transmission or distribution system; or (b)
          actions taken by PPL Electric to protect the security and integrity of
          the PPL Electric transmission or distribution system.

12.8      RFP Information. No member of PPL Electric or its representatives made
          ---------------
          any representation or warranty as to the accuracy, reliability or
          completeness of the RFP and the information contained on the RFP
          Website (including forecasts), or shall have any liability for any
          information, representations or omissions from the RFP and the
          information contained on the RFP Website (including forecasts). Any
          discussion of legislation, regulation, Retail Tariff requirements, or
          Restructuring Settlement requirements in the RFP or the RFP Website
          was provided for convenience, and no representation was made that the

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       44

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 45
Rate Schedule FERC No. 9

          RFP or the information contained on the RFP Website provided a
          complete explanation of any legislation, regulation, Retail Tariff
          requirement, or Restructuring Settlement requirement.

                    ARTICLE 13: AUDITING AND CONFIDENTIALITY

13.1      Auditing. Each Party has the right, at its sole expense and during
          --------
          normal working hours, to examine the records of the other Party to the
          extent reasonably necessary to verify the accuracy of any statement,
          charge or computation made pursuant to this Agreement. If requested,
          Supplier shall provide to PPL Electric statements evidencing the
          quantity of Unforced Capacity provided and Energy delivered at the
          Delivery Point. If any such examination reveals any inaccuracy in any
          statement, the necessary adjustments in such statement and the
          payments thereof will be made promptly and shall bear interest
          calculated at the Interest Rate from the date the overpayment or
          underpayment was made until paid; provided, however, that no
          adjustment for any statement or payment will be made unless objection
          to the accuracy thereof was made prior to the lapse of 12 months from
          the rendition thereof, and thereafter any objection shall be deemed
          waived.

13.2      PJM Requirements. In recognition of the importance of the Supplier
          ----------------
          complying fully with all applicable PJM Standards and the potential
          adverse impact on PPL Electric for failure to so comply, Supplier
          agrees, consents and authorizes PPL Electric to request PJM to advise
          or notify PPL Electric from time to time about the status of the
          Supplier's compliance with the PJM Standards, as well as Supplier's
          failure to provide or maintain during the term of this Agreement the
          Unforced Capacity and Energy resources in such amounts and of such
          type, nature and extent as represented to PPL Electric in this
          Agreement.

13.3      Confidentiality. Neither Party shall disclose information obtained
          ---------------
          under this Agreement and designated by the other Party as
          confidential, except: (a) to the Party's employees, lenders, counsel,
          accountants or advisors who have a need to know such information and

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       45

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 46
Rate Schedule FERC No. 9

          have agreed to keep such terms confidential; or (b) in order to comply
          with any applicable law, regulation, or any exchange, control area,
          independent system operator or Regional Transmission Organization
          rule, or in connection with any court or regulatory proceeding.
          However, each Party shall, to the extent practicable, use reasonable
          efforts to prevent or limit the disclosure and shall provide
          reasonable notice to the other Party prior to the disclosure. The
          Parties shall be entitled to all remedies available at law or in
          equity to enforce, or seek relief in connection with, this
          confidentiality obligation. Information designated as confidential and
          disclosed by either Party to the other Party as part of the RFP
          leading up to this Agreement shall be protected as confidential by
          both Parties under this provision.

                             ARTICLE 14: ASSIGNMENT

14.1      Assignment. Neither Party shall assign (including a merger,
          ----------
          consolidation or sale of all or substantially all of the assets of
          such Party), transfer, convey, pledge, or dispose of this Agreement in
          whole or in part, or any of the rights, interests, or obligations
          hereunder without the prior written consent of the other Party, which
          consent shall not be unreasonably withheld.

14.2      Release of Rights. No assignment (including a merger, consolidation or
          -----------------
          sale of all or substantially all of the assets of such Party),
          transfer, conveyance, pledge or disposition of rights, interests or
          obligations under this Agreement by a Party shall relieve that Party
          from liability and financial responsibility for the performance
          thereof after any such transfer, assignment, conveyance, pledge or
          disposition unless and until: (a) the non-assigning Party has
          consented in writing to such assumption and to a release of the
          assigning Party from such liability, such consent not to be
          unreasonably conditioned, delayed or withheld; and (b) the transferee
          or assignee shall agree in writing to assume the obligations and
          duties of the assigning Party under this Agreement and, in the case of
          the transferee or assignee of the Supplier, certify in writing that
          its Credit Rating is above or equal to "BBB-" (in the case of S&P),
          "Baa3" (in the case of Moody's), and "BBB-" (in the case of
          FitchIBCA).

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       46

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 47
Rate Schedule FERC No. 9

14.3      Non-complying Transfers. Any assignment, transfer, conveyance, pledge
          -----------------------
          or disposition of this Agreement or any rights, obligations or
          interests hereunder by any Party without the written consent of the
          Party shall be void and of no force or effect.

14.4      Successors and Assigns. This Agreement shall inure to the benefit of
          ----------------------
          and be binding upon the Parties and their valid and permitted
          successors and assigns.

                             ARTICLE 15: REGULATORY

15.1     Regulatory Approvals.
         --------------------

          15.1.1    Filings. Supplier and PPL Electric will make any filings of
                    -------
                    this Agreement with regulatory agencies that may be
                    necessary to enable it to become effective, including a
                    filing by Supplier with FERC and, if Supplier is an
                    Affiliate of PPL Electric, a filing by PPL Electric with the
                    PUC. Supplier's filing with FERC will be made no later than
                    two Business Days after execution of this Agreement, unless
                    otherwise agreed to by the Parties. Both Parties will
                    reasonably cooperate with each other with respect to such
                    filings and provide to each other any information reasonably
                    required to enable compliance with applicable filing and
                    regulatory requirements.

          15.1.2    Condition Precedent. This Agreement is expressly contingent
                    -------------------
                    on all required regulatory actions for all generation supply
                    agreements necessary for PPL Electric to meet its POLR
                    obligations from January 1, 2002 through December 31, 2009,
                    including: (a) the filing by suppliers with FERC of the
                    generation supply agreements with PPL Electric; (b) the
                    acceptance for filing by FERC of the generation supply
                    agreement, if any, between PPL Electric and an Affiliate;
                    and (c) the approval by the PUC of the generation supply
                    agreement, if any, between PPL Electric and an Affiliate. If
                    any of the regulatory actions identified in this section is

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       47

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 48
Rate Schedule FERC No. 9

                    not completed by July 16, 2001, in a form that is acceptable
                    to the parties to the agreement subject to the required
                    regulatory action, PPL Electric may, at its sole discretion,
                    terminate and make null and void this Agreement. If
                    terminated, the Parties to this Agreement shall have the
                    option, but not the obligation, to renegotiate a new
                    agreement or terminate their relationship.

15.2      EGS Status. Nothing in this Agreement is intended to preclude Supplier
          ----------
          from becoming an EGS or otherwise providing retail electricity
          services to end-use customers in Pennsylvania.

15.3      Future Laws. This Agreement is made subject to present or future state
          -----------
          or federal laws, regulations, or orders properly issued by state or
          federal bodies having jurisdiction.

15.4      Regulatory Risk. If the PUC issues one or more orders that have a
          ---------------
          material adverse effect on the Monthly Generation Revenue that would
          have been paid to Supplier over the life of the Agreement but for such
          PUC order(s), including orders that require or approve changes to the
          Retail Tariff or Restructuring Settlement (other than changes
          identified in this Agreement), then the Parties shall attempt, in good
          faith, to negotiate a resolution that allocates between the Parties
          the impact of such PUC order(s) in a manner consistent with the
          allocation of risk contemplated by the obligations of the Parties
          under this Agreement prior to such PUC order(s) as affected by the
          Restructuring Settlement, and the Retail Tariff and the PUC procedures
          and rules in effect as of the date of this Agreement. If the Parties
          are unable to reach a voluntary agreement, then either Party may
          require the issue of how to allocate the impact of such PUC order(s)
          in a manner consistent with the allocation of risk contemplated by the
          obligations of the Parties under this Agreement prior to such PUC
          order(s), as affected by the Restructuring Settlement, and the Retail
          Tariff and the PUC procedures and rules in effect as of the date of
          this Agreement, to be submitted to mandatory and binding arbitration
          in accordance with Article 11 of this Agreement; provided that neither
          Party may request that the arbitrator(s) terminate this Agreement due
          to such PUC order(s).

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       48

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 49
Rate Schedule FERC No. 9

15.5      Sections 205 and 206 of the Federal Power Act. Notwithstanding any
          ---------------------------------------------
          provision of this Agreement to the contrary, the rates and payments
          for services specified herein shall remain in effect during the term
          of this Agreement, and shall not be subject to change through
          application to the FERC pursuant to the provisions of Sections 205 or
          206 of the Federal Power Act. The Parties hereby waive any and all
          rights to seek to modify the provisions of this Agreement, including
          the rates and payments stated herein, under Sections 205 and 206 of
          the Federal Power Act.

                         ARTICLE 16: GENERAL PROVISIONS

16.1      Governing Law and Venue. This Agreement and the rights and duties of
          -----------------------
          the Parties hereunder shall be governed by and construed, enforced and
          performed in accordance with the laws of the Commonwealth of
          Pennsylvania, without regard to principles of conflicts of law. Any
          such proceeding shall be brought in the Courts of the Commonwealth of
          Pennsylvania, except to the extent that the Parties agree to
          arbitration under Article 11 or the FERC has exclusive jurisdiction
          over the subject matter of the proceeding. Nothing in this Agreement
          is intended to confer jurisdiction, power or authority in the PUC over
          this Agreement or Supplier.

16.2      Notices. Any notice, request, demand, statement, or payment provided
          -------
          for in this Agreement shall be in writing, unless otherwise noted, and
          shall be sent by hand delivery, overnight courier service, or
          certified mail; provided, however, that notices of interruption or
          curtailment may be sent verbally, effective immediately and, upon
          request, confirmed in writing. Notice by hand delivery shall be
          effective at the close of business on the day actually received, if
          received during business hours on a Business Day, and otherwise shall
          be effective at the close of business on the next Business Day. Notice
          by overnight courier service or certified mail shall be effective two
          Business Days after it was sent. Notices shall be addressed to the

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       49

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 50
Rate Schedule FERC No. 9

          Parties as follows or to such other address as PPL Electric or
          Supplier shall from time to time designate by letter properly
          addressed:

<TABLE>
<CAPTION>

          PPL Electric:
          NOTICES & CORRESPONDENCE                           INVOICES
          ------------------------                           --------

<S>                                                          <C>
          PPL Electric Utilities Corporation                 PPL Electric Utilities Corporation
          Two North Ninth Street                             Two North Ninth Street
          Allentown, PA  18101-1179                          Allentown, PA  18101-1179
          Attn:  CONTRACT ADMINISTRATION (GENA9-4)           Attn:  ACCOUNTS PAYABLE (GENTW-13)
          Fax: 610-774-5694                                  Fax: 610-774-4415

          Supplier:
          NOTICES & CORRESPONDENCE                           PAYMENTS
          ------------------------                           --------

          PPL ENERGYPLUS, LLC                                PPL ENERGYPLUS, LLC
          Two North Ninth Street                             Two North Ninth Street
          Allentown, PA  18101-1179                          Allentown, PA  18101-1179
          Attn: CONTRACT ADMINISTRATION (GENTW-7)            Attn: CASH RECEIPTS (GENTW-7)
          Fax:  610-774-5077                                 Fax: 610-774-4511
</TABLE>

16.3      Relationship. This Agreement shall not be construed to create an
          ------------
          association, trust, partnership, or joint venture, or to impose a
          trust or partnership duty, obligation, or liability or agency
          relationship on or with regard to either Party.

16.4      Entire Agreement. This Agreement contains the complete and exclusive
          ----------------
          agreement and understanding between the Parties as to its subject
          matter, and supersedes all prior written and oral proposals,
          confidentiality agreements, understandings, statements and
          representations, all of which are merged herein. There are no
          restrictions, promises, representations, warranties, covenants or
          undertakings other than those expressly set forth or referred to
          herein. This Agreement constitutes the definite agreement between the
          Parties as contemplated by the confidentiality agreements entered into
          as part of the RFP process.

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       50

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 51
Rate Schedule FERC No. 9

16.5      Waiver. The failure of either Party hereto to enforce at any time any
          ------
          provision of this Agreement shall not be construed to be a waiver of
          such provision, nor in any way to affect the validity of this
          Agreement or any part hereof or the right of a Party thereafter to
          enforce each and every such provision. A waiver under this Agreement
          must be in writing and state that it is a waiver. No waiver of any
          breach of this Agreement shall be held to constitute a waiver of any
          other or subsequent breach.

16.6      Interpretation of Agreement.
          ---------------------------

          16.6.1    Headings. The headings used herein are for convenience and
                    --------
                    reference purposes only and shall in no way affect the
                    meaning or interpretation of the provisions of this
                    Agreement.

          16.6.2    Experienced Parties. The Parties agree that this Agreement
                    -------------------
                    is between two commercially experienced parties. Therefore,
                    in the event an ambiguity or question of intent or
                    interpretation arises, no presumption or burden of proof
                    shall arise favoring or disfavoring any Party by virtue of
                    authorship of any of the provisions of this Agreement.

          16.6.3    Include. The words "include" "including" or "includes" or
                    -------
                    any form thereof shall be interpreted to mean "including
                    without limitation" or "includes without limitation"
                    whenever used in this Agreement.

16.7      Counterparts. This Agreement may be executed in counterparts, each of
          ------------
          which shall be deemed an original, but all of which together shall
          constitute one and the same instrument.

16.8      Severability. Except as otherwise stated herein, any provision,
          ------------
          article or section of this Agreement that is declared or rendered
          unlawful by a court of law or regulatory agency with jurisdiction over
          the Parties, or deemed unlawful because of statutory change, will not

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       51

<PAGE>

PPL EnergyPlus, LLC                                        Original Sheet No. 52
Rate Schedule FERC No. 9

          otherwise affect the lawfulness, enforceability and applicability of
          the remaining provisions, articles or sections of this Agreement, nor
          shall it affect the obligations that arise under this Agreement.

16.9      No Third Party Beneficiaries. This Agreement is intended to be solely
          ----------------------------
          for the benefit of the Parties and their valid successors and
          permitted assigns and is not intended to and shall not confer any
          rights or benefits on any third party not a signatory hereto.

          IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to
be effective as of the day and year first written above.

PPL Electric Utilities Corporation      PPL EnergyPlus, LLC

By:     /s/ Michael E. Bray             By:      /s/ John F. Cotter
        -----------------------------            -------------------------------

Name:   Michael E. Bray                 Name:    John F. Cotter
        -----------------------------            -------------------------------

Title:                                  Title:   Vice President - Energy
        President                                Marketing and Trading
        -----------------------------            -------------------------------

Issued by:    John F. Cotter                          Effective: January 1, 2002
              Vice President - Energy Marketing and Trading
Issued on:    June 20, 2001

                                       52<PAGE>

                                                                    EXHIBIT 10.6

                                                               Execution Version

                    AMENDED AND RESTATED PPL SUPPLY GUARANTEE
                    -----------------------------------------

     THIS AMENDED AND RESTATED PPL SUPPLY GUARANTEE (this "Guarantee"), dated as
                                                           ---------
of July 17, 2001, is made by PPL ENERGY SUPPLY, LLC, a Delaware limited
liability company (in such capacity, the "Guarantor") in favor of, Lessor (as
                                          ---------
hereinafter defined), individually and for the benefit of each of the other
Beneficiaries (as hereinafter defined). Capitalized terms used but not otherwise
defined in this Guarantee shall have the meanings set forth in Appendix 1 to the
Participation Agreement (as defined below), and the rules of interpretation set
forth in Appendix 1 shall apply to this Guarantee; provided, however, if any
                                                   --------  -------
term used in this Guarantee is defined in both the Participation Agreement and
this Guarantee, then for purposes of this Guarantee only, the definition
provided in this Guarantee shall control.

                              W I T N E S S E T H:

     WHEREAS, the parties thereto have entered into that certain Amended and
Restated Participation Agreement, dated as of July 17, 2001 (as amended,
supplemented or otherwise modified, the "Participation Agreement"), among PPL
                                         -----------------------
Large Scale Distributed Generation II, LLC, a Delaware limited liability
company, as Lessee and Supervisory Agent (in either such capacity, "Lessee");
                                                                    ------
Large Scale Distributed Generation II Statutory Trust, a Connecticut statutory
trust, as Lessor ("Lessor"); First Union National Bank, not in its individual
                   ------
capacity, except as expressly stated therein, but solely as Administrative Agent
("Administrative Agent"); the Persons named on Schedule I to the Participation
  --------------------
Agreement, as Certificate Holders; and the financial institutions named on
Schedule II to the Participation Agreement, as Lenders;

     WHEREAS, Guarantor executed and delivered the Original PPL Supply
Guarantee;

     WHEREAS, pursuant to Section 15.1 of the Original Guarantee, upon Guarantor
entering into one of the revolving credit agreements contemplated by the Credit
Agreement Term Sheet (as defined in the Original Guarantee), Guarantor is
required, among other things, to enter into an amendment and restatement of the
Original Guarantee to add the affirmative, negative and financial covenants and
the representations and warranties contained in such credit agreement;

     WHEREAS, it is a condition precedent to the consummation by Participants of
the transactions to be consummated on the Second Document Closing Date and each
Advance Date that Guarantor agrees to execute and deliver this Guarantee;

     WHEREAS, it is in the best interests of Guarantor that the Second Document
Closing Date and each Advance Date occur; and

     WHEREAS, this Guarantee, and the execution, delivery and performance
hereof, have been duly authorized by all necessary corporate action of
Guarantor.

<PAGE>

     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Guarantor, Guarantor hereby agrees as follows:

     Section 1.     Applicable Guarantee. Guarantor hereby irrevocably and
                    --------------------
unconditionally guarantees to Lessor, individually and for the benefit of
Administrative Agent (both individually and in its capacity as Administrative
Agent), Trustee (both individually and in its capacity as Trustee), each
Participant, each other Indemnitee, and each of the foregoing Persons respective
successors and permitted assigns (Lessor, Administrative Agent, Trustee, each
Participant, each other Indemnitee and each of their respective successors and
assigns, individually a "Beneficiary" and collectively the "Beneficiaries") (a)
the full and prompt payment when due, whether by acceleration or otherwise, and
at all times thereafter, and (b) the full and prompt performance of, all of the
Liabilities (as hereinafter defined), including Interest, Yield and Fees on any
such Liabilities, whether accruing before or after any bankruptcy or insolvency
case or proceeding involving Lessee, Lessor, Trustee, any other PPL Group Member
or any other Person and, if Interest, Yield or Fees on any portion of such
obligations ceases to accrue by operation of law by reason of the commencement
of such case or proceeding, including such Interest, Yield and Fees as would
have accrued on any such portion of such obligations if such case or proceeding
had not commenced, and further agrees to pay all expenses (including reasonable
attorneys' fees and legal expenses) paid or incurred by or on behalf of any
Beneficiary in endeavoring to collect the Liabilities, or any part thereof, and
in enforcing this Guarantee.

     The term "Liabilities", as used herein, shall mean all of the following
               -----------
(without duplication), in each case howsoever created, arising or evidenced,
whether direct or indirect, joint or several, absolute or contingent, or now or
hereafter existing, or due or to become due: all Basic Rent, Supplemental Rent,
Contingent Costs, Prepaid Rent, the Aggregate Permitted Asset Balance, the Asset
Balance, each Lease Supplement Permitted Balance, each Lease Supplement Balance,
Termination Payments, Aggregate C&A Recourse Amount, each Lease Supplement
Recourse Amount, Aggregate RVG Amount, each Lease Supplement RVG Amount,
Capitalized Costs, Claims, indemnity amounts, and all additional amounts and
other sums at any time due and owing, including the amount required to be
deposited into the Cash Collateral Account by Lessee pursuant to Section 3.8 of
the Participation Agreement, and any other amount required to be paid to any
Beneficiary, by Lessee under the terms of the Supervisory Agreement, the Lease
or any other Operative Agreement and all other obligations to be performed by
Lessee and all representations, warranties, covenants, undertakings and
agreements of Lessee under the Participation Agreement, the Supervisory
Agreement, the Lease or any other Operative Agreement (whether or not Lessee,
Guarantor or any other Person shall be relieved or released from any and all
liability or obligations under any thereof, except on account of the full and
indefeasible payment and performance of all the Liabilities and full and strict
compliance by Guarantor with all its obligations under this Guarantee or as
provided for in Section 2.2 hereof). Reference to Lessee in this Guarantee shall
be deemed to include Lessee both in its capacity as Lessee and in its capacity
as Supervisory Agent under any of the Operative Agreements.

     In any action or proceeding involving any state corporate law, or any state
or federal bankruptcy, insolvency, reorganization or any other law affecting the
rights of creditors generally, if the obligations of Guarantor under this
Guarantee would otherwise be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account

                                       -2-

<PAGE>

of the amount of its liability under this Guarantee, then, notwithstanding any
other provision hereof to the contrary, the amount of such liability shall,
without any further action by Guarantor or any other Person, be automatically
limited and reduced to the greatest amount which is valid and enforceable and
not subordinated to the claims of other creditors as determined in such action
or proceeding.

     Guarantor agrees that, if any Insolvency Event shall occur at a time when
any of the Liabilities may not then be due and payable, Guarantor shall pay to
Administrative Agent for the benefit of the Beneficiaries forthwith the full
amount which would be payable hereunder by Guarantor if all Liabilities were
then due and payable.

     Notwithstanding any modification, discharge or extension of any of the
Liabilities or any amendment, modification, stay or cure of the rights or
remedies of any Beneficiary which may occur in any bankruptcy or reorganization
case or proceeding concerning Lessee, any other PPL Group Member or any other
Person, whether permanent or temporary, and whether assented to by any
Beneficiary, Guarantor hereby agrees that it shall be obligated hereunder to pay
and perform the Liabilities and to discharge its other obligations hereunder and
under the Operative Agreements in accordance with the terms of the Operative
Agreements and the terms of this Guarantee in effect on the date immediately
prior to such case or proceeding (including the obligation to perform and pay
the portion of the Liabilities consisting of or calculated upon Interest, Yield,
Fees or Basic Rent accruing or that would have accrued after the commencement of
such bankruptcy or reorganization case or proceeding). Guarantor understands and
acknowledges that by virtue of this Guarantee, it has specifically assumed any
and all risks of a bankruptcy or reorganization case or proceeding concerning
Lessee, any other PPL Group Member or any other Person.

     This Guarantee shall in all respects constitute an absolute and
unconditional guaranty of payment (and not of collection) and performance, and
shall remain in full force and effect until the full and indefeasible payment
and performance of all of the Liabilities and all of the Guarantor's obligations
hereunder (notwithstanding, without limitation, the dissolution of Guarantor,
Lessee or any other PPL Group Member). The Liabilities and obligations of
Guarantor hereunder may be enforced without the Beneficiaries (or Administrative
Agent, on their behalf) being required to resort to any other right, remedy or
security.

     Any or all of the following actions by Administrative Agent, on behalf of
itself and the Beneficiaries, or any Beneficiary shall not affect the liability
of Guarantor hereunder (whether or not notice of such action has been given to
Guarantor): (a) retaining or obtaining a lien upon or a security interest in any
property of Lessee, any PPL Group Member, any Lessee Person or any Affiliate of
any of the foregoing to secure any of the Liabilities or any obligation
hereunder; (b) retaining or obtaining the primary or secondary obligation of any
obligor or obligors, in addition to Guarantor, with respect to any of the
Liabilities; (c) extending or renewing for one or more periods (regardless of
whether longer than the original period), altering or exchanging any of the
Liabilities; (d) releasing or compromising any obligation of Guarantor hereunder
or any obligation of any nature of any other obligor (including, without
limitation, Lessee) with respect to any of the Liabilities; (e) releasing or
failing to perfect its lien upon or security interest in, or impairing,
surrendering, releasing or permitting any substitution or exchange for, all or
any part of any property securing any of the Liabilities or any obligation

                                       -3-

<PAGE>

hereunder, or extending or renewing for one or more periods (regardless of
whether longer than the original period) or releasing, compromising, altering or
exchanging any obligations of any nature of any obligor with respect to any such
property; and (f) resorting to Guarantor for payment of any of the Liabilities,
regardless of whether Administrative Agent or any other Person shall have
resorted to PPL Corporation, as guarantor under the PPL Corporation Guarantee,
any other Person or to any property securing any of the Liabilities or any
obligation hereunder or shall have proceeded against any other obligor primarily
or secondarily obligated with respect to any of the Liabilities (all of the
actions referred to in this paragraph being hereby expressly waived by
Guarantor).

     Section 2.     Guarantor's Obligations Unconditional.
                    -------------------------------------

     2.1 Guarantor's obligations hereunder are independent of the obligations of
Lessee, any other PPL Group Member, or any other Person, and each Beneficiary
may enforce any of its rights hereunder independently of any other right or
remedy that it may at any time hold with respect to the Liabilities or any
security or other guaranty therefor. Such obligations shall be absolute and
unconditional, shall not be subject to any counterclaim, setoff, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or defense
(other than full and indefeasible payment and performance of all of the
Liabilities and full and strict compliance by Guarantor with its obligations
hereunder), whether based upon any claim that Lessee, Guarantor, any Beneficiary
or any other Person may have against any Beneficiary or any other Person or
otherwise, and shall remain in full force and effect without regard to, and
shall not be released, discharged or in any way affected by, any circumstance or
condition whatsoever (other than full and indefeasible payment and performance
of all of the Liabilities and all of Guarantor's obligations hereunder) (whether
or not Guarantor, Lessee, any other PPL Group Member, or any other Person shall
have any knowledge or notice thereof), including, without limitation:

          (a) any amendment, modification, addition, deletion, supplement or
renewal to or of or other change in the Liabilities or any Operative Agreement
or any of the agreements referred to in any thereof, or any other instrument or
agreement applicable to any Operative Agreement or any of the parties to such
agreements, or to the Assets or the other Collateral, or any assignment,
mortgage or transfer thereof or of any interest therein, or any furnishing or
acceptance of additional security for, guaranty of or right of offset with
respect to, any of the Liabilities; or the failure of any security or the
failure of any Beneficiary to perfect or insure any interest in any collateral;

          (b) any failure, omission or delay on the part of Lessee, any
Beneficiary or any other Person to conform or comply with any term of any
instrument or agreement referred to in clause (a) above;
                                       ----------

          (c) any waiver, consent, extension, indulgence, compromise, release or
other action or inaction under or in respect of any instrument, agreement,
guaranty (including the PPL Corporation Guarantee), right of offset or security
referred to in clause (a) above or any obligation or liability of Lessee or any
               ----------
Beneficiary, or any exercise or non-exercise by any Beneficiary of any right,
remedy, power or privilege under or in respect of any such instrument,
agreement, guaranty, right of offset or security or any such obligation or
liability;

                                       -4-

<PAGE>

          (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to
Lessee, any other PPL Group Member, any Beneficiary or any other Person or any
of their respective properties or creditors, or any action taken by any trustee,
receiver or court in any such proceeding;

          (e) except as provided in the second sentence of Section 2.2 hereof,
                                                           -----------
any limitation on the liability or obligations of any Person (including, without
limitation, Lessee or any other PPL Group Member) under any Operative Agreement,
the Liabilities, any collateral security for the Liabilities including the
Assets and the other Collateral, or any other guaranty of the Liabilities or any
discharge, termination, cancellation, frustration, irregularity, invalidity or
unenforceability, in whole or in part, of any of the foregoing or any other
agreement, instrument, guaranty or security referred to in clause (a) above or
                                                           ----------
any term of any thereof;

          (f) any defect in the title, compliance with specifications,
condition, design, operation or fitness for use of, or any damage to or loss or
destruction of, or any interruption or cessation in the use of the Assets or the
other Collateral by Lessee, any other PPL Group Member, or any other Person for
any reason whatsoever (including, without limitation, any governmental
prohibition or restriction, condemnation, requisition, seizure or any other act
on the part of any governmental or military authority, or any act of God or of
the public enemy) regardless of the duration thereof (even though such duration
would otherwise constitute a frustration of a lease), whether or not resulting
from accident and whether or not without fault on the part of Lessee, any other
PPL Group Member, or any other Person;

          (g) any merger or consolidation of Lessee, the Trust, Trustee,
Guarantor or any other PPL Group Member into or with any other Person or any
sale, lease or transfer of any of the assets of Lessee, the Trust, Trustee ,
Guarantor or any other PPL Group Member to any other Person;

          (h) any change in the ownership of any shares of capital stock of
Lessee or Guarantor or any corporate change in or reorganization of Lessee or
Guarantor;

          (i) any loan to or other transaction between any of the Beneficiaries
and Guarantor, the Trust, Trustee, Lessee, or any other PPL Group Member;

          (j) any other occurrence or circumstance whatsoever (other than full
and indefeasible payment and performance of all of the Liabilities and all of
Guarantor's obligations hereunder), whether similar or dissimilar to the
foregoing, and any other circumstance that might otherwise constitute a legal or
equitable defense or discharge of the liabilities of a guarantor or surety or
that might otherwise limit recourse against Guarantor; or

          (k) any assignment or grant of a security interest by any Participant
of such Participant's right, title and interest in its Certificate or Note or in
the Collateral.

     2.2 The obligations of Guarantor set forth herein constitute full recourse
obligations of Guarantor enforceable against it to the full extent of all its
assets and properties, notwithstanding any provision in the Participation
Agreement, any other Operative Agreement or any other document or agreement to
the contrary. Notwithstanding the foregoing, Guarantor shall not be required to
pay more under this Guarantee than Lessee is required to pay

                                       -5-

<PAGE>

pursuant to the Operative Agreements, solely as a result of the application of a
limitation on the recourse liability of Lessee as set forth at (i) Sections
3.2(c) or 3.4(c) of the Supervisory Agreement or Section 16.3 of the
Participation Agreement to the extent Lessee's liability to make payment is
limited to the Aggregate C&A Recourse Amount, the applicable Lease Supplement
Recourse Amount or the Aggregate Permitted Asset Balance or (ii) if Lessee
elects the Sale Option, Article XX of the Lease. Except as specifically stated
in the immediately preceding sentence, the limitations set forth in the
immediately preceding sentence will not effect or limit any of the other
obligations of Guarantor under this Guarantee.

Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Liabilities and notice of or proof of reliance by any
Beneficiary upon this Guarantee or acceptance of this Guarantee, and the
Liabilities, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guarantee. Guarantor
unconditionally waives, to the extent permitted by law: (a) acceptance of this
Guarantee and proof of reliance by any Beneficiary hereon; (b) notice of any of
the matters referred to in clauses (a) through (k) of Section 2.1 hereof, or any
                           -----------         ---    -----------
right to consent or assent to any thereof; (c) all notices that may be required
by statute, rule of law or otherwise, now or hereafter in effect, to preserve
intact any rights against Guarantor, including, without limitation, any demand,
presentment, protest, proof or notice of nonpayment under any Operative
Agreement, and notice of default or any failure on the part of Lessee to perform
and comply with any covenant, agreement, term or condition of any Operative
Agreement; (d) any right to the enforcement, assertion or exercise against
Lessee or PPL Corporation of any right, power, privilege or remedy conferred in
any Operative Agreement or otherwise; (e) any requirement of diligence on the
part of any Person; (f) any requirement of any Beneficiary to take any action
whatsoever, to exhaust any remedies or to mitigate the damages resulting from a
default by any Person under any Operative Agreement; (g) any notice of any sale,
transfer or other disposition by any Person of any right under, title to or
interest in any Operative Agreement or the Assets including the other Collateral
or any other collateral and (h) any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety, or that might otherwise limit recourse against Guarantor.

     2.3 Guarantor agrees that this Guarantee shall be automatically reinstated
if and to the extent that for any reason any payment by or on behalf of Lessee,
or PPL Corporation as guarantor under the PPL Corporation Guarantee, is
rescinded or must be otherwise restored by any Beneficiary, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise.

     2.4 Guarantor further agrees that, without limiting the generality of this
Guarantee, if an Event of Default shall have occurred and be continuing and any
Beneficiary is prevented by Applicable Laws from exercising its remedies under
the Operative Agreements (except where such Beneficiary is prevented from
exercising its remedies due solely to such Beneficiary's own willful failure to
perform, or willful breach of, any of such Beneficiary's obligations set forth
in the Operative Agreements), such Beneficiary shall be entitled to receive
hereunder from Guarantor, upon demand therefor, the sums which would otherwise
have been due from Lessee had such remedies been exercised.

                                       -6-

<PAGE>

     Section 3.     Waiver of Subrogation. Guarantor hereby irrevocably waives
                    ---------------------
any claim or other rights which it may now or hereafter acquire against Lessee
arising from the existence, payment, performance or enforcement of Guarantor's
obligations under this Guarantee or any other Operative Agreement, including any
right of subrogation, reimbursement, exoneration, or indemnification, any right
to participate in any claim or remedy of any Beneficiary against Lessee or any
property or assets now or hereafter constituting part of the Trust Estate,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including the right to take or receive from Lessee
directly or indirectly, in cash or other property or by setoff or in any manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to Guarantor in violation of the preceding sentence and the
Liabilities shall not have been indefeasibly paid and performed in full, such
amount shall be deemed to have been paid to Guarantor for the benefit of, and
held in trust for, the Beneficiaries, and shall forthwith be paid to the
Administrative Agent to be credited and applied pursuant to the terms of the
Operative Agreements. Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by the
Participation Agreement and that the waiver set forth in this paragraph is
knowingly made in contemplation of such benefits.

     Section 4.     Additional Waivers. Guarantor authorizes Administrative
                    ------------------
Agent and each Beneficiary, at its sole option, without notice or demand and
without affecting the liability of Guarantor hereunder, to release and reconvey
(with or without the receipt of any consideration) any lien against any or all
real or personal property constituting security for the Liabilities, to
foreclose any or all deeds of trust, mortgages, security agreements or other
instruments or agreements by judicial or nonjudicial sale, and to exercise any
other remedy against Lessee, any security or collateral or any other guarantor
(including PPL Corporation under the PPL Corporation Guarantee), all without
affecting the liability of Guarantor hereunder. Guarantor waives any right to
receive notice of any judicial or nonjudicial sale or foreclosure of any real
property, and the failure of Guarantor to receive such notice shall not impair
or affect Guarantor's liability hereunder.

     Section 5.     Reasonableness and Effect of Waivers. Guarantor warrants
                    ------------------------------------
and agrees that each of the waivers set forth in this Guarantee is made with
full knowledge of its significance and consequences and that, under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any of such waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law.

     Section 6.     Transfers by Beneficiaries. Each Beneficiary may, from time
                    --------------------------
to time, whether before or after any discontinuance of this Guarantee, at its
sole discretion and without notice to or consent of Guarantor, assign or
transfer any or all of the Liabilities or any interest therein, subject to
Article XII of the Participation Agreement; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Liabilities shall be and remain Liabilities for the purposes of this Guarantee,
and each and every immediate and successive permitted assignee or permitted
transferee of any of the Liabilities or of any interest therein shall, to the
extent of such assignee's or transferee's interest in the Liabilities, be
entitled to the benefits of this Guarantee to the same extent as if such
assignee or transferee were such Beneficiary.

                                       -7-

<PAGE>

     Section 7.     No Waiver by Beneficiaries. No delay in the exercise of any
                    --------------------------
right or remedy shall operate as a waiver thereof, and no single or partial
exercise of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy; nor shall any modification or
waiver of any of the provisions of this Guarantee be binding upon any
Beneficiary except as expressly set forth in a writing duly signed and delivered
on its behalf. No action permitted hereunder shall in any way affect or impair
any Beneficiary's rights or Guarantor's obligations under this Guarantee. For
the purposes of this Guarantee, Liabilities shall include all of the obligations
described in the definition thereof, notwithstanding any right or power of
Lessee or anyone else, including any other PPL Group Member, to assert any claim
or defense as to the invalidity or unenforceability of any such obligation, and
no such claim or defense shall affect or impair the obligations of Guarantor
hereunder. Guarantor's obligations under this Guarantee shall be absolute and
unconditional irrespective of any circumstance whatsoever which might constitute
a legal or equitable discharge or defense of Guarantor (other than full and
indefeasible payment and performance of all of the Liabilities and all of
Guarantor's obligations hereunder). Guarantor hereby acknowledges that there are
no conditions to the effectiveness of this Guarantee.

     Section 8.     Successors and Assigns. This Guarantee shall be binding
                    ----------------------
upon Guarantor and upon Guarantor's successors and assigns; and all references
herein to Guarantor shall be deemed to include any successor or successors,
whether immediate or remote, to such Person.

     Section 9.     Severability. Wherever possible, each provision of this
                    ------------
Guarantee shall be interpreted in such manner as to be effective and valid under
Applicable Laws, but if any provision of this Guarantee shall be prohibited by
or invalid thereunder, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guarantee.

     Section 10.    Notices. All notices, demands, declarations, consents,
                    -------
directions, approvals, instructions, requests and other communications required
or permitted by this Guarantee shall be in writing and shall be deemed to have
been duly given when addressed to the appropriate Person and delivered in the
manner specified in Section 15.3 of the Participation Agreement. The initial
address for notices to Guarantor is set forth beneath its signature below.

     Section 11.    GOVERNING LAW. THIS GUARANTEE SHALL IN ALL RESPECTS BE
                    -------------
GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK AS TO ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES, EXCEPT TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.

     Section 12.    Submission To Jurisdiction. (i) Guarantor hereby
                    --------------------------
irrevocably and unconditionally:

          (a) submits for itself and its property in any legal action or
     proceeding relating to this Guarantee, or for recognition and enforcement
     of any judgment in respect thereof, to the non-exclusive general
     jurisdiction of the United States District Court for the Southern District
     of New York and of any New York state court sitting in the Borough of
     Manhattan, and appellate courts from any thereof and, to the extent

                                       -8-

<PAGE>

     permitted by law, irrevocably agrees to be bound by any judgment rendered
     thereby in connection with this Guarantee;

          (b) consents that any such action or proceedings may be brought to
     such courts, and waives any objection that it may now or hereafter have to
     the venue of any such action or proceeding in any such court or that such
     action or proceeding was brought in an inconvenient court and agrees not to
     plead or claim the same;

          (c) agrees that service of process in any such action or proceeding
     may be effected by mailing a copy thereof by registered or certified mail
     (or any substantially similar form of mail), postage prepaid, to Guarantor
     at its address set forth on Schedule III to the Participation Agreement or
     at such other address of which the Administrative Agent shall have been
     notified by Guarantor in the same manner as provided in Section 15.3 of the
     Participation Agreement; and

          (d) agrees that nothing herein shall affect the right to effect
     service of process in any other manner permitted by law or shall limit the
     right to sue in any other jurisdiction.

     Section 13.    Jury Trial. GUARANTOR HEREBY VOLUNTARILY AND INTENTIONALLY
                    ----------
WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS GUARANTEE,
OR ANY COURSE OF CONDUCT, COURSE OR DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF GUARANTOR, BENEFICIARIES AND ANY PARTY THERETO. GUARANTOR
HEREBY AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY
OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE
PROVISIONS OF THIS SECTION 13 HAVE BEEN FULLY NEGOTIATED BY GUARANTOR AND

                   ----------
BENEFICIARIES AND SHALL BE SUBJECT TO NO EXCEPTIONS.

     Section 14.    Representations and Warranties of Guarantor. Guarantor
                    -------------------------------------------
hereby represents and warrants to each of the Participants, the Trust, Trustee
and the Administrative Agent as of the Second Document Closing Date and each
Advance Date (except with respect to the representations and warranties at
Section 14.12 and 14.13 which speak only as of the date of execution and
-------------     -----
delivery of this Guarantee) that:

     14.1  Status. The Guarantor is a limited liability company duly
           ------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the limited liability company authority to make and perform
this Guarantee.

     14.2  Authority; No Conflict. The execution, delivery and performance
           ----------------------
by the Guarantor of this Guarantee have been duly authorized by all necessary
limited liability company action and do not (i) violate any provision of law or
regulation, or any decree, order, writ or judgment, (ii) violate any provision
of its limited liability company agreement, or (iii) result in the breach of or
constitute a default under any indenture or other agreement or instrument to
which the Guarantor is a party.

                                       -9-

<PAGE>

     14.3  Legality; Etc. This Guarantee constitutes the legal, valid and
           -------------
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms except to the extent limited by (i) bankruptcy,
insolvency, fraudulent conveyance or reorganization laws or by other laws
relating to or affecting the enforceability of creditors' rights generally and
by general equitable principles which may limit the right to obtain equitable
remedies regardless of whether enforcement is considered in a proceeding of law
or equity or (ii) any applicable public policy on enforceability of provisions
relating to contribution and indemnification.

     14.4  Financial Condition.
           -------------------

          (a)  Audited Financial Statements. The consolidated balance sheet of
               ----------------------------
the Guarantor's predecessors as of December 31, 2000 and the related
consolidated statements of income and cash flows for the fiscal year then ended,
reported on by PricewaterhouseCoopers LLP, copies of which have been delivered
to the Administrative Agent, fairly present, in conformity with GAAP, the
consolidated financial position of the Guarantor's predecessors as of such date
and their consolidated results of operations and cash flows for such fiscal
year.

          (b)  Material Adverse Change. Since December 31, 2000, there has been
               -----------------------
no change in the business, assets, financial condition or operations of the
Guarantor and its Consolidated Subsidiaries, considered as a whole, that would
have a Material Adverse Effect.

     14.5  Rights to Properties. The Guarantor and its Restricted
           --------------------
Subsidiaries have good and valid fee, leasehold, easement or other right, title
or interest in or to all the properties necessary to the conduct of their
business as conducted on the date hereof and as presently proposed to be
conducted, except to the extent the failure to have such rights or interests
would not have a Material Adverse Effect.

     14.6  Litigation. Except as disclosed in Schedule 14.6 hereto, in the
           ----------                         -------------
financial statements provided pursuant to Section 14.4 or otherwise furnished in
                                          ------------
writing to the Administrative Agent, no litigation, arbitration or
administrative proceeding against the Guarantor is pending or, to the
Guarantor's knowledge, threatened, which, if determined adversely, would
materially and adversely affect the ability of Guarantor to perform any of its
obligations under this Guarantee. There is no litigation, arbitration or
administrative proceeding pending or, to the knowledge of the Guarantor,
threatened which questions the validity of this Guarantee.

     14.7  [Intentionally Omitted]

     14.8  ERISA. Each member of the ERISA Group has fulfilled its obligations
           -----
under the minimum funding standards of ERISA and the Internal Revenue Code with
respect to each Material Plan and is in compliance with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each Material
Plan, except where such failure to comply would not have a Material Adverse
Effect. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Material Plan, (ii) failed to make any contribution or payment to any
Material Plan, or made any amendment to any Material Plan, which has resulted or
could result in the imposition of a lien or the posting of a bond or other
security under ERISA or the Internal Revenue Code or (iii) incurred any

                                       -10-

<PAGE>

liability under Title IV of ERISA other than a liability or liabilities (A) to
the PBGC for premiums under Section 4007 of ERISA or (B) which individually or
in the aggregate would not have a Material Adverse Effect.

     14.9  Governmental Approvals. No authorization, consent or approval from
           ----------------------
any Governmental Authority is required for the execution, delivery and
performance by the Guarantor of this Guarantee, except such authorizations,
consents and approvals as have been obtained prior to the Second Document
Closing Date and are in full force and effect.

     14.10 Investment Company Act. The Guarantor is not an "investment company"
           ----------------------
within the meaning of the Investment Company Act of 1940, as amended.

     14.11 Public Utility Holding Company Act. The Guarantor is not a "holding
           ----------------------------------
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

     14.12 Subsidiaries, Etc. Set forth in Schedule 14.12 hereto is a complete
           -----------------
and correct list as of the Second Document Closing Date of the Restricted
Subsidiaries of the Guarantor, together with, for each such Subsidiary, the
jurisdiction of organization of such Subsidiary. Except as disclosed in Schedule
                                                                        --------
14.12 hereto, as of the Second Document Closing Date, (i) each such Subsidiary
-----
is a Wholly-Owned Subsidiary of the Guarantor and (ii) each such Subsidiary is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all corporate or other organizational
powers to carry on its businesses as now conducted.

     14.13 Disclosure.
           ----------

          (a) Subject to the Disclosure Qualification, the written information
that has been made available to the Administrative Agent and the Participants,
(each such Person a "Relying Person") by the Guarantor or its officers or
employees (the foregoing, collectively, "Representatives") prior to the Second
Document Closing Date in connection with the entering into and performance of
this Guarantee, taken as a whole and as modified or supplemented from time to
time prior to the Second Document Closing Date, except to the extent the same is
stated to be as of an earlier date, is true and correct on the date hereof and
does not contain any untrue statement of fact or omit to state a fact necessary
in order to make the statements contained therein not misleading in light of the
circumstances under which such statements were made except to the extent any
failure to be true and correct or any such omissions would not, in light of the
circumstances under which such statements or omissions were made, have a
Material Adverse Effect; provided, that the reference to factual information
                         --------
herein does not include any Financial Projections or other projections or
forward-looking information; and provided, further, that such reference to
factual information does not include copies of the appraisal and reports of the
Independent Consultants referred to in clause (b).

          (b) The Guarantor has heretofore provided to ICF Consulting and S&W
Consultants (the "Independent Consultants") solely in order to assist the
Independent Consultants in connection with their market appraisal and
engineering reports previously delivered to the Administrative Agent certain
information regarding certain generation assets of the Guarantor and its
Subsidiaries. All written factual and historical data provided to the

                                       -11-

<PAGE>

Independent Consultants was correct in light of the circumstances under which it
was provided except to the extent that any failure to be correct would not have
a Material Adverse Effect; provided, that, the Guarantor makes no representation
or warranty as to any projections or other forward-looking information,
including any Financial Projections, and the Guarantor takes no responsibility
for the conclusions, or as to any projections or other forward-looking
information, including any Financial Projections, of the Independent
Consultants.

          The Guarantor is not obligated to supplement any information or
projection or other materials referred to in this Section 14.13 after the Second
                                                  -------------
Document Closing Date.

     14.14 Tax Returns and Payments. The Guarantor and each of its Restricted
           ------------------------
Subsidiaries has filed or caused to be filed all Federal, state, local and
foreign income tax returns required to have been filed by it and has paid or
caused to be paid all income taxes shown to be due on such returns except income
taxes that are being contested in good faith by appropriate proceedings and for
which the Guarantor or its Restricted Subsidiaries, as the case may be, shall
have set aside on its books appropriate reserves with respect thereto in
accordance with GAAP or that would not reasonably be expected to have a Material
Adverse Effect.

     14.15 Compliance with Laws. To the knowledge of the Guarantor or any of its
           --------------------
Restricted Subsidiaries, the Guarantor and each of its Restricted Subsidiaries
is in compliance with all applicable laws, regulations and orders of any
Governmental Authority, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including, without limitation,
compliance with all applicable ERISA and Environmental Laws and the requirements
of any permits issued under such Environmental Laws), except to the extent (i)
such compliance is being contested in good faith by appropriate proceedings or
(ii) non-compliance would not reasonably be expected to materially and adversely
affect its ability to perform any of its obligations under this Guarantee.

     14.16 No Default. No Default or Event of Default of the type described in
           ----------
Sections 16.1(s), (t), (u), (v), (w) and (x) or, with respect to the Guarantor,
Sections 16.1(h), (l), (m) and (o) of the Participation Agreement, has occurred
and is continuing.

     14.17 Environmental Matters.
           ---------------------

          (a)  Except (i) as disclosed in or contemplated by Schedule 14.6
                                                             -------------
hereto or in the financial statements provided pursuant to Section 15.1 or
                                                           ------------
otherwise furnished to the Administrative Agent in writing, or (ii) to the
extent that the liabilities of the Guarantor and its Subsidiaries, taken as a
whole, that relate to or could result from the matters referred to in clauses
(a) through (c), inclusive, would not reasonably be expected to result in a
Material Adverse Effect, to the Guarantor's or any of its Subsidiaries'
knowledge:

          (A) no notice, notification, citation, summons, complaint or order has
     been issued, no complaint has been filed, no penalty has been assessed nor
     is any investigation or review pending or threatened by any Governmental
     Authority or other entity with respect to any (i) alleged violation by the
     Guarantor or any of its Subsidiaries of any Environmental Law, (ii) alleged
     failure by the Guarantor or any of its Subsidiaries to have any
     environmental permit, certificate, license, approval, registration

                                       -12-

<PAGE>

     or authorization required in connection with the conduct of its business or
     (iii) generation, storage, treatment, disposal, transportation or release
     of Hazardous Substances;

          (B) no Hazardous Substance has been released (and no written
     notification of such release has been filed) (whether or not in a
     reportable or threshold planning quantity) at, on or under any property now
     or previously owned, leased or operated by the Guarantor or any of its
     Subsidiaries; and

          (C) no property now or previously owned, leased or operated by the
     Guarantor or any of its Subsidiaries or any property to which the Guarantor
     or any of its Subsidiaries has, directly or indirectly, transported or
     arranged for the transportation of any Hazardous Substances, is listed or,
     to the Guarantor's or any of its Subsidiaries' knowledge, proposed for
     listing, on the National Priorities List promulgated pursuant to the
     Comprehensive Environmental Response, Compensation and Liability Act of
     1980, as amended ("CERCLA"), on CERCLIS (as defined in CERCLA) or on any
     similar federal, state or foreign list of sites requiring investigation or
     clean-up.

          (b) To the Guarantor's or any of its Subsidiaries' knowledge, there
are no Environmental Liabilities that have resulted or could reasonably be
expected to result in a Material Adverse Effect.

          (c)  For purposes of this Section 14.17, the terms "the Guarantor" and
                                    -------------
"Subsidiary" shall include any business or business entity (including a
corporation) which is a predecessor, in whole or in part, of the Guarantor or
any of its Subsidiaries from the time such business or business entity became a
Subsidiary of the Parent.

     Section 15.    General Covenants of Guarantor. Guarantor hereby covenants
                    ------------------------------
and agrees that it shall comply with the following provisions of this Section 15
                                                                      ----------
until all obligations of Guarantor hereunder and all other Liabilities have been
indefeasibly paid and performed in full and so long as the Participation
Agreement and the other Operative Agreements remain in effect:

     15.1  Information. The Guarantor will deliver or cause to be delivered
           -----------
to each of the Administrative Agent and the Participants:

          (a)  Annual Financial Statements. Within 120 days after the end of
               ---------------------------
each fiscal year of the Guarantor, a consolidated balance sheet of the Guarantor
and its Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income and cash flows for such fiscal year
and accompanied by an opinion thereon by independent public accountants of
recognized national standing, which opinion shall state that such consolidated
financial statements present fairly the consolidated financial position of the
Guarantor and its Consolidated Subsidiaries as of the date of such financial
statements and the results of their operations for the period covered by such
financial statements in conformity with GAAP applied on a consistent basis.

          (b)  Quarterly Financial Statements. Within 60 days after the end of
               ------------------------------
each of the first three quarters of each fiscal year of the Guarantor, a
consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries as
of the end of such quarter and the related consolidated statements of income and
cash flows for such fiscal quarter, all certified (subject to normal year-end

                                       -13-

<PAGE>

audit adjustments) as to fairness of presentation, GAAP and consistency by the
chief financial officer or chief accounting officer of the Guarantor; provided,
                                                                        ------
that, the financial statements required to be delivered pursuant to this Section
                                                                        -------
15.1(b) for the fiscal quarter ended March 31, 2001 shall be delivered no later

-------
than August 1, 2001.

          (c)  Officer's Certificate. Simultaneously with the delivery of each
               ---------------------
set of financial statements referred to in subsections (a) and (b) above, a
certificate of the chief financial officer or chief accounting officer of the
Guarantor, (i) setting forth in reasonable detail the calculations required to
establish compliance with the requirements of Sections 15.13 and 15.14 on the
date of such financial statements and (ii) stating whether there exists on the
date of such certificate any Default or Event of Default of the type described
in Sections 16.1(s), (t), (u), (v), (w) and (x) or, with respect to the
Guarantor, Sections 16.1(h), (l), (m) and (o) of the Participation Agreement
and, if any such Default or Event of Default then exists, setting forth the
details thereof and the action which the Guarantor is taking or proposes to take
with respect thereto.

          (d)  Default. Forthwith upon acquiring knowledge of the occurrence of
               -------
any Default or Event of Default of the type described in Sections 16.1(s), (t),
(u), (v), (w) and (x) or, with respect to the Guarantor, Sections 16.1(h), (l),
(m) and (o) of the Participation Agreement, a certificate of the chief financial
officer or chief accounting officer of the Guarantor setting forth the details
thereof and the action which the Guarantor is taking or proposes to take with
respect thereto.

          (e)  Change in Guarantor's Ratings. Upon the chief executive officer,
               -----------------------------
the president, any vice president or any senior financial officer of the
Guarantor obtaining knowledge of any change in Guarantor's Rating, a notice of
such Guarantor's Rating in effect after giving effect to such change.

          (f)  Securities Laws Filing. Within 120 days after the end of each
               ----------------------
fiscal year, a copy of any Form 10-K Report to the SEC and within 60 days after
                                                   ---
the end of each of the first three quarters in each fiscal year, a copy of any
Form 10-Q Report to the SEC, and promptly upon the filing thereof, any other
filings with the SEC.

          (g)  ERISA Matters. If and when any member of the ERISA Group: (i)
               -------------
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Material Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Material Plan has given or is required
to give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives, with
respect to any Material Plan that is a Multiemployer Plan, notice of any
complete or partial withdrawal liability under Title IV of ERISA, or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose material liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Material Plan, a copy of such notice; (iv) applies for
a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code with respect to a Material Plan, a copy of such application; (v)
gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a

                                      -14-

<PAGE>

copy of such notice and other information filed with the PBGC; (vi) gives notice
of withdrawal from any Plan pursuant to Section 4063 of ERISA; or (vii) fails to
make any payment or contribution to any Plan or makes any amendment to any Plan
which has resulted or could result in the imposition of a lien or the posting of
a bond or other security, a copy of such notice, a certificate of the chief
financial officer or chief accounting officer of the Guarantor setting forth
details as to such occurrence and action, if any, which the Guarantor or
applicable member of the ERISA Group is required or proposes to take.

          (h)  Other Information. From time to time such additional financial or
               -----------------
other information regarding the financial condition, results of operations,
properties, assets or business of the Guarantor or of any of its Subsidiaries as
Administrative Agent may reasonably request.

     15.2  Maintenance of Property; Insurance.
           ----------------------------------

          (a)  Maintenance of Properties. The Guarantor will keep, and will
               -------------------------
cause each of its Restricted Subsidiaries to keep, all property useful and
necessary in their respective businesses in good working order and condition,
subject to ordinary wear and tear, unless the Guarantor determines in good faith
that the continued maintenance of any of such properties is no longer
economically desirable and so long as the failure to so maintain such properties
would not reasonably be expected to have a Material Adverse Effect.

          (b)  Insurance. The Guarantor will maintain, or cause to be
               ---------
maintained, insurance with financially sound (determined in the reasonable
judgment of the Guarantor) and responsible companies in such amounts (and with
such risk retentions) and against such risks as is usually carried by owners of
similar businesses and properties in the same general areas in which the
Guarantor and its Restricted Subsidiaries operate.

     15.3  Conduct of Business and Maintenance of Existence. The Guarantor
           ------------------------------------------------
will (i) continue, and will cause each of its Restricted Subsidiaries to
continue, to engage only in businesses of the same general type as now conducted
by the Guarantor and its Subsidiaries and businesses related thereto or arising
out of such businesses, except to the extent that the failure to maintain any
existing business would not have a Material Adverse Effect and (ii) except as
otherwise permitted in Section 15.9, preserve, renew and keep in full force and
                       ------------
effect, and will cause each of its Subsidiaries to preserve, renew and keep in
full force and effect, their respective limited liability company (or other
entity) existence and their respective rights, privileges and franchises
necessary or material to the normal conduct of business, except, in each case,
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.

     15.4  Compliance with Laws, Etc. The Guarantor will comply, and will
           -------------------------
cause each of its Restricted Subsidiaries to comply, with all applicable laws,
regulations and orders of any Governmental Authority, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including, without limitation, compliance with all applicable ERISA and
Environmental Laws and the requirements of any permits issued under such
Environmental Laws), except to the extent (a) such compliance is being contested
in good faith by appropriate proceedings or (b) non-compliance could not
reasonably be expected to have a Material Adverse Effect.

                                       -16-

<PAGE>

     15.5  Books and Records. The Guarantor (i) will keep, and will cause
           -----------------
each of its Restricted Subsidiaries to keep, proper books of record and account
in conformity with GAAP and (ii) will permit representatives of the
Administrative Agent and each of the Participants to visit and inspect any of
their respective properties, to examine and make copies from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their officers, any employees and independent public
accountants, all at such reasonable times and as often as may reasonably be
desired; provided, that, the rights created in this Section 15.5 to "visit",

                                                    ------------
"inspect", "discuss" and copy shall not extend to any matters which the
Guarantor deems, in good faith, to be confidential, unless the Administrative
Agent and any such Participant agree in writing to keep such matters
confidential.

     15.6  [Intentionally Omitted]

     15.7  Receipt of Guarantor's Ratings. The Guarantor shall receive the
           ------------------------------
Guarantor's Rating no later than December 25, 2001.

     15.8  Restriction on Liens. The Guarantor will not, nor will it permit
           --------------------
any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets of any kind (real or
personal, tangible or intangible) of the Guarantor or any such Restricted
Subsidiary (including, without limitation, their Voting Stock), except:

          (a) Liens for taxes, assessments or governmental charges or levies not
yet due or which are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;

          (b) Liens imposed by law, such as carriers', landlords',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than 45
days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;

          (c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation;

          (d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variances and other restrictions, charges or
encumbrances (whether or not recorded) affecting the use of real property;

          (e)  Liens existing on the Second Document Closing Date and described
in Schedule 15.8 hereto;
   -------------

          (f) judgment Liens arising from judgments which secure payment of
legal obligations that would not constitute a Default under Section 7.01 of the
PPL Supply Credit Agreements as of the Closing Date;

                                       -17-

<PAGE>

          (g) any vendor's Liens, purchase money Liens or any other Lien on any
property or asset acquired by the Guarantor or any of its Restricted
Subsidiaries after the date hereof existing on any such property or asset at the
time of acquisition thereof (and not created in anticipation thereof); provided,
                                                                       --------
that, in any such case no such Lien shall extend to or cover any other asset of
the Guarantor or such Restricted Subsidiaries, as the case may be;

          (h) Liens, deposits and/or similar arrangements to secure the
performance of bids, tenders or contracts (other than contracts for borrowed
money), public or statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business by the Guarantor or any of its Restricted Subsidiaries, including Liens
to secure obligations under agreements relating to the purchase and sale of any
commodity (including power purchase and sale agreements, any commodity hedge or
derivative regardless of whether any such transaction is a "financial" or
"physical transaction");

          (i) Liens on assets of the Guarantor and its Restricted Subsidiaries
arising out of obligations or duties to any Governmental Authority with respect
to any franchise, grant, license, permit or certificate;

          (j) rights reserved to or vested in any Governmental Authority to
control or regulate any asset of the Guarantor or any of its Restricted
Subsidiaries or to use such asset in a manner which does not materially impair
the use of such asset for the purposes for which it is held by the Guarantor or
any of its Restricted Subsidiaries;

          (k) irregularities in or deficiencies of title to any asset which do
not materially adversely affect the use of such property by the Guarantor or any
of its Restricted Subsidiaries in the normal course of its business;

          (l)  any Lien on any property or asset of any corporation or other
entity existing at the time such corporation or entity is acquired, merged or
consolidated or amalgamated with or into the Guarantor or any of its Restricted
Subsidiaries and not created in contemplation of such event;

          (m) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring, constructing or
improving such asset; provided, that any such Lien attaches to such asset,
solely to extent of the value of the obligation secured by such Lien,
concurrently with or within 180 days after the acquisition, construction or
improvement thereof;

          (n) any Liens in connection with the issuance of tax-exempt industrial
development or pollution control bonds or other similar bonds issued pursuant to
Section 103(b) of the Internal Revenue Code to finance all or any part of the
purchase price of or the cost of constructing, equipping or improving property;

          (o) rights of lessees arising under leases entered into by the
Guarantor or any of its Restricted Subsidiaries as lessor, in the ordinary
course of business;

          (p) with respect to PPL Interstate Energy Company, any Liens other
than Liens securing Debt of PPL Interstate Energy Company;

                                       -18-

<PAGE>

          (q) any Liens on or reservations with respect to governmental and
other licenses, permits, franchises, consents and allowances; any Liens on
patents, patent licenses and other patent rights, patent applications, trade
names, trademarks, copyrights, claims, credits, choses in action and other
intangible property and general intangibles including, but not limited to,
computer software;

          (r) any Liens on automobiles, buses, trucks and other similar vehicles
and movable equipment; marine equipment; airplanes, helicopters and other flight
equipment; and parts, accessories and supplies used in connection with any of
the foregoing;

          (s) any Liens on furniture and furnishings; and computers and data
processing, data storage, data transmission, telecommunications and other
facilities, equipment and apparatus, which, in any case, are used primarily for
administrative or clerical purposes;

          (t)  Liens securing letters of credit entered into in the ordinary
course of business;

          (u)  Liens granted on the capital stock of Subsidiaries that are not
Restricted Subsidiaries for the purpose of securing the obligations of such
Subsidiaries;

          (v) Liens in addition to those permitted by clauses (a) through (u) on
the property or assets of a Special Purpose Subsidiary arising in connection
with the lease of such property or assets through one or more Synthetic Lease
financings;

          (w)  Liens by any Wholly-Owned Subsidiary of the Guarantor or any
Restricted Subsidiary for the benefit of the Guarantor or any such Restricted
Subsidiary;

          (x) Liens arising in respect of the Caribou Joint Venture; provided,
that the aggregate value of the obligations secured by such Liens shall not at
any time exceed $500,000,000;

          (y) Liens on property which is the subject of a Capital Lease
Obligation designating the Guarantor or any of its Restricted Subsidiaries as
lessee and all right, title and interest of the Guarantor or any of its
Restricted Subsidiaries in and to such property and in, to and under such lease
agreement, whether or not such lease agreement is intended as a security;
provided, that the aggregate fair market value of the obligations subject to
--------
such Liens shall not at any time exceed $500,000,000;

          (z) Liens on property which is the subject of one or more leases
designating the Guarantor or any of its Restricted Subsidiaries as lessee and
all right, title and interest of the Guarantor or any of its Restricted
Subsidiaries in and to such property and in, to and under any such lease
agreement, whether or not any such lease agreement is intended as a security;

          (aa) Liens arising out of the refinancing, extension, renewal or
refunding of any Debt or other obligation secured by any Lien permitted by
clauses (a) through (aa) of this Section; provided, that such Debt or other
                                          --------
obligation is not increased and is not secured by any additional assets; or

                                       -19-

<PAGE>

          (bb) other Liens on assets or property of the Guarantor or any of its
Restricted Subsidiaries, other than Liens on the Voting Stock of the Guarantor
in its Restricted Subsidiaries, so long as the aggregate value of the
obligations secured by such Liens does not exceed the greater of $250,000,000 or
15% of the total consolidated assets of the Guarantor and its Consolidated
Subsidiaries as of the most recent fiscal quarter of the Guarantor for which
financial statements are available.

     15.9  Merger or Consolidation. The Guarantor will not merge with or
           -----------------------
into or consolidate with or into any other corporation or entity, unless (i)
immediately after giving effect thereto, no event shall occur and be continuing
which constitutes a Default or Event Default, (ii) the surviving or resulting
person, as the case may be, assumes and agrees in writing to pay and perform all
of the obligations of the Guarantor under this Guarantee, (iii) substantially
all of the consolidated assets and consolidated revenues of the surviving or
resulting person, as the case may be, are anticipated to come from the utility
or energy businesses and (iv) the surviving or resulting person, as the case may
be, has senior long-term debt ratings from Moody's and S&P as available (or if
the ratings of Moody's and S&P are not available, of such other rating agency as
shall be acceptable to the Administrative Agent) at least equal to each
Guarantor's Rating at the end of the fiscal quarter immediately preceding the
effective date of such consolidation or merger. No Restricted Subsidiary will
merge or consolidate with any other Person if such Restricted Subsidiary is not
the surviving or resulting Person, unless such other Person is (a) the Guarantor
or a successor of the Guarantor permitted hereunder or (b) any other Person
which is a Wholly-Owned Restricted Subsidiary of the Guarantor or a successor of
the Guarantor permitted hereunder and such merger or consolidation would not
otherwise be prohibited as a result of the application of Section 15.17.
                                                          -------------

     15.10 Asset Sales. Except for the sale of assets required to be sold
           -----------
to conform with governmental requirements, the Guarantor shall not, and shall
not permit any of its Subsidiaries to, consummate any Asset Sale, if the
aggregate net book value of all such Asset Sales consummated during the four
calendar quarters immediately preceding any date of determination would exceed
25% of the total assets of the Guarantor and its Consolidated Subsidiaries as of
the beginning of the Guarantor's most recently ended full fiscal quarter;
provided, however, that any such Asset Sale will be disregarded for purposes of
--------  -------
the 25% limitation specified above: (a) if any such Asset Sale is in the
ordinary course of business of the Guarantor and its Subsidiaries; (b) if the
assets subject to any such Asset Sale are worn out or are no longer useful or
necessary in connection with the operation of the businesses of the Guarantor or
its Subsidiaries; (c) if the assets subject to any such Asset Sale are being
transferred to a Wholly-Owned Subsidiary of the Guarantor; (d) to the extent the
assets subject to any such Asset Sale involve transfers of assets of or equity
interests in connection with the Caribou Joint Venture; (e) if the proceeds from
any such Asset Sale (i) are, within 12 months of such Asset Sale, invested or
reinvested by the Guarantor or any Subsidiary in a Permitted Business, (ii) are
used by the Guarantor or a Subsidiary to repay Debt of the Guarantor or such
Subsidiary, or (iii) are retained by the Guarantor or its Subsidiaries; or (f)
if, prior to any such Asset Sale, Moody's and S&P confirm the then current
Guarantor Ratings after giving effect to any such Asset Sale; provided, however,
that the forgoing provision shall not be deemed to permit an Asset Sale which
would otherwise be prohibited as a result of the application of Section 15.17.
                                                                -------------

                                       -20-

<PAGE>

     15.11 Transactions with Affiliates. Neither the Guarantor nor any of its
           ----------------------------
Restricted Subsidiaries will enter into or permit to exist any arrangement or
contract with any of their respective Affiliates unless such arrangement or
contract (i) has been approved by a Governmental Authority or (ii) is fair and
equitable to the Guarantor or its Restricted Subsidiaries, as the case may be,
and is an arrangement or contract of the kind which would be entered into by a
prudent Person in the position of the Guarantor or its Restricted Subsidiaries,
as the case may be, with a Person which is not one of its Affiliates. In making
any determination as to fairness, equity and prudence, effect shall be given to
orders, rules or regulations of any administrative agency, regulatory authority
or other governmental body having jurisdiction over the Guarantor or its
Subsidiaries.

     15.12 Restrictive Agreements. Except as set forth in Schedule 15.12, the
           ----------------------                         --------------
Guarantor will not permit any of its Restricted Subsidiaries to enter into or
assume any agreement prohibiting or otherwise restricting the ability of any
Restricted Subsidiary to pay dividends or other distributions on its respective
equity and equity equivalents to the Guarantor or any of its Restricted
Subsidiaries.

     15.13 Consolidated Debt to Consolidated Capitalization Ratio. The ratio of
           ------------------------------------------------------
Consolidated Debt of the Guarantor to Consolidated Capitalization of the
Guarantor shall not exceed 65% at any time.

     15.14 Interest Coverage Ratio. The Guarantor's ratio of Consolidated EBITDA
           -----------------------
to Consolidated Interest Expense shall not be less than 2.0 to 1.0 for the four
most recently ended consecutive fiscal quarters (except for the fiscal quarters
ended June 30, 2001 and September 30, 2001, at the end of which such ratio shall
be measured for the most recently ended consecutive two and three fiscal
quarters, respectively) of the Guarantor (taken as a single accounting period).

     15.15 Indebtedness. The Guarantor will not permit any of its Restricted
           ------------
Subsidiaries to incur, create, assume or permit to exist any Debt of such
Restricted Subsidiaries except:

          (a)  Existing Debt and any extensions, renewals or refinancings
thereof;

          (b)  Debt owing to the Guarantor or a Wholly-Owned Restricted
Subsidiary;

          (c) Debt incurred by either PPL Large Scale Distributed Generation,
LLC or Lessee, in each case solely in respect of Synthetic Lease transactions;
provided, that the Debt incurred with respect to any such Synthetic Lease
transaction is nonrecourse to any other Restricted Subsidiary;

          (d)  Non-Recourse Debt; and

          (e) other Debt, the aggregate principal amount of which does not
exceed $500,000,000 at any time.

     15.16 Certification. In accordance with Section 6.2(a) of the Participation
           -------------
Agreement, Guarantor acknowledges and agrees that the delivery of an Advance
Request or the acceptance by the Lessee of the proceeds of any Advance shall be
deemed a certification by Guarantor that the representations and warranties made

                                       -21-

<PAGE>

by Guarantor in this Guarantee, in any certificate delivered pursuant to this
Guarantee and in the Responsible Officer's Certificate delivered by Guarantor on
the date hereof are true and correct in all material respects as of such date
(except with respect to the representations and warranties at Section 14.12 and
                                                              -------------
14.13 which speak only as of the date of execution and delivery of this
-----
Guarantee).

     15.17 Ownership of Lessee. Guarantor will cause Lessee to do all things
           -------------------
necessary to preserve and keep in full force and effect its existence and, to
the extent necessary to perform Lessee's obligations under the Operative
Agreements, Lessee's rights, franchises and authority. At all times prior to the
Expiration Date, Guarantor shall (i) own, directly or indirectly, and have the
right to vote 100% of all the outstanding voting stock, membership or other
equity interests of Lessee and at least 51% (unless such entity is Restricted
Subsidiary, then 100%) of all of the outstanding voting stock, membership or
other equity interests of each PPL Group Member which is a sublessee pursuant to
clause (i)(x) of Article VI of the Lease or, so long as such Lease Supplement is
in effect, an assignee of a Lease Supplement pursuant to clause (ii) of Article
VI of the Lease (a "Participating PPL Group Member"), in each case determined on
                    ------------------------------
a fully diluted basis after giving effect to the conversion and exercise of all
outstanding warrants, options and other securities or interests of Lessee or
such Participating PPL Group Member, as applicable, that are convertible into or
exercisable for voting stock, membership or other equity interests of Lessee or
such Participating PPL Group Member, as applicable, (ii) possess such rights,
directly or indirectly, as are necessary to exercise control over Lessee and
each such Participating PPL Group Member, and (iii) be, or cause any of its
Subsidiaries to be, the managing member of Lessee and, if any such Participating
PPL Group Member is a limited liability company, such Participating PPL Group
Member.

Notwithstanding the foregoing provisions of this Section 15, nothing in this
Section 15 shall be deemed to limit, modify or reduce Lessee's obligations and
covenants set forth in the Participation Agreement, including at Article IX
thereof, or any other Operative Agreement or Guarantor's obligations under this
Guarantee with respect thereto.

     Section 16.    Acknowledgment. Guarantor hereby acknowledges and agrees
                    --------------
that Lessor has, pursuant to Section 7.4 of the Security Agreement, granted to
the Administrative Agent a nonexclusive assignment of the right to enforce
Lessor's rights under this Guarantee.

     Section 17.    Effectiveness. This Guarantee shall be effective on the
                    -------------
Second Document Closing Date, and upon such effective date, this Guarantee shall
amend and completely restate and supersede the Original PPL Supply Guarantee.

     Section 18.    Certain Definitions. As used in this Guarantee, the
                    -------------------
following terms shall have the following meanings:

          "Asset Sale" shall mean any sale of any assets, including by way of
           ----------
the sale by the Guarantor or any of its Subsidiaries of equity interests in such
Subsidiaries.

          "Capital Lease" means any lease of property which, in accordance with
           -------------
GAAP, should be capitalized on the lessee's balance sheet.

                                       -22-

<PAGE>

          "Capital Lease Obligations" means, with respect to any Person, all
           -------------------------
obligations of such Person as lessee under Capital Leases, in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.

          "Caribou Joint Venture" means the transactions involving the
           ---------------------
contribution of certain assets related to, and interests in, the Martins Creek
Units 1 and 2 generating facilities (including any associated common
facilities), the Keystone and Conemaugh facilities, the Holtwood and
Wallenpaupack facilities and the Griffith facilities to a Subsidiary of the
Guarantor, and the financing and other transactions related thereto.

          "Closing Date" means the date not later than June 26, 2001 on which
           ------------
the Administrative Agent determines that the conditions specified in or pursuant
to Section 4.01 to the PPL Supply Credit Agreements have been satisfied.

          "Consolidated Capitalization" shall mean the sum of, without
           ---------------------------
duplication, (A) the Consolidated Debt of the Guarantor, (B) the consolidated
shareowners' equity (determined in accordance with GAAP) of the common,
preference and preferred stockholders of the Guarantor and minority interests
recorded on the Guarantor's consolidated financial statements (excluding
therefrom the effect of all unrealized gains and losses reported under Financial
Accounting Standards Board Statement No. 133 in connection with forward
contracts, futures contracts or other derivatives or commodity hedging
agreements for the future delivery of electricity or capacity), (C) up to an
aggregate amount of $100,000,000 of Hybrid Preferred Securities and (D) up to an
aggregate amount of $100,000,000 of Equity-Linked Securities, except that for
purposes of calculating Consolidated Capitalization of the Guarantor,
Consolidated Debt of the Guarantor shall exclude Non-Recourse Debt and
Consolidated Capitalization of the Guarantor shall exclude that portion of
shareholder equity attributable to assets securing Non-Recourse Debt.

          "Consolidated Debt" means the consolidated Debt of the Guarantor and
           -----------------
its Consolidated Subsidiaries (determined in accordance with GAAP), except that
for purposes of this definition (a) Consolidated Debt of the Guarantor shall
exclude Non-Recourse Debt and (b) Consolidated Debt of the Guarantor shall
exclude (i) up to an aggregate amount of $100,000,000 of Hybrid Preferred
Securities and (ii) up to an aggregate amount of $100,000,000 of Equity-Linked
Securities.

          "Consolidated EBITDA" means, for any period, Consolidated Net Income
           -------------------
for such period plus (in each case to the extent deducted in computing such
Consolidated Net Income) (i) Consolidated Interest Expense, (ii) provisions for
income taxes and (iii) provisions for depreciation and amortization (including
amortization of goodwill).

          "Consolidated Interest Expense" means, for any period, the gross
           -----------------------------
interest expense (including, without limitation, that attributable to Capital
Lease Obligations or a Synthetic Lease) of the Guarantor and its Consolidated
Subsidiaries determined on a consolidated basis for such period. For purposes of
the foregoing, gross interest expense shall be determined after giving effect to
any net payments made or received by the Guarantor with respect to Interest Rate
Protection Agreements, but without giving effect to the write-off of expenses
associated with the termination of Interest Rate Protection Agreements.

                                       -23-

<PAGE>

          "Consolidated Net Income" means, for any period, the net income (or
           -----------------------
net loss) of the Guarantor and its Consolidated Subsidiaries, determined on a
consolidated basis for such period, excluding the effects of gains or losses on
sales of assets (excluding sales of inventory in the ordinary course of
business) and other non-cash extraordinary gains or losses.

          "Consolidated Subsidiary" means with respect to any Person at any date
           -----------------------
any Subsidiary of such Person or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date in accordance with GAAP.

          "Corporation" means a corporation, association, company, joint stock
           -----------
company, limited liability company, partnership or business trust.

          "Debt" of any Person means, without duplication, (i) all obligations
           ----
of such Person for borrowed money, (ii) all obligations of such Person with
respect to deposits or advances of any kind, (iii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (iv) all
Guarantees by such Person of Debt of others, (v) all Capital Lease Obligations
and Synthetic Leases of such Person, (vi) all obligations of such Person in
respect of Interest Rate Protection Agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements (the amount
of any such obligation to be the net amount that would be payable upon the
acceleration, termination or liquidation thereof) and (vii) all obligations of
such Person as an account party in respect of letters of credit and bankers'
acceptances; provided, however, that "Debt" of such Person does not include (a)
             --------  -------
obligations of such Person under any installment sale, conditional sale or title
retention agreement or any other agreement relating to obligations for the
deferred purchase price of property or services (b) obligations under agreements
relating to the purchase and sale of any commodity, including any power sale or
purchase agreements, any commodity hedge or derivative (regardless of whether
any such transaction is a "financial" or physical transaction), (c) any trade
obligations or other obligations of such Person incurred in the ordinary course
of business, (d) obligations of such Person under any lease agreement (including
any lease intended as security) that is not a Capital Lease or a Synthetic Lease
or (e) obligations associated with the Caribou Joint Venture.

          "Disclosure Qualification" means that (i) no representation, warranty
           ------------------------
or covenant is made with respect to any information concerning the
Administrative Agent, any Participant any other lender or collateral agent, any
direct or indirect members of, or any Affiliates or agents or other
representatives of any of the foregoing, (ii) no representation, warranty or
covenant is made with respect to the terms or effects of or any Person's (other
than the Guarantor's) rights or obligations under any agreement or document and
(iii) any representation, warranty or covenant that is stated to be subject to
the Disclosure Qualification in any materials provided to Participants is
subject to the foregoing clauses (i) and (ii) and to the additional
qualifications, assumptions and disclaimers set forth in such materials.

          "Environmental Laws" means any and all federal, state and local
           ------------------
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses or other written governmental
restrictions relating to the environment or to emissions, discharges or releases
of pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or Hazardous Substances or wastes into the environment

                                       -24-

<PAGE>

including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
petroleum or petroleum products, chemicals or industrial, toxic or Hazardous
Substances or wastes.

          "Environmental Liabilities" means all liabilities (including
           -------------------------
anticipated compliance costs) in connection with or relating to the business,
assets, presently or previously owned, leased or operated property, activities
(including, without limitation, off-site disposal) or operations of the
Guarantor or any of its Subsidiaries, whether vested or unvested, contingent or
fixed, actual or potential, which arise under or relate to matters covered by
Environmental Laws.

          "Equity-Linked Securities" means any securities of the Guarantor or
           ------------------------
any of its Subsidiaries which are convertible into, or exchangeable for, equity
securities of the Guarantor, such Subsidiary or PPL Corporation, including any
securities issued by any of such Persons which are pledged to secure any
obligation of any holder to purchase equity securities of the Guarantor, any of
its Subsidiaries or PPL Corporation.

          "ERISA Group" means the Guarantor and all members of a controlled
           -----------
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Guarantor, are treated as a single
employer under Section 414(b) or (c) of the Internal Revenue Code.

          "Existing Debt" means the Debt listed on Schedule 6.15 to the PPL
           -------------
Supply Credit Agreements as of the Closing Date.

          "Existing Letters of Credit" means the letters of credit listed in
           --------------------------
Schedule 3.01 to the PPL Supply Credit Agreements as of the Closing Date, and
"Existing Letter of Credit" means any one of them.

          "Financial Projections" means (a) any forward looking statement
           ---------------------
(within the meaning of the Securities Act of 1933 and the rules and regulations
thereunder) and (b) any "prospective financial statement, financial forecast or
financial projection" (as defined in guidelines published by the American
Institute of Certified Public Accountants).

          "Governmental Authority" means any federal, state or local government,
           ----------------------
authority, agency, central bank, quasi-governmental authority, court or other
body or entity, and any arbitrator with authority to bind a party at law.

          "Guarantee" of or by any person means any obligation, contingent or
           ---------
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Debt of any other person (the "primary obligor") in any manner,
whether directly or indirectly, and including any obligation of such person,
direct or indirect, (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or to purchase (or to advance or supply funds
for the purchase of) any security for payment of such Debt, (ii) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Debt of the payment of such Debt or (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Debt; provided,
                                                                      --------

                                       -25-

<PAGE>

however, that the term Guarantee shall not include endorsements for collection
-------
or deposit in the ordinary course of business.

          "Guarantor's Rating" means the senior unsecured long-term debt rating
           ------------------
of the Guarantor from Moody's or S&P.

          "Hazardous Substances" means any toxic, caustic or otherwise hazardous
           --------------------
substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.

          "Hybrid Preferred Securities" means any trust preferred securities, or
           ---------------------------
deferrable interest subordinated debt with a maturity of at least 20 years, in
each case similar to PPL Electric Utilities Corporation's existing Trust
Preferred Securities (TOPrS), issued by the Guarantor, or any business trusts,
limited liability companies, limited partnerships (or similar entities) (i) all
of the common equity, general partner or similar interests of which are owned
(either directly or indirectly through one or more wholly owned Subsidiaries) at
all times by the Guarantor or any of its Subsidiaries, (ii) that have been
formed for the purpose of issuing hybrid preferred securities and (iii)
substantially all the assets of which consist of (A) subordinated debt of the
Guarantor or a Subsidiary of the Guarantor, as the case may be, and (B) payments
made from time to time on the subordinated debt.

          "Interest Rate Protection Agreements" means any agreement providing
           -----------------------------------
for an interest rate swap, cap or collar, or any other financial agreement
designed to protect against fluctuations in interest rates.

          "Internal Revenue Code" means the Internal Revenue Code of 1986, as
           ---------------------
amended, or any successor statute.

          "Lien" means, with respect to any asset, any mortgage, lien, pledge,
           ----
charge, security interest or encumbrance intended to confer or having the effect
of conferring upon a creditor a preferential interest.

          "Margin Stock" means "margin stock" as such term is defined in
           ------------
Regulation U.

          "Material Adverse Effect" means (x) any material adverse effect upon
           -----------------------
the business, assets, financial condition or operations of the Guarantor or the
Guarantor and its Subsidiaries, taken as a whole; (y) a material adverse effect
on the ability of the Guarantor to perform its obligations under this Guarantee
or (z) a material adverse effect on the validity or enforceability of this
Guarantee.

          "Material Plan" means at any time a Plan or Plans having aggregate
           -------------
Unfunded Liabilities in excess of $5,000,000.

          "Moody's" means Moody's Investors Service, Inc., a Delaware
           -------
corporation, and its successors or, absent any such successor, such nationally
recognized statistical rating organization as the Guarantor and the
Administrative Agent may select.

                                       -26-

<PAGE>

          "Multiemployer Plan" means at any time an employee pension benefit
           ------------------
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions.

          "Non-Recourse Debt" shall mean Debt that is nonrecourse to the
           -----------------
Guarantor or any Restricted Subsidiary.

          "Parent" means PPL Corporation, a Pennsylvania corporation, and its
           ------
successors.

          "Permitted Business" with respect to any Person means a business that
           ------------------
is the same or similar to the business of the Guarantor or any Subsidiary as of
the date hereof, or any business reasonably related thereto.

          "Plan" means at any time an employee pension benefit plan (including a
           ----
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.

          "PPL Supply Credit Agreements" means the $600,000,000 364-Day Credit
           ----------------------------
Agreement and $500,000,000 3 Year Credit Agreement, both dated as of June 26,
2001, among PPL Energy Supply, LLC, the Lenders from time to time party thereto,
First Union National Bank, as Administrative Agent and Issuing Lender, Citibank,
N.A., as Syndication Agent, and Barclays Bank PLC, Westdeutsche Landesbank
Girozentrale, New York Branch and Bank One, N.A., as Documentation Agents.

          "Regulation D" means Regulation D of the Board of Governors of the
           ------------
Federal Reserve System, as amended, or any successor regulation.

          "Regulation U" means Regulation U of the Board of Governors of the
           ------------
Federal Reserve System, as amended, or any successor regulation.

          "Restricted Subsidiary" means each Subsidiary listed on Schedule 14.12
           ---------------------
and each other Subsidiary designated by the Guarantor as a "Restricted
Subsidiary" in writing to the Administrative Agent; provided, that, each
Restricted Subsidiary shall be a direct Wholly-Owned Subsidiary of the Guarantor
or a Restricted Subsidiary.

          "Special Purpose Subsidiary" means any Wholly-Owned Subsidiary
           --------------------------
(regardless of the form of organization) of the Guarantor formed solely for the
purpose of, and which engages in no other activities except those necessary for,
effecting financings related to Synthetic Leases.

          "Subsidiary" means, any Corporation a majority of the outstanding
           ----------
Voting Stock of which is owned, directly or indirectly, by the Guarantor or one
or more other Subsidiaries of the Guarantor.

                                       -27-

<PAGE>

          "Synthetic Lease" means any synthetic lease, tax retention operating
           ---------------
lease, off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP.

          "Unfunded Liabilities" means, with respect to any Plan at any time,
           --------------------
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

          "Voting Stock" means stock (or other interests) of a Corporation
           ------------
having ordinary voting power for the election of directors, managers or trustees
thereof, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.

          "Wholly-Owned Subsidiary" means, with respect to any Person at any
           -----------------------
date, any Subsidiary of such Person all of the Voting Stock of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
such Person.

                            [SIGNATURE PAGE FOLLOWS]

                                       -28-

<PAGE>

     IN WITNESS WHEREOF, Guarantor has caused this Guarantee to be executed and
delivered as of the date first above written.

                                        PPL ENERGY SUPPLY, LLC,
                                        a Delaware limited liability company

                                        By:  /s/ James E. Abel
                                           ------------------------------------
                                        Name:  James E. Abel
                                             ----------------------------------
                                        Title:  Treasurer
                                              ---------------------------------

                                        Address:
                                                -------------------------------

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

                                        Attention:
                                                  -----------------------------

                                       -29-

<PAGE>

                                  SCHEDULE 14.6

                                LITIGATION, ETC.

Litigation, arbitration and administrative proceedings disclosed in or
contemplated by the Parent's Annual Report on Form 10-K to the SEC for the Year
Ended, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form
8-K filed since January 1, 2001.

                                       -30-

<PAGE>

                                 SCHEDULE 14.12

                             RESTRICTED SUBSIDIARIES

RESTRICTED SUBSIDIARY                             JURISDICTION OF ORGANIZATION
---------------------                             ----------------------------

PPL Generation, LLC                                       Delaware
PPL Montana Holdings, LLC                                 Delaware
PPL Montana, LLC                                          Delaware
PPL Martins Creek, LLC                                    Delaware
PPL Brunner Island, LLC                                   Delaware
PPL Montour, LLC                                          Delaware
PPL Susquehanna, LLC                                      Delaware
PPL Wallingford LLC                                      Connecticut
PPL Southwest Generation Holdings, LLC                    Delaware
PPL Interstate Energy Company (corporation)               Delaware
PPL Holtwood, LLC                                         Delaware
PPL Maine, LLC                                            Delaware
PPL EnergyPlus, LLC                                     Pennsylvania
PPL Global, LLC                                           Delaware
PPL Large Scale Distributed Generation, LLC               Delaware
PPL Large Scale Distributed Generation II, LLC            Delaware
PPL Investment Corporation                                Delaware

                                       -31-

<PAGE>

                                  SCHEDULE 15.8

                                 EXISTING LIENS

1.   PPL Montana, LLC and PPL Montana Holdings, LLC: Liens in favor of Citicorp
     relating to an environmental wireless network for Colstrip, the value of
     the obligations secured by such Lien being approximately $20,000, and Liens
     associated with pending transactions with Citicorp North America, Inc. to
     provide financing of a Honeywell plant simulator, the value of the
     obligations secured by such Lien being approximately $810,000, and a
     telephone system, the value of the obligations secured by such Lien being
     approximately $275,000, for Colstrip.

                                       -32-

<PAGE>

                                 SCHEDULE 15.12

                             RESTRICTIVE AGREEMENTS

1.   PPL Montana, LLC and PPL Montana Holdings, LLC: Restrictions on the payment
     of dividends and similar distributions contained in the PPL Montana, LLC's
     $150 million 364-Day Revolving Credit Facility (Tack-On Facility) with
     Chase/J.P. Morgan and other Lenders named therein and the PPL Montana,
     LLC's $100 million Three-Year Working Capital Facility with Chase/J.P.
     Morgan and other Lenders named therein; and restrictions arising in
     connection with the pass-through certificates, lessor notes and other lease
     obligations relating to PPL Montana's leases relating to the Colstrip
     Facility.

2.   Restrictions arising in connection with the Caribou Joint Venture.

                                       -33-

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