Document:

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                                                                  Exhibit 10.2

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                            POWER PURCHASE AGREEMENT

                                     BETWEEN

                          EL PASO MERCHANT ENERGY, L.P.

                                       AND

                             CEDAR BRAKES II, L.L.C.

                                      DATED
                                      AS OF

                                 OCTOBER 1, 2001

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                                TABLE OF CONTENTS
<TABLE>
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                                                                                               PAGE
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ARTICLE I  DEFINITIONS...........................................................................1
ARTICLE II  GENERAL CONDITIONS OF DELIVERY AND ACCEPTANCE OF ELECTRIC ENERGY AND CAPACITY........5
         Section A  General Conditions...........................................................5
         Section B  Sale of Energy...............................................................6
         Section C  Sale of Capacity.............................................................6
         Section D  Exceptions to Obligation to Accept Energy and Capacity.......................6
         Section E  Distribution Surcharges......................................................7
         Section F  Ancillary Services...........................................................7
ARTICLE III  TERM; EFFECTIVENESS.................................................................8
         Section A  Term.........................................................................8
         Section B  Conditions Precedent.........................................................8
ARTICLE IV  PURCHASE PRICE AND PAYMENT CONDITIONS................................................8
         Section A  Energy and Capacity Rates....................................................8
         Section B  Transmission of Energy.......................................................9
         Section C  Binding Rate.................................................................9
ARTICLE V  DELIVERY OF ENERGY AND CAPACITY.......................................................9
         Section A  Scheduling...................................................................9
         Section B  Rate of Delivery............................................................10
         Section C  Minimum Energy Deliveries...................................................10
         Section D  Make-up Energy Deliveries...................................................11
         Section E  Seller's Failure to Deliver Energy and Capacity.............................11
         Section F  Seller's Failure to Deliver Annual Quantity.................................13
ARTICLE VI  BILLING AND PAYMENT.................................................................14
         Section A  Statement...................................................................14
         Section B  Financial Settlement........................................................14
ARTICLE VII  METERING/RECORDS...................................................................15
ARTICLE VIII  [RESERVED]........................................................................15
ARTICLE IX  [RESERVED]..........................................................................15
ARTICLE X  LIABILITY............................................................................15
ARTICLE XI  FORCE MAJEURE.......................................................................16
ARTICLE XII  INDEMNIFICATION....................................................................17
ARTICLE XIII  REPRESENTATION AND WARRANTIES.....................................................18
ARTICLE XIV  EVENTS OF DEFAULT AND BREACH OF CONTRACT...........................................20
         Section A  Default by Seller...........................................................20
         Section B  Remedies....................................................................20
ARTICLE XV  ARBITRATION.........................................................................21
ARTICLE XVI  ENTIRE AGREEMENT...................................................................23
ARTICLE XVII  ASSIGNMENT/TRANSFER...............................................................23
ARTICLE XVIII  [RESERVED].......................................................................24
ARTICLE XIX  [RESERVED].........................................................................24
ARTICLE XX  CHOICE OF LAW.......................................................................24
ARTICLE XXI  CAPTIONS...........................................................................24
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<TABLE>
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ARTICLE XXII  COUNTERPARTS......................................................................25
ARTICLE XXIII  MISCELLANEOUS....................................................................25
ARTICLE XXIV  RESERVATIONS......................................................................25
ARTICLE XXV  SURVIVAL OF OBLIGATIONS............................................................26
ARTICLE XXVI  NOTICES...........................................................................26
</TABLE>

Exhibit 1  Annual Energy Deliveries
Exhibit 2  Contract Rates
Exhibit 3  Delivery Point Adjustment
Exhibit 4  Reserved
Exhibit 5  Consent to Assignment
Exhibit 6  Guaranty

                                      -ii-

<PAGE>

                            POWER PURCHASE AGREEMENT

         This Power Purchase Agreement (this "Agreement") is made and entered
into this 1st day of October, 2001, by and between El Paso Merchant Energy,
L.P., a Delaware limited partnership ("Seller") and Cedar Brakes II, L.L.C.
(formerly known as Cedar Brakes IV, L.L.C.), a Delaware limited liability
company (the "Buyer") (each individually referred to as a "Party" and
collectively as "Parties").

                                    RECITALS

         WHEREAS, Public Service Electric and Gas Company ("PSE&G") and Buyer
have entered into an Amended and Restated Power Purchase Agreement dated May 23,
2001 (the "Amended and Restated PPA"), providing for the sale by Buyer and the
purchase by PSE&G of capacity and energy.

         WHEREAS, Buyer is entering into this Agreement in order to be able,
inter alia, to assure itself of a supply of capacity and energy sufficient to
meet its obligations under the Amended and Restated PPA; and

         WHEREAS, Seller is willing to perform the various obligations set forth
herein in accordance with the terms and conditions hereof.

         NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the Parties hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

         The following terms when used herein with capitalization shall have the
following meanings, unless a different meaning shall be expressly stated:

         "AAA" means the American Arbitration Association as defined and
described in Article XV.

         "Agreement" means this Power Purchase Agreement between Seller and
Buyer.

         "Alternate Delivery Point" means any Delivery Point other than the
Camden Delivery Point or, at any time until and including October 31, 2008, the
Bayonne Delivery Point.

         "Amended and Restated PPA" has the meaning set forth in the Recitals.

         "Annual Quantity" means an annual quantity of Energy required to be
delivered hereunder in each calendar year as set forth in Exhibit 1. The Annual
Quantity for the calendar year ending on December 31, 2001 shall be prorated
based on the Effective Date.

<PAGE>

         "Annua1 Shortfall Credit" means the credit calculated in accordance
with Article V(E).

         "Bayonne" means Cogen Technologies NJ Venture.

         "Bayonne Delivery Point" means the existing point of physical
connection of the Bayonne Facility to the Public Service System as further
defined in the Bayonne Interconnection Agreement.

         "Bayonne Facility" means the gas-fired combined cycle power plant and
all appurtenant structures and equipment that, Bayonne owns/leases, operates and
maintains, for the purpose of generating electricity, steam and/or other forms
of useful thermal energy output.

         "Blended Locational Marginal Price" for any hour equals (1) until and
including October 31, 2008, 78% of the real-time locational marginal price at
the Camden Delivery Point for the hour plus 22% of the real-time locational
marginal price at the Bayonne Delivery Point for the hour and (2) thereafter the
real-time locational marginal price at the Camden Delivery Point for the hour.

         "Camden" means Camden Cogen L.P.

         "Camden Delivery Point" means the existing point of physical connection
of the Camden Facility to the Public Service System as further defined in the
Camden Interconnection Agreement.

         "Camden Facility" means the gas-fired combined cycle power plant and
all appurtenant structures and equipment that Camden owns/leases, operates and
maintains, for the purpose of generating electricity, steam and/or other forms
of useful thermal energy output.

         "Capacity" has the meaning given in Article II(C).

         "Contract Rate" means the applicable rate in dollars per MWh set forth
in Exhibit 2.

         "Curtailed Energy Deliveries" has the meaning given in Article V(D).

         "Delivery Point" means any of: (i) the Camden Delivery Point; (ii)
until and including October 31, 2008, the Bayonne Delivery Point, or (iii) any
alternate point of delivery in the PJM System of which Seller notifies Buyer
(any of which is referred to herein as the "Delivery Point").

         "Delivery Point Adjustment" means the adjustment to the Contract Rate
to be made pursuant to Article IV(B) and calculated in accordance with Exhibit
3.

         "Distribution Surcharges" has the meaning given in Article II(E).

         "Eastern Prevailing Time" means Eastern Standard Time or Eastern
Daylight Savings Time, as applicable, in New York, New York.

                                      -2-
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         "Effective Date" has the meaning given in Article III(A).

         "Energy" means electric energy measured in kilowatt-hours (or
megawatt-hours), sixty hertz, balanced three phase alternating current at the
nominal voltage of the Delivery Point.

         "Energy Shortfall Liquidated Damages" has the meaning given in Article
V(F).

         "FERC" means the Federal Energy Regulatory Commission.

         "Financia1 Settlement Energy" has the meaning given in Article VI(B).

         "Financial Settlement Notice" has the meaning given in Article VI(B).

         "Financial Settlement Price" has the meaning given in Article VI(B).

         "Financier" or "Lender" means any individual(s) or entity(ies) and any
representative(s) or trustee(s) for any such individual(s) or entity(ies)): (i)
providing financing to El Paso Merchant Energy Holding Company or Buyer or any
entity controlling, controlled by or under common control with such entity, in
respect of the transactions in this Agreement, including without limitation in
the form of (a) term or interim debt or subordinated debt financing; (b) the
establishment and/or maintenance of working capital requirements; and/or (c) any
refinancing or take-out of any such loan(s); and/or (ii) participating as an
equity investor in such transactions; and/or (iii) any lessor under a lease
finance arrangement.

         "Guarantor" means El Paso Corporation.

         "Guaranty" has the meaning given in Article III(B).

         "Hourly Shortfall" has the meaning given in Article V(E).

         "Hourly Shortfall Credit" means the credit calculated in accordance
with Article V(E).

         "Interconnection" means the physical facilities interconnecting the
Camden Facility or the Bayonne Facility, as the case may be, with the Public
Service System as further described in the applicable Interconnection Agreement.

         "Interconnection Agreements" means the Interconnection Agreement
between Buyer and Camden (being the "Camden Interconnection Agreement") and the
Interconnection Agreement between Buyer and Bayonne (being the "Bayonne
Interconnection Agreement"), each providing for the Interconnection of the
Camden Facility or the Bayonne Facility, as the case may be, with the Public
Service System.

         "Late Payment Rate" has the meaning given in Article V(F).

         "Liquidated Damages Rate" means the applicable rate in dollars per MWh
set forth in Exhibit 2.

         "Make-up Energy Deliveries" has the meaning given in Article V(D).

                                      -3-

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         "Month" means the calendar month commencing at 12:00.01 a.m. Eastern
Prevailing Time on the first day of the calendar month and concluding at
midnight Eastern Prevailing Time on the final day of the same calendar month.

         "Monthly Schedule" has the meaning given in Article V(A).

         "NERC" means North American Electric Reliability Council or any
successor thereto.

         "NJBPU" means the New Jersey Board of Public Utilities.

         "Non-Summer Hourly Minimum" means a quantity of Energy equal to (1) 50
MWh per hour until and including October 31, 2008, and (2) thereafter, 39 MWh
per hour.

         "Non-Summer On-Peak Minimum Quantity" means a quantity of Energy equal
to (1) 460,445 MWh until and including October 31, 2008, and (2) thereafter,
359,147 MWh.

         "Non-Summer Period" has the meaning given in Article V(C).

         "OATT" means the Open Access Transmission Tariff filed by PJM with the
FERC on July 14, 1997, in Docket No. OA97-261-000 as amended effective April
1,1998, as further amended modified or superseded from time to time, under which
transmission service is provided within the PJM Control Area.

         "Off-Peak Hour" means an hour occurring in the Off-Peak Period.

         "Off-Peak Period" means all other hours of a week exclusive of the
On-Peak Period.

         "On-Peak Hour" means an hour occurring in the On-Peak Period.

         "On-Peak Period" means the period commencing with hour beginning 0700
through hour ending 2300 (Eastern Prevailing Time) Monday through Friday,
excluding NERC holidays.

         "Party" has the meaning set forth in the introductory paragraph of this
Agreement.

         "PJM Operating Agreement" means the agreement governing the PJM
Interconnection, L.L.C. dated June 2, 1997, as amended December 31, 1997, as in
effect from time to time, together with all amendments and supplements thereto.

         "PJM System" means Transmission Facilities under which transmission
service is provided within the PJM Control Area, as each such term is defined in
the PJM Operating Agreement.

         "PJM Tariff" means the PJM Open Access Transmission Tariff.

         "PSE&G" means Public Service Electric and Gas Company.

                                      -4-
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         "Public Service System" means the transmission, subtransmission and
distribution facilities owned, operated and maintained by PSE&G, including the
Interconnection.

         "PURPA" means the Public Utility Regulatory Policies Act of 1978.

         "RAA" means the PJM Reliability Assurance Agreement dated June 2, 1997,
as in effect from time to time, together with all amendments and supplements
thereto.

         "Scheduled Delivery Shortfall Credit" means the credit calculated in
accordance with Article V(E).

         "Seasonal Shortfall" has the meaning given in Article V(E).

         "Seasonal Shortfall Credit" means the credit calculated in accordance
with Article V(E).

         "Summer Hourly Minimum" means a quantity of Energy equal to (1) 165 MWh
until and including October 31, 2008, and (2) thereafter, 130 MWh.

         "Summer On-Peak Minimum Quantity" means a quantity of Energy equal to
(1) until and including October 31, 2008, 185 MWh per hour multiplied by the
number of On-Peak Hours during the Summer Period and (2) thereafter 144 MWh per
hour multiplied by the number of On-Peak Hours during the Summer Period.

         "Summer Period" has the meaning given in Article V(C).

         "System Emergency" means the existence of a physical or operational
condition and/or the occurrence of an event on the Public Service System (or PJM
System) which in PSE&G's judgment is: (i) imminently likely to endanger life or
property; or (ii) impairs and/or imminently will impair: (a) PSE&G's ability to
discharge its statutory obligation(s) to provide safe, adequate and proper
service to its customers; and/or (b) the safety and/or reliability of the Public
Service System (or PJM System). System Emergency shall include a minimum
generation emergency declaration by PJM that meets the requirements specified in
the previous sentence.

                                   ARTICLE II

                       GENERAL CONDITIONS OF DELIVERY AND
                   ACCEPTANCE OF ELECTRIC ENERGY AND CAPACITY

                                   SECTION A
                               GENERAL CONDITIONS

         Seller agrees to deliver and Buyer agrees to accept, during the term of
this Agreement, Energy and Capacity delivered by Seller, subject to and in
accordance with the terms of this Agreement. Seller may provide Energy and
Capacity to Buyer, at Seller's sole option, from any source of supply.

                                      -5-

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                                   SECTION B
                                 SALE OF ENERGY

         Seller will sell and deliver to Buyer Energy that is scheduled and
delivered by Seller in accordance with Article V, and Buyer will purchase and
accept delivery of such Energy at the Delivery Point(s). The annual quantities
of Energy which Seller shall schedule and deliver in each calendar year during
the term of this Agreement commencing with the Year 2001 are set forth in
Exhibit 1 (such quantity for each year, the "Annual Quantity"). The Annual
Quantity applicable to the initial calendar year of the term of this Agreement
(if a partial calendar year) shall be adjusted by multiplying the applicable
Annual Quantity for such year times the number of days in such partial calendar
year divided by 365 days.

                                   SECTION C
                                SALE OF CAPACITY

         Seller shall arrange for capacity credits applicable to the PJM Control
Area (as defined in the PJM Open Access Tariff) to be made available to Buyer
from Capacity Resources (as defined in the RAA) ("Capacity"), which may include
at Seller's option Capacity provided by the Camden Facility, the Bayonne
Facility or from other sources of such capacity, such that Buyer shall be
credited by PJM with at least one hundred and eighty-nine (189) MW per day of
such Capacity credits through October 31, 2008 and at least one hundred
forty-nine (149) MW per day of such Capacity credits from November 1, 2008
through the end of the term of this Agreement. Seller shall take all necessary
steps utilizing PJM's "eCapacity" mechanism, or as otherwise may be required by
PJM, such that Buyer's account with PJM shall reflect such Capacity credits as
of the Effective Date and at all times throughout the term hereof. Buyer agrees
to cooperate with Seller in making any submittals required by PJM.

         The amount of Capacity credits to be provided to Buyer hereunder is
based on the methodology currently specified in the RAA. If such methodology is
no longer used by PJM, the minimum quantity of Capacity credits Seller is
required to provide hereunder (restated in terms of the new unit of measurement)
shall be calculated based upon the aggregate operation of the Camden Facility
and twenty-two percent (22%) of the Bayonne Facility during the twelve (12)
Month period from January 1, 1998, through December 31, 1998, or such shorter
period ending as of December 31, 1998, as may be specified in the new
measurement methodology. If the RAA and the PJM Operating Agreement no longer
require Buyer to obtain such Capacity credits, Seller shall provide Capacity to
Buyer in an amount equal to the amount specified in the measurement methodology
in effect immediately prior to the cancellation of such requirement.

                                   SECTION D
                       EXCEPTIONS TO OBLIGATION TO ACCEPT
                               ENERGY AND CAPACITY

         Notwithstanding the above, and without derogating from the provisions
of Article XI, Buyer shall be excused from accepting all or a portion of
Seller's Energy and Capacity in the event of a System Emergency.

                                      -6-
<PAGE>

         Where practicable, Buyer shall give Seller any advance notice Buyer
receives from PSE&G of any interruption, curtailment or reduction effected
pursuant to this Article II(D), the circumstances requiring or necessitating the
interruption, curtailment or reduction of Buyer's acceptance of Energy and
Capacity and, if able, the reasons therefor, and the extent and duration
thereof. In the event Buyer is unable, for any reason, to give Seller advance
notice of such an interruption, curtailment or reduction of such acceptance of
the Energy and Capacity, Buyer shall, as soon thereafter as practicable, contact
Seller to confirm such interruption, curtailment or reduction, explaining the
circumstances requiring or necessitating the interruption, curtailment or
reduction, and, if able, furnish the reasons therefor and the extent and
duration thereof. At Seller's request, Buyer shall use reasonable efforts to
secure from PSE&G and provide to Seller written notice explaining the
circumstances requiring or necessitating any interruption, curtailment or
reduction of service effective pursuant to this Article II(D). Buyer will
promptly notify Seller when the reason for the interruption, curtailment or
reduction no longer exists and Buyer shall promptly resume the acceptance of the
Energy and Capacity as and to the extent PSE&G resumes acceptance of Energy and
Capacity under the Amended and Restated PPA.

         In the event acceptance of the Energy and Capacity is interrupted,
curtailed or reduced by Buyer for any reason specified in this Article II(D),
Buyer agrees to exercise Buyer's rights under the Amended and Restated PPA to
cause PSE&G to use its best efforts (consistent with PSE&G's existing
obligations to restore service to its retail and wholesale customers) to correct
any condition and to restore acceptance of such power upon the cessation of any
System Emergency. Seller expressly agrees that Buyer is not liable for damages
of any kind to Seller or any third party due to Buyer's failure to accept the
Energy and Capacity for any of the reasons expressed above.

                                   SECTION E
                             DISTRIBUTION SURCHARGES

         Seller shall pay Buyer for the amount of any Distribution Surcharges
payable to PSE&G pursuant to Article II(E) of the Amended and Restated PPA
within two (2) business days of receipt of a written invoice from Buyer with
respect to such Distribution Surcharges. Seller shall pay any amounts due
pursuant to this Article II(E) into an account of Buyer or to Buyer's designee
in accordance with written instructions provided by Buyer to Seller.

                                   SECTION F
                               ANCILLARY SERVICES

         Seller shall have no obligation to provide ancillary services to Buyer
except for operating reserves as set forth in Article IV(B).

                                      -7-
<PAGE>

                                   ARTICLE III

                               TERM; EFFECTIVENESS

                                    SECTION A
                                      TERM

         This Agreement shall become effective upon the Effective Date of the
Amended and Restated PPA (the "Effective Date"). The term of this Agreement
shall be from the Effective Date until and including March 5, 2013. This
Agreement may be terminated by Buyer, on ten (10) days prior written notice to
Seller, if the Amended and Restated PPA is terminated for any reason. This
Agreement may be terminated by Seller on ten (10) days prior written notice to
Buyer, if Buyer fails to make the payment required in Article VI hereof, and
such failure continues for a period of thirty (30) days after written notice
thereof has been given by Seller to Buyer; provided, that Seller shall have no
right to terminate this Agreement pursuant to this sentence if the reason for
such non-payment results directly or indirectly from Seller's failure to perform
under this Agreement.

                                   SECTION B
                              CONDITIONS PRECEDENT

         On or before the Effective Date, Seller shall deliver to Buyer:

         (1)  a consent to assignment of this Agreement duly executed by Seller,
              in substantially the form set forth in Exhibit 5.

         (2)  a guarantee of Seller's obligations under this Agreement duly
              executed by Guarantor in favor of Buyer, in substantially the form
              set forth in Exhibit 6 (the "Guaranty").

         Upon satisfaction or waiver of the last such condition precedent to be
satisfied or waived, the Parties shall promptly affirm in writing that all
conditions precedent have been satisfied. In the event the conditions precedent
are not satisfied, or waived by the Party responsible for obtaining them, within
360 days of execution of this Agreement, either Party at its option may notify
the other Party of its election to terminate this Agreement and upon receipt of
such notice, this Agreement shall be terminated.

                                   ARTICLE IV

                      PURCHASE PRICE AND PAYMENT CONDITIONS

                                   SECTION A
                            ENERGY AND CAPACITY RATES

         The rates payable by Buyer for Energy and Capacity delivered or deemed
delivered during the term of this Agreement are set forth in Exhibit 2. The
payment for Energy

                                      -8-
<PAGE>

and Capacity shall be calculated based on delivery of Energy by Seller as
scheduled by Seller in accordance with Article V, and shall be billed in
accordance with Article VI.

                                   SECTION B
                             TRANSMISSION OF ENERGY

         Seller shall be responsible for arranging transmission of all Energy
that is delivered to Buyer hereunder and paying for all related transmission
charges, congestion costs and any necessary operating reserves to each Delivery
Point. If during any hour during a Month, either (1) Energy is delivered to an
Alternate Delivery Point or (2) the ratio of the quantity of Energy delivered to
the Camden Delivery Point during the hour to the quantity of Energy delivered to
the Bayonne Delivery Point during the same hour is not in the ratio of 78% to
22%, then a Delivery Point Adjustment shall be used to adjust the amount due for
Energy delivered during such hour. The Delivery Point Adjustment shall be
calculated in accordance with Exhibit 3. If the Delivery Point Adjustment
exceeds the delivery price for such Energy (such excess amount, the "Delivery
Point Excess"), the payment to Seller with respect to the corresponding billing
period shall be reduced by a credit in the amount of the Delivery Point Excess
against the amount payable by Buyer for the next succeeding Month; provided,
that if the amount of the credit is greater than the amount payable by Buyer for
a single Month, Seller shall pay to Buyer an amount equal to such excess portion
of the credit (each, an "Article IV(B) Payment").

                                   SECTION C
                                  BINDING RATE

         Each Party, having entered into this Agreement in good faith, hereby
waives all rights on its part now existing or hereafter arising to undertake any
proceeding for the purpose of having the purchase rate, as calculated in this
Article IV, set aside or adjusted as being unjust and unreasonable.

                                   ARTICLE V

                         DELIVERY OF ENERGY AND CAPACITY
                                   SECTION A
                                   SCHEDULING

         Not later than seven (7) business days prior to the commencement of
each calendar Month, Seller shall provide Buyer with a non-binding schedule of
proposed deliveries of Energy for each hour of the upcoming Month (the "Monthly
Schedule").

         Notwithstanding the quantities set forth in a Monthly Schedule, on the
business day preceding the day of delivery of such Energy, Seller shall provide
Buyer with a final daily schedule for deliveries of Energy no later than the
time that is two hours prior to the time that PJM requires submission of final
schedules. The volumes set forth in the final daily schedules may vary from each
other and from the volumes set forth in Monthly Schedules, provided, that Seller
shall schedule for delivery in any calendar year, an amount which equals the
Annual Quantity specified in Article II(B) for such calendar year.

                                      -9-
<PAGE>

         In the event Seller fails to furnish a final daily schedule or a
Monthly Schedule on or before the time specified in the second paragraph of this
Article V(A), the scheduled delivery of Energy shall be deemed to be that
specified in the Monthly Schedule last delivered by Seller.

         Any Monthly Schedule or final daily schedule shall be consistent with
the requirements of this Article V.

         Buyer hereby appoints Seller to be and act as its agent to do and
perform the scheduling obligations under this Agreement and such other things as
may be necessary or convenient thereto. As agent for Buyer for such scheduling
obligations, Seller is authorized to act for Buyer for such scheduling
obligations, Seller is authorized to act for Buyer in its own name or in the
name of Buyer, as deemed necessary or advisable by Seller.

                                   SECTION B
                                RATE OF DELIVERY

         Seller may deliver Energy and Financial Settlement Energy at a rate up
to 200 MWh per hour until and including October 31, 2008, and 156 MWh per hour
thereafter, provided, that in any hour in which Make-up Energy Deliveries are
scheduled in accordance with Article V(D), the rate of delivery may be up to 250
MWh per hour until and including October 31, 2008, and 195 MWh per hour
thereafter.

         Seller shall schedule and deliver Energy at the same delivery rate
during all On-Peak Hours in any day and at the same delivery rate during all
Off-Peak Hours in any day, provided, that (i) the delivery rate for On-Peak
Hours may vary from that for Off-Peak Hours in any day and (ii) the delivery
rate for On-Peak Hours in any day may vary from that for On-Peak Hours in any
other day.

                                   SECTION C
                            MINIMUM ENERGY DELIVERIES

         During the Months of June, July, August and September of each year (the
"Summer Period"), Seller shall schedule and deliver to Buyer (1) at least the
Summer Hourly Minimum during each hour of the Summer Period and (2) during the
On-Peak Hours in the Summer Period an aggregate at least equal to the Summer
On-Peak Minimum Quantity.

         During the period of the year which is not included in the Summer
Period (the "Non-Summer Period"), Seller shall schedule and deliver to Buyer (1)
at least the Non-Summer Hourly Delivery during each hour in the Non-Summer
Period and (2) during the On-Peak Hours of the Non-Summer Period an aggregate at
least equal to the Non-Summer On-Peak Minimum Quantity.

         During each calendar year, Seller shall schedule and deliver to Buyer
Energy in an aggregate amount equal to the Annual Quantity.

         The foregoing delivery amounts shall be prorated for any partial
delivery period.

                                      -10-
<PAGE>

                                   SECTION D
                            MAKE-UP ENERGY DELIVERIES

         If Seller is unable to deliver Energy or Buyer is unable to accept
delivery of Energy which has been scheduled by Seller in accordance with Article
V(A) above, due to an event of Force Majeure or due to the occurrence of an
event set forth in Article II(D) ("Curtailed Energy Deliveries"), Seller shall
have the obligation to reschedule deliveries of make-up quantities of Energy
equivalent to such Curtailed Energy Deliveries during comparable periods during
the remainder of the Month in which the event occurred ("Make-up Energy
Deliveries"). If Seller is unable to deliver Energy or Buyer is unable to accept
delivery of Energy which has been rescheduled by Seller in accordance with the
immediately preceding sentence, Seller shall have the obligation to reschedule
deliveries of make-up quantities of Energy equivalent to such undelivered Energy
during comparable periods during the remainder of the Month in which the event
occurred. If Seller is unable to reschedule such Energy due to an event of Force
Majeure or due to the occurrence of an event set forth in Article II(D), Seller
shall have the obligation to reschedule the delivery of such make-up Energy
quantities in respect of the Curtailed Energy Deliveries during comparable
periods during the immediately following Month. To the extent that Seller fails
to (i) deliver scheduled quantities of Energy or (ii) in the case of Curtailed
Energy Deliveries under this Article V(D), reschedule and deliver any such
make-up quantities with respects to Curtailed Energy Deliveries in the
immediately following Month, to the extent that Buyer is permitted to reschedule
and deliver such Make-up Energy Deliveries in any subsequent Month under the
Amended and Restated PPA, Seller shall be obligated to reschedule the delivery
of such Make-up Energy Deliveries during comparable periods during such
subsequent Month.

         For the purposes of this Article V(D), rescheduled Energy deliveries
shall be deemed to be made during a comparable period if the rescheduled
deliveries are effected during the hours in which the curtailments occurred
(e.g., similar On-Peak Hours if the curtailment occurred during On-Peak Hours
and similar Off-Peak Hours if the curtailment occurred during Off-Peak Hours).

                                   SECTION E
                 SELLER'S FAILURE TO DELIVER ENERGY AND CAPACITY

         If Seller fails for reasons other than a Force Majeure event or in the
event of an occurrence described in Article II(D), to deliver all or part of the
scheduled Energy at the Delivery Point, and PSE&G under the Amended and Restated
PPA permits Buyer to reschedule and deliver such Energy, Seller shall have the
obligation to reschedule delivery of such Energy. In the event that Seller fails
to deliver all or part of the Energy scheduled for delivery hereunder or fails
to schedule sufficient Energy to comply with Article V(C) hereunder, the payment
to Seller with respect to the corresponding billing period shall be reduced by
one or more of the following credits against the amount payable by Buyer for the
next succeeding Month; provided, that (1) if the amount of the Scheduled
Delivery Shortfall Credit, the Hourly Shortfall Credit, the Seasonal Shortfall
Credit and/or the Annual Shortfall Credit is greater than the amount payable by
Buyer for a single Month, Seller shall pay to Buyer the amount of such excess
portion of the credit(s) (each, an "Article V(E) Energy Payment") on or before
the last business day of the following Month, 2) the Scheduled Delivery
Shortfall Credit and the Hourly Shortfall Credit

                                      -11-
<PAGE>

shall be calculated after the end of each Month, (3) the Seasonal Shortfall
Credit for the Summer Period shall be calculated during October and (4) the
Seasonal Shortfall Credit for the Non-Summer Period and the Annual Shortfall
Credit shall be calculated during January of each calendar year for the prior
calendar year. These credits shall be calculated as follows:

         (i)    Scheduled Delivery Shortfall Credit. If Seller fails to deliver
                any quantities of Energy scheduled for delivery under Article
                V(A) hereof, the Scheduled Delivery Shortfall Credit shall be
                determined by multiplying the shortfall in scheduled Energy
                deliveries by the difference (if positive) between (a) the
                amounts paid by Buyer (or by PSE&G if Buyer fails to replace the
                scheduled Energy) to third parties to procure energy to replace
                the scheduled Energy which Seller failed to deliver, using
                commercially reasonable efforts under the circumstances, less
                (b) the applicable Contract Rate for such Energy.

         (ii)   Hourly Shortfall Credit. The Hourly Shortfall Credit shall
                equal, for each hour in which Seller fails to schedule at least
                the Summer Hourly Minimum or the Non-Summer Hourly Minimum, as
                the case may be, the shortfall in the scheduled Energy quantity
                (the "Hourly Shortfall") multiplied by the difference (if
                positive) between (a) the Blended Locational Marginal Price for
                the applicable hour less (b) the Contract rate for such Energy.

         (iii)  Seasonal Shortfall Credit. If Seller fails during any Summer
                Period or Non-Summer Period to schedule at least the Summer
                On-Peak Minimum or the Non-Summer On-Peak Minimum, as the case
                may be, in accordance with Article V(C) hereof, the Seasonal
                Shortfall Credit shall equal the shortfall in scheduled Energy
                quantities (the "Seasonal Shortfall") multiplied by the
                difference (if positive) between (a) the average of the Blended
                Locational Marginal Prices for the On-Peak Hours during the
                Summer Period or Non-Summer Period, as the case may be, less (b)
                the Contract Rate for such Energy; provided, however, that in
                calculating the Seasonal Shortfall Credit, the Seasonal
                Shortfall for a period shall be reduced by the amount of all
                Hourly Shortfalls during the period.

         (iv)   Annual Shortfall Credit. If Seller fails during a calendar year
                to schedule at least the Annual Quantity during the calendar
                year, the Annual Shortfall Credit shall equal the amount, if
                any, of the shortfall in scheduled Energy quantities multiplied
                by the difference (if positive) between (a) the average of the
                Blended Locational Marginal Prices for all hours during the
                calendar year less (b) the Contract Rate for such Energy;
                provided, however, that in calculating the Annual Shortfall
                Credit, the amount of the shortfall in scheduled Energy
                quantities for the calendar year shall be reduced by the amount
                of (1) all Hourly Shortfalls during the year plus (2) all
                Seasonal Shortfalls during the year.

         (v)    Capacity Credit. If Seller fails for reasons other than a Force
                Majeure or in the event of an occurrence described in Article
                II(D), during any Month to provide all or part of the Capacity
                to Buyer pursuant to Article II(C) hereof, Buyer shall

                                      -12-
<PAGE>

                 use reasonable commercial efforts to purchase replacement
                 capacity in the amount of such shortfall, and Seller will be
                 obligated to reimburse Buyer for all such replacement costs.
                 In the event that Buyer, in spite of using reasonable
                 commercial efforts, is unable to purchase such Capacity
                 shortfall, then the payments due to Seller in respect of that
                 Month shall be reduced by a credit against the amount payable
                 by Buyer for the next succeeding Month in an amount equal to
                 the deficiency charge, if any, or other charges, as
                 applicable, payable by Buyer under Article V(E) of the Amended
                 and Restated PPA; provided, however, that if the amount of the
                 credit is greater than the amount payable by Buyer for a
                 single Month, Seller shall pay to Buyer the amount of such
                 excess portion of the credit (an "Article V(E) Capacity
                 Payment") on or before the last business day of the following
                 Month

         The foregoing liquidated damages and the damages pursuant to Article
V(F) hereof shall be the sole damages to which Buyer shall be entitled as the
result of any failure by Seller to schedule or deliver Energy or to provide
Capacity under this Agreement, subject to Articles X and XIV.

                                   SECTION F
                   SELLER'S FAILURE TO DELIVER ANNUAL QUANTITY

         If Seller does not deliver the Annual Quantity (as may be adjusted for
any partial calendar year) required to be delivered pursuant to Articles II(A),
II(B) and V(C) hereof in any calendar year, then in addition to any amounts to
be credited to Buyer by Seller under Article V(E) hereof, Seller shall pay to
Buyer for such calendar year, as damages and not a penalty and as part of the
consideration for this Agreement, an amount (the "Energy Shortfall Liquidated
Damages") equal to the product of (i) the difference between (1) the Annual
Quantity for such calendar year and (2) the Energy delivered by Seller for such
calendar year multiplied by (ii) the difference between (1) the liquidated
damages rate for such calendar year set forth on Exhibit 2, hereof and (2) the
contract rate for such calendar year set forth on Exhibit 2, hereof. Buyer shall
prepare and present to Seller on or before the fifth (5th) day of February of
the succeeding calendar year a statement of the Energy Shortfall Liquidated
Damages due and payable, if any, by Seller for the preceding calendar year in
accordance with the terms hereof. Seller shall pay such Energy Shortfall
Liquidated Damages on or before the fifth (5th) day after receipt of the invoice
from Buyer into an account of Buyer in accordance with written instructions
provided by Buyer to Seller. If the payment is not received by the due date
specified above, Seller shall pay to Buyer an interest charge on unpaid amounts
which shall accrue daily from the due date until the date upon which payment is
made at the then current late payment charge for commercial customers prescribed
in PSE&G's Standard Terms and Conditions as may be amended from time to time
(the "Late Payment Rate").

                                      -13-
<PAGE>

                                   ARTICLE VI

                               BILLING AND PAYMENT

                                   SECTION A
                                    STATEMENT

         Buyer shall prepare and present to Seller, on or before the fifth day
of the second subsequent Month, a statement and payment for Energy and Capacity
delivered to Buyer during the Month in accordance with Article IV. Such
statement shall indicate (1) the total MWhs of Energy delivered during the Month
for both the On-Peak Period and the Off-Peak Period and the applicable Contract
Rates, (2) any Delivery Point Adjustment applicable in respect of the prior
Month, (3) any applicable credits, (4) the total amount of Financial Settlement
Energy deemed to be delivered during the Month and (5) the amount due to or from
Seller in respect of Financial Settlement Energy.

         If the payment is not received by the due date specified above, Buyer
shall pay to Seller an interest charge on unpaid amounts which shall accrue
daily from the due date until the date upon which payment is made at the Late
Payment Rate.

         In the event Seller disputes any statement, Seller shall present the
dispute in writing and submit supporting documentation to Buyer within a twenty
(20) day period from receipt of such statement. Upon receipt of notice of the
dispute and supporting documentation, Buyer shall have thirty-five (35) days
from receipt of such notice to resolve any dispute with Seller. In the event the
dispute is not resolved within the thirty-five (35) day period, either Party may
submit the matter to arbitration for resolution in accordance with Article XV.
The disputed amount of any statement disputed by Seller, in accordance with the
provisions of this Article VI, which is ultimately determined to be due and
owing by Buyer to Seller, from the date originally due shall, until payment,
accrue interest at the Late Payment Rate.

         Buyer shall have the right to set off against any and all amounts owed
by Buyer to Seller pursuant to this Agreement any and all amounts owed by Seller
to Buyer or by Guarantor to Buyer under the Guaranty.

                                   SECTION B
                              FINANCIAL SETTLEMENT

         A "Financial Settlement Notice" is a written notice given by a Party to
the other Party not later than two hours before PJM's deadline for next-day
deliveries and specifying the hour(s) during which Energy will not be physically
delivered under this Agreement and an amount of Energy with respect to each
specified hour ("Financial Settlement Energy"), which may not, together with the
Energy delivered during such hour, exceed the maximum delivery rate specified in
Article V(B) for the hour permitted hereunder.

         If either Party gives a Financial Settlement Notice and the other Party
agrees, then (1) quantities identified as Financial Settlement Energy shall not
be scheduled or delivered as Energy hereunder during any hour specified in the
Financial Settlement Notice provided Seller may in such hour schedule and
deliver Energy in accordance with this Agreement subject to the

                                      -14-
<PAGE>

maximum delivery rates specified in Article V(B) and (2) all Financial
Settlement Energy shall be deemed to have been scheduled, delivered and accepted
for purposes of (i) calculating the credits set forth in Article V(E) and (ii)
the maximum delivery rates specified in Article V(B) with Financial Settlement
Energy offsetting and thereby reducing the amount of Energy that Seller is
entitled to deliver within such delivery rates. The Financial Settlement Price
for each MWh of Financial Settlement Energy relating to an hour specified in the
Financia1 Settlement Notice shall equal the difference between (1) the Contract
Rate for the hour minus (2) the Blended Locational Marginal Price for the hour.
If the Financia1 Settlement Price for Financial Settlement Energy relating to an
hour is a positive amount, Buyer shall pay Seller the Financial Settlement Price
for each MWh of such Financial Settlement Energy. If the Financial Settlement
Price for Financial Settlement Energy relating to an hour is a negative amount,
Seller shall pay Buyer an amount equal to the number of MWh of such Financial
Settlement Energy times the Financial Settlement Price.

         Notwithstanding anything in this Agreement to the contrary, neither
Party may agree to a Financial Settlement Notice unless Buyer and PSE&G shall
have agreed to such a Financial Settlement Notice under Article VI(B) of the
Amended and Restated PPA.

                                  ARTICLE VII

                                METERING/RECORDS

         Metering of Energy and Capacity shall be conducted in accordance with
the requirements of the PJM Operating Agreement, including with respect to
verification of deliveries by or on behalf of Seller at the Delivery Points.

                                  ARTICLE VIII

                                   [RESERVED]

                                   ARTICLE IX

                                   [RESERVED]

                                   ARTICLE X

                                   LIABILITY

         (a) Neither Party nor its officers, directors, partners, agents,
servants, employees, affiliates, parent, subsidiaries or respective successors
or assigns shall be liable to the other Party (except as provided for in Article
V or as otherwise provided for in this Agreement) for claims for incidental,
special, direct, indirect or consequential damages whether such damages claim is
based on a cause of action based in warranty, negligence, strict liability,
contract, operation of law or otherwise except where such claim for damages
arises out of,

                                      -15-
<PAGE>

relates to or results from the gross negligence of such Party or the willful
disregard by a Party of its obligations under this Agreement; provided, however,
that Buyer shall have the right to seek to recover from Seller (i) direct
damages upon the occurrence of an Event of Default, which has been established
pursuant to and in accordance with Article XIV, (ii) damages required to be
set-off against the amount payable by PSE&G under Article (V)(E) of the Amended
and Restated PPA and (iii) indemnification payments required to be made by Buyer
to PSE&G under Article XII or Article XIII of the Amended and Restated PPA.

         (b) Notwithstanding anything in this Agreement to the contrary, in the
event of the termination of the Amended and Restated PPA prior to the
termination of this Agreement, the Parties hereby agree that Seller shall in no
such event be liable to Buyer under this Agreement (including without
limitation, liability imposed pursuant to Articles V(E), V(F), XII, XIII and XIV
hereof) unless Seller would have been liable to Buyer hereunder if the Amended
and Restated PPA were in full force and effect.

                                   ARTICLE XI

                                  FORCE MAJEURE

         An event of "Force Majeure" as used herein means an event beyond the
reasonable control of the Party claiming Force Majeure which events may include
but are not limited to: acts of God; strikes, lockouts or other similar such
industrial disturbances; acts of the public enemy, wars, civil disturbances,
blockades, military actions, insurrections or riots; landslides, floods,
washouts, lightning, earthquakes, tornadoes, hurricanes, blizzards or other
storms or storm warnings; explosions, fires, sabotage or vandalism; mandates,
directives, orders or restraints of any governmental, regulatory or judicial
body or agency (other than mandates, directives, orders or restraints either
sought, approved or not contested by the Party asserting Force Majeure or issued
in any bankruptcy or insolvency proceeding for the relief the Party asserting
Force Majeure); any catastrophic physical failures or disruptions of the PJM
transmission system; breakage, defects, malfunctioning, or accident to
machinery, equipment, materials or lines of pipe or wires; freezing of
machinery, equipment, materials or lines of pipe or wires; inability or delay in
the obtaining of materials or equipment; inability to obtain or utilize any
permit, approval, easement, license or right-of-way; events of Force Majeure as
defined under and declared by either party to the Amended and Restated PPA;
provided, that an event shall be deemed to be an event of Force Majeure
hereunder only to the extent that is deemed to be so pursuant to the Amended and
Restated PPA (whether or not the Amended and Restated PPA is in full force and
effect).

         An event of Force Majeure shall not include (i) failures of the
equipment of the Party claiming Force Majeure which are due to (a) wear and tear
and (b) defects in manufacture, design or construction; (ii) any increase in the
cost of electricity supplies or costs associated with transmission system
operation, maintenance or congestion; (iii) unavailability of Capacity and/or
Energy from any source, regardless of price, for delivery to the Delivery Point
(except in the event of a System Emergency); (iv) interruption in service by a
transmission provider unless; (a) the Party contracting with such transmission
provider shall have made arrangements with such transmission provider for the
firm transmission, as defined under the transmission

                                      -16-
<PAGE>

provider's tariff, of the Energy to be delivered hereunder, and (b) such
interruption is due to an emergency or to an event of force majeure as defined
under the transmission provider's tariff; or (v) any change in economic
conditions not caused by a Force Majeure event.

         In the event Buyer or Seller is rendered unable, wholly or in part, by
an event of Force Majeure, to perform any obligation it has under this
Agreement, it is agreed that, upon Buyer or Seller giving notice and full
particulars of such event of Force Majeure to the other Party, as soon
thereafter as practicable, the obligations of Buyer or Seller, so far as they
are affected by such event of Force Majeure, shall be suspended during the
continuance of any inability or incapacity so caused, but for no longer period
than such event of Force Majeure (a) has suspended the parties obligations under
the Amended and Restated PPA or (b) in the event that the Amended and Restated
PPA is no longer in full force and effect, would have suspended the parties
obligations under the Amended and Restated PPA as if it had remained in effect;
provided, however, neither Party shall be relieved from any obligation to make
any payment to the other required under this Agreement. The Party claiming Force
Majeure shall use best efforts to remedy the cause of the Force Majeure with all
reasonable dispatch.

         Notwithstanding anything herein to the contrary, the obligations of
Seller under this Agreement to schedule and deliver the Annual Quantity shall
not be excused or suspended by an event of Force Majeure.

         Neither Party shall be liable to the other for any claim(s), loss(es),
damage(s), liability(ies) or expense(s) sustained or incurred by Buyer or
Seller, arising out of, relating to, or resulting from Buyer's or Seller's
inability or incapacity to perform its obligations under this Agreement due to
any event of Force Majeure, as herein defined.

                                  ARTICLE XII

                                 INDEMNIFICATION

         Seller shall indemnify and hold harmless Buyer and each and every one
of its officers, agents, servants and employees, its successors and assigns of,
from and against any and all claims, demands and suits, actions, and
liabilities, losses, damages, and/or judgments, which may arise therefrom, as
well as against any fees, costs, charges or expenses which Buyer, its officers,
agents, servants and employees, its successors and assigns, incur in the defense
of any such claims, suits, actions or similar such demands made or filed by any
third-party, which in any manner arise out of, relate to, or result from
negligence, strict liability or breach of this Agreement by Seller; including,
but not limited to, the design, construction, engineering, installation,
operation, maintenance, repair, replacement, supervision, inspection, testing,
protection, reinforcement, reconstruction, decommissioning, removal, use,
control or ownership of its facilities and claims, suits, actions or similar
demands made or filed by PSE&G against Buyer pursuant to the Amended and
Restated PPA (including, without limitation, any claims, suits, actions or
demands made or filed by PSE&G pursuant to Articles XII, XIII and XIV of the
Amended and Restated PPA).

                                      -17-

<PAGE>

         In case a claim is asserted or action brought against Buyer as to which
it believes it is entitled to indemnification under this Article XII, Buyer
shall promptly notify Seller in writing of such claim or action. Prompt notice
as contemplated in the preceding sentence shall mean such notice as would be
required to enable Seller to assert and prosecute appropriate defenses relative
to such claim or such action in a timely fashion. Upon receipt of such notice
request for indemnification, Seller shall promptly make a determination of
whether it believes it is required to indemnify and shall promptly notify Buyer
in writing of that determination. If Seller determines that it is required to
indemnify Buyer pursuant to this Article XII, then Seller shall assume the
defense of such claim or action, including the employment of counsel and shall
assume thereafter the payment of all costs and expenses relative to the defenses
of such claim or action. Buyer shall cooperate in all reasonable respects with
Seller in the defense of such claim or action. Buyer shall have the right, at
its own expense, to employ separate counsel in any such action and to
participate in the defense thereof. Seller shall not be liable for any
settlement of any such claim or action effected without its consent. Before
settling any claim or action, Seller shall demonstrate to Buyer that it has
sufficient financial means or has made adequate arrangements to make all
payments under any such settlement as and when due. Notwithstanding anything
herein to the contrary, in the event that a claim for indemnification hereunder
relates to a claim for indemnification made by PSE&G under Article XII or
Article XIII of the Amended and Restated PPA or a claim for damages made by
PSE&G under Article XIV thereof, then within five (5) days of receipt of a
written notice from Buyer to Seller that states that Buyer is required to pay
indemnity payments or damages pursuant to the Amended and Restated PPA and sets
forth the amount of such indemnity payments or damages, Seller shall pay such
amounts into an account of Buyer in accordance with written instructions
provided by Buyer to Seller.

                                  ARTICLE XIII

                          REPRESENTATION AND WARRANTIES

         Seller makes the following representations and warranties:

         (a) Seller is a corporation duly organized, validly existing, in good
standing and qualified to do business under the laws of Delaware, and it has the
corporate power and authority to carry on its business as now being conducted,
to enter into this Agreement and carry out the transactions contemplated hereby,
and to perform and carry out all covenants and obligations on its part to be
performed under and pursuant to this Agreement.

         (b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby and the fulfillment of and compliance with
the provisions of this Agreement do not in any material respect conflict with or
constitute a breath of or a default under, any obligation under any agreement by
which Seller is bound, any of the terms, conditions or provisions of any law,
any order of any court or other agency of government, the certificate of
incorporation or by-laws of Seller.

         (c) All corporate actions required to be taken by or on the part of
Seller in connection with the transactions contemplated by this Agreement and
necessary to make the

                                      -18-
<PAGE>

same effective have been duly and validly taken, and this Agreement has been
duly and validly authorized, executed and delivered by Seller and constitutes
its legal, valid and binding obligation enforceable in accordance with its
terms.

         (d) Except for filing with FERC and FERC acceptance of this Agreement
for filing, all governmental approvals, consents and permits that are required
for the execution, delivery and performance of this Agreement by Seller have
been duly obtained or made, are final and are in full force and effect, and are
not subject to any appeal or further judicial or administrative proceedings.

         (e) There are no actions, suits or proceedings at law or in equity by
or before any governmental authority, arbitral tribunal or other body (other
than proceedings of general applicability to the electrical generation,
transmission and distribution industry and proceedings in the ordinary course of
business to obtain governmental authorizations) pending or threatened against or
affecting Seller or any property of Seller or brought or asserted by Seller in
any court or before any arbitrator of any kind or before or by any governmental
authority which relate in any manner to this Agreement and could reasonably be
expected to have a material adverse effect on Seller, Seller's ability to
perform its obligations under this Agreement or the validity or enforceability
of this Agreement.

         (f) In the event of any conflict between the terms of this Agreement
and the terms of the PJM Tariff or the Amended and Restated PPA, the terms of
this Agreement shall prevail and be binding between the Parties without
modification thereby.

         Seller further warrants and shall be obligated to supply to the
Delivery Points Energy and Capacity free and clear of any liens and/or adverse
claims which might attach to said Energy and Capacity prior to supply and
receipt by Buyer. Seller agrees to indemnify and hold harmless Buyer against any
and all claims, demands, suits, actions, costs, and liabilities, damages, losses
and/or judgments arising out of, relating to or resulting from any such adverse
claim or lien, as well as against any fees, costs, charges or expenses which
Buyer might incur in the defense of any such claim, suit, action or similar such
demand made or filed by such person, its successors or assigns, asserting such
adverse claim. In effecting the right of or obligation to indemnify pursuant to
and in accordance with the provisions of this Article XIII, the procedural
provisions set forth in Artic1e XII shall govern. Notwithstanding anything
herein to the contrary, in the event that a claim for indemnification hereunder
relates to a claim for indemnification made by PSE&G under Article XIII of the
Amended and Restated PPA, then within five (5) days of receipt of a written
notice from Buyer to Seller that states that Buyer is required to pay indemnity
payments pursuant to Article XII of the Amended and Restated PPA and sets forth
the amount of such indemnity payments, Seller shall pay such amounts into an
account of Buyer in accordance with written instructions provided by Buyer to
Seller.

                                      -19-
<PAGE>

                                  ARTICLE XIV

                    EVENTS OF DEFAULT AND BREACH OF CONTRACT

                                   SECTION A
                                DEFAULT BY SELLER

         Seller shall be in default under this Agreement upon the happening or
occurrence of any of the following events or conditions, each of which shall be
deemed to be an "Event of Default," and each of which shall be considered a
breach of contract for purposes of this Agreement unless it is cured in
accordance with the provisions specified below:

         1. Seller breaches or fails to observe or perform any of the material
obligations, covenants, conditions, services or responsibilities under this
Agreement, unless, within twenty-five (25) days after written notice from Buyer
specifying the nature of such breach or failure, Seller either cures such breach
or failure or, if such cure cannot be completed within twenty-five (25) days,
provides Buyer with a plan reasonably acceptable to Buyer to cure such breach or
failure and commences and diligently pursues such plan.

         2. There is an assignment for the benefit of Seller's creditors, or
Seller is adjudged bankrupt, or a petition is filed by or against Seller under
the provisions of any state insolvency law or under the provisions of the
federal bankruptcy laws, or the business or principal assets of Seller are
placed in the hands of a receiver, assignee or trustee, or Seller is dissolved,
or Seller's existence is terminated, or its business is discontinued; provided,
however, that the events described in this Article XIV(A)(2) shall not
constitute an Event of Default or otherwise affect the validity of this
Agreement, so long as the terms, covenants and conditions of this Agreement on
the part of Seller are performed, and in such event, this Agreement shall
continue to remain in full force in accordance with the terms contained herein.

         3. Seller takes any actions which prevent Buyer from performing any of
the material obligations, covenants, conditions, responsibilities or services
under this Agreement, unless, within twenty-five (25) days after written notice
from Buyer specifying the nature of such action or failure to act, Seller either
cures such action or failure to act, or, such cure cannot be completed within
twenty-five (25) days, provides Buyer with a plan reasonably acceptable to Buyer
to cure such breach or failure and commences and diligently pursues such cure.

         4. Seller fails to (i) deliver Energy and Capacity to Buyer for two
hundred and forty (240) out of three hundred and sixty-five (365) days for any
reason other than Force Majeure or a curtailment in accordance with Article
II(D) and fails to pay the liquidated damages associated with such failure as
set forth in Article V(E) or (ii) pay when due Energy Shortfall Liquidated
Damages or other payments required to be paid hereunder.

                                   SECTION B
                                    REMEDIES

         In the event that Buyer claims that an Event of Default has occurred,
Buyer shall provide Seller with written notice thereof (hereinafter referred to
as Notice of Breach). The Notice of Breach shall state the basis for such claim
and any remedy sought. The Parties shall

                                      -20-
<PAGE>

have twenty-five (25) days within which to resolve the dispute via negotiation.
If within such twenty-five (25) day period after service of the Notice of
Breach, the Parties are unable to resolve their differences by negotiation,
either Party shall have the right to submit the dispute for resolution to either
arbitration or to any regulatory body having jurisdiction, such arbitration
proceeding to be joined with any arbitration proceeding under the Amended and
Restated PPA to the extent required by Article XIII.

         The nature and extent of any damage incurred or sustained by Buyer, as
a result of any Event of Default shall be determined and calculated as of the
date the Event of Default commenced, taking into account Buyer's obligation to
act in a commercially reasonable manner to mitigate damages.

         Except as otherwise provided in this Article XIV, neither Party shall
refuse to make, suspend or delay any payment(s) otherwise required to be made
under this Agreement or refuse to carry out any of its obligations under this
Agreement for or an account of or as a result of an alleged breach of this
Agreement or Event of Default.

         Any waiver by Buyer of any breach or Event of Default shall be deemed
to extend only to the particular breach or Event of Default waived and shall not
limit or otherwise affect any right(s) that Buyer may have with respect to any
other or future breach or Event of Default, whether of a similar or different
nature.

                                   ARTICLE XV

                                   ARBITRATION

         Any controversy, dispute or claim between the Parties to this
Agreement, which the Parties are unable to resolve by negotiation or over which
any regulatory body lacks jurisdiction or declines to initiate proceedings,
shall be settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"), then in effect, and the
provisions of this Article XV. If either Party chooses arbitration, no suit at
law that seeks to resolve any controversy, dispute or claim between the Parties
shall be instituted by either Party hereto, except where such suit is instituted
to confirm an arbitration award received pursuant to this Article XV. However,
nothing contained herein shall deprive either Party of any right to: (i) obtain
injunctive or other equitable relief in any court in the State of New Jersey, on
an interim basis pending disposition of the arbitration of any controversy,
dispute or claim if such relief is available under applicable principles of law
and equity; and/or (ii) assert any crossclaim, or third-party claim in any suit
at law instituted by a third-party; and/or (iii) file and prosecute any
complaint at and with the regulatory agency having jurisdiction or make and
prosecute any claim or position in any filing made with such regulatory agency
by either Party or some third-party.

         Any controversy, dispute or claim submitted to arbitration shall be
settled by arbitration in Newark, New Jersey in accordance with the laws of the
State of New Jersey. Any award entered pursuant to such arbitration shall be
binding on both Parties and judgment upon

                                      -21-
<PAGE>

the award rendered or received may be entered in the Superior Court of the State
of New Jersey pursuant to N.J.S.A. 2A:24-1 et seq.

         Exclusive jurisdiction relative to the entry of judgment on any
arbitration award relative to any controversy or claim between the Parties shall
be in any court of appropriate subject matter jurisdiction located in New
Jersey, and the Parties to this Agreement expressly subject themselves hereby to
the personal jurisdiction of said court for entry of any such judgment and for
the resolution of any dispute, action, or suit arising in connection with the
entry of such judgment.

         The controversy or claim to be arbitrated shall be referred to three
(3) arbitrators, one to be selected by each Party and the third to be selected
by the AAA. The selections to be made by the Parties shall be made from the list
of the National Panel of Arbitrators maintained by the AAA. The arbitrator to be
selected by the AAA shall be qualified to pass on any technical or engineering
matters and shall be independent of and acceptable to both Buyer and Seller. All
decisions and awards shall be made by a majority of the arbitrators, except for
decisions relating to discovery as set forth herein.

         In the event any arbitrator dies, or refuses to act, or becomes
incapable, incompetent or unfit to act before hearings have been completed
and/or before an award has been rendered, a successor arbitrator may be selected
by the Party who originally made the selection. The selection of the successor
arbitrator shall be made consistent with the selection procedure set forth in
the preceding paragraph.

         The arbitrators selected pursuant to this Agreement shall be governed
by and apply the laws of the State of New Jersey and federal law, as applicable,
in conducting any arbitration proceeding and/or in making any award.

         Notice of a demand for arbitration (hereinafter referred to as Demand
for Arbitration) of any controversy or dispute between the Parties shall be
filed in writing with the AAA by the Party seeking arbitration and a copy of
same shall be served contemporaneously with such filing on the other Party. The
notice shall state, with specificity, the nature of the dispute and the remedy
sought. After such notice has been filed, the Parties may make discovery of any
matter relevant to such dispute before the hearing, to the extent and in the
manner provided by the Rules Governing Civil Practice in the Superior Court
contained in the Rules Governing the Courts of the State of New Jersey. Any
question that may arise with respect to the obligations of the Parties relative
to discovery and/or relative to the protection of the discovery materials shall
be referred solely to the arbitrator selected by the AAA. His determination
shall be final and conclusive. Discovery shall be completed not later than
ninety (90) days after filing of the notice of arbitration unless such period
for discovery is extended by the arbitrator selected by the AAA, upon a showing
of good cause by either Party to the arbitration.

         The arbitrators may consider any material that is relevant to the
subject matter of any such controversy even if such material might also be
relevant to an issue or issues not subject to arbitration hereunder. A
stenographic record shall be made of any arbitration hearing.

                                      -22-
<PAGE>

         Any costs associated with any arbitration under this Article XV,
including but not limited to attorney fees and witness expenses, shall be paid
by the Party against whom an award is entered unless the arbitrators by their
award otherwise provide.

         Arbitration may not be utilized and the arbitrators selected in
accordance with this Article XV shall not possess the authority or power to
alter, amend or modify any of the terms or conditions or charges set forth in
this Agreement, and further, the arbitrators may not enter any award which
alters, amends or modifies such terms, conditions or charges in any form or
manner.

         Notwithstanding anything herein to the contrary, each of the Parties
hereby agrees that the provisions of this Article XV are intended to operate,
and shall operate, such that, in the event a dispute arises hereunder which is
submitted to arbitration and arbitration proceedings are initiated under Article
XV of the Amended and Restated PPA with respect to substantially the same
dispute or with respect to another dispute involving substantially the same
facts, such disputes shall be resolved, jointly in a single proceeding by the
arbitration proceedings initiated under Article XV of the Amended and Restated
PPA. Such proceedings shall be conducted in accordance with the provisions of
Article XV of the Amended and Restated PPA. Seller hereby agrees to be bound
under this Agreement by the decision and award of the arbitration panel in such
proceedings.

                                  ARTICLE XVI

                                ENTIRE AGREEMENT

         This Agreement constitutes the entire Agreement between the Parties
with respect to the matters contained herein and all prior agreements with
respect thereto are superseded hereby. Each Party confirms that it is not
relying on any oral representations or warranties of the other Party except as
specifically set forth herein. No additions, amendments or modifications hereof
or of any terms included herein shall be binding unless duly executed by both
Parties.

                                  ARTICLE XVII

                              ASSIGNMENT/TRANSFER.

         Buyer may at any time and from time to time during the term of this
Agreement, assign its rights in this Agreement, without the consent of Seller,
to any Financier(s). Seller shall, at Buyer's request, execute a consent to
assignment provided that the terms and conditions of same are reasonably
acceptable to Buyer and Seller. Upon written notice to Seller, Buyer may
transfer its rights and obligations under this Agreement to El Paso Merchant
Energy Holding Company or any entity (i) controlling, controlled by or under
common control with El Paso Merchant Energy Holding Company or Buyer, or (ii)
which has a credit rating by Moody's and Standard & Poor's at least equal to
Baa3, in the case of Moody's or BBB-, in the case of Standard and Poor's. Seller
may not assign its rights and/or transfer its rights and obligations under this
Agreement without the prior written consent of Buyer, which consent shall not be
unreasonably withheld or delayed. Nothing contained herein shall prevent Buyer
from pledging

                                      -23-
<PAGE>

or mortgaging all or any part of its assets or interests in connection with any
financing for or related to the transactions contemplated herein.

         Except as otherwise provided herein, Buyer may not assign its rights
and/or transfer its obligations under this Agreement without the prior written
consent of Seller. Seller shall not unreasonably delay or withhold any approval
of an assignment or assignment/transfer by Buyer provided that the assignee or
assignee/transferee agrees to be bound by, subject to and to comply with the
terms and conditions of this Agreement.

                                 ARTICLE XVIII

                                   [RESERVED]

                                  ARTICLE XIX

                                   [RESERVED]

                                   ARTICLE XX

                                 CHOICE OF LAW

         This Agreement shall be interpreted, construed, governed by, performed
and enforced in accordance with the laws of the State of New Jersey and federal
law, where applicable. All questions concerning the validity, construction and
enforceability of this Agreement as well as questions concerning the sufficiency
or other aspects of performance under this Agreement shall be determined under
the laws of the State of New Jersey without recourse to the law governing
conflict of laws.

                                  ARTICLE XXI

                                    CAPTIONS

                  The subject headings of the Articles of this Agreement are
inserted solely for the purpose of convenient reference and are not intended to,
nor shall same affect the meaning of any provision of this Agreement.

                                      -24-
<PAGE>

                                  ARTICLE XXII

                                   COUNTERPART

         This Agreement may be executed in counterparts. Each shall be deemed an
original but together shall constitute one and the same instrument.

                                 ARTICLE XXIII

                                  MISCELLANEOUS

         This Agreement and the obligations of the Parties hereunder are subject
to all present and future valid laws and to all valid present and future orders,
rules and regulations of any court or regulatory authority having jurisdiction.

         In case of conflict between any provisions hereof and any applicable
law, regulation or regulatory order, such applicable law, regulation or
regulatory order shall govern.

         All terms defined in this Agreement shall have the same defined
meanings when used in any notice, correspondence, report or other document made
or delivered pursuant to or in connection with this Agreement, unless the
context shall otherwise require.

         Each reference herein to Seller and Buyer shall be deemed to include
their respective successors and assigns.

         All of the covenants, warranties, undertakings and agreements of Seller
and Buyer shall bind the respective Parties, their successors and assigns.

         References herein to Articles, Sections and Exhibits mean Articles,
Sections and Exhibits to this Agreement unless otherwise specifically provided
herein.

                                  ARTICLE XXIV

                                  RESERVATIONS

         No Party shall be prejudiced or bound, except as otherwise specifically
provided herein, nor shall any Party be deemed to have approved, accepted,
agreed or consented to any concept, theory or principle underlying or supposed
to underlie any of the matters contained herein, including but not limited to
any concept, theory, principle or method used to calculate the rates provided
for herein.

         All Parties further understand and agree that the provisions of this
Agreement relate only to the specific matter referred to herein and no Party or
person waives any claim or right which it may otherwise have with respect to any
matter not expressly provided for herein.

                                      -25-
<PAGE>

                                  ARTICLE XXV

                             SURVIVAL OF OBLIGATIONS

         Termination of this Agreement for any reason shall not relieve Buyer or
Seller of any obligation accruing or arising with respect to the period prior to
such termination and required by terms of this Agreement to be performed at date
subsequent to the date of termination.

                                  ARTICLE XXVI

                                    NOTICES

         Any notice, request, demand, or statement which either Buyer or Seller
may desire to give to the other shall be in writing and except as otherwise
provided for in this Agreement shall be considered as duly delivered when mailed
by certified mail or delivered against receipt by messenger or overnight courier
addressed to said Party as follows:

             (a)      If to Seller
                      Managing Director, El Paso Merchant Energy, L.P.
                      1001 Louisiana Street
                      Houston, TX 77002

                      With electronic mail copies to:
                      kurt.regulski@elpaso.com
                      bob.erbrick@elpaso.com

             (b)      If to Buyer or to such other person or address as the
                      addressee may have specified in a notice duly given as
                      provided herein:

                      Managing Director, El Paso Merchant Energy Holding Company
                      1001 Louisiana Street
                      Houston, TX 77002

                      Vice President, El Paso Merchant Energy Holding Company
                      Two Newton Executive Park, Second Floor
                      2227 Washington Street
                      Newton, MA 02462

                      General counsel, El Paso Merchant Energy Holding Company
                      1001 Louisiana Street
                      Houston, TX 77002

                      With electronic mail copies to:
                      tim.sullivan@elpaso.com
                      dave.nickerson@elpaso.com
                      andrew.kidd@elpaso.com

                                      -26-
<PAGE>

Except as otherwise provided in this Agreement, routine communications and
Billing Statements shall be considered as duly delivered when mailed by either
certified or ordinary mail.

               (a)    If to Seller:

                      Vice President, El Paso Merchant Energy, L.P.
                      1001 Louisiana Street
                      Houston, TX 77002

                      With electronic mail copies to:
                      bob.erbrick@elpaso.com
                      michael.kinsey@elpaso.com

               (b)    If to Buyer or to such other person or address as the
                      addressee may have specified in a notice duly given as
                      provided herein.

                      Contract Administrator - Cedar Brakes II, L.L,C.
                      1001 Louisiana Street
                      Houston, TX 77002

                      With electronic mail copies to:
                      tim.sullivan@elpaso.com
                      dave.nickerson@elpaso.com
                      andrew.kidd@elpaso.com

Monthly and Daily Schedules and Notices for Financial Settlement Energy

         Scheduling and Financial Settlement Energy information as set forth in
Article V(A) and Article VI(B) shall be provided by telephone between the
Parties with the Party providing the notice also sending a follow-up email to
the other Party before 4:00 p.m. EST on the same day. The Parties shall notify
each other in writing or email prior to the Effective Date of the appropriate
names and phone numbers to be used. The Parties agree that all telephone
conversations may be recorded and that emails will be sent to distributions
lists to be agreed to and changed as appropriate by the Parties.

                                      -27-

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date and year first above written.

                             CEDAR BRAKES II, L.L.C.

                                /s/ Clark C. Smith
                             ---------------------------------------------
                             By:    Clark C. Smith
                             Its:   President

                             EL PASO MERCHANT ENERGY, L.P.

                                /s/ Timothy D. Boum
                             --------------------------------------------
                             By:    Timothy D. Boum
                             Its:   Senior Vice President

                                      -28-
<PAGE>

EXHIBIT 1

                            Annual Energy Deliveries
<TABLE>
<CAPTION>

Year                  Annual Quantity
                           (MWh)
-----                 ---------------
<S>                     <C>
2001                       485,522(1)
2002                    [1,501,825]
2003                     1,501,825
2004                     1,501,825
2005                     1,501,825
2006                     1,501,825
2007                     1,501,825
2008                     1,447,524
2009                     1,171,424
2010                     1,171,424
2011                     1,171,424
2012                     1,171,424
2013                       205,400
</TABLE>

(1)  Note:  The Annual Quantity will be reduced prorata for any delay in the
     Effective Date beyond September 5, 2001.

                                      1-1
<PAGE>

EXHIBIT 2

                Contract Rate and Liquidated Damages Rate ($/MWh)

<TABLE>
<CAPTION>
                                                   Liquidated
Year                   Contract Rate              Damages Rate
----                   -------------              ------------
<S>                        <C>                       <C>
2001                       32.00                     92.76
2002                       32.00                     80.88
2003                       32.00                     77.75
2004                       32.00                     80.01
2005                       32.00                     82.37
2006                       32.00                     84.82
2007                       32.00                     87.37
2008                       32.00                     90.07
2009                       32.00                     93.08
2010                       32.00                     95.98
2011                       32.00                     99.00
2012                       32.00                    102.15
2013                       32.00                    105.42
</TABLE>

                                      2-1
<PAGE>

EXHIBIT 3

                  CALCULATION OF THE DELIVERY POINT ADJUSTMENT

         The Delivery Point Adjustment for any hour equals the difference, if
positive, between the Target Value ("TV") of the Energy delivered during the
hour and the Actual Value ("AV") of the Energy delivered during the hour. For
any hour in which the AV equals or exceeds the TV, the Delivery Point Adjustment
shall equal zero. The following is the formula for calculating the Delivery
Point Adjustment ("DPA").

     DPA = TV-AV

Where:

         TV = (.78 x TD x CLMP) + (.22 x TD x BLMP); provided that on and after
November 1, 2008, TV = TD x CLMP.

         AV = (CD x CLMP) / (BD x BLMP) + (AD x ALMP).

         TD = Total deliveries during the hour = CD + BD + AD.

         CD = total quantity of Energy delivered during the hour at the Camden
Delivery Point.

         BD = total quantity of Energy delivered during the hour at the Bayonne
Delivery Point.

                                      3-1
<PAGE>

EXHIBIT 4

                                    RESERVED

                                      4-1

<PAGE>

EXHIBIT 5

                        [FORM OF CONSENT TO ASSIGNMENT]

                                      5-1

<PAGE>

EXHIBIT 6

                               [FORM OF GUARANTY]

                                      6-1<PAGE>
                                                                  EXHIBIT 10.2.1

                    AMENDMENT TO THE POWER PURCHASE AGREEMENT

         This AMENDMENT TO THE POWER PURCHASE AGREEMENT, dated as of November
26, 2001 (this "Amendment"), is made by and between EL PASO MERCHANT ENERGY,
L.P., a limited partnership organized and existing under the laws of the State
of Delaware ("Seller"), and CEDAR BRAKES II, L.L.C., a limited liability company
organized and existing under the laws of the State of Delaware ("Buyer") (each
of Seller and Buyer may hereinafter be referred to as a "Party" and collectively
as the "Parties").

                              W I T N E S S E T H :

         WHEREAS, Seller and Buyer entered into the Power Purchase Agreement
(the "PPA"), dated October 1, 2001;

         WHEREAS, Seller and Buyer have agreed amend the PPA in order to make
certain clarifications to the PPA;

         NOW, THEREFORE in consideration of these premises and of the mutual
covenants and agreements set forth herein, Seller and Buyer, intending to be
legally bound, hereby agree to the following amendments to the PPA:

         Unless otherwise defined herein, all capitalized terms shall have the
meanings as in the PPA.

         SECTION A. ARTICLE V(E) is amended as follows:

         The term "Contract Rate" is deleted and replaced with the term
"Liquidated Damages Rate" in each of Sections V(E)(i)(b), (ii)(b), (iii)(b), and
(iv)(b).

         SECTION B. ARTICLE V(F) is amended and replaced in its entirety as
follows:

         If Seller does not deliver at least forty-two percent (42%) of the
Annual Quantity (as may be adjusted for any partial calendar year) by June 30 of
any calendar year or the entire Annual Quantity (as may be adjusted for any
partial calendar year) over any calendar year, then in addition to any amounts
to be credited to Buyer by Seller under Article V(E) hereof, Seller shall pay to
Buyer for such periods, as damages and not a penalty and as part of the
consideration for this Agreement, an amount (the "Energy Shortfall Liquidated
Damages") equal to the product of (i) the difference between (1)(x) forty-two
percent (42%) of the Annual Quantity (as may be adjusted for any partial
calendar year) for the period through June 30 or (y) the Annual Quantity (as may
be adjusted for any partial calendar year) for the calendar year, as applicable,
and (2) the Energy delivered by Seller (x) through June 30 of each calendar year
or (y) through December 31 of each calendar year, as applicable, multiplied by
(ii) the difference between (1) the Liquidated Damages Rate for such calendar
year set forth on Exhibit 2, hereof and (2) the Contract Rate for such calendar
year set forth on Exhibit 2, hereof; provided, however, that any amount
otherwise owed to Buyer by Seller due to Seller's failure to deliver the Annual
Quantity by December 31 in any calendar year shall be reduced by the amount paid
by Seller to Buyer due to Seller's failure to deliver at least forty-two percent
(42%) of the Annual Quantity by June 30

<PAGE>

of that calendar year. Buyer shall prepare and present to Seller on or before
the fifth (5th) day of August each calendar year, applicable to any Energy
Shortfall Liquidated Damages incurred through June 30 of such calendar year, and
on or before the fifth (5th) day of February each calendar year, applicable to
any Energy Shortfall Liquidated Damages incurred during the entire preceding
calendar year, a statement of the Energy Shortfall Liquidated Damages due and
payable, if any, by Seller for the applicable period in accordance with the
terms hereof. Seller shall pay such Energy Shortfall Liquidated Damages on or
before the fifth (5th) day after receipt of the invoice from Buyer into an
account of Buyer in accordance with written instructions provided by Buyer to
Seller. If the payment is not received by the due date specified above, Seller
shall pay to Buyer an interest charge on unpaid amounts which shall accrue daily
from the due date until the date upon which payment is made at the then current
late payment charge for commercial customers prescribed in PSE&G's Standard
Terms and Conditions as may be amended from time to time (the "Late Payment
Rate").

         SECTION C. ARTICLE XI is amended as follows:

         The fourth paragraph is revised to read as follows: "Notwithstanding
anything herein to the contrary, the obligations of Seller under this Agreement
to schedule and deliver forty-two percent (42%) of the Annual Quantity by June
30 in any calendar year and the Annual Quantity by December 31 in any calendar
year shall not be excused or suspended by an event of Force Majeure."

         SECTION D. Miscellaneous Provisions.

         1. Except as herein amended in writing, the PPA previously entered into
shall remain unchanged and in full force and effect.

         2. Except with respect to the provisions modified herein, if any
discrepancy exists between the provisions in the PPA and this Amendment, such
discrepancy shall be resolved in favor of the PPA.

         3. This Amendment shall be governed by and construed in accordance with
the laws of the State of New Jersey, without regard to conflict of law
principles, and federal law, where applicable.

         4. This Amendment shall be binding upon the Parties and their
respective successors, heirs and assigns.

         5. This Amendment constitutes the entire agreement between the Parties
hereto with respect to the matters contained herein, and all prior agreements
with respect to the matters covered herein are superseded, except as provided
above, and each Party confirms that it is not relying upon any representations
or warranties of the other Party, except as specifically set forth herein or
incorporated by reference hereto.

                                      -2-

<PAGE>

         IN WITNESS WHEREOF, the Parties have entered into this Amendment as of
the date first written above.

                                 EL PASO MERCHANT ENERGY, L.P.

                                 By:     /s/ John L. Harrison
                                       -----------------------------------------
                                       Name:  John L. Harrison
                                       Title:  Senior Vice President

                                 CEDAR BRAKES II, L.L.C.

                                 By:     /s/ John L. Harrison
                                       -----------------------------------------
                                       Name:  John L. Harrison
                                       Title:  Senior Vice President

                                     - 3 -

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